Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-13667 April 29, 1960
PRIMITIVO ANSAY, ETC., ET AL., plaintiffs-appellants,
vs.
THE BOARD OF DIRECTORS OF THE NATIONAL DEVELOPMENT COMPANY, ET
AL., defendants-appellees.
Celso A. Fernandez for appellants.
Juan C. Jimenez, for appellees.
PARAS, C. J.:
On July 25, 1956, appellants filed against appellees in the Court of First Instance of Manila a
complaint praying for a 20% Christmas bonus for the years 1954 and 1955. The court a quo on
appellees' motion to dismiss, issued the following order:
Considering the motion to dismiss filed on 15 August, 1956, set for this morning; considering
that at the hearing thereof, only respondents appeared thru counsel and there was no
appearance for the plaintiffs although the court waited for sometime for them; considering,
however, that petitioners have submitted an opposition which the court will consider together
with the arguments presented by respondents and the Exhibits marked and presented,
namely, Exhibits 1 to 5, at the hearing of the motion to dismiss; considering that the action in
brief is one to compel respondents to declare a Christmas bonus for petitioners workers in
the National Development Company; considering that the Court does not see how petitioners
may have a cause of action to secure such bonus because:
(a) A bonus is an act of liberality and the court takes it that it is not within its judicial powers
to command respondents to be liberal;
(b) Petitioners admit that respondents are not under legal duty to give such bonus but that
they had only ask that such bonus be given to them because it is a moral obligation of
respondents to give that but as this Court understands, it has no power to compel a party to
comply with a moral obligation (Art. 142, New Civil Code.).
IN VIEW WHEREOF, dismissed. No pronouncement as to costs.
A motion for reconsideration of the afore-quoted order was denied. Hence this appeal.
Appellants contend that there exists a cause of action in their complaint because their claim rests on
moral grounds or what in brief is defined by law as a natural obligation.
Since appellants admit that appellees are not under legal obligation to give such claimed bonus; that
the grant arises only from a moral obligation or the natural obligation that they discussed in their
brief, this Court feels it urgent to reproduce at this point, the definition and meaning of natural
obligation.
Article 1423 of the New Civil Code classifies obligations into civil or natural. "Civil obligations are a
right of action to compel their performance. Natural obligations, not being based on positive law but
on equity and natural law, do not grant a right of action to enforce their performance, but after
voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or
rendered by reason thereof".
It is thus readily seen that an element of natural obligation before it can be cognizable by the court is
voluntary fulfillment by the obligor. Certainly retention can be ordered but only after there has been
voluntary performance. But here there has been no voluntary performance. In fact, the court cannot
order the performance.
At this point, we would like to reiterate what we said in the case of Philippine Education Co. vs. CIR
and the Union of Philippine Education Co., Employees (NUL) (92 Phil., 381; 48 Off. Gaz., 5278)
x x x x x x x x x
From the legal point of view a bonus is not a demandable and enforceable obligation. It is so
when it is made a part of the wage or salary compensation.
And while it is true that the subsequent case of H. E. Heacock vs. National Labor Union, et al., 95
Phil., 553; 50 Off. Gaz., 4253, we stated that:
Even if a bonus is not demandable for not forming part of the wage, salary or compensation
of an employee, the same may nevertheless, be granted on equitable consideration as when
it was given in the past, though withheld in succeeding two years from low salaried
employees due to salary increases.
still the facts in said Heacock case are not the same as in the instant one, and hence the ruling
applied in said case cannot be considered in the present action.
Premises considered, the order appealed from is hereby affirmed, without pronouncement as to
costs.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48889 May 11, 1989
DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,
vs.
THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First
Instance of Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA
VILLAFUERTE, respondents.

GANCAYCO, J.:
The issue posed in this petition for review on certiorari is the validity of a promissory note which was
executed in consideration of a previous promissory note the enforcement of which had been barred
by prescription.
On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural loan
from the Agricultural and Industrial Bank (AIB), now the Development of the Philippines (DBP), in the
sum of P2,000.00, Philippine Currency, as evidenced by a promissory note of said date whereby
they bound themselves jointly and severally to pay the account in ten (10) equal yearly
amortizations. As the obligation remained outstanding and unpaid even after the lapse of the
aforesaid ten-year period, Confesor, who was by then a member of the Congress of the Philippines,
executed a second promissory note on April 11, 1961 expressly acknowledging said loan and
promising to pay the same on or before June 15, 1961. The new promissory note reads as follows
I hereby promise to pay the amount covered by my promissory note on or before
June 15, 1961. Upon my failure to do so, I hereby agree to the foreclosure of my
mortgage. It is understood that if I can secure a certificate of indebtedness from the
government of my back pay I will be allowed to pay the amount out of it.
Said spouses not having paid the obligation on the specified date, the DBP filed a complaint dated
September 11, 1970 in the City Court of Iloilo City against the spouses for the payment of the loan.
After trial on the merits a decision was rendered by the inferior court on December 27, 1976, the
dispositive part of which reads as follows:
WHEREFORE, premises considered, this Court renders judgment, ordering the
defendants Patricio Confesor and Jovita Villafuerte Confesor to pay the plaintiff
Development Bank of the Philippines, jointly and severally, (a) the sum of P5,760.96
plus additional daily interest of P l.04 from September 17, 1970, the date Complaint
was filed, until said amount is paid; (b) the sum of P576.00 equivalent to ten (10%) of
the total claim by way of attorney's fees and incidental expenses plus interest at the
legal rate as of September 17,1970, until fully paid; and (c) the costs of the suit.
Defendants-spouses appealed therefrom to the Court of First Instance of Iloilo wherein in due course
a decision was rendered on April 28, 1978 reversing the appealed decision and dismissing the
complaint and counter-claim with costs against the plaintiff.
A motion for reconsideration of said decision filed by plaintiff was denied in an order of August 10,
1978. Hence this petition wherein petitioner alleges that the decision of respondent judge is contrary
to law and runs counter to decisions of this Court when respondent judge (a) refused to recognize
the law that the right to prescription may be renounced or waived; and (b) that in signing the second
promissory note respondent Patricio Confesor can bind the conjugal partnership; or otherwise said
respondent became liable in his personal capacity. The petition is impressed with merit. The right to
prescription may be waived or renounced. Article 1112 of Civil Code provides:
Art. 1112. Persons with capacity to alienate property may renounce prescription
already obtained, but not the right to prescribe in the future.
Prescription is deemed to have been tacitly renounced when the renunciation results
from acts which imply the abandonment of the right acquired.
There is no doubt that prescription has set in as to the first promissory note of February 10, 1940.
However, when respondent Confesor executed the second promissory note on April 11, 1961
whereby he promised to pay the amount covered by the previous promissory note on or before June
15, 1961, and upon failure to do so, agreed to the foreclosure of the mortgage, said respondent
thereby effectively and expressly renounced and waived his right to the prescription of the action
covering the first promissory note.
This Court had ruled in a similar case that
... when a debt is already barred by prescription, it cannot be enforced by the creditor.
But a new contract recognizing and assuming the prescribed debt would be valid and
enforceable ... .
1

Thus, it has been held
Where, therefore, a party acknowledges the correctness of a debt and promises to pay it
after the same has prescribed and with full knowledge of the prescription he thereby
waives the benefit of prescription.
2

This is not a mere case of acknowledgment of a debt that has prescribed but a new promise to pay
the debt. The consideration of the new promissory note is the pre-existing obligation under the first
promissory note. The statutory limitation bars the remedy but does not discharge the debt.
A new express promise to pay a debt barred ... will take the case from the operation of
the statute of limitations as this proceeds upon the ground that as a statutory limitation
merely bars the remedy and does not discharge the debt, there is something more than a
mere moral obligation to support a promise, to wit a pre-existing debt which is a
sufficient consideration for the new the new promise; upon this sufficient consideration
constitutes, in fact, a new cause of action.
3

... It is this new promise, either made in express terms or deduced from an
acknowledgement as a legal implication, which is to be regarded as reanimating the old
promise, or as imparting vitality to the remedy (which by lapse of time had become
extinct) and thus enabling the creditor to recover upon his original contract.
4

However, the court a quo held that in signing the promissory note alone, respondent Confesor
cannot thereby bind his wife, respondent Jovita Villafuerte, citing Article 166 of the New Civil Code
which provides:
Art. 166. Unless the wife has been declared a non compos mentis or a spend thrift,
or is under civil interdiction or is confined in a leprosarium, the husband cannot
alienate or encumber any real property of the conjugal partnership without, the wife's
consent. If she ay compel her to refuses unreasonably to give her consent, the court
m grant the same.
We disagree. Under Article 165 of the Civil Code, the husband is the administrator of the conjugal
partnership. As such administrator, all debts and obligations contracted by the husband for the
benefit of the conjugal partnership, are chargeable to the conjugal partnership.
5
No doubt, in this
case, respondent Confesor signed the second promissory note for the benefit of the conjugal
partnership. Hence the conjugal partnership is liable for this obligation.
WHEREFORE, the decision subject of the petition is reversed and set aside and another decision is
hereby rendered reinstating the decision of the City Court of Iloilo City of December 27, 1976,
without pronouncement as to costs in this instance. This decision is immediately executory and no
motion for extension of time to file motion for reconsideration shall be granted.
SO ORDERED.
Narvasa and Cruz, JJ., concur.
Grio-Aquino, J., took no part.


Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-23749 April 29, 1977
FAUSTINO CRUZ, plaintiff-appellant,
vs.
J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA, INC., defendants-appellees.

BARREDO, J.:
Appeal from the order dated August 13, 1964 of the Court of First Instance of Quezon City in Civil
Case No. Q-7751, Faustino Cruz vs. J.M. Tuason & Co., Inc., and Gregorio Araneta, Inc., dismissing
the complaint of appellant Cruz for the recovery of improvements he has made on appellees' land
and to compel appellees to convey to him 3,000 square meters of land on three grounds: (1) failure
of the complaint to state a cause of action; (2) the cause of action of plaintiff is unenforceable under
the Statute of Frauds; and (3) the action of the plaintiff has already prescribed.
Actually, a perusal of plaintiff-appellant's complaint below shows that he alleged two separate
causes of action, namely: (1) that upon request of the Deudors (the family of Telesforo Deudor who
laid claim on the land in question on the strength of an "informacion posesoria" ) plaintiff made
permanent improvements valued at P30,400.00 on said land having an area of more or less 20
quinones and for which he also incurred expenses in the amount of P7,781.74, and since
defendants-appellees are being benefited by said improvements, he is entitled to reimbursement
from them of said amounts and (2) that in 1952, defendants availed of plaintiff's services as an
intermediary with the Deudors to work for the amicable settlement of Civil Case No. Q-135, then
pending also in the Court of First Instance of Quezon City, and involving 50 quinones of land, of
Which the 20 quinones aforementioned form part, and notwithstanding his having performed his
services, as in fact, a compromise agreement entered into on March 16, 1963 between the Deudors
and the defendants was approved by the court, the latter have refused to convey to him the 3,000
square meters of land occupied by him, (a part of the 20 quinones above) which said defendants
had promised to do "within ten years from and after date of signing of the compromise agreement",
as consideration for his services.
Within the Period allowed by the rules, the defendants filed separate motions to dismiss alleging
three Identical grounds: (1) As regards that improvements made by plaintiff, that the complaint states
no cause of action, the agreement regarding the same having been made by plaintiff with the
Deudors and not with the defendants, hence the theory of plaintiff based on Article 2142 of the Code
on unjust enrichment is untenable; and (2) anent the alleged agreement about plaintiffs services as
intermediary in consideration of which, defendants promised to convey to him 3,000 square meters
of land, that the same is unenforceable under the Statute of Frauds, there being nothing in writing
about it, and, in any event, (3) that the action of plaintiff to compel such conveyance has already
prescribed.
Plaintiff opposed the motion, insisting that Article 2142 of the applicable to his case; that the Statute
of Frauds cannot be invoked by defendants, not only because Article 1403 of the Civil Code refers
only to "sale of real property or of an interest therein" and not to promises to convey real property
like the one supposedly promised by defendants to him, but also because, he, the plaintiff has
already performed his part of the agreement, hence the agreement has already been partly executed
and not merely executory within the contemplation of the Statute; and that his action has not
prescribed for the reason that defendants had ten years to comply and only after the said ten years
did his cause of action accrue, that is, ten years after March 16, 1963, the date of the approval of the
compromise agreement, and his complaint was filed on January 24, 1964.
Ruling on the motion to dismiss, the trial court issued the herein impugned order of August 13, 1964:
In the motion, dated January 31, 1964, defendant Gregorio Araneta, Inc. prayed that
the complaint against it be dismissed on the ground that (1) the claim on which the
action is founded is unenforceable under the provision of the Statute of Frauds; and
(2) the plaintiff's action, if any has already prescribed. In the other motion of February
11, 1964, defendant J. M. Tuason & Co., Inc. sought the dismissal of the plaintiffs
complaint on the ground that it states no cause of action and on the Identical grounds
stated in the motion to dismiss of defendant Gregorio Araneta, Inc. The said motions
are duly opposed by the plaintiff.
From the allegations of the complaint, it appears that, by virtue of an agreement
arrived at in 1948 by the plaintiff and the Deudors, the former assisted the latter in
clearing, improving, subdividing and selling the large tract of land consisting of 50
quinones covered by the informacion posesoria in the name of the late Telesforo
Deudor and incurred expenses, which are valued approximately at P38,400.00 and
P7,781.74, respectively; and, for the reasons that said improvements are being used
and enjoyed by the defendants, the plaintiff is seeking the reimbursement for the
services and expenses stated above from the defendants.
Defendant J. M. Tuason & Co., Inc. claimed that, insofar as the plaintiffs claim for the
reimbursement of the amounts of P38,400.00 and P7,781.74 is concerned, it is not a
privy to the plaintiff's agreement to assist the Deudors n improving the 50 quinones.
On the other hand, the plaintiff countered that, by holding and utilizing the
improvements introduced by him, the defendants are unjustly enriching and
benefiting at the expense of the plaintiff; and that said improvements constitute a lien
or charge of the property itself
On the issue that the complaint insofar as it claims the reimbursement for the
services rendered and expenses incurred by the plaintiff, states no cause of action,
the Court is of the opinion that the same is well-founded. It is found that the
defendants are not parties to the supposed express contract entered into by and
between the plaintiff and the Deudors for the clearing and improvement of the 50
quinones. Furthermore in order that the alleged improvement may be considered a
lien or charge on the property, the same should have been made in good faith and
under the mistake as to the title. The Court can take judicial notice of the fact that the
tract of land supposedly improved by the plaintiff had been registered way back in
1914 in the name of the predecessors-in-interest of defendant J. M. Tuason & Co.,
Inc. This fact is confirmed in the decision rendered by the Supreme Court on July 31,
1956 in Case G. R. No. L-5079 entitled J.M. Tuason & Co. Inc. vs. Geronimo
Santiago, et al., Such being the case, the plaintiff cannot claim good faith and
mistake as to the title of the land.
On the issue of statute of fraud, the Court believes that same is applicable to the
instant case. The allegation in par. 12 of the complaint states that the defendants
promised and agreed to cede, transfer and convey unto the plaintiff the 3,000 square
meters of land in consideration of certain services to be rendered then. it is clear that
the alleged agreement involves an interest in real property. Under the provisions of
See. 2(e) of Article 1403 of the Civil Code, such agreement is not enforceable as it is
not in writing and subscribed by the party charged.
On the issue of statute of limitations, the Court holds that the plaintiff's action has
prescribed. It is alleged in par. 11 of the complaint that, sometime in 1952, the
defendants approached the plaintiff to prevail upon the Deudors to enter to a
compromise agreement in Civil Case No. Q-135 and allied cases. Furthermore, par.
13 and 14 of the complaint alleged that the plaintiff acted as emissary of both parties
in conveying their respective proposals and couter-proposals until the final settlement
was effected on March 16, 1953 and approved by Court on April 11, 1953. In the
present action, which was instituted on January 24, 1964, the plaintiff is seeking to
enforce the supposed agreement entered into between him and the defendants in
1952, which was already prescribed.
WHEREFORE, the plaintiffs complaint is hereby ordered DISMISSED without
pronouncement as to costs.
SO ORDERED. (Pp. 65-69, Rec. on Appeal,)
On August 22, 1964, plaintiff's counsel filed a motion for reconsideration dated August 20, 1964 as
follows:
Plaintiff through undersigned counsel and to this Honorable Court, respectfully
moves to reconsider its Order bearing date of 13 August 1964, on the following
grounds:
1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST
DEFENDANTS IN SO FAR AS PLAINTIFF'S CLAIM PAYMENT OF SERVICES AND
REIMBURSEMENT OF HIS EXPENSES, IS CONCERNED;
II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS., THE SAME
HAS NOT PRESCRIBED AND THE STATUTE OF FRAUDS IS NOT APPLICABLE
THERETO;
A R G U M E N T
Plaintiff's complaint contains two (2) causes of action the first being an action for
sum of money in the amount of P7,781.74 representing actual expenses and
P38,400.00 as reasonable compensation for services in improving the 50 quinones
now in the possession of defendants. The second cause of action deals with the
3,000 sq. ms. which defendants have agreed to transfer into Plaintiff for services
rendered in effecting the compromise between the Deudors and defendants;
Under its order of August 3, 1964, this Honorable Court dismissed the claim for sum
of money on the ground that the complaint does not state a cause of action against
defendants. We respectfully submit:
1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION AGAINST
DEFENDANTS IN SO FAR AS PLAINTIFF'S CLAIM FOR PAYMENT OF SERVICES
AND REIMBURSEMENT OF HIS EXPENSES IS CONCERNED.
Said this Honorable Court (at p. 2, Order):
O R D E R
xxx xxx xxx
On the issue that the complaint, in so far as it claims the reimbursement for the
services rendered and expenses incurred by the plaintiff, states no cause of action,
the Court is of the opinion that the same is well-founded. It is found that the
defendants are not parties to the supposed express contract entered into by and
between the plaintiff and the Deudors for the clearing and improvement of the 50
quinones. Furthermore, in order that the alleged improvement may he considered a
lien or charge on the property, the same should have been made in good faith and
under the mistake as to title. The Court can take judicial notice of the fact that the
tract of land supposedly improved by the plaintiff had been registered way back in
1914 in the name of the predecessors-in-interest of defendant J. M. Tuason & Co.,
Inc. This fact is confirmed in the decision rendered by the Supreme Court on July 31,
1956 in case G. R. No. L-5079 entitled 'J M. Tuason & Co., Inc. vs, Geronimo
Santiago, et al.' Such being the case, the plaintiff cannot claim good faith and
mistake as to the title of the land.
The position of this Honorable Court (supra) is that the complaint does not state a
cause of action in so far as the claim for services and expenses is concerned
because the contract for the improvement of the properties was solely between the
Deudors and plaintiff, and defendants are not privies to it. Now, plaintiff's theory is
that defendants are nonetheless liable since they are utilizing and enjoying the
benefit's of said improvements. Thus under paragraph 16 of "he complaint, it is
alleged:
(16) That the services and personal expenses of plaintiff mentioned in
paragraph 7 hereof were rendered and in fact paid by him to improve,
as they in fact resulted in considerable improvement of the 50
quinones, and defendants being now in possession of and utilizing
said improvements should reimburse and pay plaintiff for such
services and expenses.
Plaintiff's cause of action is premised inter alia, on the theory of unjust enrichment
under Article 2142 of the civil Code:
ART. 2142. Certain lawful voluntary and unilateral acts give rise to
the juridical relation of quasi-contract to the end that no one shill be
unjustly enriched or benefited at the expense of another.
In like vein, Article 19 of the same Code enjoins that:
ART. 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give every-one his due and observe honesty and good
faith.
We respectfully draw the attention of this Honorable Court to the fact that ARTICLE
2142 (SUPRA) DEALS WITH QUASI-CONTRACTS or situations WHERE THERE IS
NO CONTRACT BETWEEN THE PARTIES TO THE ACTION. Further, as we can
readily see from the title thereof (Title XVII), that the Same bears the designation
'EXTRA CONTRACTUAL OBLIGATIONS' or obligations which do not arise from
contracts. While it is true that there was no agreement between plaintiff and
defendants herein for the improvement of the 50 quinones since the latter are
presently enjoying and utilizing the benefits brought about through plaintiff's labor
and expenses, defendants should pay and reimburse him therefor under the principle
that 'no one may enrich himself at the expense of another.' In this posture, the
complaint states a cause of action against the defendants.
II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS. THE SAME
HAS NOT PRESCRIBED AND THE STATUTE OF FRAUDS IS NOT APPLICABLE
THERETO.
The Statute of Frauds is CLEARLY inapplicable to this case:
At page 2 of this Honorable Court's order dated 13 August 1964, the Court ruled as
follows:
O R D E R
xxx xxx xxx
On the issue of statute of fraud, the Court believes that same is
applicable to the instant Case, The allegation in par. 12 of the
complaint states that the defendants promised and agree to cede,
transfer and convey unto the plaintiff, 3,000 square meters of land in
consideration of certain services to be rendered then. It is clear that
the alleged agreement involves an interest in real property. Under the
provisions of Sec. 2(e) of Article 1403 of the Civil Code, such
agreement is not enforceable as it is not in writing and subscribed by
the party charged.
To bring this issue in sharper focus, shall reproduce not only paragraph 12 of the
complaint but also the other pertinent paragraphs therein contained. Paragraph 12
states thus:
C O M P L A I N T
xxx xxx xxx
12). That plaintiff conferred with the aforesaid representatives of defendants several
times and on these occasions, the latter promised and agreed to cede, transfer and
convey unto plaintiff the 3,000 sq. ms. (now known as Lots 16-B, 17 and 18) which
plaintiff was then occupying and continues to occupy as of this writing, for and in
consideration of the following conditions:
(a) That plaintiff succeed in convincing the DEUDORS to enter into a
compromise agreement and that such agreement be actually entered
into by and between the DEUDORS and defendant companies;
(b) That as of date of signing the compromise agreement, plaintiff
shall be the owner of the 3,000 sq. ms. but the documents evidencing
his title over this property shall be executed and delivered by
defendants to plaintiff within ten (10) years from and after date of
signing of the compromise agreement;
(c) That plaintiff shall, without any monetary expense of his part,
assist in clearing the 20 quinones of its occupants;
13). That in order to effect a compromise between the parties. plaintiff not only as
well acted as emissary of both parties in conveying their respective proposals and
counter- proposals until succeeded in convinzing the DEUDORS to settle with
defendants amicably. Thus, on March 16, 1953,a Compromise Agreement was
entered into by and between the DEUDORS and the defendant companies; and on
April 11, 1953, this agreement was approved by this Honorable Court;
14). That in order to comply with his other obligations under his agreement with
defendant companies, plaintiff had to confer with the occupants of the property,
exposing himself to physical harm, convincing said occupants to leave the premises
and to refrain from resorting to physical violence in resisting defendants' demands to
vacate;
That plaintiff further assisted defendants' employees in the actual
demolition and transferof all the houses within the perimeter of the 20
quinones until the end of 1955, when said area was totally cleared
and the houses transferred to another area designated by the
defendants as 'Capt. Cruz Block' in Masambong, Quezon City. (Pars.
12, 13 and 14, Complaint; Emphasis supplied)
From the foregoing, it is clear then the agreement between the parties mentioned in
paragraph 12 (supra) of the complaint has already been fully EXECUTED ON ONE
PART, namely by the plaintiff. Regarding the applicability of the statute of frauds (Art.
1403, Civil Code), it has been uniformly held that the statute of frauds IS
APPLICABLE ONLY TO EXECUTORY CONTRACTS BUT NOT WHERE THE
CONTRACT HAS BEEN PARTLY EXECUTED:
SAME ACTION TO ENFORCE. The statute of frauds has
been uniformly interpreted to be applicable to executory and not to
completed or contracts. Performance of the contracts takes it out of
the operation of the statute. ...
The statute of the frauds is not applicable to contracts which are
either totally or partially performed, on the theory that there is a wide
field for the commission of frauds in executory contracts which can
only be prevented by requiring them to be in writing, a facts which is
reduced to a minimum in executed contracts because the intention of
the parties becomes apparent buy their execution and execution, in
mots cases, concluded the right the parties. ... The partial
performance may be proved by either documentary or oral evidence.
(At pp. 564-565, Tolentino's Civil Code of the Philippines, Vol. IV,
1962 Ed.; Emphasis supplied).
Authorities in support of the foregoing rule are legion. Thus Mr. Justice Moran in his
'Comments on the Rules of Court', Vol. III, 1974 Ed., at p. 167, states:
2 THE STATUTE OF FRAUDS IS APPLICABLE ONLY TO
EXECUTORY CONTRACTS: CONTRACTS WHICH ARE EITHER
TOTALLY OR PARTIALLY PERFORMED ARE WITHOUT THE
STATUE. The statute of frauds is applicable only to executory
contracts. It is neither applicable to executed contracts nor to
contracts partially performed. The reason is simple. In executory
contracts there is a wide field for fraud because unless they be in
writing there is no palpable evidence of the intention of the
contracting parties. The statute has been enacted to prevent fraud.
On the other hand the commission of fraud in executed contracts is
reduced to minimum in executed contracts because (1) the intention
of the parties is made apparent by the execution and (2) execution
concludes, in most cases, the rights of the parties. (Emphasis
supplied)
Under paragraphs 13 and 14 of the complaint (supra) one can readily see that the
plaintiff has fulfilled ALL his obligation under the agreement between him defendants
concerning the 3,000 sq. ms. over which the latter had agreed to execute the proper
documents of transfer. This fact is further projected in paragraph 15 of the complaint
where plaintiff states;
15). That in or about the middle of 1963, after all the conditions stated
in paragraph 12 hereof had been fulfilled and fully complied with,
plaintiff demanded of said defendants that they execute the Deed of
Conveyance in his favor and deliver the title certificate in his name,
over the 3,000 sq. ms. but defendants failed and refused and
continue to fail and refuse to heed his demands. (par. 15, complaint;
Emphasis supplied).
In view of the foregoing, we respectfully submit that this Honorable court erred in
holding that the statute of frauds is applicable to plaintiff's claim over the 3,000 sq.
ms. There having been full performance of the contract on plaintiff's part, the same
takes this case out of the context of said statute.
Plaintiff's Cause of Action had NOT Prescribed:
With all due respect to this Honorable court, we also submit that the Court committed
error in holding that this action has prescribed:
O R D E R
xxx xxx xxx
On the issue of the statute of limitations, the Court holds that the
plaintiff's action has prescribed. It is alleged in par. III of the complaint
that, sometime in 1952, the defendants approached the plaintiff to
prevail upon the Deudors to enter into a compromise agreement in
Civil Case No. Q-135 and allied cases. Furthermore, pars. 13 and 14
of the complaint alleged that plaintiff acted as emissary of both
parties in conveying their respective proposals and counter-proposals
until the final settlement was affected on March 16, 1953 and
approved by the Court on April 11, 1953. In the present actin, which
was instituted on January 24, 1964, the plaintiff is seeking to enforce
the supposed agreement entered into between him and the
defendants in 1952, which has already proscribed. (at p. 3, Order).
The present action has not prescribed, especially when we consider carefully the
terms of the agreement between plaintiff and the defendants. First, we must draw the
attention of this Honorable Court to the fact that this is an action to compel
defendants to execute a Deed of Conveyance over the 3,000 sq. ms. subject of their
agreement. In paragraph 12 of the complaint, the terms and conditions of the
contract between the parties are spelled out. Paragraph 12 (b) of the complaint
states:
(b) That as of date of signing the compromise agreement, plaintiff
shall be the owner of the 3,000 sq. ms. but the documents evidencing
his title over this property shall be executed and delivered by
defendants to plaintiff within ten (10) years from and after date of
signing of the compromise agreement. (Emphasis supplied).
The compromise agreement between defendants and the Deudors which was
conclude through the efforts of plaintiff, was signed on 16 March 1953. Therefore, the
defendants had ten (10) years signed on 16 March 1953. Therefore, the defendants
had ten (10) years from said date within which to execute the deed of conveyance in
favor of plaintiff over the 3,000 sq. ms. As long as the 10 years period has not
expired, plaintiff had no right to compel defendants to execute the document and the
latter were under no obligation to do so. Now, this 10-year period elapsed on March
16, 1963. THEN and ONLY THEN does plaintiff's cause of action plaintiff on March
17, 1963. Thus, under paragraph 15, of the complaint (supra) plaintiff made demands
upon defendants for the execution of the deed 'in or about the middle of 1963.
Since the contract now sought to be enforced was not reduced to writing, plaintiff's
cause of action expires on March 16, 1969 or six years from March 16, 1963 WHEN
THE CAUSE OF ACTION ACCRUED (Art. 1145, Civil Code).
In this posture, we gain respectfully submit that this Honorable Court erred in holding
that plaintiff's action has prescribed.
P R A Y E R
WHEREFORE, it is respectfully prayed that " Honorable Court reconsider its Order
dated August 13, 1964; and issue another order denying the motions to dismiss of
defendants G. Araneta, Inc. and J. M. Tuason Co. Inc. for lack of merit. (Pp. 70-85,
Record on Appeal.)
Defendants filed an opposition on the main ground that "the arguments adduced by the plaintiff are
merely reiterations of his arguments contained in his Rejoinder to Reply and Opposition, which have
not only been refuted in herein defendant's Motion to Dismiss and Reply but already passed upon by
this Honorable Court."
On September 7, 1964, the trial court denied the motion for reconsiderations thus:
After considering the plaintiff's Motion for Reconsideration of August 20, 1964 and it
appearing that the grounds relied upon in said motion are mere repetition of those
already resolved and discussed by this Court in the order of August 13, 1964, the
instant motion is hereby denied and the findings and conclusions arrived at by the
Court in its order of August 13, 1964 are hereby reiterated and affirmed.
SO ORDERED. (Page 90, Rec. on Appeal.)
Under date of September 24, 1964, plaintiff filed his record on appeal.
In his brief, appellant poses and discusses the following assignments of error:
I. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT ON THE
GROUND THAT APPELLANT'S CLAIM OVER THE 3,000 SQ. MS. IS ALLEGEDLY
UNENFORCEABLE UNDER THE STATUTE OF FRAUDS;
II. THAT THE COURT A QUO FURTHER COMMITTED ERROR IN DISMISSING
APPELLANT'S COMPLAINT ON THE GROUND THAT HIS CLAIM OVER THE
3,000 SQ. MS. IS ALLEGEDLY BARRED BY THE STATUTE OF LIMITATIONS; and
III. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT FOR
FAILURE TO STATE A CAUSE OF ACTION IN SO FAR AS APPELLANT'S CLAIM
FOR REIMBURSEMENT OF EXPENSES AND FOR SERVICES RENDERED IN
THE IMPROVEMENT OF THE FIFTY (50) QUINONES IS CONCERNED.
We agree with appellant that the Statute of Frauds was erroneously applied by the trial court. It is
elementary that the Statute refers to specific kinds of transactions and that it cannot apply to any that
is not enumerated therein. And the only agreements or contracts covered thereby are the following:
(1) Those entered into in the name of another person by one who has been given no
authority or legal representation, or who has acted beyond his powers;
(2) Those do not comply with the Statute of Frauds as set forth in this number, In the
following cases an agreement hereafter made shall be unenforceable by action,
unless the same, or some note or memorandum thereof, be in writing, and
subscribed by the party charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a secondary evidence of its
contents:
(a) An agreement that by its terms is not to be performed within a
year from the making thereof;
(b) A special promise to answer for the debt, default, or miscarriage
of another;
(c) An agreement made in consideration of marriage, other than a
mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at
a price not less than five hundred pesos, unless the buyer accept and
receive part of such goods and chattels, or the evidences, or some of
them of such things in action, or pay at the time some part of the
purchase money; but when a sale is made by auction and entry is
made by the auctioneer in his sales book, at the time of the sale, of
the amount and kind of property sold, terms of sale, price, names of
the purchasers and person on whose account the sale is made, it is a
sufficient memorandum:
(e) An agreement for the leasing for a longer period than one year, or
for the sale of real property or of an interest therein:
(f) a representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent to a contract. (Art.
1403, civil Code.)
In the instant case, what appellant is trying to enforce is the delivery to him of 3,000 square meters
of land which he claims defendants promised to do in consideration of his services as mediator or
intermediary in effecting a compromise of the civil action, Civil Case No. 135, between the
defendants and the Deudors. In no sense may such alleged contract be considered as being a "sale
of real property or of any interest therein." Indeed, not all dealings involving interest in real property
come under the Statute.
Moreover, appellant's complaint clearly alleges that he has already fulfilled his part of the bargains to
induce the Deudors to amicably settle their differences with defendants as, in fact, on March 16,
1963, through his efforts, a compromise agreement between these parties was approved by the
court. In other words, the agreement in question has already been partially consummated, and is no
longer merely executory. And it is likewise a fundamental principle governing the application of the
Statute that the contract in dispute should be purely executory on the part of both parties thereto.
We cannot, however, escape taking judicial notice, in relation to the compromise agreement relied
upon by appellant, that in several cases We have decided, We have declared the same rescinded
and of no effect. In J. M. Tuason & Co., Inc. vs. Bienvenido Sanvictores, 4 SCRA 123, the Court
held:
It is also worthy of note that the compromise between Deudors and Tuason, upon
which Sanvictores predicates his right to buy the lot he occupies, has been validly
rescinded and set aside, as recognized by this Court in its decision in G.R. No. L-
13768, Deudor vs. Tuason, promulgated on May 30, 1961.
We repeated this observation in J.M. Tuason & Co., Inc. vs. Teodosio Macalindong, 6 SCRA 938.
Thus, viewed from what would be the ultimate conclusion of appellant's case, We entertain grave
doubts as to whether or not he can successfully maintain his alleged cause of action against
defendants, considering that the compromise agreement that he invokes did not actually materialize
and defendants have not benefited therefrom, not to mention the undisputed fact that, as pointed out
by appellees, appellant's other attempt to secure the same 3,000 square meters via the judicial
enforcement of the compromise agreement in which they were supposed to be reserved for him has
already been repudiated by the courts. (pp. 5-7. Brief of Appellee Gregorio Araneta, Inc.)
As regards appellant's third assignment of error, We hold that the allegations in his complaint do not
sufficiently Appellants' reliance. on Article 2142 of Civil Code is misplaced. Said article provides:
Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-
contract to the end that no one shall be unjustly enriched or benefited at the expense
of another.
From the very language of this provision, it is obvious that a presumed qauasi-contract cannot
emerge as against one party when the subject mater thereof is already covered by an existing
contract with another party. Predicated on the principle that no one should be allowed to unjustly
enrich himself at the expense of another, Article 2124 creates the legal fiction of a quasi-contract
precisely because of the absence of any actual agreement between the parties concerned.
Corollarily, if the one who claims having enriched somebody has done so pursuant to a contract with
a third party, his cause of action should be against the latter, who in turn may, if there is any ground
therefor, seek relief against the party benefited. It is essential that the act by which the defendant is
benefited must have been voluntary and unilateral on the part of the plaintiff. As one distinguished
civilian puts it, "The act is voluntary. because the actor in quasi-contracts is not bound by any pre-
existing obligation to act. It is unilateral, because it arises from the sole will of the actor who is not
previously bound by any reciprocal or bilateral agreement. The reason why the law creates a
juridical relations and imposes certain obligation is to prevent a situation where a person is able to
benefit or take advantage of such lawful, voluntary and unilateral acts at the expense of said actor."
(Ambrosio Padilla, Civil Law, Vol. VI, p. 748, 1969 ed.) In the case at bar, since appellant has a
clearer and more direct recourse against the Deudors with whom he had entered into an agreement
regarding the improvements and expenditures made by him on the land of appellees. it Cannot be
said, in the sense contemplated in Article 2142, that appellees have been enriched at the expense of
appellant.
In the ultimate. therefore, Our holding above that appellant's first two assignments of error are well
taken cannot save the day for him. Aside from his having no cause of action against appellees, there
is one plain error of omission. We have found in the order of the trial court which is as good a ground
as any other for Us to terminate this case favorably to appellees. In said order Which We have
quoted in full earlier in this opinion, the trial court ruled that "the grounds relied upon in said motion
are mere repetitions of those already resolved and discussed by this Court in the order of August 13,
1964", an observation which We fully share. Virtually, therefore. appellant's motion for
reconsideration was ruled to be pro-forma. Indeed, a cursory reading of the record on appeal reveals
that appellant's motion for reconsideration above-quoted contained exactly the same arguments and
manner of discussion as his February 6, 1964 "Opposition to Motion to Dismiss" of defendant
Gregorio Araneta, Inc. ((pp. 17-25, Rec. on Appeal) as well as his February 17, 1964 "Opposition to
Motion to Dismiss of Defendant J. M. Tuason & Co." (pp. 33-45, Rec. on Appeal and his February
29, 1964 "Rejoinder to Reply Oil Defendant J. M. Tuason & Co." (pp. 52-64, Rec. on Appeal) We
cannot see anything in said motion for reconsideration that is substantially different from the above
oppositions and rejoinder he had previously submitted and which the trial court had already
considered when it rendered its main order of dismissal. Consequently, appellant's motion for
reconsideration did not suspend his period for appeal. (Estrada vs. Sto. Domingo, 28 SCRA 890,
905-6.) And as this point was covered by appellees' "Opposition to Motion for Reconsideration" (pp.
8689), hence, within the frame of the issues below, it is within the ambit of Our authority as the
Supreme Court to consider the same here even if it is not discussed in the briefs of the parties.
(Insular Life Assurance Co., Ltd. Employees Association-NATU vs. Insular Life Assurance Co., Ltd.
[Resolution en banc of March 10, 1977 in G. R. No. L-25291).
Now, the impugned main order was issued on August 13, 1964, while the appeal was made on
September 24, 1964 or 42 days later. Clearly, this is beyond the 30-day reglementary period for
appeal. Hence, the subject order of dismissal was already final and executory when appellant filed
his appeal.
WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No costs.
Fernando (Chairman), Antonio, Aquino and Martin, .JJ., concur.
Concepcion, Jr., JJ., took no part.
Martin, J., was designated to sit in the Second Division.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-44546 January 29, 1988
RUSTICO ADILLE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO
ASEJO, JOSEFA ASEJO and SANTIAGO ASEJO, respondents.

SARMIENTO, J.:
In issue herein are property and property rights, a familiar subject of controversy and a wellspring of
enormous conflict that has led not only to protracted legal entanglements but to even more bitter
consequences, like strained relationships and even the forfeiture of lives. It is a question that
likewise reflects a tragic commentary on prevailing social and cultural values and institutions, where,
as one observer notes, wealth and its accumulation are the basis of self-fulfillment and where
property is held as sacred as life itself. "It is in the defense of his property," says this modern thinker,
that one "will mobilize his deepest protective devices, and anybody that threatens his possessions
will arouse his most passionate enmity."
1

The task of this Court, however, is not to judge the wisdom of values; the burden of reconstructing
the social order is shouldered by the political leadership-and the people themselves.
The parties have come to this Court for relief and accordingly, our responsibility is to give them that
relief pursuant to the decree of law.
The antecedent facts are quoted from the decision
2
appealed from:
xxx xxx xxx
... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi
City with an area of some 11,325 sq. m. originally belonged to one Felisa Alzul as
her own private property; she married twice in her lifetime; the first, with one Bernabe
Adille, with whom she had as an only child, herein defendant Rustico Adille; in her
second marriage with one Procopio Asejo, her children were herein plaintiffs, now,
sometime in 1939, said Felisa sold the property in pacto de retro to certain 3rd
persons, period of repurchase being 3 years, but she died in 1942 without being able
to redeem and after her death, but during the period of redemption, herein defendant
repurchased, by himself alone, and after that, he executed a deed of extra-judicial
partition representing himself to be the only heir and child of his mother Felisa with
the consequence that he was able to secure title in his name alone also, so that
OCT. No. 21137 in the name of his mother was transferred to his name, that was in
1955; that was why after some efforts of compromise had failed, his half-brothers
and sisters, herein plaintiffs, filed present case for partition with accounting on the
position that he was only a trustee on an implied trust when he redeemed,-and this is
the evidence, but as it also turned out that one of plaintiffs, Emeteria Asejo was
occupying a portion, defendant counterclaimed for her to vacate that,
Well then, after hearing the evidence, trial Judge sustained defendant in his position
that he was and became absolute owner, he was not a trustee, and therefore,
dismissed case and also condemned plaintiff occupant, Emeteria to vacate; it is
because of this that plaintiffs have come here and contend that trial court erred in:
I. ... declaring the defendant absolute owner of the property;
II. ... not ordering the partition of the property; and
III. ... ordering one of the plaintiffs who is in possession of the portion of the property
to vacate the land, p. 1 Appellant's brief.
which can be reduced to simple question of whether or not on the basis of evidence and law,
judgment appealed from should be maintained.
3

xxx xxx xxx
The respondent Court of appeals reversed the trial Court,
4
and ruled for the plaintiffs-appellants, the
private respondents herein. The petitioner now appeals, by way of certiorari, from the Court's
decision.
We required the private respondents to file a comment and thereafter, having given due course to
the petition, directed the parties to file their briefs. Only the petitioner, however, filed a brief, and the
private respondents having failed to file one, we declared the case submitted for decision.
The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the
property held in common?
Essentially, it is the petitioner's contention that the property subject of dispute devolved upon him
upon the failure of his co-heirs to join him in its redemption within the period required by law. He
relies on the provisions of Article 1515 of the old Civil Article 1613 of the present Code, giving the
vendee a retro the right to demand redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by a co-owner with aspect to his share alone.
5
While the
records show that the petitioner redeemed the property in its entirety, shouldering the expenses
therefor, that did not make him the owner of all of it. In other words, it did not put to end the existing
state of co-ownership.
Necessary expenses may be incurred by one co-owner, subject to his right to collect reimbursement
from the remaining co-owners.
6
There is no doubt that redemption of property entails a necessary
expense. Under the Civil Code:
ART. 488. Each co-owner shall have a right to compel the other co-owners to
contribute to the expenses of preservation of the thing or right owned in common and
to the taxes. Any one of the latter may exempt himself from this obligation by
renouncing so much of his undivided interest as may be equivalent to his share of
the expenses and taxes. No such waiver shall be made if it is prejudicial to the co-
ownership.
The result is that the property remains to be in a condition of co-ownership. While a vendee a retro,
under Article 1613 of the Code, "may not be compelled to consent to a partial redemption," the
redemption by one co-heir or co-owner of the property in its totality does not vest in him ownership
over it. Failure on the part of all the co-owners to redeem it entitles the vendee a retro to retain the
property and consolidate title thereto in his name.
7
But the provision does not give to the redeeming
co-owner the right to the entire property. It does not provide for a mode of terminating a co-
ownership.
Neither does the fact that the petitioner had succeeded in securing title over the parcel in his name
terminate the existing co-ownership. While his half-brothers and sisters are, as we said, liable to him
for reimbursement as and for their shares in redemption expenses, he cannot claim exclusive right to
the property owned in common. Registration of property is not a means of acquiring ownership. It
operates as a mere notice of existing title, that is, if there is one.
The petitioner must then be said to be a trustee of the property on behalf of the private respondents.
The Civil Code states:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it
is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes.
We agree with the respondent Court of Appeals that fraud attended the registration of the property.
The petitioner's pretension that he was the sole heir to the land in the affidavit of extrajudicial
settlement he executed preliminary to the registration thereof betrays a clear effort on his part to
defraud his brothers and sisters and to exercise sole dominion over the property. The aforequoted
provision therefore applies.
It is the view of the respondent Court that the petitioner, in taking over the property, did so either on
behalf of his co-heirs, in which event, he had constituted himself a negotiorum gestor under Article
2144 of the Civil Code, or for his exclusive benefit, in which case, he is guilty of fraud, and must act
as trustee, the private respondents being the beneficiaries, under the Article 1456. The evidence, of
course, points to the second alternative the petitioner having asserted claims of exclusive ownership
over the property and having acted in fraud of his co-heirs. He cannot therefore be said to have
assume the mere management of the property abandoned by his co-heirs, the situation Article 2144
of the Code contemplates. In any case, as the respondent Court itself affirms, the result would be
the same whether it is one or the other. The petitioner would remain liable to the Private
respondents, his co-heirs.
This Court is not unaware of the well-established principle that prescription bars any demand on
property (owned in common) held by another (co-owner) following the required number of years. In
that event, the party in possession acquires title to the property and the state of co-ownership is
ended .
8
In the case at bar, the property was registered in 1955 by the petitioner, solely in his name,
while the claim of the private respondents was presented in 1974. Has prescription then, set in?
We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership, must
have been preceded by repudiation (of the co-ownership). The act of repudiation, in turn is subject to
certain conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is
clearly made known to the other co-owners; (3) the evidence thereon is clear and conclusive, and (4)
he has been in possession through open, continuous, exclusive, and notorious possession of the
property for the period required by law.
9

The instant case shows that the petitioner had not complied with these requisites. We are not
convinced that he had repudiated the co-ownership; on the contrary, he had deliberately kept the
private respondents in the dark by feigning sole heirship over the estate under dispute. He cannot
therefore be said to have "made known" his efforts to deny the co-ownership. Moreover, one of the
private respondents, Emeteria Asejo, is occupying a portion of the land up to the present, yet, the
petitioner has not taken pains to eject her therefrom. As a matter of fact, he sought to recover
possession of that portion Emeteria is occupying only as a counterclaim, and only after the private
respondents had first sought judicial relief.
It is true that registration under the Torrens system is constructive notice of title,
10
but it has likewise
been our holding that the Torrens title does not furnish a shield for fraud.
11
It is therefore no
argument to say that the act of registration is equivalent to notice of repudiation, assuming there was
one, notwithstanding the long-standing rule that registration operates as a universal notice of title.
For the same reason, we cannot dismiss the private respondents' claims commenced in 1974 over
the estate registered in 1955. While actions to enforce a constructive trust prescribes in ten
years,
12
reckoned from the date of the registration of the property,
13
we, as we said, are not
prepared to count the period from such a date in this case. We note the petitioner's sub rosa efforts
to get hold of the property exclusively for himself beginning with his fraudulent misrepresentation in
his unilateral affidavit of extrajudicial settlement that he is "the only heir and child of his mother
Feliza with the consequence that he was able to secure title in his name also."
14
Accordingly, we
hold that the right of the private respondents commenced from the time they actually discovered the
petitioner's act of defraudation.
15
According to the respondent Court of Appeals, they "came to know
[of it] apparently only during the progress of the litigation."
16
Hence, prescription is not a bar.
Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in a
motion to dismiss or in the answer otherwise it is deemed waived,
17
and here, the petitioner never
raised that defense.
18
There are recognized exceptions to this rule, but the petitioner has not shown
why they apply.
WHEREFORE, there being no reversible error committed by the respondent Court of Appeals, the
petition is DENIED. The Decision sought to be reviewed is hereby AFFIRMED in toto. No
pronouncement as to costs.
SO ORDERED,
Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 82670 September 15, 1989
DOMETILA M. ANDRES, doing business under the name and style "IRENE'S WEARING
APPAREL,"petitioner,
vs.
MANUFACTURERS HANOVER & TRUST CORPORATION and COURT OF
APPEALS, respondents.
Roque A. Tamayo for petitioner.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private respondent.

CORTES, J.:
Assailed in this petition for review on certiorari is the judgment of the Court of Appeals, which,
applying the doctrine of solutio indebiti, reversed the decision of the Regional Trial Court, Branch
CV, Quezon City by deciding in favor of private respondent.
Petitioner, using the business name "Irene's Wearing Apparel," was engaged in the manufacture of
ladies garments, children's wear, men's apparel and linens for local and foreign buyers. Among its
foreign buyers was Facets Funwear, Inc. (hereinafter referred to as FACETS) of the United States.
In the course of the business transaction between the two, FACETS from time to time remitted
certain amounts of money to petitioner in payment for the items it had purchased. Sometime in
August 1980, FACETS instructed the First National State Bank of New Jersey, Newark, New Jersey,
U.S.A. (hereinafter referred to as FNSB) to transfer $10,000.00 to petitioner via Philippine National
Bank, Sta. Cruz Branch, Manila (hereinafter referred to as PNB).
Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover and Trust
Corporation to effect the above- mentioned transfer through its facilities and to charge the amount to
the account of FNSB with private respondent. Although private respondent was able to send a telex
to PNB to pay petitioner $10,000.00 through the Pilipinas Bank, where petitioner had an account, the
payment was not effected immediately because the payee designated in the telex was only "Wearing
Apparel." Upon query by PNB, private respondent sent PNB another telex dated August 27, 1980
stating that the payment was to be made to "Irene's Wearing Apparel." On August 28, 1980,
petitioner received the remittance of $10,000.00 through Demand Draft No. 225654 of the PNB.
Meanwhile, on August 25, 1980, after learning about the delay in the remittance of the money to
petitioner, FACETS informed FNSB about the situation. On September 8, 1980, unaware that
petitioner had already received the remittance, FACETS informed private respondent about the
delay and at the same time amended its instruction by asking it to effect the payment through the
Philippine Commercial and Industrial Bank (hereinafter referred to as PCIB) instead of PNB.
Accordingly, private respondent, which was also unaware that petitioner had already received the
remittance of $10,000.00 from PNB instructed the PCIB to pay $10,000.00 to petitioner. Hence, on
September 11, 1980, petitioner received a second $10,000.00 remittance.
Private respondent debited the account of FNSB for the second $10,000.00 remittance effected
through PCIB. However, when FNSB discovered that private respondent had made a duplication of
the remittance, it asked for a recredit of its account in the amount of $10,000.00. Private respondent
complied with the request.
Private respondent asked petitioner for the return of the second remittance of $10,000.00 but the
latter refused to pay. On May 12, 1982 a complaint was filed with the Regional Trial Court, Branch
CV, Quezon City which was decided in favor of petitioner as defendant. The trial court ruled that Art.
2154 of the New Civil Code is not applicable to the case because the second remittance was made
not by mistake but by negligence and petitioner was not unjustly enriched by virtue thereof [Record,
p. 234]. On appeal, the Court of Appeals held that Art. 2154 is applicable and reversed the RTC
decision. The dispositive portion of the Court of Appeals' decision reads as follows:
WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and
another one entered in favor of plaintiff-appellant and against defendant-appellee
Domelita (sic) M. Andres, doing business under the name and style "Irene's Wearing
Apparel" to reimburse and/or return to plaintiff-appellant the amount of $10,000.00,
its equivalent in Philippine currency, with interests at the legal rate from the filing of
the complaint on May 12, 1982 until the whole amount is fully paid, plus twenty
percent (20%) of the amount due as attomey's fees; and to pay the costs.
With costs against defendant-appellee.
SO ORDERED. [Rollo, pp. 29-30.]
Thereafter, this petition was filed. The sole issue in this case is whether or not the private
respondent has the right to recover the second $10,000.00 remittance it had delivered to petitioner.
The resolution of this issue would hinge on the applicability of Art. 2154 of the New Civil Code which
provides that:
Art. 2154. If something received when there is no right to demand it, and it was
unduly delivered through mistake, the obligation to return it arises.
This provision is taken from Art. 1895 of the Spanish Civil Code which provided that:
Art. 1895. If a thing is received when there was no right to claim it and which, through
an error, has been unduly delivered, an obligation to restore it arises.
In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice Bocobo explained
the nature of this article thus:
Article 1895 [now Article 2154] of the Civil Code abovequoted, is therefore
applicable. This legal provision, which determines the quasi-contract of solution
indebiti, is one of the concrete manifestations of the ancient principle that no one
shall enrich himself unjustly at the expense of another. In the Roman Law Digest the
maxim was formulated thus: "Jure naturae acquum est, neminem cum alterius
detrimento et injuria fieri locupletiorem." And the Partidas declared: "Ninguno non
deue enriquecerse tortizeramente con dano de otro." Such axiom has grown through
the centuries in legislation, in the science of law and in court decisions. The
lawmaker has found it one of the helpful guides in framing statutes and codes. Thus,
it is unfolded in many articles scattered in the Spanish Civil Code. (See for example,
articles, 360, 361, 464, 647, 648, 797, 1158, 1163, 1295, 1303, 1304, 1893 and
1895, Civil Code.) This time-honored aphorism has also been adopted by jurists in
their study of the conflict of rights. It has been accepted by the courts, which have not
hesitated to apply it when the exigencies of right and equity demanded its assertion.
It is a part of that affluent reservoir of justice upon which judicial discretion draws
whenever the statutory laws are inadequate because they do not speak or do so with
a confused voice. [at p. 632.]
For this article to apply the following requisites must concur: "(1) that he who paid was not under
obligation to do so; and, (2) that payment was made by reason of an essential mistake of fact" [City
of Cebu v. Piccio, 110 Phil. 558, 563 (1960)].
It is undisputed that private respondent delivered the second $10,000.00 remittance. However,
petitioner contends that the doctrine of solutio indebiti, does not apply because its requisites are
absent.
First, it is argued that petitioner had the right to demand and therefore to retain the second
$10,000.00 remittance. It is alleged that even after the two $10,000.00 remittances are credited to
petitioner's receivables from FACETS, the latter allegedly still had a balance of $49,324.00. Hence, it
is argued that the last $10,000.00 remittance being in payment of a pre-existing debt, petitioner was
not thereby unjustly enriched.
The contention is without merit.
The contract of petitioner, as regards the sale of garments and other textile products, was with
FACETS. It was the latter and not private respondent which was indebted to petitioner. On the other
hand, the contract for the transmittal of dollars from the United States to petitioner was entered into
by private respondent with FNSB. Petitioner, although named as the payee was not privy to the
contract of remittance of dollars. Neither was private respondent a party to the contract of sale
between petitioner and FACETS. There being no contractual relation between them, petitioner has
no right to apply the second $10,000.00 remittance delivered by mistake by private respondent to
the outstanding account of FACETS.
Petitioner next contends that the payment by respondent bank of the second $10,000.00 remittance
was not made by mistake but was the result of negligence of its employees. In connection with this
the Court of Appeals made the following finding of facts:
The fact that Facets sent only one remittance of $10,000.00 is not disputed. In the
written interrogatories sent to the First National State Bank of New Jersey through
the Consulate General of the Philippines in New York, Adelaide C. Schachel, the
investigation and reconciliation clerk in the said bank testified that a request to remit
a payment for Facet Funwear Inc. was made in August, 1980. The total amount
which the First National State Bank of New Jersey actually requested the plaintiff-
appellant Manufacturers Hanover & Trust Corporation to remit to Irene's Wearing
Apparel was US $10,000.00. Only one remittance was requested by First National
State Bank of New Jersey as per instruction of Facets Funwear (Exhibit "J", pp. 4-5).
That there was a mistake in the second remittance of US $10,000.00 is borne out by
the fact that both remittances have the same reference invoice number which is 263
80. (Exhibits "A-1- Deposition of Mr. Stanley Panasow" and "A-2-Deposition of Mr.
Stanley Panasow").
Plaintiff-appellant made the second remittance on the wrong assumption that
defendant-appellee did not receive the first remittance of US $10,000.00. [Rollo, pp.
26-27.]
It is evident that the claim of petitioner is anchored on the appreciation of the attendant facts which
petitioner would have this Court review. The Court holds that the finding by the Court of Appeals that
the second $10,000.00 remittance was made by mistake, being based on substantial evidence, is
final and conclusive. The rule regarding questions of fact being raised with this Court in a petition
for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante v. Tibe,
G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition for
certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the
Supreme Court in cases brought to it from the Court of Appeals is limited to
reviewing and revising the errors of law imputed to it, its findings of fact being
conclusive" [Chan v. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA
737, reiterating a long line of decisions]. This Court has emphatically declared that "it
is not the function of the Supreme Court to analyze or weigh such evidence all over
again, its jurisdiction being limited to reviewing errors of law that might have been
committed by the lower court" [Tiongco v. De la Merced, G.R. No. L-24426, July 25,
1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No. L-62482, April 28, 1983,
121 SCRA 865; Baniqued v. Court of Appeals, G. R. No. L-47531, February 20,
1984, 127 SCRA 596]. "Barring, therefore, a showing that the findings complained of
are totally devoid of support in the record, or that they are so glaringly erroneous as
to constitute serious abuse of discretion, such findings must stand, for this Court is
not expected or required to examine or contrast the oral and documentary evidence
submitted by the parties" [Santa Ana, Jr. v. Hernandez, G.R. No. L-16394, December
17, 1966, 18 SCRA 9731. [at pp. 144-145.]
Petitioner invokes the equitable principle that when one of two innocent persons must suffer by the
wrongful act of a third person, the loss must be borne by the one whose negligence was the
proximate cause of the loss.
The rule is that principles of equity cannot be applied if there is a provision of law specifically
applicable to a case [Phil. Rabbit Bus Lines, Inc. v. Arciaga, G.R. No. L-29701, March 16, 1987,148
SCRA 433; Zabat, Jr. v. Court of Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA 587; Rural
Bank of Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18, 1985, 135 SCRA 409; Cruz v.
Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case of De Garcia v. Court of Appeals, G.R. No.
L-20264, January 30, 1971, 37 SCRA 129, citing Aznar v. Yapdiangco, G.R. No. L-18536, March 31,
1965, 13 SCRA 486, held:
... The common law principle that where one of two innocent persons must suffer by
a fraud perpetrated by another, the law imposes the loss upon the party who, by his
misplaced confidence, has enabled the fraud to be committed, cannot be applied in a
case which is covered by an express provision of the new Civil Code, specifically
Article 559. Between a common law principle and a statutory provision, the latter
must prevail in this jurisdiction. [at p. 135.]
Having shown that Art. 2154 of the Civil Code, which embodies the doctrine of solutio indebiti,
applies in the case at bar, the Court must reject the common law principle invoked by petitioner.
Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the fact that
from the time the second $10,000.00 remittance was made, five hundred and ten days had elapsed
before private respondent demanded the return thereof. Needless to say, private respondent
instituted the complaint for recovery of the second $10,000.00 remittance well within the six years
prescriptive period for actions based upon a quasi-contract [Art. 1145 of the New Civil Code].
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.

Sagrada Orden Vs Nacoco Kinuha ng Hapon
ang lupa.
Action to recover parcel of land owned by P, and
then because of Japanese war was acquired by
other parties, then possessed by the US govt thru
its custodian then possessed by the defendant
without agreement with the US or with the
plaintiff, and def then leased a part of the land.

Issue: WON defendant is liable to Sagrada and
must pay the rentals.

Held: No. If liable at all must arise from any of
the four sources of obligations. APA was a trustee
of the US and if def liable, not to plaintiff but to
US govt. But defendant not liable for rentals bec
no express agreement bet the APA and Nacoco.
Existence of implied agreement is contrary to
the circumstances.
Source: Contract. But there was none.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-36840 May 22, 1973
PEOPLE'S CAR INC., plaintiff-appellant,
vs.
COMMANDO SECURITY SERVICE AGENCY, defendant-appellee.

TEEHANKEE, J.:
In this appeal from the adverse judgment of the Davao court of first instance limiting plaintiff-
appellant's recovery under its complaint to the sum of P1,000.00 instead of the actual damages of
P8,489.10 claimed and suffered by it as a direct result of the wrongful acts of defendant security
agency's guard assigned at plaintiff's premises in pursuance of their "Guard Service Contract", the
Court finds merit in the appeal and accordingly reverses the trial court's judgment.
The appeal was certified to this Court by a special division of the Court of Appeals on a four-to-one
vote as per its resolution of April 14, 1973 that "Since the case was submitted to the court a quo for
decision on the strength of the stipulation of facts, only questions of law can be involved in the
present appeal."
The Court has accepted such certification and docketed this appeal on the strength of its own finding
from the records that plaintiff's notice of appeal was expressly to this Court (not to the appellate
court)" on pure questions of law"
1
and its record on appeal accordingly prayed that" the
corresponding records be certified and forwarded to the Honorable Supreme Court."
2
The trial court
so approved the same
3
on July 3, 1971 instead of having required the filing of a petition for review of
the judgment sought to be appealed from directly with this Court, in accordance with the provisions
of Republic Act 5440. By some unexplained and hitherto undiscovered error of the clerk of court,
furthermore, the record on appeal was erroneously forwarded to the appellate court rather than to
this Court.
The parties submitted the case for judgment on a stipulation of facts. There is thus no dispute as to
the factual bases of plaintiff's complaint for recovery of actual damages against defendant, to wit,
that under the subsisting "Guard Service Contract" between the parties, defendant-appellee as a
duly licensed security service agency undertook in consideration of the payments made by plaintiff to
safeguard and protect the business premises of (plaintiff) from theft, pilferage, robbery, vandalism
and all other unlawful acts of any person or person prejudicial to the interest of (plaintiff)."
4

On April 5, 1970 at around 1:00 A.M., however, defendant's security guard on duty at plaintiff's
premises, "without any authority, consent, approval, knowledge or orders of the plaintiff and/or
defendant brought out of the compound of the plaintiff a car belonging to its customer, and drove
said car for a place or places unknown, abandoning his post as such security guard on duty inside
the plaintiff's compound, and while so driving said car in one of the City streets lost control of said
car, causing the same to fall into a ditch along J.P. Laurel St., Davao City by reason of which the
plaintiff's complaint for qualified theft against said driver, was blottered in the office of the Davao City
Police Department."
5

As a result of these wrongful acts of defendant's security guard, the car of plaintiff's customer,
Joseph Luy, which had been left with plaintiff for servicing and maintenance, "suffered extensive
damage in the total amount of P7,079."
6
besides the car rental value "chargeable to defendant" in
the sum of P1,410.00 for a car that plaintiff had to rent and make available to its said customer to
enable him to pursue his business and occupation for the period of forty-seven (47) days (from April
25 to June 10, 1970) that it took plaintiff to repair the damaged car,
7
or total actual damages incurred
by plaintiff in the sum of P8,489.10.
Plaintiff claimed that defendant was liable for the entire amount under paragraph 5 of their contract
whereunder defendant assumed "sole responsibility for the acts done during their watch hours" by its
guards, whereas defendant contended, without questioning the amount of the actual damages
incurred by plaintiff, that its liability "shall not exceed one thousand (P1,000.00) pesos per guard
post" under paragraph 4 of their contract.
The parties thus likewise stipulated on this sole issue submitted by them for adjudication, as follows:
Interpretation of the contract, as to the extent of the liability of the defendant to the
plaintiff by reason of the acts of the employees of the defendant is the only issue to
be resolved.
The defendant relies on Par. 4 of the contract to support its contention while the
plaintiff relies on Par. 5 of the same contract in support of its claims against the
defendant. For ready reference they are quoted hereunder:
'Par. 4. Party of the Second Part (defendant) through the
negligence of its guards, after an investigation has been conducted
by the Party of the First Part (plaintiff) wherein the Party of the
Second Part has been duly represented shall assume full
responsibilities for any loss or damages that may occur to any
property of the Party of the First Part for which it is accountable,
during the watch hours of the Party of the Second Part, provided the
same is reported to the Party of the Second Part within twenty-four
(24) hours of the occurrence, except where such loss or damage is
due to force majeure, provided however that after the proper
investigation to be made thereof that the guard on post is found
negligent and that the amount of the loss shall not exceed ONE
THOUSAND (P1,000.00) PESOS per guard post.'
'Par. 5 The party of the Second Part assumes the responsibility for the
proper performance by the guards employed, of their duties and (shall)
be solely responsible for the acts done during their watch hours, the
Party of the First Part being specifically released from any and all
liabilities to the former's employee or to the third parties arising from the
acts or omissions done by the guard during their tour of
duty.' ...
8

The trial court, misreading the above-quoted contractual provisions, held that "the liability of the
defendant in favor of the plaintiff falls under paragraph 4 of the Guard Service Contract" and
rendered judgment "finding the defendant liable to the plaintiff in the amount of P1,000.00 with
costs."
Hence, this appeal, which, as already indicated, is meritorious and must be granted.
Paragraph 4 of the contract, which limits defendant's liability for the amount of loss or damage to any
property of plaintiff to "P1,000.00 per guard post," is by its own terms applicable only for loss or
damage 'through thenegligence of its guards ... during the watch hours" provided that the same is
duly reported by plaintiff within 24 hours of the occurrence and the guard's negligence is verified
after proper investigation with the attendance of both contracting parties. Said paragraph is
manifestly inapplicable to the stipulated facts of record, which involve neither property of plaintiff that
has been lost or damaged at its premises nor mere negligence of defendant's security guard on
duty.
Here, instead of defendant, through its assigned security guards, complying with its contractual
undertaking 'to safeguard and protect the business premises of (plaintiff) from theft, robbery,
vandalism and all other unlawful acts of any person or persons," defendant's own guard on duty
unlawfully and wrongfully drove out of plaintiffs premises a customer's car, lost control of it on the
highway causing it to fall into a ditch, thereby directly causing plaintiff to incur actual damages in the
total amount of P8,489.10.
Defendant is therefore undoubtedly liable to indemnify plaintiff for the entire damages thus incurred,
since under paragraph 5 of their contract it "assumed the responsibility for the proper performance
by the guards employed of their duties and (contracted to) be solely responsible for the acts done
during their watch hours" and "specifically released (plaintiff) from any and all liabilities ... to the third
parties arising from the acts or omissions done by the guards during their tour of duty." As plaintiff
had duly discharged its liability to the third party, its customer, Joseph Luy, for the undisputed
damages of P8,489.10 caused said customer, due to the wanton and unlawful act of defendant's
guard, defendant in turn was clearly liable under the terms of paragraph 5 of their contract to
indemnify plaintiff in the same amount.
The trial court's approach that "had plaintiff understood the liability of the defendant to fall under
paragraph 5, it should have told Joseph Luy, owner of the car, that under the Guard Service
Contract, it was not liable for the damage but the defendant and had Luy insisted on the liability of
the plaintiff, the latter should have challenged him to bring the matter to court. If Luy accepted the
challenge and instituted an action against the plaintiff, it should have filed a third-party complaint
against the Commando Security Service Agency. But if Luy instituted the action against the plaintiff
and the defendant, the plaintiff should have filed a crossclaim against the latter,"
9
was unduly
technical and unrealistic and untenable.
Plaintiff was in law liable to its customer for the damages caused the customer's car, which had been
entrusted into its custody. Plaintiff therefore was in law justified in making good such damages and
relying in turn on defendant to honor its contract and indemnify it for such undisputed damages,
which had been caused directly by the unlawful and wrongful acts of defendant's security guard in
breach of their contract. As ordained in Article 1159, Civil Code, "obligations arising from contracts
have the force of law between the contracting parties and should be complied with in good faith."
Plaintiff in law could not tell its customer, as per the trial court's view, that "under the Guard Service
Contract it was not liable for the damage but the defendant" since the customer could not hold
defendant to account for the damages as he had no privity of contract with defendant. Such an
approach of telling the adverse party to go to court, notwithstanding his plainly valid claim, aside
from its ethical deficiency among others, could hardly create any goodwill for plaintiff's business, in
the same way that defendant's baseless attempt to evade fully discharging its contractual liability to
plaintiff cannot be expected to have brought it more business. Worse, the administration of justice is
prejudiced, since the court dockets are unduly burdened with unnecessary litigation.
ACCORDINGLY, the judgment appealed from is hereby reversed and judgment is hereby rendered
sentencing defendant-appellee to pay plaintiff-appellant the sum of P8,489.10 as and by way of
reimbursement of the stipulated actual damages and expenses, as well as the costs of suit in both
instances. It is so ordered.
Makalintal, Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

Cangco vs. Manila Railroad Co.
GR. No. 12131, October 14, 1918

Ma. Cristina Ramos (OAS)

Facts: Jose Cangco, herein plaintiff, was an employee of the defendant in
this case, manila Railroad Company. Upon the occasion in question, plaintiff
was returning home by rail from his daily labors. As the train drew up to
the station, plaintiff arose from his seat. As the train slowed down,
plaintiff stepped off, but one or both of his feet came in contact with a
sack of watermelons. As a result, his feet slipped from under him and he
fell violently on the platform.

The accident occurred between 7-8 oclock on a dark night as the railroad
station was lighted dimly, objects on the platform where the accident
occurred from a lighted car.

Plaintiff sued the defendant company for damages. The latter interposed the
defense that the direct and proximate cause of the injury suffered by the
plaintiff was his own contributory negligence in failing to wait until the
train had come to a complete stop before alighting.

Issue: Whether or not the conduct of the plaintiff in undertaking to alight
while the train was slightly underway was characterized by imprudence so as
to hold him guilty of contributory negligence.

Held: The act of the plaintiff in stepping off the train while it as yet
slowly moving was not characterized by imprudence so as to hold him guilty of
contributory negligence.

In arriving to such conclusion, the court used the best of negligence
enunciated in the case of Picart vs. Smith (37 PHIL 809) which was stated as
follow: Was there anything in the circumstances surrounding the plaintiff at
the time he alighted from the train which would have admitted a person of
average prudence that to get off the train under the conditions then existing
was dangerous? If so, the plaintiff should have deserted from alighting; and
his failure so to desist was contributory negligence.

In the case at bar, the plaintiff was ignorant of the fact that the
obstruction which was caused by the sacks of melds piled on the platform
existed. Moreover, the place was dark or dimly lighted. Thus, he was a
failure on the part of the defendant to afford to its passengers facilities
for safe egress from its trains.

It is not negligence per se for a traveler to alight from a slowly moving
train.


The civil liability under quasi delict is contracted without agreement or
consent, thus culpa extra contractual, on the principle that where harm, loss
or damage has been caused to a person thru fault or negligent act the
aggrieve party is entitled to be indemnified. (Cangco vs MRR, 38 Phil 768)





Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-29900 June 28, 1974
IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA, Deceased, GEORGE
PAY, petitioner-appellant,
vs.
SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.
Florentino B. del Rosario for petitioner-appellant.
Manuel V. San Jose for oppositor-appellee.

FERNANDO, J.:p
There is no difficulty attending the disposition of this appeal by petitioner on questions of law. While
several points were raised, the decisive issue is whether a creditor is barred by prescription in his
attempt to collect on a promissory note executed more than fifteen years earlier with the debtor sued
promising to pay either upon receipt by him of his share from a certain estate or upon demand, the
basis for the action being the latter alternative. The lower court held that the ten-year period of
limitation of actions did apply, the note being immediately due and demandable, the creditor
admitting expressly that he was relying on the wording "upon demand." On the above facts as found,
and with the law being as it is, it cannot be said that its decision is infected with error. We affirm.
From the appealed decision, the following appears: "The parties in this case agreed to submit the
matter for resolution on the basis of their pleadings and annexes and their respective memoranda
submitted. Petitioner George Pay is a creditor of the Late Justo Palanca who died in Manila on July
3, 1963. The claim of the petitioner is based on a promissory note dated January 30, 1952, whereby
the late Justo Palanca and Rosa Gonzales Vda. de Carlos Palanca promised to pay George Pay the
amount of P26,900.00, with interest thereon at the rate of 12% per annum. George Pay is now
before this Court, asking that Segundina Chua vda. de Palanca, surviving spouse of the late Justo
Palanca, he appointed as administratrix of a certain piece of property which is a residential dwelling
located at 2656 Taft Avenue, Manila, covered by Tax Declaration No. 3114 in the name of Justo
Palanca, assessed at P41,800.00. The idea is that once said property is brought under
administration, George Pay, as creditor, can file his claim against the administratrix."
1
It then stated
that the petition could not prosper as there was a refusal on the part of Segundina Chua Vda. de
Palanca to be appointed as administratrix; that the property sought to be administered no longer
belonged to the debtor, the late Justo Palanca; and that the rights of petitioner-creditor had already
prescribed. The promissory note, dated January 30, 1962, is worded thus: " `For value received from
time to time since 1947, we [jointly and severally promise to] pay to Mr. [George Pay] at his office at
the China Banking Corporation the sum of [Twenty Six Thousand Nine Hundred Pesos]
(P26,900.00), with interest thereon at the rate of 12% per annum upon receipt by either of the
undersigned of cash payment from the Estate of the late Don Carlos Palanca or upon demand'. . . .
As stated, this promissory note is signed by Rosa Gonzales Vda. de Carlos Palanca and Justo
Palanca."
2
Then came this paragraph: "The Court has inquired whether any cash payment has been
received by either of the signers of this promissory note from the Estate of the late Carlos Palanca.
Petitioner informed that he does not insist on this provision but that petitioner is only claiming on his
right under the promissory note ."
3
After which, came the ruling that the wording of the promissory
note being "upon demand," the obligation was immediately due. Since it was dated January 30,
1952, it was clear that more "than ten (10) years has already transpired from that time until to date.
The action, therefore, of the creditor has definitely prescribed."
4
The result, as above noted, was the
dismissal of the petition.
In an exhaustive brief prepared by Attorney Florentino B. del Rosario, petitioner did assail the
correctness of the rulings of the lower court as to the effect of the refusal of the surviving spouse of
the late Justo Palanca to be appointed as administratrix, as to the property sought to be
administered no longer belonging to the debtor, the late Justo Palanca, and as to the rights of
petitioner-creditor having already prescribed. As noted at the outset, only the question of prescription
need detain us in the disposition of this appeal. Likewise, as intimated, the decision must be
affirmed, considering the clear tenor of the promissory note.
From the manner in which the promissory note was executed, it would appear that petitioner was
hopeful that the satisfaction of his credit could he realized either through the debtor sued receiving
cash payment from the estate of the late Carlos Palanca presumptively as one of the heirs, or, as
expressed therein, "upon demand." There is nothing in the record that would indicate whether or not
the first alternative was fulfilled. What is undeniable is that on August 26, 1967, more than fifteen
years after the execution of the promissory note on January 30, 1952, this petition was filed. The
defense interposed was prescription. Its merit is rather obvious. Article 1179 of the Civil Code
provides: "Every obligation whose performance does not depend upon a future or uncertain event, or
upon a past event unknown to the parties, is demandable at once." This used to be Article 1113 of
the Spanish Civil Code of 1889. As far back as Floriano v. Delgado,
5
a 1908 decision, it has been
applied according to its express language. The well-known Spanish commentator, Manresa, on this
point, states: "Dejando con acierto, el caracter mas teorico y grafico del acto, o sea la perfeccion de
este, se fija, para determinar el concepto de la obligacion pura, en el distinctive de esta, y que es
consecuencia de aquel: la exigibilidad immediata."
6

The obligation being due and demandable, it would appear that the filing of the suit after fifteen
years was much too late. For again, according to the Civil Code, which is based on Section 43 of Act
No. 190, the prescriptive period for a written contract is that of ten years.
7
This is another instance
where this Court has consistently adhered to the express language of the applicable norm.
8
There is
no necessity therefore of passing upon the other legal questions as to whether or not it did suffice for
the petition to fail just because the surviving spouse refuses to be made administratrix, or just
because the estate was left with no other property. The decision of the lower court cannot be
overturned.
WHEREFORE, the lower court decision of July 24, 1968 is affirmed. Costs against George Pay.


Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-16570 March 9, 1922
SMITH, BELL & CO., LTD., plaintiff-appellant,
vs.
VICENTE SOTELO MATTI, defendant-appellant.
Ross and Lawrence and Ewald E. Selph for plaintiff-appellant.
Ramon Sotelo for defendant-appellant.
ROMUALDEZ, J.:
In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered into
contracts whereby the former obligated itself to sell, and the latter to purchase from it, two steel
tanks, for the total price of twenty-one thousand pesos (P21,000), the same to be shipped from New
York and delivered at Manila "within three or four months;" two expellers at the price of twenty five
thousand pesos (P25,000) each, which were to be shipped from San Francisco in the month of
September, 1918, or as soon as possible; and two electric motors at the price of two thousand pesos
(P2,000) each, as to the delivery of which stipulation was made, couched in these words:
"Approximate delivery within ninety days. This is not guaranteed."
The tanks arrived at Manila on the 27th of April, 1919: the expellers on the 26th of October, 1918;
and the motors on the 27th of February, 1919.
The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr.
Sotelo refused to receive them and to pay the prices stipulated.
The plaintiff brought suit against the defendant, based on four separate causes of action, alleging,
among other facts, that it immediately notified the defendant of the arrival of the goods, and asked
instructions from him as to the delivery thereof, and that the defendant refused to receive any of
them and to pay their price. The plaintiff, further, alleged that the expellers and the motors were in
good condition. (Amended complaint, pages 16-30, Bill of Exceptions.)
In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining and By-
Products Co., Inc., denied the plaintiff's allegations as to the shipment of these goods and their
arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter's refusal to receive them and
pay their price, and the good condition of the expellers and the motors, alleging as special defense
that Mr. Sotelo had made the contracts in question as manager of the intervenor, the Manila Oil
Refining and By-Products Co., Inc which fact was known to the plaintiff, and that "it was only in May,
1919, that it notified the intervenor that said tanks had arrived, the motors and the expellers having
arrived incomplete and long after the date stipulated." As a counterclaim or set-off, they also allege
that, as a consequence of the plaintiff's delay in making delivery of the goods, which the intervenor
intended to use in the manufacture of cocoanut oil, the intervenor suffered damages in the sums of
one hundred sixteen thousand seven hundred eighty-three pesos and ninety-one centavos
(P116,783.91) for the nondelivery of the tanks, and twenty-one thousand two hundred and fifty
pesos (P21,250) on account of the expellers and the motors not having arrived in due time.
The case having been tried, the court below absolved the defendants from the complaint insofar as
the tanks and the electric motors were concerned, but rendered judgment against them, ordering
them to "receive the aforesaid expellers and pay the plaintiff the sum of fifty thousand pesos
(P50,00), the price of the said goods, with legal interest thereon from July 26, 1919, and costs."
Both parties appeal from this judgment, each assigning several errors in the findings of the lower
court.
The principal point at issue in this case is whether or not, under the contracts entered into and the
circumstances established in the record, the plaintiff has fulfilled, in due time, its obligation to bring
the goods in question to Manila. If it has, then it is entitled to the relief prayed for; otherwise, it must
be held guilty of delay and liable for the consequences thereof.
To solve this question, it is necessary to determine what period was fixed for the delivery of the
goods.
As regards the tanks, the contracts A and B (pages 61 and 62 of the record) are similar, and in both
of them we find this clause:
To be delivered within 3 or 4 months The promise or indication of shipment carries with it
absolutely no obligation on our part Government regulations, railroad embargoes, lack of
vessel space, the exigencies of the requirement of the United States Government, or a
number of causes may act to entirely vitiate the indication of shipment as stated. In other
words, the order is accepted on the basis of shipment at Mill's convenience, time of shipment
being merely an indication of what we hope to accomplish.
In the contract Exhibit C (page 63 of the record), with reference to the expellers, the following
stipulation appears:
The following articles, hereinbelow more particularly described, to be shipped at San
Francisco within the month of September /18, or as soon as possible. Two Anderson oil
expellers . . . .
And in the contract relative to the motors (Exhibit D, page 64, rec.) the following appears:
Approximate delivery within ninety days. This is not guaranteed. This sale is subject to
our being able to obtain Priority Certificate, subject to the United States Government
requirements and also subject to confirmation of manufactures.
In all these contracts, there is a final clause as follows:
The sellers are not responsible for delays caused by fires, riots on land or on the sea, strikes
or other causes known as "Force Majeure" entirely beyond the control of the sellers or their
representatives.
Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the
goods. As to the tanks, the agreement was that the delivery was to be made "within 3 or 4 months,"
but that period was subject to the contingencies referred to in a subsequent clause. With regard to
the expellers, the contract says "within the month of September, 1918," but to this is added "or as
soon as possible." And with reference to the motors, the contract contains this expression,
"Approximate delivery within ninety days," but right after this, it is noted that "this is not guaranteed."
The oral evidence falls short of fixing such period.
From the record it appears that these contracts were executed at the time of the world war when
there existed rigid restrictions on the export from the United States of articles like the machinery in
question, and maritime, as well as railroad, transportation was difficult, which fact was known to the
parties; hence clauses were inserted in the contracts, regarding "Government regulations, railroad
embargoes, lack of vessel space, the exigencies of the requirements of the United States
Government," in connection with the tanks and "Priority Certificate, subject to the United State
Government requirements," with respect to the motors. At the time of the execution of the contracts,
the parties were not unmindful of the contingency of the United States Government not allowing the
export of the goods, nor of the fact that the other foreseen circumstances therein stated might
prevent it.
Considering these contracts in the light of the civil law, we cannot but conclude that the term which
the parties attempted to fix is so uncertain that one cannot tell just whether, as a matter of fact, those
articles could be brought to Manila or not. If that is the case, as we think it is, the obligations must be
regarded as conditional.
Obligations for the performance of which a day certain has been fixed shall be demandable
only when the day arrives.
A day certain is understood to be one which must necessarily arrive, even though its date be
unknown.
If the uncertainty should consist in the arrival or non-arrival of the day, the obligation is
conditional and shall be governed by the rules of the next preceding section. (referring to
pure and conditional obligations). (Art. 1125, Civ. Code.)
And as the export of the machinery in question was, as stated in the contract, contingent upon the
sellers obtaining certificate of priority and permission of the United States Government, subject to
the rules and regulations, as well as to railroad embargoes, then the delivery was subject to a
condition the fulfillment of which depended not only upon the effort of the herein plaintiff, but upon
the will of third persons who could in no way be compelled to fulfill the condition. In cases like this,
which are not expressly provided for, but impliedly covered, by the Civil Code, the obligor will be
deemed to have sufficiently performed his part of the obligation, if he has done all that was in his
power, even if the condition has not been fulfilled in reality.
In such cases, the decisions prior to the Civil Code have held that the obligee having done all
that was in his power, was entitled to enforce performance of the obligation. This
performance, which is fictitious not real is not expressly authorized by the Code, which
limits itself only to declare valid those conditions and the obligation thereby affected; but it is
neither disallowed, and the Code being thus silent, the old view can be maintained as a
doctrine. (Manresa's commentaries on the Civil Code [1907], vol. 8, page 132.)
The decisions referred to by Mr. Manresa are those rendered by the supreme court of Spain on
November 19, 1896, and February 23, 1871.
In the former it is held:
First. That when the fulfillment of the conditions does not depend on the will of the obligor,
but on that of a third person who can in no way be compelled to carry it out, and it is found by
the lower court that the obligor has done all in his power to comply with the obligation, the
judgment of the said court, ordering the other party to comply with his part of the contract, is
not contrary to the law of contracts, or to Law 1, Tit. I, Book 10, of the "Novsima
Recopilacin," or Law 12, Tit. 11, of Partida 5, when in the said finding of the lower court, no
law or precedent is alleged to have been violated. (Jurisprudencia Civil published by the
directors of the Revista General de Legislacion y Jurisprudencia [1866], vol. 14, page 656.)
In the second decision, the following doctrine is laid down:
Second. That when the fulfillment of the condition does not depend on the will of the obligor,
but on that of a third person, who can in no way be compelled to carry it out, the obligor's
part of the contract is complied withalf Belisario not having exercised his right of repurchase
reserved in the sale of Basilio Borja mentioned in paragraph (13) hereof, the affidavit of
Basilio Borja for the consolidacion de dominio was presented for record in the registry of
deeds and recorded in the registry on the same date.
(32) The Maximo Belisario left a widow, the opponent Adelina Ferrer and three minor
children, Vitaliana, Eugenio, and Aureno Belisario as his only heirs.
(33) That in the execution and sales thereunder, in which C. H. McClure appears as the
judgment creditor, he was represented by the opponent Peter W. Addison, who prepared
and had charge of publication of the notices of the various sales and that in none of the sales
was the notice published more than twice in a newspaper.
The claims of the opponent-appellant Addison have been very fully and ably argued by his
counsel but may, we think, be disposed of in comparatively few words. As will be seen from
the foregoing statement of facts, he rest his title (1) on the sales under the executions issued
in cases Nos. 435, 450, 454, and 499 of the court of the justice of the peace of Dagupan with
the priority of inscription of the last two sales in the registry of deeds, and (2) on a purchase
from the Director of Lands after the land in question had been forfeited to the Government for
non-payment of taxes under Act No. 1791.
The sheriff's sales under the execution mentioned are fatally defective for what of sufficient
publication of the notice of sale. Section 454 of the Code of civil Procedure reads in part as
follows:
SEC. 454. Before the sale of property on execution, notice thereof must be given, as follows:
1. In case of perishable property, by posing written notice of the time and place of the sale in
three public places of the municipality or city where the sale is to take place, for such time as
may be reasonable, considering the character and condition of the property;
2. * * * * * * *
3. In cases of real property, by posting a similar notice particularly describing the property,
for twenty days in three public places of the municipality or city where the property is
situated, and also where the property is to be sold, and publishing a copy thereof once a
week, for the same period, in some newspaper published or having general circulation in the
province, if there be one. If there are newspaper published in the province in both the
Spanish and English languages, then a like publication for a like period shall be made in one
newspaper published in the Spanish language, and in one published in the English
language:Provided, however, That such publication in a newspaper will not be required when
the assessed valuation of the property does not exceed four hundred pesos;
4. * * * * * * *
Examining the record, we find that in cases Nos. 435 and 450 the sales took place on October 14,
1916; the notice first published gave the date of the sale as October 15th, but upon discovering that
October 15th was a Sunday, the date was changed to October 14th. The correct notice was
published twice in a local newspaper, the first publication was made on October 7th and the second
and last on October 14th, the date of the sale itself. The newspaper is a weekly periodical published
every Saturday afternoon.
In case No. 454 there were only two publications of the notice in a newspaper, the first publication
being made only fourteen days before the date of the sale. In case No. 499, there were also only two
publications, the first of which was made thirteen days before the sale. In the last case the sale was
advertised for the hours of from 8:30 in the morning until 4:30 in the afternoon, in violation of section
457 of the Code of Civil Procedure. In cases Nos. 435 and 450 the hours advertised were from 9:00
in the morning until 4.30 in the afternoon. In all of the cases the notices of the sale were prepared by
the judgment creditor or his agent, who also took charged of the publication of such notices.
In the case of Campomanes vs. Bartolome and Germann & Co. (38 Phil., 808), this court held that if
a sheriff sells without the notice prescribe by the Code of Civil Procedure induced thereto by the
judgment creditor and the purchaser at the sale is the judgment creditor, the sale is absolutely void
and not title passes. This must now be regarded as the settled doctrine in this jurisdiction whatever
the rule may be elsewhere.
It appears affirmatively from the evidence in the present case that there is a newspaper published in
the province where the sale in question took place and that the assessed valuation of the property
disposed of at each sale exceeded P400. Comparing the requirements of section 454, supra, with
what was actually done, it is self-evident that notices of the sales mentioned were not given as
prescribed by the statute and taking into consideration that in connection with these sales the
appellant Addison was either the judgment creditor or else occupied a position analogous to that of a
judgment creditor, the sales must be held invalid.
The conveyance or reconveyance of the land from the Director of Lands is equally invalid. The
provisions of Act No. 1791 pertinent to the purchase or repurchase of land confiscated for non-
payment of taxes are found in section 19 of the Act and read:
. . . In case such redemption be not made within the time above specified the Government of
the Philippine Islands shall have an absolute, indefeasible title to said real property. Upon the
expiration of the said ninety days, if redemption be not made, the provincial treasurer shall
immediately notify the Director of Lands of the forfeiture and furnish him with a description of
the property, and said Director of Lands shall have full control and custody thereof to lease
or sell the same or any portion thereof in the same manner as other public lands are leased
or sold: Provided, That the original owner, or his legal representative, shall have the right to
repurchase the entire amount of his said real property, at any time before a sale or contract
of sale has been made by the director of Lands to a third party, by paying therefore the
whole sum due thereon at the time of ejectment together with a penalty of ten per centum . . .
.
The appellant Addison repurchased under the final proviso of the section quoted and was allowed to
do so as the successor in interest of the original owner under the execution sale above discussed.
As we have seen, he acquired no rights under these sales, was therefore not the successor of the
original owner and could only have obtained a valid conveyance of such titles as the Government
might have by following the procedure prescribed by the Public Land Act for the sale of public lands.
he is entitled to reimbursement for the money paid for the redemption of the land, with interest, but
has acquired no title through the redemption.
The question of the priority of the record of the sheriff's sales over that of the sale from Belisario to
Borja is extensively argued in the briefs, but from our point of view is of no importance; void sheriff's
or execution sales cannot be validated through inscription in the Mortgage Law registry.
The opposition of Adelina Ferrer must also be overruled. She maintained that the land in question
was community property of the marriage of Eulalio Belisario and Paula Ira: that upon the death of
Paula Ira inealed from is modified, and the defendant Mr. Vicente Sotelo Matti, sentenced to accept
and receive from the plaintiff the tanks, the expellers and the motors in question, and to pay the
plaintiff the sum of ninety-six thousand pesos (P96,000), with legal interest thereon from July 17,
1919, the date of the filing of the complaint, until fully paid, and the costs of both instances. So
ordered.
Araullo, C.J., Johnson, Street, Malcolm, Avancea, Villamor, Ostrand, and Johns, JJ., concur.





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


D E C I S I O N


PUNO, C.J.:

A. Precis

EN BANC


FRANCISCO CHAVEZ,
Petitioner,





- versus -







RAUL M. GONZALES,
in his capacity as the
Secretary of the
Department of Justice;
and NATIONAL
TELECOMMUNICATIONS
COMMISSION (NTC),
Respondents.
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,
[1]
Burgos v. Chief of Staff,
[2]
Social Weather Stations v.
COMELEC,
[3]
and Bayan v. Executive Secretary Ermita.
[4]
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 wire-tapping.
[5]
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.
[6]
It seems that Secretary Bunye admitted that the voice
was that of President Arroyo, but subsequently made a retraction.
[7]


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.
[8]


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.
[9]


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.
[10]


5. On June 11, 2005, the NTC issued this press release:
[11]


NTC GIVES FAIR WARNING TO RADIO AND TELEVISION
OWNERS/OPERATORS TO OBSERVE ANTI-WIRETAPPING
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 NTCwarns 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 Anti-Wiretapping 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.

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
Statementwhich states, among others, that:
[12]


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 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.


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.
[13]


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,
[14]
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.
[15]


Respondents
[16]
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.
[17]
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.
[18]


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 forwardneither 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.
[19]


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.
[20]
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,
[21]
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,
[22]
we therefore brush
aside technicalities of procedure and take cognizance of this petition,
[23]
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.


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.
[24]


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 byArticle III, Section 4 of the Constitution, copied almost verbatim from
the First Amendment of the U.S. Bill of Rights,
[25]
were considered the necessary
consequence of republican institutions and the complement of free speech.
[26]
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.
[27]


In the Philippines, the primacy and high esteem accorded freedom of
expression is a fundamental postulate of our constitutional system.
[28]
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
freedom of speech is an indispensable condition for nearly every other form of
freedom.
[29]
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.
[30]
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.
[31]
What is embraced under this provision was discussed exhaustively by
the Court inGonzales v. Commission on Elections,
[32]
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.
[33]


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.
[34]
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 guarantee. The trend represents a
profound commitment to the principle that debate on public issue should be
uninhibited, robust, and wide-open.
[35]


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.
[36]
When atrophied, the right becomes
meaningless.
[37]
The right belongs as well -- if not more to those who question,
who do not conform, who differ.
[38]
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.
[39]
To paraphrase Justice Holmes, it is freedom for the thought that we hate,
no less than for the thought that agrees with us.
[40]


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,
[41]
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,
[42]
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.
[43]
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.
[44]
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.
[45]

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.
[46]
A study of free speech jurisprudence
whether 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.
[47]


Generally, restraints on freedom of speech and expression are evaluated by
either or a combination of three tests, i.e., (a) thedangerous tendency
doctrine which permits limitations on speech once a rational connection has been
established between the speech restrained and the danger contemplated;
[48]
(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;
[49]
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.
[50]


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.
[51]


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:
[52]


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, CONTENT-
NEUTRAL 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;
[53]
(3) freedom of access to information;
[54]
and (4) freedom of
circulation.
[55]


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.
[56]
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 theirprinting and publication, are
deemed as previous restraint or censorship.
[57]
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,
[58]

and any act that restrains speech is hobbled by the presumption of invalidity and
should be greeted with furrowed brows,
[59]
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;
[60]
or (2) a content-based restraint or
censorship, i.e., the restriction is based on the subject matter of the utterance or
speech.
[61]
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.
[62]
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.
[63]
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.
[64]


On the other hand, a governmental action that restricts freedom of speech or of
the press based on content is given thestrictest 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,
[65]
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.
[66]

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 by showing a substantive and
imminent evil that has taken the life of a reality already on ground.
[67]
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.
[68]


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.
[69]


Also, the incidental restriction on speech must be no greater than what is
essential to the furtherance of that interest.
[70]
A restriction that is so broad that it
encompasses more than what is required to satisfy the governmental interest will
be invalidated.
[71]
The regulation, therefore, must be reasonable and narrowly
drawn to fit the regulatory purpose,

with the least restrictive means undertaken.
[72]


Thus, when the prior restraint partakes of a content-neutral regulation, it is
subjected to an intermediate review. A content-based
regulation,
[73]
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.
[74]


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,
[75]
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.
[76]
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];
[77]
(b) its pervasiveness as a medium; and (c) its
unique accessibility to children.
[78]
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,
[79]
they are decided on whether the governmental
restriction is narrowly tailored to further a substantial governmental
interest,
[80]
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
[81]
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,
[82]
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
[83]


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:
[84]


xxx xxx xxx

(3) 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,
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.
(5) 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.
(6) The freedom to comment on public affairs is essential to the vitality
of a representative democracy. In the 1918 case ofUnited 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 inDans 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.
[85]


In the same year that the Dans case was decided, it was reiterated in Gonzales
v. Katigbak,
[86]
that the test to determine free expression challenges was the clear
and present danger, again without distinguishing the media.
[87]
Katigbak, strictly
speaking, does not treat of broadcast media but motion pictures. Although the issue
involved obscenity standards as applied to movies,
[88]
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.
[89]


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,
[90]
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.
[91]
And in a case involving due process and equal
protection issues, the Court in Telecommunications and Broadcast Attorneys of the
Philippines v. COMELEC
[92]
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.
[93]


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.
[94]


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.
[95]
Internet, for example, remains
largely unregulated, yet the Internet and the broadcast media share
similarities,
[96]
and the rationales used to support broadcast regulation apply
equally to the Internet.
[97]
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.
[98]


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 anti-wiretapping 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. Thetotality 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.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-264 October 4, 1946
VICENTE SINGSON ENCARNACION, plaintiff-appellee,
vs.
JACINTA BALDOMAR, ET AL., defendants-appellants.
Bausa and Ampil for appellants.
Tolentino and Aguas for appellee.

HILADO, J.:
Vicente Singson Encarnacion, owner of the house numbered 589 Legarda Street, Manila,
some six years ago leased said house to Jacinto Baldomar and her son, Lefrado Fernando, upon a
month-to-month basis for the monthly rental of P35. After Manila was liberated in the last war,
specifically on March 16, 1945, and on April 7, of the same year, plaintiff Singson Encarnacion
notified defendants, the said mother and son, to vacate the house above-mentioned on or before
April 15, 1945, because plaintiff needed it for his offices as a result of the destruction of the building
where said plaintiff had said offices before. Despite this demand, defendants insisted on continuing
their occupancy. When the original action was lodged with the Municipal Court of Manila on April 20,
1945, defendants were in arrears in the payment of the rental corresponding to said month, the
agrees rental being payable within the first five days of each month. That rental was paid prior to the
hearing of the case in the municipal court, as a consequence of which said court entered judgment
for restitution and payment of rentals at the rate of P35 a month from May 1, 1945, until defendants
completely vacate the premises. Although plaintiff included in said original complaint a claim for
P500 damages per month, that claim was waived by him before the hearing in the municipal court,
on account of which nothing was said regarding said damages in the municipal court's decision.
When the case reached the Court of First Instance of Manila upon appeal, defendants filed
therein a motion to dismiss (which was similar to a motion to dismiss filed by them in the municipal
court) based upon the ground that the municipal court had no jurisdiction over the subject matter due
to the aforesaid claim for damages and that, therefore, the Court of First Instance had no appellate
jurisdiction over the subject matter of the action. That motion to dismiss was denied by His Honor,
Judge Mamerto Roxas, by order dated July 21, 1945, on the ground that in the municipal court
plaintiff had waived said claim for damages and that, therefore, the same waiver was understood
also to have been made in the Court of First Instance.lawphil. net
In the Court of First Instance the graveman of the defense interposed by defendants, as it was
expressed defendant Lefrado Fernando during the trial, was that the contract which they had
celebrated with plaintiff since the beginning authorized them to continue occupying the house
indefinetly and while they should faithfully fulfill their obligations as respects the payment of the
rentals, and that this agreement had been ratified when another ejectment case between the parties
filed during the Japanese regime concerning the same house was allegedly compounded in the
municipal court. The Court of First Instance gave more credit to plaintiff's witness, Vicente Singson
Encarnacion, jr., who testified that the lease had always and since the beginning been upon a
month-to-month basis. The court added in its decision that this defense which was put up by
defendant's answer, for which reason the Court considered it as indicative of an eleventh-hour
theory. We think that the Court of First Instance was right in so declaring. Furthermore, carried to its
logical conclusion, the defense thus set up by defendant Lefrado Fernando would leave to the sole
and exclusive will of one of the contracting parties (defendants in this case) the validity and
fulfillment of the contract of lease, within the meaning of article 1256 of the Civil Code, since the
continuance and fulfillment of the contract would then depend solely and exclusively upon their free
and uncontrolled choice between continuing paying the rentals or not, completely depriving the
owner of all say in the matter. If this defense were to be allowed, so long as defendants elected to
continue the lease by continuing the payment of the rentals, the owner would never be able to
discontinue it; conversely, although the owner should desire the lease to continue, the lessees could
effectively thwart his purpose if they should prefer to terminate the contract by the simple expedient
of stopping payment of the rentals. This, of course, is prohibited by the aforesaid article of the Civil
Code. (8 Manresa, 3d ed., pp. 626, 627; Cuyugan vs. Santos, 34 Phil., 100.)
During the pendency of the appeal in the Court of First Instance and before the judgment
appealed from was rendered on October 31, 1945, the rentals in areas were those pertaining to the
month of August, 1945, to the date of said judgment at the rate of P35 a month. During the
pendency of the appeal in that court, certain deposits were made by defendants on account of
rentals with the clerk of said court, and in said judgment it is disposed that the amounts thus
deposited should be delivered to plaintiff.
Upon the whole, we are clearly of opinion that the judgment appealed from should be, as it is
hereby, affirmed, with the costs of the three instances to appellants. So ordered.


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MAY
18
ELEIZEGUI VS. THE MANILA LAWN
TENNIS CLUB
AUTHOR // Arellano, C.J.
DARIO AND GAUDENCIO ELEIZEGUI,
plaintiffs-appellees,
vs.
THE MANILA LAWN TENNIS CLUB,
defendant-appellant.
Republic of the Philippines
Supreme Court
Manila
En Banc
G.R. No. 967
19 May 1903
Pillsburry and Sutro, for appellant.
Manuel Torres Vergara, for appellee.
ARELLANO, C.J.:
This suit concerns the lease of a piece of land for a fixed consideration and to endure at the will of the
lessee. By the contract of lease the lessee is expressly authorized to make improvements upon the land, by
erecting buildings of both permanent and temporary character, by making fills, laying pipes, and making
such other improvements as might be considered desirable for the comfort and amusement of the
members.
With respect to the term of the lease the present question has arisen. In its decision three theories have
been presented: One which makes the duration depend upon the will of the lessor, who, upon one months
notice given to the lessee, may terminate the lease so stipulated; another which, on the contrary, makes it
dependent upon the will of the lessee, as stipulated; and the third, in accordance with which the right is
reversed to the courts to fix the duration of the term.
The first theory is that which has prevailed in the judgment below, as appears from the language in which
the basis of the decision is expressed: The court is of the opinion that the contract of lease was
terminated by the notice given by the plaintiff on August 28 of last year And such is the theory
maintained by the plaintiffs, which expressly rests upon article 1581 of the Civil Code, the law which was
in force at the time the contract was entered into (January 25, 1890). The judge, in giving to this notice
the effect of terminating the lease, undoubtedly considers that it is governed by the article relied upon by
the plaintiffs, which is of the following tenor: When the term has not been fixed for the lease, it is
understood to be for years when an annual rental has been fixed, for months when the rent is monthly
The second clause of the contract provides as follows: The rent of the said land is fixed at 25 pesos per
month. (P. 11, Bill of Exceptions.)
In accordance with such a theory, the plaintiffs might have terminated the lease the month following the
making of the contract at any time after the first month, which, strictly speaking, would be the only month
with respect to which they were expressly bound, they not being bound for each successive month except
by a tacit renewal (art. 1566) an effect which they might prevent by giving the required notice.
Although the relief asked for in the complaint, drawn in accordance with the new form of procedure
established by the prevailing Code, is the restitution of the land to the plaintiffs (a formula common to
various actions), nevertheless the action which is maintained can be no other than that of desahucio, in
accordance with the substantive law governing the contract. The lessor says article 1569 of the Civil Code
may judicially dispossess the lessee upon the expiration of the conventional term or of the legal term;
the conventional term that is, the one agreed upon by the parties; the legal term, in defect of the
conventional, fixed for leases by articles 1577 and 1581. We have already seen what this legal term is with
respect to urban properties, in accordance with article 1581.
Hence, it follows that the judge has only to determine whether there is or is not conventional term. If
there be a conventional term, he can not apply the legal term fixed in subsidium to cover a case in which
the parties have made no agreement whatsoever with respect to the duration of the lease. In this case the
law interprets the presumptive intention of the parties, they having said nothing in the contract with
respect to its duration. Obligations arising from contracts have the force of law between the contracting
parties and must be complied with according to the tenor of the contracts. (Art. 1091 of the Civil Code.)
The obligations which, with the force of law, the lessors assumed by the contract entered into, so far as
pertaining to the issues, are the following: First They lease the above-described land to Mr. Williamson,
who takes it on lease, for all the time the members of the said club may desire to use it Third the
owners of the land undertake to maintain the club as tenant as long as the latter shall see fit, without
altering in the slightest degree the conditions of this contract, even though the estate be sold.
It is necessary, therefore, to answer the first question: Was there, or was there not, a conventional term, a
duration, agreed upon in the contract in question? If there was an agreed duration, a conventional term,
then the legal term the term fixed in article 1581 has no application; the contract is the supreme law of the
contracting parties. Over and above the general law is the special law, expressly imposed upon themselves
by the contracting parties. Without these clauses 1 and 3, the contract would contain no stipulation with
respect to the duration of the lease, and then article 1581, in connection with article 1569, would
necessarily be applicable. In view of these clauses, however, it can not be said that there is no stipulation
with respect to the duration of the lease, or that, notwithstanding these clauses, article 1581, in connection
with article 1569, can be applied. If this were so, it would be necessary to hold that the lessors spoke in
vain that their words are to be disregarded a claim which can not be advanced by the plaintiffs nor upheld
by any court without citing the law which detracts all legal force from such words or despoils them of their
literal sense.
It having been demonstrated that the legal term can not be applied, there being a conventional term, this
destroys the assumption that the contract of lease was wholly terminated by the notice given by the
plaintiffs, this notice being necessary only when it becomes necessary to have recourse to the legal term.
Nor had the plaintiffs, under the contract, any right to give such notice. It is evident that they had no
intention of stipulating that they reserved the right to give such notice. Clause 3 begins as follows: Mr.
Williamson, or whoever may succeed him as secretary of said club, may terminate this lease whenever
desired without other formality than that of giving a months notice. The owners of the land undertake to
maintain the club as tenant as long as the latter shall see fit. The right of the one and the obligation of the
others being thus placed in antithesis, there is something more, much more, than the inclusio unius,
exclusio alterius. It is evident that the lessors did not intend to reserve to themselves the right to rescind
that which they expressly conferred upon the lessee by establishing it exclusively in favor of the latter.
It would be the greatest absurdity to conclude that in a contract by which the lessor has left the
termination of the lease to the will of the lessee, such a lease can or should be terminated at the will of the
lessor.
It would appear to follow, from the foregoing, that, if such is the force of the agreement, there can be no
other mode of terminating the lease than by the will of the lessee, as stipulated in this case. Such is the
conclusion maintained by the defendant in the demonstration of the first error of law in the judgment, as
alleged by him. He goes so far, under this theory, as to maintain the possibility of a perpetual lease, either
as such lease, if the name can be applied, or else as an innominate contract, or under any other
denomination, in accordance with the agreement of the parties, which is, in fine, the law of the contract,
superior to all other law, provided that there be no agreement against any prohibitive statute, morals, or
public policy.
It is unnecessary here to enter into a discussion of a perpetual lease in accordance with the law and
doctrine prior to the Civil Code now in force, and which has been operative since 1889. Hence the
judgment of the supreme court of Spain of January 2, 1891, with respect to a lease made in 1887, cited by
the defendant, and a decision stated by him to have been rendered by the Audiencia of Pamplona in 1885
(it appears to be rather a decision by the head office of land registration of July 1, 1885), and any other
decision which might be cited based upon the constitutions of Cataluna, according to which a lease of
more than ten years is understood to create a life tenancy, or even a perpetual tenancy, are entirely out of
point in this case, in which the subject-matter is a lease entered into under the provisions of the present
Civil Code, in accordance with the principles of which alone can this doctrine be examined.
It is not to be understood that we admit that the lease entered into was stipulated as a life tenancy, and
still less as a perpetual lease. The terms of the contract express nothing to this effect. They do, whatever,
imply this idea. If the lease could last during such time as the lessee might see fit, because it has been so
stipulated by the lessor, it would last, first, as long as the will of the lessee that is, all his life; second,
during all the time that he may have succession, inasmuch as he who contracts does so for himself and his
heirs. (Art. 1257 of the Civil Code.) The lease in question does not fall within any of the cases in which the
rights and obligations arising from a contract can not be transmitted to heirs, either by its nature, by
agreement, or by provision of law. Furthermore, the lessee is an English association.
Usufruct is a right of superior degree to that which arises from a lease. It is a real right and includes all
the jus utendi and jus fruendi. Nevertheless, the utmost period for which a usufruct can endure, if
constituted in favor a natural person, is the lifetime of the usufructuary (art. 513, sec. 1); and if in favor of
juridical person, it can not be created for more than thirty years. (Art. 515.) If the lease might be
perpetual, in what would it be distinguished from an emphyteusis? Why should the lessee have a greater
right than the usufructuary, as great as that of an emphyteuta, with respect to the duration of the
enjoyment of the property of another? Why did they not contract for a usufruct or an emphyteusis? It was
repeatedly stated in the document that it was a lease, and nothing but a lease, which was agreed upon:
Being in the full enjoyment of the necessary legal capacity to enter into this contract of lease they have
agreed upon the lease of said estate They lease to Mr. Williamson, who receives it as such
The rental is fixed at 25 pesos a month The owners bind themselves to maintain the club as tenant
Upon the foregoing conditions they make the present contract of lease (Pp. 9, 11, and 12, bill of
exceptions.) If it is a lease, then it must be for a determinate period. (Art. 1543.) By its very nature it must
be temporary, just as by reason of its nature an emphyteusis must be perpetual, or for an unlimited
period. (Art. 1608.)
On the other hand, it can not be concluded that the termination of the contract is to be left completely at
the will of the lessee, because it has been stipulated that its duration is to be left to his will.
The Civil Code has made provision for such a case in all kinds of obligations. In speaking in general of
obligations with a term it has supplied the deficiency of the former law with respect to the duration of the
term when it has been left to the will of the debtor, and provides that in this case the term shall be fixed
by the courts. (Art. 1128, sec. 2.) In every contract, as laid down by the authorities, there is always a
creditor who is entitled to demand the performance, and a debtor upon whom rests the obligation to
perform the undertaking. In bilateral contracts the contracting parties are mutually creditors and debtors.
Thus, in this contract of lease, the lessee is the creditor with respect to the rights enumerated in article
1554, and is the debtor with respect to the obligations imposed by articles 1555 and 1561. The term within
which performance of the latter obligation is due is what has been left to the will of the debtor. This term
it is which must be fixed by the courts.
The only action which can be maintained under the terms of the contract is that by which it is sought to
obtain from the judge the determination of this period, and not the unlawful detainer action which has
been brought an action which presupposes the expiration of the term and makes it the duty of the judge to
simply decree an eviction. To maintain the latter action it is sufficient to show the expiration of the term
of the contract, whether conventional or legal; in order to decree the relief to be granted in the former
action it is necessary for the judge to look into the character and conditions of the mutual undertakings
with a view to supplying the lacking element of a time at which the lease is to expire. In the case of a loan
of money or a commodatum of furniture, the payment or return to be made when the borrower can
conveniently do so does not mean that he is to be allowed to enjoy the money or to make use of the thing
indefinitely or perpetually. The courts will fix in each case, according to the circumstances, the time for
the payment or return. This is the theory also maintained by the defendant in his demonstration of the
fifth assignment of error. Under article 1128 of the Civil Code, thus his proposition concludes, contracts
whose term is left to the will of one of the contracting parties must be fixed by the courts, the conditions
as to the term of this lease has a direct legislative sanction, and he cites articles 1128. In place of the
ruthless method of annihilating a solemn obligation, which the plaintiffs in this case have sought to
pursue, the Code has provided a legitimate and easily available remedy The Code has provided for the
proper disposition of those covenants, and a case can hardly arise more clearly demonstrating the
usefulness of that provision than the case at bar. (Pp. 52 and 53 of appellants brief.)
The plaintiffs, with respect to this conclusion on the part of their opponents, only say that article 1128
expressly refers to obligations in contracts in general, and that it is well known that a lease is included
among special contracts. But they do not observe that if contracts, simply because special rules are
provided for them, could be excepted from the provisions of the articles of the Code relative to obligations
and contracts in general, such general provisions would be wholly without application. The system of the
Code is that of establishing general rules applicable to all obligations and contracts, and then special
provisions peculiar to each species of contract. In no part of Title VI of Book IV, which treats of the
contract of lease, are there any special rules concerning pure of conditional obligations which may be
stipulated in a lease, because, with respect to these matters, the provisions of section 1, chapter 3, Title I,
on the subject of obligations are wholly sufficient. With equal reason should we refer to section 2, which
deals with obligations with a term, in the same chapter and title, if a question concerning the term arises
out of a contract of lease, as in the present case, and within this section we find article 1128, which decides
the question.
The judgment was entered below upon the theory of the expiration of a legal term which does not exist, as
the case requires that a term be fixed by the courts under the provisions of article 1128 with respect to
obligations which, as is the present, are terminable at the will of the obligee. It follows, therefore, that the
judgment below is erroneous.
The judgment is reversed and the case will be remanded to the court below with directions to enter a
judgment of dismissal of the action in favor of the defendant, the Manila Lawn Tennis Club, without
special allowance as to the recovery of costs. So ordered.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-17587 December 18, 1967
PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINIA SANTOS Y
CANON FAUSTINO, deceased, plaintiff-appellant,
vs.
LUI SHE, in her own behalf and as administratrix of the intestate estate of Wong Heng,
deceased,defendant-appellant.
Nicanor S. Sison for plaintiff-appellant.
Ozaeta, Gibbs and Ozaeta for defendant-appellant.
R E S O L U T I O N
CASTRO, J.:
This is the second motion that the defendant-appellant has filed relative to this Court's decision of
September 12, 1967. The first was a motion for reconsideration. Accepting the nullity of the other
contracts (Plff Exhs. 4-7), the defendant-appellant nevertheless contended that the lease contract
(Plff Exh. 3) is so separable from the rest of the contracts that it should be saved from invalidation.lawphil
In denying the motion, we pointed to the circumstances
that on November 15, 1957, the parties entered into the lease contract for 50 years: that ten
days after, that is on November 25, they amended the contract so as to make it cover the
entire property of Justina Santos; that on December 21, less than a month after, they entered
into another contract giving Wong Heng the option to buy the leased premises should his
pending petition for naturalization be granted; that on November 18, 1958, after failing to
secure naturalization and after finding that adoption does not confer the citizenship of the
adopting parent on the adopted, the parties entered into two other contracts extending the
lease to 99 years and fixing the period of the option to buy at 50 years.
which indubitably demonstrate that each of the contracts in question was designed to carry out
Justina Santos' expressed wish to give the land to Wong and thereby in effect place its ownership in
alien hands,
1
about which we shall have something more to say toward the end of this resolution. We
concluded that "as the lease contract was part of a scheme to violate the Constitution it suffers from
the same infirmity that renders the other contracts void and can no more be saved from illegality
than the rest of the contracts."
The present motion is for a new trial and is based on three documents executed by Justina Santos
which, so it is claimed, constitute newly-discovered material evidence. These documents are a
codicil dated November 11, 1957 and two wills executed on August 24 and August 29, 1959. In the
codicil Justina Santos not only named Tita Yaptinchay LaO the administratrix of her estate with the
right to buy the properties of the estate, but also provided that if the said LaO was legally disqualified
from buying (as she really was under article 1491 (3) of the Civil Code), she was to be her sole heir.
In either case, the codicil imposed on the administratrix the obligation to have masses said for the
soul of the testatrix and those of the latter's sister and parent. On the other hand, in both her 1959
wills Justina Santos enjoined her heirs to respect the lease contract made, and the conditional option
given, in favor of Wong.
These documents form part of the records of civil case 59470 of the Court of First Instance of Manila
in which the settlement of the estate of Justina Santos is pending, and so it is now claimed that they
could not have been produced at the trial of this case which was concluded on August 6, 1960
because they were presented in the probate court only after the death of Justina Santos on
December 28, 1964.it c-alf
This is a misrepresentation of the grossest sort. The documents were known to the defendant-
appellant and her counsel even before the death of Justina Santos. As a matter of fact, the wills
executed on August 24 and August 29, 1959 were presented in this case as Exhibits 285 and 279,
respectively, for the defendant-appellant, and were considered and expressly referred to in the
decision of the lower court and in our decision.itc-alf As for the codicil of November 11, 1957, the
defendant-appellant can hardly feign ignorance of its essence even when this case was being tried
in the lower court considering that its provisions were substantially adverted to in the testimony of
one of her witnesses
2
and were in fact recited in the decision a own a quo.
3
By no means can the
documents in question be considered newly-discovered evidence so as to warrant a reopening of
this case.
4

Nor is there anything in the documents that is likely to alter the result we have already reached in
this case. With respect to the 1957 codicil, it is claimed that Justina Santos could not have intended
by the 99-year lease to give Wong the ownership of the land considering that she had earlier (the
codicil was made on November 11, 1957 while the lease contract was executed on November 15,
1957) devised the property to Tita Yaptinchay LaO.
Without passing on the validity of her testamentary disposition since the issue is one pending before
the probate court, it suffices to state here that even granting that Justina Santos had devised the
land in dispute to LaO, Justina Santos was not thereby barred or precluded from subsequently giving
the land to Wong. The execution of the lease contract which, together with the other contracts,
amount to a transfer of ownership to Wong, constitutes an implied revocation of her codicil, at least
insofar as the disposition of the land is concerned.
5

As for the 1959 wills, it is said that they manifest a desire to abide by the law, as is evident from the
statement therein that Wong's right to buy the land be allowed "anytime he or his children should be
entitled to buy lands in the Philippines (i.e., upon becoming Filipino citizens)".lawphil it seems obvious,
however, that this is nothing but a reiteration of the substance of the lease contract and conditional
option to buy which in compensation, as our decision demonstrates, amount to a conveyance, the
protestation of compliance with the law notwithstanding. In cases like the one at bar, motives are
seldom avowed and avowals are not always candid. The problem is not, however, insuperable,
especially as in this case the very witnesses for the defendant-appellant testified that
Considering her age, ninety (90) years old at the time and her condition, she is a wealthy
woman, it is just natural when she said. "This is what I want and this will be done." In
particular reference to this contract of lease, when I said "This is not proper, she said 'you
just go ahead, you prepare that, I am the owner, and if there is illegality, I am the only one
that can question the illegality.'"
6

The ambition of the old woman before her death, according to her revelation to me, was to
see to it that these properties be enjoyed, even to own them, by Wong Heng because Doa
Justina told me that she did not have any relatives, near or far, and she considered Wong
Heng as a son and his children her grandchildren; especially her consolation in life was when
she would hear the children reciting prayers in Tagalog.
7

She was very emphatic in the care of the seventeen (17) dogs and of the maids who helped
her much, and she told me to see to it that no one could disturb Wong Heng from those
properties. That is why we thought of adoption, believing that thru adoption Wong Heng
might acquired Filipino citizenship, being the adopted child of a Filipino citizen.lawphil
8

The other points raised in the motion for new trial either have already been disposed of in our
decision or are so insubstantial to merit any attention.
ACCORDINGLY, the motion for new trial is denied.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-22558 May 31, 1967
GREGORIO ARANETA, INC., petitioner,
vs.
THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD., respondent.
Araneta and Araneta for petitioner.
Rosauro Alvarez and Ernani Cruz Pao for respondent.
REYES, J.B.L., J.:
Petition for certiorari to review a judgment of the Court of Appeals, in its CA-G.R. No. 28249-R,
affirming with modification, an amendatory decision of the Court of First Instance of Manila, in its
Civil Case No. 36303, entitled "Philippine Sugar Estates Development Co., Ltd., plaintiff, versus J.
M. Tuason & Co., Inc. and Gregorio Araneta, Inc., defendants."
As found by the Court of Appeals, the facts of this case are:
J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City, otherwise known as
the Sta. Mesa Heights Subdivision, and covered by a Torrens title in its name. On July 28, 1950,
through Gregorio Araneta, Inc., it (Tuason & Co.) sold a portion thereof with an area of 43,034.4
square meters, more or less, for the sum of P430,514.00, to Philippine Sugar Estates Development
Co., Ltd. The parties stipulated, among in the contract of purchase and sale with mortgage, that the
buyer will
Build on the said parcel land the Sto. Domingo Church and Convent
while the seller for its part will
Construct streets on the NE and NW and SW sides of the land herein sold so that the latter
will be a block surrounded by streets on all four sides; and the street on the NE side shall be
named "Sto. Domingo Avenue;"
The buyer, Philippine Sugar Estates Development Co., Ltd., finished the construction of Sto.
Domingo Church and Convent, but the seller, Gregorio Araneta, Inc., which began constructing the
streets, is unable to finish the construction of the street in the Northeast side named (Sto. Domingo
Avenue) because a certain third-party, by the name of Manuel Abundo, who has been physically
occupying a middle part thereof, refused to vacate the same; hence, on May 7, 1958, Philippine
Sugar Estates Development Co., Lt. filed its complaint against J. M. Tuason & Co., Inc., and
instance, seeking to compel the latter to comply with their obligation, as stipulated in the above-
mentioned deed of sale, and/or to pay damages in the event they failed or refused to perform said
obligation.
Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc. answered the complaint, the latter
particularly setting up the principal defense that the action was premature since its obligation to
construct the streets in question was without a definite period which needs to he fixed first by the
court in a proper suit for that purpose before a complaint for specific performance will prosper.
The issues having been joined, the lower court proceeded with the trial, and upon its termination, it
dismissed plaintiff's complaint (in a decision dated May 31, 1960), upholding the defenses
interposed by defendant Gregorio Araneta, Inc.1wph 1.t
Plaintiff moved to reconsider and modify the above decision, praying that the court fix a period within
which defendants will comply with their obligation to construct the streets in question.
Defendant Gregorio Araneta, Inc. opposed said motion, maintaining that plaintiff's complaint did not
expressly or impliedly allege and pray for the fixing of a period to comply with its obligation and that
the evidence presented at the trial was insufficient to warrant the fixing of such a period.
On July 16, 1960, the lower court, after finding that "the proven facts precisely warrants the fixing of
such a period," issued an order granting plaintiff's motion for reconsideration and amending the
dispositive portion of the decision of May 31, 1960, to read as follows:
WHEREFORE, judgment is hereby rendered giving defendant Gregorio Araneta, Inc., a
period of two (2) years from notice hereof, within which to comply with its obligation under
the contract, Annex "A".
Defendant Gregorio Araneta, Inc. presented a motion to reconsider the above quoted order, which
motion, plaintiff opposed.
On August 16, 1960, the lower court denied defendant Gregorio Araneta, Inc's. motion; and the latter
perfected its appeal Court of Appeals.
In said appellate court, defendant-appellant Gregorio Araneta, Inc. contended mainly that the relief
granted, i.e., fixing of a period, under the amendatory decision of July 16, 1960, was not justified by
the pleadings and not supported by the facts submitted at the trial of the case in the court below and
that the relief granted in effect allowed a change of theory after the submission of the case for
decision.
Ruling on the above contention, the appellate court declared that the fixing of a period was within the
pleadings and that there was no true change of theory after the submission of the case for decision
since defendant-appellant Gregorio Araneta, Inc. itself squarely placed said issue by alleging in
paragraph 7 of the affirmative defenses contained in its answer which reads
7. Under the Deed of Sale with Mortgage of July 28, 1950, herein defendant has a
reasonable time within which to comply with its obligations to construct and complete the
streets on the NE, NW and SW sides of the lot in question; that under the circumstances,
said reasonable time has not elapsed;
Disposing of the other issues raised by appellant which were ruled as not meritorious and which are
not decisive in the resolution of the legal issues posed in the instant appeal before us, said appellate
court rendered its decision dated December 27, 1963, the dispositive part of which reads
IN VIEW WHEREOF, judgment affirmed and modified; as a consequence, defendant is given
two (2) years from the date of finality of this decision to comply with the obligation to
construct streets on the NE, NW and SW sides of the land sold to plaintiff so that the same
would be a block surrounded by streets on all four sides.
Unsuccessful in having the above decision reconsidered, defendant-appellant Gregorio Araneta, Inc.
resorted to a petition for review by certiorari to this Court. We gave it due course.
We agree with the petitioner that the decision of the Court of Appeals, affirming that of the Court of
First Instance is legally untenable. The fixing of a period by the courts under Article 1197 of the Civil
Code of the Philippines is sought to be justified on the basis that petitioner (defendant below) placed
the absence of a period in issue by pleading in its answer that the contract with respondent
Philippine Sugar Estates Development Co., Ltd. gave petitioner Gregorio Araneta, Inc. "reasonable
time within which to comply with its obligation to construct and complete the streets." Neither of the
courts below seems to have noticed that, on the hypothesis stated, what the answer put in issue was
not whether the court should fix the time of performance, but whether or not the parties agreed that
the petitioner should have reasonable time to perform its part of the bargain. If the contract so
provided, then there was a period fixed, a "reasonable time;" and all that the court should have done
was to determine if that reasonable time had already elapsed when suit was filed if it had passed,
then the court should declare that petitioner had breached the contract, as averred in the complaint,
and fix the resulting damages. On the other hand, if the reasonable time had not yet elapsed, the
court perforce was bound to dismiss the action for being premature. But in no case can it be logically
held that under the plea above quoted, the intervention of the court to fix the period for performance
was warranted, for Article 1197 is precisely predicated on the absence of any period fixed by the
parties.
Even on the assumption that the court should have found that no reasonable time or no period at all
had been fixed (and the trial court's amended decision nowhere declared any such fact) still, the
complaint not having sought that the Court should set a period, the court could not proceed to do so
unless the complaint in as first amended; for the original decision is clear that the complaint
proceeded on the theory that the period for performance had already elapsed, that the contract had
been breached and defendant was already answerable in damages.
Granting, however, that it lay within the Court's power to fix the period of performance, still the
amended decision is defective in that no basis is stated to support the conclusion that the period
should be set at two years after finality of the judgment. The list paragraph of Article 1197 is clear
that the period can not be set arbitrarily. The law expressly prescribes that
the Court shall determine such period as may under the circumstances been probably
contemplated by the parties.
All that the trial court's amended decision (Rec. on Appeal, p. 124) says in this respect is that "the
proven facts precisely warrant the fixing of such a period," a statement manifestly insufficient to
explain how the two period given to petitioner herein was arrived at.
It must be recalled that Article 1197 of the Civil Code involves a two-step process. The Court must
first determine that "the obligation does not fix a period" (or that the period is made to depend upon
the will of the debtor)," but from the nature and the circumstances it can be inferred that a period was
intended" (Art. 1197, pars. 1 and 2). This preliminary point settled, the Court must then proceed to
the second step, and decide what period was "probably contemplated by the parties" (Do., par. 3).
So that, ultimately, the Court can not fix a period merely because in its opinion it is or should be
reasonable, but must set the time that the parties are shown to have intended. As the record stands,
the trial Court appears to have pulled the two-year period set in its decision out of thin air, since no
circumstances are mentioned to support it. Plainly, this is not warranted by the Civil Code.
In this connection, it is to be borne in mind that the contract shows that the parties were fully aware
that the land described therein was occupied by squatters, because the fact is expressly mentioned
therein (Rec. on Appeal, Petitioner's Appendix B, pp. 12-13). As the parties must have known that
they could not take the law into their own hands, but must resort to legal processes in evicting the
squatters, they must have realized that the duration of the suits to be brought would not be under
their control nor could the same be determined in advance. The conclusion is thus forced that the
parties must have intended to defer the performance of the obligations under the contract until the
squatters were duly evicted, as contended by the petitioner Gregorio Araneta, Inc.
The Court of Appeals objected to this conclusion that it would render the date of performance
indefinite. Yet, the circumstances admit no other reasonable view; and this very indefiniteness is
what explains why the agreement did not specify any exact periods or dates of performance.
It follows that there is no justification in law for the setting the date of performance at any other time
than that of the eviction of the squatters occupying the land in question; and in not so holding, both
the trial Court and the Court of Appeals committed reversible error. It is not denied that the case
against one of the squatters, Abundo, was still pending in the Court of Appeals when its decision in
this case was rendered.
In view of the foregoing, the decision appealed from is reversed, and the time for the performance of
the obligations of petitioner Gregorio Araneta, Inc. is hereby fixed at the date that all the squatters on
affected areas are finally evicted therefrom.
Costs against respondent Philippine Sugar Estates Development, Co., Ltd. So ordered.
Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and Castro, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-55480 June 30, 1987
PACIFICA MILLARE, petitioner,
vs.
HON. HAROLD M. HERNANDO, In his capacity as Presiding Judge, Court of Instance of Abra,
Second Judicial District, Branch I, ANTONIO CO and ELSA CO, respondents.

FELICIANO, J.:
On 17 June 1975, a five-year Contract of Lease 1 was executed between petitioner Pacifica Millare
as lessor and private respondent Elsa Co, married to Antonio Co, as lessee. Under the written
agreement, which was scheduled to expire on 31 May 1980, the lessor-petitioner agreed to rent out
to thelessee at a monthly rate of P350.00 the "People's Restaurant", a commercial establishment
located at the corner of McKinley and Pratt Streets in Bangued, Abra.
The present dispute arose from events which transpired during the months of May and July in 1980.
According to the Co spouses, sometime during the last week of May 1980, the lessor informed them
that they could continue leasing the People's Restaurant so long as they were amenable to paying
creased rentals of P1,200.00 a month. In response, a counteroffer of P700.00 a month was made by
the Co spouses. At this point, the lessor allegedly stated that the amount of monthly rentals could be
resolved at a later time since "the matter is simple among us", which alleged remark was supposedly
taken by the spouses Co to mean that the Contract of Lease had been renewed, prompting them to
continue occupying the subject premises and to forego their search for a substitute place to rent.
2
In
contrast, the lessor flatly denied ever having considered, much less offered, a renewal of the
Contract of Lease.
The variance in versions notwithstanding, the record shows that on 22 July 1980, Mrs. Millare wrote
the Co spouses requesting them to vacate the leased premises as she had no intention of renewing
the Contract of Lease which had, in the meantime, already expirecl.
3
In reply, the Co spouses
reiterated their unwillingness to pay the Pl,200.00 monthly rentals supposedly sought bv Mrs. Millare
which they considered "highly excessive, oppressive and contrary to existing laws". They also
signified their intention to deposit the amount of rentals in court, in view of Mrs. Millare's refusal to
accept their counter-offer.
4
Another letter of demand from Mrs. Millare was received on 28 July 1980
by the Co spouses, who responded by depositing the rentals for June and July (at 700.00 a month)
in court.
On 30 August 1980, a Saturday, the Co spouses jumped the gun, as it were, and filed a
Complaint
5
(docketed as Civil Case No. 1434) with the then Court of First Instance of Abra against
Mrs. Millare and seeking judgment (a) ordering the renewal of the Contract of Lease at a rental rate
of P700.00 a nionth and for a period of ten years, (b) ordering the defendant to collect the sum of
P1,400.00 deposited by plaintiffs with the court, and (c) ordering the defendant to pay damages in
the amount of P50,000.00. The following Monday, on 1 September 1980, Mrs. Millare filed an
ejectment case against the Co spouses in the Municipal Court of Bangued, Abra, docketed as Civil
Case No. 661. The spouses Co, defendants therein, sut)sequently set up lis pendens as a Civil
Case No. 661. The spouses Co, defendants therein, subsequently set up lis pendens as a defense
against the complaint for ejectment.
Mrs. Millare, defendant in Civil Case No. 1434, countered with an Omnibus Motion to
Dismiss
6
rounded on (a) lack of cause of action due to plaintiffs' failure to establish a valid renewal
of the Contract of Lease, and (b) lack of jurisdiction by the trial court over the complaint for failure of
plaintiffs to secure a certification from the Lupong Tagapayapa of the barangay wherein both
disputants reside attesting that no amicable settlement between them had been reached despite
efforts to arrive at one, as required by Section 6 of Presidential Decree No. 1508. The Co spouses
opposed the motion to dismiss.
7

In an Order dated 15 October 1980, respondent judge denied the motion to dismiss and ordered the
renewal of the Contract of Lease. Furthermore plaintiffs were allowed to deposit all accruing monthly
rentals in court, while defendant Millare was directed to submit her answer to the complaint.
8
A
motion for reconsideration
9
was subsequently filed which, however, was likewise denied. 10 Hence,
on 13 November 1980, Mrs. Millare filed the instant Petition for Certiorari, Prohibition and
Mandamus, seeking injunctive relief from the abovementioned orders. This Court issued a temporary
restraining order on 21 November 1980 enjoining respondent, judge from conducting further
proceedings in Civil Case No. 1434. 11 Apparently, before the temporary restraining order could be
served on the respondent judge, he rendered a "Judgment by Default" dated 26 November 1980
ordering the renewal of the lease contract for a term of 5 years counted from the expiration date of
the original lease contract, and fixing monthly rentals thereunder at P700.00 a month, payable in
arrears. On18 March 1981, this Court gave due course to the Petition for Certiorari, Prohibition and
Mandamus. 12
Two issues are presented for resolution: (1) whether or not the trial court acquired jurisdiction over
Civil Case No. 1434; and (2) whether or not private respondents have a valid cause of action against
petitioner.
Turning to the first issue, petitioner's attack on the jurisdiction of the trial court must fail, though for
reasons different from those cited by the respondent judge. 13 We would note firstly that the
conciliation procedure required under P.D. 1508 is not a jurisdictional requirement in the sense that
failure to have prior recourse to such procedure would not deprive a court of its jurisdiction either
over the subject matter or over the person of the defendant.14 Secondly, the acord shows that two
complaints were submitted to the barangay authorities for conciliation one by petitioner for
ejectment and the other by private respondents for renewal of the Contract of Lease. It appears
further that both complaints were, in fact, heard by the Lupong Tagapayapa in the afternoon of 30
August 1980. After attempts at conciliation had proven fruitless, Certifications to File Action
authorizing the parties to pursue their respective claims in court were then issued at 5:20 p.m. of that
same aftemoon, as attested to by the Barangay Captain in a Certification presented in evidence by
petitioner herself. 15
Petitioner would, nonetheless, assail the proceedings in the trial court on a technicaety, i.e., private
respondents allegedly filed their complaint at 4:00 p.m. of 30 August 1980, or one hour and twenty
minutes before the issuance of the requisite certification by the Lupng Tagapayapa. The defect in
procedure admittedly initially present at that particular moment when private respondents first filed
the complaint in the trial court, was cured by the subsequent issuance of the Certifications to File
Action by the barangay Lupong Tagapayapa Such certifications in any event constituted substantial
comphance with the requirement of P.D. 1508.
We turn to the second issue, that is, whether or not the complaint in Civil Case No. 1434 filed by the
respondent Co spouses claiming renewal of the contract of lease stated a valid cause of action.
Paragraph 13 of the Contract of Lease reads as follows:
13. This contract of lease is subject to the laws and regulations ofthe goverrunent;
and that this contract of lease may be renewed after a period of five (5) years under
the terms and conditions as will be mutually agreed upon by the parties at the time of
renewal; ... (Emphasis supplied.)
The respondent judge, in his Answer and Comment to the Petition, urges that under paragraph 13
quoted above.
there was already a consummated and finished mutual agreement of the parties to renew
the contract of lease after five years; what is only left unsettled between the parties to the
contract of lease is the amount of the monthly rental; the lessor insists Pl,200 a month,
while the lessee is begging P700 a month which doubled the P350 monthly rental under
the original contract .... In short, the lease contract has never expired because paragraph
13 thereof had expressly mandated that it is renewable. ... 16
In the "Judgment by Default" he rendered, the respondent Judge elaborated his views obviously
highly emotional in character in the following extraordinary tatements:
However, it is now the negative posture of the defendant-lessor to block, reject and
refuse to renew said lease contract. It is the defendant-lessor's assertion and position
that she can at the mere click of her fingers, just throw-out the plaintiffs-lessees from
the leased premises and any time after the original term of the lease contract had
already expired; This negative position of the defendantlessor, to the mind of this
Court does not conform to the principles and correct application of the philosophy
underlying the law of lease; for indeed, the law of lease is impressed with public
interest, social justice and equity; reason for which, this Court cannot sanction lot
owner's business and commercial speculations by allowing them with "unbridled
discretion" to raise rentals even to the extent of "extraordinary gargantuan
proportions, and calculated to unreasonably and unjustly eject the helpless lessee
because he cannot afford said inflated monthly rental and thereby said lessee is
placed without any alternative, except to surrender and vacate the premises
mediately,-" Many business establishments would be closed and the public would
directly suffer the direct consequences; Nonetheless, this is not the correct concept
or perspective the law of lease, that is, to place the lessee always at the mercy of the
lessor's "Merchant of Venice" and to agit the latter's personal whims and caprices;
the defendant-lessor's hostile attitude by imposing upon the lessee herein
an "unreasonable and extraordinary gargantuan monthly rental of P1,200.00", to the
mind of this Court, is "fly-by night unjust enrichment" at the expense of said lessees;
but, no Man should unjustly enrich himself at the expense of another; under these
facts and circumstances surrounding this case, the action therefore to renew the
lease contract! is "tenable" because it falls squarely within the coverage and
command of Articles 1197 and 1670 of the New Civil Code, to wit:
xxx xxx xxx
The term "to be renewed" as expressly stipulated by the herein parties in the original
contract of lease means that the lease may be renewed for another term of five (5) years;
its equivalent to a promise made by the lessor to the lessee, and as a unilateral
stipulation, obliges the lessor to fulfill her promise; of course the lessor is free to comply
and honor her commitment or back-out from her promise to renew the lease contract; but,
once expressly stipulated, the lessor shall not be allowed to evade or violate the
obligation to renew the lease because, certainly, the lessor may be held hable for
damages caused to the lessee as a consequence of the unjustifiable termination of the
lease or renewal of the same; In other words, the lessor is guilty of breach of contract:
Since the original lease was fixed for five (5) years, it follows, therefore, that the lease
contract is renewable for another five (5) years and the lessee is not required before
hand to give express notice of this fact to the lessor because it was expressly stipulated
in the original lease contract to be renewed; Wherefore, the bare refusal of the lessor to
renew the lease contract unless the monthly rental is P1,200.00 is contrary to law,
morals, good customs, public policy, justice and equity because no one should unjustly
enrich herself at the expense of another. Article 1197 and 1670 of the New Civil Code
must therefore govern the case at bar and whereby this Court is authorized to fix the
period thereof by ordering the renewal of the lease contract to another fixed term of five
(5) years. 17
Clearly, the respondent judge's grasp of both the law and the Enghsh language is tenuous at best.
We are otherwise unable to comprehend how he arrived at the reading set forth above. Paragraph
13 of the Contract of Lease can only mean that the lessor and lessee may agree to renew the
contract upon their reaching agreement on the terms and conditions to be embodied in such renewal
contract. Failure to reach agreement on the terms and conditions of the renewal contract will of
course prevent the contract from being renewed at all. In the instant case, the lessor and the lessee
conspicuously failed to reach agreement both on the amount of the rental to be payable during the
renewal term, and on the term of the renewed contract.
The respondent judge cited Articles 1197 and 1670 of the Civil Code to sustain the "Judgment by
Default" by which he ordered the renewal of the lease for another term of five years and fixed
monthly rentals thereunder at P700.00 a month. Article 1197 of the Civil Code provides as follows:
If the obligation does not fix a period, but from its nature and the circumstances it can
be inferred that a period was intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon the will of
the debtor.
In every case, the courts shall determine such period as may, under the
circumstances, have been probably contemplated by the parties. Once fixed by the
courts, the period cannot be changed by them. (Emphasis supplied.)
The first paragraph of Article 1197 is clearly inapplicable, since the Contract of Lease did in fact fix
an original period of five years, which had expired. It is also clear from paragraph 13 of the Contract
of Lease that the parties reserved to themselves the faculty of agreeing upon the period of the
renewal contract. The second paragraph of Article 1197 is equally clearly inapplicable since the
duration of the renewal period was not left to the wiu of the lessee alone, but rather to the will of both
the lessor and the lessee. Most importantly, Article 1197 applies only where a contract of lease
clearly exists. Here, the contract was not renewed at all, there was in fact no contract at all the
period of which could have been fixed.
Article 1670 of the Civil Code reads thus:
If at the end of the contract the lessee should continue enjoying the thing left for 15
days with the acquiescence of the lessor and unless a notice to the contrary by either
party has previously been given. It is understood that there is an implied new lease,
not for the period of the original contract but for the time established in Articles 1682
and 1687. The ther terms of the original contract shall be revived. (Emphasis
suplied.)
The respondents themselves, public and private, do not pretend that the continued occupancy of the
leased premises after 31 May 1980, the date of expiration of the contract, was with the
acquiescence of the lessor. Even if it be assumed that tacite reconduccion had occurred, the implied
new lease could not possibly have a period of five years, but rather would have been a month-to-
month lease since the rentals (under the original contract) were payable on a monthly basis. At the
latest, an implied new lease (had one arisen) would have expired as of the end of July 1980 in view
of the written demands served by the petitioner upon the private respondents to vacate the
previously leased premises.
It follows that the respondent judge's decision requiring renewal of the lease has no basis in law or in
fact. Save in the limited and exceptional situations envisaged inArticles ll97 and 1670 of the Civil
Code, which do not obtain here, courts have no authority to prescribe the terms and conditions of a
contract for the parties. As pointed out by Mr. Justice J.B.L. Reyes in Republic vs. Philippine Long
Distance Telephone,Co., 18
[P]arties cannot be coerced to enter into a contract where no agreement is had
between them as to the principal terms and conditions of the contract. Freedom to
stipulate such terms and conditions is of the essence of our contractual system, and
by express provision of the statute, a contract may be annulled if tainted by violence,
intimidation or undue influence (Article 1306, 1336, 1337, Civil Code of the
Philippines).
Contractual terms and conditions created by a court for two parties are a contradiction in terms. If
they are imposed by a judge who draws upon his own private notions of what morals, good customs,
justice, equity and public policy" demand, the resulting "agreement" cannot, by definition, be
consensual or contractual in nature. It would also follow that such coerced terms and conditions
cannot be the law as between the parties themselves. Contracts spring from the volition of the
parties. That volition cannot be supplied by a judge and a judge who pretends to do so, acts
tyrannically, arbitrarily and in excess of his jurisdiction. 19
WHEREFORE, the Petition for Certiorari, Prohibition and mandamus is granted. The Orders of the
respondent judge in Civil Case No. 1434 dated 26 September 1980 (denying petitioner's motion to
dismiss) and 4 November 1980 (denying petitioner's motion for reconsideration), and the "Judgment
by Default" rendered by the respondent judge dated 26 November 1980, are hereby annulled and
set aside and Civil Case No. 1434 is hereby dismissed. The temporary restraining order dated 21
November 1980 issued by this ourt, is hereby made permanent. No pronouncement as to costs.
SO ORDERED.