Oblicon Contracts 2
Oblicon Contracts 2
humanity the vendor had waived his right to cancel the contract; on the contrary,
it strengthened his right to do so, considering that even after such beneficial act
of accommodation still the vendee subsequently defaulted again and again in the
payment of the installments.
DECISION
DIZON, J p:
Appeal taken by the spouses Maria A. Garcia and Marcelino A. Timbang
hereinafter referred to as petitioners from the decision of the Court of Appeals in
CA-G.R. No. 27194-R reversing the one rendered on January 9, 1960 by the
Court of First Instance of Manila in Civil Case No. 19642 entitled "Maria A.
Garcia, et al., vs. Rita Legarda, Inc. The latter is a corporation organized under
Philippine laws, and is engaged in the sale and resale of residential lots and
suburbs. We shall refer to it hereinafter as the respondent.
On May 20, 1953 the petitioners instituted the Civil case mentioned above
against the respondent to have certain contracts numbered 322, 324, and 965
declared as existing and subsisting; to compel the respondent to accept payment
tendered by them; and to recover moral and exemplary damages and attorney's
fees in the amounts of P6,000.00 and P1,500.00 respectively.
The three causes of action alleged in their complaint involved the three parcels of
land subject matter of the contracts aforesaid. Each had an area of about 150
square meters, and formed part of the Rita Legarda Estate situated in Manila,
and subdivided into lots sold on installment basis.
(1)Contract to Sell No. 322 (Exhs. A and A-1) covering Lot 40, Block 5-CC, was
executed by the respondent in favor of Emiliano Orellana on March 1, 1947. On
June 26, 1947, the latter transferred all his rights and interest thereunder to
Encarnacion Vito who, in turn, on November 3 of the same year, made a similar
transfer of rights in favor of Delfin Bacho. Finally, on May 29, 1948, Bacho also
transferred all his rights and interest to the petitioners.
(2)On March 1, 1947, Contract to Sell No. 324(Exh. 2) covering Lot No. 20, Block
5-CC was executed by respondent in favor of Jesusa Felix. Two months later,
Felix, with the written consent of the respondent, sold her rights and interest to
petitioners.
(3)Contract to Sell No. 965 (Exh. 3) covering Lot No. 27, Block 5-CC was
executed by the respondent in favor of Angela Alvarez Solomon on January 8,
1948. With the written consent of the former, Solomon also sold her rights and
interest to the petitioners on May 11, 1948.
In its answer to the complaint, the respondent averred that in relation to the
Contracts to Sell Nos. 322, 965 and 324, petitioners paid on November 7, 1951
the 53rd, 43rd and 53rd installments, respectively, corresponding to the
installments for the month of July, 1951; that the petitioners, as of June 11, 1952,
had failed to pay the stipulated monthly installments for Contracts Nos. 322 and
324 corresponding to the period from August, 1951 through June, 1952, and in
the case of Contract No. 965, from August, 1951 through May, 1952; that despite
several demands for payment of arrears made between December, 1951 and
June, 1952 by the respondent, the petitioners had failed to pay the amounts due;
and that upon the expiration of the 90- day grace period on June 11, 1952
stipulated in the sixth paragraph of the contracts, the respondent had cancelled
them. The answer also prayed for an award of damages and attorney's fees in
the sum of P2,000.00.
On April 20, 1954 the petitioners filed a reply denying that they were in arrears as
to their obligations under the three contracts and, farther averred as affirmative
defense that the cancellation thereof was unlawful and arbitrary.
After trial the Court rendered judgment declaring Contracts Nos. 322, 324 and
965 as existing and subsisting: ordering the respondent to accept the payments
tendered by the petitioners and to pay attorney's fees in the sum of P1,500.00,
but denied the award of moral and exemplary damages. From this decision the
respondent appealed to the Court of Appeals from whose decision - reversing
that of the lower court - the instant appeal was taken.
Petitioners now urge Us, in turn, to reverse the decision of the Court of Appeals,
claiming that the latter had committed the following errors:
"I.The Honorable Court of Appeals erred in declaring that the
respondent Rita Legarda, Inc. had not waived its rights to
cancel its contracts with the petitioners on the ground that it
had previously accepted late payments of the installments
due on such contracts.
"II.The Honorable Court of Appeals erred in declaring that
par. 9 of the contract in question is not in violation of Art.
1308 of the New Civil Code.
"III.The Honorable Court of Appeals erred in not declaring
that the respondent Rita Legarda, Inc., after having tolerated
and accepted previously late payments on the installments
due on the contracts, suddenly and without suitable warning
and giving of further opportunity to pay the same could not
and should not have precipitously decided to forfeit, as it
actually forfeited, all the payments which have already been
made to it by petitioners.
"IV.The Honorable Court of Appeals erred in reversing and in
not affirming the decision of the Court of First Instance of
The above stipulation, to our mind, merely gives the vendor "the right to declare
this contract cancelled and of no effect" upon fulfillment of the conditions therein
setforth. It does not leave the validity or compliance of the contract entirely "to the
will of one of the contracting parties"; the stipulation or agreement simply says
that in case of default in the payment of installments by the vendee, he shall
have (1) "a month of grace," and that (2) should said month of grace expire
without the vendee paying his arrears, he shall have another "period of 90 days"
to pay "all the amounts he should have paid" etc., then the vendor "has the right
to declare this contract cancelled and of no effect." We have heretofore upheld
the validity of similar stipulations. In Taylor vs. Ky Tieng Piao etc. 43 Phil. 873,
876-878 the ruling was that a contract expressly giving to one part, the right to
cancel the same if a resolutory condition therein agreed upon similar to the
one under consideration is not fulfilled, is valid, the reason being that when the
contract is thus cancelled, the agreement of the parties is in reality being fulfilled.
Indeed, the power thus granted can not be said to be immoral, much less
unlawful, for it could be exercised - not arbitrarily - but only upon the other
contracting party committing the breach of contract of non-payment of the
installments agreed upon. Obviously, all that said party had to do to prevent the
other from exercising the power to cancel the contract was for him to comply with
his part of the contract. And in this case, after the maturity of any particular
installment and its non-payment, the contract gave him not only a month grace
but an additional period of 90 days.
Having arrived at the above conclusions, We now come to the question of
whether or not by having previously accepted payments of overdue installments
the respondent had waived its right to declare the contracts cancelled and of no
effect.
In this connection the record shows that on June 11, 1952 when the Contracts to
Sell Nos. 234 and 965 were cancelled, the vendees were ten months in arrears,
and that in the case of Contract to Sell No. 322 the vendees had never resumed
payment of a single installment from the date when, upon their petition, said
contract was reinstated on September 28, 1952. The contracts under
assail the validity of the deed of donation, not being a party thereto. A person
who is not principally or subsidiarily bound has no legal capacity to challenge the
validity of the contract. He must first have an interest in it. "Interest" within the
meaning of the term means material interest, an interest to be affected by the
deed, as distinguished from a mere incidental interest. Hence, a person who is
not a party to a contract and for whose benefit it was not expressly made cannot
maintain an action on it, even if the contract, if performed by the parties thereto
would incidentally affect him, except when he is prejudiced in his rights with
respect to one of the contracting parties and can show the detriment which could
positively result to him from the contract in which he had no intervention. We find
none in the instant case. CSHDTE
DECISION
BELLOSILLO, J p:
There are two (2) main issues in this petition for review: namely, (a) whether a
stipulation in a contract of lease to the effect that the contract "may be renewed
for a like term at the option of the lessee" is void for being potestative or violative
of the principle of mutuality of contracts under Art. 1308 of the Civil Code and
corollarily, what is the meaning of the clause "may be renewed for a like term at
the option of the lessee;" and, (b) whether a lessee has the legal personality to
assail the validity of a deed of donation executed by the lessor over the leased
premises.
Spouses Filemon Tanqueco and Lucia Domingo-Tanqueco owned a 512-square
meter lot located at No. 2 Sarmiento Street corner Quirino High-way, Novaliches,
Quezon City, covered by TCT No. 136779 in their name. On 30 June 1978 they
leased the property to petitioner Allied Banking Corporation (ALLIED) for a
monthly rental of P1,000.00 for the first three (3) years, adjustable by 25% every
three (3) years thereafter. 1 The lease contract specifically states in its Provision
No. 1 that "the term of this lease shall be fourteen (14) years commencing from
April 1, 1978 and may be renewed for a like term at the option of the lessee."
Pursuant to their lease agreement, ALLIED introduced an improvement on the
property consisting of a concrete building with a floor area of 340-square meters
which it used as a branch office. As stipulated, the ownership of the building
would be transferred to the lessors upon the expiration of the original term of the
lease.
Sometime in February 1988 the Tanqueco spouses executed a deed of donation
over the subject property in favor of their four (4) children, namely, private
respondents herein Oscar D. Tanqueco, Lucia Tanqueco-Matias, Ruben D.
Tanqueco and Nestor D. Tanqueco, who accepted the donation in the same
public instrument.
On 13 February 1991, a year before the expiration of the contract of lease, the
Tanquecos notified petitioner ALLIED that they were no longer interested in
renewing the lease. 2 ALLIED replied that it was exercising its option to renew
their lease under the same terms with additional proposals. 3 Respondent Ruben
D. Tanqueco, acting in behalf of all the donee-lessors, made a counter-proposal.
4 ALLIED however rejected the counter-proposal and insisted on Provision No. 1
of their lease contract.
When the lease contract expired in 1992 private respondents demanded that
ALLIED vacate the premises. But the latter asserted its sole option to renew the
lease and enclosed in its reply letter a cashier's check in the amount of
P68,400.00 representing the advance rental payments for six (6) months taking
into account the escalation clause. Private respondents however returned the
check to ALLIED, prompting the latter to consign the amount in court.
An action for ejectment was commenced before the Metropolitan Trial Court of
Quezon City. After trial, the MeTC-Br. 33 declared Provision No. 1 of the lease
contract void for being violative of Art. 1308 of the Civil Code thus
. . . but such provision [in the lease contract], to the mind of
the Court, does not add luster to defendant's cause nor
constitutes as an unbridled or unlimited license or sanctuary
of the defendant to perpetuate its occupancy on the subject
property. The basic intention of the law in any contract is
mutuality and equality. In other words, the validity of a
contract cannot be left at (sic) the will of one of the
contracting parties. Otherwise, it infringes (upon) Article
1308 of the New Civil Code, which provides: The contract
must bind both contracting parties; its validity or compliance
cannot be left to the will of one of them . . . Using the
principle laid down in the case of Garcia v. Legarda as
cornerstone, it is evident that the renewal of the lease in this
case cannot be left at the sole option or will of the defendant
notwithstanding provision no. 1 of their expired contract. For
that would amount to a situation where the continuance and
effectivity of a contract will depend only upon the sole will or
power of the lessee, which is repugnant to the very spirit
envisioned under Article 1308 of the New Civil Code . . . the
theory adopted by this Court in the case at bar finds ample
affirmation from the principle echoed by the Supreme Court
in the case of Lao Lim v. CA, 191 SCRA 150, 154, 155.
On appeal to the Regional Trial Court, and later to the Court of Appeals, the
assailed decision was affirmed. 5
On 20 February 1993, while the case was pending in the Court of Appeals,
option of the lessee." The lessor is bound by the option he has conceded to the
lessee. The lessee likewise becomes bound only when he exercises his option
and the lessor cannot thereafter be excused from performing his part of the
agreement.
Likewise, reliance by the trial court on the 1967 case of Garcia v. Rita Legarda,
Inc., 9 is misplaced. In that case, what was involved was a contract to sell
involving residential lots, which gave the vendor the right to declare the contract
cancelled and of no effect upon the failure of the vendee to fulfill any of the
conditions therein set forth. In the instant case, we are dealing with a contract of
lease which gives the lessee the right to renew the same.
With respect to the meaning of the clause "may be renewed for a like term at the
option of the lessee," we sustain petitioner's contention that its exercise of the
option resulted in the automatic extension of the contract of lease under the
same terms and conditions. The subject contract simply provides that "the term
of this lease shall be fourteen (14) years and may be renewed for a like term at
the option of the lessee." As we see it, the only term on which there has been a
clear agreement is the period of the new contract, i.e., fourteen (14) years, which
is evident from the clause "may be renewed for a like term at the option of the
lessee," the phrase "for a like term" referring to the period. It is silent as to what
the specific terms and conditions of the renewed lease shall be. Shall it be the
same terms and conditions as in the original contract, or shall it be under the
terms and conditions as may be mutually agreed upon by the parties after the
expiration of the existing lease?
In Ledesma v. Javellana 10 this Court was confronted with a similar problem. In
that case the lessee, was given the sole option to renew the lease, but the
contract failed to specify the terms and conditions that would govern the new
contract. When the lease expired, the lessee demanded an extension under the
same terms and conditions. The lessor expressed conformity to the renewal of
the contract but refused to accede to the claim of the lessee that the renewal
should be under the same terms and conditions as the original contract. In
sustaining the lessee, this Court made the following pronouncement:
Footnotes
1.Records, p. 45.
2.Records, p. 11; Exh. "C".
3.ALLIED proposed the following terms for the extension of the lease: (1) Term
of Lease: ten (10) years; (2) Escalation Rate: 10% per annum starting
on the second year; (3) Monthly Rental: P8,000/month on the first
year; and (4) Advance Rental: Six (6) months to be applied to the first
six (6) months of the lease.
4.The counter-proposal: (1) Term: Two (2) years subject to renewal at the sole
option of the lessor; (2) Rent: a) at P80,000 a month payable within
the first five (5) days of each month commencing from the date the
lease contract is executed: b) Twelve (12) months rental payable in
advance upon signing of the lease contract; (3) Deposit: P80,000 to
answer for any unpaid obligations of the lessee, payable upon signing
of the lease contract and refundable upon the termination of the lease
(net of any amount applied to the payment of any such unpaid
obligations).
5.Decision penned by Judge Jose C. de Guzman, RTC Br. 93, Quezon City;
Decision of the Court of Appeals penned by Justice Jesus M.
Elbinias, concurred in by Justices Ramon U. Mabutas. Jr., and
Salvador J. Valdez, Jr., CA-G.R. SP. Case No. 30162.
6.Rollo, p. 12.
7.8 Manresa 627.
8.G.R. No. 87047, 31 October 1990, 191 SCRA 156.
9.No. L-20175, 30 October 1976, 21 SCRA 555.
10.G.R. No. 55187, 28 April 1983, 121 SCRA 794.
11.Shimonek v. Tillanan, 1 P. 2d., 154.
12.Astudillo v. The Board or Directors of PHHC, No. L-28066, 22 September
1976, 73 SCRA 15. See also Article 1397, civil Code.
13.House International Building Tenants Association Inc. v. Intermediate
Appellate Court, G.R. No. 75287, 30 June 1987, 151 SCRA 703.
14.Teves v. The People's Homesite and Housing Corporation, et al., No. L21498, 27 June 1968, 23 SCRA 1141.
EN BANC
[G.R. No. L-264. October 4, 1946.]
VICENTE SINGSON ENCARNACION, plaintiff-appellee, vs.
JACINTA BALDOMAR, ET AL., defendants-appellants.
HILADO, J p:
Vicente Singson Encarnacion, owner of the house numbered 589
Legarda Street, Manila, some six years ago leased said house to Jacinta
Baldomar and her son, Lefrado Fernando, upon a month-to-month basis for
the monthly rental of P35. After Manila was liberated in the last war,
specifically on March 16, 1945, and on April 7, of the same year, plaintiff
Singson Encarnacion notified defendants, the said mother and son, to
vacate the house above-mentioned on or before April 15, 1945, because
plaintiff needed it for his offices as a result of the destruction of the building
where said plaintiff had said offices before. Despite this demand, defendants
insisted on continuing their occupancy. When the original action was lodged
with the Municipal Court of Manila on April 20, 1945, defendants were in
arrears in the payment of the rental corresponding to said month, the agreed
rental being payable within the first five days of each month. That rental was
paid prior to the hearing of the case in the municipal court, as a
consequence of which said court entered judgment for restitution and
payment of rentals at the rate of P35 a month from May 1, 1945, until
defendants completely vacate the premises. Although plaintiff included in
said original complaint a claim for P500 damages per month, that claim was
waived by him before the hearing in the municipal court, on account of which
nothing was said regarding said damages in the municipal court's decision.
When the case reached the Court of First Instance of Manila upon
EN BANC
[G.R. No. 13463. November 9, 1918.]
H. C. LIEBENOW, plaintiff-appellant, vs. THE PHILIPPINE
VEGETABLE OIL COMPANY, defendant-appellee.
DECISION
STREET, J p:
This action was instituted by the plaintiff, H. C. Liebenow, on May
11, 1917, in the Court of First Instance of the city of Manila against the
defendant, the Philippine Vegetable Oil Company, a corporation engaged in
the manufacture of coconut oil in the city of Manila. The purpose of the
proceeding is to recover a sum of money to which the plaintiff considers
himself entitled by way of a bonus in addition to the salary earned by him
while in the employment of the defendant company as superintendent of its
factory in the district of Nagtahan, city of Manila. At the hearing in the Court
of First Instance judgment was entered against the plaintiff, absolving the
defendant from the complaint, and the plaintiff has appealed.
The contract under which the plaintiff rendered the service to which
reference has been made is expressed in a letter of March 17, 1914, written
by the president of the Philippine Vegetable Oil Company to Liebenow as
follows:
"We hereby confirm conversation had on yesterday
by our Mr. Vorster and yourself to the effect that this
company engages your services as superintendent of its
factory at Nagtahan for the period of one year from April 1st,
1914, at a monthly compensation of P500 (five hundred
pesos) and living quarters and such further amount in the
way of bonus as the board of directors may see fit to grant
you."
In conformity with this agreement, the plaintiff entered upon the
discharge of his duties as superintendent of the factory aforesaid on April 1,
1914, and continued to render service in this capacity not only for the period
of one year specified in the contract, but for an additional period of four
months, or until August 1, 1916, when his services terminated. At some time
during the course of this employment, the exact date of which does not
appear, the monthly salary of P500 was raised to P750, but the contract was
not otherwise changed. After the employment ceased the defendant
company continued to deliver to the plaintiff each month a check for P750,
the equivalent of the salary he had been receiving. These payments were
continued until the total sum of P4,500 had been thus paid.
The plaintiff alleges in his complaint that by reason of his skill and
ability the defendant's plant was made much more productive and its profits
thereby enormously increased. It is not denied that the service rendered was
satisfactory to the company, and the court found that during the time the
plaintiff was employed as superintendent the output of the plant had
increased and the cost of operation had diminished, with consequent profit
to the defendant company.
It is the plaintiff's contention that the stipulation contained in the
letter of March 17, 1914, to the effect that the plaintiff should receive such
further amount in the way of bonus, over and above salary, as the board of
directors might see fit to grant has not been satisfied. The P4,500, which he
received in the form of a monthly check of P750 for six successive months
after the termination of his services, seems to be considered by the plaintiff
purely in the light of a free gift, and it is insisted that this money was not paid
to him in satisfaction, in whole or in part, of the stipulated bonus. We cannot
concur in this suggestion. It is true that the directors did not by anticipation
declare that these payments should be considered in the light of a "bonus;"
and a resolution to this effect was not adopted by them until after the trial in
the Court of First Instance had commenced. This circumstance we consider
unimportant. The money thus paid was in addition to salary; and it came
from the same source and was paid by the same authority as any bonus that
might have been awarded to him. The fact that the money was not so
labeled is immaterial.
The plaintiff, however, contends that he is entitled to a bonus to be
fixed by the court as a reasonable participation in the increased profits of the
factory under his care, taking into consideration his technical skill and the
greater output resulting therefrom. He believes that the increased profits of
the enterprise due directly to his efficiency amounted to at least P100,000;
and he suggests, as the lowest proper minimum that he should be awarded
an amount sufficient to raise his salary for the whole period to the sum of
P12,000 per annum, the amount supposedly paid to his predecessor. This
last suggestion is based on the circumstance that, upon a certain occasion,
he talked to the company's manager about the amount of the bonus which
he would expect to receive and informed the manager that he would not be
satisfied with less than his predecessor had been accustomed to receive.
The manager, so the plaintiff says, expressed his conformity with this idea.
The solution of the case makes it necessary to consider the legal
effect of the stipulation inserted in the contract in question to the effect that
the plaintiff should be entitled to such further amount in the way of bonus as
the board of directors might see fit to grant.
We see no reason to doubt that a promise of this character creates
a legal obligation binding upon the promisor, although in its actual results it
may not infrequently prove to be illusory. Such a promise is not, in our
opinion, nugatory, under Article 1115 of the Civil Code, as embodying a
condition dependent exclusively upon the will of the obligor. Nor can it be
held invalid under Article 1256 of the same Code, which declares that the
validity and performance of a contract cannot be left to the will of one of the
contracting parties. The uncertainty of the amount to be paid by way of
bonus is also no obstacle to the validity of the contract (Article 1273, Civil
Code); since the contract itself specifies the manner in which the amount
for. The court reserved the matter for later determination and in the end
ruled that the evidence which the plaintiff sought to elicit was irrelevant. The
witness was therefore excused from producing the papers mentioned in the
subpoena duces tecum and the plaintiff duly excepted.
According to the plaintiff's theory of the case, he was entitled to a
bonus the amount of which should be determined by the court with a view to
the usefulness and efficiency which he had exhibited in the course of his
employment; and he insists that the profits earned by the defendant during
the time he was employed as superintendent of the Nagtahan factory are
relevant in determining the amount to be thus awarded. For reasons already
stated, this contention is untenable; and we are of the opinion that the court
committed no error in refusing to compel the production of the documents
and records in question. The right to the bonus was wholly independent of
the profits, and the amount of the profits could not properly be taken into
consideration by the court at all.
The subpoena duces tecum is, in all respects, like the ordinary
subpoena ad testificandum, with the exception that it concludes with an
injunction that the witness shall bring with him and produce at the
examination the books, documents, or things described in the subpoena. It is
issued in the same manner as the ordinary subpoena, and is procurable
from the clerk as of course without application to the court. Section 402 of
the Code of Civil Procedure says that the subpoena duces tecum may be
used to compel the witness to bring any book, document, or other thing
under his control, which he is bound by law to produce in evidence. The
words "which he is bound by law to produce in evidence" indicate a limitation
upon the exigency of the writ; and it is evident that there is this difference
between the ordinary subpoena to testify and the subpoena duces tecum,
namely, that while the person to whom the subpoena to testify is directed is
bound absolutely and without qualification to appear in response to the
subpoena, the person to whom the subpoena duces tecum is directed is
bound only in so far as he is required by law to produce the documents in
evidence.
It results therefore that, if the case is such as to make it doubtful
whether the documents to be produced are such that the witness is bound
by law to produce them, the witness is entitled to have the court pass upon
this question; and where a subpoena duces tecum is improperly issued to
enforce the production of documents which the witness is not bound to
produce, a proper remedy is by motion to vacate or set aside the subpoena.
Such was the procedure adopted in this case.
The power to require the production of books, documents, and
papers by means of the subpoena duces tecum is one which is undoubtedly
capable of abuse and one which, if improperly used, causes great
annoyance, not to say, expense to the person against whom it is directed. If
the use of the subpoena duces tecum were in practice confined to the office
of compelling the production of documents and papers which are directly
DECISION
PUNO, J p:
Petitioner bank seeks the review of the decision, dated October 15,
1992, of the Court of Appeals 1 in CA G.R. CV No. 27195, the dispositive
portion of which reads as follows:
"WHEREFORE, the judgment appealed from is hereby SET
ASIDE and a new one is entered ordering defendantappellee PNB of re-apply the interest rate of 12% per annum
to plaintiffs-appellants (referring to herein private
respondents) indebtedness and to accordingly take the
appropriate charges from plaintiffs-appellants' (private
respondents') payment of P81,000.00 made on December
26, 1985. Any balance on the indebtedness should, likewise,
be charged interest at the rate of 12% per annum.
"SO ORDERED."
The parties do not dispute the facts as laid down by respondent
court in its impugned decision, viz.:
"On April 7, 1982, (private respondents) as owners of a
NACIDA-registered enterprise, obtained a loan under the
Cottage Industry Guaranty Loan Fund (CIGLF) from the
Philippine National Bank (PNB) in the amount of Fifty
Thousand (P50,000.00) Pesos, as evidenced by a Credit
Agreement. Under the Promissory Note covering the loan,
the loan was to be amortized over a period of three (3) years
to end on March 29, 1985, at twelve (12%) percent interest
annually.
"To secure the loan, (private respondents) executed a Real
Estate Mortgage over a 1.5542 hectare parcel of
unregistered agricultural land located at Cambang-ug,
Toledo City, which was appraised by the PNB at P1,062.52
and given a loan value of P531.26 by the Bank. In addition,
(private respondents) executed a Chattel Mortgage over a
thermo plastic-forming machine, which had an appraisal
value of P8,800 and a loan value of P4,400.00.
"The Credit Agreement provided inter alia, that
'(a)The BANK reserves the right to increase the
interest rate within the limits allowed by law at any
time depending on whatever policy it may adopt in
the future; Provided, that the interest rate on this
accommodation shall be correspondingly
decreased in the event that the applicable
maximum interest is reduced by law or by the
Monetary Board. In either case, the adjustment in
the interest rate agreed upon shall take effect on
the effectivity date of the increase or decrease in
the maximum interest rate.'
"The Promissory Note, in turn, authorized the PNB to raise
the rate of interest, at any time without notice, beyond the
stipulated rate of 12% but only "within the limits allowed by
law."
The Real Estate Mortgage contract likewise
provided that
'(k)INCREASE OF INTEREST RATE: The rate of
interest charged on the obligation secured by this
mortgage as well as the interest on the amount
which may have been advanced by the
MORTGAGE, in accordance with the provision
thereof, shall be subject during the life of this
contract to such an increase within the rate allowed
by law, as the Board of Directors of the
MORTGAGEE may prescribe for its debtors.'
"On February 17, 1983, (private respondents) were granted
an additional NACIDA loan of Fifty Thousand (P50,000.00)
Pesos by the PNB, for which (private respondents) executed
another Promissory Note, which was to mature on April 1,
1985. Other than the date of maturity, the second promissory
Footnotes
1.Through its Second Division, composed of Associate Justices Santiago
M. Kapunan (chairman and ponente), Oscar M. Herrera, and
Serafin V.C. Guingona.
2.Rollo, pp. 32-34.
3.Presided by Judge Generoso A. Juaban.
4.Rollo, p. 35.
5.Petition, p. 9; Rollo, p. 16.
6.See Mutual Life Ins. Co. of New York v. Young's Adm'rs, 23 L.Ed. 152;
Noland Co. v. Graver Tank & Mfg. Co., 301 F. 2d 43; Miller v.
Miller, 134 F. 2d 583, 588; See also Linne v. Ronkienen, 37 N.W.
2d 237, 239.
7.See Suitter v. Thompson, 358 P. 2d 267; Levy v. Baetjer, 81 A. 2d 644.
FIRST DIVISION
[G.R. No. L-27696. September 30, 1977.]
MIGUEL FLORENTINO, ROSARIO ENCARNACION de
FLORENTINO, MANUEL ARCE, JOSE FLORENTINO,
VICTORINO FLORENTINO, ANTONIO FLORENTINO,
REMEDION ENCARNACION and SEVERINA
ENCARNACION, petitioners-appellants, vs. SALVADOR
ENCARNACION, SR., SALVADOR ENCARNACION, JR.,
and ANGEL ENCARNACION, oppositors to encumbrancepetitioners-appellees.
DECISION
GUERRERO, J p:
Appeal from the decision of the Court of First Instance of Ilocos Sur, acting as a
land registration court, in Land Registration Case No. N-310.
On May 22, 1964, the petitioners-appellants Miguel Florentino, Rosario
Encarnacion de Florentino, Manuel Arce, Jose Florentino, Victorino Florentino,
Antonio Florentino, Remedios Encarnacion and Severina Encarnacion, and the
petitioners-appellees Salvador Encarnacion, Sr., Salvador Encarnacion, Jr. and
Angel Encarnacion filed with the Court of First Instance of Ilocos Sur an
application for the registration under Act 496 of a parcel of agricultural land
located at Barrio Lubong, Dacquel, Cabugao, Ilocos Sur. prLL
The application alleged among other things that the applicants are the common
and pro-indiviso owners in fee simple of the said land with the improvements
existing thereon; that to the best of their knowledge and belief, there is no
mortgage, lien or encumbrance of any kind whatsoever affecting said land, nor
any other person having any estate or interest thereon, legal or equitable,
remainder, reservation or in expectancy; that said applicants had acquired the
aforesaid land thru and by inheritance from their predecessors in interest, lately
from their aunt, Doa Encarnacion Florentino who died in Vigan, Ilocos Sur in
1941, and for which the said land was adjudicated to them by virtue of the deed
of extrajudicial partition dated August 24, 1947; that applicants Salvador
Encarnacion, Jr. and Angel Encarnacion acquired their respective shares of the
land thru purchase from the original heirs, Jesus, Caridad, Lourdes and Dolores,
all surnamed Singson, on one hand and from Asuncion Florentino on the other.
After due notice and publication, the Court set the application for hearing. No
opposition whatsoever was filed except that of the Director of Lands which was
later withdrawn, thereby leaving the application unopposed. Thereupon, an order
of general default was issued against the whole world. Upon application of the
applicants, the Clerk of Court was commissioned and authorized to receive the
evidence of the applicants and ordered to submit the same for the Court's proper
resolution.
The crucial point in controversy in this registration case is centered in the
stipulation marked Exhibit O-1 embodied in the deed of extrajudicial partition
(Exhibit O) dated August 24, 1947 which states:
"Los productos de esta parcela de terreno situada en el
Barrio Lubong, Dacquel, Cabugao, Ilocos Sur, se destinan
para costear los gastos de procesion de la Tercera Caida,
celebracion y sermon de Siete Palabras, Seis Estaciones de
Cuaresma, procesion del Nio Jesus, reparacion y
SO ORDERED." 2
After Motions for Reconsideration were denied by the court, the petitionersappellants appealed directly to this Court pursuant to Rule 41, Rules of Court,
raising the following assignment of errors:
I.The lower court erred in concluding that the stipulation embodied in Exhibit O
on religious expenses is just an arrangement, stipulation, or grant revocable at
the unilateral option of the co-owners.
II.The lower court erred in finding and concluding that the encumbrance or
religious expenses embodied in Exhibit O, the extrajudicial partition between the
co-heirs, is binding only on the applicants Miguel Florentino, Rosario
Encarnacion de Florentino, Manuel Arce, Jose Florentino, Antonio Florentino,
Victorino Florentino, Remedios Encarnacion and Severina Encarnacion.
III.The lower court as a registration court erred in passing upon the merits of the
encumbrance (Exhibit O-1) as the same was never put to issue and as the
question involved is an adjudication of rights of the parties.
We find the first and second assignments of error impressed with merit and,
therefore, tenable. The stipulation embodied in Exhibit O-1 on religious expenses
is not revocable at the unilateral option of the co-owners and neither is it binding
only on the petitioners-appellants Miguel Florentino, Rosario Encarnacion de
Florentino, Manuel Arce, Jose Florentino, Victorino Florentino, Antonio
Florentino, Remedios Encarnacion and Severina Encarnacion. It is also binding
on the oppositors-appellees Angel Encarnacion, Salvador Encarnacion, Sr. and
Salvador Encarnacion, Jr.
The stipulation (Exhibit O-1) is part of an extrajudicial partition (Exh. O) duly
agreed and signed by the parties, hence the same must bind the contracting
parties thereto and its validity or compliance cannot be left to the will of one of
them (Art. 1308, N.C.C.). Under Art. 1311 of the New Civil Code, this stipulation
takes effect between the parties, their assigns and heirs. This article provides:.
"Art. 1311. Contracts take effect only between the parties,
their assigns and heirs, except in cases where the rights and
obligations arising from the contract are not transmissible by
their nature, or by stipulation or by provision of law. The heir
is not liable beyond the value of the property he received
from the decedent.
If a contract should contain a stipulation in favor of a third
person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person
is not sufficient. The contracting parties must have clearly
and deliberately conferred a favor upon a third person."
The second paragraph of Article 1311 above-quoted states the law on
stipulations pour autrui. Considering the nature and purpose of the stipulation
(Exh. O-1), We hold that said stipulation is a stipulation pour autrui. A stipulation
pour autrui is a stipulation in favor of a third person conferring a clear and
deliberate favor upon him, and which stipulation is merely a part of a contract
entered into by the parties, neither of whom acted as agent of the third person,
and such third person may demand its fulfillment provided that he communicates
his acceptance to the obligor before it is revoked. 3 The requisites are: (1) that
the stipulation in favor of a third person should be a part, not the whole, of the
contract; (2) that the favorable stipulation should not be conditioned or
compensated by any kind of obligation whatever; and (3) neither of the
contracting parties bears the legal representation or authorization of third party.
To constitute a valid stipulation pour autrui, it must be the purpose and intent of
the stipulating parties to benefit the third person, and it is not sufficient that the
third person may be incidentally benefited by the stipulation. The fairest test to
determine whether the interest of third person in a contract is a stipulation pour
autrui or merely an incidental interest, is to rely upon the intention of the parties
as disclosed by their contract. In applying this test, it matters not whether the
stipulation is in the nature of a gift or whether there is an obligation owing from
the promises to the third person. That no such obligation exists may in some
degree assist in determining whether the parties intended to benefit a third
person. 4
In the case at bar, the determining point is whether the co-owners intended to
benefit the Church when in their extrajudicial partition of several parcels of land
inherited by them from Doa Encarnacion Florentino they agreed that with
respect to the land situated in Barrio Lubong, Dacquel, Cabugao, Ilocos Sur, the
fruits thereof shall serve to defray the religious expenses specified in Exhibit O-1.
The evidence on record shows that the true intent of the parties is to confer a
direct and material benefit upon the Church. The fruits of the aforesaid land were
used thenceforth to defray the expenses of the Church in the preparation and
celebration of the Holy Week, an annual Church function. Suffice it to say that
were it not for Exhibit O-1, the Church would have necessarily expended for this
religious occasion, the annual religious procession during the Holy Week and
also for the repair and preservation of all the statutes, tables, carriages and all
other things necessary for the celebration of the Seven Last Words.
We find that the trial court erred in holding that the stipulation, arrangement or
grant (Exhibit O-1) is revocable at the option of the co-owners. While a stipulation
in favor of a third person has no binding effect in itself before its acceptance by
the party favored, the law does not provide when the third person must make his
acceptance. As a rule, there is no time limit; such third Person has all the time
until the stipulation is revoked. Here, We find that the Church accepted the
stipulation in its favor before it is sought to be revoked by some of the co-owners,
namely the petitioners-appellees herein. It is not disputed that from the time of
the death of Doa Encarnacion Florentino in 1941, as had always been the case
since time immemorial, up to a year before the filing of their application in May
1964, the Church had been enjoying the benefits of the stipulation. The
enjoyment of benefits flowing therefrom for almost seventeen years without
question from any quarters can only be construed as an implied acceptance by
the Church of the stipulation pour autrui before its revocation.
"The acceptance does not have to be in any particular form,
even when the stipulation is for the third person an act of
liberality or generosity on the part of the promisor or
promisee." 5
"It need not be made expressly and formally. Notification of
acceptance, other than such as is involved in the making of
demand, is unnecessary." 6
"A trust constituted between two contracting parties for the
benefit of a third person is not subject to the rules governing
donation of real property. The beneficiary of a trust may
demand performance of the obligation without having
formally accepted the benefit of the trust in a public
document, upon mere acquiescence in the formation of the
trust and acceptance under the second paragraph of Art.
1257 of the Civil Code." 7
Hence, the stipulation (Exhibit O-1) cannot now be revoked by any of the
stipulators at their own option. This must be so because of Article 1257, Civil
Code and the cardinal rule of contracts that it has the force of law between the
parties. 8 Thus, this Court ruled in Garcia v. Rita Legarda, Inc., 9 "Article 1309 is
a virtual reproduction of Article 1256 of the Civil Code, so phrased to emphasize
that the contract must bind both parties, based on the principles (1) that
obligation arising from contracts have the force of law between the contracting
parties; and (2) that there must be mutuality between the parties based on their
essential equality, to which is repugnant to have one party bound by the contract
leaving the other free therefrom."
Consequently, Salvador Encarnacion, Sr. must bear with Exhibit O-1, being a
signatory to the Deed of Extrajudicial Partition embodying such beneficial
stipulation. Likewise, with regards to Salvador, Jr. and Angel Encarnacion, they
too are bound to the agreement. Being subsequent purchasers, they are privies
or successors in interest; it is axiomatic that contracts are enforceable against
the parties and their privies. 10 Furthermore, they are shown to have given their
conformity to such agreement when they kept their peace in 1962 and 1963,
having already bought their respective shares of the subject land but did not
question the enforcement of the agreement as against them. They are also
shown to have knowledge of Exhibit O-1 as they had admitted in a Deed of Real
Mortgage executed by them on March 8, 1962 involving their shares of the
subject land, that, "This parcel of land is encumbered as evidenced by the
document No. 420, page 94, Book I, series 1947, executed by the heirs of the
late Encarnacion Florentino, on August 26, 1947, before M. Francisco Ante,
Notary Public of Vigan, Ilocos Sur, in its page 10 of the said document of
partition, and also by other documents."
The annotation of Exhibit O-1 on the face of the title to be issued in this case is
merely a guarantee of the continued enforcement and fulfillment of the beneficial
stipulation. It is error for the lower court to rule that the petitioners-appellants are
not the real parties in interest, but the Church. That one of the parties to a
contract pour autrui is entitled to bring an action for its enforcement or to prevent
its breach is too clear to need any extensive discussion. Upon the other hand,
that the contract involved contained a stipulation pour autrui amplifies this settled
rule only in the sense that the third person for whose benefit the contract was
entered into may also demand its fulfillment provided he had communicated his
acceptance thereof to the obligor before the stipulation in his favor is revoked. 11
Consideration by the court that the evidence already of record is sufficient and
adequate for rendering a decision upon these issues. 12 In the case at bar, the
records clearly show that the second and third premises enumerated above are
fully met. With regards to the first premise, the petitioners-appellants cannot
claim that the issues anent Exhibit O-1 were not put in issue because this is
contradictory to their stand before the lower court where they took the initial step
in praying for the court's determination of the merits of Exhibit O-1 as an
encumbrance to be annotated on the title to be issued by such court. On the
other hand, the petitioners-appellees who had the right to invoke the limited
jurisdiction of the registration court failed to do so but met the issues head on.
cdrep
Secondly, for this very special reason, We will uphold the actuation of the lower
court in determining the conflicting interests of the parties in the registration
proceedings before it. This case has been languishing in our courts for thirteen
long years. To require that it be remanded to the lower court for another
proceeding under its general jurisdiction is not in consonance with our avowed
policy of speedy justice. It would not be amiss to note that if this case be
remanded to the lower court, and should appeal again be made, the same issues
will once more be raised before Us; hence, Our decision to resolve at once the
issues in the instant petition.
IN VIEW OF THE FOREGOING, the decision of the Court of First Instance of
Ilocos Sur in Land Registration Case No. N-310 is affirmed but modified to allow
the annotation of Exhibit O-1 as an encumbrance on the face of the title to be
finally issued in favor of all the applicants (herein appellants and herein
appellees) in the registration proceedings below.
No pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Muoz Palma, Martin and Fernandez, JJ.,
concur.
Footnotes
SECOND DIVISION
[G.R. No. 79518. January 13, 1989.]
REBECCA C. YOUNG, assisted by her husband
ANTONIO GO, petitioner, vs. COURT OF APPEALS, PH
CREDIT CORP., PHIL. HOLDING, INC. FRANCISCO
VILLAROMAN, FONG YOOK LU, ELLEN YEE FONG and
THE REGISTER OF DEEDS OF MANILA, respondents.
PARAS, J p:
This is a petition for review on certiorari seeking to set aside the decision of the
Court of Appeals 1 in CA-G.R. No. 1002, entitled Spouses Chui Wan and Felisa
Tan Yu and Rebecca Young vs. PH Credit Corporation et al., which affirmed the
decision of the Regional Trial Court of Manila, Branch XXXII, earlier dismissing
the complaint of petitioners for Annulment of Sale, Specific Performance and
Damages, against respondents.
The facts of the case are as follows:
Defendant Philippine Holding, Inc. is the former owner of a piece of land located
at Soler St., Sta. Cruz, Manila, and a two storey building erected thereon,
consisting of six units; Unit 1350 which is vacant, Unit 1352 occupied by Antonio
Young, Unit 1354 by Rebecca C. Young, Unit 1356 by Chui Wan and Felisa Tan
Yu, Unit 1358 by Fong Yook Lu and Ellen Yee Fong and Unit 1360 by the Guan
50).
The lower court decided in favor of the defendants and against the plaintiffs, thus
dismissing the complaint together with defendants' counterclaims (Rollo, p. 15)
On the other hand, the claim of Rebecca C. Young was similarly rejected by the
trial court on the following grounds: (1) that she was not a party in the Civil Case
No. 123883, wherein subject compromise agreement was submitted and
approved by the trial court apart from the fact that she did not even affix her
signature to the said compromise agreement; (2) that Rebecca Young had failed
to present any evidence to show that she had demanded from the defendantsowners, observance of her right of first refusal before the said owners sold units
1356, 1358 and 1360; (3) that even assuming that her supposed right of first
refusal is a stipulation for the benefit of a third person, she did not inform the
obligor of her acceptance as required by the second paragraph of Article 1311 of
the Civil Code.
Chui Wan and Felisa Tan Yu and Rebecca C. Young, assisted by her husband,
appealed to the Court of Appeals which dismissed the same on August 7, 1987,
for lack of merit. LexLib
Hence this petition, which was brought to this Court only by Rebecca Young,
assisted by her husband Antonio Go.
On October 2, 1987, respondents Fong Yook Lu, moved to strike out or dismiss
outright the instant petition (Rollo, p. 35). In the resolution of November 4, 1987,
the Second Division of this Court required the petitioner to comment on said
motion (Rollo, p. 37), which comment was filed on December 17, 1987 (Rollo, p.
38). Thereafter, in the resolution of January 20, 1988, respondents were required
to file a reply thereto (Rollo, p. 42) which was filed on January 11, 1988 (Rollo, p.
43). On March 24, 1988, petitioner filed a rejoinder to reply (Rollo, p. 46) in
compliance with the resolution of February 29, 1988 (Rollo, p. 45).
In the resolution of May 11, 1988, the petition was given due course and the
parties were required to submit simultaneously their respective memoranda
(Rollo, p. 47). Respondents filed their memorandum on June 29, 1988 (Rollo, p.
48), while petitioner's memorandum was filed on July 14, 1988 (Rollo, p. 64).
Petitioner raised the following assignments of error:
1.The lower court erred in holding that Rebecca C. Young
cannot enforce the stipulation in her favor in the compromise
agreement as she is not party therein.
2.The lower court erred in holding that even if par. 3 of the
compromise agreement is construed as a stipulation pour
autrui Rebecca Young cannot enforce it because she did not
communicate her acceptance thereof to the obligor. (Rollo,
p. 7)
In fact, on cross-examination, she admitted that she was not a party to the case
and that she did not sign the aforesaid joint motion because it was not presented
to her (Rollo, p. 18).
More than that, by the aforesaid actuations of the parties and petitioner's
apparent lack of interest, the intention is evident, not to include the latter either in
the onerous, or in the beneficient provisions of said agreement.
Petitioner further argued that the stipulation giving her the right of first refusal is a
stipulation pour autrui or a stipulation in favor of a third person under Article 1311
of the Civil Code.
The requisites of a stipulation pour autrui or a stipulation in favor of a third person
Footnotes
1.Penned by CA Justices Lorna S. Lombos-De la Fuente (ponente), Ricardo J.
Francisco and Alfredo L. Benipayo.
FIRST DIVISION
[G.R. No. 27014. October 5, 1927.]
PAULINA CRISTOBAL ET AL., plaintiffs-appellees, vs.
MARCELINO GOMEZ, defendant-appellant.
DECISION
STREET, J p:
This action was instituted in the Court of First Instance of the
Province of Cavite by Paulina Cristobal, Luis Gomez, Josefa Gomez,
Paciencia Gomez and Jose Gomez, for the purpose of recovering from
Marcelino Gomez two parcels of land located in the sitio of Jabay,
municipality of Bacoor, Province of Cavite, and a lot located in the town of
Bacoor, Cavite, all more particularly described in the second paragraph of
the complaint, and for the purpose of compelling the defendant to pay to the
plaintiffs the income received by him from said property since 1918. To the
complaint the defendant answered with a general denial and two special
defenses not necessary to be here recounted other than to indicate that he
claimed to be owner in his own right of all of the property which is the subject
of the action. Upon hearing the cause the trial court found that the property
in question belongs to the plaintiffs, as coowners, and he therefore ordered
the defendant to surrender the property to them and execute an appropriate
deed of transfer as well as to pay the costs of the proceeding. From this
judgment the defendant appealed.
The property with which this action is concerned formerly belonged
to Epifanio Gomez, deceased husband of the plaintiff Paulina Cristobal and
father of the four Gomez children who are joined with their mother Paulina in
the complaint. On December 13, 1891, Epifanio Gomez sold this property
under contract of sale with pacto de retro to Luis R. Yangco, redeemable in
five years, for the sum of P2,500, the vendor remaining in possession in the
character of lessee. The period expressed in this agreement passed without
redemption, with the result that the property consolidated in Yangco, who,
nevertheless, many years later conceded to the vendor the privilege of
repurchasing. Gomez was without means to effect the repurchase of the
property himself, and he therefore found it necessary to apply to a kinsman,
Bibiano Baas, for assistance. Baas hesitated to lend Gomez the money
upon his own sole credit; but told him that he would let him have the money
if his brother Marcelino Gomez and his sister Telesfora Gomez would make
themselves responsible for the loan. Epifanio therefore consulted with his
brother and sister and they agreed to assist him in getting back his property.
Accordingly, in the latter part of July, 1907, Bibiano Baas was called in
consultation, at the home of Telesfora Gomez in Manila, with Epifanio
Gomez and Marcelino Gomez. These four being present upon that occasion,
an agreement was reached, which was, in substance, that Bibiano Baas
should advance the sum of P7,000, upon the personal credit of Marcelino
and Telesfora Gomez, and that this money should be used to repurchase
the property in the names of Marcelino Gomez and Telesfora Gomez, who
should hold and administer the property until the capital advanced by Baas
should be paid off, after which the property would be returned to Epifanio
Gomez. This agreement was carried into effect by the execution of the
Exhibits A and D of the plaintiffs, and though executed two days apart, these
documents, as the trial court found, really constitute parts of one transaction.
By the Exhibit A, executed on August 12, 1907, Marcelino Gomez and
Telesfora Gomez created a "private partnership in participation" for the
purpose of redeeming the property which their brother Epifanio had sold to
Yangco. It was therein agreed that the capital of this partnership should
consist of P7,000, of which Marcelino Gomez was to supply the amount of
P1,500, and Telesfora Gomez the sum of P5,500. It was further agreed that
all the property to be redeemed should be placed in the name of the two,
namely, Marcelino Gomez and Telesfora Gomez, and that Marcelino Gomez
should be its manager. Among the provisions in this agreement of major
importance to the present decision, we find the following:
"(h)That all the income, rent, and produce of the
aforesaid property of Epifanio Gomez shall be applied
exclusively to the amortization of the capital employed by the
two parties, that is to say, Don Marcelino Gomez and Dona
Telesfora Gomez, with its corresponding interest and other
incidental expenses.
"(i)As soon as the capital employed, with its interest
and other incidental expenses, shall have been covered,
said properties shall be returned to our brother Epifanio
Gomez or to his legitimate children, with the direct
intervention, however, of both parties, namely, Don
Marcelino Gomez and Dona Telesfora Gomez, or one of
them.
"(j)In order that the property of Epifanio Gomez may
be returned, it is made essential that he shall manifest good
behavior in the opinion of Don Marcelino Gomez and Doa
Telesfora Gomez jointly."
By the Exhibit D, executed on July 10, 1907, Luis R. Yangco
conveyed to Marcelino Gomez and Telesfora Gomez the three pieces of
property which he had obtained from Epifanio Gomez. Though this
conveyance recites a consideration of P5,000, the amount really paid to
Yangco upon this occasion was P6,700, consisting of the sum of P5,000,
which was needed to redeem the property from Yangco, the further sum of
P1,500 necessary to pay a loan which Epifanio Gomez had obtained from
Gregoria Yangco, sister of Luis R. Yangco, and finally the sum of P200
which Yangco exacted as a present for his manager. The payment of these
sums left P300 of the capital which Baas had advanced, and this balance
was left with Marcelino Gomez to pay the expenses of documentation and to
make certain needed repairs upon the property.
A little more than a year after the transaction above-mentioned had
Paulina Cristobal is the widow, and the other plaintiffs are her
children and those of Epifanio Gomez, her deceased husband, and the
defendant is the brother of Epifanio Gomez. As stated in the majority opinion
on December 31, 1891, the deceased brother sold the property in question
under pacto de retro to Luis R. Yangco with the right to redeem in five years.
The deceased brother, not having the money with which to redeem the
property, applied to Bibiano Baas for assistance, who agreed to do so on
condition that the defendant and his sister would become personally
responsible for the loan, and on July, 1907, the property was thus redeemed
upon the terms and conditions stated in the majority opinion, and pursuant to
that agreement, the P7,000 thus advanced by Bibiano Baas was used to
repurchase the property in the name of the defendant and his sister
Telesfora Gomez.
The record is conclusive that Epifanio Gomez was a man of
dissolute habits and more or less a spendthrift. That he was squandering his
property, and was very unreliable in money matters, and that on several
occasions the defendant and his sister had been forced to come to his relief
to protect the good name of the family, and that it was for such reason that
the conditions specified were imposed in the agreement of July, 1907. It also
appears that the sister, desiring to be released of her financial responsibility,
conveyed any interest which she may have had to the defendant. That later
the title to the property consolidated in Yangco's with whom the contract of
pacto de retro was made, and that thereafter it was conveyed to the
defendant. The record is also conclusive that the defendant was a thrifty,
prudent, business man, and that under his management and by close
personal attention to the business, he eventually paid for the property, and
that a portion of the purchase price was paid out of his own money, and that
it was through his personal attention and the investment of his own money,
that he was enabled to acquire title and pay for the property.
The legal effect of the majority opinion is to penalize the defendant
for his thrift and prudent business methods, and to take the property away
from him without any compensation for his twenty years of long and faithful
service upon the theory that he acquired the title in trust, and at all times
held it in trust for the use and benefit of his deceased brother and his heirs.
There is no evidence that the defendant acted as trustee or that he ever
recognized a trust, or that during the whole period of twenty years he ever
rendered any accounting or that any one ever requested him to make an
accounting. The evidence is conclusive that at all times he acted, dealt with
and treated the property as his own, upon which he spent his own time, his
own money, and improved the property, so as to give it a commercial value.
Because he did that and the property now has increased in value, it is taken
away from him without any compensation for his services, and he is denied
the fruits of twenty years of his labor in giving t a commercial value.
This is one of many cases which come before this court growing
out of the increase in the value of property, and which would never appear in
court, if there was not an increase in value. The very fact that during the
whole period of twenty years, the defendant was never called upon or
required to make an accounting, and that at all times he considered, dealt
with, and treated the property as his own, is conclusive evidence that he
never held the title in trust for any one.
The judgment of the lower court should be reversed.
EN BANC
[G.R. No. L-23276. November 29, 1968.]
MELECIO COQUIA, MARIA ESPANUEVA and MANILA
YELLOW TAXICAB CO., INC., plaintiffs-appellees, vs.
FIELDMEN'S INSURANCE CO., INC., defendant-appellant.
the true intention of this Policy to protect . . . the liabilities of the Insured towards
the passengers of the Motor Vehicle and the Public" in other words, third parties.
Thus, the policy under consideration is typical of contracts pour autrui this
character being made more manifest by the fact that the deceased driver paid
fifty percent (50%) of the corresponding premiums, which were deducted from his
weekly commissions. Under these conditions, it is clear that the Coquias who,
admittedly, are the sole heirs of the deceased have a direct cause of action
against the Company (Uy Tam v. Leonard, 30 Phil. 471, 485-486; Kauffman v.
Philippine National Bank, 42 Phil. 182, 187, 189), and, since they could have
maintained this action by themselves, without the assistance of the insured it
goes without saying that they could and did properly join the latter in filing the
complaint herein (Guingon v. Capital Insurance & Surety Co., Inc., L-22042, Aug.
17, 1967).
3.ID.; ID.; ID.; ID.; REFERENCE OF DISPUTE TO ARBITRATORS AS
PROVIDED IN THE POLICY, DEEMED WAIVED BY THE ACTS OR
OMISSIONS OF THE PARTIES. Section 17 of the policy under consideration
reads: "If any difference or dispute shall arise with respect to the amount of the
Company's liability under this Policy, the same shall be referred to the decision of
a single arbitrator to be agreed upon by both parties or failing such agreement of
a single arbitrator, to the decision of two arbitrators, one to be appointed in
writing by each of the parties within one calendar month after having been
required in writing so to do by either of the parties and in case of disagreement
between the arbitrator to the decision of an umpire who shall have been
appointed in writing by the arbitrators before entering on the reference and the
costs of and incidental to the reference shall be dealt with in the Award. And it is
hereby expressly stipulated and declared that it shall be a condition precedent to
any right of action or suit upon this Policy that the award by such arbitrator,
arbitrators or umpire of the amount of the Company's liability hereunder if
disputed shall be first obtained." The record shows, however, that none of the
parties to the contract invoked this section, or made any reference to arbitration,
during the negotiations preceding the institution of the present case. In fact,
counsel for both parties stipulated, in the trial court, that none of them had, at any
time during said negotiations, even suggested the settlement of the issue
between them by arbitration, as provided in said section. Their aforementioned
acts or omissions had the effect of a waiver of their respective right to demand an
arbitration (Kahnweiler v. Phenix Insurance Co. of Brooklyn, 67 Fed. 483;
Independent School District No. 35, St. Louis County v. A. Hedenberg & Co.,
Inc., 7 NW 2nd, 511).
DECISION
CONCEPCION, C.J p:
This is an appeal from a decision of the Court of First Instance of Manila, certified
Thus, the policy under consideration is typical of contracts pour autrui, this
character being made more manifest by the fact that the deceased driver paid
fifty percent (50%) of the corresponding premiums, which were deducted from his
weekly commissions. Under these conditions, it is clear that the Coquias who,
admittedly, are the sole heirs of the deceased have a direct cause of action
against the Company, 3 and, since they could have maintained this action by
themselves, without the assistance of the Insured, it goes without saying that
they could and did properly join the latter in filing the complaint herein. 4
The second defense set up by the Company is based upon Section 17 of the
policy reading:
"If any difference or dispute shall arise with respect to the
amount of the Company's liability under this Policy, the same
shall be referred to the decision of a single arbitrator to be
agreed upon by both parties or failing such agreement of a
single arbitrator, to the decision of two arbitrators, one to be
appointed in writing by each of the parties within one
calendar month after having been required in writing so to do
by either of the parties and in case of disagreement between
the arbitrators, to the decision of an umpire who shall have
been appointed in writing by the arbitrators before entering
on the reference and the costs of and incidental to the
reference shall be dealt with in the Award. And it is hereby
expressly stipulated and declared that it shall be a condition
precedent to any right of action or suit upon this Policy that
the award by such arbitrator, arbitrators or umpire of the
amount of the Company's liability hereunder if disputed shall
be first obtained."
The record shows, however, that none of the parties to the contract invoked this
section, or made any reference to arbitration, during the negotiations preceding
the institution of the present case. In fact, counsel for both parties stipulated, in
the trial court, that none of them had, at any time during said negotiations, even
suggested the settlement of the issue between them by arbitration, as provided in
said section. Their aforementioned acts or omissions had the effect of a waiver of
their respective right to demand an arbitration. Thus, in Kahnweiler vs. Phenix
Ins. Co. of Brooklyn, 5 it was held:
"Another well-settled rule for interpretation of all contracts is
the parties inconsistent with the notion that they treated the
arbitration provision as in effect, or any conduct which might
be reasonably construed as showing that they did not intend
to avail themselves of such provision, may amount to a
waiver thereof and estop the party charged with such
conduct from claiming its benefits'."
xxx xxx xxx
"The decisive facts here are that both parties from the
inception of their dispute proceeded in entire disregard of the
provisions of their contract relating arbitration and that
neither at any stage of such dispute, either before or after
commencement of the action, demanded arbitration, either
by oral or written demand, pleading, or otherwise. Their
conduct was as effective a rejection of the right to arbitrate
as if, in the best Coolidge tradition, they had said, `We do
not choose to arbitrate'. As arbitration under the express
provisions of article 40 was `at the choice of either party,'
and was chosen by neither, a waiver by both of the right to
arbitration followed as a matter of law."
WHEREFORE, the decision appealed from should be as it is hereby affirmed in
toto, with costs against the herein defendant-appellant, Fieldmen's Insurance
Co., Inc.
IT IS SO ORDERED
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Ruiz Castro, Fernando and
Capistrano, JJ., concur.
EN BANC
[G.R. No. L-22404. May 31, 1971.]
PASTOR B. CONSTANTINO, plaintiff-appellant, vs.
HERMINIA ESPIRITU, defendant-appellee.
discussion. Upon the other hand, that the contract involved contained a
stipulation pour atrui amplifies this settled rule only in the sense that the third
person for whose benefit the contract was entered into may also demand its
fulfillment provided he had communicated his acceptance thereof to the obligor
before the stipulation in his favor is revoked
2.ID.; ID.; STATUTE OF FRAUDS; PARTIALLY PERFORMED CONTRACTS
EXCLUDED FROM APPLICATION THEREOF. The contention that the
contract in question is not enforceable by action by reason of the provisions of
the Statute of Frauds does not appear to be indubitable, it being clear upon the
facts alleged in the amended complaint that the contract between the parties had
already been partially performed by the execution of the deed of sale, the action
brought below being only for the enforcement of another phase thereof, namely,
the execution by appellee of a deed of conveyance in favor of the beneficiary
thereunder.
BARREDO, J., concurring:
1.REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE RULE; NOT APPLICABLE
WHEN REAL AGREEMENT OR ADDITIONAL TERMS INTENDED TO BE
PROVED ARE SPECIFICALLY ALLEGED IN THE PLEADING; RULE MAY NOT
BE UTILIZED AS INSTRUMENT TO CONCEAL OR SHIELD FRAUD. The
general rule of admissibility which excludes evidence aliunde tending to vary the
terms of a written agreement is subject to the exception, among others, that the
same does not apply when the party wishing to prove the real agreement or the
additional terms specifically alleges such agreement or terms in his pleading.
Otherwise stated, the matter of whether or not there is really an obligation on the
part of the appellee to convey the land in question to her child with appellee is
only one of proof, there being no technical bar to the evidence, much less to
appellant's action. Withal, like the Statute of Frauds, the parol evidence rule may
not be used as a shield to commit fraud with impunity, particularly, when, as in
this case, it is alleged that an implied trust is involved. I would even go further. I
venture to add that even if this case were considered as one involving an
express trust under Article 1443 of the Civil Code which provides that an express
trust affecting realty may not be proved by parol evidence. I would still hold that
appellant's case is subject to this exception. It is a fundamental principle
underlying all rules of proof that never may the same be utilized as instruments to
conceal or shield fraud.
DECISION
DIZON, J p:
This is a direct appeal on a question of law taken by Pastor B. Constantino from
an order of the Court of First Instance of Rizal denying his motion for the
admission of his amended complaint in Civil Case No. 5924, entitled "Pastor B.
Constantino vs. Herminia Espiritu."
Appellant's complaint alleged, inter alia, that he had, by a fictitious deed of
absolute sale annexed thereto, conveyed to appellee on October 30, 1953, for a
consideration of P8,000.00, the two-storey house and four (4) subdivision lots
covered by Transfer Certificate of Title No. 20174 issued by the Register of
Deeds of Rizal on October 25, 1950 in the name of Pastor B. Constantino,
married to Honorata Geukeko, with ,the understanding that appellee would hold
the properties in trust for their illegitimate son, Pastor Constantino, Jr., still
unborn at the time of the conveyance; that thereafter appellee mortgaged said
properties to the Republic Savings Bank of Manila twice to secure payment of
two loans, one of P3.000.00 and the other of P2,000.00, and that thereafter she
offered them for sale. The complaint then prayed for the issuance of a writ of
preliminary injunction restraining appellee and her agents or representatives from
further alienating or disposing of the properties, and for judgment ordering her to
execute a deed of absolute sale of said properties in favor of Pastor B.
Constantino, Jr., the beneficiary (who, at the filing of said complaint, was about
five years of age), and to pay attorney's fees in the sum of P2,000.00.
As a result of the conveyance mentioned heretofore, TCT No. 20714 in the name
of plaintiff was partially cancelled and in lieu thereof, TCT No. 32744 was issued
by the Register of Deeds of Rizal in the name of appellee Herminia Espiritu.
On December 16, 1959, appellee moved to dismiss the complaint on the ground
that it stated no cause of action because Pastor Constantino, Jr., the beneficiary
of the alleged trust, was not included as party-plaintiff, and on the further ground
that appellant's cause of action was unenforceable under the Statute of Frauds.
In his opposition to said motion to dismiss, appellant argued that the Statute of
Frauds does not apply to trustee and cestui que trust as in the case of appellee
and her illegitimate child, and that for this reason appellant would not be barred
from proving by parol evidence an implied trust existing under Article 1453 of the
Civil Code. On the other hand, in her rejoinder to appellant's opposition,, appellee
argued that what the former was invoking in his complaint (Paragraph V,
Complaint) was an implied trust under Article 1453 of the Civil Code and not an
express trust under Section 3, Rule 3 of the Revised Rules of Court. Finding the
grounds alleged in the motion to dismiss to be meritorious, the trial court
dismissed the complaint, with costs.
Immediately after receiving notice of said order of dismissal, appellant filed a
motion for the admission of an amended complaint, attaching thereto a copy
hereof, the amendment consisting mainly of the inclusion of the minor, Pastor
Constantino, Jr. as co-plaintiff. The amended complaint further prayed for the
appointment of appellant as said minor's guardian ad litem. An opposition thereto
was filed on the ground that the amendment aforesaid was not an inclusion but a
substitution of the party plaintiff. As the latter had no interest whatsoever in the
subject matter of the case, it was argued that the substitution was not allowed in
Footnotes
1.This rule of evidence is commonly known as the parol evidence rule. In its
operation, however, it excludes all kinds of evidence, whether oral, in
writing or otherwise, which tends to prove a term or condition not
appearing in the written agreement, if such terms or condition had
been agreed upon before or simultaneously with the agreement. For
this reason, I prefer to call the evidence barred by the general rule
evidence aliunde rather than parol evidence, which is often mistaken
to refer only to evidence by word of mouth, which, as already
explained, is not the sense in which it is supposed to be understood in
the parol evidence rule.
FIRST DIVISION
[G.R. No. 128690. January 21, 1999.]
ABS-CBN BROADCASTING CORPORATION, petitioner,
vs. HONORABLE COURT OF APPEALS, REPUBLIC
BROADCASTING CORP., VIVA PRODUCTIONS, INC.,
and VICENTE DEL ROSARIO, respondents.
In 1990, ABS-CBN and VIVA executed a Film Exhibition Agreement whereby the
latter gave the former an exclusive right to exhibit 24 VIVA Films for TV telecast.
Later, VIVA, through respondent Vincent del Rosario, offered ABS-CBN a list of 3
film packages (36 titles) from which the latter may exercise its right of first refusal
under their agreement. ABS-CBN ticked off 10 titles therefrom. Thereafter, in
February 1992, Del Rosario offered ABS-CBN airing rights over a package of
104 movies for P60 million. In April, 1992, Del Rosario, and Eugenio Lopez of
ABS-CBN, met at a restaurant to discuss the package proposal. According to
Lopez, however, what they agreed upon was ABS-CBN's exclusive film rights to
14 films for P36 million. Del Rosario denied the same. He insisted that the
discussion was on VIVA's offer of 104 films for P60 million, to which ABS-CBN
later made a counter proposal but rejected by VIVA's Board of Directors. Hence,
VIVA later granted RBS the exclusive right to air the 104 VIVA films, including the
14 films supposedly granted to ABS-CBN. ABS-CBN then filed a complaint for
specific performance with prayer for injunction. The RTC granted the prayer and
required ABS-CBN post a P35 million bond, But while ABS-CBN was moving for
reduction of the bond, RBS offered to put up a counterbond and was allowed to
post P30 million. Later, the RTC rendered a decision in favor of RBS and VIVA,
ordering ABS-CBN to pay RBS the amount it paid for the print advertisement and
premium on the counterbond, moral damages, exemplary damages and
attorney's fee. ABS-CBN appealed to the Court of Appeals. Viva and Del Rosario
also appealed seeking moral and exemplary damages and additional attorney's
fees. The Court of Appeals affirmed the RTC decision and sustained the
monetary awards, VIVA's and Del Rosario's appeals were denied.
The key issues are: 1. Whether there was a perfected contract between VIVA
and ABS-CBN; and 2. Whether RBS is entitled to damages and attorney's fees.
The first issue is resolved against ABS-CBN, in the absence of the requisites to
make a valid contract. The alleged agreement on the 14 films, if there is one, is
not binding to VIVA as it is not manifested that Del Rosario has an authority to
bind VIVA. Thus, when ABS-CBN made a counter-proposal to VIVA, the same
was submitted to its Board of Directors, who rejected the same. Further, the
Court agreed that the alleged agreement is not a continuation of the 1990
Contract as the right of first refusal under the said contract had already been
exercised by ABS-CBN. However, on the issue of damages, the Court found
ABS-CBN. RBS is not entitled to actual damages as the claim thereof did not
arise from that which allows the same to be recovered. Neither is RBS entitled to
attorney's fees as there is no showing of bad faith in the other party's persistence
in his case. Also, being a corporation, RBS is not entitled to moral damages as
the same is awarded to compensate actual injuries suffered. Lastly, exemplary
damages cannot be awarded in the absence of proof that ABS-CBN was inspired
by malice or bad faith.
SYLLABUS
1.CIVIL LAW; CONTRACT; ELUCIDATED. A contract is a meeting of minds
between two persons whereby one binds himself to give something or to render
some service to another for a consideration. There is no contract unless the
following requisites concur: (1) consent of the contracting parties; (2) object
certain which is the subject of the contract; and (3) cause of the obligation, which
is established. A contract undergoes three stages: (a) preparation, conception, or
generation, which is the period of negotiation and bargaining, ending at the
moment of agreement of the parties; (b) perfection or birth of the contract, which
is the moment when the parties come to agree on the terms of the contract; and
(c) consummation or death, which is the fulfillment or performance of the terms
agreed upon in the contract. Contracts that are consensual in nature are
perfected upon mere meeting of the minds. Once there is concurrence between
the offer and the acceptance upon the subject matter, consideration, and terms
of payment, a contract is produced. The offer must be certain. To convert the
offer into a contract, the acceptance must be absolute and must not qualify the
terms of the offer; it must be plain, unequivocal, unconditional, and without
variance of any sort from the proposal. A qualified acceptance, or one that
involves a new proposal, constitutes a counter-offer and is a rejection of the
original offer. Consequently, when something is desired which is not exactly what
is proposed in the offer, such acceptance is not sufficient to generate consent
because any modification or variation from the terms of the offer annuls the offer.
2.CORPORATION LAW; BOARD OF DIRECTORS; POWER TO ENTER INTO
CONTRACTS; DELEGATION; VALIDITY THEREOF. Under the Corporation
Code, unless otherwise provided by said Code, corporate powers, such as the
power to enter into contracts, are exercised by the Board of Directors. However,
the Board may delegate such powers to either an executive committee or officials
or contracted managers. The delegation, except for the executive committee,
must be for specific purposes. Delegation to officers makes the latter agents of
the corporation; accordingly, the general rules of agency as to the binding effects
of their acts would apply. For such officers to be deemed fully clothed by the
corporation to exercise a power of the Board, the latter must specially authorize
them to do so. That Del Rosario did not have the authority to accept ABS-CBN's
counter-offer was best evidenced by his submission of the draft contract to
VIVA'S Board of Directors for the latter's approval. In any event, there was
between Del Rosario and Lopez III no meeting of minds.
3.CIVIL LAW; OBLIGATIONS AND CONTRACTS; DAMAGES; ACTUAL
DAMAGES; ELABORATED. Chapter 2, Title XVIII, Book IV of the Civil Code
is the specific law on actual or compensatory damages. Except as provided by
law or by stipulation, one is entitled to compensation for actual damages only for
such pecuniary loss suffered by him as he has duly proved. The indemnification
shall comprehend not only the value of the loss suffered, but also that of the
profits that the obligee failed to obtain. In contracts and quasi-contracts the
damages which may be awarded are dependent on whether the obligor acted
with good faith or otherwise. In case of good faith, the damages recoverable are
those which are the natural and probable consequences of the breach of the
obligation and which the parties have foreseen or could have reasonably
foreseen at the time of the constitution of the obligation. If the obligor acted with
fraud, bad faith, malice, or wanton attitude, he shall be responsible for all
damages which may be reasonably attributed to the non-performance of the
obligation. In crimes and quasi-delicts, the defendant shall be liable for all
damages which are the natural and probable consequences of the act or
omission complained of, whether or not such damages have been foreseen or
could have reasonably been foreseen by the defendant. Actual damages may
likewise be recovered for loss or impairment of earning capacity in cases of
temporary or permanent personal injury, or for injury to the plaintiff's business
standing or commercial credit. DIETcC
4.ID.; ID.; ID.; ID.; CASE AT BAR. The claim of RBS for actual damages did
not arise from contract, quasi-contract, delict, or quasi-delict. It arose from the
fact of filing of the complaint despite ABS-CBN's alleged knowledge of lack of
cause of action. Needless to state, the award of actual damages cannot be
comprehended under the law on actual damages. RBS could only probably take
refuge under Articles 19, 20, and 21 of the Civil Code. It may further be observed
that in cases where a writ of preliminary injunction is issued, the damages which
the defendant may suffer by reason of the writ are recoverable from the injunctive
bond. In this case, ABS-CBN had not yet filed the required bond; as a matter of
fact, it asked for reduction of the bond and even went to the Court of Appeals to
challenge the order on the matter. Clearly then, it was not necessary for RBS to
file a counterbond. Hence, ABS-CBN cannot be held responsible for the premium
RBS paid for the counterbond. Neither could ABS-CBN be liable for the print
advertisements for "Maging Sino Ka Man" for lack of sufficient legal basis. The
RTC issued a temporary restraining order and later, a writ of preliminary
injunction on the basis of its determination that there existed sufficient grounds
for the issuance thereof. Notably, the RTC did not dissolve the injunction on the
ground of lack of legal and factual basis, but because of the plea of RBS that it
be allowed to put up a counterbond.
5.ID.; ID.; ID.; ID.; ATTORNEY'S FEES; ELABORATED. As regards attorney's
fees, the law is clear that in the absence of stipulation, attorney's fees may be
recovered as actual or compensatory damages under any of the circumstances
provided for in Article 2208 of the Civil Code. The general rule is that attorney's
fees cannot be recovered as part of damages because of the policy that no
premium should be placed on the right of litigate. They are not to be awarded
every time a party wins a suit. The power of the court to award attorney's fees
under Article 2208 demands factual, legal, and equitable justification. Even when
a claimant is compelled to litigate with third persons or to incur expenses to
protect his rights, still attorney's fees may not be awarded where no sufficient
showing of bad faith could be reflected in a party's persistence in a case other
than an erroneous conviction of the righteousness of his cause.
thereof defines what are included in moral damages, while Article 2219
enumerates the cases where they may be recovered. Article 2220 provides that
moral damages may be recovered in breaches of contract where the defendant
acted fraudulently or in bad faith. Moral damages are in the category of an award
designed to compensate the claimant for actual injury suffered and not to impose
a penalty on the wrongdoer. The award is not meant to enrich the complainant at
the expense of the defendant, but to enable the injured party to obtain means,
diversion, or amusements that will serve to obviate the moral suffering he has
undergone. It is aimed at the restoration, within the limits of the possible, of the
spiritual status quo ante, and should be proportionate to the suffering inflicted.
Trial courts must then guard against the award of exorbitant damages; they
should exercise balanced restrained and measured objectivity to avoid suspicion
that it was due to passion, prejudice, or corruption on the part of the trial court.
7.ID.; ID.; ID.; ID.; CASE AT BAR. RBS's claim for moral damages could
possibly fall only under item (10) of Article 2219, thereof which reads: (10) Acts
and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
However, the award of moral damages cannot be granted in favor of a
corporation because, being an artificial person and having existence only in legal
contemplation, it has no feelings, no emotions, no senses. It cannot, therefore,
experience physical suffering and mental anguish, which can be experienced
only by one having a nervous system. The statement in People v. Manero and
Mambulao Lumber Co. v. PNB that a corporation may recover moral damages if
it "has a good reputation that is debased, resulting in social humiliation" is an
obiter dictum. On this score alone the award for damages must be set aside,
since RBS is a corporation.
8.ID.; ID.; ID.; EXEMPLARY DAMAGES; ELUCIDATED. The basic law on
exemplary damages is Section 5, Chapter 3, Title XVIII, Book IV of the Civil
Code. These are imposed by way of example or correction for the public good, in
addition to moral, temperate, liquidated, or compensatory damages. They are
recoverable in criminal cases as part of the civil liability when the crime was
committed with one or more aggravating circumstances; in quasi-delicts, if the
defendant acted with gross negligence; and in contracts and quasi-contracts, if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent
manner.
9.ID.; ID.; ID.; ID.; CASE AT BAR. The claim of RBS against ABS-CBN is not
based on contract, quasi-contract, delict, or quasi-delict. Hence, the claims for
moral and exemplary damages can only be based on Articles 19, 20, and 21 of
the Civil Code. The elements of abuse of right under Article 19 are the following:
(1) the existence of a legal right or duty, (2) which is exercised in bad faith, and
(3) for the sole intent of prejudicing or injuring another. Article 20 speaks of the
general sanction for all other provisions of law which do not especially provide for
their own sanction; while Article 21 deals with acts contra bonus mores, and has
the following elements: (1) there is an act which is legal, (2) but which is contrary
to morals, good custom, public order, or public policy, and (3) and it is done with
intent to injure. Verily then, malice or bad faith is at the core of Articles 19, 20,
and 21. Malice or bad faith implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or moral obliquity. Such must be
substantiated by evidence. There is no adequate proof that ABS-CBN was
inspired by malice or bad faith. It was honestly convinced of the merits of its
cause after it had undergone serious negotiations culminating in its formal
submission of a draft contract. Settled is the rule that the adverse result of an
action does not per se make the action wrongful and subject the actor to
damages, for the law could not have meant to impose a penalty on the right to
litigate. If damages result from a person's exercise of a right, it is damnum
absque injuria. TIADCc
DECISION
ten (10) titles" (from the list) "we can purchase" (Exh. "3" Viva) and therefore did not accept said list (TSN, June 8,
1992, pp. 9-10). The titles ticked off by Mrs. Concio are not
the subject of the case at bar except the film "Maging Sino
Ka Man."
For further enlightenment, this rejection letter dated
January 06, 1992 (Exh "3" - Viva) is hereby quoted:
6 January 1992
Dear Vic,
This is not a very formal business letter I am writing
to you as I would like to express my difficulty in
recommending the purchase of the three film
packages you are offering ABS-CBN.
From among the three packages I can only tick off
10 titles we can purchase. Please see attached. I
hope you will understand my position. Most of the
action pictures in the list do not have big action
stars in the cast. They are not for primetime. In line
with this I wish to mention that I have not scheduled
for telecast several action pictures in our very first
contract because of the cheap production value of
these movies as well as the lack of big action stars.
As a film producer, I am sure you understand what I
am trying to say as Viva produces only big action
pictures.
In fact, I would like to request two (2) additional
runs for these movies as I can only schedule them
in our non-primetime slots. We have to cover the
amount that was paid for these movies because as
you very well know that non-primetime advertising
rates are very low. These are the unaired titles in
the first contract.
1.Kontra Persa [sic]
2.Raider Platoon
3.Underground guerillas
4.Tiger Command
5.Boy de Sabog
6.Lady Commando
7.Batang Matadero
8.Rebelyon
I hope you will consider this request of mine.
The other dramatic films have been offered to us
before and have been rejected because of the
ruling of MTRCB to have them aired at 9:00 p.m.
due to their very adult themes.
As for the 10 titles I have choosen [sic] from the 3
packages please consider including all the other
Viva movies produced last year. I have quite an
attractive offer to make.
Thanking you and with my warmest regards.
(Signed)
Charo
SantosConcio
On February 27, 1992, defendant Del Rosario approached
ABS-CBN's Ms. Concio, with a list consisting of 52 original
movie titles (i.e. not yet aired on television) including the 14
titles subject of the present case, as well as 104 re-runs
(previously aired on television) from which ABS-CBN may
choose another 52 titles, as a total of 156 titles, proposing to
sell to ABS-CBN airing rights over this package of 52
originals and 52 re-runs for P60,000,000.00 of which
P30,000,000.00 will be in cash and P30,000,000.00 worth of
television spots (Exh. "4" to "4-C" - Viva; "9" - Viva).
On April 2, 1992, defendant Del Rosario and ABSCBN's general manager, Eugenio Lopez III, met at the
Tamarind Grill Restaurant in Quezon City to discuss the
package proposal of Viva. What transpired in that lunch
meeting is the subject of conflicting versions. Mr. Lopez
testified that he and Mr. Del Rosario allegedly agreed that
ABS-CBN was granted exclusive film rights to fourteen (14)
films for a total consideration of P36 million; that he allegedly
put this agreement as to the price and number of films in a
"napkin" and signed it and gave it to Mr. Del Rosario (Exh.
D; TSN, pp. 24-26, 77-78, June 8, 1992). On the other hand,
Del Rosario denied having made any agreement with Lopez
regarding the 14 Viva films; denied the existence of a napkin
in which Lopez wrote something; and insisted that what he
and televising of the fourteen VIVA films subject of the controversy, starting
with the film Maging Sino Ka Man, which was scheduled to be shown on
private respondent RBS' channel 7 at seven o'clock in the evening of said
date.
On 17 June 1992, after appropriate proceedings, the RTC issued
an order 7 directing the issuance of a writ of preliminary injunction upon
ABS-CBN's posting of a P35 million bond. ABS-CBN moved for the
reduction of the bond, 8 while private respondents moved for reconsideration
of the order and offered to put up a counterbond. 9
In the meantime, private respondents filed separate answers with
counterclaim. 10 RBS also set up a cross-claim against VIVA.
On 3 August 1992, the RTC issued an order 11 dissolving the writ
of preliminary injunction upon the posting by RBS of a P30 million
counterbond to answer for whatever damages ABS-CBN might suffer by
virtue of such dissolution. However, it reduced petitioner's injunction bond to
P15 million as a condition precedent for the reinstatement of the writ of
preliminary injunction should private respondents be unable to post a
counterbond.
At the pre-trial 12 on 6 August 1992, the parties, upon suggestion
of the court, agreed to explore the possibility of an amicable settlement. In
the meantime, RBS prayed for and was granted reasonable time within
which to put up a P30 million counterbond in the event that no settlement
would be reached.
As the parties failed to enter into an amicable settlement, RBS
posted on 1 October 1992 a counterbond, which the RTC approved in its
Order of 15 October 1992. 13
On 19 October 1992, ABS-CBN filed a motion for reconsideration
14 of the 3 August and 15 October 1992 Orders, which RBS opposed. 15
On 29 October 1992, the RTC conducted a pre-trial. 16
Pending resolution of its motion for reconsideration, ABS-CBN filed
with the Court of Appeals a petition 17 challenging the RTC's Orders of 3
August and 15 October 1992 and praying for the issuance of a writ of
preliminary injunction to enjoin the RTC from enforcing said orders. The
case was docketed as CA-G.R. SP No. 29300.
On 3 November 1992, the Court of Appeals issued a temporary
restraining order 18 to enjoin the airing, broadcasting, and televising of any
or all of the films involved in the controversy.
On 18 December 1992, the Court of Appeals promulgated a
decision 19 dismissing the petition in CA-G.R. SP No. 29300 for being
premature. ABS-CBN challenged the dismissal in a petition for review filed
with this Court on 19 January 1993, which was docketed as G.R. No.
108363.
In the meantime the RTC received the evidence for the parties in
Civil Case No. Q-92-12309. Thereafter, on 28 April 1993, it rendered a
decision 20 in favor of RBS and VIVA and against ABS-CBN disposing as
follows:
WHEREFORE, under cool reflection and
prescinding from the foregoing, judgment is rendered in
favor of defendants and against the plaintiff.
(1)The complaint is hereby dismissed;
(2)Plaintiff ABS-CBN is ordered to pay defendant RBS the
following:
a)P107,727.00, the amount of premium paid by
RBS to the surety which issued defendant
RBS's bond to lift the injunction;
b)P191,843.00 for the amount of print
advertisement for "Maging Sino Ka Man"
in various newspapers;
c)Attorney's fees in the amount of P1 million;
d)P5 million as and by way of moral damages;
e)P5 million as and by way of exemplary damages;
(3)For defendant VIVA, plaintiff ABS-CBN is ordered to pay
P212,000.00 by way of reasonable attorney's fees.
(4)The cross-claim of defendant RBS against defendant
VIVA is dismissed.
(5)Plaintiff to pay the costs.
According to the RTC, there was no meeting of minds on the price
and terms of the offer. The alleged agreement between Lopez III and Del
Rosario was subject to the approval of the VIVA Board of Directors, and said
agreement was disapproved during the meeting of the Board on 7 April
1992. Hence, there was no basis for ABS-CBN's demand that VIVA signed
the 1992 Film Exhibition Agreement. Furthermore, the right of first refusal
under the 1990 Film Exhibition Agreement had previously been exercised
per Ms. Concio's letter to Del Rosario ticking off ten titles acceptable to
them, which would have made the 1992 agreement an entirely new contract.
On 21 June 1993, this Court denied 21 ABS-CBN's petition for
review in G.R. No. 108363, as no reversible error was committed by the
Court of Appeals in its challenged decision and the case had "become moot
and academic in view of the dismissal of the main action by the court a quo
in its decision" of 28 April 1993.
III
. . . IN AWARDING MORAL AND EXEMPLARY DAMAGES
IN FAVOR OF PRIVATE RESPONDENT RBS.
IV
. . . IN AWARDING ATTORNEY'S FEES IN FAVOR OF
RBS.
ABS-CBN claims that it had yet to fully exercise its right of first
refusal over twenty-four titles under the 1990 Film Exhibition Agreement, as
it had chosen only ten titles from the first list. It insists that we give credence
to Lopez's testimony that he and Del Rosario met at the Tamarind Grill
Restaurant, discussed the terms and conditions of the second list (the 1992
Film Exhibition Agreement) and upon agreement thereon, wrote the same on
a paper napkin. It also asserts that the contract has already been effective,
as the elements thereof, namely, consent, object, and consideration were
established. It then concludes that the Court of Appeals' pronouncements
were not supported by law and jurisprudence, as per our decision of 1
December 1995 in Limketkai Sons Milling, Inc. v. Court of Appeals, 23 which
cited Toyota Shaw, Inc. v. Court of Appeals, 24 Ang Yu Asuncion v. Court of
Appeals; 25 and Villonco Realty Company v. Bormaheco, Inc. 26
Anent the actual damages awarded to RBS, ABS-CBN disavows
liability therefor. RBS spent for the premium on the counterbond of its own
volition in order to negate the injunction issued by the trial court after the
parties had ventilated their respective positions during the hearings for the
purpose. The filing of the counterbond was an option available to RBS, but it
can hardly be argued that ABS-CBN compelled RBS to incur such expense.
Besides, RBS had another available option, i.e., move for the dissolution of
the injunction; or if it was determined to put up a counterbond, it could have
presented a cash bond. Furthermore under Article 2203 of the Civil Code,
the party suffering loss or injury is also required to exercise the diligence of a
good father of a family to minimize the damages resulting from the act or
omission. As regards the cost of print advertisements, RBS had not
convincingly established that this was a loss attributable to the non-showing
of "Maging Sino Ka Man"; on the contrary, it was brought out during trial that
with or without the case or the injunction, RBS would have spent such an
amount to generate interest in the film.
ABS-CBN further contends that there was no clear basis for the
awards of moral and exemplary damages. The controversy involving ABSCBN and RBS did not in any way originate from business transaction
between them. The claims for such damages did not arise from any
contractual dealings or from specific acts committed by ABS-CBN against
RBS that may be characterized as wanton, fraudulent, or reckless; they
arose by virtue only of the filing of the complaint. An award of moral and
exemplary damages is not warranted where the record is bereft of any proof
offer. 40
When Mr. Del Rosario of VIVA met with Mr. Lopez of ABS-CBN at
the Tamarind Grill on 2 April 1992 to discuss the package of films, said
package of 104 VIVA films was VIVA's offer to ABS-CBN to enter into a new
Film Exhibition Agreement. But ABS-CBN, sent, through Ms. Concio, a
counter-proposal in the form of a draft contract proposing exhibition of 53
films for a consideration of P35 million. This counter-proposal could be
nothing less than the counter-offer of Mr. Lopez during his conference with
Del Rosario at Tamarind Grill Restaurant. Clearly, there was no acceptance
of VIVA's offer, for it was met by a counter-offer which substantially varied
the terms of the offer.
ABS-CBN's reliance in Limketkai Sons Milling, Inc. v. Court of
Appeals 41 and Villonco Realty Company v. Bormaheco, Inc., 42 is
misplaced. In these cases, it was held that an acceptance may contain a
request for certain changes in the terms of the offer and yet be a binding
acceptance as long as "it is clear that the meaning of the acceptance is
positively and unequivocally to accept the offer, whether such request is
granted or not." This ruling was, however, reversed in the resolution of 29
March 1996, 43 which ruled that the acceptance of an offer must be
unqualified and absolute, i.e., it "must be identical in all respects with that of
the offer so as to produce consent or meeting of the minds."
On the other hand, in Villonco, cited in Limketkai, the alleged
changes in the revised counter-offer were not material but merely
clarificatory of what had previously been agreed upon. It cited the statement
in Stuart v. Franklin Life Insurance Co. 44 that "a vendor's change in a
phrase of the offer to purchase, which change does not essentially change
the terms of the offer, does not amount to a rejection of the offer and the
tender of a counter-offer." 45 However, when any of the elements of the
contract is modified upon acceptance, such alteration amounts to a counteroffer.
In the case at bar, ABS-CBN made no unqualified acceptance of
VIVA's offer. Hence, they underwent a period of bargaining. ABS-CBN then
formalized its counter-proposals or counter-offer in a draft contract. VIVA
through its Board of Directors, rejected such counter-offer. Even if it be
conceded arguendo that Del Rosario had accepted the counter-offer, the
acceptance did not bind VIVA, as there was no proof whatsoever that Del
Rosario had the specific authority to do so.
Under the Corporation Code, 46 unless otherwise provided by said
Code, corporate powers, such as the power to enter into contracts, are
exercised by the Board of Directors. However, the Board may delegate such
powers to either an executive committee or officials or contracted managers.
The delegation, except for the executive committee, must be for specific
purposes. 47 Delegation to officers makes the latter agents of the
corporation; accordingly, the general rules of agency as to the binding
effects of their acts would apply. 48 For such officers to be deemed fully
clothed by the corporation to exercise a power of the Board, the latter must
specially authorize them to do so. That Del Rosario did not have the
authority to accept ABS-CBN's counter-offer was best evidenced by his
submission of the draft contract to VIVA's Board of Directors for the latter's
approval. In any event, there was between Del Rosario and Lopez III no
meeting of minds. The following findings of the trial court are instructive:
A number of considerations militate against ABSCBN's claim that a contract was perfected at that lunch
meeting on April 02, 1992 at the Tamarind Grill.
FIRST, Mr. Lopez claimed that what was agreed
upon at the Tamarind Grill referred to the price and the
number of films, which he wrote on a napkin. However,
Exhibit "C" contains numerous provisions which were not
discussed at the Tamarind Grill, if Lopez testimony was to be
believed nor could they have been physically written on a
napkin. There was even doubt as to whether it was a paper
napkin or a cloth napkin. In short what were written in Exhibit
"C" were not discussed, and therefore could not have been
agreed upon, by the parties. How then could this court
compel the parties to sign Exhibit "C" when the provisions
thereof were not previously agreed upon?
SECOND, Mr. Lopez claimed that what was agreed
upon as the subject matter of the contract was 14 films. The
complaint in fact prays for delivery of 14 films. But Exhibit
"C" mentions 53 films as its subject matter. Which is which?
If Exhibit "C" reflected the true intent of the parties, then
ABS-CBN's claim for 14 films in its complaint is false or if
what it alleged in the complaint is true, then Exhibit "C" did
not reflect what was agreed upon by the parties. This
underscores the fact that there was no meeting of the minds
as to the subject matter of the contract, so as to preclude
perfection thereof. For settled is the rule that there can be no
contract where there is no object certain which is its subject
matter (Art. 1318, NCC).
THIRD, Mr. Lopez [sic] answer to question 29 of his
affidavit testimony (Exh. "D") states:
"We were able to reach an agreement. VIVA gave
us the exclusive license to show these fourteen (14)
films, and we agreed to pay Viva the amount of
P16,050,000.00 as well as grant Viva commercial
slots worth P19,950,000.00. We had already
earmarked this P16,050,000.00."
and specific performance cases, inter alia, will not preclude the filing of, or abate,
an ejectment case. Unlawful detainer and forcible entry suits under Rule 70 are
designed to summarily restore physical possession of a piece of land or building
to one who has been illegally or forcibly deprived thereof, without prejudice to the
settlement of the parties' opposing claims of juridical possession in appropriate
proceedings. It has been held that these actions "are intended to avoid disruption
of public order by those who would take the law in their hands purportedly to
enforce their claimed right of possession." In these cases, the issue is pure
physical or de facto possession, and pronouncements made on questions of
ownership are provisional in nature.
2.ID.; ID.; ID.; ID.; SHOWING OF "STRONG REASONS OF EQUITY," AS AN
EXCEPTION THERETO; CASE AT BAR. In Wilmon Auto Supply Corporation,
et al., v. Court of Appeals, et al., the issue of whether or not an ejectment case
based on expiration of lease contract should be abated by an action to enforce
the right of preemption or prior purchase of the leased premises was resolved in
the negative. Only in rare instances is suspension allowed to await the outcome
of the pending civil action. In Wilmon, the Court recognized that Vda. De Legaspi
v. Avendao [based on strong reasons of equity] was an exception to the general
rule against suspension of an ejectment proceeding. In the case at bar, the
continued occupation by private respondent of the leased premises is
conditioned upon his right to acquire ownership over said property. The factual
milieu obtaining here, however, hardly falls within the aforecited exception as the
resolution of the ejectment suit will not result in the demolition of the leased
premises, as in the case of Vda. De Legaspi v. Avendao. Verily, private
respondent failed to show "strong reasons of equity" to sustain the suspension or
dismissal of the ejectment case.
3.CIVIL LAW; SALES; CONTRACT OF SALE, WHEN PERFECTED; NO
ABSOLUTE ACCEPTANCE OF SELLER'S OFFER IN CASE AT BAR.
Contracts that are consensual in nature, like a contract of sale, are perfected
upon mere meeting of the minds. Once there is concurrence between the offer
and the acceptance upon the subject matter, consideration, and terms of
payment, a contract is produced. The offer must be certain. To convert the offer
into a contract, the acceptance must be absolute and must not qualify the terms
of the offer; it must be plain, unequivocal, unconditional, and without variance of
any sort from the proposal. A qualified acceptance, or one that involves a new
proposal, constitutes a counter-offer and is a rejection of the original offer.
Consequently, when something is desired which is not exactly what is proposed
in the offer, such acceptance is not sufficient to generate consent because any
modification or variation from the terms of the offer annuls the offer. ASTDCH
4.ID.; ID.; ID.; CASE AT BAR. In the case at bar, while it is true that private
respondent informed petitioner that he is accepting the latter's offer to sell the
leased property, it appears that they did not reach an agreement as to the extent
of the lot subject of the proposed sale. This is evident from the April 15, 1993
[and November 7, 1993 reply-letter[s] of private respondent to petitioner . . . The
foregoing letters reveal that private respondent did not give his consent to buy
only 413.28 square meters of the leased lot, as he desired to purchase the whole
490 square-meter-leased premises which, however, was not what was exactly
proposed in petitioner's offer. Clearly, therefore, private respondent's acceptance
of petitioner's offer was not absolute, and will consequently not generate consent
that would perfect a contract.
DECISION
YNARES-SANTIAGO, J p:
This is a petition for review under Rule 45 of the Rules of Court seeking to set
aside the August 29, 1997 decision 1 and the November 28, 1997 resolution 2 of
the Court of Appeals 3 in CA-G.R. SP No. 40031, affirming the decision 4 of the
Regional Trial Court of Caloocan City, Branch 131, in Civil Case No. C-17033
which reversed the Decision 5 of the Metropolitan Trial Court of Caloocan,
Branch 53, in an ejectment suit docketed as Civil Case No. 21755.
The antecedent facts are as follows: Petitioner Yolanda Palattao entered into a
lease contract whereby she leased to private respondent a house and a 490square-meter lot located in 101 Caimito Road, Caloocan City, covered by
Transfer Certificate of Title No. 247536 and registered in the name of petitioner.
The duration of the lease contract was for three years, commencing from
January 1, 1991, to December 31, 1993, renewable at the option of the parties.
The agreed monthly rental was P7,500.00 for the first year; P8,000.00 for the
second year; and P8,500.00 for the third year. The contract gave respondent
lessee the first option to purchase the leased property. 6
During the last year of the contract, the parties began negotiations for the sale of
the leased premises to private respondent. In a letter dated April 2, 1993,
petitioner offered to sell to private respondent 413.28 square meters of the
leased lot at P7,800.00 per square meter, or for the total amount of
P3,223,548.00. 7 Private respondent replied on April 15, 1993 wherein he
informed petitioner that he "shall definitely exercise [his] option [to buy]" the
leased property. 8 Private respondent, however, manifested his desire to buy the
whole 490-square-meter leased premises and inquired from petitioner the reason
why only 413.28 square meters of the leased lot were being offered for sale. In a
letter dated November 6, 1993, petitioner made a final offer to sell the lot at
P7,500.00 per square meter with a downpayment of 50% upon the signing of the
contract of conditional sale, the balance payable in one year with a monthly
lease/interest payment of P14,000.00 which must be paid on or before the fifth
day of every month that the balance is still outstanding. 9 On November 7, 1993,
private respondent accepted petitioner's offer and reiterated his request for
clarification as to the size of the lot for sale. 10 Petitioner acknowledged private
respondent's acceptance of the offer in his letter dated November 10, 1993.
Petitioner gave private respondent on or before November 24, 1993, within which
to pay the 50% downpayment in cash or manager's check. Petitioner stressed
that failure to pay the downpayment on the stipulated period will enable petitioner
to freely sell her property to others. Petitioner likewise notified private respondent
that she is no longer renewing the lease agreement upon its expiration on
December 31, 1993. 11
Private respondent did not accept the terms proposed by petitioner. Neither was
there any documents of sale nor payment by private respondent of the required
downpayment. Private respondent wrote a letter to petitioner on November 29,
1993 manifesting his intention to exercise his option to renew their lease contract
for another three years, starting January 1, 1994 to December 31, 1996. 12 This
was rejected by petitioner, reiterating that she was no longer renewing the lease.
Petitioner demanded that private respondent vacate the premises, but the latter
refused.
Hence, private respondent filed with the Regional Trial Court of Caloocan,
Branch 127, a case for specific performance, docketed as Civil Case No. 16287,
13 seeking to compel petitioner to sell to him the leased property. Private
respondent further prayed for the issuance of a writ of preliminary injunction to
prevent petitioner from filing an ejectment case upon the expiration of the lease
contract on December 31, 1993.
During the proceedings in the specific performance case, the parties agreed to
maintain the status quo. After they failed to reach an amicable settlement,
petitioner filed the instant ejectment case before the Metropolitan Trial Court of
Caloocan City, Branch 53. 14 In his answer, 15 private respondent alleged that
he refused to vacate the leased premises because there was a perfected
contract of sale of the leased property between him and petitioner. Private
respondent argued that he did not abandon his option to buy the leased property
and that his proposal to renew the lease was but an alternative proposal to the
sale. He further contended that the filing of the ejectment case violated their
agreement to maintain the status quo.
On July 28, 1995, the Metropolitan Trial Court rendered a decision in favor of
petitioner. The dispositive portion thereof states:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendant, ordering the defendant
and all persons claiming right under him to pay the plaintiff
as follows:
1.P12,000.00 per month representing reasonable monthly
rental from January 1, 1994 and months thereafter until
defendants shall vacate the subject premises;
2.P10,000.00 representing attorney's fee;
your Honor.
Court
Anyway, this is a gentleman's agreement that there will be
no new movement but the status quo will be
maintained.
Atty. Siapan, Atty. Mendez & Atty. Uy.
Yes, your Honor. (simultaneously (sic) in saying) 20
The foregoing agreement to maintain the status quo pending negotiations was
noted by the trial court in its January 21, 1994 Order postponing the hearing to
enable the parties to arrive at an amicable settlement, to wit:
Upon agreement of the parties herein for postponement of
today's schedule as there might be some possibility of
settling the claims herein, let the hearing today be cancelled.
In the meantime this case is set for hearing on February 28,
1994 at 8:30 a.m., should the parties not arrive at any
amicable settlement. 21
It is beyond cavil therefore that the preservation of the status quo agreed upon by
the parties applied only during the period of negotiations for an amicable
settlement and cannot be construed to be effective for the duration of the
pendency of the specific performance case. It is a settled rule that injunction suits
and specific performance cases, inter alia, will not preclude the filing of, or abate,
an ejectment case. Unlawful detainer and forcible entry suits under Rule 70 are
designed to summarily restore physical possession of a piece of land or building
to one who has been illegally or forcibly deprived thereof, without prejudice to the
settlement of the parties' opposing claims of juridical possession in appropriate
proceedings. It has been held that these actions "are intended to avoid disruption
of public order by those who would take the law in their hands purportedly to
enforce their claimed right of possession." In these cases, the issue is pure
physical or de facto possession, and pronouncements made on questions of
ownership are provisional in nature. 22
In Wilmon Auto Supply Corporation, et al. v. Court of Appeals, et al. 23 the issue
of whether or not an ejectment case based on expiration of lease contract should
be abated by an action to enforce the right of preemption or prior purchase of the
leased premises was resolved in the negative. The Court outlined the following
precedents:
1.Injunction suits instituted in the RTC by defendants in
ejectment actions in the municipal trial courts or
other courts of the first level (Nacorda v. Yatco, 17
SCRA 920 [1966]) do not abate the latter; and
In the case at bar, the continued occupation by private respondent of the leased
premises is conditioned upon his right to acquire ownership over said property.
The factual milieu obtaining here, however, hardly falls within the aforecited
exception as the resolution of the ejectment suit will not result in the demolition of
the leased premises, as in the case of Vda. De Legaspi v. Avendao. Verily,
private respondent failed to show "strong reasons of equity" to sustain the
suspension or dismissal of the ejectment case. Argumentum a simili valet in lege.
Precedents are helpful in deciding cases when they are on all fours or at least
substantially identical with previous litigations. 26 Faced with the same scenario
on which the general rule is founded, and finding no reason to deviate therefrom,
the Court adheres to the settled jurisprudence that suits involving ownership may
not be successfully pleaded in abatement of an action for ejectment.
Contracts that are consensual in nature, like a contract of sale, are perfected
upon mere meeting of the minds. Once there is concurrence between the offer
and the acceptance upon the subject matter, consideration, and terms of
payment, a contract is produced. The offer must be certain. To convert the offer
into a contract, the acceptance must be absolute and must not qualify the terms
of the offer; it must be plain, unequivocal, unconditional, and without variance of
any sort from the proposal. A qualified acceptance, or one that involves a new
proposal, constitutes a counter-offer and is a rejection of the original offer.
Consequently, when something is desired which is not exactly what is proposed
in the offer, such acceptance is not sufficient to generate consent because any
modification or variation from the terms of the offer annuls the offer. 27
In the case at bar, while it is true that private respondent informed petitioner that
he is accepting the latter's offer to sell the leased property, it appears that they
did not reach an agreement as to the extent of the lot subject of the proposed
sale. This is evident from the April 15, 1993 reply-letter of private respondent to
petitioner, to wit:
I would like to inform you that I shall definitely,exercise my
option as embodied in Provision "F" (First Option) of our
Contract of Lease dated December 21, 1990. As per
agreement, my first option covers the 490 square meters site
which I am currently leasing from you at 101 Caimito Road,
Caloocan City. Specifically, your Transfer Certificate of Title
#247536 delineates the property sizes as 492 square
meters.
Your offer, however, states only 413.28 square meters are
for sale to me. I trust that this is merely an oversight on your
part. Notwithstanding the rumors to the effect that part of the
property have already been sold to other parties, I would like
to believe that you still retain absolute ownership over the
entire property covered by my Contract of Lease. Kindly
enlighten me on this matter so that we can proceed with the
negotiations for the sale of your property to me. 28
Likewise, in his November 7, 1993 reply-letter, private respondent stated that:
While it is true that you first offered your property for sale to
me last April 14, 1993, it is also equally true that you only
correspond with me on this matter again on October 27,
1993. I answered your April 14 offer with a registered mail on
that the monthly rental to be paid by private respondent from the date of the
termination of the lease contract until the leased premises is vacated is reduced
to P8,500.00. SHCaDA
SO ORDERED.
Davide, Jr., C.J., Puno, Kapunan and Austria-Martinez, JJ., concur.
Footnotes
SECOND DIVISION
[G.R. No. 148541. November 11, 2004.]
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs. BONITA O. PEREZ and ALFREDO PEREZ,
respondents.
DECISION
CALLEJO, SR., J p:
This is a petition for review on certiorari seeking to reverse and set aside the
Decision 1 of the Court of Appeals (CA) dated February 28, 2001, and to
reinstate the Decision of the Regional Trial Court (RTC), Makati City, Branch
145, in Civil Case No. 12057, as modified by trial court's Order dated June 11,
1993.
The Antecedents
On April 28, 1978, petitioner Development Bank of the Philippines (DBP) sent a
letter to respondent Bonita Perez, informing the latter of the approval of an
industrial loan amounting to P214,000.00 for the acquisition of machinery and
equipment and for working capital, and an additional industrial loan amounting to
P21,000.00 to cover unforeseen price escalation. 2
On May 18, 1978, the respondents were made to sign four promissory notes
covering the total amount of the loan, P235,000.00. Three promissory notes for
P24,000.00, P48,000.00, and P142,000.00, respectively, were executed, totaling
P214,000.00. These promissory notes were all due on August 31, 1988. 3 A
fourth promissory note due on September 19, 1988 was, likewise, executed to
cover the additional loan of P21,000.00. 4 The promissory notes were to be paid
in equal quarterly amortizations and were secured by a mortgage contract
rate per
annum
computed on
total
amortizations
past due
irrespective
of age.
PLUS
Penalty
charge of 8%
per annum
computed on
total
amortizations
in arrears
irrespective
of age.
The DBP further reserves the right to increase, with notice to
the mortgagor, the rate of interest on the loan as well as all
other fees and charges on loans and advances pursuant to
such policy as it may adopt from time to time during the
period of the loan; Provided that the rate of interest on the
loan shall be reduced in the event that the applicable
maximum rate of interest is reduced by law or by the
Monetary Board; Provided, further, that the adjustment in the
rate of interest shall take effect on or after the effectivity of
the increase or decrease in the maximum rate of interest.
In case of non-payment of the amount of this note or any
portion of it on demand, when due, or any other amount or
amounts due on account of this note, the entire obligation
shall become due and demandable, and if, for the
enforcement of the payment thereof, the DEVELOPMENT
BANK OF THE PHILIPPINES, is constrained to entrust the
case to its attorneys, I/we, jointly and severally, bind
myself/ourselves to pay for attorney's fees, as provided for in
the mortgage contract, in addition to the legal fees and other
incidental expenses. In the event of foreclosure of the
mortgage securing this note, I/we further bind
myself/ourselves, jointly and severally, to pay the deficiency,
if any. AacDHE
SIGNED IN THE PRESENCE OF:
illegibleSGD.SGD.
illegibleBONITA ANG ORDIALESALFREDO PEREZ
(Bonita O. Perez)
This Promissory Note supersedes the Promissory Note
dated May 18, 1978 and stands secured by a mortgage
contract executed by the above parties on the same date,
subject to the following terms and conditions. 10
As stated in the promissory note, the first amortization was due on August 7,
1982, and the succeeding amortizations, every quarter thereafter. However, the
respondents made their first payment amounting to P15,000.00 11 only on April
20, 1983 or after the lapse of three quarters. 12 Their second payment, which
should have been paid on November 7, 1982, was made on December 2, 1983
and only in the amount of P5,000.00. The third payment was then made at the
time when the ninth quarterly amortization should have been paid. After this, the
respondents completely stopped paying. 13 The total payments they made after
the restructure of the loan amounted to P35,000.00 only. 14
This failure to meet the quarterly amortization of the loan prompted the petitioner
to institute foreclosure proceedings on the mortgages. The sale of the properties
covered by the mortgage contract was scheduled on October 30, 1985. 15
On October 24, 1985, the respondents filed a Complaint 16 for the nullification of
the new promissory note with damages and preliminary prohibitory injunction.
The complaint alleged that the petitioner restructured the respondents' obligation
in bad faith by requiring them to sign another promissory note for P231,000.00
without considering the total payments made on the loan amounting to
P224,383.43. The respondents claimed that the petitioner failed to explain to
them how it had arrived at the amount of the restructured loan. The respondents
also alleged that the petitioner failed to furnish them with a disclosure statement
as required by Rep. Act No. 3765, also known as the Truth in Lending Act, prior
to the consummation of the transaction. They averred that the interest imposed
on the said transaction was usurious. They, likewise, alleged that the new
promissory note constituted a novation of the previous obligations.
In its answer, the petitioner denied the allegations and averred that the claim for
violation of the disclosure requirement under Rep. Act No. 3765 was not within
the jurisdiction of the RTC and was barred by prescription. By way of compulsory
counterclaim, the petitioner prayed that the respondents be ordered to pay their
obligation, plus exemplary damages and costs. 17 During trial, the petitioner
presented a Statement of Account dated September 14, 1990, showing that the
total amount of the obligation as of September 15, 1990 was P1,384,465.71. 18
On October 25, 1985, the trial court ordered the petitioner to desist from holding
the public auction of the respondents' properties. The trial court issued an Order
on April 25, 1986 to maintain the status quo.
In its Decision dated May 10, 1993, the court a quo upheld the validity of the new
promissory note and ordered the respondents to pay their obligation. The
dispositive portion reads:
WHEREFORE, judgment is rendered dismissing the
complaint for failure of plaintiffs to prove their causes of
action by clear preponderance of evidence, with costs
against them.
The order issued on April 25, 1986, ordering the defendant
Bank to maintain the status quo and suspending the auction
sale, is hereby set aside.
Defendant Bank's counterclaim is hereby granted, and
plaintiffs are hereby ordered to pay the former the sum of
One Million Three Hundred Eighty-four Thousand Four
Hundred Sixty-five Pesos and Seventy-one Centavos
(P1,384,465.71), representing the latter's obligation as of
September 15, 1990, with interest thereon at the legal rate of
twelve (12%) percent per annum pursuant to Sec. 2 of CB
Circular No. 905; (Sagrador vs. Valderrama, supra), from
September 15, 1990 up to full payment of said sum. The
other counterclaim for exemplary damages is hereby
dismissed.
SO ORDERED. 19
Upon the petitioner's motion for reconsideration, the trial court issued an order 20
amending the dispositive portion of its decision by changing the rate of interest to
eighteen percent (18%) per annum.
Dissatisfied, the respondents appealed to the CA. On February 28, 2001, the CA
rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the Decision dated
May 10, 1993, docketed as Civil Case No. 12057 by the
Regional Trial Court of Makati, Branch 145, is hereby
MODIFIED in the sense that the amount of P1,384,465.71
as of September 1990 is SET ASIDE and the formula
mandated by Central Bank Circular No. 158 should be
applied by the trial court in computing the total obligation and
liability of appellants. All the other parts of the assailed
decision are AFFIRMED in toto.
SO ORDERED. 21
The CA found that the respondents did not voluntarily sign the restructured
promissory note as they were only forced to sign it for fear of having their
mortgaged property foreclosed by the bank. It ruled that the restructured
promissory note which was prepared by the petitioner alone was a contract of
adhesion which violates the rule on mutuality of contracts.
Nonetheless, the CA held that the trial court should have used the formula
prescribed by paragraph 3, 22 Sec. 2(i), Central Bank (CB) Circular No. 158,
Rules and Regulations Implementing Rep. Act No. 3765, in computing the total
obligation of the respondents considering that Sec. 3(a) thereof provides that it
applies to any loans, mortgages, deeds of trust, advances and discounts. 23 The
CA also held that since the loan is secured by a mortgage contract, the eighteen
percent (18%) interest rate was excessive and usurious under CB Circular No.
817. According to the appellate court, CB Circular No. 905, series of 1982, simply
suspended the effectivity of the Usury Law; it did not authorize either party to
unilaterally raise the interest without the other party's consent. 24 Finally, the CA
concluded that there was neither basis nor explanation as to how the measly
amount of P214,000.00 in 1972, restructured to P231,000.00 in 1982, ballooned
to P1,384,465.71 as of September 15, 1990. 25
Both parties moved to reconsider the said decision. The CA denied the said
motions in a Resolution dated May 31, 2001.
The Present Petition
The petitioner raises the following grounds in the instant petition:
1.Whether or not the Honorable Court of Appeals had
decided this instant case in a way not in accord with
the spirit and intent of Republic Act No. 3765,
otherwise known as the Truth in Lending Act, when
it declared that "the trial court should have applied
the formula provided by Central Bank Circular No.
158, series of 1963, as provided above to arrive at
the total obligations of appellants less the amounts
paid by appellants as evidenced by the vouchers
and receipts attached to the records;"
2.Whether or not the conclusion of the Honorable Court of
Appeals stating that the private respondents did not
voluntarily sign the restructured promissory note is
entirely grounded on speculations and/or surmises
or conjectures;
3.Whether or not the Honorable Court of Appeals failed to
notice certain relevant facts which if it had been
considered would change its finding that the
restructured promissory note was prepared by the
appellee Bank alone;
interest rate should be eighteen percent (18%), the interest rate they agreed
upon. 35 For their part, the respondents argue that the Central Bank engaged in
self-legislation in enacting CB Circular No. 905.
We agree with the ruling of the CA. It is elementary that the laws in force at the
time the contract was made generally govern the effectivity of its provision. 36
We note that the new promissory note was executed on May 6, 1982, prior to the
effectivity of CB Circular No. 905 on January 1, 1983. At that time, The Usury
Law, Act No. 2655, as amended by Presidential Decree No. 116, was still in force
and effect.
Under the Usury Law, no person shall receive a rate of interest, including
commissions, premiums, fines and penalties, higher than twelve percent (12%)
per annum or the maximum rate prescribed by the Monetary Board for a loan
secured by a mortgage upon real estate the title to which is duly registered. 37
In this case, by specific provision in the new promissory note, the restructured
loan continued to be secured by the same mortgage contract executed on May
18, 1978 which covered real and personal properties of the respondents. We,
therefore, find the eighteen percent (18%) interest rate plus the additional interest
and penalty charges of eighteen percent (18%) and eight percent (8%),
respectively, to be highly usurious.
In usurious loans, the entire obligation does not become void because of an
agreement for usurious interest; the unpaid principal debt still stands and
remains valid, but the stipulation as to the usurious interest is void.
Consequently, the debt is to be considered without stipulation as to the interest.
38 In the absence of an express stipulation as to the rate of interest, the legal
rate at twelve percent (12%) per annum shall be imposed. 39
Neither is the contention of the respondents that the Central Bank engaged in
self-legislation correct. As we held in First Metro Investment Corporation v. Este
Del Sol Mountain Reserve, Inc.: 40
. . . Central Bank Circular No. 905 did not repeal nor in any
way amend the Usury Law but simply suspended the latter's
effectivity. The illegality of usury is wholly the creature of
legislation. A Central Bank Circular cannot repeal a law.
Only a law can repeal another law. Thus, retroactive
application of a Central Bank Circular cannot, and should
not, be presumed. 41
On the third issue, the petitioner argues that CB Circular No. 158 does not
prescribe a formula in computing a debtor's monetary obligation, but merely
provides for the formula in computing the simple annual rate. It contends that the
amount of the debtor's obligation must be computed in accordance with the
interest rate, charges, and manner of computation agreed upon by the parties. 42
RESOLUTION
PERALTA, J p:
Before the Court are the Motions for Reconsideration separately filed by movants
Teofisto T. Guingona, Bishop Broderick S. Pabillo, Solita Collas Monsod, Maria
Corazon Mendoza Acol, Fr. Jose Dizon, Nelson Java Celis, Pablo R.
Manalastas, Georgina R. Encanto and Anna Leah E. Colina (herein referred to
as Guingona, et al.) in G.R. No. 201127; 1 Solidarity for Sovereignty (S4S)
and stress that the March 31, 2012 Deed of Sale is not a special transaction
which warrants any exemption from the mandatory requirements of a public
bidding. 29 It is likewise their view that time constraints, budgetary consideration
and other advantages in extending the option period are not plausible
justifications for non-compliance with the requirements of public bidding. 30
Finally, movants assail the constitutionality of the entire AES Contract and
consequently of the option contract because of its failure to provide that the
mandatory minimum system capabilities be complied with; and because of the
provision on shared responsibility between the Comelec and Smartmatic. 31
G.R. No. 201413
I.THE NON-RELEASE OF THE SECURITY DEPOSIT BY
COMELEC INDICATES THE EXISTENCE OF
UNFULFILLED OBLIGATIONS BY THE
CONTRACTOR, AND THEREFORE, IT IS
ABSURD TO CITE THIS UNCURED BREACH BY
THE CONTRACTOR TO JUSTIFY THE GRANT
OF MORE RIGHTS TO THE SAID CONTRACTOR
BY EXTENDING THE EXPIRED OPTION TO
PURCHASE WHICH EFFECTIVELY
CIRCUMVENTS THE GOVERNMENT
PROCUREMENT LAW. TSDHCc
II.THERE IS NO JUSTIFIABLE BASIS TO ACCEPT MERE
ARGUMENTS THAT THE PCOS IS CAPABLE OF
RUNNING WITH DIGITAL SIGNATURES,
SECURE[D] FROM HACKING AND COMPLIANT
WITH THE MINIMUM ACCURACY RATE OF
99.995%, WHEN IN ACTUAL PERFORMANCE
DURING MAY 2010 [ELECTIONS,] THE PCOS
OPERATED WITHOUT DIGITAL SIGNATURES,
FOUND VULNERABLE TO HACKING AND
FAILED BY THE ACCURACY REQUIREMENT, AS
SHOWN BY THE APPLICABLE COMELEC
RESOLUTIONS, TWG-RMA REPORT, AUDIT
LOGS AND PRINT LOGS. 32
Movants Tan Dem, et al. convey their view on the absurdity of the Court's
decision in justifying the resurrection of the dead OTP with the continuing
effectivity of the stipulation on performance security notwithstanding the
presumed existence of uncured contractual breach by the contractor. 33 They
also express doubt that the PCOS machines are capable of running with digital
signatures compliant with the minimum accuracy rate. 34
For their part, respondents offer the following comments:
COMELEC
The Comelec, on the other hand, argues that it validly exercised the OTP
because the period for its exercise was amended and accordingly extended to
March 31, 2012. It highlights the provision in the AES Contract on the right to
amend the contract which the parties did during its effectivity. 35 It does not
agree with movants' claim that the parties to the contract intended that the option
period be definite. 36 Rather, it maintains that the parties are free to extend the
option period in the same way that they can amend the other provisions of the
contract. 37 Moreover, the Comelec insists that the extension of the option period
is neither a material nor substantial amendment considering that after the
extension, the AES Contract taken as a whole still contains substantially the
same terms and conditions as the original contract and does not translate to
concrete financial advantages to Smartmatic-TIM. 38 It also argues that the
extension of the option period could not have affected the bid prices or financial
proposals of the bidders since they understood from the RFP that it had no
separate price allocation. 39 It emphasizes that a longer period was not a benefit
but a burden to the bidders such that they would not have submitted a lower but
in fact a higher bid because they would have to give up the opportunity to lease
or sell the PCOS machines to third parties and it would also result in higher costs
in warehousing and security. 40 The Comelec also opines that San Diego and
San Buenaventura, cited by movants, are not applicable because they involve
alterations of the essential terms and conditions of the main contract to the
disadvantage of the government unlike this case where there is an alteration only
with respect to the ancillary provision of the AES Contract and for the benefit of
the Comelec. 41 The Comelec reiterates that the extension of the option period is
advantageous to it and burdensome for Smartmatic-TIM. 42 Lastly, it posits that
the exercise of the OTP was the more prudent choice for the Comelec taking into
consideration the budget and time constraints. 43
SMARTMATIC-TIM
Smartmatic-TIM contends that the OTP is only an ancillary provision in the
subsisting AES Contract which has already satisfied the public bidding
requirements. 44 It disagrees with petitioners that the extension of the option
period was unilateral and claims instead that it was mutual as the parties in fact
executed an agreement on the extension. 45 Assuming that the option period
had already expired, the extension is not a substantial or material amendment
since it only pertains to a residual component of the AES Contract. 46 It also
echoes the Comelec's argument that the San Diego and San Buenaventura
cases are not applicable to the present case because of the difference in factual
circumstances. 47 Moreover, it reiterates its claim that the extension is favorable
to the Comelec and does not prejudice the other bidders. 48 Smartmatic-TIM
explains that the retention of the performance security is due to its residual
continuing obligations to maintain the PCOS machines and update the software
in anticipation of their possible use for elections after 2010, and not due to the
existence of unfulfilled obligations as provided in the AES Contract. 49 It likewise
points out that the alleged flaws and deficiencies of the PCOS machines do not
affect its compliance with the requirements of RA 9369. 50 It emphasizes that the
use of digital signatures and their availability for use in future elections have been
adequately established. 51 It also defends PCOS machines' compliance with the
minimum requirements under RA 9369 as found by the Court in Roque v.
Comelec. 52 As to the alleged glitches, Smartmatic-TIM claims that they are not
attributable to any inherent defect in the PCOS machines and, in any case,
enhancements have already been made. 53 Lastly, Smartmatic-TIM stresses
that the arguments challenging the validity and constitutionality of the AES
Contract and the performance by the Comelec of its mandate have already been
rejected with finality by the Court in Roque v. Comelec. 54
We find no reason to disturb our June 13, 2012 Decision.
Clearly, under the AES Contract, the Comelec was given until December 31,
2010 within which to exercise the OTP the subject goods listed therein including
the PCOS machines. The option was, however, not exercised within said period.
But the parties later entered into an extension agreement giving the Comelec
until March 31, 2012 within which to exercise it. With the extension of the period,
the Comelec validly exercised the option and eventually entered into a contract of
sale of the subject goods. The extension of the option period, the subsequent
exercise thereof, and the eventual execution of the Deed of Sale became the
subjects of the petitions challenging their validity in light of the contractual
stipulations of respondents and the provisions of RA 9184. IcDHaT
In our June 13, 2012 Decision, we decided in favor of respondents and placed a
stamp of validity on the assailed resolutions and transactions entered into. Based
on the AES Contract, we sustained the parties' right to amend the same by
extending the option period. Considering that the performance security had not
been released to Smartmatic-TIM, the contract was still effective which can still
be amended by the mutual agreement of the parties, such amendment being
reduced in writing. To be sure, the option contract is embodied in the AES
Contract whereby the Comelec was given the right to decide whether or not to
buy the subject goods listed therein under the terms and conditions also agreed
upon by the parties. As we simply held in the assailed decision:
While the contract indeed specifically required the Comelec
to notify Smartmatic-TIM of its OTP the subject goods until
December 31, 2010, a reading of the other provisions of the
AES contract would show that the parties are given the right
to amend the contract which may include the period within
which to exercise the option. There is, likewise, no
prohibition on the extension of the period, provided that the
contract is still effective. 55
In interpreting Article 2.2 of the AES Contract, movants claim that the use of
the word "surviving" and the phrase "without prejudice" suggests that the
warranty provision and the OTP are covered by a different period and not by
the term of the AES Contract. 56
We cannot subscribe to said postulation. Article 2.2 of the AES Contract reads:
Article 2
EFFECTIVITY
xxx xxx xxx
2.2.The Term of this Contract begins from the date of
effectivity until the release of the Performance Security,
without prejudice to the surviving provisions of this
Contract including the warranty provision as prescribed
in Article 8.3 and the period of the option to purchase
(Emphasis supplied).
The provision means that the contract takes effect from the date of effectivity until
the release of the performance security. Article 8 thereof, on the other hand,
states when the performance security is released, to wit:
Article 8
Performance Security and Warranty
xxx xxx xxx
Within seven (7) days from delivery by the PROVIDER to
COMELEC of the Over-all Project Management Report after
successful conduct of the May 10, 2010 elections,
COMELEC shall release to the PROVIDER the abovementioned Performance Security without need of demand.
The performance security may, therefore, be released before December 31,
2010, the deadline set in the AES Contract within which the Comelec could
exercise the option. The moment the performance security is released, the
contract would have ceased to exist. However, since it is without prejudice to the
surviving provisions of the contract, the warranty provision and the period of the
option to purchase survive even after the release of the performance security.
While these surviving provisions may have different terms, in no way can we then
consider the provision on the OTP separate from the main contract of lease such
that it cannot be amended under Article 19.
In this case, the contract is still effective because the performance security has
not been released. Thus, not only the option and warranty provisions survive but
the entire contract as well. In light of the contractual provisions, we, therefore,
sustain the amendment of the option period.
The amendment of a previously bidded contract is not per se invalid. For it to be
nullified, the amendment must be substantial such that the other bidders were
deprived of the terms and opportunities granted to the winning bidder after it won
the same and that it is prejudicial to public interest. In our assailed decision, we
found the amendment not substantial because no additional right was made
available to Smartmatic-TIM that was not previously available to the other
bidders; except for the extension of the option period, the exercise of the option
was still subject to same terms and conditions such as the purchase price and
the warranty provisions; and the amendment is more advantageous to the
Comelec and the public. AHCaED
Movants seek the application of San Diego 57 where we nullified the extension of
the lease agreement and considered said amendment substantial. We, however,
find the case inapplicable. The extension made in San Diego pertained to the
period of the main contract of lease while in this case, the extension referred not
to the main contract of lease of goods and services but to the period within which
to exercise the OTP. In extending the original period of lease of five years to
another five years without public bidding, the Municipality of Naujan, Province of
Mindoro acted in violation of existing law. The period of lease undoubtedly was a
vital and essential particular to the contract of lease. In San Diego, the
Municipality of Naujan was the lessor of its municipal waters and the petitioner,
the lessee. An extension of the lease contract would mean that the lessee would
be given undue advantage because it would enjoy the lease of the property
under the same terms and conditions for a longer period. Moreover, prior to the
extension of the lease period, the rentals were reduced upon the request of the
lessee. The end result was that the municipality was deprived of income by way
of rentals because of the reduced rates and longer period of lease.
In this case, the extension of the option period means that the Comelec had
more time to determine the propriety of exercising the option. With the extension,
the Comelec could acquire the subject PCOS machines under the same terms
and conditions as earlier agreed upon. The end result is that the Comelec
acquired the subject PCOS machines with its meager budget and was able to
utilize the rentals paid for the 2010 elections as part of the purchase price.
We maintain the view that the extension of the option period is an amendment to
the AES Contract authorized by Article 19 thereof. As held in Agan, Jr. v.
Philippine International Air Terminals Co., Inc.: 58
While we concede that a winning bidder is not precluded
from modifying or amending certain provisions of the
contract bidded upon, such changes must not constitute
substantial or material amendments that would alter the
basic parameters of the contract and would constitute a
denial to the other bidders of the opportunity to bid on
the same terms. Hence, the determination of whether or not
a modification or amendment of a contract bidded out
constitutes a substantial amendment rests on whether the
contract, when taken as a whole, would contain substantially
different terms and conditions that would have the effect of
altering the technical and/or financial proposals previously
submitted by other bidders. The alterations and
Villarama, Jr. and Perlas-Bernabe, JJ., maintain the dissent in the June 13, 2012
Decision.
Separate Opinions
VELASCO, JR., J., concurring:
I agree with the ponencia that the Motions for Reconsideration dated October 3,
2012 should be dismissed, but for a different reason, i.e., the disputed Deed of
Sale for the acquisition of the PCOS machines and CCS hardware and software
can be considered as a purchase through direct contracting, a mode of
acquisition not subject to the usual bidding requirements under Republic Act No.
(RA) 9184 or the Government Procurement Reform Act. I am, however, of a
different disposition with respect to the majority's holding that the extension of the
Option to Purchase (OTP) is valid, and consequently, the assailed deed of sale is
also valid.
The OTP Has Expired
The majority's position is that the OTP was still subsisting when the Deed of Sale
was executed in view of the non-receipt by Smartmatic-TIM Corporation of the
Performance Security, which receipt will terminate the AES Contract pursuant to
Article 2 thereof. I beg to disagree. As I have discussed in my June 13, 2012
separate concurring opinion, I am of the view that a different period is given by
the parties with respect to the OTP, as articulated in Article 2.2 of the AES
Contract, which reads:
Article 2
EFFECTIVITY
2.2.The Term of this Contract begins from the date of
effectivity until the release of the Performance Security,
without prejudice to the surviving provisions of this
Contract, including the warranty provision as prescribed in
Article 8.3 and the period of the option to purchase.
(Emphasis ours.)
Shorn of the non-essentials, the provision would read "The Term of this Contract
[is] . . . until the release of the Performance Security, without prejudice to . . . the
period of the option to purchase." With, this, the only interpretation that can be
given to the provision is that the life of the AES Contract GENERALLY ends upon
the release of the Performance Security, EXCEPT with respect to the period of
the OTP, hence the use of the qualifying phrase "without prejudice to." As such,
whether or not Smartmatic-TIM has already received the Performance Security is
immaterial with respect to the proper determination of the date when the OTP
was terminated, the OTP having its own period of existence, independent from
that of the AES Contract.
The period of the OTP is specified in Par. 28.1 of Part V of the RFP, which states
that "[a]n offer for an option to purchase by component shall be decided by the
COMELEC before December 31, 2010." Admittedly, the COMELEC failed to
exercise the OTP within the prescribed period and this failure resulted in the
expiration of the OTP. This is not to say, however, that the purchase of the
PCOS machines and allied components via a new contract, separate and distinct
from the AES Contract, by the COMELEC is invalid for lack of a public bidding.
The purchase can be justified under the Direct Contracting mode,an
Alternative Mode of Procurement under RA 9184
Concededly, the subsequent contract in question is not an extension of the
previous AES Contract, but a new one. And not being an ordinary contract but a
procurement by the government, RA 9184 or the Government Procurement
Reform Act applies. Section 10 of said law requires for the validity of every
government procurement that competitive bidding be conducted. As the law
provides: cCHITA
ARTICLE IV
COMPETITIVE BIDDING
Sec. 10.Competitive Bidding. All Procurement shall be
done through Competitive Bidding, except as provided for in
Article XVI of this Act.
This rule, however, is not absolute. There are recognized exceptions to the
bidding requirement, as can be gleaned in the above-quoted provision. The
exceptions are laid out on the provisions of "Alternative Modes of Procurement"
under Section 48, Article XVI of RA 9184, which reads:
Sec. 48.Alternative Methods. Subject to the prior approval
of the Head of the Procuring Entity or his duly authorized
representative, and whenever justified by the conditions
provided in this Act, the Procuring Entity may, in order to
promote economy and efficiency, resort to any of the
following alternative methods of Procurement:
a.Limited Source Bidding, otherwise known as Selective
Bidding a method of Procurement that involves
direct invitation to bid by the Procuring Entity from a
set of pre-selected suppliers or consultants with
known experience and proven capability relative to
the requirements of a particular contract;
b.Direct Contracting, otherwise known as Single Source
Procurement a method of Procurement that does
not require elaborate Bidding Documents because
the supplier is simply asked to submit a price
In this regard, I reiterate my position that all the foregoing conditions exist in the
present case, thus allowing COMELEC to use an alternative method of
procurement permitted under said statute. Allow me to discuss the existence of
said conditions in seriatim.
Prior approval of the procuring entity
The prior approval of the procuring entity, respondent COMELEC in this case,
was made through COMELEC Resolution Nos. 9376 and 9377. In said
Resolutions, COMELEC manifested its resolve to purchase the AES hardware
and software covered by the OTP in the AES Contract between it and
Smartmatic-TIM. In its Resolution No. 9376, the COMELEC stated:
NOW, THEREFORE, the Commission on Elections, by virtue
of the powers vested in it by the Constitution, the Omnibus
Election Code, Republic Act No. 9369 and other election
laws, and after finding the exercise of the Option to
Purchase most advantageous to the government,
RESOLVED, as it hereby RESOLVES, to exercise its Option
to Purchase the PCOS and CCS hardware and software in
accordance with Section 4.3, Article 4 of the AES contract
between the Commission and SMARTMATIC-TIM in
connection with the May 10, 2010 National and Local
Elections . . . .
Conditions justifying a Direct Contracting
As for the second condition, I submit that the Deed of Sale executed by
respondents is analogous to the "Direct Contracting" mode defined in the
above-quoted Sec. 48 (b), Art. XVI of RA 9184 that is exempt from the more
protracted process of competitive bidding. Sec. 50, RA 9184, provides the
alternative conditions before a resort to direct contracting is permitted:
Section 50.Direct Contracting. Direct Contracting may be
resorted to only in any of the following conditions:
a.Procurement of Goods of proprietary nature, which
can be obtained only from the proprietary
source, i.e., when patents, trade secrets and
copyrights prohibit others from manufacturing
the same items;
b.When the Procurement of critical components from a
specific manufacturer, supplier, or distributor is a
condition precedent to hold a contractor to
guarantee its project performance, in accordance
with the provisions of his contract; or
c.Those sold by an exclusive dealer or manufacturer,
the original 2009 AES Contract and almost PhP7 billion less than that estimated
by the COMELEC to purchase the same number of PCOS machines (without the
software and accompanying hardware) based on the lowest calculated
responsive bid for the 2010 elections.
With the above considerations, I respectfully submit that the terms of the
procurement contract are undeniably more advantageous to the government.
The assailed Deed of Sale promotes economy and efficiency,and
obtains for the most advantageous price
Anent the last requisite, I am of the opinion that it is likewise present in the
instant case.
In addition to the considerations discussed above which show that the
COMELEC is no longer in a position to seek other suppliers, as petitioners would
have it, recall that the automation of the 2013 elections is bombarded with
numerous complications, including time and budget constraints. Note that based
on the bids submitted for the 2010 automated elections, the COMELEC
determined that the funds needed for the procurement of 125,000 PCOS
machines to ensure a 600:1 voter-to-precinct ratio is around PhP12.85 billion.
However, it was only given a PhP7.96 billion budget for the entire automation of
the 2013 elections, which will involve not only the procurement of the equipment
but also the price of the allied services. This budget is obviously insufficient for
the Commission to be able to perform its mandate of automating the upcoming
2013 elections.
To further add to the government's advantage, Smartmatic-TIM also shouldered
the storage price of the PCOS units and offered them for sale without considering
inflation or putting a price on the enhancements and modifications demanded by
COMELEC. Too, obtaining more funds from Congress and going through with
competitive bidding, as insisted by petitioners, will eat up the precious time
necessary to test and modify a new AES, if any, and prepare and educate the
electorate and poll officers on its operation to prevent any human blunders that
might lead to an erroneous declaration of the results of an election, when here is
a system with which the electorate and the concerned poll officials are already
familiar with. This not only reduces the attending time constraint for it abbreviates
the learning curve of all the parties concerned, it also minimizes the errors
attributable to the variations and differences offered by a new AES, as seen in
the 2010 elections where the system was used for the first time on a national
scale. Besides, to require the COMELEC to procure a new and, as demanded by
petitioners, flawless AES for the 2013 elections with a budget of Php2.2 billion, at
least PhP5 billion short of the original amount requested, is requiring the
Commission to execute a financial miracle with only a few months to pull it off.
TacADE
Given the prevailing conditions and the constraints imposed on COMELEC, the
course of action taken by the poll body proves to be the most efficient and
Fourth, the ponencia argues that the Court's ruling in San Diego v. The
Municipality of Naujan, Province of Mindoro 1 is inapplicable for the reason that
the extension made in that case pertained to the period of the main contract of
lease and not to the period of an ancillary contract such as the OTP, as in the
present case. It notes that in San Diego, the extension of the lease contract
meant that the lessee would be given undue advantage because it would enjoy
the lease of the property under the same terms and conditions for a longer
period; here, the extension of the option period gave the COMELEC more time to
determine the propriety of exercising the option. Thus, with the extension, the
COMELEC could acquire the PCOS machines under the same terms and
conditions as previously agreed upon.
Fifth, the ponencia submits that it is unnecessary to discuss the issues raised by
the movants pertaining to the glitches of the PCOS machines, their compliance
with the minimum system capabilities and the COMELEC's abdication of its
exclusive power in the conduct of the elections since these issues have been
discussed and passed upon in the case of Roque, Jr. v. Commission on
Elections. 2
These arguments are addressed in the same order they are posed under the
topical headings below.
a.The OTP clearly lapsed
Contrary to the majority's conclusion, I submit that the OTP simply lapsed when
the COMELEC failed to exercise the option on or before December 31, 2010. By
virtue of the OTP an option contract preparatory to a contract of sale and
distinct from the main contract of lease SMARTMATIC-TIM, as owner, agreed
with the COMELEC that it shall have the right to buy the leased goods at a fixed
price, to be exercised within a specific period. Failing to exercise this right within
the option period, the COMELEC allowed the option to expire and thus,
SMARTMATIC-TIM was released from its obligation to respect the COMELEC's
right or privilege to buy. As I emphasized in my June 13, 2012 Dissent:
As authorized by the AES contract, COMELEC exercised the
OTP for the 2010 special elections in the ARMM by
purchasing 920 units of Precinct-Count Optical Scan System
(PCOS) machines and 36 units of Consolidated Canvassing
System (CCS). No further action was taken by COMELEC
on the OTP for the remainder of the goods under the option
(81,280 PCOS machines and 1,684 CCS) on or before 31
December 2010. Under these developments, the option
clearly lapsed. [italics and emphasis supplied]
Significantly, SMARTMATIC-TIM even acted under the assumption that the
option has been terminated, viz.:
The COMELEC inaction is highlighted by SMARTMATICTIM's unilateral offers to extend the period for the
technically subsists because of the COMELEC's retention of SMARTMATICTIM's performance security, Section 2.2, Article 2 of the AES Contract clearly
mandates that its continued effectivity is without prejudice to "the period of the
option to purchase." Thus, I conclude that under these terms, the COMELEC and
SMARTMATIC-TIM clearly recognized that the OTP and the period for its
exercise stand differently from the main contract of lease of goods and service. In
other words, the effectivity of the warranty provision and of the OTP are
covered by an entirely different period and not by the term of the main
contract of lease of goods. Properly viewed from this perspective, this
interpretation thus demolishes the ponencia's position that the OTP in this case
still subsists. As emphasized in my Dissent:
In the present case, COMELEC and SMARTMATIC-TIM's
intention to extend an already expired option period could
not have validly gone past the negotiation stage. Specifically,
SMARTMATIC-TIM formally made an offer to the COMELEC
to extend the original period and, upon its lapse, to provide
for a new period to exercise the same option; these,
COMELEC simply ignored. Thus, this offer is merely an
imperfect promise (politacion) that, by reason of lack of
acceptance before the expiration of the period, did not
give rise to any binding commitment. [italics and
emphasis supplied]
c.The unilateral extension of the OTP amounts to a substantial
amendment of the AES Contract
I cannot subscribe to the majority's view that the extension of the OTP cannot be
characterized as a substantial amendment because no additional right was given
to SMARTMATIC-TIM and that the option was still subject to the same terms and
conditions previously agreed upon. To my mind, this view seriously ignores the
fact that the period for the exercise of the option is a substantial particular
in the option contract. I reached this conclusion bearing in mind that the subject
of the OTP is a novel technological system in the conduct of an election and the
transitory nature of the information technology employed by the AES, viz.:
It should be considered in this regard that the subject of the
OTP is, collectively and broadly speaking, a technological
system in the conduct of an election. To my mind, a change
in technology over a short period of time through the advent
of a more advanced technology is a vital reason for limiting
the period within which the option must be exercised.
Therefore, the fact that the original price in the AES
contract is maintained is no argument, in favor of the
modification of the period of the OTP. If indeed the
original expiration date of the OTP is legally insignificant in
view of the deemed-sold provision under Article 5.11 of the
AES contract, I see no reason why SMARTMATIC-TIM
Republic Act No. 8436 and the independence that the Constitution guarantees to
it.
For the foregoing reasons, I vote to grant the motions for reconsideration.
FIRST DIVISION
[G.R. No. L-23546. August 29, 1974.]
LAGUNA TAYABAS BUS COMPANY and BATANGAS
TRANSPORTATION COMPANY, petitioners, vs.
FRANCISCO C. MANABAT, as assignee of Bian
Transportation Company, Insolvent, respondent.
MAKASIAR, J p:
This is an appeal by certiorari from a judgment of the Court of Appeals dated
August 31, 1964, which WE AFFIRM.
The undisputed facts are recounted by the Court of Appeals through then
Associate Justice Salvador Esguerra thus:
"On January 20, 1956, a contract was executed whereby the
Bian Transportation Company leased to the LagunaTayabas Bus Company at a monthly rental of P2,500.00 its
certificates of public convenience over the lines known as
Manila-Bian, Manila-Canlubang and Sta. Rosa-Manila, and
to the Batangas Transportation Company its certificate of
public convenience over the line known as Manila-Batangas
Wharf, together with one 'International' truck, for a period of
five years, renewable for another similar period, to
commence from the approval of the lease contract by the
Public Service Commission. On the same date the Public
Service Commission provisionally approved the lease
contract on condition that the lessees should operate on the
leased lines in accordance with the prescribed time schedule
and that such approval was subject to modification or
cancellation and to whatever decision that in due time might
While proceedings before the Public Service Commission were thus going on, as
a consequence of the continuing failure of the lessees to fulfill their earlier
promise to pay the accruing rentals on the leased certificates,
"On May 19, 1959, plaintiff Bian Transportation Company,
represented by Francisco C. Manabat, assignee, filed this
action against defendants Laguna Tayabas Bus Company
and Batangas Transportation Company for the recovery of
the sum of P42,500 representing the accrued rentals for the
lease of the certificates of public convenience of the former
to the latter, corresponding to the period from January, 1958,
to May, 1959, inclusive, plus the sum of P1,836.92 which
was deducted by the defendants from the rentals due for
August, 1957, together with all subsequent rentals from
June, 1959, that became due and payable; P5,000.00 for
attorney's fees and such corrective and exemplary damages
as the court may find reasonable.
"The defendants moved to dismiss the complaint for lack of
jurisdiction over the subject matter of the action, there being
another case pending in the Public Service Commission
between the same parties for the same cause. . ." (pp. 2021, rec.; pp. 54-55, ROA)
The motion to dismiss was, however, denied.
Meanwhile
"The Public Service Commission delegated its Chief
Attorney to receive evidence of the parties on the petition of
the herein defendants for authority to suspend operation on
the lines leased to them by the plaintiff. The defendants, the
assignee of the plaintiff and other creditors of the insolvent
presented evidence before the Chief Attorney and the
hearing was concluded on June 29, 1959. On October 20,
1959, the Public Service Commission issued an order the
dispositive part of which reads as follows:
'In view of the foregoing, the petitioners
herein are authorized to suspend their operation of
the trips of the Bian Transportation Company
between Batangas Piers-Manila, Bian-Manila, Sta.
Rosa-Manila and Canlubang-Manila authorized in
the aforementioned cases from the date of the filing
of their petition on February 18, 1958, until
December 31, 1959.'" (p. 25, rec.; pp. 60-61, ROA).
Going back to the Court of First Instance of Laguna
". . . The motion (to dismiss) having been denied, the
From the decision of the Court of First Instance, defendants appealed to the
Court of Appeals, which affirmed the same in toto in its decision dated August 31,
1964. Said decision was received by the appellants on September 7, 1964.
On September 21, 1964, appellants filed the present appeal, raising the following
questions of law:
"1.Considering that the Court of Appeals found that the
Public Service Commission provisionally approved the lease
contract of January 20, 1956 between petitioners and Bian
Transportation Company upon the condition, among others,
that such approval was subject to modification and
cancellation and to whatever decision that in due time might
be rendered in the case, the Court of Appeals erred in giving
no legal effect and significance whatever to the suspension
The authorities from which the petitioners draw support, however, are not
applicable to the case at bar.
Article 1680 of the Civil Code reads thus:
"Art. 1680.The lessee shall have no right to a reduction of
the rent on account of the sterility of the land leased, or by
reason of the loss of fruits due to ordinary fortuitous events;
but he shall have such right in case of the loss of more than
one-half of the fruits through extraordinary and unforeseen
fortuitous events, save always when there is a specific
stipulation to the contrary.
"Extraordinary fortuitous events are understood to be: fire,
war, pestilence, unusual flood, locusts, earthquake, or others
which are uncommon, and which the contracting parties
could not have reasonably foreseen."
Article 1680, it will be observed is a special provision for leases of rural lands. No
other legal provision makes it applicable to ordinary leases. Had the intention of
the lawmakers been so, they would have placed the article among the general
provisions on lease. Nor can the article be applied analogously to ordinary
leases, for precisely because of its special character, it was meant to apply only
to a special specie of lease. It is a provision of social justice designed to relieve
poor farmers from the harsh consequences of their contracts with rich
landowners. And taken in that light, the article provides no refuge to lessees
whose financial standing or social position is equal to, or even better than, the
lessor as in the case at bar.
Even if the cited article were a general rule on lease, its provisions nevertheless
do not extend to petitioners. One of its requisites is that the cause of loss of the
fruits of the leased property must be an "extraordinary and unforeseen fortuitous
event." The circumstances of the instant case fail to satisfy such requisite. As
correctly ruled by the Court of Appeals, the alleged causes for the suspension of
operations on the lines leased, namely, the high prices of spare parts and
gasoline and the reduction of the dollar allocations, "already existed when the
contract of lease was executed" (p. 11, Decision; p. 30, rec.; Cuyugan v. Dizon,
89 Phil. 80). The cause of petitioners' inability to operate on the lines cannot,
therefore, be ascribed to fortuitous events or circumstances beyond their control,
but to their own voluntary desistance (p. 13, Decision; p. 32, rec.).
If the petitioners would predicate their plea on the basis solely of their inability to
use the certificates of public convenience, absent the requisite of fortuitous
event, the cited article would speak strongly against their plea. Article 1680
opens with the statement: "The lessee shall have no right to reduction of the rent
on account of the sterility of the land leased . . ." Obviously, no reduction can be
sustained on the ground that the operation of the leased lines was suspended
upon the mere speculation that it would yield no substantial profit for the lessee
FERNANDO, J p:
What is to be determined in this appeal is the correctness of a lower court
decision absolving from liability defendants Atlas Trading Development
Corporation (hereinafter referred to as Atlas) and Alto Surety & Insurance
Company (hereinafter referred to as Alto), the former under a contract for the
sale of galvanized steel sheets and the latter under a performance bond.
While the plaintiff-appellant is the National Marketing Corporation, the action was
originally started by its predecessor Philippine Relief and Trade Rehabilitation
Administration (hereinafter referred to as the Pratra). In its complaint dated June
14, 1950, it alleged: On July 21, 1948, defendant Atlas offered to sell to the
plaintiff 8,000 metric tons of galvanized sheets at the price of U.S. $247 per ton
of 1,000 kilos, CIF Manila, to be shipped beginning August, 1948; 1 on July 24,
1948, the plaintiff made an order and agreed to purchase the galvanized sheets
offered by defendant Atlas with the condition that the seller should furnish a
performance bond in favor of the plaintiff in the amount of P100,000.00; 2 on
August 5, 1948, the plaintiff and defendant Atlas as sales brokers for West India
Commercial Corp. of New York City, N.Y., U.S.A., executed a contract of
purchase and sale wherein the said defendant obligated itself to sell 8,000 metric
tons of galvanized steel sheets, at the price of U.S. $247 per ton of 1,000 kilos
CIF Manila; 3 under the aforementioned contract, defendant Atlas obligated itself
In a decision of this Court, 17 it was held that the failure to open a letter of credit
within a period agreed upon suffices to prevent a binding juridical tie from being
created. That case, dealing with offer and acceptance, reiterated the principle
that to bind the offeror, "the offeree must comply with the conditions of the offer."
the situation before us deals with a perfected contract. Here the time element
does not enter into the failure of one party to live up to the terms of the contract.
What was manifest was the discrepancy between what was agreed upon in the
contract and the letter of credit, the effectivity of which requires that "all
conditions contained [in it] be strictly complied with, however onerous they may
be." 18 The above principle is deemed "absolutely necessary for the protection of
the banking and mercantile community." There is a New York Supreme Court
decision to the effect that a "material variance between the letter of credit and the
sales agreement would excuse non-performance by the seller." 19
Plaintiff-appellant must have been mindful of the force and applicability of the
above controlling principle. In its Brief, it sought to avoid its application by
alleging that by its very nature "a letter of credit cannot contain all the particulars
nor can it embody all the agreements previously entered into by the parties for
the terms and conditions of their agreement are already contained in separate
documents." 20 Plaintiff-appellant would then allege that no such period of
allowance or grace for the late shipment was provided for because the same was
already embodied in the contract of purchase and sale, Exhibit C. 21 Such an
argument is far from persuasive. An authoritative excerpt from Zollman on Banks
and Banking argues to the contrary. Thus: "Where, therefore, legal relations arise
from a letter of credit, such letter contains the entire contract of the parties, and
their resulting obligations should be measured by its provisions. It constitutes the
complete agreement, and is independent of the contract of sale between the
buyer and the seller, and is unaffected by any breach of contract on the part of
the seller or the buyer or by any controversy which may arise between the buyer
and seller or by any other transaction between the buyer and seller." 22
It follows then that the lower court was correct in holding that no liability was
incurred under the contract of purchase and sale because of such failure to make
the delivery. Such being the case, the question of whether or not defendant
Atlas, which acted as a sales broker, could be held liable for the alleged breach
need not be passed upon.
As for the surety, defendant Alto, the judgment must likewise be affirmed for the
obvious reason that as no accountability of the principal arose from the failure to
make the delivery of the galvanized steel sheets, it was equally exempt from
liability.
WHEREFORE, the judgment appealed from is affirmed. Without pronouncement
as to costs.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro
and Angeles, JJ., concur.
Bengzon, J.P., J., is on leave.