G.R. No. 185530, April 18, 2018
MAKATI TUSCANY CONDOMINIUM CORPORATION, Petitioner, v. MULTIREALTY DEVELOPMENT CORPORATION, Respondent.
DECISION
LEONEN, J.:
Reformation of an instrument may be allowed if subsequent and contemporaneous acts of the
parties show that their true intention was not accurately reflected in the written instrument.
This resolves the Petition for Review on Certiorari1 filed by Makati Tuscany Condominium
Corporation (Makati Tuscany), assailing the April 28, 2008 Amended Decision2 and December 4,
2008 Resolution3 of the Court of Appeals in CA-G.R. CV No. 44696.
In 1974, Multi-Realty Development Corporation (Multi-Realty) built Makati Tuscany, a 26-storey
condominium building located at the corner of Ayala Avenue and Fonda Street, Makati City.4
Makati Tuscany had a total of 160 units, with 156 ordinary units from the 2nd to the 25th floors
and four (4) penthouse units on the 26th floor.5 It also had 270 parking slots which were
apportioned as follows: one (1) parking slot for each ordinary unit; two (2) parking slots for each
penthouse unit; and the balance of 106 parking slots were allocated as common areas.6
On July 30, 1975, Multi-Realty, through its president Henry Sy, Sr., executed and signed Makati
Tuscany's Master Deed and Declaration of Restrictions (Master Deed),7 which was registered with
the Register of Deeds of Makati in 1977.8
Sometime in 1977, pursuant to Republic Act No. 4726, or the Condominium Act, Multi-Realty
created and incorporated Makati Tuscany Condominium Corporation (MATUSCO) to hold title
over and manage Makati Tuscany's common areas. That same year, Multi-Realty executed a Deed
of Transfer of ownership of Makati Tuscany's common areas to MATUSCO.9
On April 26, 1990, Multi-Realty filed a complaint for damages and/or reformation of instrument
with prayer for temporary restraining order and/or preliminary injunction against MATUSCO.
This complaint was docketed as Civil Case No. 90-1110 and raffled to Branch 59 of Makati
Regional Trial Court.10
Multi-Realty alleged in its complaint that of the 106 parking slots designated in the Master Deed
as part of the common areas, only eight (8) slots were actually intended to be guest parking slots;
thus, it retained ownership of the remaining 98 parking slots.11
Multi-Realty claimed that its ownership over the 98 parking slots was mistakenly not reflected in
the Master Deed "since the documentation and the terms and conditions therein were all of first
impression,"12 considering that Makati Tuscany was one of the first condominium developments
in the Philippines.13
On October 29, 1993, the Regional Trial Court14 dismissed Multi­Realty's complaint. It noted that
Multi-Realty itself prepared the Master Deed and Deed of Transfer; therefore, it was unlikely that
it had mistakenly included the 98 parking slots among the common areas transferred to
MATUSCO. It also emphasized that Multi-Realty's prayer for the reformation of the Master Deed
could not be granted absent proof that MATUSCO acted fraudulently or inequitably towards
Multi-Realty. Finally, it ruled that Multi-Realty was guilty of estoppel by deed.15 The fallo of its
Decision read:
Premises considered, this case is dismissed. [MATUSCO's] counterclaim is likewise dismissed the
same not being compulsory and no filing fee having been paid. [Multi-Realty] is however ordered
to pay [MATUSCO's] attorney's fees in the amount of P50,000.00
Cost against plaintiff.
SO ORDERED.16
Both parties appealed the Regional Trial Court Decision to the Court of Appeals. On August 21,
2000, the Court of Appeals17 dismissed both appeals on the ground of prescription.
In dismissing Multi-Realty's appeal, the Court of Appeals held that an action for reformation of an
instrument must be brought within 10 years from the execution of the contract. As to the dismissal
of MATUSCO's appeal, the Court of Appeals ruled that its claim was based on a personal right to
collect a sum of money, which had a prescriptive period of four (4) years, and not based on a real
right, with a prescriptive period of 30 years.18
The fallo of the Court of Appeals August 21, 2000 Decision read:
WHEREFORE, foregoing premises considered, no merit in fact and in law is hereby ORDERED
DISMISSED, and the judgment of the trial court is MODIFIED by deleting the award of attorney's
fees not having been justified but AFFIRMED as to its Order dismissing both the main complaint
of [Multi-Realty] and the counterclaim of [MATUSCO]. With costs against both parties.
SO ORDERED.19
Multi-Realty moved for reconsideration,20 but its motion was denied in the Court of Appeals
January 18, 2001 Resolution.21 It then filed a petition for review22 before this Court.
On June 16, 2006, this Court in Multi-Realty Development Corporation v. The Makati Tuscany
Condominium Corporation23 granted Multi-Realty's petition, set aside the assailed Court of
Appea]s August 21, 2000 Decision, and directed the Court of Appeals to resolve Multi-Realty's
appeal.
Multi-Realty Development Corporation ruled that the Court of Appeals should have resolved the
appeal on the merits instead of motu proprio resolving the issue of whether or not the action had
already prescribed, as the issue of prescription was never raised by the parties before the lower
courts.24
Nonetheless, Multi-Realty Development Corporation held that even if prescription was raised as
an issue, the Court of Appeals still erred in dismissing the case because Multi-Realty's right to file
an action only accrued in 1989 when MATUSCO denied Multi-Realty's ownership of the 98
parking slots. The Court of Appeals ruled that it was only then that Multi-Realty became aware of
the error in the Master Deed, thereafter seeking its reformation to reflect the true agreement of the
parties. Thus, prescription had not yet set in when Multi-Realty filed its complaint for reformation
of instrument in 1990.25
The fallo in Multi-Realty Development Corporation read:
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 44696 is SET ASIDE. The Court of Appeals is directed to resolve
[Multi­-Realty's] appeal with reasonable dispatch. No costs.
ORDERED.26 (Emphasis in the original)
On November 5, 2007, the Court of Appeals27 denied both appeals.
Regarding Multi-Realty's appeal, the Court of Appeals held that the Master Deed could only be
read to mean that the 98 parking slots being claimed by Multi-Realty belonged to MATUSCO. It
highlighted that the language of the Master Deed, as prepared by Multi-Realty, was clear and not
susceptible to any other interpretation.28
The Court of Appeals upheld the Regional Trial Court's finding that Multi-Realty was guilty of
estoppel by deed and likewise declared that MATUSCO was not estopped from questioning MultiRealty's claimed ownership over and sales of the disputed parking slots.29
The fallo of the Court of Appeals November 5, 2007 Decision read:
WHEREFORE, the instant appeals are hereby DENIED. The assailed Decision dated October 29,
1993 of the Regional Trial Court (Branch 65), Makati, Metro Manila (now Makati City), in Civil
Case No.
90-1110 is MODIFIED-in that: (1) the counterclaim of The Makati Tuscany Condominium
Corporation is DISMISSED-not on the ground of non-payment of docket fees but on ground of
prescription; and, (2) the award of attorney's fees in favor of The Makati Tuscany Condominium
Corporation is DELETED for not having been justified. We however AFFIRM in all other aspects.
Costs against both parties.
SO ORDERED.30 (Emphasis in the original)
Multi-Realty moved for the reconsideration of the Court of Appeals November 5, 2007 Decision
and on April 28, 2008, the Court of Appeals promulgated an Amended Decision,31 reversing its
November 5, 2007 Decision and directing the reformation of the Master Deed and Deed of
Transfer.
In reversing its November 5, 2007 Decision, the Court of Appeals ruled that the Master Deed and
Deed of Transfer did not reflect the true intention of the parties on the ownership of the 98 parking
slots.32
The Court of Appeals stated that in reformation cases, the party asking for reformation had the
burden to overturn the presumption of validity accorded to a written contract. It held that MultiRealty was able to discharge this burden.33
The fallo of the Court of Appeals April 28, 2008 Amended Decision read:
WHEREFORE, premises considered, the present Motion for
Reconsideration is PARTLY GRANTED. Our Decision dated November
05, 2007 is hereby MODIFIED-in that We ORDER the reformation of the Master Deed and
Declaration of Restrictions of the Makati Tuscany Condominium Project and the Deed of Transferto clearly provide that the ownership over the ninety[-]eight (98) extra parking lots be retained by
Multi-Realty Development Corporation. We however DENY the damages and attorney's fees
prayed for by Multi-Realty Development Corporation. We AFFIRM in all other respects. No costs.
SO ORDERED.34 (Emphasis in the original)
MATUSCO moved for the reconsideration35 of the Amended Decision, but its motion was denied
in the Court of Appeals December 4, 2008 Resolution.36
On February 5, 2009, MATUSCO filed its Petition for Review37 on Certiorari before this Court.
In its Petition, petitioner claims that the Court of Appeals erred in granting Multi-Realty's appeal
because there was no basis to reform the Master Deed and Deed of Transfer. It asserts that there
was no mistake, fraud, inequitable conduct, or accident which led to the execution of an instrument
that did not express the true intentions of the parties. It avers that the instruments clearly expressed
what the parties agreed upon.38
Petitioner also assails the Court of Appeals' ruling that it was estopped from questioning
respondent's sales of26 out of the 98 contested parking slots and from claiming ownership of the
remaining unsold parking slots because it was supposedly fully aware of respondent's ownership
of them and did not oppose its sales for 9 years.39
Petitioner maintains that estoppel cannot apply because the sales made by respondent were patently
illegal as they went against the stipulations in the Master Deed. Furthemore, petitioner contends
that it never misled respondent regarding ownership of the 98 parking slots since it was respondent
itself which drafted the Master Deed and Deed of Transfer that turned over ownership of the
common areas, including the 98 parking slots, to MATUSCO.40
In its Comment,41 respondent insists that it never intended to include the 98 parking slots among
the common areas transferred to MATUSCO. It avers that due to its then inexperience with the
condominium business, with Makati Tuscany being one of the Philippines' first condominium
projects, the Master Deed and Deed of Transfer failed to reflect the original intention to exclude
the 98 parking slots from Makati Tuscany's common areas.42
Respondent points to the parties' subsequent acts that led to the only conclusion that it was always
the intention to exclude the 98 parking slots from the common areas, and that this was known and
accepted by petitioner from the beginning.43
Respondent maintains that the Petition raises factual findings and prays that this Court take a
second look at the evidence presented and come up with its own factual findings, in derogation of
the purpose of an appeal under Rule 45 of the Rules of Court, which generally limits itself to
questions of law.44
Respondent also points out that in Multi-Realty Development Corporation, this Court, in its recital
of material facts, acknowledged that it retained ownership over the 98 parking slots, but that its
ownership over them was not reflected in the Master Deed and Deed of Transfer. Thus, respondent
asserts that the issue of ownership can no longer be threshed out on appeal on the ground of res
judicata.45
In its Reply,46 petitioner claims that just like respondent, it also committed a mistake in good faith
and "also labored under a mistaken appreciation of the nature and ownership of the ninety[-]eight
(98) parking slots"47 when it failed to object to respondent's sales of some of the parking slots
from 1977 to 1986 and when it issued Certificates of Management over the sold parking slots. It
was only later that petitioner realized the extent of its legal right over the 98 parking slots;
consequently, it exerted effort to exercise its dominion over them. Petitioner argues that this cannot
be characterized as bad faith on its part.48
Petitioner adds that the Master Deed and Deed of Transfer are public documents, being duly
registered with the Register of Deeds of Makati City, ergo, their terms, conditions, and restrictions
are valid and binding in rem. It opines that for the Court of Appeals to change the clear and
categorical wordings of the Master Deed more than 30 years after its registration goes against
public policy and the Condominium Act.49
Petitioner insists that if respondent merely made a mistake in including the 98 parking slots among
the common areas transferred to petitioner, this mistake must be construed in petitioner's favor as
respondent is owned by one of the wealthiest family corporations in the country while petitioner
is merely an association of innocent purchasers for value.50
The issues raised for this Court's resolution are as follows:
First, whether or not there is a need to reform the Master Deed and the Deed of Transfer; and
Second, whether or not this Court is bound by the factual findings in Multi-Realty Development
Corporation v. The Makati Tuscany Condominium Corporation on the ground of conclusiveness
of judgment.
Reformation of an instrument is a remedy in equity where a valid existing contract is allowed by
law to be revised to express the true intentions of the contracting parties.51 The rationale is that it
would be unjust to enforce a written instrument which does not truly reflect the real agreement of
the parties.52 In reforming an instrument, no new contract is created for the parties, rather, the
reformed instrument establishes the real agreement between the parties as intended, but for some
reason, was not embodied in the original instrument.53
An action for reformation of an instrument finds its basis in Article 1359 of the Civil Code which
provides:
Article 1359. When, there having been a meeting of the minds of the parties to a contract, their
true intention is not expressed in the instrument purporting to embody the agreement, by reason of
mistake, fraud, inequitable conduct or accident, one of the parties may ask for the reformation of
the instrument to the end that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the
parties, the proper remedy is not reformation of the instrument but annulment of the contract.
The National Irrigation Administration v. Gamit54 stated that there must be a concurrence of the
following requisites for an action for reformation of instrument to prosper:
(1) there must have been a meeting of the minds of the parties to the contract; (2) the instrument
does not express the true intention of the parties; and (3) the failure of the instrument to express
the true intention of the parties is due to mistake, fraud, inequitable conduct or accident.55
The burden of proof then rests upon the party asking for the reformation of the instrument to
overturn the presumption that a written instrument already sets out the true intentions of the
contracting parties.56
It is not disputed that the parties entered into a contract regarding the management of Makati
Tuscany's common areas. A Master Deed and a Deed of Transfer were executed to contain all the
terms and conditions on the individual ownership of Makati Tuscany's units and the co-ownership
over the common areas. The question to be resolved is whether the provisions in the Master Deed
and Deed of Transfer over the 98 parking slots, as part of the common areas, expressed the true
intentions of the parties, and if not, whether it was due to mistake, fraud, inequitable conduct, or
accident.
Sections 5 and 7(d) of the Master Deed provide as follows:
SEC. 5. Accessories to Units. - To be considered as part of each unit and reserved for the exclusive
use of its owner are the balconies adjacent thereto and the parking lot or lots which are to be
assigned to each unit.
....
SEC. 7. The Common Areas. - The common elements or areas of The Makati Tuscany shall
comprise all the parts of the project other than the units, including without limitation the following:
....
(d) All driveways, playgrounds, garden areas and parking areas other than those assigned to each
unit under Sec. 5 above[.]57
A plain and literal reading of Section 7(d) in relation to Section 5 shows that all parking areas
which are not assigned to units come under petitioner's authority because they are part of the
common areas.
Respondent argues that what was written in the Master Deed and Deed of Transfer failed to fully
capture what was actually intended by the parties. However, intentions involve a state of mind,
making them difficult to decipher; therefore, the subsequent and contemporaneous acts of the
parties must be presented into evidence to reflect the parties' intentions.58
To substantiate its claim that there was a difference between the written terms in the Master Deed
and Deed of Transfer and the parties' intentions, respondent refers to their prior and subsequent
acts.
First, respondent points out that in the color-coded floor plans for the ground floor, upper
basement, and lower basement, only eight (8) guest parking slots were indicated as part of the
common areas. However, respondent alleges that due to its inexperience with documenting
condominium developments, it failed to reflect the correct number of guest parking slots in the
Master Deed and Deed of Transfer.59
Second, acting under the honest belief that it continued to own the 98 parking slots, respondent
sold 26 of them to Makati Tuscany's unit owners from 1977 to 1986, without any hint of a
complaint or opposition from petitioner. Respondent also states that petitioner repeatedly
cooperated and supported its sales by issuing Certificates of Management for the condominium
units and parking slots sold by respondent.60
Third, petitioner's Board of Directors made repeated offers to purchase the parking slots from
respondent, signifying petitioner's recognition of respondent's retained ownership over the
disputed parking slots. This was made evident in an excerpt from the minutes of the June 14, 1979
meeting of MATUSCO's Board of Directors:
UNASSIGNED PARKING SLOTS
Mr. Jovencio Cinco informed the Board of the final proposal of Multi-Realty Development Corp.
to sell the condominium corp. all of the unassigned parking lots at a discounted price of P15,000.00
per lot, or some 50% lower than their regular present price of P33,000.00 each.
After discussion, it was agreed to hold in abeyance any decision on the matter for all the members
of the Board in attendance to pass upon.61
Finally, respondent highlights that it was only in September 1989, when the value of the 72
remaining unallocated parking slots had risen to approximately P250,000.00 each or
approximately P18,000,000.00 for the 72 parking slots, that petitioner first claimed ownership of
the remaining parking slots.62
At this juncture, it must be pointed out that petitioner never rebutted any of respondent's statements
regarding the subsequent acts of the parties after the execution and registration of the Master Deed
and Deed of Transfer. Petitioner even adopted the narration of facts in Multi-Realty Development
Corporation and declared in its Reply that:
1. The Petition does not raise questions of fact because no doubt or difference exists between the
parties' appreciation of the truth or falsehood of alleged facts, nor does it require the Honorable
Court to evaluate the credibility of witnesses or their testimonies. The resolution of the instant
controversy rests solely upon the correct application of principles of law and pertinent
jurisprudence, as well as hallowed ideals of fairness and public policy which are specific or
germane to the undisputed facts. These facts have already been framed by this Honorable Court in
a related case brought before it by the same parties, albeit limited to the sole issue of prescription
of the action for reformation of instruments initiated by [Multi­-Realty]. For the avoidance of
doubt, these facts are reproduced hereunder as follows:
....
1.3 Makati Tuscany consisted of 160 condominium units, with 156 units from the 2nd to the 25th
floors, and 4 penthouse units in the 26th floor. Two hundred seventy (270) parking slots were built
therein for appointment among its unit owners. One hundred sixty-four (164) of the parking slots
were so allotted, with each unit at the 2nd to the 25th floors being allotted one ( 1) parking slot
each, and each penthouse unit with two slots. Eight (8) other parking slots, found on the ground
floor of the Makati Tuscany were designated as guest parking slots, while the remaining ninety[]eight (98) were to be retained by Multi-Realty for sale to unit owners who would want to have
additional slots.
....
1.7. The Master Deed was filed with the Register of Deeds in 1977. Multi-Realty executed a Deed
of Transfer in favor of Makati Tuscany over these common areas. However, the Master Deed and
the Deed of Transfer did not reflect or specify the ownership of the 98 parking slots. Nevertheless,
Multi-Realty sold 26 of them in 19 to 1986 to condominium unit buyers who needed additional
parking slots. Makati Tuscany did not object, and certificates of title were later issued by the
Register of Deeds in favor of the buyers. Makati Tuscany issued Certificates of Management
covering the condominium units and parking slots which Multi-Realty has sold.
1.8 At a meeting of Makati Tuscany's Board of Directors on 13 March 1979, a resolution was
approved, authorizing its President, Jovencio Cinco, to negotiate terms under which Makati
Tuscany would buy 36 of the unallocated parking slots from Multi-Realty. During another meeting
of the Board of Directors on 14 June 1979, Cinco informed the Board members of Multi-Realty's
proposal to sell all of the unassigned parking lots at a discounted price of P15,000.00 per lot, or
some 50% lower than the then prevailing price of P33,000.00 each. The Board agreed to hold in
abeyance any decision on the matter to enable all its members to ponder upon the matter.63
(Emphasis supplied, citations omitted)
Just like respondent, petitioner invokes mistake in good faith to explain its seeming recognition of
respondent's ownership of the 72 remaining parking slots, showing its acquiescence to respondent's
sale of the 26 parking slots and its issuance of the Certificates of Management for the sold
condominium units and parking slots.64
Petitioner fails to convince.
The totality of the undisputed evidence proving the parties' acts is consistent with the conclusion
that the parties never meant to include the 98 parking slots among the common areas to be
transferred to petitioner. The evidence is consistent to support the view that petitioner was aware
of this fact.
From 1977 to 1986, respondent sold 26 of the 98 parking lots now under contention without protest
from petitioner. Petitioner recognized respondent's ownership of the disputed parking lots on at
least two (2) occasions when its Board of Directors made known its intention to purchase them
from respondent.
In its Manifestation Ad Cautelam,65 petitioner asked to be allowed to file a reply to respondent's
comment to rectify the "erroneous statements of fact and conclusions of law"66 contained in it.
However, petitioner in its Reply67 did not contradict any of the subsequent acts of the parties
narrated by respondent, showing petitioner's repeated acquiescence to respondent's acts of
dominion over the parking slots. Petitioner even adopted this Court's narration of facts in MultiRealty Development Corporation where this Court stated that "[e]ight (8) other parking slots,
found on the ground floor of the Makati Tuscany were designated as guest parking slots, while the
remaining 98 were to be retained by Multi-Realty for sale to unit owners who would want to have
additional slots."68
Petitioner claims that it was confusion and not bad faith that caused its belated assertion of
ownership over the parking slots.69 However, the facts show that it was the intention of the parties
all along for Multi-Realty to retain ownership of the 98 parking slots and then sell them to unit
owners who wanted additional parking slots.
Petitioner argues its lack of bad faith in claiming ownership over the 98 parking slots. Whether or
not it acted in bad faith was never in issue. Instead, the issue to be resolved was whether or not
respondent committed a mistake in drafting and executing the Master Deed and Deed of Transfer,
thereby leading to the inadvertent inclusion of the 98 parking slots among the common areas
transferred to petitioner.
Further, it is difficult to impute confusion and bad faith, which are states of mind appropriate for
a natural individual person, to an entire corporation. The fiction where corporations are granted
both legal personality separate from its owners and a capacity to act should not be read as endowing
corporations with a single mind. In truth, a corporation is a hierarchical community of groups of
persons both in the governing board and in management. Corporations have different minds
working together including its lawyers, auditors, and, in some cases, their compliance officers.
To grant the argument that a corporation, like a natural person, was confused or not in bad faith is
to extend to it too much analogy and to endow it more of the human characteristics beyond its
legal fiction. This Court is not endowed with such god-like qualities of a creator or should allow
illicit extensions of legal fiction to cause injustice.
Respondent, through a preponderance of evidence, was able to prove its claim that the Master
Deed and Deed of Transfer failed to capture the true intentions of the parties; hence, it is but right
that the instruments be reformed to accurately reflect the agreement of the parties.
Petitioner asserts that respondent's admission of committing a mistake in drafting the Master Deed
and Deed of Transfer makes it liable to suffer the consequences of its mistake and should be bound
by the plain meaning and import of the instruments. It contends that respondent should be estopped
from claiming that the Master Deed and Deed of Transfer failed to show the parties' true intentions.
Again, petitioner fails to convince.
In Philippine National Bank v. Court of Appeals,70 this Court held:
"The doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and
justice, and its purpose is to forbid one to speak against his own act, representations, or
commitments to the injury of one to whom they were directed and who reasonably relied thereon.
The doctrine of estoppel springs from equitable principles and the equities in the case. It is
designed to aid the law in the administration of justice where without its aid injustice might result."
It has been applied by this Court wherever and whenever special circumstances of a case so
demand.71
In this case, except for the words in the contract, all of respondent's acts were consistent with its
position in the case.
Petitioner does not deny that it stayed silent when respondent sold the parking slots on several
occasions or that it offered to buy the parking slots from respondent on at least two (2) occasions.
It excuses itself by saying that just like respondent, it "also labored under a mistaken appreciation
of the nature and ownership of the ninety[-]eight (98) parking slots in question."72
Both parties recognized respondent's ownership of the parking slots. Petitioner initially respected
respondent's ownership despite the Master Deed's and Deed of Transfer's stipulations. It was
petitioner that changed its position decades after it acted as if it accepted respondent's ownership.
Petitioner cannot claim the benefits of estoppel. It was never made to rely on any false
representations. It knew from its inception as a corporation that ownership of the parking slots
remained with respondent. Its dealings with respondent and the actuations of its Board of Directors
convincingly show that it was aware of and respected respondent's ownership. The Court of
Appeals ruled as follows:
Not even the registration of the Master Deed with the Makati City Register of Deeds renders MultiRealty guilty of estoppel by deed. For one, [MATUSCO] was not made to believe that it shall be
the owner of the questioned extra parking lots. And for another, [MATUSCO] was not made to
rely on any false representation. As we have earlier discussed-evidence is replete that both parties
knew at the outset that ownership over the said extra parking lots were to be retained by MultiRealty. It is sad to note, however, that such fact was not clearly reflected in the Master Deed and
the Deed of Transfer. Besides, it was only after the issue of ownership cropped up that MultiRealty realized that, indeed, there was a mistake in the drafting of the Master Deed.73
II
Despite petitioner's adoption of this Court's recital of facts in Multi­-Realty Development
Corporation, this Court deems it proper to address respondent's claim that this Court upheld its
ownership of the disputed parking slots, as Multi-Realty Development Corporation supposedly
contained final factual findings on this very issue, which ought to be respected on the ground of
res judicata.74
Respondent is mistaken.
There is res judicata when the following concur:
a)the former judgment must be final;
b)the court which rendered judgment had jurisdiction over the parties and the subject matter;
c)it must be a judgment on the merits;
d)and there must be between the first and second actions identity of parties, subject matter, and
cause of action.75 (Emphasis in the original, citation omitted)
Multi-Realty Development Corporation did not take on the merits of the case but only tackled the
issue of prescription n.ised to this Court on appeal. After finding that the action had not yet
prescribed and was mistakenly dismissed by the Court of Appeals because of a supposedly stale
claim, this Court directed that it be remanded to the Court of Appeals for a resolution of the appeal:
Nevertheless, given the factual backdrop of the case, it was inappropriate for the CA, motu proprio,
to delve into and resolve the issue of whether [Multi-Realty's] action had already prescribed. The
appellate court should have proceeded to resolve [Multi-Realty's] appeal on its merits instead of
dismissing the same on a ground not raised by the parties in the RTC and even in their pleadings
in the CA.
....
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 44696 is SET ASIDE. The Court of Appeals is directed to resolve
petitioner's appeal with reasonable dispatch. No costs.
ORDERED.76
Clearly, res judicata had not yet set in and this Court was not precluded from evaluating all of the
evidence vis-a-vis the issues raised by both parties.
WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED. The Court
of Appeals April 28, 2008 Amended Decision and December 4, 2008 Resolution in CA-G.R. CV
No. 44696 are AFFIRMED.
SO ORDERED.
G.R. No. 117604 March 26, 1997
CHINA BANKING CORPORATION, petitioner, vs. COURT OF APPEALS, and
VALLEY GOLF and COUNTRY CLUB, INC., respondents.
KAPUNAN, J.:
Through a petition for review on certiorari under Rule 45 of the Revised Rules of Court, petitioner
China Banking Corporation seeks the reversal of the decision of the Court of Appeals dated 15
August 1994 nullifying the Securities and Exchange Commission's order and resolution dated 4
June 1993 and 7 December 1993, respectively, for lack of jurisdiction. Similarly impugned is the
Court of Appeals' resolution dated 4 September 1994 which denied petitioner's motion for
reconsideration.
The case unfolds thus:
On 21 August 1974, Galicano Calapatia, Jr. (Calapatia, for brevity) a stockholder of private
respondent Valley Golf & Country Club, Inc. (VGCCI, for brevity), pledged his Stock Certificate
No. 1219 to petitioner China Banking Corporation (CBC, for brevity).1
On 16 September 1974, petitioner wrote VGCCI requesting that the aforementioned pledge
agreement be recorded in its books.2
In a letter dated 27 September 1974, VGCCI replied that the deed of pledge executed by Calapatia
in petitioner's favor was duly noted in its corporate books.3
On 3 August 1983, Calapatia obtained a loan of P20,000.00 from petitioner, payment of which
was secured by the aforestated pledge agreement still existing between Calapatia and petitioner.4
Due to Calapatia's failure to pay his obligation, petitioner, on 12 April 1985, filed a petition for
extrajudicial foreclosure before Notary Public Antonio T. de Vera of Manila, requesting the latter
to conduct a public auction sale of the pledged stock.5
On 14 May 1985, petitioner informed VGCCI of the above-mentioned foreclosure proceedings
and requested that the pledged stock be transferred to its (petitioner's) name and the same be
recorded in the corporate books. However, on 15 July 1985, VGCCI wrote petitioner expressing
its inability to accede to petitioner's request in view of Calapatia's unsettled accounts with the
club.6
Despite the foregoing, Notary Public de Vera held a public auction on 17 September 1985 and
petitioner emerged as the highest bidder at P20,000.00 for the pledged stock. Consequently,
petitioner was issued the corresponding certificate of sale.7
On 21 November 1985, VGCCI sent Calapatia a notice demanding full payment of his overdue
account in the amount of P18,783.24. 8 Said notice was followed by a demand letter dated 12
December 1985 for the same amount9 and another notice dated 22 November 1986 for P23,483.24.
10
On 4 December 1986, VGCCI caused to be published in the newspaper Daily Express a notice of
auction sale of a number of its stock certificates, to be held on 10 December 1986 at 10:00 a.m.
Included therein was Calapatia's own share of stock (Stock Certificate No. 1219).
Through a letter dated 15 December 1986, VGCCI informed Calapatia of the termination of his
membership due to the sale of his share of stock in the 10 December 1986 auction. 11
On 5 May 1989, petitioner advised VGCCI that it is the new owner of Calapatia's Stock Certificate
No. 1219 by virtue of being the highest bidder in the 17 September 1985 auction and requested
that a new certificate of stock be issued in its name. 12
On 2 March 1990, VGCCI replied that "for reason of delinquency" Calapatia's stock was sold at
the public auction held on 10 December 1986 for P25,000.00. 13
On 9 March 1990, petitioner protested the sale by VGCCI of the subject share of stock and
thereafter filed a case with the Regional Trial Court of Makati for the nullification of the 10
December 1986 auction and for the issuance of a new stock certificate in its name. 14
On 18 June 1990, the Regional Trial Court of Makati dismissed the complaint for lack of
jurisdiction over the subject matter on the theory that it involves an intra-corporate dispute and on
27 August 1990 denied petitioner's motion for reconsideration.
On 20 September 1990, petitioner filed a complaint with the Securities and Exchange Commission
(SEC) for the nullification of the sale of Calapatia's stock by VGCCI; the cancellation of any new
stock certificate issued pursuant thereto; for the issuance of a new certificate in petitioner's name;
and for damages, attorney's fees and costs of litigation.
On 3 January 1992, SEC Hearing Officer Manuel P. Perea rendered a decision in favor of VGCCI,
stating in the main that "(c)onsidering that the said share is delinquent, (VGCCI) had valid reason
not to transfer the share in the name of the petitioner in the books of (VGCCI) until liquidation of
delinquency." 15 Consequently, the case was dismissed. 16
On 14 April 1992, Hearing Officer Perea denied petitioner's motion for reconsideration. 17
Petitioner appealed to the SEC en banc and on 4 June 1993, the Commission issued an order
reversing the decision of its hearing officer. It declared thus:
The Commission en banc believes that appellant-petitioner has a prior right over the pledged share
and because of pledgor's failure to pay the principal debt upon maturity, appellant-petitioner can
proceed with the foreclosure of the pledged share.
WHEREFORE, premises considered, the Orders of January 3, 1992 and April 14, 1992 are hereby
SET ASIDE. The auction sale conducted by appellee-respondent Club on December 10, 1986 is
declared NULL and VOID. Finally, appellee-respondent Club is ordered to issue another
membership certificate in the name of appellant-petitioner bank.
SO ORDERED. 18
VGCCI sought reconsideration of the abovecited order. However, the SEC denied the same in its
resolution dated 7 December 1993. 19
The sudden turn of events sent VGCCI to seek redress from the Court of Appeals. On 15 August
1994, the Court of Appeals rendered its decision nullifying and setting aside the orders of the SEC
and its hearing officer on ground of lack of jurisdiction over the subject matter and, consequently,
dismissed petitioner's original complaint. The Court of Appeals declared that the controversy
between CBC and VGCCI is not intra-corporate. It ruled as follows:
In order that the respondent Commission can take cognizance of a case, the controversy must
pertain to any of the following relationships: (a) between the corporation, partnership or
association and the public; (b) between the corporation, partnership or association and its
stockholders, partners, members, or officers; (c) between the corporation, partnership or
association and the state in so far as its franchise, permit or license to operate is concerned, and (d)
among the stockholders, partners or associates themselves (Union Glass and Container
Corporation vs. SEC, November 28, 1983, 126 SCRA 31). The establishment of any of the
relationship mentioned will not necessarily always confer jurisdiction over the dispute on the
Securities and Exchange Commission to the exclusion of the regular courts. The statement made
in Philex Mining Corp. vs. Reyes, 118 SCRA 602, that the rule admits of no exceptions or
distinctions is not that absolute. The better policy in determining which body has jurisdiction over
a case would be to consider not only the status or relationship of the parties but also the nature of
the question that is the subject of their controversy (Viray vs. Court of Appeals, November 9, 1990,
191 SCRA 308, 322-323).
Indeed, the controversy between petitioner and respondent bank which involves ownership of the
stock that used to belong to Calapatia, Jr. is not within the competence of respondent Commission
to decide. It is not any of those mentioned in the aforecited case.
WHEREFORE, the decision dated June 4, 1993, and order dated December 7, 1993 of respondent
Securities and Exchange Commission (Annexes Y and BB, petition) and of its hearing officer
dated January 3, 1992 and April 14, 1992 (Annexes S and W, petition) are all nullified and set
aside for lack of jurisdiction over the subject matter of the case. Accordingly, the complaint of
respondent China Banking Corporation (Annex Q, petition) is DISMISSED. No pronouncement
as to costs in this instance.
SO ORDERED. 20
Petitioner moved for reconsideration but the same was denied by the Court of Appeals in its
resolution dated 5 October 1994. 21
Hence, this petition wherein the following issues were raised:
II
ISSUES
WHETHER OR NOT RESPONDENT COURT OF APPEALS (Former Eighth Division)
GRAVELY ERRED WHEN:
1. IT NULLIFIED AND SET ASIDE THE DECISION DATED JUNE 04, 1993 AND ORDER
DATED DECEMBER 07, 1993 OF THE SECURITIES AND EXCHANGE COMMISSION EN
BANC, AND WHEN IT DISMISSED THE COMPLAINT OF PETITIONER AGAINST
RESPONDENT VALLEY GOLF ALL FOR LACK OF JURISDICTION OVER THE SUBJECT
MATTER OF THE CASE;
2. IT FAILED TO AFFIRM THE DECISION OF THE SECURITIES AND EXCHANGE
COMMISSION EN BANC DATED JUNE 04, 1993 DESPITE PREPONDERANT EVIDENCE
SHOWING THAT PETITIONER IS THE LAWFUL OWNER OF MEMBERSHIP
CERTIFICATE NO. 1219 FOR ONE SHARE OF RESPONDENT VALLEY GOLF.
The petition is granted.
The basic issue we must first hurdle is which body has jurisdiction over the controversy, the regular
courts or the SEC.
P. D. No. 902-A conferred upon the SEC the following pertinent powers:
Sec. 3. The Commission shall have absolute jurisdiction, supervision and control over all
corporations, partnerships or associations, who are the grantees of primary franchises and/or a
license or permit issued by the government to operate in the Philippines, and in the exercise of its
authority, it shall have the power to enlist the aid and support of and to deputize any and all
enforcement agencies of the government, civil or military as well as any private institution,
corporation, firm, association or person.
xxx xxx xxx
Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction
to hear and decide cases involving:
a) Devices or schemes employed by or any acts of the board of directors, business associates, its
officers or partners, amounting to fraud and misrepresentation which may be detrimental to the
interest of the public and/or of the stockholders, partners, members of associations or organizations
registered with the Commission.
b) Controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members, or associates; between any or all of them and the corporation, partnership
or association of which they are stockholders, members or associates, respectively; and between
such corporation, partnership or association and the State insofar as it concerns their individual
franchise or right to exist as such entity;
c) Controversies in the election or appointment of directors, trustees, officers, or managers of such
corporations, partnerships or associations.
d) Petitions of corporations, partnerships or associations to be declared in the state of suspension
of payments in cases where the corporation, partnership or association possesses property to cover
all of its debts but foresees the impossibility of meeting them when they respectively fall due or in
cases where the corporation, partnership or association has no sufficient assets to cover its
liabilities, but is under the Management Committee created pursuant to this Decree.
The aforecited law was expounded upon in Viray v. CA 22 and in the recent cases of Mainland
Construction Co., Inc. v. Movilla 23 and Bernardo v. CA, 24 thus:
. . . .The better policy in determining which body has jurisdiction over a case would be to consider
not only the status or relationship of the parties but also the nature of the question that is the subject
of their controversy.
Applying the foregoing principles in the case at bar, to ascertain which tribunal has jurisdiction we
have to determine therefore whether or not petitioner is a stockholder of VGCCI and whether or
not the nature of the controversy between petitioner and private respondent corporation is intracorporate.
As to the first query, there is no question that the purchase of the subject share or membership
certificate at public auction by petitioner (and the issuance to it of the corresponding Certificate of
Sale) transferred ownership of the same to the latter and thus entitled petitioner to have the said
share registered in its name as a member of VGCCI. It is readily observed that VGCCI did not
assail the transfer directly and has in fact, in its letter of 27 September 1974, expressly recognized
the pledge agreement executed by the original owner, Calapatia, in favor of petitioner and has even
noted said agreement in its corporate books. 25 In addition, Calapatia, the original owner of the
subject share, has not contested the said transfer.
By virtue of the afore-mentioned sale, petitioner became a bona fide stockholder of VGCCI and,
therefore, the conflict that arose between petitioner and VGCCI aptly exemplies an intra-corporate
controversy between a corporation and its stockholder under Sec. 5(b) of P.D. 902-A.
An important consideration, moreover, is the nature of the controversy between petitioner and
private respondent corporation. VGCCI claims a prior right over the subject share anchored mainly
on Sec. 3, Art VIII of its by-laws which provides that "after a member shall have been posted as
delinquent, the Board may order his/her/its share sold to satisfy the claims of the Club. . ." 26 It is
pursuant to this provision that VGCCI also sold the subject share at public auction, of which it was
the highest bidder. VGCCI caps its argument by asserting that its corporate by-laws should prevail.
The bone of contention, thus, is the proper interpretation and application of VGCCI's aforequoted
by-laws, a subject which irrefutably calls for the special competence of the SEC.
We reiterate herein the sound policy enunciated by the Court in Abejo v. De la Cruz 27:
6. In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative
commissions and boards the power to resolve specialized disputes in the field of labor (as in
corporations, public transportation and public utilities) ruled that Congress in requiring the
Industrial Court's intervention in the resolution of labor-management controversies likely to cause
strikes or lockouts meant such jurisdiction to be exclusive, although it did not so expressly state in
the law. The Court held that under the "sense-making and expeditious doctrine of primary
jurisdiction . . . the courts cannot or will not determine a controversy involving a question which
is within the jurisdiction of an administrative tribunal, where the question demands the exercise of
sound administrative discretion requiring the special knowledge, experience, and services of the
administrative tribunal to determine technical and intricate matters of fact, and a uniformity of
ruling is essential to comply with the purposes of the regulatory statute administered.
In this era of clogged court dockets, the need for specialized administrative boards or commissions
with the special knowledge, experience and capability to hear and determine promptly disputes on
technical matters or essentially factual matters, subject to judicial review in case of grave abuse of
discretion, has become well nigh indispensable. Thus, in 1984, the Court noted that "between the
power lodged in an administrative body and a court, the unmistakable trend has been to refer it to
the former. 'Increasingly, this Court has been committed to the view that unless the law speaks
clearly and unequivocably, the choice should fall on [an administrative agency.]'" The Court in the
earlier case of Ebon v. De Guzman, noted that the lawmaking authority, in restoring to the labor
arbiters and the NLRC their jurisdiction to award all kinds of damages in labor cases, as against
the previous P.D. amendment splitting their jurisdiction with the regular courts, "evidently, . . .
had second thoughts about depriving the Labor Arbiters and the NLRC of the jurisdiction to award
damages in labor cases because that setup would mean duplicity of suits, splitting the cause of
action and possible conflicting findings and conclusions by two tribunals on one and the same
claim."
In this case, the need for the SEC's technical expertise cannot be over-emphasized involving as it
does the meticulous analysis and correct interpretation of a corporation's by-laws as well as the
applicable provisions of the Corporation Code in order to determine the validity of VGCCI's
claims. The SEC, therefore, took proper cognizance of the instant case.
VGCCI further contends that petitioner is estopped from denying its earlier position, in the first
complaint it filed with the RTC of Makati (Civil Case No. 90-1112) that there is no intra-corporate
relations between itself and VGCCI.
VGCCI's contention lacks merit.
In Zamora v. Court of Appeals, 28 this Court, through Mr. Justice Isagani A. Cruz, declared that:
It follows that as a rule the filing of a complaint with one court which has no jurisdiction over it
does not prevent the plaintiff from filing the same complaint later with the competent court. The
plaintiff is not estopped from doing so simply because it made a mistake before in the choice of
the proper forum. . . .
We remind VGCCI that in the same proceedings before the RTC of Makati, it categorically stated
(in its motion to dismiss) that the case between itself and petitioner is intra-corporate and insisted
that it is the SEC and not the regular courts which has jurisdiction. This is precisely the reason
why the said court dismissed petitioner's complaint and led to petitioner's recourse to the SEC.
Having resolved the issue on jurisdiction, instead of remanding the whole case to the Court of
Appeals, this Court likewise deems it procedurally sound to proceed and rule on its merits in the
same proceedings.
It must be underscored that petitioner did not confine the instant petition for review on certiorari
on the issue of jurisdiction. In its assignment of errors, petitioner specifically raised questions on
the merits of the case. In turn, in its responsive pleadings, private respondent duly answered and
countered all the issues raised by petitioner.
Applicable to this case is the principle succinctly enunciated in the case of Heirs of Crisanta Y.
Gabriel-Almoradie v. Court of Appeals, 29 citing Escudero v. Dulay 30 and The Roman Catholic
Archbishop of Manila v. Court of Appeals. 31
In the interest of the public and for the expeditious administration of justice the issue on
infringement shall be resolved by the court considering that this case has dragged on for years and
has gone from one forum to another.
It is a rule of procedure for the Supreme Court to strive to settle the entire controversy in a single
proceeding leaving no root or branch to bear the seeds of future litigation. No useful purpose will
be served if a case or the determination of an issue in a case is remanded to the trial court only to
have its decision raised again to the Court of Appeals and from there to the Supreme Court.
We have laid down the rule that the remand of the case or of an issue to the lower court for further
reception of evidence is not necessary where the Court is in position to resolve the dispute based
on the records before it and particularly where the ends of justice would not be subserved by the
remand thereof. Moreover, the Supreme Court is clothed with ample authority to review matters,
even those not raised on appeal if it finds that their consideration is necessary in arriving at a just
disposition of the case.
In the recent case of China Banking Corp., et al. v. Court of Appeals, et al., 32 this Court, through
Mr. Justice Ricardo J. Francisco, ruled in this wise:
At the outset, the Court's attention is drawn to the fact that since the filing of this suit before the
trial court, none of the substantial issues have been resolved. To avoid and gloss over the issues
raised by the parties, as what the trial court and respondent Court of Appeals did, would unduly
prolong this litigation involving a rather simple case of foreclosure of mortgage. Undoubtedly, this
will run counter to the avowed purpose of the rules, i.e., to assist the parties in obtaining just,
speedy and inexpensive determination of every action or proceeding. The Court, therefore, feels
that the central issues of the case, albeit unresolved by the courts below, should now be settled
specially as they involved pure questions of law. Furthermore, the pleadings of the respective
parties on file have amply ventilated their various positions and arguments on the matter
necessitating prompt adjudication.
In the case at bar, since we already have the records of the case (from the proceedings before the
SEC) sufficient to enable us to render a sound judgment and since only questions of law were
raised (the proper jurisdiction for Supreme Court review), we can, therefore, unerringly take
cognizance of and rule on the merits of the case.
The procedural niceties settled, we proceed to the merits.
VGCCI assails the validity of the pledge agreement executed by Calapatia in petitioner's favor. It
contends that the same was null and void for lack of consideration because the pledge agreement
was entered into on 21 August
1974 33 but the loan or promissory note which it secured was obtained by Calapatia much later or
only on 3 August 1983. 34
VGCCI's contention is unmeritorious.
A careful perusal of the pledge agreement will readily reveal that the contracting parties explicitly
stipulated therein that the said pledge will also stand as security for any future advancements (or
renewals thereof) that Calapatia (the pledgor) may procure from petitioner:
xxx xxx xxx
This pledge is given as security for the prompt payment when due of all loans, overdrafts,
promissory notes, drafts, bills or exchange, discounts, and all other obligations of every kind which
have heretofore been contracted, or which may hereafter be contracted, by the PLEDGOR(S)
and/or DEBTOR(S) or any one of them, in favor of the PLEDGEE, including discounts of Chinese
drafts, bills of exchange, promissory notes, etc., without any further endorsement by the
PLEDGOR(S) and/or Debtor(s) up to the sum of TWENTY THOUSAND (P20,000.00) PESOS,
together with the accrued interest thereon, as hereinafter provided, plus the costs, losses, damages
and expenses (including attorney's fees) which PLEDGEE may incur in connection with the
collection thereof. 35 (Emphasis ours.)
The validity of the pledge agreement between petitioner and Calapatia cannot thus be held suspect
by VGCCI. As candidly explained by petitioner, the promissory note of 3 August 1983 in the
amount of P20,000.00 was but a renewal of the first promissory note covered by the same pledge
agreement.
VGCCI likewise insists that due to Calapatia's failure to settle his delinquent accounts, it had the
right to sell the share in question in accordance with the express provision found in its by-laws.
Private respondent's insistence comes to naught. It is significant to note that VGCCI began sending
notices of delinquency to Calapatia after it was informed by petitioner (through its letter dated 14
May 1985) of the foreclosure proceedings initiated against Calapatia's pledged share, although
Calapatia has been delinquent in paying his monthly dues to the club since 1975. Stranger still,
petitioner, whom VGCCI had officially recognized as the pledgee of Calapatia's share, was neither
informed nor furnished copies of these letters of overdue accounts until VGCCI itself sold the
pledged share at another public auction. By doing so, VGCCI completely disregarded petitioner's
rights as pledgee. It even failed to give petitioner notice of said auction sale. Such actuations of
VGCCI thus belie its claim of good faith.
In defending its actions, VGCCI likewise maintains that petitioner is bound by its by-laws. It
argues in this wise:
The general rule really is that third persons are not bound by the by-laws of a corporation since
they are not privy thereto (Fleischer v. Botica Nolasco, 47 Phil. 584). The exception to this is when
third persons have actual or constructive knowledge of the same. In the case at bar, petitioner had
actual knowledge of the by-laws of private respondent when petitioner foreclosed the pledge made
by Calapatia and when petitioner purchased the share foreclosed on September 17, 1985. This is
proven by the fact that prior thereto, i.e., on May 14, 1985 petitioner even quoted a portion of
private respondent's by-laws which is material to the issue herein in a letter it wrote to private
respondent. Because of this actual knowledge of such by-laws then the same bound the petitioner
as of the time when petitioner purchased the share. Since the by-laws was already binding upon
petitioner when the latter purchased the share of Calapatia on September 17, 1985 then the
petitioner purchased the said share subject to the right of the private respondent to sell the said
share for reasons of delinquency and the right of private respondent to have a first lien on said
shares as these rights are provided for in the by-laws very very clearly. 36
VGCCI misunderstood the import of our ruling in Fleischer v. Botica Nolasco Co.: 37
And moreover, the by-law now in question cannot have any effect on the appellee. He had no
knowledge of such by-law when the shares were assigned to him. He obtained them in good faith
and for a valuable consideration. He was not a privy to the contract created by said by-law between
the shareholder Manuel Gonzales and the Botica Nolasco, Inc. Said by-law cannot operate to defeat
his rights as a purchaser.
An unauthorized by-law forbidding a shareholder to sell his shares without first offering them to
the corporation for a period of thirty days is not binding upon an assignee of the stock as a personal
contract, although his assignor knew of the by-law and took part in its adoption. (10 Cyc., 579;
Ireland vs. Globe Milling Co., 21 R.I., 9.)
When no restriction is placed by public law on the transfer of corporate stock, a purchaser is not
affected by any contractual restriction of which he had no notice. (Brinkerhoff-Farris Trust &
Savings Co. vs. Home Lumber Co., 118 Mo., 447.)
The assignment of shares of stock in a corporation by one who has assented to an unauthorized
by-law has only the effect of a contract by, and enforceable against, the assignor; the assignee is
not bound by such by-law by virtue of the assignment alone. (Ireland vs. Globe Milling Co., 21
R.I., 9.)
A by-law of a corporation which provides that transfers of stock shall not be valid unless approved
by the board of directors, while it may be enforced as a reasonable regulation for the protection of
the corporation against worthless stockholders, cannot be made available to defeat the rights of
third persons. (Farmers' and Merchants' Bank of Lineville vs. Wasson, 48 Iowa, 336.) (Emphasis
ours.)
In order to be bound, the third party must have acquired knowledge of the pertinent by-laws at the
time the transaction or agreement between said third party and the shareholder was entered into,
in this case, at the time the pledge agreement was executed. VGCCI could have easily informed
petitioner of its by-laws when it sent notice formally recognizing petitioner as pledgee of one of
its shares registered in Calapatia's name. Petitioner's belated notice of said by-laws at the time of
foreclosure will not suffice. The ruling of the SEC en banc is particularly instructive:
By-laws signifies the rules and regulations or private laws enacted by the corporation to regulate,
govern and control its own actions, affairs and concerns and its stockholders or members and
directors and officers with relation thereto and among themselves in their relation to it. In other
words, by-laws are the relatively permanent and continuing rules of action adopted by the
corporation for its own government and that of the individuals composing it and having the
direction, management and control of its affairs, in whole or in part, in the management and control
of its affairs and activities. (9 Fletcher 4166, 1982 Ed.)
The purpose of a by-law is to regulate the conduct and define the duties of the members towards
the corporation and among themselves. They are self-imposed and, although adopted pursuant to
statutory authority, have no status as public law. (Ibid.)
Therefore, it is the generally accepted rule that third persons are not bound by by-laws, except
when they have knowledge of the provisions either actually or constructively. In the case of
Fleisher v. Botica Nolasco, 47 Phil. 584, the Supreme Court held that the by-law restricting the
transfer of shares cannot have any effect on the transferee of the shares in question as he "had no
knowledge of such by-law when the shares were assigned to him. He obtained them in good faith
and for a valuable consideration. He was not a privy to the contract created by the by-law between
the shareholder . . . and the Botica Nolasco, Inc. Said by-law cannot operate to defeat his right as
a purchaser. (Emphasis supplied.)
By analogy of the above-cited case, the Commission en banc is of the opinion that said case is
applicable to the present controversy. Appellant-petitioner bank as a third party can not be bound
by appellee-respondent's by-laws. It must be recalled that when appellee-respondent
communicated to appellant-petitioner bank that the pledge agreement was duly noted in the club's
books there was no mention of the shareholder-pledgor's unpaid accounts. The transcript of
stenographic notes of the June 25, 1991 Hearing reveals that the pledgor became delinquent only
in 1975. Thus, appellant-petitioner was in good faith when the pledge agreement was contracted.
The Commission en banc also believes that for the exception to the general accepted rule that third
persons are not bound by by-laws to be applicable and binding upon the pledgee, knowledge of
the provisions of the VGCI By-laws must be acquired at the time the pledge agreement was
contracted. Knowledge of said provisions, either actual or constructive, at the time of foreclosure
will not affect pledgee's right over the pledged share. Art. 2087 of the Civil Code provides that it
is also of the essence of these contracts that when the principal obligation becomes due, the things
in which the pledge or mortgage consists maybe alienated for the payment to the creditor.
In a letter dated March 10, 1976 addressed to Valley Golf Club, Inc., the Commission issued an
opinion to the effect that:
According to the weight of authority, the pledgee's right is entitled to full protection without
surrender of the certificate, their cancellation, and the issuance to him of new ones, and when done,
the pledgee will be fully protected against a subsequent purchaser who would be charged with
constructive notice that the certificate is covered by the pledge. (12-A Fletcher 502)
The pledgee is entitled to retain possession of the stock until the pledgor pays or tenders to him
the amount due on the debt secured. In other words, the pledgee has the right to resort to its
collateral for the payment of the debts. (Ibid, 502)
To cancel the pledged certificate outright and the issuance of new certificate to a third person who
purchased the same certificate covered by the pledge, will certainly defeat the right of the pledgee
to resort to its collateral for the payment of the debt. The pledgor or his representative or registered
stockholders has no right to require a return of the pledged stock until the debt for which it was
given as security is paid and satisfied, regardless of the length of time which have elapsed since
debt was created. (12-A Fletcher 409)
A bona fide pledgee takes free from any latent or secret equities or liens in favor either of the
corporation or of third persons, if he has no notice thereof, but not otherwise. He also takes it free
of liens or claims that may subsequently arise in favor of the corporation if it has notice of the
pledge, although no demand for a transfer of the stock to the pledgee on the corporate books has
been made. (12-A Fletcher 5634, 1982 ed., citing Snyder v. Eagle Fruit Co., 75 F2d739) 38
Similarly, VGCCI's contention that petitioner is duty-bound to know its by-laws because of Art.
2099 of the Civil Code which stipulates that the creditor must take care of the thing pledged with
the diligence of a good father of a family, fails to convince. The case of Cruz & Serrano v. Chua
A. H. Lee, 39 is clearly not applicable:
In applying this provision to the situation before us it must be borne in mind that the ordinary pawn
ticket is a document by virtue of which the property in the thing pledged passes from hand to hand
by mere delivery of the ticket; and the contract of the pledge is, therefore, absolvable to bearer. It
results that one who takes a pawn ticket in pledge acquires domination over the pledge; and it is
the holder who must renew the pledge, if it is to be kept alive.
It is quite obvious from the aforequoted case that a membership share is quite different in character
from a pawn ticket and to reiterate, petitioner was never informed of Calapatia's unpaid accounts
and the restrictive provisions in VGCCI's by-laws.
Finally, Sec. 63 of the Corporation Code which provides that "no shares of stock against which the
corporation holds any unpaid claim shall be transferable in the books of the corporation" cannot
be utilized by VGCCI. The term "unpaid claim" refers to "any unpaid claim arising from unpaid
subscription, and not to any indebtedness which a subscriber or stockholder may owe the
corporation arising from any other transaction." 40 In the case at bar, the subscription for the share
in question has been fully paid as evidenced by the issuance of Membership Certificate No. 1219.
41 What Calapatia owed the corporation were merely the monthly dues. Hence, the aforequoted
provision does not apply.
WHEREFORE, premises considered, the assailed decision of the Court of Appeals is REVERSED
and the order of the SEC en banc dated 4 June 1993 is hereby AFFIRMED.
SO ORDERED.
G.R. No. 77365 April 7, 1992
RITA CALEON, petitioner, vs. AGUS DEVELOPMENT CORPORATION and COURT
OF APPEALS, respondents.
BIDIN, J.:
This is a petition for review on certiorari seeking the reversal of the January 28, 1987 decision of
the Court of Appeals in CA-G.R. SP No. 10990 entitled "Rita Caleon V. Hon. Samilo Barlongay,
et al." dismissing the petition for review of the decision of the Regional Trial Court of Manila,
Branch 34, which affirmed the decision of the Metropolitan Trial Court of Manila, Branch XII,
ejecting the petitioner.
The undisputed facts of the case are as follows:
Private respondent Agus Development Corporation is the owner of a parcel of land denominated
as Lot 39, Block 28, situated at 1611-1619 Lealtad, Sampaloc, Manila, which it leased to petitioner
Rita Caleon for a monthly rental of P180.00. Petitioner constructed on the lot leased a 4-door
apartment building.
Without the consent of the private respondent, the petitioner sub-leased two of the four doors of
the apartment to Rolando Guevarra and Felicisima Estrada for a monthly rental of P350.00 each.
Upon learning of the sub-lease, private respondent through counsel demanded in writing that the
petitioner vacate the leased premises (Rollo, Annex "A", p. 20).
For failure of petitioner to comply with the demand, private respondent filed a complaint for
ejectment (Civil Case No. 048908) with the Metropolitan Trial Court of Manila, Branch XII
against the petitioner citing as ground therefor the provisions of Batas Pambansa Blg. 25, Section
5, which is the unauthorized sub-leasing of part of the leased premises to third persons without
securing the consent of the lessor within the required sixty (60)-day period from the promulgation
of the new law (B.P. 25). (Rollo, Petition, p. 8).
After trial, the court a quo rendered its decision ordering petitioner and all persons claiming
possession under her (a) to vacate the premises alluded to in the complaint; (b) to remove whatever
improvement she introduced on the property; (c) to pay private respondent the amount of
P2,000.00 as attorney's fees; and (d) to pay the costs (Rollo, Annex "A", p. 19).
Petitioner appealed the decision to the Regional Trial Court and on November 24, 1980, presiding
judge of the RTC, the Hon. Samilo Barlongay, affirmed in toto the decision of the Metropolitan
Trial Court (Rollo, Annex "A", p. 19).
The decision of the Regional Trial Court was appealed to the Court of Appeals for review. The
respondent Court of Appeals rendered its decision dated January 28, 1987, the dispositive portion
of which reads as follows:
PREMISES CONSIDERED, the petition not being prima facie meritorious, the same is outright
dismissed.
SO ORDERED. (Rollo, Annex "A", p. 21)
Hence, the petition for review on certiorari.
The principal issue in this case is whether or not the lease of an apartment includes a sublease of
the lot on which it is constructed, as would constitute a ground for ejectment under Batas Pambansa
BLg. 25.
Petitioner is of the view that Batas Pambansa Blg. 25 is not applicable because what she leased
was her own apartment house which does not include a sublease of the lot she leased from private
respondent on which the apartment is constructed.
Petitioner's contention is untenable.
This issue has already been laid to rest in the case of Duellome v. Gotico (7 SCRA 841 [1963])
where this Court ruled that the lease of a building naturally includes the lease of the lot, and the
rentals of the building includes those of the lot. Thus:
. . . the lease of a building would naturally include the lease of the lot and that the rentals of the
building include the rentals of the lot.
xxx xxx xxx
Furthermore, under our Civil Code, the occupancy of a building or house not only suggests but
implies the tenancy or possession in fact of the land on which they are constructed. This is not a
new pronouncement. An extensive elaboration of this rule was discussed by this Court in the case
of Baquiran, et al., v. Baquiran, et al., 53 O.G. p. 1130.
. . . the Court of Appeals should have found the herein appellees lessees of the house, and for all
legal purposes, of the lot on which it was built as well.
But petitioner insists that the ruling in the aforecited case is not applicable to the case at bar because
the former is a damage suit while the latter is an ejectment case.
Be that as it may, this Court has categorically answered in the affirmative, the principal question,
common to both cases and on which rests the resolution of the issues involved therein. Under the
above ruling it is beyond dispute that petitioner in leasing her apartment has also subleased the lot
on which it is constructed which lot belongs to private respondent. Consequently, she has violated
the provisions of Section 5, Batas Pambansa Blg. 25 which is a ground for Ejectment.
Section 5 of Batas Pambansa Blg. 25 enumerates the grounds for judicial ejectment, among which
is the subleasing of residential units without the written consent of the owner/lessor, to wit:
Se. 5 Grounds for judicial ejectment. Ejectment shall be allowed on the following grounds:
a) Subleasing or assignment of lease of residential units in whole or in part, with the written consent
of the owner/lessor: Provided that in the case of subleases or assignments executed prior to the
approval of this Act, the sublessor/assignor shall have sixty days from the effectivity of this Act
within which to obtain the written approval of the owner/lessor or terminate the sublease or
assignment.
Section 2(b) of Batas Pambansa Blg. 25 defines the term residential unit as follows:
Sec. 2. Definition of Terms — Unless otherwise indicated wherever in this Act, the following shall
have the following meaning:
xxx xxx xxx
b. A residential unit — refers to an apartment, house and/or land on which another's dwelling is
located used for residential purposes and shall include not only buildings, parts or units thereof
used solely as dwelling places, except motels, motel rooms, hotels, hotel rooms, boarding houses,
dormitories, rooms and bedspaces for rent, but also those used for home industries, retail stores,
or other business purposes if the owner thereof and his family actually live therein and use it
principally for dwelling purposes: . . .
Petitioner argued further that Batas Pambansa Blg. 25 cannot be applied in this case because there
is a perfected contract of lease without any express prohibition on subleasing which had been in
effect between petitioner and private respondent long before the enactment of Batas Pambansa
Blg. 25. Therefore, the application of said law to the case at bar is unconstitutional as an
impairment of the obligation of contracts.
It is well settled that all presumptions are indulged in favor of constitutionality; one who attacks a
statute, alleging unconstitutionality must prove its invalidity beyond a reasonable doubt
(Victoriano v. Elizalde Rope Workers' Union, 59 SCRA 54 [1974]). In fact, this Court does not
decide questions of a constitutional nature unless that question is properly raised and presented in
appropriate cases and is necessary to a determination of the case, i.e., the issue of constitutionality
must be the very lis mota presented (Tropical Homes, Inc. v. National Housing Authority, 152
SCRA 540 [1987]).
In any event, it is now beyond question that the constitutional guaranty of non-impairment of
obligations of contract is limited by and subject to the exercise of police power of the state in the
interest of public health, safety, morals and general welfare (Kabiling, et al. v. National Housing
Authority, 156 SCRA 623 [1987]). In spite of the constitutional prohibition, the State continues to
possess authority to safeguard the vital interests of its people. Legislation appropriate to
safeguarding said interest may modify or abrogate contracts already in effect (Victoriano v.
Elizalde Rope Workers' Union, et al., supra). In fact, every contract affecting public interest suffers
a congenital infirmity in that it contains an implied reservation of the police power as a postulate
of the existing legal order. This power can be activated at anytime to change the provisions of the
contract, or even abrogate it entirely, for the promotion or protection of the general welfare. Such
an act will not militate against the impairment clause, which is subject to and limited by the
paramount police power (Villanueva v. Castañeda, 154 SCRA 142 [1987]).
Batas Pambansa Blg. 25, "An Act Regulating Rentals of Dwelling Units or of Land On Which
Another's Dwelling is Located and For Other Purposes" shows that the subject matter of the law
is the regulation of rentals and is intended only for dwelling units with specified monthly rentals
constructed before the law became effective (Baens v. Court of Appeals, 125 SCRA 634 [1983]).
Batas Pambansa Blg. 25 is derived from P.D. No. 20 which has been declared by this Court as a
police power legislation, applicable to leases entered into prior to July 14, 1971 (effectivity date
of RA 6539), so that the applicability thereof to existing contracts cannot be denied (Gutierrez v.
Cantada, 90 SCRA 1 [1979]).
Finally, petitioner invokes, among others, the promotion of social justice policy of the New
Constitution. Like P.D. No. 20, the objective of Batas Pambansa Blg. 25 is to remedy the plight of
lessees, but such objective is not subject to exploitation by the lessees for whose benefit the law
was enacted. Thus, the prohibition provided for in the law against the sublease of the premises
without the consent of the owner. As enunciated by this Court, it must be remembered that social
justice cannot be invoked to trample on the rights of property owners, who under our Constitution
and laws are also entitled to protection. The social justice consecrated in our Constitution was not
intended to take away rights from a person and give them to another who is not entitled thereto
(Salonga v. Farrales, 105 SCRA 360 [1981]).
WHEREFORE, the Petition is Denied for lack of merit and the assailed decision of the Court of
Appeals is Affirmed.
SO ORDERED.
[G.R. No. L-27454. April 30, 1970.]
ROSENDO O. CHAVES, Plaintiff-Appellant, v. FRUCTUOSO GONZALES, DefendantAppellee.
Chaves, Elio, Chaves & Associates, for Plaintiff-Appellant.
Sulpicio E. Platon, for Defendant-Appellee.
SYLLABUS
1. CIVIL LAW; CONTRACTS; BREACH OF CONTRACT FOR NON-PERFORMANCE;
FIXING OF PERIOD BEFORE FILING OF COMPLAINT FOR NON-PERFORMANCE,
ACADEMIC.— Where the time for compliance had expired and there was breach of contract by
non-performance, it was academic for the plaintiff to have first petitioned the court to fix a period
for the performance of the contract before filing his complaint.
2. ID.; ID.; ID.; DEFENDANT CANNOT INVOKE ARTICLE 1197 OF THE CIVIL CODE OF
THE PHILIPPINES.— Where the defendant virtually admitted non-performance of the contract
by returning the typewriter that he was obliged to repair in a non-working condition, with essential
parts missing, Article 1197 of the Civil Code of the Philippines cannot be invoked. The fixing of
a period would thus be a mere formality and would serve no purpose than to delay.
3. ID.; ID.; ID.; DAMAGES RECOVERABLE; CASE AT BAR.— Where the defendant-appellee
contravened the tenor of his obligation because he not only did not repair the typewriter but
returned it "in shambles,’’ he is liable for the cost of the labor or service expended in the repair of
the typewriter, which is in the amount of P58.75, because the obligation or contract was to repair
it. In addition, he is likewise liable under Art. 1170 of the Code, for the cost of the missing parts,
in the amount of P31.10, for in his obligation to repair the typewriter he was bound, but failed or
neglected, to return it in the same condition it was when he received it.
4. ID.; ID.; ID.; CLAIMS FOR DAMAGES OR ATTORNEY’S FEES NOT RECOVERABLE;
NOT ALLEGED OR PROVED IN INSTANT CASE.— Claims for damages and attorney’s fees
must be pleaded, and the existence of the actual basis thereof must be proved. As no findings of
fact were made on the claims for damages and attorney’s fees, there is no factual basis upon which
to make an award therefor.
5. REMEDIAL LAW; APPEALS; APPEAL FROM COURT OF FIRST INSTANCE TO
SUPREME COURT; ONLY QUESTIONS OF LAW REVIEWABLE.— Where the appellant
directly appeals from the decision of the trial court to the Supreme Court on questions of law, he
is bound by the judgment of the court a quo on its findings of fact.
DECISION
REYES, J.B.L., J.:
This is a direct appeal by the party who prevailed in a suit for breach of oral contract and recovery
of damages but was unsatisfied with the decision rendered by the Court of First Instance of Manila,
in its Civil Case No. 65138, because it awarded him only P31.10 out of his total claim of P690 00
for actual, temperate and moral damages and attorney’s fees.
The appealed judgment, which is brief, is hereunder quoted in full:jgc:chanrobles.com.ph
"In the early part of July, 1963, the plaintiff delivered to the defendant, who is a typewriter repairer,
a portable typewriter for routine cleaning and servicing. The defendant was not able to finish the
job after some time despite repeated reminders made by the plaintiff. The defendant merely gave
assurances, but failed to comply with the same. In October, 1963, the defendant asked from the
plaintiff the sum of P6.00 for the purchase of spare parts, which amount the plaintiff gave to the
defendant. On October 26, 1963, after getting exasperated with the delay of the repair of the
typewriter, the plaintiff went to the house of the defendant and asked for the return of the
typewriter. The defendant delivered the typewriter in a wrapped package. On reaching home, the
plaintiff examined the typewriter returned to him by the defendant and found out that the same
was in shambles, with the interior cover and some parts and screws missing. On October 29, 1963.
the plaintiff sent a letter to the defendant formally demanding the return of the missing parts, the
interior cover and the sum of P6.00 (Exhibit D). The following day, the defendant returned to the
plaintiff some of the missing parts, the interior cover and the P6.00.
"On August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business Machines, and
the repair job cost him a total of P89.85, including labor and materials (Exhibit C).
"On August 23, 1965, the plaintiff commenced this action before the City Court of Manila,
demanding from the defendant the payment of P90.00 as actual and compensatory damages,
P100.00 for temperate damages, P500.00 for moral damages, and P500.00 as attorney’s fees.
"In his answer as well as in his testimony given before this court, the defendant made no denials
of the facts narrated above, except the claim of the plaintiff that the typewriter was delivered to
the defendant through a certain Julio Bocalin, which the defendant denied allegedly because the
typewriter was delivered to him personally by the plaintiff.
"The repair done on the typewriter by Freixas Business Machines with the total cost of P89.85
should not, however, be fully chargeable against the defendant. The repair invoice, Exhibit C,
shows that the missing parts had a total value of only P31.10.
"WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum
of P31.10, and the costs of suit.
"SO ORDERED."cralaw virtua1aw library
The error of the court a quo, according to the plaintiff-appellant, Rosendo O. Chaves, is that it
awarded only the value of the missing parts of the typewriter, instead of the whole cost of labor
and materials that went into the repair of the machine, as provided for in Article 1167 of the Civil
Code, reading as follows:jgc:chanrobles.com.ph
"ART. 1167. If a person obliged to do something fails to do it, the same shall be executed at his
cost.
This same rule shall be observed if he does it in contravention of the tenor of the obligation.
Furthermore it may be decreed that what has been poorly done he undone."cralaw virtua1aw
library
On the other hand, the position of the defendant-appellee, Fructuoso Gonzales, is that he is not
liable at all, not even for the sum of P31.10, because his contract with plaintiff-appellant did not
contain a period, so that plaintiff-appellant should have first filed a petition for the court to fix the
period, under Article 1197 of the Civil Code, within which the defendant appellee was to comply
with the contract before said defendant-appellee could be held liable for breach of contract.
Because the plaintiff appealed directly to the Supreme Court and the appellee did not interpose
any appeal, the facts, as found by the trial court, are now conclusive and non-reviewable. 1
The appealed judgment states that the "plaintiff delivered to the defendant . . . a portable typewriter
for routine cleaning and servicing" ; that the defendant was not able to finish the job after some
time despite repeated reminders made by the plaintiff" ; that the "defendant merely gave
assurances, but failed to comply with the same" ; and that "after getting exasperated with the delay
of the repair of the typewriter", the plaintiff went to the house of the defendant and asked for its
return, which was done. The inferences derivable from these findings of fact are that the appellant
and the appellee had a perfected contract for cleaning and servicing a typewriter; that they intended
that the defendant was to finish it at some future time although such time was not specified; and
that such time had passed without the work having been accomplished, far the defendant returned
the typewriter cannibalized and unrepaired, which in itself is a breach of his obligation, without
demanding that he should be given more time to finish the job, or compensation for the work he
had already done. The time for compliance having evidently expired, and there being a breach of
contract by non-performance, it was academic for the plaintiff to have first petitioned the court to
fix a period for the performance of the contract before filing his complaint in this case. Defendant
cannot invoke Article 1197 of the Civil Code for he virtually admitted non-performance by
returning the typewriter that he was obliged to repair in a non-working condition, with essential
parts missing. The fixing of a period would thus be a mere formality and would serve no purpose
than to delay (cf. Tiglao. Et. Al. V. Manila Railroad Co. 98 Phil. 18l).
It is clear that the defendant-appellee contravened the tenor of his obligation because he not only
did not repair the typewriter but returned it "in shambles", according to the appealed decision. For
such contravention, as appellant contends, he is liable under Article 1167 of the Civil Code. jam
quot, for the cost of executing the obligation in a proper manner. The cost of the execution of the
obligation in this case should be the cost of the labor or service expended in the repair of the
typewriter, which is in the amount of P58.75. because the obligation or contract was to repair it.
In addition, the defendant-appellee is likewise liable, under Article 1170 of the Code, for the cost
of the missing parts, in the amount of P31.10, for in his obligation to repair the typewriter he was
bound, but failed or neglected, to return it in the same condition it was when he received it.
Appellant’s claims for moral and temperate damages and attorney’s fees were, however, correctly
rejected by the trial court, for these were not alleged in his complaint (Record on Appeal, pages 15). Claims for damages and attorney’s fees must be pleaded, and the existence of the actual basis
thereof must be proved. 2 The appealed judgment thus made no findings on these claims, nor on
the fraud or malice charged to the appellee. As no findings of fact were made on the claims for
damages and attorney’s fees, there is no factual basis upon which to make an award therefor.
Appellant is bound by such judgment of the court, a quo, by reason of his having resorted directly
to the Supreme Court on questions of law.
IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby modified, by
ordering the defendant-appellee to pay, as he is hereby ordered to pay, the plaintiff-appellant the
sum of P89.85, with interest at the legal rate from the filing of the complaint. Costs in all instances
against appellee Fructuoso Gonzales.
G.R. No. L-16217 May 25, 1964
ALFONSO DE LOS REYES, ET AL., plaintiffs-appellees, vs.
LUIS DE LEON, defendant-appellant.
Alberto P. San Juan for plaintiffs-appellees.
Augusto de Leon for defendant-appellant.
MAKALINTAL, J.:
This appeal was originally filed with the Court of Appeals. Subsequently, it was endorsed to and
accepted by this Court for the reason that the issues raised involve only questions of law.
As security for a loan of P60,000, Japanese Currency obtained from the herein appellant, the
appellees executed two mortgage agreements in favor of the former. The first, entitled "Real Estate
Mortgage" and executed on July 4, 1944, so far as germane to this litigation, provided:
That for and in consideration of the loan of FORTY THOUSAND PESOS (P40,000.00) Philippine
Currency, received from the Mortgagee, the receipt of which is hereby acknowledged, and to
secure the payment of the same as well as interest thereon, and other advances of money that may
hereinafter be obtained from the mortgagor as well as for other valuable considerations received
or that the latter may acquire, including interest and expenses of any other obligations owing to
the Mortgagee whether direct or indirect, principal or secondary, the Mortgagor does hereby
transfer and convey by way of Mortgage unto the Mortgagee, his assigns and successors, the parcel
of land hereinbelow described, their title thereto being, evidenced by Transfer Certificate of Title
No. 66955, of the Register of Deeds of the City of Manila, which parcel of land is more particularly
described as follows:
xxx
xxx
xxx
This mortgage is constituted under the following conditions:
(1) Time is the paramount condition of this agreement namely, that the said loan of FORTY
THOUSAND PESOS (P40,000.00) shall not be paid sooner nor later than within the first Three
years after the Greater East Asia War, to be computed from the signing of the Treaty of Peace;
xxx
xxx
xxx
(3) The Mortgagor ... shall pay in time the taxes and assessments of the mortgaged property,
reporting to the Mortgagee the fact of such payment on the dates in which they were effected;
(4) The Mortgagor shall not lease the mortgaged property under contract nor shall sell nor dispose
of the same in any manner, nor encumber the same with a second mortgage, without the written
consent of the Mortgagee;
xxxxxxxxx
(6) If at any time the Mortgagor shall fail or refuse to pay any of his obligations stipulated when
due, or whatever obligations herein secured, then all the entire loan of Forty Thousand Pesos
(P40,000.00) including accumulated interest, and other obligations of the Mortgagor of any nature,
shall become due and payable, and the Mortgagee may immediately foreclose this mortgage
judicially or extrajudicially, under Act No. 3135, as amended, and in case of foreclosure, the
Mortgagee, on filing the corresponding petition, shall be appointed receiver, ...;
The second agreement was denominated "Real Estate Additional Mortgage". Dated July 11, 1944
and constituted upon the same property as the one offered in the first instrument, it stipulated,
insofar as relevant to the issues in this case, the following:
That on July 4th, 1944, the Mortgagor obtained from the Mortgagee the loan of FORTY
THOUSAND (P40,000.00), secured by a lien of first mortgage under real property situated at
Nebraska, Malate, Manila, Philippines, more particularly described under Transfer Certificate of
Title No. 66955, in the Land Records of the City of Manila, as follows:
xxx
xxx
xxx
That the MORTGAGOR, desiring to obtain an additional loan of TWENTY THOUSAND PESOS
(P20,000.00) from the MORTGAGEE, has, by these presents, transferred, conveyed and assigned,
in favor of the MORTGAGEE, his assigns, heirs and successors in interest, the above described
parcel of land, subject to the following conditions:
That all the terms and conditions in Deed of Mortgage, dated July 4, 1944, between the same
parties, hereto, executed before Notary Public for the City of Manila, Mr. Nicanor Sison, per Doc.
No 21, Page 90, Book I, Series of 1944, in the notarial register of the above-mentioned notary
public, were herein incorporated and made part of this document, with the exception only of the
terms which may be repugnant and contrary to the additional conditions and supplementary
agreements hereinafter stipulated, to wit:
The conditions of this additional mortgage, are: (A) That the amount of FORTY THOUSAND
PESOS (P40,000.00), including the accrued interest above-mentioned as consideration in Doc. No.
21, Page No. 90, Book I, Series of 1944, executed before the Notary Public for the City of Manila,
Mr. Nicanor Sison, between the parties hereto, shall be paid not sooner nor later than within three
(3) years after the war, counted from the date of the signing of the Treaty of Peace by the
Belligerent Powers; and (B) That said payment must be made in Philippine Currency; Provided,
however, in the event that prior to the termination of the present war and signing of the Treaty of
Peace and its proclamation by the corresponding powers, the Mortgagor does not redeem and pay
the loan obtained under the original mortgage as per document abovementioned, then this
additional loan and all its consideration shall be automatically condoned, cancelled and annulled,
including TEN THOUSAND PESOS (P10,000.00) of the original loan together with the accrued
interest up to the cessation of the war born the entire amount of the original loan. ... .
Subsequently, or on August 5, 1953, the appellees received the following communication from the
appellant's lawyer:
This is to inform you that by reason of your failure to pay the taxes due for the years 1951 and
1952 and 1953 on the property covered by Transfer Certificate of Title No. 66955 of the City of
Manila which was mortgaged by you in favor of Luis de Leon to secure a loan of P60,000.00, your
indebtedness in the latter amount together with the accumulated interest thereon has become due
and payable, and we are, therefore, taking the necessary extrajudicial steps to foreclose said
properly in accordance with the terms and conditions of the two real estate mortgages executed by
you in favor of Luis de Leon.
Acting on the foregoing communication, the appellees paid the back taxes complained of on
September 3, 1953.
The foreclosure sale was scheduled by the Sheriff on September 4, 1953. Before the sale could
proceed, appellee de los Reyes presented to the appellant and his counsel the receipts evidencing
payment of the taxes for 1951 and 1952 (only the first installment of the tax for 1953 was then
due). Nevertheless, appellant and his counsel insisted on the foreclosure to collect the indebtedness
allegedly in the amount of P60,000.00. However, the extrajudicial sale was deferred until
September 21, 1953.
At the auction, the appellant was the lone and sole bidder. He won the bid at P30,000.00 and for
which he was, therefore, issued the Sheriff's Certificate of Sale.
On August 21, 1954, appellees filed suit to annul the foreclosure sale, charging therefore three
grounds, to wit: (1) misrepresentation of the amount of the actual indebtedness, (2) absence of
demand prior to foreclosure, and (3) prematurity, because the foreclosure was effected long before
the period stipulated in the contract.
The defendant-appellant filed a timely answer with a counterclaim for damages. In the same, only
one ground was invoked by him in justification of the act complained of, namely, "failure on the
part of the, plaintiffs to pay the real estate taxes for 1951 to 1953, inclusive."
Upon the issues thus joined as above, the trial court rendered judgment holding that "all the
proceedings had in the said sale and foreclosure" to be "null and void and of no effect," and
condemning appellant to pay the sum of P3,000.00 as attorney's fees.
On failing to have the aforesaid judgment reconsidered, the case was appealed.
The judgment should be affirmed for several reasons:
(1) The ground for such foreclosure was the failure of appellees to pay the taxes on the mortgaged
properly for 1951, 1952 and 1953. The pertinent stipulation of the mortgage Contract read as
follows:
(6) If at any time the Mortgagor shall fail or refuse to pay any of his obligations stipulated when
due, or whatever obligation herein secured, then all the entire loan of Forty Thousand Pesos
(P40,000.00) including accumulated interest, and other obligations of the Mortgagor of any nature,
shall become due and payable, and the Mortgagee may immediately foreclosed this mortgage
judicially or extrajudicially under Act as amended, and in case of foreclosure, the Mortgagee, on
filing the corresponding petition, shall be appointed receiver, ...;
The issue on this point is: Did appellees incur in default in their obligation to pay the taxes, vis-avis appellant, even without previous demand by the latter for such payment? And did appellees,
assuming that their failure to pay the taxes rendered the entire loan due and payable, incur in default
in the payment of said loan in the absence of a previous demand upon them? It should be
remembered that no demand was made either in respect of the taxes or of the loan itself, the only
notice given to appellees being the letter received by them from appellant's lawyer on August 5,
1953, to the effect that he was taking the necessary steps to foreclose the mortgage extrajudicially
because the taxes had not been paid. 1äwphï1.ñët
Article 1169 of the Civil Code provides that those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of
the obligation. Demand is dispensed with only: (a) when the obligation or the law expressly so
declares, that is, that the debtor shall be considered in default without the need for such demand;
(b) when time is of the essence of the obligation; and (c) when demand would be useless.
Circumstances (a) and (c) were not present in the instant case. Circumstance (b) was stipulated,
but in a sense contrary to the pretension of appellant. Thus paragraph (1) of the original contract
of mortgage states: "Time is the paramount condition of this agreement, namely, that the said loan
of P40,000.00 shall rot be paid sooner nor later then with in the first three (3) years after the Greater
East Asia War, to be computed from the signing of the Treaty of Peace." In the subsequent
mortgage of July 4, 1944, for an additional loan of P20,000.00, the time element was emphasized
and modified by the following clause: "Provided, however, in the event that prior to the termination
of the present war and the signing of the Treaty of Peace and its proclamation by the corresponding
powers, the Mortgagor does not redeem and pay the loan obtained under the original mortgage ...,
then this additional mortgage shall be automatically condoned, cancelled and annulled, including
ten thousand pesos (P10,000.00) of the original loan together with accrued interest up to the
cessation of the war." In other words, provided appellees did not accelerate payment but waited
instead until after the treaty of peace was signed and proclaimed by the "corresponding powers,"
they were entitled to a reduction of their mortgage indebtedness to only one-half, or P30,000.00.
The treaty of peace was signed on September 8, 1951, and proclaimed by President Magsaysay on
November 5, 1956. From the date of signing appellees had until September 1954, and until
November 1959 from the date of proclamation. Consequently, under neither alternative had there
been default in the fulfilment of the principal obligation when the mortgage was foreclosed
extrajudicially and the property sold on September 4, 1953.
Referring specifically to the nonpayment of the taxes for 1951, 1952 and the first part of 1953, we
believe that in the light of the principal stipulation of the contract concerning the time when the
mortgage debt was to be paid, such nonpayment of taxes was not a material breach of the contract;
and that in any event, when the taxes were actually paid there was substantial compliance with the
obligation in this particular aspect so as to arrest effectively the foreclosure sale.
(2) The fixing of the period for payment was obviously to insure, for the benefit of appellant, that
such payment would be made in Philippine currency and not in Japanese fiat money; and for the
benefit of appellees, so that their indebtedness would be reduced from P60,000.00 to only
P30,000.00. Appellees did not lose their right to avail of the period for having violated "any
undertaking in consideration of which the creditor agreed to the period" (Art. 1198, Civil Code).
This is so because the timely payment of real estate taxes on the mortgaged property was clearly
not the consideration which moved the parties to fix, as they did, the term or period for the payment
of the indebtedness.
(3) The extrajudicial foreclosure of the mortgage at the instance of appellant was for the sum of
P60,000.00 instead of only P30,000.00, which was the amount appellees were bound to pay after
the treaty of peace was signed and/or proclaimed. Thus, after appellant had bought the mortgaged
property at the sheriff's sale appellees would still stand indebted to them for P30,000.00. This result
is entirely against the import of the contract and the intent of the parties thereunder. It is unjust,
unfair and oppressive, for appellees in effect would be penalized for acceleration of payment which
was not of their own choosing, but brought about by the extrajudicial foreclosure made at the
instance of appellant when no default had yet been incurred by appellees.
The judgment appealed from is affirmed, with costs.
G.R. No. L-48006
July 8, 1942
FAUSTO BARREDO, petitioner,vs. SEVERINO GARCIA and TIMOTEA ALMARIO,
respondents.
Celedonio P. Gloria and Antonio Barredo for petitioner.
Jose G. Advincula for respondents.
BOCOBO, J.:
This case comes up from the Court of Appeals which held the petitioner herein, Fausto Barredo,
liable in damages for the death of Faustino Garcia caused by the negligence of Pedro Fontanilla, a
taxi driver employed by said Fausto Barredo.
At about half past one in the morning of May 3, 1936, on the road between Malabon and Navotas,
Province of Rizal, there was a head-on collision between a taxi of the Malate Taxicab driven by
Pedro Fontanilla and a carretela guided by Pedro Dimapalis. The carretela was overturned, and
one of its passengers, 16-year-old boy Faustino Garcia, suffered injuries from which he died two
days later. A criminal action was filed against Fontanilla in the Court of First Instance of Rizal,
and he was convicted and sentenced to an indeterminate sentence of one year and one day to two
years of prision correccional. The court in the criminal case granted the petition that the right to
bring a separate civil action be reserved. The Court of Appeals affirmed the sentence of the lower
court in the criminal case. Severino Garcia and Timotea Almario, parents of the deceased on March
7, 1939, brought an action in the Court of First Instance of Manila against Fausto Barredo as the
sole proprietor of the Malate Taxicab and employer of Pedro Fontanilla. On July 8, 1939, the Court
of First Instance of Manila awarded damages in favor of the plaintiffs for P2,000 plus legal interest
from the date of the complaint. This decision was modified by the Court of Appeals by reducing
the damages to P1,000 with legal interest from the time the action was instituted. It is undisputed
that Fontanilla 's negligence was the cause of the mishap, as he was driving on the wrong side of
the road, and at high speed. As to Barredo's responsibility, the Court of Appeals found:
... It is admitted that defendant is Fontanilla's employer. There is proof that he exercised the
diligence of a good father of a family to prevent damage. (See p. 22, appellant's brief.) In fact it is
shown he was careless in employing Fontanilla who had been caught several times for violation
of the Automobile Law and speeding (Exhibit A) — violation which appeared in the records of
the Bureau of Public Works available to be public and to himself. Therefore, he must indemnify
plaintiffs under the provisions of article 1903 of the Civil Code.
The main theory of the defense is that the liability of Fausto Barredo is governed by the Revised
Penal Code; hence, his liability is only subsidiary, and as there has been no civil action against
Pedro Fontanilla, the person criminally liable, Barredo cannot be held responsible in the case. The
petitioner's brief states on page 10:
The Court of Appeals holds that the petitioner is being sued for his failure to exercise all the
diligence of a good father of a family in the selection and supervision of Pedro Fontanilla to prevent
damages suffered by the respondents. In other words, The Court of Appeals insists on applying in
the case article 1903 of the Civil Code. Article 1903 of the Civil Code is found in Chapter II, Title
16, Book IV of the Civil Code. This fact makes said article to a civil liability arising from a crime
as in the case at bar simply because Chapter II of Title 16 of Book IV of the Civil Code, in the
precise words of article 1903 of the Civil Code itself, is applicable only to "those (obligations)
arising from wrongful or negligent acts or commission not punishable by law.
The gist of the decision of the Court of Appeals is expressed thus:
... We cannot agree to the defendant's contention. The liability sought to be imposed upon him in
this action is not a civil obligation arising from a felony or a misdemeanor (the crime of Pedro
Fontanilla,), but an obligation imposed in article 1903 of the Civil Code by reason of his negligence
in the selection or supervision of his servant or employee.
The pivotal question in this case is whether the plaintiffs may bring this separate civil action against
Fausto Barredo, thus making him primarily and directly, responsible under article 1903 of the Civil
Code as an employer of Pedro Fontanilla. The defendant maintains that Fontanilla's negligence
being punishable by the Penal Code, his (defendant's) liability as an employer is only subsidiary,
according to said Penal code, but Fontanilla has not been sued in a civil action and his property
has not been exhausted. To decide the main issue, we must cut through the tangle that has, in the
minds of many confused and jumbled together delitos and cuasi delitos, or crimes under the Penal
Code and fault or negligence under articles 1902-1910 of the Civil Code. This should be done,
because justice may be lost in a labyrinth, unless principles and remedies are distinctly envisaged.
Fortunately, we are aided in our inquiry by the luminous presentation of the perplexing subject by
renown jurists and we are likewise guided by the decisions of this Court in previous cases as well
as by the solemn clarity of the consideration in several sentences of the Supreme Tribunal of Spain.
Authorities support the proposition that a quasi-delict or "culpa aquiliana " is a separate legal
institution under the Civil Code with a substantivity all its own, and individuality that is entirely
apart and independent from delict or crime. Upon this principle and on the wording and spirit
article 1903 of the Civil Code, the primary and direct responsibility of employers may be safely
anchored.
The pertinent provisions of the Civil Code and Revised Penal Code are as follows:
CIVIL CODE
ART. 1089 Obligations arise from law, from contracts and quasi-contracts, and from acts and
omissions which are unlawful or in which any kind of fault or negligence intervenes.
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ART. 1092. Civil obligations arising from felonies or misdemeanors shall be governed by the
provisions of the Penal Code.
ART. 1093. Those which are derived from acts or omissions in which fault or negligence, not
punishable by law, intervenes shall be subject to the provisions of Chapter II, Title XVI of this
book.
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ART 1902. Any person who by an act or omission causes damage to another by his fault or
negligence shall be liable for the damage so done.
ART. 1903. The obligation imposed by the next preceding article is enforcible, not only for
personal acts and omissions, but also for those of persons for whom another is responsible.
The father and in, case of his death or incapacity, the mother, are liable for any damages caused
by the minor children who live with them.
Guardians are liable for damages done by minors or incapacitated persons subject to their authority
and living with them.
Owners or directors of an establishment or business are equally liable for any damages caused by
their employees while engaged in the branch of the service in which employed, or on occasion of
the performance of their duties.
The State is subject to the same liability when it acts through a special agent, but not if the damage
shall have been caused by the official upon whom properly devolved the duty of doing the act
performed, in which case the provisions of the next preceding article shall be applicable.
Finally, teachers or directors of arts trades are liable for any damages caused by their pupils or
apprentices while they are under their custody.
The liability imposed by this article shall cease in case the persons mentioned therein prove that
they are exercised all the diligence of a good father of a family to prevent the damage.
ART. 1904. Any person who pays for damage caused by his employees may recover from the
latter what he may have paid.
REVISED PENAL CODE
ART. 100. Civil liability of a person guilty of felony. — Every person criminally liable for a felony
is also civilly liable.
ART. 101. Rules regarding civil liability in certain cases. — The exemption from criminal liability
established in subdivisions 1, 2, 3, 5, and 6 of article 12 and in subdivision 4 of article 11 of this
Code does not include exemption from civil liability, which shall be enforced to the following
rules:
First. In cases of subdivision, 1, 2 and 3 of article 12 the civil liability for acts committed by any
imbecile or insane person, and by a person under nine years of age, or by one over nine but under
fifteen years of age, who has acted without discernment shall devolve upon those having such
person under their legal authority or control, unless it appears that there was no fault or negligence
on their part.
Should there be no person having such insane, imbecile or minor under his authority, legal
guardianship, or control, or if such person be insolvent, said insane, imbecile, or minor shall
respond with their own property, excepting property exempt from execution, in accordance with
the civil law.
Second. In cases falling within subdivision 4 of article 11, the person for whose benefit the harm
has been prevented shall be civilly liable in proportion to the benefit which they may have received.
The courts shall determine, in their sound discretion, the proportionate amount for which each one
shall be liable.
When the respective shares can not be equitably determined, even approximately, or when the
liability also attaches to the Government, or to the majority of the inhabitants of the town, and, in
all events, whenever the damage has been caused with the consent of the authorities or their agents,
indemnification shall be made in the manner prescribed by special laws or regulations.
Third. In cases falling within subdivisions 5 and 6 of article 12, the persons using violence or
causing the fear shall be primarily liable and secondarily, or, if there be no such persons, those
doing the act shall be liable, saving always to the latter that part of their property exempt from
execution.
ART. 102. Subsidiary civil liability of innkeepers, tavern keepers and proprietors of establishment.
— In default of persons criminally liable, innkeepers, tavern keepers, and any other persons or
corporation shall be civilly liable for crimes committed in their establishments, in all cases where
a violation of municipal ordinances or some general or special police regulation shall have been
committed by them or their employees.
Innkeepers are also subsidiarily liable for the restitution of goods taken by robbery or theft within
their houses lodging therein, or the person, or for the payment of the value thereof, provided that
such guests shall have notified in advance the innkeeper himself, or the person representing him,
of the deposit of such goods within the inn; and shall furthermore have followed the directions
which such innkeeper or his representative may have given them with respect to the care of and
vigilance over such goods. No liability shall attach in case of robbery with violence against or
intimidation against or intimidation of persons unless committed by the innkeeper's employees.
ART. 103. Subsidiary civil liability of other persons. — The subsidiary liability established in the
next preceding article shall also apply to employers, teachers, persons, and corporations engaged
in any kind of industry for felonies committed by their servants, pupils, workmen, apprentices, or
employees in the discharge of their duties.
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ART. 365. Imprudence and negligence. — Any person who, by reckless imprudence, shall commit
any act which, had it been intentional, would constitute a grave felony, shall suffer the penalty of
arresto mayor in its maximum period to prision correccional in its minimum period; if it would
have constituted a less grave felony, the penalty of arresto mayor in its minimum and medium
periods shall be imposed.
Any person who, by simple imprudence or negligence, shall commit an act which would otherwise
constitute a grave felony, shall suffer the penalty of arresto mayor in its medium and maximum
periods; if it would have constituted a less serious felony, the penalty of arresto mayor in its
minimum period shall be imposed."
It will thus be seen that while the terms of articles 1902 of the Civil Code seem to be broad enough
to cover the driver's negligence in the instant case, nevertheless article 1093 limits cuasi-delitos to
acts or omissions "not punishable by law." But inasmuch as article 365 of the Revised Penal Code
punishes not only reckless but even simple imprudence or negligence, the fault or negligence under
article 1902 of the Civil Code has apparently been crowded out. It is this overlapping that makes
the "confusion worse confounded." However, a closer study shows that such a concurrence of
scope in regard to negligent acts does not destroy the distinction between the civil liability arising
from a crime and the responsibility for cuasi-delitos or culpa extra-contractual. The same negligent
act causing damages may produce civil liability arising from a crime under article 100 of the
Revised Penal Code, or create an action for cuasi-delito or culpa extra-contractual under articles
1902-1910 of the Civil Code.
The individuality of cuasi-delito or culpa extra-contractual looms clear and unmistakable. This
legal institution is of ancient lineage, one of its early ancestors being the Lex Aquilia in the Roman
Law. In fact, in Spanish legal terminology, this responsibility is often referred to as culpa aquiliana.
The Partidas also contributed to the genealogy of the present fault or negligence under the Civil
Code; for instance, Law 6, Title 15, of Partida 7, says: "Tenudo es de fazer emienda, porque, como
quier que el non fizo a sabiendas en daño al otro, pero acaescio por su culpa."
The distinctive nature of cuasi-delitos survives in the Civil Code. According to article 1089, one
of the five sources of obligations is this legal institution of cuasi-delito or culpa extra-contractual:
"los actos . . . en que intervenga cualquier genero de culpa o negligencia." Then article 1093
provides that this kind of obligation shall be governed by Chapter II of Title XVI of Book IV,
meaning articles 1902-0910. This portion of the Civil Code is exclusively devoted to the legal
institution of culpa aquiliana.
Some of the differences between crimes under the Penal Code and the culpa aquiliana or cuasidelito under the Civil Code are:
1. That crimes affect the public interest, while cuasi-delitos are only of private concern.
2. That, consequently, the Penal Code punishes or corrects the criminal act, while the Civil Code,
by means of indemnification, merely repairs the damage.
3. That delicts are not as broad as quasi-delicts, because the former are punished only if there is a
penal law clearly covering them, while the latter, cuasi-delitos, include all acts in which "any king
of fault or negligence intervenes." However, it should be noted that not all violations of the penal
law produce civil responsibility, such as begging in contravention of ordinances, violation of the
game laws, infraction of the rules of traffic when nobody is hurt. (See Colin and Capitant, "Curso
Elemental de Derecho Civil," Vol. 3, p. 728.)
Let us now ascertain what some jurists say on the separate existence of quasi-delicts and the
employer's primary and direct liability under article 1903 of the Civil Code.
Dorado Montero in his essay on "Responsibilidad" in the "Enciclopedia Juridica Española" (Vol.
XXVII, p. 414) says:
El concepto juridico de la responsabilidad civil abarca diversos aspectos y comprende a diferentes
personas. Asi, existe una responsabilidad civil propiamente dicha, que en ningun casl lleva
aparejada responsabilidad criminal alguna, y otra que es consecuencia indeclinable de la penal que
nace de todo delito o falta."
The juridical concept of civil responsibility has various aspects and comprises different persons.
Thus, there is a civil responsibility, properly speaking, which in no case carries with it any criminal
responsibility, and another which is a necessary consequence of the penal liability as a result of
every felony or misdemeanor."
Maura, an outstanding authority, was consulted on the following case: There had been a collision
between two trains belonging respectively to the Ferrocarril Cantabrico and the Ferrocarril del
Norte. An employee of the latter had been prosecuted in a criminal case, in which the company
had been made a party as subsidiarily responsible in civil damages. The employee had been
acquitted in the criminal case, and the employer, the Ferrocarril del Norte, had also been
exonerated. The question asked was whether the Ferrocarril Cantabrico could still bring a civil
action for damages against the Ferrocarril del Norte. Maura's opinion was in the affirmative, stating
in part (Maura, Dictamenes, Vol. 6, pp. 511-513):
Quedando las cosas asi, a proposito de la realidad pura y neta de los hechos, todavia menos parece
sostenible que exista cosa juzgada acerca de la obligacion civil de indemnizar los quebrantos y
menoscabos inferidos por el choque de los trenes. El titulo en que se funda la accion para demandar
el resarcimiento, no puede confundirse con las responsabilidades civiles nacidas de delito, siquiera
exista en este, sea el cual sea, una culpa rodeada de notas agravatorias que motivan sanciones
penales, mas o menos severas. La lesion causada por delito o falta en los derechos civiles, requiere
restituciones, reparaciones o indemnizaciones, que cual la pena misma atañen al orden publico;
por tal motivo vienen encomendadas, de ordinario, al Ministerio Fiscal; y claro es que si por esta
via se enmiendan los quebrantos y menoscabos, el agraviado excusa procurar el ya conseguido
desagravio; pero esta eventual coincidencia de los efectos, no borra la diversidad originaria de las
acciones civiles para pedir indemnizacion.
Estas, para el caso actual (prescindiendo de culpas contractuales, que no vendrian a cuento y que
tiene otro regimen), dimanan, segun el articulo 1902 del Codigo Civil, de toda accion u omision,
causante de daños o perjuicios, en que intervenga culpa o negligencia. Es trivial que acciones
semejantes son ejercitadas ante los Tribunales de lo civil cotidianamente, sin que la Justicia
punitiva tenga que mezclarse en los asuntos. Los articulos 18 al 21 y 121 al 128 del Codigo Penal,
atentos al espiritu y a los fines sociales y politicos del mismo, desenvuelven y ordenan la materia
de responsabilidades civiles nacidas de delito, en terminos separados del regimen por ley comun
de la culpa que se denomina aquiliana, por alusion a precedentes legislativos del Corpus Juris.
Seria intempestivo un paralelo entre aquellas ordenaciones, y la de la obligacion de indemnizar a
titulo de culpa civil; pero viene al caso y es necesaria una de las diferenciaciones que en el tal
paralelo se notarian.
Los articulos 20 y 21 del Codigo Penal, despues de distribuir a su modo las responsabilidades
civiles, entre los que sean por diversos conceptos culpables del delito o falta, las hacen extensivas
a las empresas y los establecimientos al servicio de los cuales estan los delincuentes; pero con
caracter subsidiario, o sea, segun el texto literal, en defecto de los que sean responsables
criminalmente. No coincide en ello el Codigo Civil, cuyo articulo 1903, dice; La obligacion que
impone el articulo anterior es exigible, no solo por los actos y omisiones propios, sino por los de
aquellas personas de quienes se debe responder; personas en la enumeracion de las cuales figuran
los dependientes y empleados de los establecimientos o empresas, sea por actos del servicio, sea
con ocasion de sus funciones. Por esto acontece, y se observa en la jurisprudencia, que las
empresas, despues de intervenir en las causas criminales con el caracter subsidiario de su
responsabilidad civil por razon del delito, son demandadas y condenadas directa y aisladamente,
cuando se trata de la obligacion, ante los tribunales civiles.
Siendo como se ve, diverso el titulo de esta obligacion, y formando verdadero postulado de nuestro
regimen judicial la separacion entre justicia punitiva y tribunales de lo civil, de suerte que tienen
unos y otros normas de fondo en distintos cuerpos legales, y diferentes modos de proceder,
habiendose, por añadidura, abstenido de asistir al juicio criminal la Compañia del Ferrocarril
Cantabrico, que se reservo ejercitar sus acciones, parece innegable que la de indemnizacion por
los daños y perjuicios que le irrogo el choque, no estuvo sub judice ante el Tribunal del Jurado, ni
fue sentenciada, sino que permanecio intacta, al pronunciarse el fallo de 21 de marzo. Aun cuando
el veredicto no hubiese sido de inculpabilidad, mostrose mas arriba, que tal accion quedaba
legitimamente reservada para despues del proceso; pero al declararse que no existio delito, ni
responsabilidad dimanada de delito, materia unica sobre que tenian jurisdiccion aquellos
juzgadores, se redobla el motivo para la obligacion civil ex lege, y se patentiza mas y mas que la
accion para pedir su cumplimiento permanece incolume, extraña a la cosa juzgada.
As things are, apropos of the reality pure and simple of the facts, it seems less tenable that there
should be res judicata with regard to the civil obligation for damages on account of the losses
caused by the collision of the trains. The title upon which the action for reparation is based cannot
be confused with the civil responsibilities born of a crime, because there exists in the latter,
whatever each nature, a culpa surrounded with aggravating aspects which give rise to penal
measures that are more or less severe. The injury caused by a felony or misdemeanor upon civil
rights requires restitutions, reparations, or indemnifications which, like the penalty itself, affect
public order; for this reason, they are ordinarily entrusted to the office of the prosecuting attorney;
and it is clear that if by this means the losses and damages are repaired, the injured party no longer
desires to seek another relief; but this coincidence of effects does not eliminate the peculiar nature
of civil actions to ask for indemnity.
Such civil actions in the present case (without referring to contractual faults which are not pertinent
and belong to another scope) are derived, according to article 1902 of the Civil Code, from every
act or omission causing losses and damages in which culpa or negligence intervenes. It is
unimportant that such actions are every day filed before the civil courts without the criminal courts
interfering therewith. Articles 18 to 21 and 121 to 128 of the Penal Code, bearing in mind the spirit
and the social and political purposes of that Code, develop and regulate the matter of civil
responsibilities arising from a crime, separately from the regime under common law, of culpa
which is known as aquiliana, in accordance with legislative precedent of the Corpus Juris. It would
be unwarranted to make a detailed comparison between the former provisions and that regarding
the obligation to indemnify on account of civil culpa; but it is pertinent and necessary to point out
to one of such differences.
Articles 20 and 21 of the Penal Code, after distriburing in their own way the civil responsibilities
among those who, for different reasons, are guilty of felony or misdemeanor, make such civil
responsibilities applicable to enterprises and establishments for which the guilty parties render
service, but with subsidiary character, that is to say, according to the wording of the Penal Code,
in default of those who are criminally responsible. In this regard, the Civil Code does not coincide
because article 1903 says: "The obligation imposed by the next preceding article is demandable,
not only for personal acts and omissions, but also for those of persons for whom another is
responsible." Among the persons enumerated are the subordinates and employees of
establishments or enterprises, either for acts during their service or on the occasion of their
functions. It is for this reason that it happens, and it is so observed in judicial decisions, that the
companies or enterprises, after taking part in the criminal cases because of their subsidiary civil
responsibility by reason of the crime, are sued and sentenced directly and separately with regard
to the obligation, before the civil courts.
Seeing that the title of this obligation is different, and the separation between punitive justice and
the civil courts being a true postulate of our judicial system, so that they have different fundamental
norms in different codes, as well as different modes of procedure, and inasmuch as the Compaña
del Ferrocarril Cantabrico has abstained from taking part in the criminal case and has reserved the
right to exercise its actions, it seems undeniable that the action for indemnification for the losses
and damages caused to it by the collision was not sub judice before the Tribunal del Jurado, nor
was it the subject of a sentence, but it remained intact when the decision of March 21 was rendered.
Even if the verdict had not been that of acquittal, it has already been shown that such action had
been legitimately reserved till after the criminal prosecution; but because of the declaration of the
non-existence of the felony and the non-existence of the responsibility arising from the crime,
which was the sole subject matter upon which the Tribunal del Jurado had jurisdiction, there is
greater reason for the civil obligation ex lege, and it becomes clearer that the action for its
enforcement remain intact and is not res judicata.
Laurent, a jurist who has written a monumental work on the French Civil Code, on which the
Spanish Civil Code is largely based and whose provisions on cuasi-delito or culpa extracontractual are similar to those of the Spanish Civil Code, says, referring to article 1384 of the
French Civil Code which corresponds to article 1903, Spanish Civil Code:
The action can be brought directly against the person responsible (for another), without including
the author of the act. The action against the principal is accessory in the sense that it implies the
existence of a prejudicial act committed by the employee, but it is not subsidiary in the sense that
it can not be instituted till after the judgment against the author of the act or at least, that it is
subsidiary to the principal action; the action for responsibility (of the employer) is in itself a
principal action. (Laurent, Principles of French Civil Law, Spanish translation, Vol. 20, pp. 734735.)
Amandi, in his "Cuestionario del Codigo Civil Reformado" (Vol. 4, pp. 429, 430), declares that
the responsibility of the employer is principal and not subsidiary. He writes:
Cuestion 1. La responsabilidad declarada en el articulo 1903 por las acciones u omisiones de
aquellas personas por las que se debe responder, es subsidiaria? es principal? Para contestar a esta
pregunta es necesario saber, en primer lugar, en que se funda el precepto legal. Es que realmente
se impone una responsabilidad por una falta ajena? Asi parece a primera vista; pero semejante
afirmacion seria contraria a la justicia y a la maxima universal, segun la que las faltas son
personales, y cada uno responde de aquellas que le son imputables. La responsabilidad de que
tratamos se impone con ocasion de un delito o culpa, pero no por causa de ellos, sino por causa
del causi delito, esto es, de la imprudencia o de la negligencia del padre, del tutor, del dueño o
director del establecimiento, del maestro, etc. Cuando cualquiera de las personas que enumera el
articulo citado (menores de edad, incapacitados, dependientes, aprendices) causan un daño, la ley
presume que el padre, el tutor, el maestro, etc., han cometido una falta de negligencia para prevenir
o evitar el daño. Esta falta es la que la ley castiga. No hay, pues, responsabilidad por un hecho
ajeno, sino en la apariencia; en realidad la responsabilidad se exige por un hecho propio. La idea
de que esa responsabilidad sea subsidiaria es, por lo tanto, completamente inadmisible.
Question No. 1. Is the responsibility declared in article 1903 for the acts or omissions of those
persons for who one is responsible, subsidiary or principal? In order to answer this question it is
necessary to know, in the first place, on what the legal provision is based. Is it true that there is a
responsibility for the fault of another person? It seems so at first sight; but such assertion would
be contrary to justice and to the universal maxim that all faults are personal, and that everyone is
liable for those faults that can be imputed to him. The responsibility in question is imposed on the
occasion of a crime or fault, but not because of the same, but because of the cuasi-delito, that is to
say, the imprudence or negligence of the father, guardian, proprietor or manager of the
establishment, of the teacher, etc. Whenever anyone of the persons enumerated in the article
referred to (minors, incapacitated persons, employees, apprentices) causes any damage, the law
presumes that the father, guardian, teacher, etc. have committed an act of negligence in not
preventing or avoiding the damage. It is this fault that is condemned by the law. It is, therefore,
only apparent that there is a responsibility for the act of another; in reality the responsibility exacted
is for one's own act. The idea that such responsibility is subsidiary is, therefore, completely
inadmissible.
Oyuelos, in his "Digesto: Principios, Doctrina y Jurisprudencia, Referentes al Codigo Civil
Español," says in Vol. VII, p. 743:
Es decir, no responde de hechos ajenos, porque se responde solo de su propia culpa, doctrina del
articulo 1902; mas por excepcion, se responde de la ajena respecto de aquellas personas con las
que media algun nexo o vinculo, que motiva o razona la responsabilidad. Esta responsabilidad, es
directa o es subsidiaria? En el orden penal, el Codigo de esta clase distingue entre menores e
incapacitados y los demas, declarando directa la primera (articulo 19) y subsidiaria la segunda
(articulos 20 y 21); pero en el orden civil, en el caso del articulo 1903, ha de entenderse directa,
por el tenor del articulo que impone la responsabilidad precisamente "por los actos de aquellas
personas de quienes se deba responder."
That is to say, one is not responsible for the acts of others, because one is liable only for his own
faults, this being the doctrine of article 1902; but, by exception, one is liable for the acts of those
persons with whom there is a bond or tie which gives rise to the responsibility. Is this responsibility
direct or subsidiary? In the order of the penal law, the Penal Code distinguishes between minors
and incapacitated persons on the one hand, and other persons on the other, declaring that the
responsibility for the former is direct (article 19), and for the latter, subsidiary (articles 20 and 21);
but in the scheme of the civil law, in the case of article 1903, the responsibility should be
understood as direct, according to the tenor of that articles, for precisely it imposes responsibility
"for the acts of those persons for whom one should be responsible."
Coming now to the sentences of the Supreme Tribunal of Spain, that court has upheld the principles
above set forth: that a quasi-delict or culpa extra-contractual is a separate and distinct legal
institution, independent from the civil responsibility arising from criminal liability, and that an
employer is, under article 1903 of the Civil Code, primarily and directly responsible for the
negligent acts of his employee.
One of the most important of those Spanish decisions is that of October 21, 1910. In that case,
Ramon Lafuente died as the result of having been run over by a street car owned by the "compañia
Electric Madrileña de Traccion." The conductor was prosecuted in a criminal case but he was
acquitted. Thereupon, the widow filed a civil action against the street car company, paying for
damages in the amount of 15,000 pesetas. The lower court awarded damages; so the company
appealed to the Supreme Tribunal, alleging violation of articles 1902 and 1903 of the Civil Code
because by final judgment the non-existence of fault or negligence had been declared. The
Supreme Court of Spain dismissed the appeal, saying:
Considerando que el primer motivo del recurso se funda en el equivocado supuesto de que el
Tribunal a quo, al condonar a la compañia Electrica Madrileña al pago del daño causado con la
muerte de Ramon La fuente Izquierdo, desconoce el valor y efectos juridicos de la sentencia
absolutoria deictada en la causa criminal que se siguio por el mismo hecho, cuando es lo cierto
que de este han conocido las dos jurisdicciones bajo diferentes as pectos, y como la de lo criminal
declrao dentro de los limites de su competencia que el hecho de que se trata no era constitutivo de
delito por no haber mediado descuido o negligencia graves, lo que no excluye, siendo este el unico
fundamento del fallo absolutorio, el concurso de la culpa o negligencia no califacadas, fuente de
obligaciones civiles segun el articulo 1902 del Codigo, y que alcanzan, segun el 1903, netre otras
perosnas, a los Directores de establecimientos o empresas por los daños causados por sus
dependientes en determinadas condiciones, es manifesto que la de lo civil, al conocer del mismo
hehco baho este ultimo aspecto y al condenar a la compañia recurrente a la indemnizacion del daño
causado por uno de sus empleados, lejos de infringer los mencionados textos, en relacion con el
articulo 116 de la Ley de Enjuciamiento Criminal, se ha atenido estrictamente a ellos, sin invadir
atribuciones ajenas a su jurisdiccion propia, ni contrariar en lo mas minimo el fallo recaido en la
causa.
Considering that the first ground of the appeal is based on the mistaken supposition that the trial
court, in sentencing the Compañia Madrileña to the payment of the damage caused by the death of
Ramon Lafuente Izquierdo, disregards the value and juridical effects of the sentence of acquittal
rendered in the criminal case instituted on account of the same act, when it is a fact that the two
jurisdictions had taken cognizance of the same act in its different aspects, and as the criminal
jurisdiction declared within the limits of its authority that the act in question did not constitute a
felony because there was no grave carelessness or negligence, and this being the only basis of
acquittal, it does no exclude the co-existence of fault or negligence which is not qualified, and is a
source of civil obligations according to article 1902 of the Civil Code, affecting, in accordance
with article 1903, among other persons, the managers of establishments or enterprises by reason
of the damages caused by employees under certain conditions, it is manifest that the civil
jurisdiccion in taking cognizance of the same act in this latter aspect and in ordering the company,
appellant herein, to pay an indemnity for the damage caused by one of its employees, far from
violating said legal provisions, in relation with article 116 of the Law of Criminal Procedure,
strictly followed the same, without invading attributes which are beyond its own jurisdiction, and
without in any way contradicting the decision in that cause. (Emphasis supplied.)
It will be noted, as to the case just cited:
First. That the conductor was not sued in a civil case, either separately or with the street car
company. This is precisely what happens in the present case: the driver, Fontanilla, has not been
sued in a civil action, either alone or with his employer.
Second. That the conductor had been acquitted of grave criminal negligence, but the Supreme
Tribunal of Spain said that this did not exclude the co-existence of fault or negligence, which is
not qualified, on the part of the conductor, under article 1902 of the Civil Code. In the present case,
the taxi driver was found guilty of criminal negligence, so that if he had even sued for his civil
responsibility arising from the crime, he would have been held primarily liable for civil damages,
and Barredo would have been held subsidiarily liable for the same. But the plaintiffs are directly
suing Barredo, on his primary responsibility because of his own presumed negligence — which he
did not overcome — under article 1903. Thus, there were two liabilities of Barredo: first, the
subsidiary one because of the civil liability of the taxi driver arising from the latter's criminal
negligence; and, second, Barredo's primary liability as an employer under article 1903. The
plaintiffs were free to choose which course to take, and they preferred the second remedy. In so
doing, they were acting within their rights. It might be observed in passing, that the plaintiff choose
the more expeditious and effective method of relief, because Fontanilla was either in prison, or
had just been released, and besides, he was probably without property which might be seized in
enforcing any judgment against him for damages.
Third. That inasmuch as in the above sentence of October 21, 1910, the employer was held liable
civilly, notwithstanding the acquittal of the employee (the conductor) in a previous criminal case,
with greater reason should Barredo, the employer in the case at bar, be held liable for damages in
a civil suit filed against him because his taxi driver had been convicted. The degree of negligence
of the conductor in the Spanish case cited was less than that of the taxi driver, Fontanilla, because
the former was acquitted in the previous criminal case while the latter was found guilty of criminal
negligence and was sentenced to an indeterminate sentence of one year and one day to two years
of prision correccional.
(See also Sentence of February 19, 1902, which is similar to the one above quoted.)
In the Sentence of the Supreme Court of Spain, dated February 14, 1919, an action was brought
against a railroad company for damages because the station agent, employed by the company, had
unjustly and fraudulently, refused to deliver certain articles consigned to the plaintiff. The Supreme
Court of Spain held that this action was properly under article 1902 of the Civil Code, the court
saying:
Considerando que la sentencia discutida reconoce, en virtud de los hechos que consigna con
relacion a las pruebas del pleito: 1.º, que las expediciones facturadas por la compañia ferroviaria a
la consignacion del actor de las vasijas vacias que en su demanda relacionan tenian como fin el
que este las devolviera a sus remitentes con vinos y alcoholes; 2.º, que llegadas a su destino tales
mercanias no se quisieron entregar a dicho consignatario por el jefe de la estacion sin motivo
justificado y con intencion dolosa, y 3.º, que la falta de entrega de estas expediciones al tiempo de
reclamarlas el demandante le originaron daños y perjuicios en cantidad de bastante importancia
como expendedor al por mayor que era de vinos y alcoholes por las ganancias que dejo de obtener
al verse privado de servir los pedidos que se le habian hecho por los remitentes en los envases:
Considerando que sobre esta base hay necesidad de estimar los cuatro motivos que integran este
recurso, porque la demanda inicial del pleito a que se contrae no contiene accion que nazca del
incumplimiento del contrato de transporte, toda vez que no se funda en el retraso de la llegada de
las mercancias ni de ningun otro vinculo contractual entre las partes contendientes, careciendo,
por tanto, de aplicacion el articulo 371 del Codigo de Comercio, en que principalmente descansa
el fallo recurrido, sino que se limita a pedir la reparaction de los daños y perjuicios producidos en
el patrimonio del actor por la injustificada y dolosa negativa del porteador a la entrega de las
mercancias a su nombre consignadas, segun lo reconoce la sentencia, y cuya responsabilidad esta
claramente sancionada en el articulo 1902 del Codigo Civil, que obliga por el siguiente a la
Compañia demandada como ligada con el causante de aquellos por relaciones de caracter
economico y de jurarquia administrativa.
Considering that the sentence, in question recognizes, in virtue of the facts which it declares, in
relation to the evidence in the case: (1) that the invoice issued by the railroad company in favor of
the plaintiff contemplated that the empty receptacles referred to in the complaint should be returned
to the consignors with wines and liquors; (2) that when the said merchandise reached their
destination, their delivery to the consignee was refused by the station agent without justification
and with fraudulent intent, and (3) that the lack of delivery of these goods when they were
demanded by the plaintiff caused him losses and damages of considerable importance, as he was
a wholesale vendor of wines and liquors and he failed to realize the profits when he was unable to
fill the orders sent to him by the consignors of the receptacles:
Considering that upon this basis there is need of upholding the four assignments of error, as the
original complaint did not contain any cause of action arising from non-fulfillment of a contract
of transportation, because the action was not based on the delay of the goods nor on any contractual
relation between the parties litigant and, therefore, article 371 of the Code of Commerce, on which
the decision appealed from is based, is not applicable; but it limits to asking for reparation for
losses and damages produced on the patrimony of the plaintiff on account of the unjustified and
fraudulent refusal of the carrier to deliver the goods consigned to the plaintiff as stated by the
sentence, and the carrier's responsibility is clearly laid down in article 1902 of the Civil Code
which binds, in virtue of the next article, the defendant company, because the latter is connected
with the person who caused the damage by relations of economic character and by administrative
hierarchy. (Emphasis supplied.)
The above case is pertinent because it shows that the same act may come under both the Penal
Code and the Civil Code. In that case, the action of the agent was unjustified and fraudulent and
therefore could have been the subject of a criminal action. And yet, it was held to be also a proper
subject of a civil action under article 1902 of the Civil Code. It is also to be noted that it was the
employer and not the employee who was being sued.
Let us now examine the cases previously decided by this Court.
In the leading case of Rakes vs. Atlantic Gulf and Pacific Co. (7 Phil., 359, 362-365 [year 1907]),
the trial court awarded damages to the plaintiff, a laborer of the defendant, because the latter had
negligently failed to repair a tramway in consequence of which the rails slid off while iron was
being transported, and caught the plaintiff whose leg was broken. This Court held:
It is contended by the defendant, as its first defense to the action that the necessary conclusion
from these collated laws is that the remedy for injuries through negligence lies only in a criminal
action in which the official criminally responsible must be made primarily liable and his employer
held only subsidiarily to him. According to this theory the plaintiff should have procured the arrest
of the representative of the company accountable for not repairing the track, and on his prosecution
a suitable fine should have been imposed, payable primarily by him and secondarily by his
employer.
This reasoning misconceived the plan of the Spanish codes upon this subject. Article 1093 of the
Civil Code makes obligations arising from faults or negligence not punished by the law, subject to
the provisions of Chapter II of Title XVI. Section 1902 of that chapter reads:
"A person who by an act or omission causes damage to another when there is fault or negligence
shall be obliged to repair the damage so done.
"SEC. 1903. The obligation imposed by the preceeding article is demandable, not only for personal
acts and omissions, but also for those of the persons for whom they should be responsible.
"The father, and on his death or incapacity, the mother, is liable for the damages caused by the
minors who live with them.
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"Owners or directors of an establishment or enterprise are equally liable for the damages caused
by their employees in the service of the branches in which the latter may be employed or in the
performance of their duties.
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"The liability referred to in this article shall cease when the persons mentioned therein prove that
they employed all the diligence of a good father of a family to avoid the damage."
As an answer to the argument urged in this particular action it may be sufficient to point out that
nowhere in our general statutes is the employer penalized for failure to provide or maintain safe
appliances for his workmen. His obligation therefore is one 'not punished by the laws' and falls
under civil rather than criminal jurisprudence. But the answer may be a broader one. We should
be reluctant, under any conditions, to adopt a forced construction of these scientific codes, such as
is proposed by the defendant, that would rob some of these articles of effect, would shut out
litigants against their will from the civil courts, would make the assertion of their rights dependent
upon the selection for prosecution of the proper criminal offender, and render recovery doubtful
by reason of the strict rules of proof prevailing in criminal actions. Even if these articles had always
stood alone, such a construction would be unnecessary, but clear light is thrown upon their
meaning by the provisions of the Law of Criminal Procedure of Spain (Ley de Enjuiciamiento
Criminal), which, though never in actual force in these Islands, was formerly given a suppletory
or explanatory effect. Under article 111 of this law, both classes of action, civil and criminal, might
be prosecuted jointly or separately, but while the penal action was pending the civil was suspended.
According to article 112, the penal action once started, the civil remedy should be sought therewith,
unless it had been waived by the party injured or been expressly reserved by him for civil
proceedings for the future. If the civil action alone was prosecuted, arising out of a crime that could
be enforced only on private complaint, the penal action thereunder should be extinguished. These
provisions are in harmony with those of articles 23 and 133 of our Penal Code on the same subject.
An examination of this topic might be carried much further, but the citation of these articles
suffices to show that the civil liability was not intended to be merged in the criminal nor even to
be suspended thereby, except as expressly provided in the law. Where an individual is civilly liable
for a negligent act or omission, it is not required that the injured party should seek out a third
person criminally liable whose prosecution must be a condition precedent to the enforcement of
the civil right.
Under article 20 of the Penal Code the responsibility of an employer may be regarded as subsidiary
in respect of criminal actions against his employees only while they are in process of prosecution,
or in so far as they determine the existence of the criminal act from which liability arises, and his
obligation under the civil law and its enforcement in the civil courts is not barred thereby unless
by the election of the injured person. Inasmuch as no criminal proceeding had been instituted,
growing our of the accident in question, the provisions of the Penal Code can not affect this action.
This construction renders it unnecessary to finally determine here whether this subsidiary civil
liability in penal actions has survived the laws that fully regulated it or has been abrogated by the
American civil and criminal procedure now in force in the Philippines.
The difficulty in construing the articles of the code above cited in this case appears from the briefs
before us to have arisen from the interpretation of the words of article 1093, "fault or negligence
not punished by law," as applied to the comprehensive definition of offenses in articles 568 and
590 of the Penal Code. It has been shown that the liability of an employer arising out of his relation
to his employee who is the offender is not to be regarded as derived from negligence punished by
the law, within the meaning of articles 1902 and 1093. More than this, however, it cannot be said
to fall within the class of acts unpunished by the law, the consequence of which are regulated by
articles 1902 and 1903 of the Civil Code. The acts to which these articles are applicable are
understood to be those not growing out of pre-existing duties of the parties to one another. But
where relations already formed give rise to duties, whether springing from contract or quasi
contract, then breaches of those duties are subject to articles 1101, 1103, and 1104 of the same
code. A typical application of this distinction may be found in the consequences of a railway
accident due to defective machinery supplied by the employer. His liability to his employee would
arise out of the contract of employment, that to the passengers out of the contract for passage,
while that to the injured bystander would originate in the negligent act itself.
In Manzanares vs. Moreta, 38 Phil., 821 (year 1918), the mother of the 8 of 9-year-old child
Salvador Bona brought a civil action against Moreta to recover damages resulting from the death
of the child, who had been run over by an automobile driven and managed by the defendant. The
trial court rendered judgment requiring the defendant to pay the plaintiff the sum of P1,000 as
indemnity: This Court in affirming the judgment, said in part:
If it were true that the defendant, in coming from the southern part of Solana Street, had to stop
his auto before crossing Real Street, because he had met vehicles which were going along the latter
street or were coming from the opposite direction along Solana Street, it is to be believed that,
when he again started to run his auto across said Real Street and to continue its way along Solana
Street northward, he should have adjusted the speed of the auto which he was operating until he
had fully crossed Real Street and had completely reached a clear way on Solana Street. But, as the
child was run over by the auto precisely at the entrance of Solana Street, this accident could not
have occurred if the auto had been running at a slow speed, aside from the fact that the defendant,
at the moment of crossing Real Street and entering Solana Street, in a northward direction, could
have seen the child in the act of crossing the latter street from the sidewalk on the right to that on
the left, and if the accident had occurred in such a way that after the automobile had run over the
body of the child, and the child's body had already been stretched out on the ground, the automobile
still moved along a distance of about 2 meters, this circumstance shows the fact that the automobile
entered Solana Street from Real Street, at a high speed without the defendant having blown the
horn. If these precautions had been taken by the defendant, the deplorable accident which caused
the death of the child would not have occurred.
It will be noticed that the defendant in the above case could have been prosecuted in a criminal
case because his negligence causing the death of the child was punishable by the Penal Code. Here
is therefore a clear instance of the same act of negligence being a proper subject-matter either of a
criminal action with its consequent civil liability arising from a crime or of an entirely separate
and independent civil action for fault or negligence under article 1902 of the Civil Code. Thus, in
this jurisdiction, the separate individually of a cuasi-delito or culpa aquiliana under the Civil Code
has been fully and clearly recognized, even with regard to a negligent act for which the wrongdoer
could have been prosecuted and convicted in a criminal case and for which, after such a conviction,
he could have been sued for this civil liability arising from his crime.
Years later (in 1930) this Court had another occasion to apply the same doctrine. In Bernal and
Enverso vs. House and Tacloban Electric & Ice Plant, Ltd., 54 Phil., 327, the parents of the fiveyear-old child, Purificacion Bernal, brought a civil action to recover damages for the child's death
as a result of burns caused by the fault and negligence of the defendants. On the evening of April
10, 1925, the Good Friday procession was held in Tacloban, Leyte. Fortunata Enverso with her
daughter Purificacion Bernal had come from another municipality to attend the same. After the
procession the mother and the daughter with two others were passing along Gran Capitan Street in
front of the offices of the Tacloban Electric & Ice Plant, Ltd., owned by defendants J. V. House,
when an automobile appeared from the opposite direction. The little girl, who was slightly ahead
of the rest, was so frightened by the automobile that she turned to run, but unfortunately she fell
into the street gutter where hot water from the electric plant was flowing. The child died that same
night from the burns. The trial courts dismissed the action because of the contributory negligence
of the plaintiffs. But this Court held, on appeal, that there was no contributory negligence, and
allowed the parents P1,000 in damages from J. V. House who at the time of the tragic occurrence
was the holder of the franchise for the electric plant. This Court said in part:
Although the trial judge made the findings of fact hereinbefore outlined, he nevertheless was led
to order the dismissal of the action because of the contributory negligence of the plaintiffs. It is
from this point that a majority of the court depart from the stand taken by the trial judge. The
mother and her child had a perfect right to be on the principal street of Tacloban, Leyte, on the
evening when the religious procession was held. There was nothing abnormal in allowing the child
to run along a few paces in advance of the mother. No one could foresee the coincidence of an
automobile appearing and of a frightened child running and falling into a ditch filled with hot
water. The doctrine announced in the much debated case of Rakes vs. Atlantic Gulf and Pacific
Co. ([1907]), 7 Phil., 359), still rule. Article 1902 of the Civil Code must again be enforced. The
contributory negligence of the child and her mother, if any, does not operate as a bar to recovery,
but in its strictest sense could only result in reduction of the damages.
It is most significant that in the case just cited, this Court specifically applied article 1902 of the
Civil Code. It is thus that although J. V. House could have been criminally prosecuted for reckless
or simple negligence and not only punished but also made civilly liable because of his criminal
negligence, nevertheless this Court awarded damages in an independent civil action for fault or
negligence under article 1902 of the Civil Code.
In Bahia vs. Litonjua and Leynes (30 Phil., 624 [year 1915), the action was for damages for the
death of the plaintiff's daughter alleged to have been caused by the negligence of the servant in
driving an automobile over the child. It appeared that the cause of the mishap was a defect in the
steering gear. The defendant Leynes had rented the automobile from the International Garage of
Manila, to be used by him in carrying passengers during the fiesta of Tuy, Batangas. Leynes was
ordered by the lower court to pay P1,000 as damages to the plaintiff. On appeal this Court reversed
the judgment as to Leynes on the ground that he had shown that the exercised the care of a good
father of a family, thus overcoming the presumption of negligence under article 1903. This Court
said:
As to selection, the defendant has clearly shown that he exercised the care and diligence of a good
father of a family. He obtained the machine from a reputable garage and it was, so far as appeared,
in good condition. The workmen were likewise selected from a standard garage, were duly licensed
by the Government in their particular calling, and apparently thoroughly competent. The machine
had been used but a few hours when the accident occurred and it is clear from the evidence that
the defendant had no notice, either actual or constructive, of the defective condition of the steering
gear.
The legal aspect of the case was discussed by this Court thus:
Article 1903 of the Civil Code not only establishes liability in cases of negligence, but also
provides when the liability shall cease. It says:
"The liability referred to in this article shall cease when the persons mentioned therein prove that
they employed all the diligence of a good father of a family to avoid the damage."
From this article two things are apparent: (1) That when an injury is caused by the negligence of a
servant or employee there instantly arises a presumption of law that there was negligence on the
part of the matter or employer either in the selection of the servant or employee, or in supervision
over him after the selection, or both; and (2) that presumption is juris tantum and not juris et de
jure, and consequently, may be rebutted. It follows necessarily that if the employer shows to the
satisfaction of the court that in selection and supervision he has exercised the care and diligence
of a good father of a family, the presumption is overcome and he is relieve from liability.
This theory bases the responsibility of the master ultimately on his own negligence and not on that
of his servant.
The doctrine of the case just cited was followed by this Court in Cerf vs. Medel (33 Phil., 37 [year
1915]). In the latter case, the complaint alleged that the defendant's servant had so negligently
driven an automobile, which was operated by defendant as a public vehicle, that said automobile
struck and damaged the plaintiff's motorcycle. This Court, applying article 1903 and following the
rule in Bahia vs. Litonjua and Leynes, said in part (p. 41) that:
The master is liable for the negligent acts of his servant where he is the owner or director of a
business or enterprise and the negligent acts are committed while the servant is engaged in his
master's employment as such owner.
Another case which followed the decision in Bahia vs. Litonjua and Leynes was Cuison vs. Norton
& Harrison Co., 55 Phil., 18 (year 1930). The latter case was an action for damages brought by
Cuison for the death of his seven-year-old son Moises. The little boy was on his way to school
with his sister Marciana. Some large pieces of lumber fell from a truck and pinned the boy
underneath, instantly killing him. Two youths, Telesforo Binoya and Francisco Bautista, who were
working for Ora, an employee of defendant Norton & Harrison Co., pleaded guilty to the crime of
homicide through reckless negligence and were sentenced accordingly. This Court, applying
articles 1902 and 1903, held:
The basis of civil law liability is not respondent superior but the relationship of pater familias. This
theory bases the liability of the master ultimately on his own negligence and not on that of his
servant. (Bahia vs. Litonjua and Leynes [1915], 30 Phil., 624; Cangco vs. Manila Railroad Co.
[1918], 38 Phil., 768.)
In Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co., 55 Phil., 517 (year 1930) the
plaintiff brought an action for damages for the demolition of its wharf, which had been struck by
the steamer Helen C belonging to the defendant. This Court held (p. 526):
The evidence shows that Captain Lasa at the time the plaintiff's wharf collapsed was a duly
licensed captain, authorized to navigate and direct a vessel of any tonnage, and that the appellee
contracted his services because of his reputation as a captain, according to F. C. Cadwallader. This
being so, we are of the opinion that the presumption of liability against the defendant has been
overcome by the exercise of the care and diligence of a good father of a family in selecting Captain
Lasa, in accordance with the doctrines laid down by this court in the cases cited above, and the
defendant is therefore absolved from all liability.
It is, therefore, seen that the defendant's theory about his secondary liability is negatived by the six
cases above set forth. He is, on the authority of these cases, primarily and directly responsible in
damages under article 1903, in relation to article 1902, of the Civil Code.
Let us now take up the Philippine decisions relied upon by the defendant. We study first, City of
Manila vs. Manila Electric Co., 52 Phil., 586 (year 1928). A collision between a truck of the City
of Manila and a street car of the Manila Electric Co. took place on June 8, 1925. The truck was
damaged in the amount of P1,788.27. Sixto Eustaquio, the motorman, was prosecuted for the crime
of damage to property and slight injuries through reckless imprudence. He was found guilty and
sentenced to pay a fine of P900, to indemnify the City of Manila for P1,788.27, with subsidiary
imprisonment in case of insolvency. Unable to collect the indemnity from Eustaquio, the City of
Manila filed an action against the Manila Electric Company to obtain payment, claiming that the
defendant was subsidiarily liable. The main defense was that the defendant had exercised the
diligence of a good father of a family to prevent the damage. The lower court rendered judgment
in favor of the plaintiff. This Court held, in part, that this case was governed by the Penal Code,
saying:
With this preliminary point out of the way, there is no escaping the conclusion that the provisions
of the Penal Code govern. The Penal Code in easily understandable language authorizes the
determination of subsidiary liability. The Civil Code negatives its application by providing that
civil obligations arising from crimes or misdemeanors shall be governed by the provisions of the
Penal Code. The conviction of the motorman was a misdemeanor falling under article 604 of the
Penal Code. The act of the motorman was not a wrongful or negligent act or omission not
punishable by law. Accordingly, the civil obligation connected up with the Penal Code and not
with article 1903 of the Civil Code. In other words, the Penal Code affirms its jurisdiction while
the Civil Code negatives its jurisdiction. This is a case of criminal negligence out of which civil
liability arises and not a case of civil negligence.
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Our deduction, therefore, is that the case relates to the Penal Code and not to the Civil Code.
Indeed, as pointed out by the trial judge, any different ruling would permit the master to escape
scot-free by simply alleging and proving that the master had exercised all diligence in the selection
and training of its servants to prevent the damage. That would be a good defense to a strictly civil
action, but might or might not be to a civil action either as a part of or predicated on conviction for
a crime or misdemeanor. (By way of parenthesis, it may be said further that the statements here
made are offered to meet the argument advanced during our deliberations to the effect that article
0902 of the Civil Code should be disregarded and codal articles 1093 and 1903 applied.)
It is not clear how the above case could support the defendant's proposition, because the Court of
Appeals based its decision in the present case on the defendant's primary responsibility under
article 1903 of the Civil Code and not on his subsidiary liability arising from Fontanilla's criminal
negligence. In other words, the case of City of Manila vs. Manila Electric Co., supra, is predicated
on an entirely different theory, which is the subsidiary liability of an employer arising from a
criminal act of his employee, whereas the foundation of the decision of the Court of Appeals in
the present case is the employer's primary liability under article 1903 of the Civil Code. We have
already seen that this is a proper and independent remedy.
Arambulo vs. Manila Electric Co. (55 Phil., 75), is another case invoked by the defendant. A
motorman in the employ of the Manila Electric Company had been convicted o homicide by simple
negligence and sentenced, among other things, to pay the heirs of the deceased the sum of P1,000.
An action was then brought to enforce the subsidiary liability of the defendant as employer under
the Penal Code. The defendant attempted to show that it had exercised the diligence of a good
father of a family in selecting the motorman, and therefore claimed exemption from civil liability.
But this Court held:
In view of the foregoing considerations, we are of opinion and so hold, (1) that the exemption from
civil liability established in article 1903 of the Civil Code for all who have acted with the diligence
of a good father of a family, is not applicable to the subsidiary civil liability provided in article 20
of the Penal Code.
The above case is also extraneous to the theory of the defendant in the instant case, because the
action there had for its purpose the enforcement of the defendant's subsidiary liability under the
Penal Code, while in the case at bar, the plaintiff's cause of action is based on the defendant's
primary and direct responsibility under article 1903 of the Civil Code. In fact, the above case
destroys the defendant's contention because that decision illustrates the principle that the
employer's primary responsibility under article 1903 of the Civil Code is different in character
from his subsidiary liability under the Penal Code.
In trying to apply the two cases just referred to, counsel for the defendant has failed to recognize
the distinction between civil liability arising from a crime, which is governed by the Penal Code,
and the responsibility for cuasi-delito or culpa aquiliana under the Civil Code, and has likewise
failed to give the importance to the latter type of civil action.
The defendant-petitioner also cites Francisco vs. Onrubia (46 Phil., 327). That case need not be set
forth. Suffice it to say that the question involved was also civil liability arising from a crime.
Hence, it is as inapplicable as the two cases above discussed.
The foregoing authorities clearly demonstrate the separate individuality of cuasi-delitos or culpa
aquiliana under the Civil Code. Specifically they show that there is a distinction between civil
liability arising from criminal negligence (governed by the Penal Code) and responsibility for fault
or negligence under articles 1902 to 1910 of the Civil Code, and that the same negligent act may
produce either a civil liability arising from a crime under the Penal Code, or a separate
responsibility for fault or negligence under articles 1902 to 1910 of the Civil Code. Still more
concretely, the authorities above cited render it inescapable to conclude that the employer — in
this case the defendant-petitioner — is primarily and directly liable under article 1903 of the Civil
Code.
The legal provisions, authors, and cases already invoked should ordinarily be sufficient to dispose
of this case. But inasmuch as we are announcing doctrines that have been little understood in the
past, it might not be inappropriate to indicate their foundations.
Firstly, the Revised Penal Code in article 365 punishes not only reckless but also simple
negligence. If we were to hold that articles 1902 to 1910 of the Civil Code refer only to fault or
negligence not punished by law, according to the literal import of article 1093 of the Civil Code,
the legal institution of culpa aquiliana would have very little scope and application in actual life.
Death or injury to persons and damage to property through any degree of negligence — even the
slightest — would have to be indemnified only through the principle of civil liability arising from
a crime. In such a state of affairs, what sphere would remain for cuasi-delito or culpa aquiliana?
We are loath to impute to the lawmaker any intention to bring about a situation so absurd and
anomalous. Nor are we, in the interpretation of the laws, disposed to uphold the letter that killeth
rather than the spirit that giveth life. We will not use the literal meaning of the law to smother and
render almost lifeless a principle of such ancient origin and such full-grown development as culpa
aquiliana or cuasi-delito, which is conserved and made enduring in articles 1902 to 1910 of the
Spanish Civil Code.
Secondly, to find the accused guilty in a criminal case, proof of guilt beyond reasonable doubt is
required, while in a civil case, preponderance of evidence is sufficient to make the defendant pay
in damages. There are numerous cases of criminal negligence which can not be shown beyond
reasonable doubt, but can be proved by a preponderance of evidence. In such cases, the defendant
can and should be made responsible in a civil action under articles 1902 to 1910 of the Civil Code.
Otherwise, there would be many instances of unvindicated civil wrongs. Ubi jus ibi remedium.
Thirdly, to hold that there is only one way to make defendant's liability effective, and that is, to
sue the driver and exhaust his (the latter's) property first, would be tantamount to compelling the
plaintiff to follow a devious and cumbersome method of obtaining relief. True, there is such a
remedy under our laws, but there is also a more expeditious way, which is based on the primary
and direct responsibility of the defendant under article 1903 of the Civil Code. Our view of the
law is more likely to facilitate remedy for civil wrongs, because the procedure indicated by the
defendant is wasteful and productive of delay, it being a matter of common knowledge that
professional drivers of taxis and similar public conveyance usually do not have sufficient means
with which to pay damages. Why, then, should the plaintiff be required in all cases to go through
this roundabout, unnecessary, and probably useless procedure? In construing the laws, courts have
endeavored to shorten and facilitate the pathways of right and justice.
At this juncture, it should be said that the primary and direct responsibility of employers and their
presumed negligence are principles calculated to protect society. Workmen and employees should
be carefully chosen and supervised in order to avoid injury to the public. It is the masters or
employers who principally reap the profits resulting from the services of these servants and
employees. It is but right that they should guarantee the latter's careful conduct for the personnel
and patrimonial safety of others. As Theilhard has said, "they should reproach themselves, at least,
some for their weakness, others for their poor selection and all for their negligence." And according
to Manresa, "It is much more equitable and just that such responsibility should fall upon the
principal or director who could have chosen a careful and prudent employee, and not upon the
injured person who could not exercise such selection and who used such employee because of his
confidence in the principal or director." (Vol. 12, p. 622, 2nd Ed.) Many jurists also base this
primary responsibility of the employer on the principle of representation of the principal by the
agent. Thus, Oyuelos says in the work already cited (Vol. 7, p. 747) that before third persons the
employer and employee "vienen a ser como una sola personalidad, por refundicion de la del
dependiente en la de quien le emplea y utiliza." ("become as one personality by the merging of the
person of the employee in that of him who employs and utilizes him.") All these observations
acquire a peculiar force and significance when it comes to motor accidents, and there is need of
stressing and accentuating the responsibility of owners of motor vehicles.
Fourthly, because of the broad sweep of the provisions of both the Penal Code and the Civil Code
on this subject, which has given rise to the overlapping or concurrence of spheres already
discussed, and for lack of understanding of the character and efficacy of the action for culpa
aquiliana, there has grown up a common practice to seek damages only by virtue of the civil
responsibility arising from a crime, forgetting that there is another remedy, which is by invoking
articles 1902-1910 of the Civil Code. Although this habitual method is allowed by our laws, it has
nevertheless rendered practically useless and nugatory the more expeditious and effective remedy
based on culpa aquiliana or culpa extra-contractual. In the present case, we are asked to help
perpetuate this usual course. But we believe it is high time we pointed out to the harm done by
such practice and to restore the principle of responsibility for fault or negligence under articles
1902 et seq. of the Civil Code to its full rigor. It is high time we caused the stream of quasi-delict
or culpa aquiliana to flow on its own natural channel, so that its waters may no longer be diverted
into that of a crime under the Penal Code. This will, it is believed, make for the better safeguarding
of private rights because it re-establishes an ancient and additional remedy, and for the further
reason that an independent civil action, not depending on the issues, limitations and results of a
criminal prosecution, and entirely directed by the party wronged or his counsel, is more likely to
secure adequate and efficacious redress.
In view of the foregoing, the judgment of the Court of Appeals should be and is hereby affirmed,
with costs against the defendant-petitioner.
G.R. No. 96492 November 26, 1992
ROMEO REYES, ANGEL PARAYAO, and EMILIO MANANGHAYA, petitioners,
vs.
THE COURT OF APPEALS, EUFROCINA DE LA CRUZ and VIOLETA DELOS
REYES, respondents.
NOCON, J.:
Petitioners Romeo Reyes, Angel Parayao and Emilio Mananghaya question the respondent Court's
decision promulgated on November 22, 1990, 1 which affirmed with modification the agrarian
court's decision promulgated January 10, 1990,2 which ordered them and the other defendants
therein to, among others, restore possession of the disputed landholding to private respondent,
Eufrocina Vda. dela Cruz. Said respondent court's decision is now final and executory as to
Olympio Mendoza and Severino Aguinaldo, the other petitioners in the respondent court, since
they did not appeal the same.
Since petitioners do not dispute the findings of fact of the respondent Court, the same shall be
quoted verbatim and are as follows:
It appears from the records that Juan Mendoza, father of herein defendant Olympio Mendoza, is
the owner of Farm Lots Nos. 46 and 106, Block 2, Psd-38453 of the Bahay Pare Estate, Bahay
Pare, Candaba, Pampanga, with an area of 23,000 square meters and 19,000 square meters,
respectively. Devoted to the production of palay, the lots were tenanted and cultivated by Julian
dela Cruz, husband of plaintiff Eufrocina dela Cruz. Julian died on September 25, 1979.
In her complaint, Eufrocina alleged that upon the death of Julian, she succeeded him as bona fide
tenant of the subject lots; that between July 7 to July 15, 1984, Olympio Mendoza, in conspiracy
with the other defendants, prevented her daughter Violeta and her workers through force,
intimidation, strategy and stealth, from entering and working on the subject premises; and that
until the filing of the instant case, defendants had refused to vacate and surrender the lots, thus
violating her tenancy rights. Plaintiff therefore prayed for judgment for the recovery of possession
and damages with a writ of preliminary mandatory injunction in the meantime.
Defendants Reyes, Parayao, Aguinaldo and Mananghaya, duly elected and/or appointed barangay
officials of Bahay Pare, Candaba, Pampanga, denied interference in the tenancy relationship
existing between plaintiff and defendant Mendoza, particularly in the cultivation of the latter's
farm lots. Claiming that they have always exercised fairness, equity, reason and impartiality in the
discharge of their official functions, they asked for the dismissal of the case and claimed moral
damages and attorney's fees in the total amount of P165,000.00 (Answer with Counterclaim,
Records, pp. 48-51).
For his part, defendant Mendoza raised abandonment, sublease and mortgage of the farm lots
without his consent and approval, and non-payment of rentals, irrigation fees and other taxes due
the government, as his defenses. He also demanded actual and exemplary damages, as well as
attorney's fees (Answer, pp. 77-78).
During the pendency of the case in the lower court, Mendoza of the case in the lower court,
Mendoza was in possession of the subject lots and had cultivated the same. Upon motion of
plaintiff, the court directed its Deputy Sheriff to supervise the harvesting of the palay crops, to
cause the threshing thereof and to deposit the net harvest (after deducting from the expenses
incurred), in a bonded warehouse of the locality subject to the disposition of the court. 3
The respondent Court rendered judgment affirming the appealed agrarian court's decision with the
modification that Lot 106 is not covered by it.
The dispositive portion of the appealed decision, which was modified, states as follows:
WHEREFORE, judgment is hereby rendered, in favor of plaintiff and against defendants
On the Mandatory Injunction:
1. Ordering said defendants to restore possession of the landholding subject of the action to the
plaintiff and enjoining said defendants and any person claiming under them to desist from
molesting them or interfering with the possession and cultivation of the landholding descriptive in
paragraph 3 of the complaint, to wit:
Farm Lots Nos. 46 and 106, Block 2, Psd-38453 of the Bahay Pare Estate, Bahay Pare, Candaba,
Pampanga, with a total area of 23,969 square meters, more or less, owned by a certain Juan
Mendoza, and devoted principally to the production of palay, as evidenced by a Certification from
the Ministry of Agrarian Reform issued on July 30, 1984.
2. a) Ordering the defendants to vacate the premises of the two landholding in question and to
respect the tenancy rights of plaintiff with respect to the same;
b) Ordering defendants, jointly and severally to pay unto plaintiff 220 cavans of palay or its
equivalent in cash of P33,000.00 from the principal crop year of 1984, and every harvest time until
defendants finally vacate and surrender possession and cultivation of the landholding in question
to plaintiff.
c) the prayer for moral damages, not having been sufficiently proved, the same is denied.
d) Ordering defendants jointly and severally, to pay the costs of suit.
The awards herein provided should first be satisfied from the deposits of the harvests ordered by
the Court from which the planting and harvesting expenses have been paid to defendant Olympio
Mendoza; and if said net deposits with the Court or the warehouses as ordered by the Court are
insufficient, then the balance should be paid by defendants, jointly and severally. 4
Defendants who are the petitioners in this case, in a Petition for Review on Certiorari, present for
the consideration of the Court:
[T]he lone issue of whether or not they can be held liable, jointly and severally, with the other
defendants, for the harvests of the litigated property, Lot No. 46, or the money equivalent thereof
starting from the principal crop years of 1984 and every harvest time thereafter until the possession
and cultivation of the aforestated landholding are finally surrendered to the private respondent. 5
It is the position of petitioners that they are not liable jointly and severally with Olympio Mendoza
and Severino Aguinaldo because the present petition involves Lot No. 46, Block 2, Psd-38453 of
the bahay Pare Estate, bahay Pare, Candaba, Pampanga and not Lot No. 106 of the estate, which
lot was purchased by petitioner Romeo Reyes from Olympio Mendoza's father, Juan, and which
he later donated to the barangay Bahay Pare of Candaba, Pampanga, for the construction of the
Bahay Pare Barangay High School. 6 As to their supposed participation in the dispossession of
private respondent from the disputed landholding, petitioners present the September 30, 1987
Resolution of Investigating Fiscal Jesus M. Pamintuan, as approved by Pampanga Provincial
Fiscal Villamor I. Dizon, in I.S. No. 8576, 7 wherein private respondent's complaint against
petitioners and the other defendants in the agrarian court for violation of P.D. 5838 was dismissed,
to show that private respondent's "point is already settled and considered closed." 9 lastly,
petitioners claim that they were included in the present controversy so that their political career
would be destroyed.10
Private respondents deny petitioners' allegations and contend that it was petitioners who conspired
with Olympio Mendoza and Severino Aguinaldo in ejecting them not only from Lot No. 46 but
also from Lot No. 106. They maintain that it was in Farmlot No. 46 from where they were ejected
and dispossessed, so much so that even if Farmlot No. 106 was removed by the Court of Appeals
from the judgment, as Farmlot No. 46 was harvesting palay worth at least P33,000.00 per year
since 1989, private respondents, who are entitled to the possession and peaceful enjoyment of the
farmlot as provided for in Section 23 of the Agrarian Reform Law, should be compensated for the
lost income by the petitioners who are solidarily liable with Olympio Mendoza and Severino
Aguinaldo. 11
We find for the private respondents.
It is clear that petitioners are asking Us to re-examine all the evidence already presented and
evaluated by the trial court and re-evaluated again by the respondent appellate court. Said evidence
served as basis in arriving at the trial court and appellate court's findings of fact. We shall not
analyze such evidence all over again but instead put finis to the factual findings in this case. Settled
is the rule that only questions of law may be raised in a petition for review on certiorari under Rule
45 of the Rules of Court 12 absent the exceptions which do not obtain in the instant case. 13
We agree with the appellate court in its retiocination, which We adopt, on why it has to dismiss
the appeal. Said the Court:
In her Complaint, plaintiff-appellee alleged that she "is the tenant of Farm Lots Nos. 46 and 106
Block 2, Psd-38453 of the Bahay Pare Estate, Bahay Pare, Candaba, Pampanga, with a total area
of 23,969 square meters, more or less . . ." (Complaint, Record, vol. 1, p.1). However, during
Violeta's testimony, she clarified that actually only Lot No. 106, which contains an area of P19,000
square meters, is not included in this controversy (T.S.N., August 10, 1989, p. 5; May 8, 1989, p.
12). This statement was corroborated by plaintiff's counsel, Atty. Arturo Rivera, who informed the
court that the 19,000 square meter lot is subject of a pending case before the MTC of Sta. Ana,
Pampanga (Ibid., p. 15). The inconsistency between the averment of the complaint and the
testimony of the witness should not only because there was no showing that she intended to mislead
defendants and even the trial court on the subject matter of the suit. It would in the complaint since
together with Lot 106 had been include in the complaint since together with Lot 46, it is owned by
Olympio's father.
We also concur with the trial court's finding on the participation of the other appellants in the
dispossession of appellee. They not only knew Olympio personally, some of them were even asked
by Olympio to help him cultivate the land, thus lending credence to the allegation that defendant
Olympio, together with his co-defendants, prevented plaintiff and her workers from entering the
land through "strong arm methods". (Decision of RTC, records, vol. II p. 564).
Finally, we rule that the trial court did not err when it favorably considered the affidavits of
Eufrocina and Efren Tecson (Annexes "B" and "C") although the affiants were not presented and
subjected to cross-examination. Section 16 of P.D. No. 946 provides that the "Rules of Court shall
not be applicable in agrarian cases even in a suppletory character." The same provision states that
"In the hearing, investigation and determination of any question or controversy, affidavits and
counter-affidavits may be allowed and are admissible in evidence".
Moreover, in agrarian cases, the quantum of evidence required is no more than substantial
evidence. This substantial evidence rule was incorporated in section 18, P.D. No. 946 which took
effect on June 17, 1976 (Castro vs. CS, G.R. No. 34613, January 26, 1989). In Bagsican vs. Hon.
Court of Appeals, 141 SCRA 226, the Supreme Court defined what substantial evidence is:
Substantial evidence does not necessarily import preponderant evidence, as is required in an
ordinary civil case. It has been defined to be such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion and its absence is not shown by stressing that there is
contrary evidence on record, direct or circumstantial, for the appellate court cannot substitute its
own judgment or criteria for that of the trial court in determining wherein lies the weight of
evidence or what evidence is entitled to belief.14
WHEREFORE, finding no reversible error in the decision appealed from, the petition is hereby
DENIED for lack of merit. The decision of the Court of Appeals promulgated on November 22,
1990 is AFFIRMED in toto. Costs against the petitioners.
SO ORDERED.