G.R. No.

L-6913

November 21, 1913

THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee, vs. GREGORIO DE LA PEA, administrator of the estate of Father Agustin de la Pea, defendant-appellant. J. Lopez Vito, for appellant. Arroyo and Horrilleno, for appellee. MORELAND, J.: This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awarding to the plaintiff the sum of P6,641, with interest at the legal rate from the beginning of the action. It is established in this case that the plaintiff is the trustee of a charitable bequest made for the construction of a leper hospital and that father Agustin de la Pea was the duly authorized representative of the plaintiff to receive the legacy. The defendant is the administrator of the estate of Father De la Pea. In the year 1898 the books Father De la Pea, as trustee, showed that he had on hand as such trustee the sum of P6,641, collected by him for the charitable purposes aforesaid. In the same year he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortly thereafter and during the war of the revolution, Father De la Pea was arrested by the military authorities as a political prisoner, and while thus detained made an order on said bank in favor of the United States Army officer under whose charge he then was for the sum thus deposited in said bank. The arrest of Father De la Pea and the confiscation of the funds in the bank were the result of the claim of the military authorities that he was an insurgent and that the funds thus deposited had been collected by him for revolutionary purposes. The money was taken from the bank by the military authorities by virtue of such order, was confiscated and turned over to the Government. While there is considerable dispute in the case over the question whether the P6,641 of trust funds was included in the P19,000 deposited as aforesaid, nevertheless, a careful examination of the case leads us to the conclusion that said trust funds were a part of the funds deposited and which were removed and confiscated by the military authorities of the United States.

That branch of the law known in England and America as the law of trusts had no exact counterpart in the Roman law and has none under the Spanish law. In this jurisdiction, therefore, Father De la Pea's liability is determined by those portions of the Civil Code which relate to obligations. (Book 4, Title 1.) Although the Civil Code states that "a person obliged to give something is also bound to preserve it with the diligence pertaining to a good father of a family" (art. 1094), it also provides, following the principle of the Roman law, major casus est, cui humana infirmitas resistere non potest, that "no one shall be liable for events which could not be foreseen, or which having been foreseen were inevitable, with the exception of the cases expressly mentioned in the law or those in which the obligation so declares." (Art. 1105.) By placing the money in the bank and mixing it with his personal funds De la Pea did not thereby assume an obligation different from that under which he would have lain if such deposit had not been made, nor did he thereby make himself liable to repay the money at all hazards. If the had been forcibly taken from his pocket or from his house by the military forces of one of the combatants during a state of war, it is clear that under the provisions of the Civil Code he would have been exempt from responsibility. The fact that he placed the trust fund in the bank in his personal account does not add to his responsibility. Such deposit did not make him a debtor who must respond at all hazards. We do not enter into a discussion for the purpose of determining whether he acted more or less negligently by depositing the money in the bank than he would if he had left it in his home; or whether he was more or less negligent by depositing the money in his personal account than he would have been if he had deposited it in a separate account as trustee. We regard such discussion as substantially fruitless, inasmuch as the precise question is not one of negligence. There was no law prohibiting him from depositing it as he did and there was no law which changed his responsibility be reason of the deposit. While it may be true that one who is under obligation to do or give a thing is in duty bound, when he sees events approaching the results of which will be dangerous to his trust, to take all reasonable means and measures to escape or, if unavoidable, to temper the effects of those events, we do not feel constrained to hold that, in choosing between two means equally legal, he is culpably negligent in selecting one whereas he would not have been if he had selected the other. The court, therefore, finds and declares that the money which is the subject matter of this action was deposited by Father De la Pea in the Hongkong and Shanghai Banking Corporation of Iloilo; that said money was forcibly taken from the bank by the armed forces

of the United States during the war of the insurrection; and that said Father De la Pea was not responsible for its loss. The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing by his complaint. C.A. No. 34 April 29, 1946

On February 18, 1942, at the instance of the defendant who desired to move to another house, the plaintiffs and the defendant, together with Leon Villena, among others, went to the dug-out to take out the defendant's container and discovered, to their consternation, that their money and things, except for a few papers, had been lost. One day during the first week of April, 1942, the defendant reported the loss of her money and jewels, causing the arrest and investigation of Leon Villena, two others and the plaintiff Engracio Obejera, who where released shortly after, except Engracio Obejera who was released only on April 19, 1942 after he, with his wife, had consented to execute Exhibit Y which document was sought to be annulled by the plaintiffs and appellees herein. The defendant and appellant contends that she deposited her money and jewelry with the plaintiffs and that the plaintiffs, acknowledging liability for the loss of her money and jewelry, offered to transfer their property under Transfer Certificate of Title No. 666 and accordingly executed the document in question. On the other hand, the plaintiffs deny the alleged deposit, deny knowledge of the loss of the defendant's money and jewelry, and claim that their consent to the deed of transfer was obtained through violence and intimidation. After a careful consideration of the nine assignments of error and examination of the evidence of this case, the contention of the defendant and appellant cannot be sustained. The alleged deposit cannot be believed and is contrary to the ordinary course of nature and the ordinary habits of life (section 69 [z], Rule 123, Rules of Court). Leon Villena, the barrio lieutenant, policemen Ruperto Buenafe and Apolonio Corpuz, and Mayor Berberabe were uniform in their testimony that in their investigation of the case, the plaintiff Engracio Obejera admitted that he agreed to keep and be responsible for the defendant's things. It appears, however, that Leon Villena himself and his son Balbino participated in the hiding, and acknowledged liability for the loss, of the defendant's things. Exhibit 1, apparently prepared for the benefit of the defendant, reads as follows, "I, Mercedes Intak, wife of Engracio Obejera who was the companion of chief Leon Villena and the latter's son Balbino Villena in hiding (under ground) the money and jewels of Iga Sy ...," and mentions nothing regarding the alleged deposit. And the deed of the transfer (Exhibit Y) states, "... and we, on the other hand, the said Leon Villena and Balbino Villena, because we are responsible for one-half of the money and jewels still unrecovered, I, Leon Villena, promise to transfer to Engracio Obejera my four parcels of land ...." Now, if Leon Villena and his son had taken part in the hiding of the defendant's money and jewelry and acknowledged responsibility therefor, as evidenced by the said documents, then his claim and the defendant's claim that Engracio Obejera alone agreed to keep and be responsible for those things is false; and it follows that the same claim of policemen Ruperto Buenafe and Apolonio Corpus and Mayor Berberabe are likewise false.

ENGRACIO OBEJERA and MERCEDES INTAK, plaintiffs-appellees, vs. IGA SY, defendant-appellant. Pedro Panganiban for appellant. Jose Mayo Librea for appellees. JARANILLA, J.: By virtue of the appeal filed against the decision of the Court of First Instance of Batangas annulling, on the ground of force and intimidation, the deed of transfer executed on April 9, 1942 (Exhibit Y), whereby the plaintiffs and appellees agreed to transfer to the defendant and appellant their property assessed at P2,230 in case they failed to return to the defendant on December 31, 1942 the balance of P3,697 and pieces of jewelry worth P400 allegedly deposited with the plaintiffs on January 2, 1942, the above-entitled case was submitted to this court for review. On December 13, 1941, plaintiffs and defendant sought refuge in the house of Leon Villena, barrio lieutenant of Dalig, Batangas, Batangas, on account of the Japanese invasion of the Philippines. On January 2, 1942, news having spread that the Japanese forces were closing in and were committing barbarous acts, which gripped the people in terror, plaintiffs and defendant, after consultation with their host Leon Villena, decided to hide their things and valuables in a dug-out belonging to Leon Villena about thirty meters away from his house. The defendant placed in said dug-out her money allegedly amounting to P5,021 and jewelry worth P400 in her own container; Leon Villena and his wife also placed therein their own things; the plaintiffs also placed their things and money allegedly amounting to P3,000. They did this at night and covered the dug-out with palay belonging to Leon Villena and the defendant Iga Sy.

It should also be considered, in this connection, that the dug-out into which the plaintiffs and the defendant hid their money and valuables belongs to Leon Villena; that the plaintiffs and the defendant only sought refuge in his house; that neither the plaintiffs nor the defendant had, therefore, control over, or absolute and exclusive access, to the dug-out, as proved by the fact that when the defendant decided to take her things with her because she was going to move to another house, two days before the discovery of the loss, she asked their host Leon Villena to allow and help her removed her things. Under these circumstances, it is hard to believe that plaintiff Engracio Obejera would assume responsibility over the defendant's things hidden in a place not belonging to him but to Leon Villena, in whose house they only sought refuge and were like guests, and especially at a time when the confusion and fear resulting from the Japanese invasion and fast advance so gripped everyone that nobody could be sure of his own things and even of his life. The more natural conclusion is that plaintiffs and defendant decided to hide their things in the dug-out of their host Leon Villena, thinking it to be the safest place, and hoping, like many and all others, in those horrible days, that they might recover them, if at all, after the confusion and uncertainty. This, in case Leon Villena himself, as was the most natural thing to happen, did not offer to his guests to take care of their things by hiding them in his dug-out, for he and his son, as a matter of fact, took part in the safekeeping and they even covered the dug-out afterwards with their own palay together with the palay of the defendant; later he had to give his consent and actually accompanied the plaintiffs and the defendant when the latter wanted to take out her things from the dug-out; and then, after the discovery of the loss, he and his son admitted liability for the loss of the defendant's things as evidenced by both Exhibits 1 and Y. Even if the defendant's theory of deposit were sustained, any obligation arising therefrom was extinguished upon the loss, without the fault of the depositee and under circumstances which at the time were inevitable (article 1182 in connection with article 1766, and article 1105, Civil Code), of the things allegedly deposited. The evidence of record, in this regard, uniformly shows that the plaintiffs were not in any way responsible for the loss of the defendant's money and jewelry. Both Mayor Roman L. Perez and Chief of Police Apolonio Corpus testified that they did not find any evidence that the plaintiffs, who also lost their own valuables, could be in any manner connected with the loss. Even the documents, Exhibits 1 and Y, so much relied upon by the defendant and evidently prepared for her benefit, having been written on the same typewriter, do not state any such connection. In the case of Lizares vs. Hernaez and Alunan (40 Phil., 981, 991), the Supreme Court held: In this bailment ordinary care and diligence are required of the bailee and he is not liable for the inevitable loss or destruction of the chattel, not attributable to his fault.

If while the bailment continues, the chattel is destroyed, or stolen, or perishes, without negligence on the bailee's part, the loss as in other hirings, falls upon the owner, in accordance with the maxim res perit domino . . . . To the same effect are the cases of Crame Sy Panco vs. Gonzaga (10 Phil., 646, 648), in which it was held that the death of the carabaos in that case being fortuitous, the obligation of the defendants therein to return them was extinguished as a matter of fact and of law; of Insular Government vs. Bingham (13 Phil., 558, 571), in which the defendant therein was absolved from the obligation to deliver to the Government of the Philippine Islands a revolver with ammunition which went down and were lost when his boat was sunk in a storm through no fault of his or his crew; and of Yap Kim Chuan vs. Tiaoqui (31 Phil., 433, 440), in which the defendant therein was held not responsible for the wetting sustained by the goods and merchandise of the plaintiffs therein as a result of the torrential rainfall. It necessarily follows that the deed of transfer dated April 19, 1942 (Exhibit Y), whereby the plaintiffs paid P500 to the defendant and further promised to transfer their property under Transfer Certificate of Title No. 666 in case they failed to return on December 31, 1942 the balance of the loss for which, as already stated, they cannot be held liable, is null and void for lack of cause or consideration (article 1275, Civil Code). This also applies to the document dated April 11, 1942, Exhibit 1. But these two documents are also null and void upon the other ground that the consent of the plaintiffs therein was obtained through duress and intimidation. The continued detention of the plaintiff Engracio Obejera from April 11 to 19, 1942 by the mayor and policemen of Batangas, in spite of the fact that they had not found any evidence against the plaintiffs; the fact that the municipal policemen applied continuous pressure on the plaintiffs to make good the loss, so that the plaintiff's wife, accompanied by policeman Ruperto Buenafe, had to raise, with much difficulty, the amount of P500 to secure the settlement of the case; the fact that Mayor Roman L. Perez, although he never intended to keep the plaintiff Engracio Obejera in detention as he did not believe him guilty at all and did not consider himself empowered to order his detention, did not, nevertheless, release the plaintiff until he and his wife consented to execute the deed of transfer, Exhibit Y, in spite of their continuous protestations of innocence and supplications of mercy; and the fear created in the minds of the plaintiffs that they would be delivered to the Japanese soldiers and suffer cruel punishment, if not death, in their hands, unless they executed the said deed of transfer, all show very clearly the irresistible force and intimidation employed, in this case, to coerce the plaintiffs into executing the said document, rendering it, therefore, null and void for lack of free consent (articles 1265, 1267, 1268, Civil Code).

In Jalbuena vs. Ledesma (8 Phil., 601, 605), we held: In this instance the signing of an undertaking appears to have been insisted upon by the judge in the presence and at the instance of the opposing party, and to have been expressly made the condition of non-imprisonment, amid circumstances of procedure quite unusual in courts of justice, in a tribunal convened under military auspices and exercising extraordinary powers. So that there would be reason to say that the consent of the surety was obtained by coercion, even if the judge had jurisdiction over the case. In this connection, we reaffirm what we declared in Vales vs. Villa (35 Phil., 769, 789, 790), thus: But when his sense, judgment, and his will rebel and he refuses absolutely to act as requested, but is nevertheless overcome by force or intimidation to such an extent that he becomes a mere automaton and acts mechanically only, a new element enters, namely, a disappearance of the personality of the actor. He ceases to exist as an independent entity with faculties and judgment, and in his place is substituted another--the one exercising the force or making use of the intimidation. While his hand signs, the will which moves it is another's. While a contract is made, it has, in reality and in law, only one party to it; and, there being only one party, the one using the force or the intimidation, it is unreasonable for lack of a second party. The contention that plaintiffs offered to transfer their property in acknowledgment of their responsibility for the loss of her things appears groundless. Aside from the fact that it cannot be believed, as already stated, that there was constituted in this case a deposit, we are of the opinion that such an offer, made by way of compromise in order that plaintiff Engracio Obejera might only escape continued detention and grueling punishment or even death in the hands of the Japanese soldiers, for the alleged loss for which he was not in any way criminally liable, is not an admission of debt and is not admissible in evidence against the plaintiffs (section 9, Rule 123, Rules of Court). An offer to compromise is not a confession of debt and is not admissible in evidence (Code of Civ. Proc., section 346). In a criminal causes for theft (U. S. vs. Maqui, 27 Phil., Rep., 97) this court said that the weight both of authority and reason sustains the rule which admits evidence of offers to compromise, in criminal cases, but permits the accused to show that such offers were not made under the consciousness of guilt, but merely to avoid the inconvenience of imprisonment or for some other reason which would justify a claim by the accused that the offer to compromise was

not in truth an admission of his guilt and an attempt to avoid the legal consequences which would ordinarily ensue therefrom. (United States vs. Torres and Padilla, 34 Phil., 994, 999.) . On account of its consensual character a compromise, to be valid and effective requires in its performance meeting of the minds in a certain, spontaneous, and free way with regard to a definite object or objects; and in case it be shown and proved that there was error, deceit, violence, or intimidation the compromise would be null, because the consent given therein is null and void through lack of the indispensable requisites for its validity and effectiveness." (Hernandez vs. Barcelon, 23 Phil., 599, 608.) . Wherefore, the decision of the court a quo is hereby affirmed in toto with costs against the defendant and appellant. So ordered. G.R. No. L-12986 March 31, 1966

THE SPOUSES BERNABE AFRICA and SOLEDAD C. AFRICA, and the HEIRS OF DOMINGA ONG, petitioners-appellants, vs. CALTEX (PHIL.), INC., MATEO BOQUIREN and THE COURT OF APPEALS, respondents-appellees. Ross, Selph, Carrascoso and Janda for the respondents. Bernabe Africa, etc. for the petitioners. MAKALINTAL., J.: This case is before us on a petition for review of the decision of the Court of Appeals, which affirmed that of the Court of First Instance of Manila dismissing petitioners' second amended complaint against respondents. The action is for damages under Articles 1902 and 1903 of the old Civil Code. It appears that in the afternoon of March 18, 1948 a fire broke out at the Caltex service station at the corner of Antipolo street and Rizal Avenue, Manila. It started while gasoline was being hosed from a tank truck into the underground storage, right at the opening of the receiving tank where the nozzle of the hose was inserted. The fire spread to and burned several neighboring houses, including the personal properties and effects inside them. Their owners, among them petitioners here, sued respondents Caltex (Phil.), Inc. and Mateo Boquiren, the

first as alleged owner of the station and the second as its agent in charge of operation. Negligence on the part of both of them was attributed as the cause of the fire. The trial court and the Court of Appeals found that petitioners failed to prove negligence and that respondents had exercised due care in the premises and with respect to the supervision of their employees. The first question before Us refers to the admissibility of certain reports on the fire prepared by the Manila Police and Fire Departments and by a certain Captain Tinio of the Armed Forces of the Philippines. Portions of the first two reports are as follows: 1. Police Department report: Investigation disclosed that at about 4:00 P.M. March 18, 1948, while Leandro Flores was transferring gasoline from a tank truck, plate No. T-5292 into the underground tank of the Caltex Gasoline Station located at the corner of Rizal Avenue and Antipolo Street, this City, an unknown Filipino lighted a cigarette and threw the burning match stick near the main valve of the said underground tank. Due to the gasoline fumes, fire suddenly blazed. Quick action of Leandro Flores in pulling off the gasoline hose connecting the truck with the underground tank prevented a terrific explosion. However, the flames scattered due to the hose from which the gasoline was spouting. It burned the truck and the following accessorias and residences. 2. The Fire Department report: In connection with their allegation that the premises was (sic) subleased for the installation of a coca-cola and cigarette stand, the complainants furnished this Office a copy of a photograph taken during the fire and which is submitted herewith. it appears in this picture that there are in the premises a coca-cola cooler and a rack which according to information gathered in the neighborhood contained cigarettes and matches, installed between the gasoline pumps and the underground tanks. The report of Captain Tinio reproduced information given by a certain Benito Morales regarding the history of the gasoline station and what the chief of the fire department had told him on the same subject. The foregoing reports were ruled out as "double hearsay" by the Court of Appeals and hence inadmissible. This ruling is now assigned as error. It is contended: first, that said reports

were admitted by the trial court without objection on the part of respondents; secondly, that with respect to the police report (Exhibit V-Africa) which appears signed by a Detective Zapanta allegedly "for Salvador Capacillo," the latter was presented as witness but respondents waived their right to cross-examine him although they had the opportunity to do so; and thirdly, that in any event the said reports are admissible as an exception to the hearsay rule under section 35 of Rule 123, now Rule 130. The first contention is not borne out by the record. The transcript of the hearing of September 17, 1953 (pp. 167-170) shows that the reports in question, when offered as evidence, were objected to by counsel for each of respondents on the ground that they were hearsay and that they were "irrelevant, immaterial and impertinent." Indeed, in the court's resolution only Exhibits J, K, K-5 and X-6 were admitted without objection; the admission of the others, including the disputed ones, carried no such explanation. On the second point, although Detective Capacillo did take the witness stand, he was not examined and he did not testify as to the facts mentioned in his alleged report (signed by Detective Zapanta). All he said was that he was one of those who investigated "the location of the fire and, if possible, gather witnesses as to the occurrence, and that he brought the report with him. There was nothing, therefore, on which he need be cross-examined; and the contents of the report, as to which he did not testify, did not thereby become competent evidence. And even if he had testified, his testimony would still have been objectionable as far as information gathered by him from third persons was concerned. Petitioners maintain, however, that the reports in themselves, that is, without further testimonial evidence on their contents, fall within the scope of section 35, Rule 123, which provides that "entries in official records made in the performance of his duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated." There are three requisites for admissibility under the rule just mentioned: (a) that the entry was made by a public officer, or by another person specially enjoined by law to do so; (b) that it was made by the public officer in the performance of his duties, or by such other person in the performance of a duty specially enjoined by law; and (c) that the public officer or other person had sufficient knowledge of the facts by him stated, which must have been acquired by him personally or through official information (Moran, Comments on the Rules of Court, Vol. 3 [1957] p. 398). Of the three requisites just stated, only the last need be considered here. Obviously the material facts recited in the reports as to the cause and circumstances of the fire were not

within the personal knowledge of the officers who conducted the investigation. Was knowledge of such facts, however, acquired by them through official information? As to some facts the sources thereof are not even identified. Others are attributed to Leopoldo Medina, referred to as an employee at the gas station were the fire occurred; to Leandro Flores, driver of the tank truck from which gasoline was being transferred at the time to the underground tank of the station; and to respondent Mateo Boquiren, who could not, according to Exhibit V-Africa, give any reason as to the origin of the fire. To qualify their statements as "official information" acquired by the officers who prepared the reports, the persons who made the statements not only must have personal knowledge of the facts stated but must have the duty to give such statements for record.1 The reports in question do not constitute an exception to the hearsay rule; the facts stated therein were not acquired by the reporting officers through official information, not having been given by the informants pursuant to any duty to do so. The next question is whether or not, without proof as to the cause and origin of the fire, the doctrine of res ipsa loquitur should apply so as to presume negligence on the part of appellees. Both the trial court and the appellate court refused to apply the doctrine in the instant case on the grounds that "as to (its) applicability ... in the Philippines, there seems to he nothing definite," and that while the rules do not prohibit its adoption in appropriate cases, "in the case at bar, however, we find no practical use for such doctrine." The question deserves more than such summary dismissal. The doctrine has actually been applied in this jurisdiction, in the case of Espiritu vs. Philippine Power and Development Co. (CA-G.R. No. 3240-R, September 20, 1949), wherein the decision of the Court of Appeals was penned by Mr. Justice J.B.L. Reyes now a member of the Supreme Court. The facts of that case are stated in the decision as follows: In the afternoon of May 5, 1946, while the plaintiff-appellee and other companions were loading grass between the municipalities of Bay and Calauan, in the province of Laguna, with clear weather and without any wind blowing, an electric transmission wire, installed and maintained by the defendant Philippine Power and Development Co., Inc. alongside the road, suddenly parted, and one of the broken ends hit the head of the plaintiff as he was about to board the truck. As a result, plaintiff received the full shock of 4,400 volts carried by the wire and was knocked unconscious to the ground. The electric charge coursed through his body and caused extensive and serious multiple burns from skull to legs, leaving the bone exposed in some parts and causing intense pain and wounds that were not completely healed when the case was tried on June 18, 1947, over one year after the mishap.

The defendant therein disclaimed liability on the ground that the plaintiff had failed to show any specific act of negligence, but the appellate court overruled the defense under the doctrine of res ipsa loquitur. The court said: The first point is directed against the sufficiency of plaintiff's evidence to place appellant on its defense. While it is the rule, as contended by the appellant, that in case of noncontractual negligence, or culpa aquiliana, the burden of proof is on the plaintiff to establish that the proximate cause of his injury was the negligence of the defendant, it is also a recognized principal that "where the thing which caused injury, without fault of the injured person, is under the exclusive control of the defendant and the injury is such as in the ordinary course of things does not occur if he having such control use proper care, it affords reasonable evidence, in the absence of the explanation, that the injury arose from defendant's want of care." And the burden of evidence is shifted to him to establish that he has observed due care and diligence. (San Juan Light & Transit Co. v. Requena, 244, U.S. 89, 56 L. ed. 680.) This rule is known by the name of res ipsa loquitur (the transaction speaks for itself), and is peculiarly applicable to the case at bar, where it is unquestioned that the plaintiff had every right to be on the highway, and the electric wire was under the sole control of defendant company. In the ordinary course of events, electric wires do not part suddenly in fair weather and injure people, unless they are subjected to unusual strain and stress or there are defects in their installation, maintenance and supervision; just as barrels do not ordinarily roll out of the warehouse windows to injure passersby, unless some one was negligent. (Byrne v. Boadle, 2 H & Co. 722; 159 Eng. Reprint 299, the leading case that established that rule). Consequently, in the absence of contributory negligence (which is admittedly not present), the fact that the wire snapped suffices to raise a reasonable presumption of negligence in its installation, care and maintenance. Thereafter, as observed by Chief Baron Pollock, "if there are any facts inconsistent with negligence, it is for the defendant to prove." It is true of course that decisions of the Court of Appeals do not lay down doctrines binding on the Supreme Court, but we do not consider this a reason for not applying the particular doctrine of res ipsa loquitur in the case at bar. Gasoline is a highly combustible material, in the storage and sale of which extreme care must be taken. On the other hand, fire is not considered a fortuitous event, as it arises almost invariably from some act of man. A case strikingly similar to the one before Us is Jones vs. Shell Petroleum Corporation, et al., 171 So. 447:

Arthur O. Jones is the owner of a building in the city of Hammon which in the year 1934 was leased to the Shell Petroleum Corporation for a gasoline filling station. On October 8, 1934, during the term of the lease, while gasoline was being transferred from the tank wagon, also operated by the Shell Petroleum Corporation, to the underground tank of the station, a fire started with resulting damages to the building owned by Jones. Alleging that the damages to his building amounted to $516.95, Jones sued the Shell Petroleum Corporation for the recovery of that amount. The judge of the district court, after hearing the testimony, concluded that plaintiff was entitled to a recovery and rendered judgment in his favor for $427.82. The Court of Appeals for the First Circuit reversed this judgment, on the ground the testimony failed to show with reasonable certainty any negligence on the part of the Shell Petroleum Corporation or any of its agents or employees. Plaintiff applied to this Court for a Writ of Review which was granted, and the case is now before us for decision.1wph1.t In resolving the issue of negligence, the Supreme Court of Louisiana held: Plaintiff's petition contains two distinct charges of negligence one relating to the cause of the fire and the other relating to the spreading of the gasoline about the filling station. Other than an expert to assess the damages caused plaintiff's building by the fire, no witnesses were placed on the stand by the defendant. Taking up plaintiff's charge of negligence relating to the cause of the fire, we find it established by the record that the filling station and the tank truck were under the control of the defendant and operated by its agents or employees. We further find from the uncontradicted testimony of plaintiff's witnesses that fire started in the underground tank attached to the filling station while it was being filled from the tank truck and while both the tank and the truck were in charge of and being operated by the agents or employees of the defendant, extended to the hose and tank truck, and was communicated from the burning hose, tank truck, and escaping gasoline to the building owned by the plaintiff. Predicated on these circumstances and the further circumstance of defendant's failure to explain the cause of the fire or to show its lack of knowledge of the cause, plaintiff has evoked the doctrine of res ipsa loquitur. There are many cases in which the doctrine may be successfully invoked and this, we think, is one of them.

Where the thing which caused the injury complained of is shown to be under the management of defendant or his servants and the accident is such as in the ordinary course of things does not happen if those who have its management or control use proper care, it affords reasonable evidence, in absence of explanation by defendant, that the accident arose from want of care. (45 C.J. #768, p. 1193). This statement of the rule of res ipsa loquitur has been widely approved and adopted by the courts of last resort. Some of the cases in this jurisdiction in which the doctrine has been applied are the following, viz.: Maus v. Broderick, 51 La. Ann. 1153, 25 So. 977; Hebert v. Lake Charles Ice, etc., Co., 111 La. 522, 35 So. 731, 64 L.R.A. 101, 100 Am. St. Rep. 505; Willis v. Vicksburg, etc., R. Co., 115 La. 63, 38 So. 892; Bents v. Page, 115 La. 560, 39 So. 599. The principle enunciated in the aforequoted case applies with equal force here. The gasoline station, with all its appliances, equipment and employees, was under the control of appellees. A fire occurred therein and spread to and burned the neighboring houses. The persons who knew or could have known how the fire started were appellees and their employees, but they gave no explanation thereof whatsoever. It is a fair and reasonable inference that the incident happened because of want of care. In the report submitted by Captain Leoncio Mariano of the Manila Police Department (Exh. X-1 Africa) the following appears: Investigation of the basic complaint disclosed that the Caltex Gasoline Station complained of occupies a lot approximately 10 m x 10 m at the southwest corner of Rizal Avenue and Antipolo. The location is within a very busy business district near the Obrero Market, a railroad crossing and very thickly populated neighborhood where a great number of people mill around tuntil gasoline Whatever be the activities of these people or lighting a cigarette cannot be excluded and this constitute a secondary hazard to its operation which in turn endangers the entire neighborhood to conflagration. Furthermore, aside from precautions already taken by its operator the concrete walls south and west adjoining the neighborhood are only 2-1/2 meters high at most and cannot avoid the flames from leaping over it in case of fire. Records show that there have been two cases of fire which caused not only material damages but desperation and also panic in the neighborhood.

Although the soft drinks stand had been eliminated, this gasoline service station is also used by its operator as a garage and repair shop for his fleet of taxicabs numbering ten or more, adding another risk to the possible outbreak of fire at this already small but crowded gasoline station. The foregoing report, having been submitted by a police officer in the performance of his duties on the basis of his own personal observation of the facts reported, may properly be considered as an exception to the hearsay rule. These facts, descriptive of the location and objective circumstances surrounding the operation of the gasoline station in question, strengthen the presumption of negligence under the doctrine of res ipsa loquitur, since on their face they called for more stringent measures of caution than those which would satisfy the standard of due diligence under ordinary circumstances. There is no more eloquent demonstration of this than the statement of Leandro Flores before the police investigator. Flores was the driver of the gasoline tank wagon who, alone and without assistance, was transferring the contents thereof into the underground storage when the fire broke out. He said: "Before loading the underground tank there were no people, but while the loading was going on, there were people who went to drink coca-cola (at the coca-cola stand) which is about a meter from the hole leading to the underground tank." He added that when the tank was almost filled he went to the tank truck to close the valve, and while he had his back turned to the "manhole" he, heard someone shout "fire." Even then the fire possibly would not have spread to the neighboring houses were it not for another negligent omission on the part of defendants, namely, their failure to provide a concrete wall high enough to prevent the flames from leaping over it. As it was the concrete wall was only 2-1/2 meters high, and beyond that height it consisted merely of galvanized iron sheets, which would predictably crumple and melt when subjected to intense heat. Defendants' negligence, therefore, was not only with respect to the cause of the fire but also with respect to the spread thereof to the neighboring houses. There is an admission on the part of Boquiren in his amended answer to the second amended complaint that "the fire was caused through the acts of a stranger who, without authority, or permission of answering defendant, passed through the gasoline station and negligently threw a lighted match in the premises." No evidence on this point was adduced, but assuming the allegation to be true certainly any unfavorable inference from the admission may be taken against Boquiren it does not extenuate his negligence. A decision of the Supreme Court of Texas, upon facts analogous to those of the present case, states the rule which we find acceptable here. "It is the rule that those who distribute a dangerous article or agent, owe a degree of protection to the public proportionate to and commensurate with a danger involved ... we think it is the generally accepted rule as applied to torts that 'if the

effects of the actor's negligent conduct actively and continuously operate to bring about harm to another, the fact that the active and substantially simultaneous operation of the effects of a third person's innocent, tortious or criminal act is also a substantial factor in bringing about the harm, does not protect the actor from liability.' (Restatement of the Law of Torts, vol. 2, p. 1184, #439). Stated in another way, "The intention of an unforeseen and unexpected cause, is not sufficient to relieve a wrongdoer from consequences of negligence, if such negligence directly and proximately cooperates with the independent cause in the resulting injury." (MacAfee, et al. vs. Traver's Gas Corporation, 153 S.W. 2nd 442.) The next issue is whether Caltex should be held liable for the damages caused to appellants. This issue depends on whether Boquiren was an independent contractor, as held by the Court of Appeals, or an agent of Caltex. This question, in the light of the facts not controverted, is one of law and hence may be passed upon by this Court. These facts are: (1) Boquiren made an admission that he was an agent of Caltex; (2) at the time of the fire Caltex owned the gasoline station and all the equipment therein; (3) Caltex exercised control over Boquiren in the management of the state; (4) the delivery truck used in delivering gasoline to the station had the name of CALTEX painted on it; and (5) the license to store gasoline at the station was in the name of Caltex, which paid the license fees. (Exhibit T-Africa; Exhibit U-Africa; Exhibit X-5 Africa; Exhibit X-6 Africa; Exhibit Y-Africa). In Boquiren's amended answer to the second amended complaint, he denied that he directed one of his drivers to remove gasoline from the truck into the tank and alleged that the "alleged driver, if one there was, was not in his employ, the driver being an employee of the Caltex (Phil.) Inc. and/or the owners of the gasoline station." It is true that Boquiren later on amended his answer, and that among the changes was one to the effect that he was not acting as agent of Caltex. But then again, in his motion to dismiss appellants' second amended complaint the ground alleged was that it stated no cause of action since under the allegations thereof he was merely acting as agent of Caltex, such that he could not have incurred personal liability. A motion to dismiss on this ground is deemed to be an admission of the facts alleged in the complaint. Caltex admits that it owned the gasoline station as well as the equipment therein, but claims that the business conducted at the service station in question was owned and operated by Boquiren. But Caltex did not present any contract with Boquiren that would reveal the nature of their relationship at the time of the fire. There must have been one in existence at that time. Instead, what was presented was a license agreement manifestly tailored for purposes of this case, since it was entered into shortly before the expiration of the one-year period it was intended to operate. This so-called license agreement (Exhibit 5-Caltex) was executed on November 29, 1948, but made effective as of January 1, 1948 so as to cover the

date of the fire, namely, March 18, 1948. This retroactivity provision is quite significant, and gives rise to the conclusion that it was designed precisely to free Caltex from any responsibility with respect to the fire, as shown by the clause that Caltex "shall not be liable for any injury to person or property while in the property herein licensed, it being understood and agreed that LICENSEE (Boquiren) is not an employee, representative or agent of LICENSOR (Caltex)." But even if the license agreement were to govern, Boquiren can hardly be considered an independent contractor. Under that agreement Boquiren would pay Caltex the purely nominal sum of P1.00 for the use of the premises and all the equipment therein. He could sell only Caltex Products. Maintenance of the station and its equipment was subject to the approval, in other words control, of Caltex. Boquiren could not assign or transfer his rights as licensee without the consent of Caltex. The license agreement was supposed to be from January 1, 1948 to December 31, 1948, and thereafter until terminated by Caltex upon two days prior written notice. Caltex could at any time cancel and terminate the agreement in case Boquiren ceased to sell Caltex products, or did not conduct the business with due diligence, in the judgment of Caltex. Termination of the contract was therefore a right granted only to Caltex but not to Boquiren. These provisions of the contract show the extent of the control of Caltex over Boquiren. The control was such that the latter was virtually an employee of the former. Taking into consideration the fact that the operator owed his position to the company and the latter could remove him or terminate his services at will; that the service station belonged to the company and bore its tradename and the operator sold only the products of the company; that the equipment used by the operator belonged to the company and were just loaned to the operator and the company took charge of their repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the company's gasoline and service station; that the price of the products sold by the operator was fixed by the company and not by the operator; and that the receipts signed by the operator indicated that he was a mere agent, the finding of the Court of Appeals that the operator was an agent of the company and not an independent contractor should not be disturbed. To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it by the contracting parties, should thereby a controversy as to what they really had intended to enter into, but the way the contracting parties do or perform their respective obligations stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title given the contract by the parties, the former must prevail over the latter.

(Shell Company of the Philippines, Ltd. vs. Firemens' Insurance Company of Newark, New Jersey, 100 Phil. 757). The written contract was apparently drawn for the purpose of creating the apparent relationship of employer and independent contractor, and of avoiding liability for the negligence of the employees about the station; but the company was not satisfied to allow such relationship to exist. The evidence shows that it immediately assumed control, and proceeded to direct the method by which the work contracted for should be performed. By reserving the right to terminate the contract at will, it retained the means of compelling submission to its orders. Having elected to assume control and to direct the means and methods by which the work has to be performed, it must be held liable for the negligence of those performing service under its direction. We think the evidence was sufficient to sustain the verdict of the jury. (Gulf Refining Company v. Rogers, 57 S.W. 2d, 183). Caltex further argues that the gasoline stored in the station belonged to Boquiren. But no cash invoices were presented to show that Boquiren had bought said gasoline from Caltex. Neither was there a sales contract to prove the same. As found by the trial court the Africas sustained a loss of P9,005.80, after deducting the amount of P2,000.00 collected by them on the insurance of the house. The deduction is now challenged as erroneous on the ground that Article 2207 of the New Civil Code, which provides for the subrogation of the insurer to the rights of the insured, was not yet in effect when the loss took place. However, regardless of the silence of the law on this point at that time, the amount that should be recovered be measured by the damages actually suffered, otherwise the principle prohibiting unjust enrichment would be violated. With respect to the claim of the heirs of Ong P7,500.00 was adjudged by the lower court on the basis of the assessed value of the property destroyed, namely, P1,500.00, disregarding the testimony of one of the Ong children that said property was worth P4,000.00. We agree that the court erred, since it is of common knowledge that the assessment for taxation purposes is not an accurate gauge of fair market value, and in this case should not prevail over positive evidence of such value. The heirs of Ong are therefore entitled to P10,000.00. Wherefore, the decision appealed from is reversed and respondents-appellees are held liable solidarily to appellants, and ordered to pay them the aforesaid sum of P9,005.80 and P10,000.00, respectively, with interest from the filing of the complaint, and costs.

G.R. No. L-10244

February 29, 1916

SANTIAGO CRUZADO, plaintiff-appellant, vs. ESTEFANIA BUSTOS and MANUEL ESCALER, defendants-appellees. TORRES, J.: This appeal, by bill of exceptions, was taken from the judgment of June 17, 1914, in which the trial judge absolved defendants from the complaint and plaintiff from the crosscomplaint, without express finding as to costs. Counsel for plaintiff appealed from this judgment and moved for a new trial. This motion was denied, exception was taken by appellant, and, on the filing of the proper bill of exceptions, the same was approved, certified, and transmitted to the clerk of this court, together with a transcript of the evidence introduced at the trial. Counsel for the plaintiff Santiago Cruzado filed a written complaint on October 8, 1910, amended on September 25, 1913, in which he alleged that plaintiff was the owner of certain rural property situated in the barrio of Dolores, formerly San Isidro, of the municipality of Bacolor, Pampanga, containing an area of 65 balitas and bounded as set forth in the complaint; that Estafania Bustos, during her lifetime, and now the administrator of her estate, together with the other defendant, Manuel Escaler, had, since the year 1906 up to the present, been detaining the said parcel of land, and had refused to deliver the possession thereof to plaintiff and to recognize his ownership of the same, notwithstanding the repeated demands made upon them; that by such detention, the plaintiff had suffered losses and damages to the amount of P3,500. He therefore asked for judgment declaring plaintiff to be the owner of the said parcel of land and ordering defendants to return it to plaintiff and to pay the latter P3,500 for losses and damages, and the costs. The demurrer filed by the defendant Bustos having been overruled, in her answer she made a general denial of each and all of the allegations of the complaint, and of each and all of the paragraphs thereof, and, as a special defense, alleged that the title to the said land, produced by the plaintiff, was not a lawful one, for the reason that only a simulated sale of the land was made by the between herself and the deceased Agapito Geronimo Cruzado, plaintiff's father, and that for more than thirty years preceding the present time she had been the sole, exclusive, and lawful owner of the said parcel of land in question; that she had been holding it quietly, peaceably, publicly and in good faith; that it formed an integral part of another larger parcel of land, both parcels aggregating a total area of 100 balitas, 9 loanes, and 41 square brazas; that in September, 1891, with plaintiff's knowledge, the defendant Bustos

sold and conveyed all the said property to the other defendant Manuel Escaler who then acquired the possession and ownership of the said parcel of land, and had retained such ownership and possession up to the present time; that at no time and on no account whatever had plaintiff or any other person except defendants acquired possession of the said parcel of land or any part thereof, nor any right or title therein. She therefore prayed to be absolved from the complaint, with the costs against plaintiff. The other defendant, Manuel Escaler, in an amended answer to the aforementioned complaint, denied each and all of the allegations therein contained and each and all of its clauses, and, as a special defense, alleged that plaintiff's title to the said land was illegal as only a simulated sale was made by and between Agapito Geronimo Cruzado, plaintiff's predecessor in interest, and Bernardino Dizon; that defendants had been in possession of the said parcel of land for more than thirty years; that the defendant Escaler in good faith purchased the land in question from Estefania Bustos, widow of Dizon, without ever having had any notice of any defect in the vendor's title; that plaintiff had knowledge of the contract of sale of the land in question yet did nothing to oppose its purchase by the defendant Escaler, wherefore the latter, in acquiring the property, did so under the belief that the plaintiff Santiago Cruzado had no right or interest therein. He therefore prayed that the complaint be dismissed, with the costs against plaintiff, and that an injunction issue to restrain the latter from interfering with the defendant Escaler in the enjoyment of his property and rights and from performing any act prejudicial to his interests. On the case coming to trial, both parties adduced evidence, among which was included the deposition of Inocencio Rosete. Counsel for defendants, in a cross-complaint set forth: that as shown by the evidence, the defendant Escaler acquired in good faith from Estefania Bustos the land in question at a time when there was no record whatever in the property registry to show that this land belonged to a third person or any other than the vendor; that, on entering into possession of the property, Escaler spent P4,000 in-improvements and in the repair of a long dike to prevent the erosion of the land by the frequent overflows of the adjoining estuary; that of this sum P2,000 was paid by Escaler and the remaining P2,000 by Estafania Bustos, in her capacity as lessee of the land; and that in case the judgment of the court should be adverse to defendants, these latter, as owners in good faith, were entitled to be indemnified by plaintiff for the said expenses. He therefore asked that plaintiff be ordered to reimburse half of the said P4,000 to each of the defendants in case judgment should be rendered favorable to plaintiff.

The latter's counsel, in answer to the said cross-complaint, specifically denied each and all of the allegations thereof and, in special defense, reproduced plaintiff's amended complaint in all its parts and alleged that the facts set forth in the cross-complaint did not constitute a cause of action. He therefore prayed that plaintiff be absolved from the cross-complaint and that judgment be rendered against defendants, in conformity with the prayer of his complaint. After the evidence was all in, counsel for the defendant Escaler moved that the deposition of the witness Inocencio Espanol Rosete be admitted into the record, and in support of his motion stated that with the authorization of the court the said deposition had been taken on November 21, 1913, in the municipality of Arayat in the presence of plaintiff's attorney; that the said declaration of the deponent was duly forwarded to the clerk of the court, and there attached to the record, but through an unintentional oversight of defendant's attorney, it was not presented in evidence at the trial; that this deposition was very important for the defendants' defense; and that the deponent was and continued to be unable to appear before the court on account of a threatened attack of brain fever which might develop during the journey from Arayat to San Fernando. Plaintiff's counsel asked that the foregoing motion be overruled and that the deposition of the witness Rosete be stricken from the record, because defendants' motion was made out of time and was contrary to the rules of procedure, and there was no reason for altering the order of procedure, as requested by defendants, for, when the period for the reception of the evidence of both parties is closed, an alteration in the order of procedure such as asked by defendants would be improper and illegal, counsel citing the decision of this court in the case of Garcia vs. Reyes.1 He alleged, moreover, that the said deposition necessarily affected the main issue in controversy and that to allow the motion would be in contravention of the provisions of section 364 of the Code of Civil Procedure. He therefore asked that the said motion be overruled. The court, however, ordered that the deposition of the witness Inocencio Rosete be admitted in evidence, and that plaintiff's exception be noted. In view of the foregoing, the judgment aforementioned was rendered. The questions herein submitted for the decision of this court are: 1. Is it or is it not true that the deed of sale, Exhibit A, (p. 40 of the record) of 65 balitas of land situated in the municipality of Bacolor, Pampanga, executed by Estefania Bustos, with the assistance of her husband Bernardino Dizon, in favor of Agapito Geronimo Cruzado, for the sum of P2,200, was simulated, not with intent to defraud any third person, but for the sole purpose of making it appear that the vendee, Cruzado, then a candidate for the position of procurador on the date of the said deed, September 7,1875, possessed real estate to the

value of P2,200 with which to guarantee the faithful discharge of the duties of the office of procurador? 2. It is or is it not true that, notwithstanding such apparent alienation of the 65 balitas of land, the supposed vendee continued in possession thereof, without the supposed purchaser having taken possession of the property until September 10, 1891, when its owner Bustos sold to Escaler, not only the said 65 balitas of land, but also all the remainder of a large tract of agricultural land of which the portion appearing as sold to Agapito G. Cruzado formed and forms a part, and that Escaler was then and, until the date of plaintiff's claim, continued to be in peaceable, uninterrupted possession of the said whole tract of land, including the aforementioned portion of 65 balitas? 3. Has the right of ownership prescribed which Manuel Escaler is and has been enjoying in the land which Estefania Bustos had sold to him and which includes the parcel of 65 balitas claimed by plaintiff, Santiago Cruzado, or has the right of any real or personal action he might exercise by reason of the sale to Cruzado prescribed on account of the lapse of the respective periods fixed by law, between the 7th of September, 1875, the date of said sale, and the 8th of October, 1910, that of the filing of the complaint? To judge from the evidence adduced in this case, there is ample ground for holding that the said deed of sale of a parcel of 65 balitas of land was simulated, not to defraud any creditor or other person interested in the land nor for the purpose of eluding any lawful obligation on the part of its owner, Estafania Bustos, but for the sole purpose of doing a favor, of rendering a special service to Agapito Geronimo Cruzado, father of the plaintiff Santiago Cruzado. During his lifetime Agapito G. Cruzado aspired to hold the office of procurador in the Court of First Instance of Pampanga, but notwithstanding that he possessed the required ability for the discharge of the duties of that position, he was unable to give the required bond, an indispensable condition for his appointment, as he was possessed of no means or real property wherewith to guarantee the proper discharge of his duties in the manner prescribed by the laws then in force. In the certified copy of the record of the case tried in the Secretaria de Gobierno of the abolished Real Audiencia de Manila, issued by the Assistant Executive Secretary and chief of the division of archives, there appears on page 178 a decree by the presidencia of this latter tribunal, issued by virtue of the resolution passed by the sala de gobierno on November 24, 1875, whereby it was ordered that Agapito Geronimo Cruzado should be noticed that within the period of 30 days he must show proof of having furnished a bond of

P700 in cash or of P2,100 in real property as security for the position of procurador to which he had been appointed, with the understanding that should be fail to furnish such bond he would not be issued the certificate entitling him to practice the profession of procurador. After complying with the requirements of the said court and executing the mortgage deed of the land purchased by the procurador elect Cruzado from Estefania Bustos, on March 18, 1876, the mortgage was recorded in the old mortgage registry then kept in the office of the Ayuntamiento of Manila during the former sovereignty, and thereafter Agapito G. Cruzado received his appointment and commenced to discharge the duties of his position. The above-related facts conclusively prove that Estefania Bustos executed the deed of sale Exhibit A in favor of the deceased Cruzado in order to enable the latter, by showing that he was a property owner, to hold the office of procurador. This position he held for many years, thanks to the liberality of the pretended vendor, who, notwithstanding the statements contained in the deed of sale, does not appear to have been paid anything as a result of the sham sale, a sale which was affected, not in prejudice or fraud of any person, nor those who were entitled to hold Cruzado liable for the proper discharge of the duties of his office, because, had the need arisen, any liability of his could have been covered by the value of the land, the sale of which was fictitiously set forth in that deed as lawfully belonging to Cruzado, and then Estefania Bustos would have had no right either to object to or escape the consequences of that alienation, although simulated. The simulation of the said sale was effected by making a pretended contract which bore the appearance of truth, when really and truly there was no contract, because the contracting parties did not in fact intend to execute one, but only to formulate a sale in such a manner that, for the particular purposes sought by Bustos and Cruzado, it would appear to have been celebrated solely that Cruzado might hold his office of procurador on the strength of the security afforded by the value of the land feignedly sold. The record does not show when the procurador Cruzado died, but it is unquestionable that he was still living during the last months of 1882, judging from the certificate which he himself issued to Norberto Decena (Exhibit 3). He must have died sometime between the years 1882 and 1890, to judge from the contents of the letters plaintiff addressed to Natalio Dizon, one of the children of Estefania Bustos, on July 7, 1891, and July 4, 1896, and from the fact that in the said year 1890 Agapito G. Cruzado was no longer a practicing procurador in the Court of First Instance of Pampanga..

It is true that even after the death of the aforesaid procurador, any liability he might have incurred in connection with the exercise of his office could have been, upon presentation of the proper claim, collected out of the value of the land apparently sold by Estafania Bustos and pledged as security for the proper discharge of the duties of his office. On October 8, 1910, when his son Santiago Cruzado filed his complaint, already more than twenty years had elapsed since 1889, if plaintiff's father died in 1889 and not between 1883 and 1889; therefore, any right of action to foreclose the mortgage, or any personal action with regard to the value of the encumbered land, as the result of any liability incurred in the performance of his duties as procurador, has more than prescribed. (Art. 1964, Civil Code, and secs. 38, 39 and 43, Act. No. 190.). On the termination of the sovereignty of Spain over this Archipelago, the Spanish courts here established went out of existence on January 31, 1899, the Pampanga court indeed being abolished about the middle of 1897 as a result of the revolution against the former sovereignty. The personnel of those courts also ceased to render service as such. It may therefore be affirmed that, if the said lien on the land in question has not terminated by its no longer having any object, it is at least undeniable that prescription has already run with respect to any action that might have been brought against the pledged land to recover for any liability which might have been incurred by the procurador Cruzado during his lifetime in connection with his office, so that this real estate may now be considered as free from that hypothecary encumbrance. At the present time we have only to explain what rights Agapito G. Cruzado transmitted at his death to his son, the herein plaintiff, by virtue of the deed of sale of the land in litigation, executed by its owner Estefania Bustos. It is unquestionable that the contract of sale of the 65 balitas of land was perfect and binding upon both contracting parties, since they both appear in that instrument to have agreed upon the thing sold, to wit, the 65 balitas of land, and upon the price, P2,200; but it is also undeniable that the said contract was not consummated, inasmuch as, notwithstanding that the deed of sale Exhibit A was accomplished and this document was kept by the pretended purchaser, it is positively certain that the latter did not pay the purchase price of P2,200, and never took possession of the land apparently sold in the said deed. All that this vendee afterwards did was to pledge the land on March 14, 1876, that is, six months and some days after the 7th of September, 1875, the date when he purchased it as security for the faithful discharge of the duties of his office of procurador of the Court of First Instance of Pampanga.

The plaintiff, Santiago Cruzado, a son of the vendee, claiming that the said land was being detained by the vendor, or by the administrator of the latter's estate or her death after the commencement of these proceedings, and by the other defendant Manuel Escaler, prayed the court to declare him to be the owner thereof, to order the defendants to return it to him and to pay him for losses and damages, and the costs. The action brought by the plaintiff is evidently one for recovery of possession, founded on the right transmitted to him by his father at his death, a right arising from the said simulated deed of sale of the land in question. This action is of course improper, not only because the sale was simulated, but also because it was not consummated. The price of the land was not paid nor did the vendee take possession of the property from the 7th of September, 1875, when the said sale was feigned, until the time of his death; nor did any of his successors, nor the plaintiff himself until the date of his claim, enter into possession of the land. It is indeed true that it is not necessary that the thing sold or its price should have been delivered in order that the contract of purchase and sale be deemed perfect on account of its being consensual, and from it reciprocal obligations arise mutually to compel the parties to effect its fulfillment; but there is no transmission of ownership until the thing, as in the case at bar, the land, has been delivered, and the moment such delivery is made the contract of purchase and sale is regarded as consummated. Article 1450 of the Civil Code, relied upon in this connection by the appellant, refers solely to the perfection of the contract and not to its consummation. The purchaser is also a creditor with respect to the products of the thing sold, and article 1095 of the Civil Code prescribes as follows: A creditor has a right to the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire a property right thereto until it has been delivered to him. The provisions of this article are in agreement with that of the second paragraph of article 609 of the same Code, which is of the following tenor: Ownership is acquired by retention. Ownership and other property rights are required and transmitted by law, by gift, by testate or intestate succession, and, in consequence of certain contracts, by tradition.

They can also be acquired by prescription. The provisions of the said article 1095 are also in accord with those of article 1462 which reads: A thing sold shall be considered as delivered, when it is placed in the hands and possession of the vendee. When the sale should be made by means of a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if in said instrument the contrary does not appear or may be clearly inferred. It is true that the deed of sale Exhibit A remained in possession of the vendee Cruzado, but the sale is not to be considered as consummated by this because the said vendee never entered into possession of the land and neither did his son the plaintiff. The latter, moreover, was unable to prove that at any time as owner of the land he collected the fruits harvested thereon, or that any other person cultivated the said land in the name and representation of his deceased father or of the plaintiff himself. The fiction created by means of the execution and delivery of a public instrument produces no effect if the person acquiring it never takes possession of the thing sold or acquired, as happened in the case at bar. If, as prescribed by the preinserted article 1095, the creditor, and in the present case the vendee, does not acquire a property right in the land purchased until the property has been delivered to him or he has taken possession of it, it is unquestionable that, as neither the plaintiff nor his predecessor in interest took possession of the land in litigation, neither of them acquired any property right therein and, consequently, could not and cannot now bring an action for recovery of possession which arises out of a property right in a thing which belongs to them and not a mere right productive of a personal obligation. The plaintiff Santiago Cruzado could only, in a proper case, exercise the personal right of action flowing from the right possessed by his father to compel the vendor to fulfill the contract made in a public instrument to deliver the land sold or to give him possession of it, in consequence of the said contract, though simulated and executed for the sole purpose that the deceased Cruzado in default of P700 in cash might appear to own real estate with which to insure the proper performance of his duties as procurador, an office he then desired to hold. The supreme court of Spain in a decision of cassation of June 1, 1990, established the following doctrine:

That articles 1258 and 1450 of the Civil Code and the decisions of cassation of June 30, 1854, April 13 and December 13, 1861, June 30, 1864, and April 19 and December 15, 1865, do not warrant the conclusion that whoever purchases personal or real property may exercise with respect thereto all rights of action inherent in its ownership, without it having, in some way or another, been placed at his disposal. On the contrary, the distinction between the perfecting and the consummation of a contract marks the diversity of relations of the contracting parties among themselves and of the owner with respect to what constitutes this property. This principle is in harmony with those set up by the same high tribunal in its decision of January 19, 1898, and March 8, 1901. In this last decision, also rendered on an appeal in cassation, the doctrine enunciated in the excerpt copied here below was established: That the contract of purchase and sale, as consensual, is perfected by consent as to the price and the thing and is consummated by the reciprocal delivery of the one and the other, the full ownership of the thing sold being conveyed to the vendee, from which moment the rights of action derived from this right may be exercised. It is, then, of the utmost importance to examine whether in the said sale the purchase price was paid and whether the vendee took possession of the land supposed to have been sold. The record discloses that Cruzado during his lifetime was, before he became a procurador, an official escribiente or clerk charged with the duty of coursing records and proceedings in the Court of Pampanga; that his salary was hardly sufficient to maintain him and his family; that on account of the insufficiency of his monthly stipend, he was frequently obliged to borrow money from his friends, notwithstanding that he with his family lodged in the house of Bernardino Dizon, the husband of the vendor Bustos, situated in the municipality of Bacolor, with whom Cruzado maintained intimate relations of friendship, and on this account the said couple were content to live in a country house they owned on one of their rice fields. Such was the testimony of several witnesses who lived in that municipality, and who knew and had considerable dealings with the plaintiff's father for many years. It was the opinion of these witnesses that the deceased Agapito G. Cruzado was a poor man, for the reason that his monthly salary scarcely provided for the needs of himself and his family, and they therefore believed that he could not have furnished the sum of P2,200 to purchase the land in question, and, furthermore, if the plaintiff's father had possessed this sum, he would have made the deposit of the sum of P700, the amount of security required by the Presidencia of the former Real Audiencia de Manila for his appointment as procurador,

since, having the means, he would have preferred to deposit this smaller sum rather than to have used P2,200 in acquiring a piece of land from which he would derive no benefit whatever, as in fact he never did, as he must have known that in spite of the simulated sale of the property its owner would continue in its possession and would cultivate it, as she did do until her death. It is, therefore, unquestionable that the price of the sale was not paid, an omission which would indicate that it was in effect simulated. Aside from the fact that the spouses Estafania Bustos and Bernardino Dizon had no need to sell the said 65 balitas of land, or of fencing or separating this parcel from the large tract of land that belonged to them and of which it formed a part, for the reason that they were rich and at that time were not in need of money to cultivate their extensive landholdings, it is also to be noted that the portion of land sold was worth very much more than the P2,200 which, in the said instrument, purported to be its price. In addition to the foregoing, the proceedings in the case at bar furnish ample proof that Agapito Geronimo Cruzado during his lifetime stated to various persons that he succeeded in giving bond for his appointment as procurador by means of the said instrument of simulated sale, executed in his favor by the spouses Dizon and Bustos, as he did not have the money to make the deposit required for his appointment. So close were the relations that then existed between the Cruzado family and that of Dizon and Bustos, that later on the plaintiff married a daughter of these latter; hence, plaintiff, in the beginning of his letters Exhibits 8 and 9 addressed to Natalio Dizon, a son of the vendor Estefania Bustos, calls his correspondent his "dear and esteemed brother-in-law." It is therefore not stranger that these spouses should have wished to help plaintiff's predecessor in interest by assisting him to obtain the office of procurador, even to the extent of making a feigned sale. However, years afterwards, prompted by an intuition of possible future difficulties, Dizon and his wife Bustos went to the office of Agapito G. Cruzado and required him to cancel the said deed of sale, in order to avoid any lawsuit after their death. Cruzado promised to look for money wherewith to substitute the mortgage bond. This demand had to be repeated several times, because Cruzado did not cancel the deed as he promised. Furthermore, it is shown that the instrument Exhibit A is merely a second copy obtained by the plaintiff from the chief of division of archives, without prior summons or notification of the vendor Estefania Bustos, who was still living, in conformity with the provisions contained in article 18 of the Notarial Law of February 15, 1889, and without the plaintiff's having explained what became of the first copy. Besides, the clerk and notary who certified that instrument did not attest therein that in his presence the vendee Cruzado paid over the sum of P2,200, the price of the land sold, and as the vendor denied having received this sum,

the obligation devolved upon plaintiff to prove that his deceased father had paid the price stated in that instrument. By this not having done so, his omission constitutes additional proof that the sale of the land, the recovery of possession of which plaintiff now seeks, was really simulated. The supreme court of Spain, in a decision dated February 20, 1899, rendered on an appeal in cassation, laid down the doctrine that, in accordance with the provisions of article 40 of the Mortgage Law, in the alienation of real property it is understood that no price has been paid if the notary does not attest its delivery or the contracting parties do not prove that it was previously paid. The courts are allowed full latitude to accept the presumption that the purchase price has not been paid when the notary before whom the instrument was executed does not attest the delivery of the money, and when, such delivery being denied by one of the contracting parties, the other does not adduce proof of its payment, especially when such presumption is corroborated by other circumstantial evidence which, all together, undoubtedly prove that the sale was feigned and simulated for certain purposes sought to be attained by the parties, though, as in the case at bar, the simulation was not effected in fraud of creditors. Besides the failure to pay the purchase price, the record discloses another very important fact, to wit, that neither the vendee nor his heirs, among these latter, the plaintiff, had at any time taken possession of the land which in the said instrument Exhibit A appeared to have been sold, for, by the testimony of seven competent witnesses examined at the trial it is decisively and conclusively proven that the alleged vendor, Estefania Bustos, and her husband while he was living, notwithstanding the said alienation, continued to possess the said land supposedly sold to plaintiff's father, and cultivated it, as she had done long before the sale of September, 1875, and continued to do so up to the date of the complaint filed by Santiago Cruzado; in the first period, until September 10, 1891, as the owner of the land, and from this date, when the whole of the large tract of land of which the said portion apparently sold forms a part was sold to the other defendant Manuel Escaler, the original owner Estefania Bustos continued in the material possession of the land, but now as the lessee of the new owner, until 1908, when she was substituted by Marcelo Rodriguez as the new lessee of the property. The plaintiff at no time after his father's death occupied the land in litigation, notwithstanding his allegation that he has been collecting rentals from Estefania Bustos, his mother-in-law, by reason of his having leased the land to her. The plaintiff endeavored to prove that during the years 1882 and 1883 he personally took charge of and tilled the disputed land on shares through his tenants named Florentino de los Reyes, Lino Cortes, Macario de los Reyes and Regino de los Reyes, all of whom

corroborated plaintiff's testimony in this regard. However, six of the defendants' witnesses positively stated that they never were aware that the said tenants had worked on the land in question during either the said two years or in any other, for these latter were working on the adjacent lands belonging to other owners. Pablo Angeles, one of the defendants' witnesses, testified that Regino and Florentino de los Reyes were his tenants on shares and were employed on his land adjoining that in question. He was positively certain that they never worked on the disputed land during or about the years aforementioned, because the carabaos used by his said two tenants belonged to him and he never would have permitted them to use these animals in working land that did not belong to him. He added that Regino's children, Macario and Basilio, were at that time so young, being about eight years of age, that they were not yet able to work in the fields. The plaintiff must have been well convinced that he had no right whatever in the land supposedly purchased by his father. The latter never demanded its possession from its owner Estefania Bustos and never thought of declaring the property as belonging to him, for the purposes of the land tax, from the time this tax was established in this country, notwithstanding that the plaintiff, knowing his obligation, filed a sworn declaration relative to a lot he owned in the municipality of Bacolor. This procedure of plaintiff's proves that he did not believe himself to be the owner of the land he claims and which its present owner Manuel Escaler has constantly declared for the purpose of assessment. Moreover, about the middle of the year 1891, the plaintiff Santiago Cruzado begged his brother-in-law Natalio Dizon to tell the latter's mother, plaintiff's mother-in-law, that Cruzado desired the lease four balitas of the land in question, and some days afterwards, possibly because he received no reply from his said brother-in-law, he addressed a letter to Dizon (Exhibit 9, page 152 of the record, translated on page 154) in which he repeated his request and asked for a reply; but notwithstanding that his brother-in-law Dizon told him that he could not dispose of any part of the said land for the reason that his mother Estefania Bustos was negotiating for the sale of all the land she possessed in the sitio of Sicat to Manuel Escaler, plaintiff went to Dizon's house on an occasion when Paulino de la Cruz was there. Cruz was a representative of Escaler and had been charged to inform himself of the situation, condition and quality of the land which Bustos was about to sell to his principal and was at the said house for the purpose of being shown the land offered for sale. On this occasion plaintiff learned that negotiations were being made for the sale of all the land owned by Estefania Bustos of which the 65 balitas in litigation formed a part. Plaintiff did not then or afterwards make any statement or objection whatever in defense of his rights and interest, if he really believed that he was entitled to the land shown in the instrument Exhibit A to have been purchased by his father.

Plaintiff made no protest whatsoever, because he well knew that the said sale was simulated and that his father had acquired no right whatever in the property; he was therefore anxious to lease four balitas of the same land, a purpose in which he was unsuccessful because a deal was then already going forward for the sale of the said land to its present owner, Manuel Escaler, who in fact did but it on September 10, 1891. If plaintiff were convinced that he was the owner of the land, as he rashly asserted that he was in his complaint for recovery of possession, it is not understood why about the middle of the year 1891 he wished to lease, not all the 65 balitas, but only four of them, as stated in his said letter, Exhibit 9. From that time the new owner Manuel Escaler took possession of all the land sold by Estefania Bustos, including the 65 balitas in litigation, and continued in its possession as the owner thereof until October 8, 1910, when plaintiff filed his claim. Thus, more than the ten years required by law for ordinary prescription had already elapsed, as Escaler purchased the land and was holding it in good faith under a lawful title and was not disturbed in his continuous and peaceable possession, one that was adverse to the whole world. It is therefore unquestionable that he has absolutely acquired by prescription the ownership of the disputed land, and the action brought by plaintiff, founded solely on a simulated sale executed by the original owner of the land, not to the prejudice, but to the benefit, of the pretended vendee, cannot prevail against Escaler's rights. The registration obtained by the plaintiff in the property registry of the second copy of the said instrument Exhibit A, about two months before filing his action for recovery, to wit, on August 23, 1910, has not improved the deed of sale nor made it more effective, nor could it affect the rights held by the original owner and the present proprietor of the land in question, inasmuch as their predecessor in interest, by default of payment of the price of the sale and on account of his never having taken possession of the land sold, was not the owner thereof, nor did he acquire any property right whatever therein. Consequently at his death he could not have transmitted to the plaintiff as his successor any greater right than a personal right to exact the fulfillment of a contract, and as plaintiff was not the owner of the land, he could not validly register it. Article 1473 of the Civil Code prescribes: If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be personal property.

Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry. Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. On the sale of the land to the defendant Escaler, neither he nor the plaintiff had had it entered in the property registry, but the said new owner, Escaler, took possession of the land on the date of its acquisition, September 10,1891, and has retained possession thereof up to the present time. So that when plaintiff registered the land he was not in possession thereof and no longer had any right whatever therein, because it already belonged to the defendant Escaler, its lawful owner. However, even though it were proper for plaintiff to bring the real action for recovery derived, though we do not admit that it could be, from the simulated sale before mentioned, both this action as well as the personal action the only one available in a proper case, as before demonstrated, pursuant to the provisions of article 1095 of the Civil Code have both certainly prescribed, for the reason that the periods fixed by law for filing such actions have much more than elapsed. Article 1939 of the Civil Code says: Prescription, which began to run before the publication of this code, shall be governed by the prior laws; but if, after this code became operative, all the time required in the same for prescription has elapsed, it shall be effectual, even if according to said prior laws a longer period of time may be required. Personal actions prescribe after ten years; and the same with the writ of execution therein issued, after twenty years; while real actions prescribe after thirty years: according to Law 5, Title 8, Book 1 of the Novisima Recopilacion, and Law 21, Title 29, Partida 3, which were those in force on the date of the execution of the deed of sale, Exhibit A. From September 7, 1875, to October 8, 1910, when the complaint was filed, thirty-five years have elapsed. Therefore, not only in accordance with the laws aforecited, but also pursuant to the provisions of articles 1963 and 1964 of the Civil Code, the periods fixed for the prescription of the personal action which could, in a proper case, have been exercised, as well as for the real action for recovery of possession brought by the plaintiff without right so to do, have more than prescribed.

For all the foregoing reasons, whereby the errors assigned to the judgment appealed from have been duly refuted, the said judgment should be, as it is hereby, affirmed, with the costs against the appellant. So ordered. G.R. No. L-2412 April 11, 1906

the 30th of the same month demand was made upon the defendant for the payment of the purchase price of the vessel in the manner stipulated and defendant failed to pay. Plaintiff finally prayed that judgment be rendered in accordance with the prayer of his previous complaint. Defendant in his answer asked that the complaint be dismissed with costs to the plaintiff, alleging that on or about June 13 both parties met in a public establishment of this city and the plaintiff personally proposed to the defendant the sale of the said vessel, the plaintiff stating that the vessel belonged to him and that it was then in a sea worthy condition; that defendant accepted the offer of sale on condition that the title papers were found to be satisfactory, also that the vessel was in a seaworthy condition; that both parties then called on Calixto Reyes, a notary public, who, after examining the documents, informed them that they were insufficient to show the ownership of the vessel and to transfer title thereto; that plaintiff then promised to perfect his title and about June 23 called on defendant to close the sale, and the defendant believing that plaintiff had perfected his title, wrote to him on the 23d of June and set the following day for the execution of the contract, but, upon being informed that plaintiff had done nothing to perfect his title, he insisted that he would buy the vessel only when the title papers were perfected and the vessel duly inspected. Defendant also denied the other allegations of the complaint inconsistent with his own allegations and further denied the statement contained in paragraph 4 of the complaint to the effect that the contract was completed as to the vessel; that the purchase price and method of payment had been agreed upon; that the vessel was ready for delivery to the purchaser and that an attempt had been made to deliver the same, but admitted, however, the allegations contained in the last part of the said paragraph. The court below found that the parties had not arrived at a definite understanding. We think that this finding is supported by the evidence introduced at the trial. A sale shall be considered perfected and binding as between vendor and vendee when they have agreed as to the thing which is the object of the contract and as to the price, even though neither has been actually delivered. (Art. 1450 of the Civil Code.) Ownership is not considered transmitted until the property is actually delivered and the purchaser has taken possession of the value and paid the price agreed upon, in which case the sale is considered perfected.

PEDRO ROMAN, plaintiff-appellant, vs. ANDRES GRIMALT, defendant-appellee. Alberto Barretto, for appellant. Chicote, Miranda and Sierra, for appellee. TORRES, J.: On July 2, 1904, counsel for Pedro Roman filed a complaint in the Court of First Instance of this city against Andres Grimalt, praying that judgment be entered in his favor and against the defendant (1) for the purchase price of the schooner Santa Marina, to wit, 1,500 pesos or its equivalent in Philippine currency, payable by installments in the manner stipulated; (2) for legal interest on the installments due on the dates set forth in the complaint; (3) for costs of proceedings; and (4) for such other and further remedy as might be considered just and equitable. On October 24 of the same year the court made an order sustaining the demurer filed by defendant to the complaint and allowing plaintiff ten days within which to amend his complaint. To this order the plaintiff duly excepted. Counsel for plaintiff on November 5 amended his complaint and alleged that between the 13th and the 23rd day of June, 1904, both parties, through one Fernando Agustin Pastor, verbally agreed upon the sale of the said schooner; that the defendant in a letter dated June 23 had agreed to purchase the said schooner and of offered to pay therefor in three installment of 500 pesos each, to wit, on July 15, September 15, and November 15, adding in his letter that if the plaintiff accepted the plan of payment suggested by him the sale would become effective on the following day; that plaintiff on or about the 24th of the same month had notified the defendant through Agustin Pastor that he accepted the plan of payment suggested by him and that from that date the vessel was at his disposal, and offered to deliver the same at once to defendant if he so desired; that the contract having been closed and the vessel being ready for delivery to the purchaser, it was sunk about 3 o'clock p. m., June 25, in the harbor of Manila and is a total loss, as a result of a severe storm; and that on

When the sale is made by means of a public instrument the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract. (Art. 1462 of the Civil Code.) Pedro Roman, the owner, and Andres Grimalt, the purchaser, had been for several days negotiating for the purchase of the schooner Santa Marina from the 13th to the 23d of June, 1904. They agreed upon the sale of the vessel for the sum of 1,500 pesos, payable in three installments, provided the title papers to the vessel were in proper form. It is so stated in the letter written by the purchaser to the owner on the 23rd of June. The sale of the schooner was not perfected and the purchaser did not consent to the execution of the deed of transfer for the reason that the title of the vessel was in the name of one Paulina Giron and not in the name of Pedro Roman, the alleged owner. Roman promised, however, to perfect his title to the vessel, but he failed to do so. The papers presented by him did not show that he was the owner of the vessel. If no contract of sale was actually executed by the parties the loss of the vessel must be borne by its owner and not by a party who only intended to purchase it and who was unable to do so on account of failure on the part of the owner to show proper title to the vessel and thus enable them to draw up the contract of sale. The vessel was sunk in the bay on the afternoon of the 25th of June, 1904, during a severe storm and before the owner had complied with the condition exacted by the proposed purchaser, to wit, the production of the proper papers showing that the plaintiff was in fact the owner of the vessel in question. The defendant was under no obligation to pay the price of the vessel, the purchase of which had not been concluded. The conversations had between the parties and the letter written by defendant to plaintiff did not establish a contract sufficient in itself to create reciprocal rights between the parties. It follows, therefore, that article 1452 of the Civil Code relative to the injury or benefit of the thing sold after a contract has been perfected and articles 1096 and 1182 of the same code relative to the obligation to deliver a specified thing and the extinction of such obligation when the thing is either lost or destroyed, are not applicable to the case at bar. The first paragraph of article 1460 of the Civil Code and section 335 of the Code of Civil Procedure are not applicable. These provisions contemplate the existence of a perfected contract which can not, however, be enforced on account of the entire loss of the thing or

made the basis of an action in court through failure to conform to the requisites provided by law. The judgment of the court below is affirmed and the complaint is dismissed with costs against the plaintiff. After the expiration of twenty days from the date hereof let judgment be entered in accordance herewith and ten days thereafter let the case be remanded to the Court of First Instance for proper action. So ordered. Arellano, C.J., Mapa, Johnson, Carson and Willard, JJ., concur. SECOND DIVISION [G.R. No. 127206. September 12, 2003] PERLA PALMA GIL, VICENTE HIZON, JR., and ANGEL PALMA GIL, petitioners, vs. HON. COURT OF APPEALS, HEIRS OF EMILIO MATULAC, CONSTANCIO MAGLANA, AGAPITO PACETES & The REGISTER OF DEEDS OF DAVAO CITY, Respondents. DECISION For review on appeal by certiorari are the Decision[1] of the Court of Appeals in CA-G.R. CV. No. 43188 promulgated on March 19, 1996, and its Resolution[2] dated October 17, 1996, denying the petitioners Motion for Reconsideration of the said decision.chanroblesvirtuallawlibrary The appealed decision affirmed in toto the judgment of the Regional Trial Court, Davao City, Branch 16, in Civil Case No. 15,356 which dismissed the complaint of the herein petitioners. The Antecedents Concepcion Palma Gil, and her sister, Nieves Palma Gil, married to Angel Villarica, were the co-owners of a parcel of commercial land with an area of 829 square meters, identified as Lot No. 59-C, covered by Transfer Certificate of Title (TCT) No. 432 located in Davao City. The spouses Angel and Nieves Villarica had constructed a two-storey commercial building on the property. On October 13, 1953, Concepcion filed a complaint against her sister Nieves with the then Court of First Instance of Davao City, docketed as Civil Case No. 1160 for specific performance, to compel the defendant to cede and deliver to her an undivided portion of the said property with an area of 256.2 square meters. After due proceedings, the court rendered judgment on April 7, 1954 in favor of Concepcion, ordering

the defendant to deliver to the plaintiff an undivided portion of the said property with an area of 256.2 square meters:chanroblesvirtuallawlibrary A la vista de los datos expuestos, el Juzgado dicta sentencia condenando a la demanda, Nieves Palma Gil de Villarica, cumpla con los terminos del documento (Exh. A) ordenando a aquella que otogue los documentos necesarios traspasando a favor de la demandante (CONCEPCION PALMA GIL), 256 metros cuadrados con 20 centimetros del Lote No. 56C descrito mas particularmente en el Certificado de Titulo No. 432.[3]chanroblesvirtuallawlibrary Nieves appealed to the Court of Appeals which affirmed the assailed decision. In due course, the decision became final and executory. On motion of the plaintiff (Concepcion), the court issued a writ of execution. Nieves, however, refused to execute the requisite deed in favor of her sister. On April 27, 1956, the court issued an order authorizing ex-officio Sheriff Eriberto Unson to execute the requisite deed of transfer to the plaintiff over an undivided portion of the property with a total area of 256.2 square meters. Instead of doing so, the sheriff had the property subdivided into four lots namely, Lot 59-C-1, with an area of 218 square meters; Lot 59-C-2, with an area of 38 square meters; Lot 59-C-3, with an area of 14 square meters; and Lot 59-C-4, with an area of 560 square meters, all covered by a subdivision plan. The sheriff thereafter executed a Deed of Transfer to Concepcion over Lot 59-C-1 and Lot 59-C-2 with a total area of 256.2 square meters.chanroblesvirtuallawlibrary On October 24, 1956, Concepcion executed a deed of absolute sale over Lot 59-C-1 in favor of Iluminada Pacetes. In the said deed, the area of Lot 59-C-1 appeared as 256 square meters although under the subdivision plan, the area of the property was only 218 square meters. The vendee obliged herself to pay the said amount, to wit:chanroblesvirtuallawlibrary 1. The purchase price of P21,600.00 shall be paid as follows: P7,500.00 to be paid upon the signing of this instrument; and the balance of P14,100.00 to be paid upon the delivery of the corresponding Certificate of Title in the name of the VENDEE.[4]chanroblesvirtuallawlibrary Under the deed of absolute sale, the parties further agreed as follows:chanroblesvirtuallawlibrary 2. That the VENDOR shall, within the period of ONE HUNDRED TWENTY (120) DAYS, from the signing of this agreement, undertake and work for the issuance of the corresponding Certificate of Title of the said Lot No. 59-C-1 in her favor with the proper government office or offices, to the end that the same can be duly transferred in the name of the herein VENDEE, by virtue thereof.chanroblesvirtuallawlibrary

3. That pending the full and complete payment of the purchase price to the VENDOR, the VENDEE shall collect and receive any and all rentals and such other income from the land above-described for her own account and benefit, this right of the VENDEE to begin from December 1, 1956.[5]chanroblesvirtuallawlibrary In the meantime, Nieves filed a motion in Civil Case No. 1160 to compel the sheriff to report on his compliance with the courts Order dated April 27, 1956. The motion was denied. A motion for reconsideration of the denial met the same fate. Nieves appealed to the Court of Appeals, which appeal was docketed as CA-G.R. No. 22438-R.chanroblesvirtuallawlibrary In a parallel development, Concepcion filed a complaint for unlawful detainer against the spouses Angel and Nieves Villarica with the Municipal Trial Court docketed as Civil Case No. 2246. On October 4, 1956, the court rendered judgment in favor of the plaintiff and against the defendants, the decretal portion of which reads as follows:chanroblesvirtuallawlibrary From the foregoing, it is indeed evident and clear that the herein defendants have been unlawfully withholding possession of the land from the plaintiff, and hereby finds in favor of the plaintiff, and against the defendants, ordering the latter to vacate the premises described in the complaint, removing whatever improvements they have constructed thereon. The defendants are further judged to pay the plaintiff the amount of ONE HUNDRED FIFTY PESOS (P150.00) a month from the time of the filing of this complaint until the lot is finally vacated in concept of rentals, deprived of the plaintiff due to the unlawful possession of the defendants, and to pay the costs of this suit.[6]chanroblesvirtuallawlibrary The decision became final and executory but the plaintiff did not file any motion for a writ of execution. chanroblesvirtuallawlibrary The spouses Angel and Nieves Villarica filed a complaint on October 24, 1956 against the sheriff and Concepcion with the Court of First Instance of Davao City, docketed as Civil Case No. 2151 for the nullification of the deed of transfer executed by the sheriff.[7]chanroblesvirtuallawlibrary On December 21, 1956, Iluminada Pacetes filed a motion to intervene in Civil Case No. 2151, as vendee of the property subject of the case, which was granted by the court. She then filed a motion to dismiss the complaint. The court granted the motion. Nieves appealed to the Court of Appeals which appeal was docketed as CA-G.R. No. 22008-R. Nieves appeals in Civil Cases Nos. 1160 and 2151 were certified by the CA to this Court, docketed as G.R. No. L-15799 and G.R. No. L-15801.chanroblesvirtuallawlibrary

On the basis of the deed of transfer executed by Sheriff Iriberto A. Unson, the Register of Deeds issued TCT No. 7450 over Lot 59-C-1 and 59-C-2 on July 17, 1957 in the name of Concepcion, with a total area of 256.2 square meters. However, the latter failed to transfer title to the property to and under the name of Iluminada Pacetes. Consequently, the latter did not remit the balance of the purchase price of the property to Concepcion.chanroblesvirtuallawlibrary In the interim, the spouses Angel and Nieves Villarica executed a real estate mortgage over Lot 59-C-4 in favor of Prudential Bank as security for a loan. On August 4, 1959, Concepcion died intestate and was survived by Nieves Villarica and her nephews and nieces. Iluminada filed a motion in Civil Case No. 1160 for her substitution as party-plaintiff in lieu of the deceased Concepcion. On August 2, 1961, the court issued an order granting the motion.chanroblesvirtuallawlibrary On August 31, 1961, this Court rendered judgment in G.R. Nos. L-15799 and L-15801 setting aside the deed of transfer executed by the sheriff in favor of Concepcion Palma Gil, and remanding the records to the trial court for further proceedings.[8] In compliance with the Decision of this Court in G.R. No. L-15801, the trial court conducted further proceedings in Civil Case No. 1160 and discovered that the defendant had mortgaged Lot 59-C-4 to the Prudential Bank. Consequently, the court issued an order on February 17, 1964, declaring that the defendant had waived the benefits of the Decision of the Court on August 31, 1961 in G.R. No. L-15801; thus, the conveyance of the property made by Concepcion in favor of Iluminada on October 24, 1956 must stand. Nieves filed a motion for the reconsideration of the said order but the court denied the same in an Order dated February 29, 1964. Nieves appealed the order to the CA which dismissed the appeal for her failure to file a record on appeal. Nieves filed a petition for review with this Court docketed as G.R. No. L-28363.chanroblesvirtuallawlibrary More than five years having elapsed without the decision in Civil Case No. 2246 being enforced, Iluminada filed a complaint docketed as Civil Case No. 4413 in the Court of First Instance of Davao City, for the revival and execution of the decision of the Municipal Trial Court in Civil Case No. 2246 (the unlawful detainer case). The plaintiff therein averred that, as Concepcions successor-in-interest, she acquired the right of action to enforce the decision in Civil Case No. 2246. The defendants, on the other hand, averred that Iluminada had not yet paid the balance of the purchase price of Lot 59-C-1; hence, she had not acquired title over the lot and the right to evict the defendant. The deed of absolute sale executed by Concepcion in favor of the plaintiff was an executory, not an executed deed. On January 26, 1965, the court rendered judgment in favor of the defendants and dismissed the complaint. The decretal portion reads:chanroblesvirtuallawlibrary

IN VIEW OF THE FOREGOING, the Court believes that the plaintiff herein has not been properly and legally subrogated to the rights and action of deceased Concepcion Palma Gil and, hence, for these reasons the Court dismisses this case without pronouncement as to costs.chanroblesvirtuallawlibrary The counterclaim is also hereby ordered dismissed.[9]chanroblesvirtuallawlibrary On March 16, 1966, Iluminada Pacetes and Agapito Pacetes executed a deed of absolute sale over Lot 59-C-1 and Lot 59-C-2 in favor of Constancio B. Maglana for P110,000.00, covered by TCT No. 7450.[10] The spouses-vendors undertook to secure title over the lots under the name of the vendee within ninety days.chanroblesvirtuallawlibrary On May 15, 1974, this Court denied the petition for certiorari filed by Nieves in G.R. No. L-28363.[11] The Court, in part, ruled:chanroblesvirtuallawlibrary But while the issue at bar exclusively involves the timeliness of the appeal of the petitioners to the Court of Appeals, this Court has nonetheless examined and analyzed the substantive aspects of this case and is satisfied that the ORDERS of the trial court complained of are morally just.chanroblesvirtuallawlibrary Accordingly, the instant appeal is dismissed and the resolution of the Court of Appeals dated July 31, 1967 and its resolution dated October 18, 1967 are affirmed.[12]chanroblesvirtuallawlibrary The decision of the Court became final and executory.chanroblesvirtuallawlibrary On May 5, 1975, the spouses Agapito and Iluminada Pacetes filed a complaint against Nieves in the Court of First Instance of Davao City, docketed as Civil Case No. 8836 for the recovery of possession of Lot 59-C-1 and Lot 59-C-2. The Pacetes spouses claimed that Lot 59-C-2 was included in TCT No. 7450 under the name of Concepcion. The spouses prayed that judgment be rendered in their favor after due proceedings thus:chanroblesvirtuallawlibrary PRAYERchanroblesvirtuallawlibrary PREMISES CONSIDERED, it is most respectfully prayed that:chanroblesvirtuallawlibrary 1. During the pendency of this case, Defendant be ordered:chanroblesvirtuallawlibrary

a. To refrain from collecting rentals from the tenants or occupants of the building erected in said Lot 59-C-1; in that the tenants be directed to pay their rental to the plaintiff;chanroblesvirtuallawlibrary b. To demolish her aforesaid building of strong materials and vacate the premises of Lot 59-C-1 and Lot 59-C-2.chanroblesvirtuallawlibrary 2. After hearing, Defendant be ordered to:chanroblesvirtuallawlibrary a. Pay the Plaintiffs the amount consisting of compensation for the use of the land they have been depribed (sic) of to receive and enjoy since October 24, 1956 due to the unwarranted and illegal occupation of the said lots by defendant;chanroblesvirtuallawlibrary b. Pay Plaintiffs moral and exemplary damages in such amount as the Honorable Court may fix considering the facts and the law;chanroblesvirtuallawlibrary c. Pay Plaintiffs such expenses of litigation as may be proven during the trial, andchanroblesvirtuallawlibrary d. Pay Plaintiffs expenses for services of counsel they had to incurr (sic) in this complaint.chanroblesvirtuallawlibrary 3. OTHER RELIEFS consonant with justice and equity are prayed for.[13]chanroblesvirtuallawlibrary On May 10, 1977, Nieves Villarica executed a lease agreement with Virginia Jorge and Anita Vergara over Lots 59-C-1 and 59-C-2. The lessees took actual possession of the leased property.chanroblesvirtuallawlibrary In their Answer to the complaint in Civil Case No. 8836, the defendants averred, by way of defense, that the complaint was barred by the decision of the CFI in Civil Case No. 4413, which ruled that the Deed of Absolute Sale executed by Concepcion in favor of Iluminada was merely an executory, but not an executed contract. After the plaintiffs had rested their case, the defendants filed a motion to dismiss (demurrer to evidence). On October 29, 1975, the court issued an order dismissing the complaint on the ground that the action was barred by the decision of the court in Civil Case No. 4413.[14] Thus, Virginia Jorge and Anita Vergara continued to be in physical possession of the property.chanroblesvirtuallawlibrary In the meantime, on August 8, 1977, Iluminada consigned with the court in Civil Case No. 1160 the amount of P11,983.00 only as payment of the purchase price of the property. Iluminada was issued receipts for the amount.[15] As successor-in-interest of Concepcion, she likewise filed a motion for execution in Civil Case No. 1160 for the eviction of the defendant Nieves Villarica and all those acting for and in her behalf. The court issued an order on August 19, 1977 granting the motion. The defendants filed a motion for reconsideration of the order claiming that Iluminada was not a party to the case which the

court denied on September 2, 1977. The defendant filed another motion for reconsideration which was likewise denied on September 16, 1977. The defendant filed a petition for certiorari with the Court of Appeals docketed as CA-G.R. No. 62957-R, which petition was dismissed on August 26, 1980. The CA ruled that Iluminada Pacetes was the real party-ininterest as the vendee of the property. The defendant filed a petition with this Court docketed as G.R. No. L-56399.chanroblesvirtuallawlibrary In the meantime, Iluminada filed a petition with the RTC docketed as Miscellaneous Case No. 4715 for the issuance of an owners duplicate of TCT No. 7450. On March 22, 1978, the court granted the petition and ordered the Register of Deeds to issue an owners duplicate of the said title under the name of Concepcion Gil. Iluminada presented the said order and the deed of absolute sale executed by Concepcion in her favor. On May 9, 1978, the Register of Deeds issued TCT No. 61514 over Lot 59-C-1, with an area of 218 square meters, in the name of Iluminada Pacetes.[16]chanroblesvirtuallawlibrary On April 21, 1980, TCT No. 73412 was issued by the Register of Deeds of Davao City in favor of Constancio Maglana over Lot 59-C-1 only.[17] The next day, Constancio Maglana executed a deed of sale not only over Lot 59-C-1 but also Lot 59-C-2, in favor of Emilio Matulac for the purchase price of P150,000.00.[18] On the basis of the said deed, the Register of Deeds issued TCT No. 80631 to and under the name of Emilio Matulac over the two lots.chanroblesvirtuallawlibrary In the meantime, Angel Villarica had died on April 20, 1974. On July 7, 1981, his heirs, including his widow Nieves, executed an Extra-Judicial Settlement of Estate of Deceased in which the latter waived, ceded and transferred to her children Teresita Magpantay, Antero P.G. Villarica, Zenaida V. Alovera, Emperatriz V. Garcia, Napoleon P.G. Villarica and Rupendo P.G. Villarica her rights and interests over the property covered by TCT No. 7450.[19]chanroblesvirtuallawlibrary On January 13, 1982, this Court affirmed the resolution of the Court of Appeals, in CA-G.R. No. 62975-R and dismissed the petition for certiorari in G.R. No. L-56399, thus, paving the way for the execution of the decision of the trial court in Civil Case No. 1160, per its Order dated August 19, 1977. Emilio Matulac filed a motion for the issuance of a writ of execution. The Court granted the motion on February 18, 1982. Nieves filed a motion for the reconsideration of the order which the court denied in its Order dated March 17, 1982. Virginia Jorge and Anita Vergara, the lessees, filed a motion for reconsideration but the court denied the motion. Nonetheless, the lessees were allowed to stay in the property until April 9, 1982. However, the lessees refused to vacate the property after said date.chanroblesvirtuallawlibrary

On April 10, 1982, Emilio Matulac filed a motion in Civil Case No. 1160 for the issuance of a writ of execution and an order of demolition. On April 20, 1982, the trial court issued an order granting the motion for a writ of execution on April 30, 1982. The court also issued a special order for the demolition of the buildings on the property. The buildings on the property, including the properties owned by Virginia Jorge and Anita Vergara, were demolished on June 14, 1982. Emilio Matulac thereafter commenced the construction of a building thereon. The defendant Nieves Villarica, in the meantime, filed a motion in Civil Case No. 1160 to annul the proceedings, including the writ of execution issued by the court, and the issuance of a restraining order.chanroblesvirtuallawlibrary For their part, Virginia Jorge and Anita Vergara filed a petition for certiorari with this Court docketed as G.R. No. L-60690 for the nullification of the aforesaid orders and the writ of demolition issued by the trial court in Civil Case No. 1160.chanroblesvirtuallawlibrary Three of the surviving heirs of Concepcion Gil, namely, Perla Palma Gil, Vicente Hizon, Jr. and Angel Palma Gil, through their first cousin, Atty. Vicente Villarica, one of Nieves Villaricas children, filed on June 17, 1982, a complaint against Emilio Matulac, Constancio Maglana, Agapito Pacetes, and the Register of Deeds, with the Court of First Instance, docketed as Civil Case No. 15,356 for the cancellation of the deed of sale executed by Concepcion in favor of Iliminada Pacetes; the deed of sale executed by the latter in favor of Constancio Maglana; the deed of sale executed by the latter in favor of Emilio Matulac, as well as TCT Nos. 61514, 73412 and 80631 under the respective names of the vendees.chanroblesvirtuallawlibrary The plaintiffs alleged, inter alia, that the deed of absolute sale executed by Concepcion in favor of Iluminada over Lots 59-C-1 and 59-C-2 was a contract to sell, an executory contract, as declared by the Court of First Instance in Civil Cases Nos. 4413 and 8836, and not an executed contract; the defendant spouses Agapito and Iluminada Pacetes failed to pay the balance of the purchase price of the property during the lifetime of Concepcion; hence, what was embodied in the said deed was not fulfilled by the vendee. Consequently, the sale is null and void.chanroblesvirtuallawlibrary The plaintiffs prayed for the issuance of a temporary restraining order and a writ of preliminary injunction to enjoin the defendant Emilio Matulac from continuing with the construction of a building on the property. The plaintiffs likewise prayed that after due proceedings, judgment be rendered in their favor and against the defendants, thus:chanroblesvirtuallawlibrary

WHEREFORE, in view of the aforecited reasons it is most respectfully prayed that:chanroblesvirtuallawlibrary 1) An order be rendered immediately enjoining defendant Matulac from doing further work in the construction of the building and enjoining him from entering the premises and the land subject of this complaint and after trial making the injunction above-mentioned permanent, ordering the removal of any structure and other construction within the plaintiffs above-described property and thereafter, upon said defendants failure to do so authorizing plaintiffs to order said removal at defendants expense.chanroblesvirtuallawlibrary 2) Judgment be rendered ordering:chanroblesvirtuallawlibrary a. Defendant Register of Deeds to cancel TCT No. T-61514, T-73412 and T80631 and issued (sic) a new Transfer Certificate of Title in the name of the above-mentioned heirs of the late Concepcion Palma Gil nullifying the deeds of sale, Annexes B, C, and D hereof;chanroblesvirtuallawlibrary b. Defendants Pacetes, Maglana and Matulac jointly and solidarily liable to plaintiffs for moral and exemplary damages as may be granted by this Honorable Court and the amount of P25,000.00 as attorneys fees; andchanroblesvirtuallawlibrary c. Litigation expenses and other reliefs as may be justified under this case.[20]chanroblesvirtuallawlibrary In his answer to the complaint, defendant Emilio Matulac interposed the following special and affirmative defenses: (a) he is the lawful owner of the property; (b) the action is barred by the Decision of this Court in G.R. No. L-56399; (c) the plaintiffs are estopped from assailing the sale to him of the property; and (d) he is a purchaser in good faith.chanroblesvirtuallawlibrary On November 29, 1982, the court issued an order in Civil Case No. 1160, denying the motion for the nullification of the proceedings and for a writ of preliminary injunction. Nieves filed a motion for reconsideration of the order. On February 18, 1983, the court issued an order denying the motion. Nieves filed a petition with the Court of Appeals for the nullification of the same.chanroblesvirtuallawlibrary

In the meantime, Emilio Matulac died intestate and was substituted by his heirs Sonia Matulac, Josephine Matulac and Gregorio Matulac.[21] A petition was filed with the RTC of Davao City for the settlement of his estate docketed as SP-No. 2747. The Court appointed Sonia Matulac as administratrix of the estate.chanroblesvirtuallawlibrary The CA rendered a decision granting the petition and ordering the trial court to conduct further proceedings to implement the August 19, 1977 Order. Sonia Matulac filed a petition for review on certiorari with this Court docketed as G.R. No. 85538 for the nullification of the decision of the CA.chanroblesvirtuallawlibrary On November 24, 1989, this Court rendered a Decision dismissing the petition in G.R. No. L-60690. This Court said:chanroblesvirtuallawlibrary When We dismissed on September 16, 1974, the petition for certiorari filed by defendants questioning the orders, dated December 7, 1961 and December 17, 1964, in effect We had confirmed the sale by plaintiff in Civil case No. 1160, Concepcion Palma Gil, of Lot 59-C-1 and 59-C-2 to Illuminada Pacetes and affirmed the ruling of the trial court that defendants had waived the benefit of Our Resolution rendered on August 31, 1961.[22]chanroblesvirtuallawlibrary Meanwhile, one of the plaintiffs, Perla Palma Gil in Civil Case No. 15,356, was appointed by the court as administratrix of the estate of Concepcion on December 29, 1989,[23] and filed in the said case a motion to intervene as plaintiff in her capacity as administratrix in behalf of all the heirs of Concepcion.[24] The heirs of Emilio Matulac opposed the motion considering that they, and not the estate of Concepcion, owned the subject property; thus the claim of the plaintiff should be filed in SP-No. 2747. On April 7, 1990, the said motion was denied by the trial court.[25] The said court declared:chanroblesvirtuallawlibrary Being already a plaintiff together with the other plaintiffs in thise (sic) case, said intervention by plaintiff Perla Palma Gil is not absolutely necessary and imperative. It would only delay the early disposition of the case if allowed. chanroblesvirtuallawlibrary On January 8, 1990, this Court dismissed the petition in G.R. No. 85538. The petitioners filed a motion for reconsideration and on July 2, 1992, this Court granted the motion and reversed the decision of the CA. This Court ruled in the said case as follows:chanroblesvirtuallawlibrary When Concepcion Palma Gil, plaintiff in Civil Case No. 1160 sold the land in question to Iluminada Pacetes on October 24, 1956, the latter became the new owner of the property. By virtue of the order of substitution issued by the court, said new owner (Pacetes) became a

formal party---the party plaintiff. As the new party plaintiff, Pacetes had the right to move for the issuance of a writ of execution, which was correctly granted by the trial court in the questioned Order dated August 19, 1977.chanroblesvirtuallawlibrary The subsequent transfers of the property from Pacetes to Maglana, and then from Maglana to herein movant Matulac, was acquired pendente lite. The latter (Matulac) as the latest owner of the property, was, as aptly put by the trial court, subrogated to all the rights and obligations of Pacetes. He is thus the party who now has a substantial interest in the property. Matulac is a real party-in- interest subrogated to all the rights of Iluminada Pacetes, including the right to the issuance of a writ of execution in his name. Hence, the questioned orders of the lower court dated November 29, 1982 and February 18, 1983 as well as the Writ of Possession issued pursuant to the aforementioned orders are valid. They do not in any way run counter to the order of the lower court dated August 19, 1977, which granted the motion for execution filed by Pacetes, who, as earlier pointed out, was succeeded in all his rights and interests, by herein petitioner, Matulac.chanroblesvirtuallawlibrary Although the dispositive portion of the judgment rendered in Civil Case No. 1160 did not award the parties their respective shares in the property, the power of the court to issue the order of execution cannot be limited to what is stated in the dispositive portion of the judgment. As held in Paylago vs. Nicolas (189 SCRA 728 [1990]), the body of the decision must be consulted in case of ambiguity in the dispositive portion. Hence, in Jorge vs. Consolacion (supra), we ruled that the execution of the judgment cannot be limited to its dispositive portion, considering the continued failure of the defendant Nieves Palma GilVillarica, to comply with what was required of her in the judgment. Respondents deprived petitioner Concepcion Palma Gil and her successors-in-interest of their legal right to possess the land.[26] (Underscoring supplied)chanroblesvirtuallawlibrary On June 11, 1993, the trial court rendered judgment in Civil Case No. 15,356 in favor of the defendants. The trial court ruled that this Court had affirmed, in G.R. No. 85538 and G.R. No. L-60690, the sales of the property from Concepcion Palma Gil to Iluminada Pacetes, then to Constancio Maglana and to Emilio Matulac; hence, the trial court was barred by the rulings of this Court. The plaintiffs appealed to the CA with the following assignment of errors:chanroblesvirtuallawlibrary I. The trial court erred in not holding that Iluminada Pacetes had no right to sell or transfer the two (2) parcels of land to Constancio Maglana;chanroblesvirtuallawlibrary

II. That the trial court erred in not declaring the sale of the properties in question from Iluminada Pacetes to Constancio Maglana, thence, from Constancio Maglana to Emilio Matulac NULL and VOID;chanroblesvirtuallawlibrary III. That the trial court erred in dismissing the complaint;chanroblesvirtuallawlibrary IV. That the trial court erred in not ordering the cancellation of transfer Certificate of Title No. T-80631 in the name of Emilio Matulac and the issuance of a new title in the name of Concepcion Palma Gil;chanroblesvirtuallawlibrary V. That the trial court erred in not holding the appellees liable for damages to the appellants.[27]chanroblesvirtuallawlibrary In the meantime, on June 29, 1994, the estate of Emilio Matulac executed a deed of sale of real estate in which the estate sold Lots 59-C-1 and 59-C-2 and the building thereon to the Prudential Education Plan, Inc. for P7,000,000.00.[28] On March 19, 1996, the CA rendered a decision affirming the decision assailed therein and dismissing the appeal. The CA ruled that the deed of absolute sale executed by Concepcion in favor of Iluminada Pacetes was a deed of absolute sale over Lots 59-C-1 and 59-C-2, under which the ownership over the property subject thereof was transferred to the vendee. Moreover, the validity of the sales of the subject lots by Concepcion to Iluminada, by the latter to Constancio Maglana, and by the latter to Emilio Matulac, had been confirmed by this Court in G.R. No. L-60690 and G.R. No. 85538. Although Iluminada paid the balance of the purchase price of the property only on August 8, 1977, the payment was still timely, in light of Article 1592 of the New Civil Code. Besides, the property had already been sold to the respondents Constancio Maglana and Emilio Matulac.chanroblesvirtuallawlibrary The appellants, now petitioners in this case, assert that private respondents Agapito and Iluminada Pacetes failed to pay the balance of the purchase price in the amount of P14,100.00. They did consign and deposit the amount of P11,983.00, but only on August 8, 1977, twenty one years from the execution of the Deed of Absolute Sale in favor of the said spouses, without the latter instituting an action for the cancellation of their obligation. According to the petitioners, the consignation made by Iluminada Pacetes of the amount did not produce any legal effect. Furthermore, private respondents Constancio Maglana and Emilio Matulac were not purchasers in good faith because at the time they purchased the respective properties, the two-storey building constructed by the spouses Angel and Nieves Villarica on the said property was still existing. Hence, the decision of the CA should be reversed and set aside.chanroblesvirtuallawlibrary In their Comment on the petition, private respondents Constancio Maglana and Agapito Pacetes averred that the action of the petitioners in the court a quo was barred by the Decision of this Court in G.R. No. L-60690 on November 24, 1989.

THE RULING OF THE COURTchanroblesvirtuallawlibrary The petition is denied due course.chanroblesvirtuallawlibrary We note that the petitioners failed to implead all the compulsory heirs of the deceased Concepcion Gil in their complaint. When she died intestate, Concepcion Gil, a spinster, was survived by her sister Nieves, and her nephews and nieces, three of whom are the petitioners herein.chanroblesvirtuallawlibrary Upon Concepcions demise, all her rights and interests over her properties, and the rights and obligations under the Deed of Absolute Sale executed in favor of Iluminada Pacetes, were transmitted to her sister, and her nephews and nieces[29] by way of succession, a mode of acquiring the property, rights and obligation of the decedent to the extent of the value of the inheritance of the heirs. The heirs stepped into the shoes of the decedent upon the latters death.[30]chanroblesvirtuallawlibrary In their complaint, the petitioners alleged that:chanroblesvirtuallawlibrary 7. That upon the death of the late Concepcion Palma Gil, her heirs namely: A. Children of the deceased Pilar Palma Gil Rodriguez; B. Children of the deceased Asuncion Palma Gil Hizon one of whom is plaintiff Vicente Hizon, Jr.; C. Nieves Palma Gil Villarica; D. David Palma Gil one of whom is plaintiff Angel Palma Gil; E. Perla Palma Gil; and F. Children of the deceased Jose Palma Gil, ipso facto became co-owners of the said subject property by operation of law;[31]chanroblesvirtuallawlibrary When she testified, petitioner Palma Gil stated that:chanroblesvirtuallawlibrary ATTY. GALLARDO:chanroblesvirtuallawlibrary With the Courts permission.chanroblesvirtuallawlibrary Q You said that you are one of the 3 plaintiffs in this case?chanroblesvirtuallawlibrary A Yes, sir.chanroblesvirtuallawlibrary Q Now, aside from these 3 plaintiffs who are supposed to be the heirs of the late Concepcion Palma Gil, there are also other heirs who were not included as plaintiffs in this case?chanroblesvirtuallawlibrary A Yes, because that time when they demolished the building and I accompanied Atty. Villarica at the site where they had the demolition, we found out that during the confrontation that we have to hurry and file the case right away. So we were not able to contact all the heirs and I have contacted . . .since 3 of us were there during the demolition,

so we decided that I will be one, and Angel Palma Gil was also there and also Vicente Hizon Jr. whom I contacted at the Apo View Hotel and I contacted also Julian Rodriguez, another cousin thru telephone and he told us to go ahead and file the case. We cannot get all the heirs. We cannot gather all of them and we will have a hard time asking them to sign, so we just filed the case.chanroblesvirtuallawlibrary Q You are telling the court that the other heirs were not included because they were not available to sign the complaint?chanroblesvirtuallawlibrary A They were not there during the demolition.chanroblesvirtuallawlibrary Q When was the case filed?chanroblesvirtuallawlibrary A June 14, the demolition was on June 14, 1982.chanroblesvirtuallawlibrary ATTY. QUITAIN:chanroblesvirtuallawlibrary The best evidence would be the complaint, Your Honor.chanroblesvirtuallawlibrary ATTY. GALLARDO:chanroblesvirtuallawlibrary Q It appears in the complaint that it was filed sometime on June 16, 1982?chanroblesvirtuallawlibrary A We had it on June 14 the demolition, and we filed it right away because we were in a hurry.chanroblesvirtuallawlibrary Q Since June 16, 1982 up to the present the other heirs did not do anything to be included in the complaint?chanroblesvirtuallawlibrary ATTY. QUITAIN:chanroblesvirtuallawlibrary The best evidence would be the motion for intervention and it would seem that compaero is contending that there is a need to include all heirs. Under the civil law on property even one co-owner may file a case.[32]chanroblesvirtuallawlibrary Although the petitioners sought leave from the trial court to amend their complaint to implead the intestate estate of the deceased Concepcion Gil through her administratrix Perla Palma Gil, as party plaintiff, the trial court denied the petitioners plea. The petitioners manifested to the trial court that they would assign the denial of their plea as one of the assigned errors in case of appeal to the CA. They failed to do so. The petitioners were duty bound to implead all their cousins as parties-plaintiffs; otherwise, the trial court could not validly grant relief as to the present parties and as to those who were not impleaded.[33]chanroblesvirtuallawlibrary Being indispensable parties, the absence of the surviving sister, nephews and nieces of the decedent in the complaint as parties-plaintiffs, and in this case, as parties-petitioners, renders all subsequent actions of the trial court null and void for want of authority to act, not only as to the absent parties, but even as to those present. Hence, the petition at bar should be dismissed.[34]chanroblesvirtuallawlibrary

Even if we were to brush aside this procedural lapse and delve into the merits of the case, a denial in due course is inevitable.chanroblesvirtuallawlibrary Article 1191[35] in tandem with Article 1592[36] of the New Civil Code are central to the issues at bar. Under the last paragraph of Article 1169 of the New Civil Code, in reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay in the other begins. Thus, reciprocal obligations are to be performed simultaneously so that the performance of one is conditioned upon the simultaneous fulfillment of the other.[37] The right of rescission of a party to an obligation under Article 1191 of the New Civil Code is predicated on a breach of faith by the other party that violates the reciprocity between them.[38]chanroblesvirtuallawlibrary That the deed of absolute sale executed by Concepcion Gil in favor of Iluminada Pacetes is an executory contract and not an executed contract is a settled matter. In a perfected contract of sale of realty, the right to rescind the said contract depends upon the fulfillment or nonfulfillment of the prescribed condition. We ruled that the condition pertains in reality to the compliance by one party of an undertaking the fulfillment of which would give rise to the demandability of the reciprocal obligation pertaining to the other party.[39] The reciprocal obligation envisaged would normally be, in the case of the vendee, the payment by the vendee of the agreed purchase price and in the case of the vendor, the fulfillment of certain express warranties.[40]chanroblesvirtuallawlibrary In another case, we ruled that the non-payment of the purchase price of property constitutes a very good reason to rescind a sale for it violates the very essence of the contract of sale. In Central Bank of the Philippines v. Bichara,[41] we held that the non-payment of the purchase price of property is a resolutory condition for which the remedy is either rescission or specific performance under Article 1191 of the New Civil Code. This is true for reciprocal obligations where the obligation is a resolutory condition of the other.[42] The vendee is entitled to retain the purchase price or a part of the purchase price of realty if the vendor fails to perform any essential obligation of the contract. Such right is premised on the general principles of reciprocal obligations.[43]chanroblesvirtuallawlibrary In this case, Concepcion Gil sold Lot 59-C-1 to Iluminada Pacetes for P21,600.00 payable as follows:chanroblesvirtuallawlibrary 1. The purchase price of P21,600.00 shall be paid as follows: P7,500.00, to be paid upon the signing of this instrument; and the balance of P14,100.00, to be paid upon the delivery of the corresponding Certificate of Title in the name of the VENDEE.chanroblesvirtuallawlibrary

Concepcion Gil obliged herself to transfer title over the property to and under the name of the vendee within 120 days from the execution of the deed.chanroblesvirtuallawlibrary 2. That the VENDOR shall, within the period of ONE HUNDRED TWENTY (120) DAYS, from the signing of this agreement, undertake and work for the issuance of the corresponding Certificate of Title of the said Lot No. 59-C-1 in her favor with the proper government office or offices, to the end that the same can be duly transferred in the name of the herein VENDEE, by virtue thereof.chanroblesvirtuallawlibrary 3. That pending the full and complete payment of the purchase price to the VENDOR, the VENDEE shall collect and receive any and all rentals and such other income from the land above-described for her own account and benefit, this right of the VENDEE to begin from December 1, 1956.chanroblesvirtuallawlibrary That it is further stipulated that this contract shall be binding upon the heirs, executors and administrators of the respective parties hereof.chanroblesvirtuallawlibrary And I, CONCEPCION PALMA GIL, with all the personal circumstances above-stated, hereby confirm all the terms and conditions stipulated in this instrument.[44]chanroblesvirtuallawlibrary The vendee paid the downpayment of P7,500.00. By the terms of the contract, the obligation of the vendee to pay the balance of the purchase price ensued only upon the issuance of the certificate of title by the Register of Deeds over the property sold to and under the name of the vendee, and the delivery thereof by the vendor Concepcion Gil to the latter. Concepcion failed to secure a certificate of title over the property. When she died intestate on August 4, 1959, her obligation to deliver the said title to the vendee devolved upon her heirs, including the petitioners. The said heirs, including the petitioners failed to do so, despite the lapse of eighteen years since Concepcions death.chanroblesvirtuallawlibrary Iluminada was not yet obliged on August 8, 1977 to pay the balance of the purchase price of the property, but as a sign of good faith, she nevertheless consigned the amount of P11,983.00, part of the balance of the purchase price of P14,000.00, with the court in Civil Case No. 1160. The court accepted the consignation and she was issued receipts therefor. Still, the heirs of Concepcion Gil, including the petitioners, failed to deliver the said title to the vendee. Iluminada was compelled to file, at her expense, a petition with the RTC docketed as Miscellaneous Case No. 4715 for the issuance of an owners duplicate of TCT No. 7450 covering the property sold which was granted by the court on March 22, 1978. It was only on May 9, 1978 that Iluminada managed to secure TCT No. 61514 over the property under her name. Upon the failure of the heirs to comply with the decedents prestation, Iluminada Pacetes was impelled to resort to legal means to protect her rights and interests.chanroblesvirtuallawlibrary The petitioners, as successors-in-interest of the vendor, are not the injured parties entitled to a rescission of the deed of absolute sale. It was Concepcions heirs, including the petitioners, who were obliged to deliver to the vendee a certificate of title over the property under the

latters name, free from all liens and encumbrances within 120 days from the execution of the deed of absolute sale on October 24, 1956, but had failed to comply with the obligation.chanroblesvirtuallawlibrary The consignation by the vendee of the purchase price of the property is sufficient to defeat the right of the petitioners to demand for a rescission of the said deed of absolute sale.[45]chanroblesvirtuallawlibrary It bears stressing that when the vendee consigned part of the purchase price with the Court and secured title over the property in her name, the heirs of Concepcion, including the petitioners, had not yet sent any notarial demand for the rescission of the deed of absolute sale to the vendee, or filed any action for the rescission of the said deed with the appropriate court.chanroblesvirtuallawlibrary Although the vendee consigned with the Court only the amount of P11,983.00, P2,017.00 short of the purchase price of P14,000.00, it cannot be claimed that Concepcion was an unpaid seller because under the deed of sale, she was still obligated to transfer the property in the name of the vendee, which she failed to do so. According to Article 1167 of the New Civil Code: Art. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost.chanroblesvirtuallawlibrary 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 be undone. (1098)chanroblesvirtuallawlibrary The vendee (Iluminada) had to obtain the owners duplicate of TCT No. 7450 and thereafter secure its transfer in her name. Pursuant to Article 1167, the expenses incurred by the vendee should be charged against the amount of P2,617.00 due to the heirs of Concepcion Gil as the vendors successors-in-interest.chanroblesvirtuallawlibrary In sum, the decision of the CA affirming the decision of the RTC dismissing the complaint of the petitioners is affirmed.chanroblesvirtuallawlibrary IN LIGHT OF ALL THE FOREGOING, the petition for review is DENIED for lack of merit.chanroblesvirtuallawlibrary SO ORDERED.chanroblesvirtuallawlibrary

EN BANC PUNO, C.J.: FRANCISCO CHAVEZ, Petitioner, G.R. No. 168338 Present: PUNO, C.J., QUISUMBING, YNARES-SANTIAGO, SANDOVAL-GUTIERREZ, CARPIO, AUSTRIA-MARTINEZ, CORONA, CARPIO MORALES, AZCUNA, TINGA, CHICO-NAZARIO, VELASCO, JR., NACHURA, REYES, and LEONARDO-DE CASTRO, JJ. Promulgated: February 15, 2008 In this jurisdiction, it is established that freedom of the press is crucial and so inextricably woven into the right to free speech and free expression, that any attempt to restrict it must be met with an examination so critical that only a danger that is clear and present would be allowed to curtail it. Indeed, we have not wavered in the duty to uphold this cherished freedom. We have struck down laws and issuances meant to curtail this right, as in Adiong v. COMELEC, Burgos v. Chief of Staff, Social Weather Stations v. COMELEC, and Bayan v. Executive Secretary Ermita. When on its face, it is clear that a governmental act is nothing more than a naked means to prevent the free exercise of speech, it must be nullified. B. The Facts 1. The case originates from events that occurred a year after the 2004 national and local elections. On June 5, 2005, Press Secretary Ignacio Bunye told reporters that the opposition was planning to destabilize the administration by releasing an audiotape of a mobile phone conversation allegedly between the President of the Philippines, Gloria Macapagal Arroyo, and a high-ranking official of the Commission on Elections (COMELEC). The conversation was audiotaped allegedly through wiretapping. Later, in a Malacaang press briefing, Secretary Bunye produced two versions of the tape, one supposedly the complete version, and the other, a spliced, doctored or altered version, which would suggest that the President had instructed the COMELEC official to manipulate the election results in the Presidents favor. It seems that A. Precis

- versus -

RAUL M. GONZALES, in his capacity as the Secretary of the Department of Justice; and NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), Respondents.

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DECISION

Secretary Bunye admitted that the voice was that of President Arroyo, but subsequently made a retraction. 2. On June 7, 2005, former counsel of deposed President Joseph Estrada, Atty. Alan Paguia, subsequently released an alleged authentic tape recording of the wiretap. Included in the tapes were purported conversations of the President, the First Gentleman Jose Miguel Arroyo, COMELEC Commissioner Garcillano, and the late Senator Barbers. 3. On June 8, 2005, respondent Department of Justice (DOJ) Secretary Raul Gonzales warned reporters that those who had copies of the compact disc (CD) and those broadcasting or publishing its contents could be held liable under the Anti-Wiretapping Act. These persons included Secretary Bunye and Atty. Paguia. He also stated that persons possessing or airing said tapes were committing a continuing offense, subject to arrest by anybody who had personal knowledge if the crime was committed or was being committed in their presence. 4. On June 9, 2005, in another press briefing, Secretary Gonzales ordered the National Bureau of Investigation (NBI) to go after media organizations found to have caused the spread, the playing and the printing of the contents of a tape of an alleged wiretapped conversation involving the President about fixing votes in the 2004 national elections. Gonzales said that he was going to start with Inq7.net, a joint venture between the Philippine Daily Inquirer and GMA7 television network, because by the very nature of the Internet medium, it was able to disseminate the contents of the tape more widely. He then expressed his intention of inviting the editors and managers of Inq7.net and GMA7 to a probe, and supposedly declared, I [have] asked the NBI to conduct a tactical interrogation of all concerned. 5. On June 11, 2005, the NTC issued this press release:

NTC GIVES FAIR WARNING TO RADIO AND TELEVISION OWNERS/OPERATORS TO OBSERVE ANTIWIRETAPPING LAW AND PERTINENT CIRCULARS ON PROGRAM STANDARDS xxx xxx xxx

Taking into consideration the countrys unusual situation, and in order not to unnecessarily aggravate the same, the NTC warns all radio stations and television network owners/operators that the conditions of the authorization and permits issued to them by Government like the Provisional Authority and/or Certificate of Authority explicitly provides that said companies shall not use [their] stations for the broadcasting or telecasting of false information or willful misrepresentation. Relative thereto, it has come to the attention of the [NTC] that certain personalities are in possession of alleged taped conversations which they claim involve the President of the Philippines and a Commissioner of the COMELEC regarding supposed violation of election laws. These personalities have admitted that the taped conversations are products of illegal wiretapping operations. Considering that these taped conversations have not been duly authenticated nor could it be said at this time that the tapes contain an accurate or truthful representation of what was recorded therein, it is the position of the [NTC] that the continuous airing or broadcast of the said taped conversations by radio and television stations is a continuing violation of the AntiWiretapping Law and the conditions of the Provisional Authority and/or Certificate of Authority issued to these radio and television stations. It has been subsequently established that the said tapes are false and/or fraudulent after a prosecution or appropriate investigation, the concerned radio and television companies are hereby warned that their broadcast/airing of such false information and/or willful misrepresentation shall

be just cause for the suspension, revocation and/or cancellation of the licenses or authorizations issued to the said companies. In addition to the above, the [NTC] reiterates the pertinent NTC circulars on program standards to be observed by radio and television stations. NTC Memorandum Circular 111-12-85 explicitly states, among others, that all radio broadcasting and television stations shall, during any broadcast or telecast, cut off from the air the speech, play, act or scene or other matters being broadcast or telecast the tendency thereof is to disseminate false information or such other willful misrepresentation, or to propose and/or incite treason, rebellion or sedition. The foregoing directive had been reiterated by NTC Memorandum Circular No. 22-89, which, in addition thereto, prohibited radio, broadcasting and television stations from using their stations to broadcast or telecast any speech, language or scene disseminating false information or willful misrepresentation, or inciting, encouraging or assisting in subversive or treasonable acts. The [NTC] will not hesitate, after observing the requirements of due process, to apply with full force the provisions of said Circulars and their accompanying sanctions on erring radio and television stations and their owners/operators.

of press freedom with high sense of responsibility and discerning judgment of fairness and honesty. NTC did not issue any MC [Memorandum Circular] or Order constituting a restraint of press freedom or censorship. The NTC further denies and does not intend to limit or restrict the interview of members of the opposition or free expression of views. What is being asked by NTC is that the exercise of press freedom [be] done responsibly. KBP has program standards that KBP members will observe in the treatment of news and public affairs programs. These include verification of sources, non-airing of materials that would constitute inciting to sedition and/or rebellion.

The KBP Codes also require that no false statement or willful misrepresentation is made in the treatment of news or commentaries. The supposed wiretapped tapes should be treated with sensitivity and handled responsibly giving due consideration to the process being undertaken to verify and validate the authenticity and actual content of the same.

6. On June 14, 2005, NTC held a dialogue with the Board of Directors of the Kapisanan ng mga Brodkaster sa Pilipinas (KBP). NTC allegedly assured the KBP that the press release did not violate the constitutional freedom of speech, of expression, and of the press, and the right to information. Accordingly, NTC and KBP issued a Joint Press Statement which states, among others, that: NTC respects and will not hinder freedom of the press and the right to information on matters of public concern. KBP & its members have always been committed to the exercise

C. The Petition Petitioner Chavez filed a petition under Rule 65 of the Rules of Court against respondents Secretary Gonzales and the NTC, praying for the issuance of the writs of certiorari and prohibition, as extraordinary legal remedies, to

annul void proceedings, and to prevent the unlawful, unconstitutional and oppressive exercise of authority by the respondents. Alleging that the acts of respondents are violations of the freedom on expression and of the press, and the right of the people to information on matters of public concern, petitioner specifically asked this Court: [F]or [the] nullification of acts, issuances, and orders of respondents committed or made since June 6, 2005 until the present that curtail the publics rights to freedom of expression and of the press, and to information on matters of public concern specifically in relation to information regarding the controversial taped conversion of President Arroyo and for prohibition of the further commission of such acts, and making of such issuances, and orders by respondents. Respondents denied that the acts transgress the Constitution, and questioned petitioners legal standing to file the petition. Among the arguments they raised as to the validity of the fair warning issued by respondent NTC, is that broadcast media enjoy lesser constitutional guarantees compared to print media, and the warning was issued pursuant to the NTCs mandate to regulate the telecommunications industry. It was also stressed that most of the [television] and radio stations continue, even to this date, to air the tapes, but of late within the parameters agreed upon between the NTC and KBP. D. THE PROCEDURAL THRESHOLD: LEGAL STANDING To be sure, the circumstances of this case make the constitutional challenge peculiar. Petitioner, who is not a member of the broadcast media, prays that we strike down the acts and statements made by respondents as violations of the right to free speech, free expression and a free press. For another, the recipients of the press statements have not come forward neither

intervening nor joining petitioner in this action. Indeed, as a group, they issued a joint statement with respondent NTC that does not complain about restraints on freedom of the press. It would seem, then, that petitioner has not met the requisite legal standing, having failed to allege such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the Court so largely depends for illumination of difficult constitutional questions. But as early as half a century ago, we have already held that where serious constitutional questions are involved, the transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing aside if we must, technicalities of procedure. Subsequently, this Court has repeatedly and consistently refused to wield procedural barriers as impediments to its addressing and resolving serious legal questions that greatly impact on public interest, in keeping with the Court's duty under the 1987 Constitution to determine whether or not other branches of government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them. Thus, in line with the liberal policy of this Court on locus standi when a case involves an issue of overarching significance to our society, we therefore brush aside technicalities of procedure and take cognizance of this petition, seeing as it involves a challenge to the most exalted of all the civil rights, the freedom of expression. The petition raises other issues like the extent of the right to information of the public. It is fundamental, however, that we need not address all issues but only the most decisive one which in the case at bar is whether the acts of the respondents abridge freedom of speech and of the press. But aside from the primordial issue of determining whether free speech and freedom of the press have been infringed, the case at bar also

gives this Court the opportunity: (1) to distill the essence of freedom of speech and of the press now beclouded by the vagaries of motherhood statements; (2) to clarify the types of speeches and their differing restraints allowed by law; (3) to discuss the core concepts of prior restraint, content-neutral and content-based regulations and their constitutional standard of review; (4) to examine the historical difference in the treatment of restraints between print and broadcast media and stress the standard of review governing both; and (5) to call attention to the ongoing blurring of the lines of distinction between print and broadcast media.

freedom of speech is an indispensable condition for nearly every other form of freedom. Moreover, our history shows that the struggle to protect the freedom of speech, expression and the press was, at bottom, the struggle for the indispensable preconditions for the exercise of other freedoms. For it is only when the people have unbridled access to information and the press that they will be capable of rendering enlightened judgments. In the oft-quoted words of Thomas Jefferson, we cannot both be free and ignorant. E.1. ABSTRACTION OF FREE SPEECH Surrounding the freedom of speech clause are various concepts that we have adopted as part and parcel of our own Bill of Rights provision on this basic freedom. What is embraced under this provision was discussed exhaustively by the Court in Gonzales v. Commission on Elections, in which it was held: At the very least, free speech and free press may be identified with the liberty to discuss publicly and truthfully any matter of public interest without censorship and punishment. There is to be no previous restraint on the communication of views or subsequent liability whether in libel suits, prosecution for sedition, or action for damages, or contempt proceedings unless there be a clear and present danger of substantive evil that Congress has a right to prevent. Gonzales further explained that the vital need of a constitutional democracy for freedom of expression is undeniable, whether as a means of assuring individual self-fulfillment; of attaining the truth; of assuring participation by the people in social, including political, decision-making; and of maintaining the balance between stability and change. As early as the 1920s, the trend as reflected in Philippine and American decisions was to recognize the broadest scope and assure the widest latitude for this constitutional

E. RE-EXAMINING THE LAW ON FREEDOM OF SPEECH, OF EXPRESSION AND OF THE PRESS No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances. Freedom of expression has gained recognition as a fundamental principle of every democratic government, and given a preferred right that stands on a higher level than substantive economic freedom or other liberties. The cognate rights codified by Article III, Section 4 of the Constitution, copied almost verbatim from the First Amendment of the U.S. Bill of Rights, were considered the necessary consequence of republican institutions and the complement of free speech. This preferred status of free speech has also been codified at the international level, its recognition now enshrined in international law as a customary norm that binds all nations. In the Philippines, the primacy and high esteem accorded freedom of expression is a fundamental postulate of our constitutional system. This right was elevated to constitutional status in the 1935, the 1973 and the 1987 Constitutions, reflecting our own lesson of history, both political and legal, that

guarantee. The trend represents a profound commitment to the principle that debate on public issue should be uninhibited, robust, and wide-open. Freedom of speech and of the press means something more than the right to approve existing political beliefs or economic arrangements, to lend support to official measures, and to take refuge in the existing climate of opinion on any matter of public consequence. When atrophied, the right becomes meaningless. The right belongs as well -- if not more to those who question, who do not conform, who differ. The ideas that may be expressed under this freedom are confined not only to those that are conventional or acceptable to the majority. To be truly meaningful, freedom of speech and of the press should allow and even encourage the articulation of the unorthodox view, though it be hostile to or derided by others; or though such view induces a condition of unrest, creates dissatisfaction with conditions as they are, or even stirs people to anger. To paraphrase Justice Holmes, it is freedom for the thought that we hate, no less than for the thought that agrees with us. The scope of freedom of expression is so broad that it extends protection to nearly all forms of communication. It protects speech, print and assembly regarding secular as well as political causes, and is not confined to any particular field of human interest. The protection covers myriad matters of public interest or concern embracing all issues, about which information is needed or appropriate, so as to enable members of society to cope with the exigencies of their period. The constitutional protection assures the broadest possible exercise of free speech and free press for religious, political, economic, scientific, news, or informational ends, inasmuch as the Constitution's basic guarantee of freedom to advocate ideas is not confined to the expression of ideas that are conventional or shared by a majority. The constitutional protection is not limited to the exposition of ideas. The protection afforded free speech extends to speech or publications that are entertaining as well as instructive or informative. Specifically, in Eastern Broadcasting Corporation (DYRE) v. Dans, this Court stated that all forms of

media, whether print or broadcast, are entitled to the broad protection of the clause on freedom of speech and of expression. While all forms of communication are entitled to the broad protection of freedom of expression clause, the freedom of film, television and radio broadcasting is somewhat lesser in scope than the freedom accorded to newspapers and other print media, as will be subsequently discussed. E.2. DIFFERENTIATION: THE LIMITS & RESTRAINTS OF FREE SPEECH From the language of the specific constitutional provision, it would appear that the right to free speech and a free press is not susceptible of any limitation. But the realities of life in a complex society preclude a literal interpretation of the provision prohibiting the passage of a law that would abridge such freedom. For freedom of expression is not an absolute, nor is it an unbridled license that gives immunity for every possible use of language and prevents the punishment of those who abuse this freedom. Thus, all speech are not treated the same. Some types of speech may be subjected to some regulation by the State under its pervasive police power, in order that it may not be injurious to the equal right of others or those of the community or society. The difference in treatment is expected because the relevant interests of one type of speech, e.g., political speech, may vary from those of another, e.g., obscene speech. Distinctions have therefore been made in the treatment, analysis, and evaluation of the permissible scope of restrictions on various categories of speech. We have ruled, for example, that in our jurisdiction slander or libel, lewd and obscene speech, as well as fighting words are not entitled to constitutional protection and may be penalized. Moreover, the techniques of reviewing alleged restrictions on speech (overbreadth, vagueness, and so on) have been applied differently to each category, either consciously or unconsciously. A study of free speech

jurisprudencewhether here or abroadwill reveal that courts have developed different tests as to specific types or categories of speech in concrete situations; i.e., subversive speech; obscene speech; the speech of the broadcast media and of the traditional print media; libelous speech; speech affecting associational rights; speech before hostile audiences; symbolic speech; speech that affects the right to a fair trial; and speech associated with rights of assembly and petition. Generally, restraints on freedom of speech and expression are evaluated by either or a combination of three tests, i.e., (a) the dangerous tendency doctrine which permits limitations on speech once a rational connection has been established between the speech restrained and the danger contemplated; (b) the balancing of interests tests, used as a standard when courts need to balance conflicting social values and individual interests, and requires a conscious and detailed consideration of the interplay of interests observable in a given situation of type of situation; and (c) the clear and present danger rule which rests on the premise that speech may be restrained because there is substantial danger that the speech will likely lead to an evil the government has a right to prevent. This rule requires that the evil consequences sought to be prevented must be substantive, extremely serious and the degree of imminence extremely high. As articulated in our jurisprudence, we have applied either the dangerous tendency doctrine or clear and present danger test to resolve free speech challenges. More recently, we have concluded that we have generally adhered to the clear and present danger test. E.3. IN FOCUS: FREEDOM OF THE PRESS Much has been written on the philosophical basis of press freedom as part of the larger right of free discussion and expression. Its practical importance, though, is more easily grasped. It is the chief source of information on current affairs. It is the most pervasive and perhaps most powerful vehicle

of opinion on public questions. It is the instrument by which citizens keep their government informed of their needs, their aspirations and their grievances. It is the sharpest weapon in the fight to keep government responsible and efficient. Without a vigilant press, the mistakes of every administration would go uncorrected and its abuses unexposed. As Justice Malcolm wrote in United States v. Bustos: The interest of society and the maintenance of good government demand a full discussion of public affairs. Complete liberty to comment on the conduct of public men is a scalpel in the case of free speech. The sharp incision of its probe relieves the abscesses of officialdom. Men in public life may suffer under a hostile and unjust accusation; the wound can be assuaged with the balm of clear conscience. Its contribution to the public weal makes freedom of the press deserving of extra protection. Indeed, the press benefits from certain ancillary rights. The productions of writers are classified as intellectual and proprietary. Persons who interfere or defeat the freedom to write for the press or to maintain a periodical publication are liable for damages, be they private individuals or public officials. E.4. ANATOMY OF RESTRICTIONS: PRIOR RESTRAINT, CONTENTNEUTRAL AND CONTENT-BASED REGULATIONS Philippine jurisprudence, even as early as the period under the 1935 Constitution, has recognized four aspects of freedom of the press. These are (1) freedom from prior restraint; (2) freedom from punishment subsequent to publication; (3) freedom of access to information; and (4) freedom of circulation. Considering that petitioner has argued that respondents press statement constitutes a form of impermissible prior restraint, a closer scrutiny of this

principle is in order, as well as its sub-specie of content-based (as distinguished from content-neutral) regulations. At this point, it should be noted that respondents in this case deny that their acts constitute prior restraints. This presents a unique tinge to the present challenge, considering that the cases in our jurisdiction involving prior restrictions on speech never had any issue of whether the governmental act or issuance actually constituted prior restraint. Rather, the determinations were always about whether the restraint was justified by the Constitution. Be that as it may, the determination in every case of whether there is an impermissible restraint on the freedom of speech has always been based on the circumstances of each case, including the nature of the restraint. And in its application in our jurisdiction, the parameters of this principle have been etched on a case-to-case basis, always tested by scrutinizing the governmental issuance or act against the circumstances in which they operate, and then determining the appropriate test with which to evaluate. Prior restraint refers to official governmental restrictions on the press or other forms of expression in advance of actual publication or dissemination. Freedom from prior restraint is largely freedom from government censorship of publications, whatever the form of censorship, and regardless of whether it is wielded by the executive, legislative or judicial branch of the government. Thus, it precludes governmental acts that required approval of a proposal to publish; licensing or permits as prerequisites to publication including the payment of license taxes for the privilege to publish; and even injunctions against publication. Even the closure of the business and printing offices of certain newspapers, resulting in the discontinuation of their printing and publication, are deemed as previous restraint or censorship. Any law or official that requires some form of permission to be had before publication can be made, commits an infringement of the constitutional right, and remedy can be had at the courts.

Given that deeply ensconced in our fundamental law is the hostility against all prior restraints on speech, and any act that restrains speech is presumed invalid, and any act that restrains speech is hobbled by the presumpti on of invalidity and should be greeted with furrowed brows, it is important to stress not all prior restraints on speech are invalid. Certain previous restraints may be permitted by the Constitution, but determined only upon a careful evaluation of the challenged act as against the appropriate test by which it should be measured against. Hence, it is not enough to determine whether the challenged act constitutes some form of restraint on freedom of speech. A distinction has to be made whether the restraint is (1) a content-neutral regulation, i.e., merely concerned with the incidents of the speech, or one that merely controls the time, place or manner, and under well defined standards; or (2) a content-based restraint or censorship, i.e., the restriction is based on the subject matter of the utterance or speech. The cast of the restriction determines the test by which the challenged act is assayed with. When the speech restraints take the form of a content-neutral regulation, only a substantial governmental interest is required for its validity. Because regulations of this type are not designed to suppress any particular message, they are not subject to the strictest form of judicial scrutiny but an intermediate approachsomewhere between the mere rationality that is required of any other law and the compelling interest standard applied to content-based restrictions. The test is called intermediate because the Court will not merely rubberstamp the validity of a law but also require that the restrictions be narrowly-tailored to promote an important or significant governmental interest that is unrelated to the suppression of expression. The intermediate approach has been formulated in this manner: A governmental regulation is sufficiently justified if it is within the constitutional power of the Government, if it furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free

expression; and if the incident restriction on alleged [freedom of speech & expression] is no greater than is essential to the furtherance of that interest. On the other hand, a governmental action that restricts freedom of speech or of the press based on content is given the strictest scrutiny in light of its inherent and invasive impact. Only when the challenged act has overcome the clear and present danger rule will it pass constitutional muster, with the government having the burden of overcoming the presumed unconstitutionality. Unless the government can overthrow this presumption, the content-based restraint will be struck down. With respect to content-based restrictions, the government must also show the type of harm the speech sought to be restrained would bring about especially the gravity and the imminence of the threatened harm otherwise the prior restraint will be invalid. Prior restraint on speech based on its content cannot be justified by hypothetical fears, but only b y showing a substantive and imminent evil that has taken the life of a reality already on ground. As formulated, the question in every case is whether the words used are used in such circumstances and are of such a nature as to create a clear and present danger that they will bring about the substantive evils that Congress has a right to prevent. It is a question of proximity and degree. The regulation which restricts the speech content must also serve an important or substantial government interest, which is unrelated to the suppression of free expression. Also, the incidental restriction on speech must be no greater than what is essential to the furtherance of that interest. A restriction that is so broad that it encompasses more than what is required to satisfy the governmental interest will be invalidated. The regulation, therefore, must be reasonable and narrowly

drawn to fit the regulatory purpose, with the least restrictive means undertaken.

Thus, when the prior restraint partakes of a content-neutral regulation, it is subjected to an intermediate review. A content-based regulation, however, bears a heavy presumption of invalidity and is measured against the clear and present danger rule. The latter will pass constitutional muster only if justified by a compelling reason, and the restrictions imposed are neither overbroad nor vague. Applying the foregoing, it is clear that the challenged acts in the case at bar need to be subjected to the clear and present danger rule, as they are content-based restrictions. The acts of respondents focused solely on but one objecta specific content fixed as these were on the alleged taped conversations between the President and a COMELEC official. Undoubtedly these did not merely provide regulations as to the time, place or manner of the dissemination of speech or expression. E.5. Dichotomy of Free Press: Print v. Broadcast Media Finally, comes respondents argument that the challenged act is valid on the ground that broadcast media enjoys free speech rights that are lesser in scope to that of print media. We next explore and test the validity of this argument, insofar as it has been invoked to validate a content-based restriction on broadcast media. The regimes presently in place for each type of media differ from one other. Contrasted with the regime in respect of books, newspapers, magazines and traditional printed matter, broadcasting, film and video have been subjected to regulatory schemes. The dichotomy between print and broadcast media traces its origins in the United States. There, broadcast radio and television have been held to have

limited First Amendment protection, and U.S. Courts have excluded broadcast media from the application of the strict scrutiny standard that they would otherwise apply to content-based restrictions. According to U.S. Courts, the three major reasons why broadcast media stands apart from print media are: (a) the scarcity of the frequencies by which the medium operates [i.e., airwaves are physically limited while print medium may be limitless]; (b) its pervasiveness as a medium; and (c) its unique accessibility to children. Because cases involving broadcast media need not follow precisely the same approach that [U.S. courts] have applied to other media, nor go so far as to demand that such regulations serve compelling government interests, they are decided on whether the governmental restriction is narrowly tailored to further a substantial governmental interest, or the intermediate test. As pointed out by respondents, Philippine jurisprudence has also echoed a differentiation in treatment between broadcast and print media. Nevertheless, a review of Philippine case law on broadcast media will show thatas we have deviated with the American conception of the Bill of Rights we likewise did not adopt en masse the U.S. conception of free speech as it relates to broadcast media, particularly as to which test would govern content-based prior restraints. Our cases show two distinct features of this dichotomy. First, the difference in treatment, in the main, is in the regulatory scheme applied to broadcast media that is not imposed on traditional print media, and narrowly confined to unprotected speech (e.g., obscenity, pornography, seditious and inciting speech), or is based on a compelling government interest that also has constitutional protection, such as national security or the electoral process. Second, regardless of the regulatory schemes that broadcast media is subjected to, the Court has consistently held that the clear and present danger test applies to content-based restrictions on media, without making a distinction as to traditional print or broadcast media.

The distinction between broadcast and traditional print media was first enunciated in Eastern Broadcasting Corporation (DYRE) v. Dans, wherein it was held that [a]ll forms of media, whether print or broadcast, are entitled to the broad protection of the freedom of speech and expression clause. The test for limitations on freedom of expression continues to be the clear and present danger rule Dans was a case filed to compel the reopening of a radio station which had been summarily closed on grounds of national security. Although the issue had become moot and academic because the owners were no longer interested to reopen, the Court still proceeded to do an analysis of the case and made formulations to serve as guidelines for all inferior courts and bodies exercising quasi-judicial functions. Particularly, the Court made a detailed exposition as to what needs be considered in cases involving broadcast media. Thus:
xxx (3) xxx xxx

All forms of media, whether print or broadcast, are entitled to the broad protection of the freedom of speech and expression clause. The test for limitations on freedom of expression continues to be the clear and present danger rule, that words are used in such circumstances and are of such a nature as to create a clear and present danger that they will bring about the substantive evils that the lawmaker has a right to prevent, In his Constitution of the Philippines (2nd Edition, pp. 569-570) Chief Justice Enrique M. Fernando cites at least nine of our decisions which apply the test. More recently, the clear and present danger test was applied in J.B.L. Reyes in behalf of the Anti-Bases Coalition v. Bagatsing. (4) The clear and present danger test, however, does not lend itself to a simplistic and all embracing interpretation applicable to all utterances in all forums. Broadcasting has to be licensed. Airwave frequencies have to be allocated among qualified users. A broadcast corporation cannot

simply appropriate a certain frequency without regard for government regulation or for the rights of others. All forms of communication are entitled to the broad protection of the freedom of expression clause. Necessarily, however, the freedom of television and radio broadcasting is somewhat lesser in scope than the freedom accorded to newspaper and print media. The American Court in Federal Communications Commission v. Pacifica Foundation (438 U.S. 726), confronted with a patently offensive and indecent regular radio program, explained why radio broadcasting, more than other forms of communications, receives the most limited protection from the free expression clause. First, broadcast media have established a uniquely pervasive presence in the lives of all citizens, Material presented over the airwaves confronts the citizen, not only in public, but in the privacy of his home. Second, broadcasting is uniquely accessible to children. Bookstores and motion picture theaters may be prohibited from making certain material available to children, but the same selectivity cannot be done in radio or television, where the listener or viewer is constantly tuning in and out. Similar considerations apply in the area of national security. The broadcast media have also established a uniquely pervasive presence in the lives of all Filipinos. Newspapers and current books are found only in metropolitan areas and in the poblaciones of municipalities accessible to fast and regular transportation. Even here, there are low income masses who find the cost of books, newspapers, and magazines beyond their humble means. Basic needs like food and shelter perforce enjoy high priorities. On the other hand, the transistor radio is found everywhere. The television set is also becoming universal. Their message may be simultaneously received by a national or regional audience of listeners including the indifferent or unwilling who happen to be within reach of a blaring radio or television set. The materials broadcast over the airwaves reach every person of every age,

(5)

(6)

persons of varying susceptibilities to persuasion, persons of different I.Q.s and mental capabilities, persons whose reactions to inflammatory or offensive speech would be difficult to monitor or predict. The impact of the vibrant speech is forceful and immediate. Unlike readers of the printed work, the radio audience has lesser opportunity to cogitate analyze, and reject the utterance. The clear and present danger test, therefore, must take the particular circumstances of broadcast media into account. The supervision of radio stations-whether by government or through self-regulation by the industry itself calls for thoughtful, intelligent and sophisticated handling. The government has a right to be protected against broadcasts which incite the listeners to violently overthrow it. Radio and television may not be used to organize a rebellion or to signal the start of widespread uprising. At the same time, the people have a right to be informed. Radio and television would have little reason for existence if broadcasts are limited to bland, obsequious, or pleasantly entertaining utterances. Since they are the most convenient and popular means of disseminating varying views on public issues, they also deserve special protection. The freedom to comment on public affairs is essential to the vitality of a representative democracy. In the 1918 case of United States v. Bustos (37 Phil. 731) this Court was already stressing that. The interest of society and the maintenance of good government demand a full discussion of public affairs. Complete liberty to comment on the conduct of public men is a scalpel in the case of free speech. The sharp incision of its probe relieves the abscesses of officialdom. Men in public life may suffer under a hostile and an unjust accusation; the wound can be assuaged with the balm of a clear conscience. A public officer must not be too thin-skinned with reference to comment upon his official acts. Only thus can the intelligence and dignity of the individual be exalted.

(7)

Broadcast stations deserve the special protection given to all forms of media by the due process and freedom of expression clauses of the Constitution. [Citations omitted]

It is interesting to note that the Court in Dans adopted the arguments found in U.S. jurisprudence to justify differentiation of treatment (i.e., the scarcity, pervasiveness and accessibility to children), but only after categorically declaring that the test for limitations on freedom of expression continues to be the clear and present danger rule, for all forms of media, whether print or broadcast. Indeed, a close reading of the above-quoted provisions would show that the differentiation that the Court in Dans referred to was narrowly restricted to what is otherwise deemed as unprotected speech (e.g., obscenity, national security, seditious and inciting speech), or to validate a licensing or regulatory scheme necessary to allocate the limited broadcast frequencies, which is absent in print media. Thus, when this Court declared in Dans that the freedom given to broadcast media was somewhat lesser in scope than the freedom accorded to newspaper and print media, it was not as to what test should be applied, but the context by which requirements of licensing, allocation of airwaves, and application of norms to unprotected speech. In the same year that the Dans case was decided, it was reiterated in Gonzales v. Katigbak, that the test to determine free expression challenges was the clear and present danger, again without distinguishing the media. Katigbak, strictly speaking, does not treat of broadcast media but motion pictures. Although the issue involved obscenity standards as applied to movies, the Court concluded its decision with the following obiter dictum that a less liberal approach would be used to resolve obscenity issues in television as opposed to motion pictures: All that remains to be said is that the ruling is to be limited to the concept of obscenity applicable to motion pictures. It is the consensus of this Court that where television is concerned, a less liberal approach calls for observance. This is so because unlike

motion pictures where the patrons have to pay their way, television reaches every home where there is a set. Children then will likely be among the avid viewers of the programs therein shown..It cannot be denied though that the State as parens patriae is called upon to manifest an attitude of caring for the welfare of the young. More recently, in resolving a case involving the conduct of exit polls and dissemination of the results by a broadcast company, we reiterated that the clear and present danger rule is the test we unquestionably adhere to issues that involve freedoms of speech and of the press. This is not to suggest, however, that the clear and present danger rule has been applied to all cases that involve the broadcast media. The rule applies to all media, including broadcast, but only when the challenged act is a content-based regulation that infringes on free speech, expression and the press. Indeed, in Osmena v. COMELEC, which also involved broadcast media, the Court refused to apply the clear and present danger rule to a COMELEC regulation of time and manner of advertising of political advertisements because the challenged restriction was content-neutral. And in a case involving due process and equal protection issues, the Court in Telecommunications and Broadcast Attorneys of the Philippines v. COMELEC treated a restriction imposed on a broadcast media as a reasonable condition for the grant of the medias franchise, without going into which test would apply. That broadcast media is subject to a regulatory regime absent in print media is observed also in other jurisdictions, where the statutory regimes in place over broadcast media include elements of licensing, regulation by administrative bodies, and censorship. As explained by a British author: The reasons behind treating broadcast and films differently from the print media differ in a number of respects, but have a common historical basis. The stricter system of controls seems to have been adopted in answer to the view that owing to their

particular impact on audiences, films, videos and broadcasting require a system of prior restraints, whereas it is now accepted that books and other printed media do not. These media are viewed as beneficial to the public in a number of respects, but are also seen as possible sources of harm.

Parenthetically, these justifications are now the subject of debate. Historically, the scarcity of frequencies was thought to provide a rationale. However, cable and satellite television have enormously increased the number of actual and potential channels. Digital technology will further increase the number of channels available. But still, the argument persists that broadcasting is the most influential means of communication, since it comes into the home, and so much time is spent watching television. Since it has a unique impact on people and affects children in a way that the print media normally does not, that regulation is said to be necessary in order to preserve pluralism. It has been argued further that a significant main threat to free expressionin terms of diversitycomes not from government, but from private corporate bodies. These developments show a need for a reexamination of the traditional notions of the scope and extent of broadcast media regulation. The emergence of digital technology -- which has led to the convergence of broadcasting, telecommunications and the computer industry -- has likewise led to the question of whether the regulatory model for broadcasting will continue to be appropriate in the converged environment. Internet, for example, remains largely unregulated, yet the Internet and the broadcast media share similarities, and the rationales used to support broadcast regulation apply equally to the Internet. Thus, it has been argued that courts, legislative bodies and the government agencies regulating media must agree to regulate both, regulate neither or develop a new regulatory framework and rationale to justify the differential treatment. F. The Case At Bar Having settled the applicable standard to content-based restrictions on broadcast media, let us go to its application to the case at bar. To recapitulate, a governmental action that restricts freedom of speech or of the press based on content is given the strictest scrutiny, with the government

having the burden of overcoming the presumed unconstitutionality by the clear and present danger rule. This rule applies equally to all kinds of media, including broadcast media. This outlines the procedural map to follow in cases like the one at bar as it spells out the following: (a) the test; (b) the presumption; (c) the burden of proof; (d) the party to discharge the burden; and (e) the quantum of evidence necessary. On the basis of the records of the case at bar, respondents who have the burden to show that these acts do not abridge freedom of speech and of the press failed to hurdle the clear and present danger test. It appears that the great evil which government wants to prevent is the airing of a tape recording in alleged violation of the anti-wiretapping law. The records of the case at bar, however, are confused and confusing, and respondents evidence falls short of satisfying the clear and present danger test. Firstly, the various statements of the Press Secretary obfuscate the identity of the voices in the tape recording. Secondly, the integrity of the taped conversation is also suspect. The Press Secretary showed to the public two versions, one supposed to be a complete version and the other, an altered version. Thirdly, the evidence of the respondents on the whos and the hows of the wiretapping act is ambivalent, especially considering the tapes different versions. The identity of the wire tappers, the manner of its commission and other related and relevant proofs are some of the invisibles of this case. Fourthly, given all these unsettled facets of the tape, it is even arguable whether its airing would violate the antiwiretapping law. We rule that not every violation of a law will justify straitjacketing the exercise of freedom of speech and of the press. Our laws are of different kinds and doubtless, some of them provide norms of conduct which even if violated have only an adverse effect on a persons private comfort but does not endanger national security. There are laws of great significance but their violation, by itself and without more, cannot support suppression of free speech and free press. In fine, violation of law is just a factor, a vital one to be sure, which should be weighed in adjudging whether to restrain freedom

of speech and of the press. The totality of the injurious effects of the violation to private and public interest must be calibrated in light of the preferred status accorded by the Constitution and by related international covenants protecting freedom of speech and of the press. In calling for a careful and calibrated measurement of the circumference of all these factors to determine compliance with the clear and present danger test, the Court should not be misinterpreted as devaluing violations of law. By all means, violations of law should be vigorously prosecuted by the State for they breed their own evil consequence. But to repeat, the need to prevent their violation cannot per se trump the exercise of free speech and free press, a preferred right whose breach can lead to greater evils. For this failure of the respondents alone to offer proof to satisfy the clear and present danger test, the Court has no option but to uphold the exercise of free speech and free press. There is no showing that the feared violation of the anti-wiretapping law clearly endangers the national security of the State. This is not all the faultline in the stance of the respondents. We slide to the issue of whether the mere press statements of the Secretary of Justice and of the NTC in question constitute a form of content-based prior restraint that has transgressed the Constitution. In resolving this issue, we hold that it is not decisive that the press statements made by respondents were not reduced in or followed up with formal orders or circulars. It is sufficient that the press statements were made by respondents while in the exercise of their official functions. Undoubtedly, respondent Gonzales made his statements as Secretary of Justice, while the NTC issued its statement as the regulatory body of media. Any act done, such as a speech uttered, for and on behalf of the government in an official capacity is covered by the rule on prior restraint. The concept of an act does not limit itself to acts already converted to a formal order or official circular. Otherwise, the non formalization of an act into an official order or circular will result in the easy circumvention of the prohibition on prior restraint. The press statements at bar are acts that should be struck down as they constitute impermissible forms of prior restraints on the right to free speech and press.

There is enough evidence of chilling effect of the complained acts on record. The warnings given to media came from no less the NTC, a regulatory agency that can cancel the Certificate of Authority of the radio and broadcast media. They also came from the Secretary of Justice, the alter ego of the Executive, who wields the awesome power to prosecute those perceived to be violating the laws of the land. After the warnings, the KBP inexplicably joined the NTC in issuing an ambivalent Joint Press Statement. After the warnings, petitioner Chavez was left alone to fight this battle for freedom of speech and of the press. This silence on the sidelines on the part of some media practitioners is too deafening to be the subject of misinterpretation. The constitutional imperative for us to strike down unconstitutional acts should always be exercised with care and in light of the distinct facts of each case. For there are no hard and fast rules when it comes to slippery constitutional questions, and the limits and construct of relative freedoms are never set in stone. Issues revolving on their construct must be decided on a case to case basis, always based on the peculiar shapes and shadows of each case. But in cases where the challenged acts are patent invasions of a constitutionally protected right, we should be swift in striking them down as nullities per se. A blow too soon struck for freedom is preferred than a blow too late. In VIEW WHEREOF, the petition is GRANTED. The writs of certiorari and prohibition are hereby issued, nullifying the official statements made by respondents on June 8, and 11, 2005 warning the media on airing the alleged wiretapped conversation between the President and other personalities, for constituting unconstitutional prior restraint on the exercise of freedom of speech and of the press SO ORDERED.

G.R. No. 107737 October 1, 1999 JUAN L. PEREZ, LUIS KEH, CHARLIE LEE and ROSENDO G. TANSINSIN, JR., petitioners, vs. COURT OF APPEALS, LUIS CRISOSTOMO and VICENTE ASUNCION, respondents. GONZAGA-REYES, J.: This is a petition for review on certiorari of the Decision 1 of the Court of Appeals affirming the decision of the Regional Trial Court of Bulacan, Branch 9 2 that disposed of Civil Case No. 5610-M (Luis Crisostomo v. Luis Keh, Juan Perez, Charlie Kee and Atty. Rosendo G. Tansinsin, Jr.) as follows:
WHEREFORE, premises considered, judgment is hereby rendered: a) directing defendant JUAN PEREZ to allow plaintiff LUIS CRISOSTOMO to occupy and operate the "Papaya Fishpond" for a period of 5 1/2 years at the rental rates of P150,000.00 for the first six months and P175,000.00 for the remaining five years (the same rates provided for in Exh. 4); b) ordering defendants LUIS KEH, CHARLIE LEE, JUAN PEREZ and Atty. ROSENDO TANSINSIN, JR. to pay unto the plaintiff the amounts of P150,000.00 as actual damages; P20,000.00 as moral damages; P20,000.00 as exemplary damages; and P10,000.00 as attorney's fees, plus the costs of the suit; c) directing the release, delivery or payment directly to plaintiff LUIS CRISOSTOMO of the amounts of P128,572.00 and P123,993.85, including the interests which may have already accrued thereon, deposited with the Paluwagan ng Bayan Savings Bank (Paombong, Bulacan Branch) in the name of the Clerk of Court and/or Deputy Clerk of Court Rodrigo C. Libunao under this Court's Order dated February 14, 1980; however, the plaintiff is required to pay defendant Perez the corresponding rental on the fishpond for the period June 1979-January 1980 based on the rate of P150,000.00 per annum, deducting therefrom the amount of P21,428.00 already paid to and received by then co-usufructuary Maria Perez (Exh. E); d) dismissing the defendants' separate counter-claims for damages, for lack of merit; and e) dismissing the Pleading in Intervention Pro Interesse Suo filed by VICENTE ASUNCION on the ground of lis pendens. SO ORDERED.

The facts upon which the Court of Appeals based its Decision are the following: Along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and Vicente Asuncion, petitioner Juan Perez is a usufructuary of a parcel of land popularly called the "Papaya Fishpond." Covered by Transfer Certificate of Title No. 8498 of the Registry of Deeds for the Province of Bulacan, the fishpond is located in

Sto. Rosario, Hagonoy, Bulacan and has an area of around 110 hectares. On June 5, 1975, the usufructuaries entered into a contract leasing the fishpond to Luis Keh for a period of five (5) years and renewable for another five (5) years by agreement of the parties, under the condition that for the first five-year period the annual rental would be P150,000.00 and for the next five years, P175,000.00. Paragraph 5 of the lease contract states that the lessee "cannot sublease" the fishpond "nor assign his rights to anyone." 3 Private respondent Luis Crisostomo, who reached only the 5th grade, is a businessman engaged in the operation of fishponds. On September 20, 1977, while he was at his fishpond in Almazar, Hermosa, Bataan, his bosom friend named Ming Cosim arrived with petitioner Charlie Lee. The two persuaded private respondent to take over the operation of "Papaya Fishpond" as petitioner Lee and his partner, petitioner Luis Keh, were allegedly losing money in its operation. Private respondent having acceded to the proposal, sometime in December of that year, he and petitioners Lee and Keh executed a written agreement denominated as "pakiao buwis" whereby private respondent would take possession of the "Papaya Fishpond" from January 6, 1978 to June 6, 1978 in consideration of the amount of P128,000.00 broken down as follows: P75,000.00 as rental, P50,000.00 for the value of milkfish in the fishpond and P3,000 for labor expenses. Private respondent paid the P75,000.00 to petitioner Keh at the house of petitioner Lee in Sta. Cruz, Hagonoy, Bulacan in the presence of Lee's wife, brother-in-law and other persons. He paid the balance to petitioner Lee sometime in February or March 1978 because he was uncertain as to the right of petitioners Keh and Lee to transfer possession over the fishpond to him. Private respondent made that payment only after he had received a copy of a written agreement dated January 9, 1978 4 whereby petitioner Keh ceded, conveyed and transferred all his "rights and interests" over the fishpond to petitioner Lee, "up to June 1985." From private respondent's point of view, that document assured him of continuous possession of the property for as long as he paid the agreed rentals of P150,000.00 until 1980 and P.175,000.00 until 1985.1wphi1.nt For the operation of the fishpond from June 1978 to May 1979, private respondent, accompanied by Ming Cosim and Ambrocio Cruz, paid the amount of P150,000.00 at the Malabon, Metro Manila office of petitioner Keh. The following receipt was issued to him:
RECEIPT June 6, 1978 P150.000,00 Received from Mr. LUIS KEH the sum of ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00), Philippine Currency, as full payment of the yearly leased

rental of the Papaya Fishpond for the year beginning June 1978 and ending on May 1979. The next payment shall be made on June 6, 1979. Said sum was paid in Producers Bank of the Philippines Check No. (illegible) 164595 dated June 6, 1978. Mr. Luis Keh has not transferred his rights over the fishpond to any person. Caloocan City, June 6, 1978. JUAN L. PEREZ ET AL. By: (Sgd.) Rosendo G. Tansinsin, Jr. CONFORME TO THE ABOVE: (Sgd.) LUIS KEH

Handwritten below that receipt but above the signature of petitioner Charlie Lee, are the following: "Rec'd from Luis Crisostomo sum of one hundred fiftyfour thousand P154,000.00 for above payment. 5 Private respondent incurred expenses for repairs in and improvement of the fishpond in the total amount of P486,562.65. 6 However, sometime in June 1979, petitioners Tansinsin and Juan Perez, in the company of men bearing armalites, went to the fishpond and presented private respondent with a letter dated June 7, 1979 showing that petitioner Luis Keh had surrendered possession of the fishpond to the usufructuaries. Because of the threat to deprive him of earnings of around P700,000.00 that the 700,000 milkfish in the fishpond would yield, and the refusal of petitioners Keh, Juan Perez and Lee to accept the rental for June 5, 1979 to June 6, 1980, private respondent filed on June 14, 1979 with the then Court of First Instance of Bulacan an action for injunction and damages. He prayed for the issuance of a restraining order enjoining therein defendants Keh, Perez and Lee from entering the premises and taking possession of the fishpond. He also prayed for actual damages of P50,000.00, moral damages of P20,000.00, exemplary damages in an amount that the court might award, and attorney's fees of P10,000.00. 7 That same day, June 14, 1979, the lower court granted the prayer for a restraining order. On November 13, 1979, Crisostomo paid one of the usufructuaries, Maria Perez (who died in 1984), the amount of P21,428.00 as her 1/7 share of the annual rental of the fishpond for 1979-80. Maria Perez issued a notarized receipt for that amount. 8 On January 11, 1980, the court lifted the restraining order thereby effectively depriving private respondent of possession over the fishpond. On February 14, 1980, the parties submitted a partial compromise agreement with the following stipulations:

1. The amount of P128,572.00 that private respondent deposited as rental with the Office of the Clerk of Court under O.R. No. 21630 dated November 15, 1979 be withdrawn from that office and deposited with the Paluwagan ng Bayan Savings & Loan Association, Inc. (Paombong, Bulacan branch) and which deposit shall not be withdrawn unless authorized by the court; and 2. The plaintiff could personally harvest milkfish "with commercial value" in the presence of Perez and under the supervision of the deputy clerk of court within the appointed period and that the net proceeds of the sale (P123,993.85 per the Report dated March 4, 1980 of the deputy clerk of court) be deposited in the name of the deputy clerk of court of Branch 6 of the then Court of First Instance of Bulacan with the same branch of the Paluwagan ng Bayan Savings & Loan Association, Inc. and which deposit shall not be withdrawn unless upon order of the court after hearing.

The court approved that agreement on that same date. Thereafter, the usufructuaries entered into a contract of lease with Vicente Raymundo and Felipe Martinez for the six-year period of June 1, 1981 to May 30, 1987 in consideration of the annual rentals of P550,000.00 for the first two years and P400,000.00 for the next four years. Upon expiration of that lease, the same property was leased to Pat Laderas for P1 million a year. The complaint was later amended to include petitioner Tansinsin, the alleged administrator of the fishpond, as one of the defendants. 9 Except in the joint answer that the defendants had filed, petitioners Keh and Lee did not appear before the court. Neither did they testify. In their defense, petitioners Juan Perez and Tansinsin presented evidence to prove that they had negotiated for the lease of the property with Benito Keh in 1975. However, they averred, for reasons unknown to petitioner Perez, in the contract of lease that petitioner Tansinsin prepared, petitioner Luis Keh was named as lessee. Petitioner Perez had never met Keh or Lee but according to petitioner Tansinsin, petitioner Luis Keh was substituted for Benito Keh because the latter was preoccupied with his other businesses. Sometime in 1979, petitioner Keh's agent named Catalino Alcantara relayed to petitioner Perez, Keh's intention to surrender possession of the fishpond to the usufructuaries. Because petitioner Perez demanded that said intention should be made in writing, on June 5, 1979, Perez received from Keh a letter to that effect. When private respondent received a copy of that letter of petitioner Keh, he took the position that petitioner Perez had no right to demand possession of the fishpond from him because Perez had no contract with him. Private respondent was allowed four (4) months within which to vacate the premises but he immediately filed the complaint for injunction and damages. Thereafter, private respondent's counsel,

Atty. Angel Cruz and other persons tried to prevail upon petitioner Perez to allow private respondent to occupy the property for three (3) more years. Petitioner Perez declined that proposition. On September 6, 1989, the lower court rendered the aforesaid decision. It arrived at the conclusion that the defendants therein "conspired with one another to exploit the plaintiff's naivete and educational inadequacies and, in the process, to defraud him by inducing him into taking possession of the "Papaya Fishpond" in their fond hope that, as soon as the plaintiff applying his known expertise as a successful fishpond operator shall have considerably improved the fishpond, they will regain possession of the premises and offer the lease thereof to other interested parties at much higher rental rates as laid bare by supervening realities." That conclusion was founded on the following:
1. The plaintiffs (private respondent Crisostomo's) testimony bears the "hallmarks of truth: candid, straightforward and uncontrived." He had proven himself a "much more credible witness than his opponents." 2. The notarized receipt of Maria Perez of her share as a usufructuary in the rental for 1979-80 is a "clear avowal of plaintiffs legitimate operation of the "Papaya Fishpond" as assignee or transferee thereof." It was impossible for the other usufructuaries, especially Juan Perez who was residing in the same locality and actively involved in the "affairs of the fishpond," not to have known that plaintiff occupied the fishpond for one and a half years as assignee of Keh and Lee. It was unbelievable that both Tansinsin and Perez would only perceive the plaintiff as a mere encargado of Keh and Lee. 3. The receipt whereby Tansinsin acknowledged payment of P150,000.00 as rental for June 1978-May 1979 bears "tell-tale signs" of the conspiracy. Firstly, the statement "Mr. Luis Keh has not transferred his rights over the fishpond to any person" is entirely irrelevant to that receipt unless it was intended "to preempt plaintiff's claim of rights and interests over the said property as either sublessee or assignee." Secondly, Keh's having signified "Conforme to the above" is a gratuitous notation as it actually indicates that the money came from the plaintiff. Thirdly, Atty. Tansinsin's receipt of the amount for and in behalf of "JUAN L. PEREZ ET AL." illustrates his "active and dominant role in the affairs" of the fishpond whether as administrator thereof or as beneficiary of a share from its fruits. 4. Service upon plaintiff of Keh's letter surrendering possession of the fishpond implied that defendants knew that plaintiff was in possession thereof. That they resorted to the intimidating presence of armed men is proof that they expected the plaintiff to refuse to give up possession of the property. These circumstances "completely belie the protestations of Perez and Tansinsin of lack of

knowledge of the contract entered into" between the plaintiff, and Lee and Keh. 5. The nonpresentation of Lee and Keh on the witness stand by Atty. Tansinsin "can very well be construed as a smart maneuver to cover up the sinister cabal for deception inferrable from the attendant facts and circumstances." In their joint answer, Keh and Lee tried to relieve Perez of any liability in favor of the plaintiff. That is understandable "because, should the Court disregard the reliance of Perez on the prohibition against sub-lease or assignment of the "Papaya Fishpond", then all the defendants shall have exposed themselves to unavoidable liability for the acts complained of by the plaintiff." 6. Atty. Tansinsin was the common legal counsel of all the defendants and, by his testimony, even the plaintiff. Atty. Tansinsin's denial that he was plaintiffs counsel was his way of "deflecting plaintiffs imputations of professional improprieties against him." Plaintiff must have assumed that Atty. Tansinsin was also his lawyer considering that they were "on very friendly terms" and therefore Atty. Tansinsin might have been instrumental in dispelling whatever fears plaintiff had entertained as regards the business transactions involved. 7. The fact that the fishpond was subsequently rented out for astronomical amounts is proof that the plaintiff had considerably 10 improved the fishpond.

The lower court added:

Bluntly yet succinctly put, the foregoing circumstances when viewed collectively with other cogent aspects of the instant case inexorably lead to the Court's wellconsidered view that the defendants tempted by the bright prospect of a lucrative business coup embarked themselves in an egregious scheme to take undue advantage of the gullibility of the plaintiff who, as borne by ensuing events, proved himself an ideal victim to prey upon: pathetically unsuspecting yet only too eager to invest his material resources and self-acquired technical know-how to redeem what was then a dwindling business enterprise from total collapse. Plaintiffs impressive performance, alas, only redounded ultimately to the supreme benefit exclusively of the defendants. A classic case of "ako ang nagsaing, iba ang kumain!"

The defendants elevated the case to the Court of Appeals which, as earlier mentioned, affirmed the decision of the trial court and disposed of the appeal on February 18, 1992 as follows:
WHEREFORE, in view of all the foregoing, judgment appealed from, is hereby AFFIRMED. However, intervenor-appellant is hereby declared co-usufructuary of the Papaya fishpond, and is, therefore, entitled to all rights and interest due to the usufructuaries of the said fishpond. SO ORDERED.

On the defendant-appellants' contention that the principle of res judicata should be applied because the Court of Appeals had ruled on the issue of possession in CAG.R. No. 10415-R, a petition for certiorari and injunction with preliminary mandatory injunction, the Court of Appeals held that said principle was unavailing. The petition in CA-G.R. No. 10415-R involved a writ of injunction "which presupposes the pendency of a principal or main action." Moreover, the decision in that case did not resolve the issue of who should be in possession of the Papaya Fishpond as findings of fact of the trial court cannot be reviewed in a certiorari proceeding.1wphi1.nt The Court of Appeals ruled further that appellee Crisostomo "cannot be considered a possessor in bad faith, considering that he took possession of the fishpond when appellants Keh and Lee assigned to him appellant Keh's leasehold right." It held that appellant Perez knew of the transfer of possession of the fishpond to appellee and that the receipt evidencing payment of the 1978-1979 rental even bears an expressed admission by Lee that the payment came from appellee Crisostomo. Agreeing with the court a quo that "defendants-appellants employed fraud to the damage and prejudice of plaintiff-appellee," the Court of Appeals held that appellants should be held liable for damages. As regards the intervention pro interesse suo, the appellate court ruled that the same should be allowed because, even if the litigation would not be technically binding upon him, complications might arise that would prejudice his rights. Pointing out that a usufruct may be transferred, assigned or disposed of, the Court of Appeals ruled that the intervenor cannot be excluded as a usufructuary because he had acquired his right as such from a sale in execution of the share of Jorge Lorenzo, one of the usufructuaries of the fishpond. Herein petitioners filed a motion for the reconsideration of that Decision of the Court of Appeals. They alleged that the Decision was premature because it was rendered when they had not yet even received a copy of the intervenor's brief wherein assignments of errors that directly affected their rights and interests were made. They insisted that the principle of res judicata was applicable because in G.R. No. 64354, this Court upheld the Decision of the Court of Appeals in CA-G.R. No. 10415. They added that appellee Crisostomo was guilty of forum shopping because the issue of possession had been "squarely decided" in CA-G.R. No. 10415. They stressed that the contract of lease between Keh and the usufructuaries prohibited subleasing of the fishpond; that by the receipt dated June 6, 1978, it was Keh who paid the rental; that appellee Crisostomo was a perjured witness because in the notebook showing his expenses, the amount of P150,000.00 for rentals does not appear; that the term of the contract had expired and there was no renewal thereof, and that the consideration of P150,000.00 was grossly inadequate. They averred

that the Court of Appeals erred in awarding damages that were not prayed for in the second amended complaint and that amounts not specified in the complaint were awarded as damages. They disclaimed that Atty. Tansinsin was the administrator of the fishpond. On October 30, 1992, the Court of Appeals denied the motion for reconsideration for lack of merit. It ruled that the Decision was not prematurely promulgated "considering that the intervention proceeding is solely between intervenor and defendants-appellants, which is completely separable and has nothing to do with the merits of the appeal." In the instant petition for review on certiorari, petitioners raise six (6) grounds for giving due course to it. 11 Those grounds may be distilled into the following: (a) the applicability of the principle of res judicata; (b) the premature promulgation of the Decision of the Court of Appeals, and (c) private respondent was not a sublesee of the fishpond under the law. In arguing that the principle of res judicata applies in this case, petitioners rely on the portion of the Decision 12 of the Court of Appeals in CA-G.R. No. 10415 that states:
We find no basis for declaring respondent Judge guilty of grave abuse of discretion on this regard. The trial court's finding that petitioner does not appear entitled to any contract or law to retain possession of the fishpond in question since he is neither an assignee or sub-lessee and, therefore, merely a stranger to the contract of lease is a finding of fact review of which is not proper in a certiorari proceedings. Not only is petitioner not a party to the lease agreement over the fishpond in question but also the very authority upon which he predicates his possession over the fishpond that the leasehold right of Luis Keh had been assigned to him undoubtedly lacks basis for the very contract between Luis Keh and the lessors expressly provides That the lessee cannot sub-lease above-described fishpond nor assign his rights to anyone. xxx xxx xxx 13 (Emphasis supplied by petitioners.)

Petitioners assert that said Decision of the Court of Appeals which was in effect upheld by this Court when it denied the petition for review on certiorari in G.R. No. 64354 (Luis Crisostomo v. Intermediate Appellate Court), 14 is "res judicata to the issue of possession in this case." 15 However, as expressed in that quoted portion of the Decision in CA-G.R. No. 10415, the issue of whether private respondent is an assignee or a sub-lessee "is a finding of fact review of which is not proper in a certiorari proceeding" or the proceeding in that case. CA-G.R. No. 10415 was spawned by the lifting on January 11, 1980 of the restraining order previously issued by the trial court on June 14, 1979. Private respondent filed a special civil action of certiorari and injunction with preliminary mandatory injunction and/or mandatory restraining order to question the order of

January 11, 1980. Thus, the issue in that petition was whether or not the trial court gravely abused its discretion in lifting the restraining order. The statement in that Decision of the Court of Appeals that a writ of preliminary injunction may be denied "if the party applying for it has insufficient title or interest to sustain it and no claim to an ultimate relief (is) sought" by no means resolved the issue of who is entitled to possess the fishpond. In denying the petition for certiorari, the Court of Appeals was simply saying that there was no reason to restore private respondent to the possession of the fishpond pursuant to the restraining order that he had earlier obtained. The issue of possession was collaterally discussed only to resolve the propriety of the lifting of the restraining order based on evidence available at that time. Hence, there was no judgment on the merits in the main case or in Civil Case No. 5610-M. Simply put, the Decision in CA-G.R. No. 10415 involves an interlocutory order on the propriety of the lifting of the restraining order and not a judgment on the merits of Civil Case No. 5610-M. For res judicata to apply, the following requisites must concur: (a) the former judgment must be final; (b) the court which rendered it had jurisdiction over the subject matter and the parties; (c) the judgment must be on the merits, and (d) there must be between the first and second actions identity of parties, subject matter and causes of action. 16 The Decision in CA-G.R. No. 10415 having resolved only an interlocutory matter, the principle of res judicata cannot be applied in this case. There can be no res judicata where the previous order in question was not an order or judgment determinative of an issue of fact pending before the court but was only an interlocutory order because it required the parties to perform certain acts for final adjudication. 17 In this case, the lifting of the restraining order paved the way for the possession of the fishpond on the part of petitioners and/or their representatives pending the resolution of the main action for injunction. In other words, the main issue of whether or not private respondent may be considered a sublessee or a transferee of the lease entitled to possess the fishpond under the circumstances of the case had yet to be resolved when the restraining order was lifted. Petitioners assail the Court of Appeals' Decision as "premature" and therefore null and void, because prior to the promulgation of that Decision, private respondentintervenor Vicente Asuncion failed to furnish them with a copy of his brief the assignment of errors of which allegedly "directly" affected their rights and interests. 18 While it is true that petitioners were deprived of the opportunity to contravene the allegations of the intervenor in his brief, that fact can not result in the nullity of the Decision of the Court of Appeals. 19 Vicente Asuncion intervened pro interesse suo or "according to his interest." 20 Intervention pro interessse suo is a mode of intervention in equity wherein a stranger desires to intervene for the purpose of asserting a property right in the res, or thing, which is the subject matter of the

litigation, without becoming a formal plaintiff or defendant, and without acquiring control over the course of a litigation, which is conceded to the main actors therein. 21 In this case, intervenor Vicente Asuncion aimed to protect his right as a usufructuary. Inasmuch as he has the same rights and interests as petitioner Juan Perez, any judgment rendered in the latter's favor entitled him to assert his right as such usufructuary against his co-usufructuary. Should said intervenor claim his share in the usufruct, no rights of the petitioners other than those of Juan Perez would be prejudiced thereby. Worth noting is the fact that after the trial court had allowed Vicente Asuncion's intervention pro interesse suo, petitioner Juan Perez filed a petition for certiorari docketed as CA-G.R. No. 13519 to set aside the order denying his motion to dismiss the pleading in intervention. In its Decision of January 27, 1988, the Seventh Division of the Court of Appeals 22 denied the petition for certiorari for lack of merit. It upheld the trial court's ruling to allow the intervention pro interesse suo to protect Vicente Asuncion's right as a co-usufructuary in the distribution or disposition of the amounts representing the rentals that were deposited with the court. That Vicente Asuncion had filed Civil Case No. 8215-M seeking recovery of his alleged share in the fruits of the Papaya Fishpond from 1978 would not be a reason for the dismissal of the motion for intervention pursuant to Rule 16, Sec. 1 (e) of the Rules of Court. 23 The Court of Appeals explained as follows:
Indeed, if by means of intervention a stranger to a lawsuit is permitted to intervene without thereby becoming a formal plaintiff or defendant (Joaquin v. Herrera, 37 Phil. 705, 723 [1918]), then there is in the case at bar no identity of parties to speak of. Lis pendens as a ground for a motion to dismiss requires as a first element identity of parties in the two cases. Nor is there an identity of relief sought. Civil Case No. 8295-M seeks an accounting of the proceeds of the fishpond while Civil Case No. 5610-M is for injunction to prevent the petitioner from retaking the fishpond from Luis Crisostomo. The herein private respondent sought to intervene in the latter case simply to protect his right as usufructuary in the money deposited in the court by the plaintiff Luis Crisostomo. We hold that in allowing the intervention in this case the trial court acted with prudence 24 and exercised its discretion wisely.

Unconvinced by the Court of Appeals' Decision in CA-G.R. SP No. 13519, petitioner Juan Perez filed a petition for review on certiorari with this Court under G.R. No. 82096. On May 9, 1988, this Court denied the petition on the grounds that the issues raised are factual and that there is no sufficient showing that the findings of the respondent court are not supported by substantial evidence or that the court had committed any reversible error in the questioned judgment. 25 The Resolution of the Court dated May 9, 1988 became final and executory on August 26, 1988. 26 Moreover, granting that the intervention be considered as Vicente Asuncion's "appeal," a litigant's failure to furnish his opponent with a copy of his appeal does

not suffice to warrant dismissal of that appeal. In such an instance, all that is needed is for the court to order the litigant to furnish his opponent with a copy of his appeal. 27 This is precisely what happened in this case. On May 13, 1992, the Court of Appeals issued a Resolution directing counsel for intervenor to furnish herein petitioners with a copy of intervenor Vicente Asuncion's brief within a 10-day period. It also granted petitioners an opportunity to file a reply-brief or memorandum and the intervenor, a reply to said memorandum. 28 That Resolution is proper under the premises because, by the nature of an intervention pro interesse suo, it can proceed independently of the main action. Thus, in the Resolution of October 30, 1992, in resolving the issue of the alleged prematurity of its Decision, the Court of Appeals held that "the proceeding is solely between intervenor and defendantsappellants, which is completely separable and has nothing to do with the merits of the appeal." 29 At the hearing of Civil Case No. 5610-M, petitioner Juan Perez attempted to establish the death on October 14, 1979 of Jorge Lorenzo, 30 the usufructuary from whom Vicente Asuncion derived his right to intervene pro interesse suo. Since under Article 603 of the Civil Code a usufruct is extinguished "by the death of the usufructuary, unless a contrary intention clearly appears," there is no basis by which to arrive at the conclusion that the usufruct originally exercised by Jorge Lorenzo has indeed been extinguished or, on the contrary, has survived Lorenzo's demise on account of provisions in the document constituting the usufruct. That matter is best addressed in Civil Case No. 8215-M wherein Vicente Asuncion seeks his share as a transferee of the usufruct established for Jorge Lorenzo. All that is discussed here is the matter of intervention pro interesse suo vis-a-vis the issue of prematurity of the Decision of the Court of Appeals. Petitioners' principal argument against the Court of Appeals' Decision in favor of private respondent Crisostomo is that he could not have been an assignee or sublessee of the fishpond because no contract authorized him to be so. Petitioners' argument is anchored on factual issues that, however, have no room for discussion before this Court. It is well-entrenched doctrine that questions of fact are not proper subjects of appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to questions of law. 31 Factual findings of the Court of Appeals are conclusive on the parties and carry even more weight when said court affirms the factual findings of the trial court. 32 Accordingly, this review shall be limited to questions of law arising from the facts as found by both the Court of Appeals and the trial court. Admittedly, the contract between the usufructuaries and petitioner Keh has a provision barring the sublease of the fishpond. However, it was petitioner Keh himself who violated that provision in offering the operation of the fishpond to

private respondent. Apparently on account of private respondent's apprehensions as regards the right of petitioners Keh and Lee to transfer operation of the fishpond to him, on January 9, 1978, petitioner Keh executed a document ceding and transferring his rights and interests over the fishpond to petitioner Lee. That the same document might have been a ruse to inveigle private respondent to agree to their proposal that he operate the fishpond is of no moment. The fact is, petitioner Keh did transfer his rights as a lessee to petitioner Lee in writing and that, by virtue of that document, private respondent acceded to take over petitioner Keh's rights as a lessee of the fishpond. Although no written contract to transfer operation of the fishpond to private respondent was offered in evidence, 33 the established facts further show that petitioner Juan Perez and his counsel, petitioner Tansinsin, knew of and acquiesced to that arrangement by their act of receiving from the private respondent the rental for 1978-79. By their act of receiving rental from private respondent through the peculiarly written receipt dated June 6, 1978, petitioners Perez and Tansinsin were put in estoppel to question private respondent's right to possess the fishpond as a lessee. Estoppel in pais arises when one, by his acts, representations or admissions, or by his own silence when he ought to speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts. 34 Nevertheless, we hesitate to grant private respondent's prayer that he should be restored to the possession of the fishpond as a consequence of his unjustified ejectment therefrom. To restore possession of the fishpond to him would entail violation of contractual obligations that the usufructuaries have entered into over quite a long period of time now. Supervening events, such as the devaluation of the peso as against the dollar as well as the addition of improvements in the fishpond that the succeeding lessees could have introduced, have contributed to the increase in rental value of the property. To place private respondent in the same position he was in before the lifting of the restraining order in 1980 when he was deprived the right to operate the fishpond under the contract that already expired in 1985 shall be to sanction injustice and inequity. This Court, after all, may not supplant the right of the usufructuaries to enter into contracts over the fishpond through this Decision. Nonetheless, under the circumstances of the case, it is but proper that private respondent should be properly compensated for the improvements he introduced in the fishpond.1wphi1.nt Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and the obligor does what has been forbidden him, it shall also be undone at his expense." The lease contract prohibited petitioner Luis Keh, as lessee, from

subleasing the fishpond. In entering into the agreement for pakiao-buwis with private respondent, not to mention the apparent artifice that was his written agreement with petitioner Lee on January 9, 1978, petitioner Keh did exactly what was prohibited of him under the contract to sublease the fishpond to a third party. That the agreement for pakiao-buwis was actually a sublease is borne out by the fact that private respondent paid petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the amount of annual rental agreed upon in the lease contract between the usufructuaries and petitioner Keh. Petitioner Keh led private respondent to unwittingly incur expenses to improve the operation of the fishpond. By operation of law, therefore, petitioner Keh shall be liable to private respondent for the value of the improvements he had made in the fishpond or for P486,562.65 with interest of six percent (6%) per annum from the rendition of the decision of the trial court on September 6, 1989. 35 The law supports the awards of moral and exemplary damages in favor of private respondent and against the petitioners. Their conspiratorial scheme to utilize private respondent's expertise in the operation of fishponds to bail themselves out of financial losses has been satisfactorily established to warrant a ruling that they violated Article 21 of the Civil Code and therefore private respondent should be entitled to an award of moral damages. Article 21 states that "(a)ny person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." Exemplary damages shall likewise be awarded pursuant to Article 2229 of the Civil Code. 36 Because private respondent was compelled to litigate to protect his interest, attorney's fees shall also be awarded. 37 WHEREFORE, in light of the foregoing premises, the decision of the Court of Appeals is AFFIRMED insofar as it (a) directs the release to private respondent of the amounts of P128,572.00 and P123,993.85 deposited with the Paluwagan ng Bayan Savings Bank in Paombong, Bulacan and (b) requires private respondent Crisostomo to pay petitioner Juan Perez the rental for the period June 1979 to January 1980 at the rate of P150,000.00 per annum less the amount of P21,428.00 already paid to usufructuary Maria Perez. It should, however, be subject to the MODIFICATIONS that:
1. Petitioner Luis Keh shall pay private respondent Luis Crisostomo in the amount of P486,562.25 with legal interest from the rendition of the judgment in Civil Case No. 5610-M or on September 6, 1989, and 2. Petitioners be made liable jointly and severally liable for moral damages of P50,000.00, exemplary damages of P20,000 and attorney's fees of P10,000.00. No costs.

SO ORDERED. G.R. No. L-22359 November 28, 1924 JULIO DE LA ROSA, plaintiff-appellant, vs. THE BANK OF THE PHILIPPINE ISLANDS, defendant-appellant. Ramon Sotelo for plaintiff-appellant. Araneta and Zaragoza for defendant-appellant. ROMUALDEZ, J.: This action was instituted on June 11, 1923, by means of a complaint on the ground that the defendant bank started a contest of designs and plans for the construction of a building, announcing that the prizes would be awarded not later that on November 30, 1921; that the plaintiff took part in said contest, having performed work and incurred expenses for that purpose; that said bank refrained from naming judges and awarding the prizes in accordance with the conditions stipulated. The plaintiff prays that judgment be rendered in his favor for the sum of P30,000 as damages, with interest and the costs. The defendant bank answered denying the facts contained in the second and following paragraphs of the complaint. After the trial, the court rendered judgment ordering the defendant bank to pay the plaintiff an indemnity of P4,000 and the costs. Both parties appealed from this judgment, the plaintiff assigning the following errors as committed by the trial court: 1. In holding that the sum of P4,000 was a just and reasonable indemnity to the plaintiff. 2. In not ordering the defendant bank to pay the P30,000 prayed for in the complaint. The defendant bank, in turn, assigned the following errors as committed by the trial court: 1. In holding that the date set for the award of prizes is essential in the contract. 2. In ordering that the sum of P4,000 be paid to the plaintiff. The fundamental question on which the plaintiff's action depends is raised in the first assignment of error made by the defendant bank, or, whether or not the date set for the award of the prizes was essential in the contract and, therefore, whether or not the failure to award the prizes on said date was breach of contract on the part of the defendant. First of all, we find that due to the fact that the bank started and advertised the said contest, offering prizes under certain conditions, and the plaintiff prepared, by labor and expense, and took part in said contest, the bank is bound to comply with the promise made in the rules and conditions prepared and advertised by it.

A binding obligation may even originate in advertisements addressed to the general public. (6 R. C. L., 600.) It is an elementary principle that where a party publishes an offer to the world, and before it is withdrawn another acts upon it, the party making the offer is bound to perform his promise. This principle is frequently applied in cases of the offer of rewards, . . . (6 R. C. L., 607.) What is to be determined is whether or not the defendant bank was in default in not awarding the prizes on November, 30, 1921. The plaintiff contends that it was, according to paragraph 2 of article 1100 of the Civil Code, the complete text of which is as follows: Persons obliged to deliver or to do something are in default from the moment the creditor demands of them judicially or extrajudicially the fulfillment of their obligation. Nevertheless, the demand of the creditor shall not be necessary in order that the default may arise 1. When the obligator or the law expressly so provides; 2. When by reason of the nature and circumstances of the obligation it shall appear that the designation of the time at which the thing was to be delivered or the service rendered was the principal inducement to the creation of the obligation. In reciprocal obligations neither of the obligators shall be in default if the other does not fulfill or does not submit to the fulfillment of that which is incumbent upon him. From the time on the obliges performs his obligation the default begins for the other party. And the party plaintiff contends that the said date was the principal inducement because the current cost of concrete buildings at the time was fixed. The fixation of said price cannot be considered as the principal inducement of the contract, but undoubtedly only for the uniformity of the designs to be presented and to secure greater justice in the appreciation of the relative merits of each work submitted. Such fixation of price, naturally, was not the principal inducement for the contestants. Neither was it for the bank which could not certain that said price would continue to be current price when it desired to construct the building designed. We do not find sufficient reason for considering that the date set for the reward of the prizes was the principal inducement to the creation of the obligation. And, taking into consideration the criterion that must be followed in order to judge whether or not the time for the performance of the obligation is the principal inducement in a given case, we hold that it was not in the instant case. The distinguished Manresa explains the matter in the following terms: 1awphi1.net

These words ("principal inducement" in paragraph 2 of article 1100 of the Civil Code) whose special meaning in connection with this article and the circumstances of each obligation does not permit of their being confused with the permanent general idea, and the distinct clearness of consideration of contracts, may give rise to serious doubts by reason of the breadth of expression, and must be judged in each particular case, it being impossible to give a general rule to explain them. It will for instance, be unquestionable that the hypothesis implied in this exception is affected when the matter, for instance, is the delivery of things of the rendition of services to be employed in agricultural work, and the time of said work has been designated as the date for the fulfillment of the obligation; it will also exist when, for instance, fruits or any objects are to be delivered which might be used by the creditor in industrial operations having a determinate period for carrying them out and designated for their delivery; and, finally, it will also assist whenever, as in these cases, it appears that the obligation would not have been created for a date other than that fixed. The defendant bank cannot be held to have been in default through the mere lapse of time. For this judicial or extrajudicial demand was necessary for the performance of the obligation, and it was not alleged here, nor does it appear that before bringing this action the plaintiff had ever demanded it from the defendant bank in any manner whatsoever. The defendant bank, therefore, was not in default. The plaintiff's allegation that the defendant bank abstained from continuing the contest was not proven. On the contrary, it was proved, and so stated in the decision appealed from, that during the trial of this case in the Court of First Instance the designs were on the way to New York where they were sent to a technical committee. This committee, according to the new evidence before us presented by the defendant bank and which we now hold admissibe and admit, was appointed by the defendant bank for the study and determination of the designs presented and entitled to the prizes advertised, and which rendered its report and awarded the prizes in accordance with the rules and conditions of the contract, except in regard to the date of such award of prizes which, as we have found, is not essential to the contract in question. It appearing that the defendant bank was not in default it is needles to discuss the other questions raised, all depending upon the existence of said default. We find the plaintiff has no cause of action in this case, The judgment appealed from is reversed and the defendant is entirely absolved from the complaint, without any express finding as to costs. So ordered. Johnson, Street, Malcolm, Villamor, Ostrand and Johns, JJ., concur. PEDRO MARTINEZ, Plaintiff-Appellant, G. R. No. 7663

October 20, 1913 -versusMATIAS CAVIVES, ET AL., Defendants-Appellees. ROBERT LINEAU, ADMINISTRATOR, Intervener-Appellant. DECISION

original obligations had been novated by the agreement made in 1898 between Carlos Cavives and Pedro Martinez. It was held that as either party to this agreement exercised proper diligence in securing the signatures of the other brothers, there was a tacit consent to permit the obligation to stand as a debt against Carlos Cavives alone. The fact that the compromise settlement made between the plaintiff and the widow of Carlos Cavives made no mention of the amounts borrowed by Matias and Severino Cavives was deemed by the court further proof of the intention of the plaintiff to novate the debts of the three brothers and hold only Carlos liable for their payment. Article 1205 of the Civil Code reads as follows: "Novation, consisting in the substitution of a debtor in the place of the original one, may be made without the knowledge of the latter, but not without the consent of the creditor." So far as Exhibit 4 is concerned, it cannot be presumed that the plaintiff considered the liability of Carlos alone as better than the liability of all three of the brothers, since Carlos promised, at his request, to secure the signatures of his brothers to this document. Nor can it be presumed, in the absence of evidence, that there was any consideration present to induce Carlos to assume what was theretofore strictly a liability of his brothers. So that to construe Exhibit 4 to the effect that by its terms Carlos was substituted as the sole debtor of the plaintiff would mean that the latter accepted less security for his loans than he originally had, and that the former assumed liabilities which he was under no obligation to assume and for which he was no valid consideration. At the time this instrument was executed, then, it was not the intention of either of the signers to release these defendants as debtors of the plaintiff. As to the subsequent silence of both parties to this agreement, We do not consider that it was, at least so far as the plaintiff was concerned, of any significance. He signed Exhibit 4 at the time Carlos Cavives signed it on the condition that the latter would secure the signatures of his two brothers to it, thereby creating a joint obligation against the three. Carlos Cavives never secured the signatures of his brothers. The contract in question contained mutual obligations which were to be fulfilled by each of the signers, i.e., on the part of Carlos to secure the signatures of his brothers to the instrument, and then on the part of the plaintiff to recognized it as a joint obligation of the three brothers covering their indebtedness to him. The last paragraph of Article 1100 of the Civil Code reads as follows: "In mutual obligations, none of the persons bound shall incur default if the other does not fulfill or does not submit to properly fulfill what is incumbent upon him. From the time

TRENT, J:

Pedro Martinez, the plaintiff in this case, seeks to recover from Matias Cavives and Severino Cavives, the defendants, on some promissory notes executed by them in 1896. The first note, in the sum of $4,317.15 Mexican currency, was executed on April 8 of that year, and was jointly signed by them and their brother, Carlos Cavives, now deceased. The note calls for interest at ten per cent annum. Matias Cavives obtained $300 on April 30 $200 on May 30 and $200 on June 7 of that year, and Severino Cavives, $600 on June 9 [all Mexican currency], each of which stipulated that the sums mentioned therein had been borrowed under the same terms and conditions as were expressed in the joint obligation of the three brothers above mentioned. The due execution of all these notes is admitted. None of these notes were ever paid by any of the three brothers. On June 14, 1898, the deceased brother Carlos entered into an agreement with the plaintiff whereby all the obligations contracted by the three brothers during the year 1896 were liquidated and a new note was executed and signed by these two parties (Exhibit 4), its amount, $9,483,5 reales, 17 cuartos, purporting to include the principal and interest at the specified rate up to the date of its execution. The evidence of record shows that Carlos Cavives, in executing this note, agreed to obtain the signatures of his brothers to it, but this was never done. During the settlement of the estate of the deceased Carlos, an agreement was entered into by his widow and Pedro Martinez, whereby the latter agreed to accept P3,000 in full satisfaction of his claim against her husband's estate, a sum considerably less than the principal and accumulated interest of the original notes. A note [Exhibit 5] was executed under these conditions, whereby the widow was to pay its face value in annual installments. The contention of the defendants, sustained by the Court below, was that the

one of the persons obligated fulfills his obligation, the default begins for the other party." Until Carlos obtained the signatures of his brothers to this instrument, We cannot say that the plaintiff was in any way bound to acknowledge it as anything more than an executory contract containing a condition precedent which was to be performed by Carlos Cavives before his [the plaintiff's] obligation was due. Mere continued silence on his part could signify nothing until the signatures of the two brothers had been secured. As further indication that this contract [Exhibit 4] was not considered as discharging the original obligation of the defendants in this case, it may be noted that the plaintiff has never surrendered, nor was he ever called upon to surrender so far as this record shows, the original promissory notes executed by these defendants. They are still in his possession. Up to the time of the compromise settlement between the plaintiff and the widow of Carlos, at least, there is not a scintilla of evidence to show that either party to the contract of 1898 considered it as a discharge of the original debtors, Severino and Matias Cavives. The compromise settlement with the widow of Carlos, Exhibit 5, is relied upon to show novation. In this document, plaintiff makes the settlement, in effect, that the whole sum of the liquidated obligation of the brothers set forth in Exhibit 4 was a liability against the estate of Carlos. It is urged that this shows the plaintiff's intention to novate the debt by substituting Carlos as his sole debtor in lieu of the defendants. There is one fact which points strongly against this conclusion. That is, that the present action against these defendants was instituted some months previous to the date of the compromise settlement and has been prosecuted by the plaintiff with due diligence ever since its institution. But admitting, for the moment, that by this compromise settlement he was desirous of so substituting Carlos as his sole debtor in lieu of the defendants, it does not by any means follow that he could do so without the consent of Carlos. The consent of the new debtor is as essential to the novation as is that of the creditor. As We have seen, there is nothing to show that Carlos ever consented to such an arrangement. Indeed, the evidence is all the other way. A mere recital that he had so consented to accept full liability for the debts of his brothers, especially after his death, would not be sufficient to establish the fact. But We cannot believe that this statement was intended to have any such meaning by the plaintiff in view of the fact that at the time it was made he was actively prosecuting a suit against the brothers who were originally liable as his debtors, and the further fact that the total amount due him, including interest, was greatly in excess of the sum due him in 1898. Furthermore, the position taken by these defendants in their Amended Answer is

diametrically opposed to the defense of novation. In that Amended Answer, they say: "That these defendants have never refused to pay the proportion of the total amount borrowed which they justly owe, that is, one-third of it, to Don Francisco Martinez, or his executor or administrator, or to all of his heirs, but they do refuse to pay to one of the heirs what belongs to all of them." Article 1204 of the Civil Code reads: "In order that an obligation may be extinguished by another which substituted it, it is necessary that it should be so expressly declared, or that the old and new be incompatible in all points." In its Decision of December 31, 1904, the Supreme Court of Spain said: "Novation of contracts cannot be presumed in any case unless it is a necessary result of the express will of the parties, or that the old and the new obligations are incompatible in all points." To the same effect is its Decision of January 25, 1899. In its Decision of March 14, 1908, that High Court said [quoting from the syllabus]: "It is not proper to consider an obligation novated by unimportant modifications which do not alter its essence and when it is not extinguished by another which takes its place or substitutes the person of the debtor." To the same effect are the Decisions of April 15, 1909, and July 8, 1910. In Latiolais, Admrx. vs. Citizens' Bank of Louisiana [33 La. Ann., 1444], one Duclozel mortgaged property to the defendant band for the triple purpose of obtaining shares in the capital stock of the bank, bonds which the bank was authorized to issue, and loans to him as a stockholder. Duclozel subsequently sold this mortgaged property to one Sproule, who, as one of the terms of the sale, assumed the liabilities of his vendor to the bank. Sproule sold part of the property to Graff and Chalfant. The debt becoming due, the bank brought suit against the last two named persons and Sproule as owners. Duclozel was not made a party. The bank discontinued these proceedings and subsequently brought suit against Latiolais, administratrix of Duclozel, who had died. The Court said: "But the plaintiff insists that in its petition in the proceeding first brought the bank ratified the sale made by Duclozel to Sproule, and by the latter to other parties, in treating them as owners. Be that so, but it does not follow, in the absence of either a formal and express or of an implied consent to novate, which should be irresistibly inferred from surrounding circumstances, that it

has discharged Duclozel unconditionally, and has accepted those parties as new delegated debtors in his place. Nemo presumitur donare. "Novation is a contract, the object of which is: either to extinguish an existing obligation and to substitute a new one in its place; or to discharge an old debtor and substitute a new one to him; or to substitute a new creditor to an old creditor with regard to whom the debtor is discharged. "It is never presumed. The intention must clearly result from the terms of the agreement or by a full discharge of the original debt. Novation by the substitution of the new debtor can take place without the consent of the debtor, but the delegation does not operate a novation, unless the creditor has expressly declared that he intends to discharge with delegating debtor, and the delegating debtor was not in open failure or insolvency at the time. The mere indication by a debtor of a person who is to pay in his place does not operate a novation. Delegatus debitor est odiosus in lege. "The most that could be inferred would be that the bank in the exercise of a sound discretion, proposed to better its condition by accepting an additional debtor to be and remain bound with the original one." In Fidelity L. & T. Co. vs. Engleby (99 Va., 168), the Court said: "Whether or not a debt has been novated is a question of fact and depends entirely upon the intention novated. In the absence of satisfactory proof to the contrary, the presumption is that the debt has not been extinguished by taking the new evidence of indebtedness; such new evidence, in the absence of an intention expressed or implied, being treated as a conditional payment merely." In Hamlin vs. Drummond [91 Me., 175; 39 A., 551], it was said that novation is never presumed but must always be proven. In Netterstorm vs. Gallistel [110 Ill. App., 352], it was said that the burden of establishing a novation is on the party who asserts its existence; that novation is not easily presumed; and that it must clearly appear before the court will recognize it. There is no express stipulation in any of the documents of record that the obligation of the defendants was novated, and the parole evidence tending to show that it was novated is not sufficient in law to establish that fact. During the progress to this case, Robert Lineau, administrator of the estate of Francisco Martinez, father of the plaintiff, intervened claiming that the obligations of the defendant were justly due to the estate of the said Francisco Martinez. The

notes themselves [Exhibit G] make no mention whatever of Francisco Martinez, nor is there any evidence upon which the relation of principal and agent between Francisco Martinez and Pedro Martinez could be predicated. The notes must therefore be declared the sole property of the plaintiff, and the intervener's claim must be denied. For the foregoing reasons, it is hereby ordered that the defendants Severino Cavives and Matias Cavives, comply with their obligations as set forth in Exhibit G, by the payment of the principal and interest thereon at the rate of ten per cent per annum as called for in the said notes, from the date of their execution up to the full satisfaction of the judgment in this case. It is understood that as to the first note signed by the three brothers, these defendants are each liable for one-third of its principal and accumulated interest; that Matias Cavives is alone liable for the notes executed by him of April 30th, May 30th , and June 7th, 1896, whose amounts are $300, $200, and $200, respectively; and that Severino Cavives is alone liable for the note of June 9, 1896, signed by him, amounting to $600. The judgment appealed from is reversed and in accordance with Sections 3, 4, and 5 of Act No. 1045, and the Decision of this Court in Urbano vs. Ramirez [15 Phil. Rep., 371], the record will be returned to the Court below and a new trial will be had for the sole purpose of ascertaining, after due hearing, the present actual value of Mexican money as compared with Philippine currency, in order to reduce the debt to Philippine currency. Final judgment will then be entered against the defendant in accordance with this decisions. Without costs. Arellano, C.J., Torres, Johnson, Carson and Moreland, JJ., concur. G.R. No. L-11328 January 15, 1918 RUFINA CAUSING, plaintiff-appellant, vs. ALFONSO BENCER, defendant-appellee. Perfecto J. Salas Rodriguez for appellant. De leon and Magalona and J. M.a Arroyo for appellee. STREET, J.: This action was instituted by Rufina Causing upon November 14, 1914, in the Court of First Instance of Iloilo, to annul a contract for the sale of a parcel of land and to recover the property itself from Alfonso Bencer as follows: A parcel of land for rice and sugar cane in the barrio of Bokbokay, Vista Alegre, district of Barotac Viejo municipality of Banate, Province of Iloilo, P. I., having an area of about 70 hectares, bounded on the North by lands belonging to Pacifico

Bencer, Maria Salome Causing, and that of Alfonso Balleza; on the South by those of Esteban Navarro, Maria Salome Causing, and the heirs of Jorge Lachica; on the East by the Barotac Viejo River; and on the West by those of Alfonso Bencer, Ignacio Balleza, Alfonso Balleza, and Maria Salome Causing. It appears that in years gone by this land had been owned by the plaintiff, a single woman of full legal age, in common with certain nieces of hers who were then minors and over whom she seems to have exercised an informal guardianship. In the year 1909 negotiations were begun between her and the defendant with a view to the sale of this land to him; and an agreement was effected by which she undertook to convey the property to him for the sum of P1,200. Needing legal assistance in order to get the conveyance drawn up properly, the parties repaired to the office of her relative, Casiano Causing, attorney, but when he learned that the minors had an interest in the property, he informed them that the conveyance could not be legalized without judicial sanction. The efforts to effect the transfer of title by deed was then abandoned for the time being; but Bencer paid her P800 of the purchase price upon August 14, 1909, and took possession of the land, with the understanding that he was to pay the balance later and that meanwhile she would take steps to procure judicial approval of the sale as regards the interests of the minors. In 1910 a new engagement was made in regard to the price to be paid, which was to the effect that Bencer should pay P600 in addition to what he had already paid or P1,400 in all, provided the plaintiff would give him an extension of time to May, 1911, within which to pay the balance. Time went on and neither party performed the engagement. Bencer's failure to pay may have been due in part, as the plaintiff alleges, to his lack of ready money; or it may have been due as he claims, to the fact that the plaintiff had become reluctant to carry out the engagement and did not appear to collect the money at the place stipulated as the place of payment. However this may be, it is evident that the plaintiff was not yet in a position to execute a deed conveying the entire interest in the property, as no steps had been taken to get judicial approval for the sale of the shares belonging to the minors. However, as these heirs reached majority the plaintiff successively acquired their respective interests by purchase, and before the action in this case was instituted she had become the possessor of all their shares. The property meanwhile increased in value-a circumstance possibly due in part to improvements which the defendant claims to have made on property. In view of the changed conditions, the plaintiff appears to have become desirous of rescinding the contract, and accordingly brought this suit to annul the contract and recover the property, together with the sum of P3,850 alleged to be due as damages for the use and occupation of the land by the defendant during the time he has been in possession. The plaintiff also prayed for general relief. At the hearing the court below dismissed the action in so far as it sought the recovery of the land and damages for use and occupation, but gave judgment in plaintiff's favor for P600

with interest at 6 per cent from August 14, 1910, until paid. From this action of the court the plaintiff has appealed. We can see no valid reason why the plaintiff should be permitted to rescind this contract, It is evidently a case where the contract entailed mutual obligation, and if either party can be said to have been in default it was the plaintiff, Rufina Causing, rather than the defendant, Bencer. In article 1100 of the Civil Code it is declared that in mutual obligations neither party shall be deemed to be in default if the other does not fulfill, or offer to fulfill his own obligation, and that from the time one person obligated fulfills his obligation the default begins for the other party. We find that the contract contemplated a conveyance of the entire interest in the land; and the plaintiff clearly obligated herself to that extent. She was therefore not in a position to compel the defendant to pay until she could offer to him a deed sufficient to pass the whole legal estate; and for the same reason, she cannot now be permitted to rescind the contract on the ground that the defendant has heretofore failed to pay the purchase price. At the time the plaintiff accepted the payment of P800 in 1909, from an agent of the defendant, she executed a receipt in which it was said that this was an advance payment for the land in case the sale that should be effected (anticipo del terreno en caso se effective la venta); and from this it is argued that it was understood that the negotiations were merely provisional and that the sale could be abandoned. We do not so interpret the transaction; and it was evidently not so interpreted by the defendant Bencer, who has been continuously in possession claiming as owner by virtue of the original contract. Reduced to its simplest terms the case presented is this. One of several owners of a piece of property pro indiviso has made a valid contract for the sale thereof with the understanding that she should convey the interest of her coowners or procure the same to be conveyed. Since the contract was executed she has acquired the interest of the coowners by purchase and is now in a position fully to perform the contract. It results that she is, in our opinion, under a legal obligation to transfer the estate, and is not entitled to rescind the contract and recover the property from the person to whom she contracted to convey it. In this situation either party is entitled to enforce performance, and neither will be relieved from his obligation without the consent of the other. There can be no question of the power of a person to bind himself to sell something which he does not yet possess; acquiring title to the thing sold. The most reasonable interpretation of the action of the plaintiff in buying out the minor heirs as they reached majority was that she thereby intended to place herself in a position to comply with the contract which she had made with the defendant Bencer. Of course if she had never acquired these interests an action for damages would have been Bencer's only remedy. Under the prayer for general relief the court gave judgment in favor of the plaintiff for the sum of P600 the unpaid balance of the purchase money. This was proper. The court also allowed interest on this sum from August 14, 1910. The right of the plaintiff to recover

interest for the period prior to the institution of the suit is questionable in point of law, but the justice of allowing it is evident, in view of the fact that the defendant has had continuous use of the property. As the defendant has not appealed, or complained of the action of the court, the judgment will be affirmed in all respects, with costs against the appellant. So ordered. SECOND DIVISION [G.R. No. 130886. January 29, 2004] COMMONWEALTH INSURANCE CORPORATION, Petitioner, vs. COURT OF APPEALS and RIZAL COMMERCIAL BANKING CORPORATION, respondents. DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari assailing the Decision[1] of the Court of Appeals (CA), promulgated on May 16, 1997 in CA-G.R. CV No. 44473[2], which modified the decision dated March 5, 1993 of the Regional Trial Court of Makati (Branch 64); and the Resolution[3] dated September 25, 1997, denying petitioners motion for reconsideration.chanroblesvirtuallawlibrary The facts of the case as summarized by the Court of Appeals are as follows:chanroblesvirtuallawlibrary In 1984, plaintiff-appellant Rizal Commercial Banking Corporation (RCBC) granted two export loan lines, one, for P2,500,000.00 to Jigs Manufacturing Corporation (JIGS) and, the other, for P1,000,000.00 to Elba Industries, Inc. (ELBA). JIGS and ELBA which are sister corporations both drew from their respective credit lines, the former in the amount of P2,499,992.00 and the latter for P998,033.37 plus P478,985.05 from the case-to-case basis and trust receipts. These loans were evidenced by promissory notes (Exhibits A to L, inclusive JIGS; Exhibits V to BB, inclusive ELBA) and secured by surety bonds (Exhibits M to Q inclusive JIGS; Exhibits CC to FF, inclusive ELBA) executed by defendant-appellee Commonwealth Insurance Company (CIC).chanroblesvirtuallawlibrary Specifically, the surety bonds issued by appellee CIC in favor of appellant RCBC to secure the obligations of JIGS totaled P2,894,128.00 while that securing ELBAs obligation was P1,570,000.00. Hence, the total face value of the surety bonds issued by appellee CIC was P4,464,128.00.chanroblesvirtuallawlibrary JIGS and ELBA defaulted in the payment of their respective loans. On October 30, 1984, appellant RCBC made a written demand (Exhibit N) on appellee CIC to pay JIGs account to the full extend (sic) of the suretyship. A similar demand (Exhibit O) was made on December 17, 1984 for appellee CIC to pay ELBAs account to the full extend (sic) of the suretyship. In response to those demands, appellee CIC made several payments from February 25, 1985 to

February 10, 1988 in the total amount of P2,000,000.00. There having been a substantial balance unpaid, appellant RCBC made a final demand for payment (Exhibit P) on July 7, 1988 upon appellee CIC but the latter ignored it. Thus, appellant RCBC filed the Complaint for a Sum of Money on September 19, 1988 against appellee CIC.[4]chanroblesvirtuallawlibrary The trial court rendered a decision dated March 5, 1993, the dispositive portion of which reads as follows:chanroblesvirtuallawlibrary WHEREFORE, premises considered, in the light of the above facts, arguments, discussion, and more important, the law and jurisprudence, the Court finds the defendants Commonwealth Insurance Co. and defaulted third party defendants Jigs Manufacturing Corporation, Elba Industries and Iluminada de Guzman solidarily liable to pay herein plaintiff Rizal Commercial Banking Corporation the sum of Two Million Four Hundred Sixty-Four Thousand One Hundred Twenty-Eight Pesos (P2,464,128.00), to pay the plaintiff attorneys fees of P10,000.00 and to pay the costs of suit.chanroblesvirtuallawlibrary IT IS SO ORDERED.[5]chanroblesvirtuallawlibrary Not satisfied with the trial courts decision, RCBC filed a motion for reconsideration praying that in addition to the principal sum of P2,464,128.00, defendant CIC be held liable to pay interests thereon from date of demand at the rate of 12% per annum until the same is fully paid. However, the trial court denied the motion.chanroblesvirtuallawlibrary RCBC then appealed to the Court of Appeals.chanroblesvirtuallawlibrary On May 16, 1997, the CA rendered the herein assailed decision, ruling thus:chanroblesvirtuallawlibrary . . .chanroblesvirtuallawlibrary Being solidarily bound, a suretys obligation is primary so that according to Art. 1216 of the Civil Code, he can be sued alone for the entire obligation. However, one very important characteristic of this contract is the fact that a suretys liability shall be limited to the amount of the bond (Sec. 176, Insurance Code). This does not mean however that even if he defaults in the performance of his obligation, the extend (sic) of his liability remains to be the amount of the bond. If he pays his obligation at maturity upon demand, then, he cannot be made to pay more than the amount of the bond. But if he fails or refuses without justifiable cause to pay his obligation upon a valid demand so that he is in mora solvendi (Art. 1169, CC), then he must pay damages or interest in consequence thereof according to Art. 1170. Even if this interest is in excess of the amount of the bond, the defaulting surety is liable according to settled jurisprudence.chanroblesvirtuallawlibrary . . .chanroblesvirtuallawlibrary Appellant RCBC contends that when appellee CIC failed to pay the obligation upon extrajudicial demand, it incurred in delay in consequence of which it became liable to pay legal interest. The obligation to pay such interest does not arise from the contract of suretyship but from law as a result of delay or mora. Such an interest is not, therefore, covered by the limitation of appellees liability expressed in the contract. Appellee CIC

refutes this argument stating that since the surety bonds expressly state that its liability shall in no case exceed the amount stated therein, then that stipulation controls. Therefore, it cannot be made to assume an obligation more than what it secured to pay.chanroblesvirtuallawlibrary The contention of appellant RCBC is correct because it is supported by Arts. 1169 and 1170 of the Civil Code and the case of Asia Surety & Insurance Co., Inc. and Manila Surety & Fidelity Co. supra. On the other hand, the position of appellee CIC which upholds the appealed decision is untenable. The best way to show the untenability of this argument is to give this hypothetical case situation: Surety issued a bond for P1 million to secure a Debtors obligation of P1 million to Creditor. Debtor defaults and Creditor demands payment from Surety. If the theory of appellee and the lower court is correct, then the Surety may just as well not pay and use the P1 million in the meantime. It can choose to pay only after several years after all, his liability can never exceed P1 million. That would be absurd and the law could not have intended it.[6] (Emphasis supplied)chanroblesvirtuallawlibrary and disposed of the case as follows:chanroblesvirtuallawlibrary WHEREFORE, the appealed Decision is MODIFIED in the manner following:chanroblesvirtuallawlibrary The appellee Commonwealth Insurance Company shall pay the appellant Rizal Commercial Banking Corporation:chanroblesvirtuallawlibrary 1. On the account of JIGS, P2,894,128.00 ONLY with 12% legal interest per annum from October 30, 1984 minus payments made by the latter to the former after that date; and on the account of ELBA, P1,570,000.00 ONLY with 12% legal interest per annum from December 17, 1984 minus payments made by the latter to the former after that day; respecting in both accounts the applications of payment made by appellant RCBC on appellee CICs payments;chanroblesvirtuallawlibrary 2. Defendant-appellee Commonwealth Insurance Company shall pay plaintiff-appellant RIZAL COMMERCIAL BANKING CORP. and (sic) attorneys fee of P10,000.00 and cost of this suit;chanroblesvirtuallawlibrary 3. The third-party defendants JIGS MANUFACTURING CORPORATION, ELBA INDUSTRIES and ILUMINADA N. DE GUZMAN shall respectively indemnify COMMONWEALTH INSURANCE CORPORATION for whatever it had paid and shall pay to RIZAL COMMERCIAL BANKING CORPORATION of their respective individual obligations pursuant to this decision.chanroblesvirtuallawlibrary SO ORDERED.[7]chanroblesvirtuallawlibrary CIC filed a motion for reconsideration but the CA denied the same.chanroblesvirtuallawlibrary Hence, herein petition by CIC raising a single assignment of error, to wit:chanroblesvirtuallawlibrary Respondent Court of Appeals grievously erred in ordering petitioner to pay respondent RCBC the amount of the surety bonds plus legal interest of 12% per annum minus payments made by the petitioner.[8]chanroblesvirtuallawlibrary

The sole issue is whether or not petitioner should be held liable to pay legal interest over and above its principal obligation under the surety bonds issued by it.chanroblesvirtuallawlibrary Petitioner argues that it should not be made to pay interest because its issuance of the surety bonds was made on the condition that its liability shall in no case exceed the amount of the said bonds.chanroblesvirtuallawlibrary We are not persuaded. Petitioners argument is misplaced.chanroblesvirtuallawlibrary Jurisprudence is clear on this matter. As early as Tagawa vs. Aldanese and Union Gurantee Co.[9] and reiterated in Plaridel Surety & Insurance Co., Inc. vs. P.L. Galang Machinery Co., Inc.[10], and more recently, in Republic vs. Court of Appeals and R & B Surety and Insurance Company, Inc.[11], we have sustained the principle that if a surety upon demand fails to pay, he can be held liable for interest, even if in thus paying, its liability becomes more than the principal obligation. The increased liability is not because of the contract but because of the default and the necessity of judicial collection.[12]chanroblesvirtuallawlibrary Petitioners liability under the suretyship contract is different from its liability under the law. There is no question that as a surety, petitioner should not be made to pay more than its assumed obligation under the surety bonds.[13] However, it is clear from the above-cited jurisprudence that petitioners liability for the payment of interest is not by reason of the suretyship agreement itself but because of the delay in the payment of its obligation under the said agreement.chanroblesvirtuallawlibrary Petitioner admits having incurred in delay. Nonetheless, it insists that mere delay does not warrant the payment of interest. Citing Section 244 of the Insurance Code,[14] petitioner submits that under the said provision of law, interest shall accrue only when the delay or refusal to pay is unreasonable; that the delay in the payment of its obligation is not unreasonable because such delay was brought about by negotiations being made with RCBC for the amicable settlement of the case.chanroblesvirtuallawlibrary We are not convinced. chanroblesvirtuallawlibrary It is not disputed that out of the principal sum of P4,464,128.00 petitioner was only able to pay P2,000,000.00. Letters demanding the payment of the respective obligations of JIGS and ELBA were initially sent by RCBC to petitioner on October 30, 1984[15] and December 17, 1984.[16] Petitioner made payments on an installment basis spanning a period of almost three years, i.e., from February 25, 1985 until February 10, 1988. On July 7, 1988, or after a period of almost five months from its last payment, RCBC, thru its legal counsel, sent a final letter of demand asking petitioner to pay the remaining balance of its obligation including interest.[17] Petitioner failed to pay. As of the date of the filing of the complaint on September 19, 1988, petitioner was even unable to pay the remaining balance of P2,464,128.00 out of the principal amount it owes RCBC. chanroblesvirtuallawlibrary Petitioners contention that what prevented it from paying its obligation to RCBC is the fact that the latter insisted on imposing interest and penalties over and above the principal sum it seeks to recover is not plausible. Considering that petitioner admits its obligation to pay the

principal amount, then it should have paid the remaining balance of P2,464,128.00, notwithstanding any disagreements with RCBC regarding the payment of interest. The fact that the negotiations for the settlement of petitioners obligation did not push through does not excuse it from paying the principal sum due to RCBC. chanroblesvirtuallawlibrary The issue of petitioners payment of interest is a matter that is totally different from its obligation to pay the principal amount covered by the surety bonds it issued. Petitioner offered no valid excuse for not paying the balance of its principal obligation when demanded by RCBC. Its failure to pay is, therefore, unreasonable. Thus, we find no error in the appellate courts ruling that petitioner is liable to pay interest.chanroblesvirtuallawlibrary As to the rate of interest, we do not agree with petitioners contention that the rate should be 6% per annum. The appellate court is correct in imposing 12% interest. It is in accordance with our ruling in Eastern Shipping Lines, Inc. vs. Court of Appeals,[18] wherein we have established certain guidelines in awarding interest in the concept of actual and compensatory damages, to wit:chanroblesvirtuallawlibrary I.When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on Damages of the Civil Code govern in determining the measure of recoverable damages.chanroblesvirtuallawlibrary II.With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as followschanroblesvirtuallawlibrary 1.When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.chanroblesvirtuallawlibrary 2.When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.chanroblesvirtuallawlibrary

3.When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.[19] (Emphasis supplied)chanroblesvirtuallawlibrary In the present case, there is no dispute that petitioners obligation consists of a loan or forbearance of money. No interest has been agreed upon in writing between petitioner and respondent. Applying the above-quoted rule to the present case, the Court of Appeals correctly imposed the rate of interest at 12% per annum to be computed from the time the extra-judicial demand was made. This is in accordance with the provisions of Article 1169[20] of the Civil Code and of the settled rule that where there has been an extra-judicial demand before action for performance was filed, interest on the amount due begins to run not from the date of the filing of the complaint but from the date of such extra-judicial demand.[21] RCBCs extra-judicial demand for the payment of JIGS obligation was made on October 30, 1984; while the extra-judicial demand for the payment of ELBAs obligation was made on December 17, 1984. On the other hand, the complaint for a sum of money was filed by RCBC with the trial court only on September 19, 1988.chanroblesvirtuallawlibrary WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court of Appeals are AFFIRMED in toto.chanroblesvirtuallawlibrary SO ORDERED.c