Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-26002 October 31, 1969

ABELARDO BAUTISTA and ROBERTO TAN TING, petitioners-appellees,

vs.
FEDERICO O. BORROMEO, INC., HONORABLE CESAR C. CRUZ, Judge of the Municipal
Court of Mandaluyong, Rizal and JESUS BAUTISTA, Deputy Sheriff of Manila as Special
Sheriff, respondents-appellants.

Dante O. Tinga and Leopoldo V. Repotente, Jr. for petitioners-appellees.

Modesto S. Mendoza for respondents-appellants.

SANCHEZ, J.:

Respondents-appellants seek to overturn the decision of the Court of First Instance of Rizal of
January 6, 1966 granting petitioners-appellees' petition for relief from judgment, setting aside the
July 23, 1965 decision of the Municipal Court of Mandaluyong, Rizal, in Civil Case 1365 and
ordering a new trial.

The background facts are as follows:

On September 15, 1964, the Ford truck of petitioner Roberto Tan Ting driven by Abelardo Bautista,
the other petitioner, and the Volkswagen delivery panel truck owned by respondent Federico O.
Borromeo, Inc. (hereinafter called Borromeo) were involved in a traffic accident along Epifanio de los
Santos Avenue. In said traffic accident, Quintin Delgado, a helper in Borromeo's delivery panel truck,
sustained injuries which resulted in his instantaneous death. Borromeo had to pay Delgado's widow
the sum of P4,444 representing the compensation (death benefit) and funeral expenses due
Delgado under the Workmen's Compensation Act.

On June 17, 1965, upon the averment that the said vehicular accident was caused by petitioners'
negligence, Borromeo started suit in the Municipal Court of Mandaluyong, Rizal to recover from
petitioners the compensation and funeral expenses it paid to the widow of Quintin Delgado.1

At the scheduled hearing of the case on July 23, 1965, neither petitioners nor their counsel
appeared. Borromeo was thus allowed to present its evidence ex parte. On the same day, July 23,
1965, the municipal court rendered judgment in favor of Borromeo and against the petitioners in the
principal sum of P4,444, and P500 attorney's fees, and costs. Respondents aver that this judgment
has been executed and satisfied.

On August 6, 1965, petitioners received copy of the municipal court's decision.

On August 13, 1965, petitioners moved to set aside the decision. On August 14, 1965, this motion
was denied.

On August 16, 1965, copy of this order of denial was sent by registered mail to counsel of
petitioners. Said counsel did not receive this registered mail and the mail matter was returned to the
court unclaimed. However, said counsel learned of this denial on September 2, 1965 allegedly "in
the course of his investigation."

Petitioners filed a notice of appeal dated September 2, 1965. They, however, paid the appellate
docket fee and deposited their cash appeal bond only on September 28, 1965. Their appeal was
consequently turned down by the municipal court, for the reason that the deposit of the bond and the
payment of the docket fee were done after the lapse of the reglementary period.

Nothing was done by petitioners until October 26, 1965, when they lodged a petition for relief from
the inferior court's judgment in the Court of First Instance of Rizal.2 They there claimed excusable
negligence for the failure of petitioners' counsel to appear in the July 23, 1965 hearing at the
municipal court and asserted that they had a good and substantial defense in that "there was no
contractual relationship between the parties, whether express or implied." They sought preliminary
injunction, prayed for trial de novo on the merits. A restraining order was at first issued by the court;
but the prayer for preliminary injunction was eventually denied.

Respondents' answer contended that the petition for relief was filed out of time; that petitioners'
counsel's failure to attend the hearing of July 23, 1965 does not constitute excusable negligence;
and that the affidavits attached to the petition do not show good and substantial defense.

Petitioners thereafter moved for judgment on the pleadings. No objection thereto was interposed by
respondents. The lower court then rendered the judgment mentioned in the first part of this opinion.

A move to reconsider failed. Hence, this appeal.

We vote to reverse the lower court's judgment for the following reasons:

1. The petition for relief from judgment under Rule 38 of the Rules of Court is unavailable to
petitioners.

A basic precept is that when another remedy at law is open to a party, he cannot sue out a petition
for relief under Rule 38.3 Thus, a petition for relief is not a substitute for appeal. It has been held that
where a defendant could have appealed — but did not appeal — from the decision of the inferior
court to the Court of First Instance but instead filed a petition for relief, his petition was inappropriate
as it "would amount to reviving his right to appeal which he had irretrievably lost through the gross
inaction of his counsel."4

Here, petitioners learned of the municipal court judgment on August 6, 1965, when they received a
copy of its decision. They moved to set aside that judgment on August 13, 1965. At that time, a
petition for relief could not be availed of because the judgment of the municipal court had not yet
become final.5 But, on September 2, 1965, petitioners learned of the court's order of August 14, 1965
denying their motion to set aside. They could have appealed. Because, nothing in the record
suggests that the notices to petitioners to take delivery of the registered envelope — containing the
inferior court's resolution denying petitioners' motion to set aside the decision — were ever
served on said petitioners. On the contrary, Teresita Roxas, secretary of petitioners' counsel, in her
affidavit dated October 23, 1965, Annex E of the petition for relief, categorically denied receipt of any
such notice, thus: "That I have not received any registry notice corresponding to a registered mail at
the Manila Post Office containing an order by the Municipal Court of Mandaluyong, Rizal, dated
August 14, 1965."6
But petitioners did not perfect their appeal to the Court of First Instance on time — they paid the
appellate docket fee and deposited their appeal bond only on September 28, eleven (11) days late.
Clearly, their failure to seasonably appeal was through their own fault.

And, when they did file a petition for relief on October 26, 1965, it was way beyond the sixty-day
period from August 6, 1965, the time they first learned of the judgment to be set aside, as required
by Section 3, Rule 38 of the Rules of Court.

We accordingly, rule that petitioners' petition for relief must fail.

2. Petitioners failed to make out a case of excusable negligence for counsel's non-attendance at the
July 23, 1965 hearing.

Their counsel, Atty. Leopoldo V. Repotente, Jr., explains his failure to attend the hearing in this wise
— "he relied on the assurance of his associate, Atty. Lucenito N. Tagle, that the latter will attend to
the case for him since on that same date he (Atty. Repotente) had another case before the City
Court of Quezon City." In his sworn statement, Atty. Tagle in turn stated that he was unable to attend
the hearing despite his promise to do so because, in his own words, "when I transferred to my new
office at A & T Building, Escolta, Manila, the record of this case was misplaced, mislaid or otherwise
lost by my helpers and was not among those turned over to my possession" and "it was only a few
days after the date of hearing on July 23, 1965, that I found the record of this case in one of the
drawers of my table in my former office and it was only then that I realized my failure to attend the
hearing on July 23, 1965, ... ."

We cannot view such negligence of petitioners' two attorneys as excusable. There was no plausible
reason for Repotente to entrust the hearing of the case to another lawyer. His lame excuse was that
he requested Tagle to attend the hearing of said case for him because he had another hearing at the
City Court of Quezon City. This is unworthy of serious consideration. For, as respondents aver —
and this is not denied by petitioners — the hearing of July 23, 1965 before the municipal court was
set in open court during the initial date of hearing held on July 1, 1965 after Atty. Repotente
consulted his calendar. When Repotente agreed in open court to set the trial of the case for July 23,
1965, it may very well be presumed that his other case in Quezon City was not yet calendared for
hearing. He could not have, in good faith, agreed to set the case for hearing on the day on which he
had another previously scheduled trial. Further, he failed to notify his clients of the hearing set for
July 23, 1965; they also failed to appear thereat. Certainly, Repotentes' inadvertence cannot be
labeled as excusable.

Nor may Atty. Tagle offer as excuse the fact that the record of the case "was misplaced, mislaid or
otherwise lost." This is a stereotyped excuse. It is resorted to by lawyers in order to win new trial of
the case and thereby move farther away the day of reckoning. To be remembered is that the life of
each case is in its record. If the record of the case was misplaced, mislaid or lost, he should have
nevertheless attended the scheduled hearing and requested for a postponement by reason thereof.
But he did not. Appropriate it is to recall here that a prudent lawyer keeps a separate record or diary
of hearings of cases he handles and of his professional engagements. A lawyer's schedules of
hearings — intended as reminder — are not noted by the lawyer in his record of the case. That
would be useless for the purpose.

There is then no excusable negligence to which the petition for relief can cling.

3. Even on the merits, petitioners' case must fall.

Borromeo paid the widow of its employee, Quintin Delgado, compensation (death benefit) and
funeral expenses for the latter's death while in the course of employment. This obligation arises from
law — Section 2 of the Workmen's Compensation Act.7 The same law in its Section 6 also provides
that "[i]n case an employee suffers an injury for which compensation is due under this Act by any
other person besides his employer, it shall be optional with such injured employee either to claim
compensation from his employer, under this Act, or sue such other person for damages, in
accordance with law; and in case compensation is claimed and allowed in accordance with this Act,
the employer who paid such compensation or was found liable to pay the same, shall succeed the
injured employee to the right of recovering from such person what he paid: ..."8

It is evident from the foregoing that "if compensation is claimed and awarded, and the employer pays
it, the employer becomes subrogated to and acquires, by operation of law, the worker's rights
against the tortfeasor."9

No need then there is to establish any contractual relationship between Quintin Delgado and herein
petitioners. Indeed, there is none. The cause of action of respondent corporation is one which does
not spring from a creditor-debtor relationship. It arises by virtue of its subrogation to the right of
Quintin Delgado to sue the guilty party. Such subrogation is sanctioned by the Workmen's
Compensation Law aforesaid. It is as a subrogee to the rights of its deceased employee, Quintin
Delgado, that Borromeo filed a suit against petitioners in the Municipal Court of Mandaluyong,
Rizal. 10

FOR THE REASONS GIVEN, the appealed decision of January 6, 1966 under review is hereby
reversed and the petition for relief is hereby dismissed.

Costs against petitioners-appellees. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and
Barredo, JJ.,concur.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

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

ARTURO PELAYO, plaintiff-appellant,

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

J.H. Junquera, for appellant.

Filemon Sotto, for appellee.

TORRES, J.:

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

In answer to the complaint counsel for the defendants denied all of the allegation therein contained
and alleged as a special defense, that their daughter-in-law had died in consequence of the said
childbirth, and that when she was alive she lived with her husband independently and in a separate
house without any relation whatever with them, and that, if on the day when she gave birth she was
in the house of the defendants, her stay their was accidental and due to fortuitous circumstances;
therefore, he prayed that the defendants be absolved of the complaint with costs against the plaintiff.

The plaintiff demurred to the above answer, and the court below sustained the demurrer, directing
the defendants, on the 23rd of January, 1907, to amend their answer. In compliance with this order
the defendants presented, on the same date, their amended answer, denying each and every one of
the allegations contained in the complaint, and requesting that the same be dismissed with costs.

As a result of the evidence adduced by both parties, judgment was entered by the court below on
the 5th of April, 1907, whereby the defendants were absolved from the former complaint, on account
of the lack of sufficient evidence to establish a right of action against the defendants, with costs
against the plaintiff, who excepted to the said judgment and in addition moved for a new trial on the
ground that the judgment was contrary to law; the motion was overruled and the plaintiff excepted
and in due course presented the corresponding bill of exceptions. The motion of the defendants
requesting that the declaration contained in the judgment that the defendants had demanded
therefrom, for the reason that, according to the evidence, no such request had been made, was also
denied, and to the decision the defendants excepted.
Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of having
been sent for by the former, attended a physician and rendered professional services to a daughter-
in-law of the said defendants during a difficult and laborious childbirth, in order to decide the claim of
the said physician regarding the recovery of his fees, it becomes necessary to decide who is bound
to pay the bill, whether the father and mother-in-law of the patient, or the husband of the latter.

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

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

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

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

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

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

In applying the provisions of the Civil Code in an action for support, the supreme court of Spain,
while recognizing the validity and efficiency of a contract to furnish support wherein a person bound
himself to support another who was not his relative, established the rule that the law does impose
the obligation to pay for the support of a stranger, but as the liability arose out of a contract, the
stipulations of the agreement must be held. (Decision of May 11, 1897.)
Within the meaning of the law, the father and mother-in-law are strangers with respect to the
obligation that devolves upon the husband to provide support, among which is the furnishing of
medical assistance to his wife at the time of her confinement; and, on the other hand, it does not
appear that a contract existed between the defendants and the plaintiff physician, for which reason it
is obvious that the former can not be compelled to pay fees which they are under no liability to pay
because it does not appear that they consented to bind themselves.

The foregoing suffices to demonstrate that the first and second errors assigned to the judgment
below are unfounded, because, if the plaintiff has no right of action against the defendants, it is
needless to declare whether or not the use of forceps is a surgical operation.

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

Mapa and Tracey, JJ., concur.

Arellano, C.J., and Carson, J., concurs in the result.
Willard, J., dissents.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 858 January 23, 1903

FRANCISCO MARTINEZ, plaintiff-appellee,

vs.
PEDRO MARTINEZ, defendant-appellant.

Carlos Ledesma, for appellant.

Felipe G. Calderon, for appellee.

WILLARD, J.:

In the decision in this case it is found as a fact that the titles to the steamer Balayan and the coasting
vesselOgoño are registered in the name of the defendant. It must be assumed from this that the
defendant has the legal title to the vessels, as without it they could not be so registered.

These facts standing alone show that the defendant is the owner of the property.

Two other facts, however, appear in the decision which the appellee claims warranted the court
below in deciding that the defendant was not the owner.

1. That court found that the money with which the vessels were purchased was furnished by the
plaintiff, the father of the defendant. Does this fact make him the owner of them, the title having been
taken and registered in the son's name?

The various ways in which the title to property may be acquired are stated in article 609 of the Civil
Code.

The plaintiff never acquired the title to these vessels in any one of the ways therein described. He
did not acquire it by donation or succession. He did not acquire it by means of any contract.

The court does not find that the father and son had between themselves any contract of any kind by
virtue of which the son agreed to transfer the title to the father or to hold it for his benefit.

There is an allegation in the complaint that the defendant acted as the agent of the plaintiff in the
purchase. This is denied in the answer and there is no finding in the decision which supports this
allegation of the complaint.

There is only the bare fact that the price of property which was conveyed to the defendant by a third
person was paid by the plaintiff. It can not be said that the law by reason of this fact transfers any
title or interest in the thing itself to the plaintiff.

Article 1090 of the Civil Code provides that "obligations derived from the law are not to be presumed.
Only those expressly provided for in this Code or in special laws are enforceable."
It is provided in article 161 of the same Code, relating to minors, that "the ownership or enjoyment of
property acquired by a minor child with funds of his parents, pertain to the latter." This article does
not apply to the present case, for the son was of age.

Nor can such general doctrine be found in the former law. Law 49, title 5, partida 5, the effect of
which is incorrectly stated in the brief of the appellee, expressly provided that property bought with
another's money should not belong to the owner of the money except in certain enumerated cases of
which this is not one.

Law 48, title 5, partida 5, also expressly provided that where one bought with his own money
property the title to which he procured to be transferred to a third person, such third person had the
right to keep it by reimbursing the other for his outlay.

It may be true that the laws in some of the United States would in this case raise a resulting trust in
favor of the plaintiff. But such laws are not in force here; and whatever other right the plaintiff may
have against the defendant, either for the recovery of the money paid or for damages, it is clear that
such payment gave him no title either legal or equitable to these vessels.

If there were evidence in the case which would have justified the court below in finding that the
defendant acted as the agent of the plaintiff or that there was some other contract between them, he
should have incorporated such findings in his decision.

Article 133 of the Code of Civil Procedure requires the court to file a written decision. If the facts
stated in that decision together with those admitted in the pleadings are not sufficient as a matter of
law to support the judgment, it must be reversed, if excepted to.

The record, however, contains all the evidence and an examination of it shows that no such findings
would have been warranted. As to the Balayan, it appears that the son had nothing whatever to do
with its purchase. It was bought by the father with the money of the conjugal partnership, and the
title by his direction placed in the son's name.

As to the Ogoño, the father's intervention in the purchase nowhere appears. He simply testified that
it was bought with his money.

It is said that the court below found as a fact that the father was the owner of the vessels and that we
can not disturb this finding because there was no motion for a new trial. This contention can not be
sustained. The ultimate question in the whole case was: Who owned this property? The resolution of
that question depended upon the application of legal principles to the facts connected with its
acquisition and subsequent management. Those facts were that the father bought and paid for it,
and that the titles to it were taken and registered in the son's name. A statement that by reason of
these facts the father is the owner is a statement of law and not a finding of fact.

2. It was found as a fact that the father had exercised acts of ownership over the vessel. That finding
is entirely consistent with the legal ownership by the son. The exercise of such acts could not
transfer such ownership from the son.

3. There is in the record a letter written by the defendant to the plaintiff in which the latter is asked if
he desires to sell the Balayan. This letter is not incorporated into the findings and we have no right to
consider it. But, if we had, it would not in our opinion change the result. Such a letter might well have
been written by a son to a father, both of them recognizing the fact that the son was the owner of the
property as to which the inquiry was made.
4. In conclusion we may say that even on the supposition that a written and recorded title to vessels
may be overcome by parol evidence, that offered in this case was insufficient to accomplish such a
result. As to theBalayan, there is nothing whatever to show why the father placed the title in his son's
name. It may have been either as a gift or a loan. As to the Ogoño, there is the simple declaration of
the father that he paid for it. This may have been either a gift or a loan.

The judgment is reversed and a new trial is granted with costs against the appellee.

Torres, Mapa, and Ladd, JJ., concur.

Arellano, C.J., did not sit in this case.

Separate Opinions

COOPER, J., dissenting:

This action was brought by Don Francisco Martinez against Don Pedro Martinez, the appellant, for
the recovery as owner of two certain vessels, the steamship Balayan and the schooner Ogoño.

The plaintiff brings the suit for himself and in representation of his deceased wife, alleging that the
ships were bought with funds belonging to the community estate.

The defendant in his answer claims that he is the exclusive owner of the ships, basing his right to
such ownership upon their registration in his name in the office of the Captain of the Port, and
further, that the ships were purchased with his individual money.

The first assignment of error is that "the court erred in adjudging the ownership of the property of the
shipsBalayan and Ogoño to Don Francisco Martinez, the latter not having presented written
documents of the acquisition of said ships nor certificates of inscription in the registry."

I. This assignment of error raises the question of the sufficiency of the proof to sustain the judgment
of the court below and requires an examination of the evidence taken in the court below and a trial of
the questions of fact as to the ownership of the property.

Section 497 of the Code of Civil Procedure provides that in the hearings upon bills of exceptions in
civil actions and special proceedings, the Supreme Court shall not review the evidence taken in the
court below nor retry the questions of fact except as in that section provided, which are in the
following cases:

(1) Where assessors have sat with the judge and both assessors are of the opinion that the findings
of fact and judgment are wrong and have certified their dissent.

(2) Upon the ground of the discovery of new and material evidence.

(3) Where the excepting party files a motion in the Court of First Instance of a new trial upon the
grounds that the findings of fact are plainly and manifestly against the weight of evidence and the
judge overrules the motion and due exception was taken to his overruling the same.
There was no motion for a new trial in the Court of First Instance, nor is it contended that his case
falls within either of the other exception.

It is insisted that while this court will not review or retry questions of fact, yet if it appears from the
findings of fact as contained in the decision of the lower court that the facts do not justify the
judgment or conclusion of law the case will be reversed for a new trial.

There was no exception taken to the judgment, the exception being only such as is inferred from the
presentation and allowance of the bill of exceptions.

This is not sufficient to justify this court in entertaining such objection; the rule is that where a
judgment is entered not warranted by the findings the property remedy is by applicable to the court
in which it is entered to correct or vacate the judgment, and unless the action of the court has been
thus invoked the petition will not be considered on appeal. (Scott vs. Minneapolis R.R. Co., 42 Minn.,
179.)

But had the exception been properly taken an examination of the findings clearly shows that the
judgment is sustained by them. The following findings of fact were made by the lower court and are
contained in the judgment to wit: "I am of the opinion that Don Francisco Martinez, for himself and in
representation of his wife, is the actual and true owner of said steamship and schooner and has
exercised over them acts of ownership and dominion, and that this ships were bought with the funds
by him furnished. With respect to the fact that the steamship and schooner may have been
registered in the name of the defendant, Pedro Martinez, it is my opinion that this fact can not be
considered as prejudicial to the true right of the plaintiff."

An analysis of this finding will show that it consists of the finding of, first, an ultimate fact, that is, that
the plaintiff D. Francisco Martinez is the actual and true owner of the steamship and schooner, the
property in controversy; second, the probative fact that he has exercised over them acts of
ownership and dominion and that these ships were bought with funds furnished by him, and, third,
the probative fact that the ships were registered in the name of the defendant, Pedro Martinez.

The majority of the court regard the firs finding — that is, that the plaintiff is the actual and true
owner of the property in controversy — as a statement of law and not a finding of fact, and have
rejected it as a finding of fact. In reversing the case for a new trial the decision is based upon the
finding that the vessels are registered in the name of the defendant, and it is said that it must be
assumed that the defendant has a title to the vessels as without it they could not be so registered.

The conclusion I reach is the reverse of that reached by the court. The finding of the plaintiff's
ownership of the vessel and schooner is not a conclusion of law, but is the finding of an ultimate fact
in the case, and was the proper and the only finding that could have been made. As stated in the
opinion, the ultimate question in the whole case was, Who owned this property?

The supreme court of Minnesota has passed upon the precise question in the case of
Common vs. Grace (36 Minn., 276). The findings of the lower court in that case was that "John
Grace was, at the time of his death, the owner in fee simple of the real estate." The appellant made
a request in the court below for additional findings. Upon the refusal of the lower court to make such
additional findings it was assigned as error on appeal. Mitchell, J., says: "The facts required to be
found are the ultimate facts forming the issues presented by the pleadings and which constitute the
foundation of a judgment and not those which are simply evidentiary of them. The court is not
required to find merely evidentiary facts or to set forth and explain the means or processes by which
it arrived at such findings. Neither evidence, argument, nor comment has any legitimate place in the
findings of fact. The test of the sufficiency of the findings of fact by a court, we apprehend, is, Would
they answer if presented by a jury in the form of a special verdict, which is required to present the
conclusions of fact as established by the evidence, and not the evidence to prove them, and to
present those conclusions of fact so that nothing remains to the court but to draw from them
conclusions of law? In the case at bar the finding of fact that John Grace was, at the time of his
death, the owner in fee simple of the real estate in question was the ultimate fact upon which the
decision of the case depended. It covered the only issue in the case, and was a sufficient foundation
for a judgment in favor of defendants. It could only be arrived at upon the hypothesis that the deeds
in dispute were duly executed, and the finding necessarily implied and included this."

In the case of Daly vs. Socorro (80 Cal., 367) It is said: "The appellant further contends that the
cause should be reversed because the court failed to find upon certain other issues presented. His
right to maintain the action was based wholly upon his ownership and right of possession, and these
being found against him it is immaterial to him whether the court found as to other facts or not, as
the judgment must have been against him whatever the other finding might have been."

The finding of the court that the ships were registered in the name of the defendant is the finding
only of a probative or evidentiary fact, that is, it is the finding simply of evidence tending to prove the
ultimate fact, to wit, the fact of ownership. The various means of proving this ultimate fact is the
evidence. Thus a bill of sale is evidence of ownership. The possession of property is prima
facie evidence of ownership, and so perhaps is the registry of ships evidence of the ownership of the
person in whose name it is made; but while it is evidence tending to prove ownership, there may be
other evidence in the case totally destroying its value, such as a sale and conveyance of the ship by
the owner or person in whose name it is registered made subsequent to the date of the registration;
title by prescription as against the party in whose name the ship is registered held the title simply as
agent of the party claiming ownership. For this reason the finding that the vessels are registered in
the name of the defendant is inconclusive and is entirely insufficient as a finding of fact.

The finding of fact must be such as includes the entire issue or the ultimate fact to be proven, and in
this case, as is stated in the opinion, the ultimate question in the whole case was who owned this
property. The lower court has responded to this issue by saying that "while the ships are registered
in the name of the defendant that this fact can not be considered as prejudicial to the direct
ownership of the plaintiff. That D. Francisco Martinez, the plaintiff, for himself and in representation
of his wife, is the actual and true owner of said ships and has exercised over them acts of ownership
and dominion."

There is no conflict in the findings, for, as stated by the lower court, the ship may be registered in the
name of the defendant and still be owned by the plaintiff. But, if any such conflict exists, then the
finding of the probative fact that the vessels are registered in the name of the defendant must give
way to the finding of the ultimate fact that the ownership is with the plaintiff.

When the ultimate fact is found no finding of probative facts which may tend to establish that the
ultimate fact was found against the evidence can overcome the finding of the ultimate fact.
(Smith vs. Acker, 52 Cal., 217; Perry vs.Quackenbush, 105 Cal., 299; Smith vs. Jones, 131 Ind.)

Not only is the ultimate fact of ownership which is the paramount finding in the case allowed to be
overthrown by the less important and subsidiary finding of the evidentiary fact of registration of the
ship, but the opinion wholly ignores the other finding of the probative fact, that is, that the plaintiff has
exercised acts of ownership and dominion over the property and that the ships were purchased with
funds furnished by him.
II. It is said in the opinion in referring to a letter written by the defendant to the plaintiff that this letter
is not incorporated in the findings and we have no right to consider it, yet the court in its decision has
gone into an examination of the evidence thus improperly brought here.

This ambiguity in the opinion makes it necessary to refer briefly to the evidence. Such review will
show that the evidence before the lower court was entirely sufficient to support the finding of
ownership in the plaintiff. It consists of letters written to the plaintiff by his agents, Armstrong &
Sloan, who acted for him in the purchase of the shipBalayan; the testimony of the plaintiff as to his
purchase and payment of the price of the ship; proof of witnesses of the acts of ownership on the
part of the plaintiff after the purchase of the ships by him; that the defendant resided with the plaintiff,
who was his father, and that the defendant had no means with which to make such purchase;
various acts of the defendant recognizing the plaintiff's ownership in the vessel; evidence introduced
on the part of the plaintiff tending to show his ownership and tending to show that the defendant
acted simply as plaintiff's agent in the control which he exercised over the ship.

In one of the letters written by Armstrong & Sloan to the plaintiff dated August 22, 1892, they say:

"We have credited to your account $18,843.65 which you left before your departure for the cost of
the ship bought for you in Hongkong." Also the book entries in the mercantile office of Armstrong &
Sloan, in which appear the following:

Cash, August, 1892.

Aug. Francisco $18,843.65

24. Martinez,
received from
him account of
cost of one
launch in
Hongkong

Cash, September, 1892.

Sept. Francisco
13. Martinez to
Chartered Bank,
remittance to
Hongkong
account of steam
launch, $18,300
at 3/4 per cent
discount 16,881.75
Cost of message 3.23
Total 16,884.98

Another letter is in evidence from the same parties to the plaintiff dated October 13, 1892, in
which they say that they had telegraphed the day before to Hongkong for the ship to sail
"and we have written that the name Balayan be given it."
Several other letters were introduced written by the same parties to the plaintiff concerning the
ship Balayan, in which they say the deal was closed and by which they make arrangements for
incidental expenses in the equipment of ship, insurance upon it, and its sailing from Hongkong to
Manila.

A letter is also contained in the record written by the defendant to the plaintiff on the 27th of October,
1899, which is as follows:

Manila, October 27, 1899. — Esteemed Father: With my kindest regards (beso a V. la
mano). With respect to the steamship Balayan, Señor Sloan sends word to you that there is
an American who wishes to purchase it for 24,000 pesos, and asks whether you desire to
sell it or not that you reply because he awaits your answer . . . .

It also appears in evidence that the ship Balayan had the initials of the plaintiff "F. M." on the
smokestack, and that at some recent date the defendant had caused these initials to be erased and
those of his own substituted.

The defendant for a number of years managed the plaintiff's business under a general power of
attorney, and was a member of his family, and such acts of ownership as he exercised over these
ships may be properly referred to this authority.

When the relationship of the parties — that is, that of son and father — is considered in connection
with other proof in the case, the conclusion is irresistible that the ships are owned by the plaintiff and
that there has been a most flagrant abuse on the part of the defendant of a father's confidence.

For the reason above stated I dissent from the decision.

CONTRACTS

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-1299 November 16, 1903

VICENTE PEREZ, plaintiff-appellee,

vs.
EUGENIO POMAR, Agent of the Compañia General de Tabacos, defendant-appellant.

Francisco Dominguez for appellant.

Ledesma, Sumulong and Quintos for appellee.

TORRES, J.:

In a decision dated February 9, 1903, the judge of the Sixth Judicial District, deciding a case brought
by the plaintiff against the defendant for the recovery of wages due and unpaid, gave judgment
against the latter for the sum of $600 and the costs of suit, less the sum of $50, Mexican.

On August 27, 1902, Don Vicente Perez filed in the Court of First Instance of Laguna a complaint,
which was amended on the 17th of January of this year, asking that the court determine the amount
due the plaintiff, at the customary rate of compensation for interpreting in these Islands, for services
rendered in the Tabacalera Company, and that, in view of the circumstances of the case, judgment
be rendered in his favor for such sum. The complaint also asked that the defendant be condemned
to the payment of damages in the sum of $3,200, gold, together with the costs of suit. In this
complaint it was alleged that Don Eugenio Pomar, as general agent of the Compañia General de
Tabacos in the said province, verbally requested the plaintiff on the 8th of December, 1901, to act as
interpreter between himself and the military authorities; that after the date mentioned the plaintiff
continued to render such services up to and including May 31, 1902; that he had accompanied the
defendant, Pomar, during that time at conferences between the latter and the colonel commanding
the local garrison, and with various officers and doctors residing in the capital, and at conferences
with Captain Lemen in the town of Pilar, and with the major in command at the town of Pagsanjan,
concerning the shipment of goods from Manila, and with respect to Pagsanjan to this city; that the
plaintiff during this period held himself in readiness to render services whenever required; that on
this account his private business, and especially a soap factory established in the capital, was
entirely abandoned; that to the end that such services might be punctually rendered, the agent,
Pomar, assured him that the Tabacalera Company always generously repaid services rendered it,
and that he therefore did not trouble himself about his inability to devote the necessary amount of
time to his business, the defendant going so far as to make him flattering promises of employment
with the company, which he did not accept; that these statements were made in the absence of
witnesses and that therefore his only proof as to the same was Mr. Pomar's word as a gentleman;
that the employees of the company did not understand English, and by reason of the plaintiff's
mediation between the agent, and the military authorities large profits were obtained, as would
appear from the account and letterpress books of the agency corresponding to those dates. In the
amended complaint it was added that the defendant, on behalf of the company, offered to
renumerate the plaintiff for the services rendered in the most advantageous manner in which such
services are compensated, in view of the circumstances under which they were requested; and that
the plaintiff, by rendering the company such services, was obliged to abandon his own business, the
manufacture of soap, and thereby suffered damages in the sum of $3,200, United States currency.

The defendant, on the 25th of September, 1902, filed an answer asking for the dismissal of the
complaint, with costs to the plaintiff. In his answer the defendant denied the allegation in the first
paragraph of the complaint, stating that it was wholly untrue that the company, and the defendant as
its agent, had solicited the services of the plaintiff as interpreter before the military authorities for the
period stated, or for any other period, or that the plaintiff had accompanied Pomar at the
conferences mentioned, concerning shipments from Manila and exports from some of the towns of
the province to this capital. He stated that he especially denied paragraphs 2 of the complaint, as it
was absolutely untrue that the plaintiff had been at the disposal of the defendant for the purpose of
rendering such services; that he therefore had not been obliged to abandon his occupation or his
soap factory, and that the statement that an offer of employment with the company had been made
to him was false. The defendant also denied that through the mediation of the plaintiff the company
and himself had obtained large profits. The statements in paragraphs 6, 7, 8, and 9 of the complaint
were also denied. The defendant stated that, on account of the friendly relations which sprang up
between the plaintiff and himself, the former borrowed from him from time to time money amounting
to $175 for the purposes of his business, and that he had also delivered to the plaintiff 36 arrobas of
oil worth $106, and three packages of resin for use in coloring his soap; that the plaintiff
accompanied the defendant to Pagsanjan, Pilar, and other towns when the latter made business
trips to them for the purpose of extending his business and mercantile relations therein; that on
these excursions, as well as on private and official visits which he had to make, the plaintiff
occasionally accompanied him through motives of friendship, and especially because of the free
transportation given him, and not on behalf of the company of which he was never interpreter and for
which he rendered no services; that the plaintiff in these conferences acted as interpreter of his own
free will, without being requested to do so by the defendant and without any offer of payment or
compensation; that therefore there existed no legal relation whatever between the company and the
plaintiff, and that the defendant, when accepting the spontaneous, voluntary and officious services of
the plaintiff, did so in his private capacity and not as agent of the company, and that it was for this
reason that he refused to enter into negotiations with the plaintiff, he being in no way indebted to the
latter. The defendant concluded by saying that he answered in his individual capacity.

A complaint having been filed against the Compañia General de Tabacos and Don Eugenio Pomar,
its agent in the Province of Laguna, the latter, having been duly summoned, replied to the complaint,
which was subsequently amended, and stated that he made such reply in his individual capacity and
not as agent of the company, with which the plaintiff had had no legal relations. The suit was
instituted between the plaintiff and Pomar, who, as such, accepted the issue and entered into the
controversy without objection, opposed the claim of the plaintiff, and concluded by asking that the
complaint be dismissed, with the costs to the plaintiff. Under these circumstances and construing the
statutes liberally, we think it proper to decide the case pending between both parties in accordance
with law and the strict principles of justice.

From the oral testimony introduced at the trial, it appears that the plaintiff, Perez, did on various
occasions render Don Eugenio Pomar services as interpreter of English; and that he obtained
passes and accompanied the defendant upon his journeys to some of the towns in the Province of
Laguna. It does not appear from the evidence, however, that the plaintiff was constantly at the
disposal of the defendant during the period of six months, or that he rendered services as such
interpreter continuously and daily during that period of time.

It does not appear that any written contract was entered into between the parties for the employment
of the plaintiff as interpreter, or that any other innominate contract was entered into; but whether the
plaintiff's services were solicited or whether they were offered to the defendant for his assistance,
inasmuch as these services were accepted and made use of by the latter, we must consider that
there was a tacit and mutual consent as to the rendition of the services. This gives rise to the
obligation upon the person benefited by the services to make compensation therefor, since the
bilateral obligation to render services as interpreter, on the one hand, and on the other to pay for the
services rendered, is thereby incurred. (Arts. 1088, 1089, and 1262 of the Civil Code). The supreme
court of Spain in its decision of February 12, 1889, holds, among other things, "that not only is there
an express and tacit consent which produces real contract but there is also a presumptive consent
which is the basis of quasi contracts, this giving rise to the multiple juridical relations which result in
obligations for the delivery of a thing or the rendition of a service."

Notwithstanding the denial of that defendant, it is unquestionable that it was with his consent that the
plaintiff rendered him services as interpreter, thus aiding him at a time when, owing to the existence
of an insurrection in the province, the most disturbed conditions prevailed. It follows, hence, that
there was consent on the part of both in the rendition of such services as interpreter. Such service
not being contrary to law or to good custom, it was a perfectly licit object of contract, and such a
contract must necessarily have existed between the parties, as alleged by the plaintiff. (Art. 1271,
Civil Code.)

The consideration for the contract is also evident, it being clear that a mutual benefit was derived in
consequence of the service rendered. It is to be supposed that the defendant accepted these
services and that the plaintiff in turn rendered them with the expectation that the benefit would be
reciprocal. This shows the concurrence of the three elements necessary under article 1261 of the
Civil Code to constitute a contract of lease of service, or other innominate contract, from which an
obligation has arisen and whose fulfillment is now demanded.

Article 1254 of the Civil Code provides that a contract exists the moment that one or more persons
consent to be bound, with respect to another or others, to deliver some thing or to render some
service. Article 1255 provides that the contracting parties may establish such covenants, terms, and
conditions as they deem convenient, provided they are not contrary to law, morals or public policy.
Whether the service was solicited or offered, the fact remains that Perez rendered to Pomar services
as interpreter. As it does not appear that he did this gratuitously, the duty is imposed upon the
defendant, having accepted the benefit of the service, to pay a just compensation therefor, by virtue
of the innominate contract of facio ut des implicitly established.

The obligations arising from this contract are reciprocal, and, apart from the general provisions with
respect to contracts and obligations, the special provisions concerning contracts for lease of services
are applicable by analogy.

In this special contract, as determined by article 1544 of the Civil Code, one of the parties
undertakes to render the other a service for a price certain. The tacit agreement and consent of both
parties with respect to the service rendered by the plaintiff, and the reciprocal benefits accruing to
each, are the best evidence of the fact that there was an implied contract sufficient to create a legal
bond, from which arose enforceable rights and obligations of a bilateral character. lawphi1.net

In contracts the will of the contracting parties is law, this being a legal doctrine based upon the
provisions of articles 1254, 1258, 1262, 1278, 1281, 1282, and 1289 of the Civil Code. If it is a fact
sufficiently proven that the defendant, Pomar, on various occasions consented to accept an
interpreter's services, rendered in his behalf and not gratuitously, it is but just that he should pay a
reasonable remuneration therefor, because it is a well-known principle of law that no one should be
permitted to enrich himself to the damage of another.
With respect to the value of the services rendered on different occasions, the most important of
which was the first, as it does not appear that any salary was fixed upon by the parties at the time
the services were accepted, it devolves upon the court to determine, upon the evidence presented,
the value of such services, taking into consideration the few occasions on which they were rendered.
The fact that no fixed or determined consideration for the rendition of the services was agreed upon
does not necessarily involve a violation of the provisions of article 1544 of the Civil Code, because at
the time of the agreement this consideration was capable of being made certain. The discretionary
power of the court, conferred upon it by the law, is also supported by the decisions of the supreme
court of Spain, among which may be cited that of October 18, 1899, which holds as follows: "That as
stated in the article of the Code cited, which follows the provisions of law 1, title 8, of the fifth partida,
the contract for lease of services is one in which one of the parties undertakes to make some thing
or to render some service to the other for a certain price, the existence of such a price being
understood, as this court has held not only when the price has been expressly agreed upon but also
when it may be determined by the custom and frequent use of the place in which such services were
rendered."

No exception was taken to the judgment below by the plaintiff on account of the rejection of his claim
for damages. The decision upon this point is, furthermore, correct.

Upon the supposition that the recovery of the plaintiff should not exceed 200 Mexican pesos, owing
to the inconsiderable number of times he acted as interpreter, it is evident that the contract thus
implicitly entered into was not required to be in writing and that therefore it does not fall within article
1280 of the Civil Code; nor is it included within the provisions of section 335 of the Code of Civil
Procedure, as this innominate contract is not covered by that section. The contract of lease of
services is not included in any of the cases expressly designated by that section of the procedural
law, as affirmed by the appellant. The interpretation of the other articles of the Code alleged to have
been infringed has also been stated fully in this opinion.

For the reasons stated, we are of the opinion that judgment should be rendered against Don
Eugenio Pomar for the payment to the plaintiff of the sum of 200 Mexican pesos, from which will be
deducted the sum of 50 pesos is made as to the costs of this instance. The judgment below is
accordingly affirmed in so far as it agrees with this opinion, and reversed in so far as it may be in
conflict therewith. Judgment will be entered accordingly twenty days after this decision is filed.

Arellano, C.J., Willard, and Mapa, JJ., concur.

Separate Opinions

MCDONOUGH, J., dissenting:

I dissent from the opinion of the majority. In my opinion there is no legal evidence in the case from
which the court may conclude that the recovery should be 200 Mexican pesos. I am therefore in
favor of affirming the judgment.
Cooper, J., concurs.
Johnson, J., did not sit in this case.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-29203 July 26, 1971

MARITIME COMPANY OF THE PHILIPPINES, plaintiff-appellant,

vs.
REPARATIONS COMMISSION or REPARATION MISSION, defendant-appellee.

Rafael Dinglasan for plaintiff-appellant.

Panfilo M. Manguera and Jober Ayura for defendant-appellee.

FERNANDO, J.:

Decisive of the crucial issue posed by this appeal from a decision of the lower court is the
applicability of the well-settled principle that a statute should be considered as entering into and
forming part of a contract. Plaintiff Maritime Company of the Philippines, now appellant, would deny
that it is controlling in its suit to hold defendant Reparations Commission, now appellee, liable for the
freight charges as the consignee of reparations goods, notwithstanding that under Section 11 of the
Reparations Act, 1 ocean freight and other expenses incident to importation shall be paid by the end-user
and not by such agency. That defendant is exempt from such obligation is further stressed by the
concluding sentence thereof: "Nothing herein shall be construed as exempting the end-user from paying
in full all the necessary costs, charges and expenses incident to the application for and the procurement,
production delivery and acquisition, of, the goods concerned." It could not have been entirely unexpected
therefore for the lower court to reach the conclusion that it had no choice on the matter in view of the
explicit character of such statutory language which must be read into the contract of shipment. So it held
in dismissing plaintiff's complaint for the recovery of freight charges. As such decision is not vitiated by
any infirmity, we affirm.

In plaintiff's complaint of July 29, 1965, after setting forth its corporate character as well as that of the
defendant Reparations Commission, which is vested by law with the power to enter into contracts
and to sue and be sued, it alleged that shipments of reparations goods were loaded in three of its
vessels consigned to defendant, with corresponding freight charges amounting to
P228,250.58. 2 Then came the allegation that said vessels arrived in Manila and discharged all such
shipment of reparations goods, which were duly delivered to and received by defendant as consignee in
good order and condition, but defendant failed and refused to pay, notwithstanding repeated demands,
the total amount of the freight charge, above-mentioned. 3 There was a claim for attorney's fee in the
amount of P20,000.00, plaintiff, according to the complaint, being compelled to engage counsel. 4 The
prayer was for a judgment against defendant in favor of plaintiff in the aforesaid sum of P228,250.58 as
freight charges plus 6% interest thereon from the date of the filing the complaint until fully paid, and the
sum of P20,000.0 by way of attorney's fees.

There was no denial in the answer of defendant filed on September 10, 1965 of the facts as alleged,
but Section 11 of the Reparations Act was invoked to show that it was not liable at all for the freight
charges, a matter which, according to defendant, was fully known to plaintiff as it had in several
instances collected, freight charges from the end-users concerned. 5 In its special affirmative defenses,
defendant contended that plaintiff's claim was barred by a prior judgment under the principle of res
adjudicata and that "as a carrier of reparations goods, [it] is not only presumed to know the law but is
chargeable with knowledge of that law, and when it thus entered into a contract of carriage or
affreightment of reparations goods, it rendered itself bound by the pertinent provision of Section 11 of the
Reparations Law ... on the question of who is liable for said freight charges; that as a matter of fact,
plaintiff in its prior dealings with the defendant on this matter had so recognized and accepted the set-up
as envisioned by Section 11 of the Reparations Law." 6Its prayer was for the dismissal of the complaint
with costs against plaintiff.

As noted, defendant's contention was sustained by the lower court in its decision of March 29, 1968
dismissing the complaint. After referring to the language of Section 11 of the Reparations Act,
mentioned at the opening of this opinion, it reached the above conclusion, there, being "no doubt on
the interpretation as to who will pay for the freight charges." 7 It was likewise set forth therein that
plaintiff in fact had been collecting freight charges from end-users and turning over a portion thereof, at
least 50%, to defendant to pay its outstanding obligations, plaintiff having purchased several vessels
through the Reparations Commission payable on instalIments. 8 There was no question then, to its mind,
that plaintiff, considering such conduct, had no right to demand the payment of freight charges from
defendant. 9

From the above decision, an appeal was taken to this Court on April 26, 1968. The brief for plaintiff-
appellant was filed on September 7 of the same year. Defendant-appellee Reparations Commission,
in turn submitted its brief on October 7, 1968. There was no reply brief on the part of the appellant.
Notwithstanding the vigorous presentation of the alleged errors imputed to the lower court, there is
no legal justification, as was already indicated, for a reversal.

1. It is to be recognized that a large degree of autonomy is accorded contracting parties. Not that it is
unfettered. They may, according to the Civil Code, 10 establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy." The law thus sets limits. It is a fundamental requirement that the contract
entered into must be in accordance with, and not repugnant to, an applicable statute. Its terms are
embodied therein. The contracting parties need not repeat them. They do not even have to be referred to.
Every contract thus contains not only what has been explicitly stipulated, but the statutory provisions that
have any bearing on the matter. So it has been invariably held from United States v. Constantino, 11 a
1919 decision, toLakas Ng Manggagawang Makabayan (LMM) v. Abiera, 12 promulgated only a year
ago. 13 According to Justice Malcolm, speaking for the Court in the former: "It is an elementary rule of
contracts that the laws, in force at the time the contract was made, enter into and govern it." 14 This is how
the matter is put in the latest decision: "The principle is thus well-settled that an existing law enters into
and forms part of a valid contract without the need for the parties expressly making reference to it. Only
thus could its validity insofar as some of its provisions are concerned be assured." 15

A fairly recent restatement of the principle, in the language of Justice J.B.L. Reyes, speaking for the
Court, appears in Liberation Steamship Co., Inc. vs. Court of Industrial Relations. 16 Thus: "The rule is
that the law forms part of, and is, read into, every contract, unless clearly excluded therefrom in those
cases where such exclusion is allowed ... ." 17 What is the law that forms part of, and is to be read into,
the contract between plaintiff-appellant and defendant-appellee? It is, to repeat, Section 11 of Republic
Act No. 1789 as amended. 18 More specifically: "The insurance, ocean freight and other expenses
incident to importation shall be paid by the end-user in accordance with usual business practice." The
Last sentence is equally plain: "Nothing herein shall be construed as exempting the end-user from paying
in full all the necessary costs, charges and expenses incident to the application for and the procurement,
production, delivery and acquisition, of, the goods concerned." The above provisions, then, form part of
and must be read into the shipping contracts between plaintiff-appellant and defendant-appellee, unless
they could be "clearly excluded therefrom", assuming "such exclusion is allowed."
There is thus no persuasive force to the first error imputed to the lower court for their being applied
to the contractual relationship between the parties. There is no showing that the shipping contracts
between them are clearly excluded from the law, much less that such exclusion could be allowed.
The lower court had no choice then. It yielded obedience to the law. What it did certainly cannot be
stigmatized as error.

It is in that sense that reliance by plaintiff-appellant on the force and effect to be given the usual
contracts between shipper and carriers, while finding support in the applicable provisions both of the
Civil Code and the Code of Commerce, is far from persuasive. As was pointed out in the equally
forceful brief of defendant-appellee, to so view the matter is to ignore what has been explicitly set
forth in Section 11 of the Reparations Act which is controlling.

Nor did the attempt by plaintiff-appellant to invoke equitable considerations strengthen an inherently
weak case. It asserted that defendant-appellee was in a better position to collect the freight charges.
This is the answer of the latter: "Contrary to appellant's contention, it is itself and not the appellee
which is in a better position to collect the corresponding ocean freight. This is because under the
Reparations Law and established reparations set-up, the incidental charges to reparations
importations, including freight charges are to be paid by the end-user to the party concerned upon
the arrival but before delivery of the goods to the end-user, and "in accordance with usual business
practices." (Sect. 11 R.A. 1789, as amended) Under this concept before the carrier issues the
"Permit to deliver" the shipments, it could rightfully demand payment as a settlement of the freight
charges. This is the stage more appropriate and commands a better facility in so far as the collection
of the freight charges is concerned, and not after the goods shall have been released to the end-
user by the carrier and the corresponding contract of Conditional Purchase and Sale executed by
and between the Commission and the End-user
concerned." 19 It cannot be said then that plaintiff-appellant's effort to thus collect would be futile.
Moreover, there is always the remedy of a court action. Both in the answer of defendant-appellee 20, as
well as in its brief, 21 reference was made to such a suit actually being filed by plaintiff-appellant against a
reparations end-user, C. G. Nazario and Sons, Inc. as well as the Reparations Commission as far back as
1961. 22 It was therein decided that defendant-appellee was not liable for the freight charges, such
obligation being incumbent on its co-defendant C. G. Nazario and Sons, Inc., the end-user.

At bottom then, this is one of those cases where a statutory provision free from any ambiguity, quite
specific and definite, calls for application. Under such circumstances, there is not even any need for
construction. The task of the judiciary is clear. 23 It must consider the law as controlling. This is what the
lower court did. Certainly, no error could justly be imputed to it.

2. Nor is the second assignment of error deserving of a better fate. Plaintiff-appellant would find fault
with the holding of the lower court that its having collected the freight charges on certain occasions
from the end-users of reparations goods and applying portions thereof to the payment of its
obligation to defendant-appellee for the purchase of several vessels indicated it had no right to
demand payment thereof from the latter. On this point, the appealed decision reads: "The practice
followed by the plaintiff in its dealings with the defendant establishes the fact that the plaintiff has
been collecting the freight charges from the end-users and turning over a portion thereof (at least
50%) to the [defendant] in payment of the outstanding obligation of the plaintiff to the defendant, the
plaintiff having purchased several vessels thru the Reparations Commission and paying the Latter
by installments ... . There is, therefore, no question that as far as the plaintiff in its relation with the
defendant is concerned, said plaintiff has been collecting from the end-users the freight charges of
reparations goods from the end-users and, therefore, it has no right to demand the same from the
defendant." 24 On the face thereof, the imputation of error would be hard to justify. The conclusion
reached proceeds from an accurate appraisal of plaintiff-appellant's conduct. Nor is it without support in
the evidence.
So it was made manifest in defendant-appellee's brief in these words: "To exemplify and bolster the
foregoing view, attention is respectfully invited to the herein quoted contents of Exhs. 6, 7 and 8 of
defendant-appellee: From Exh. "6" which is a letter of the plaintiff-appellant to the defendant-
appellee, dated August 7, 1963 containing the manifestation of plaintiff to turn over to the defendant
50% of freightage collected, we quote in part: "Allowing some time for the collection of freights from
the various end-users, we expect to remit to the Reparations Commission an approximate total of
P60,000.00 within 60 days". (emphasis supplied) From Exh. "7" which is a letter dated October 3,
1963, of plaintiff-appellant to defendant-appellee we quote the following: "As of August 28, 1963, the
only remaining past due account on this vessel was a delinquency interest of P4,600.46. On that
date, however, we paid the Reparations Commission the sum of P37,629.80 representing 50% of
the freights on reparations cargo ... ." (Emphasis supplied) And per Exh. "8" which is also a letter of
plaintiff-appellant to defendant-appellee, dated Feb. 6, 1964, and which requests authority to load
reparations cargoes on non-reparations vessels, there is manifested therein: "We undertake to apply
10% of whatever freights collected on reparations cargo loaded on the above vessels to the
Reparations Commission for our reparations account with you." (Emphasis supplied)" 25

All that plaintiff-appellant could say on the matter is the following: "It is respectfully submitted, that
even assumingarguendo only that on certain occasions plaintiff-appellant would collect the freight
charges from the end-users concerned; nevertheless, that practice does not at all affect the question
of who is liable for the freight charges under the contracts of carriage, ... . Just because herein
plaintiff-appellant would, on certain occasions, collect the freight charges from the end-users by
virtue of an understanding with the consignee or owner of said reparations goods, it does not
necessarily follow that under the said contracts of affreightment, the end-users are already liable for
said freight charges which are collectible and demandable thereunder only from the consignee
thereof."26 This attempt by plaintiff-appellant to erode its conduct of its legal significance is unavailing,
considering that it is based on an assumption as to defendant-appellee being liable for the payment of the
freight charges, which, as had been made clear, is at war with the specific language of the controlling
statutory provision.

Clearly, then, this assignment of error is lacking in merit. Plaintiff-appellant, it must be stressed,
cannot possibly be unaware of the controlling legal provisions, considering that it has been itself the
beneficiary of the Reparations Act, not to mention the fact that it has previously collected from end-
users. Such was a finding of the lower court, which we are not at liberty to disturb, the appeal being
purely on questions of law. As the last two errors allegedly committed by the lower court were based
on plaintiff-appellant's basic premise as to the non-applicability of Section 11 of the Reparations Act,
no useful purpose would be served by any further discussion. It suffices to state that the appealed
decision can thus stand the vigorous attack launched against it.

3. One last word. This opinion deals with a shipping contract governed by specific provisions of the
Reparations Act. Nothing in the opinion is to be considered applicable to contracts of a similar nature
where ordinarily what has been explicitly agreed upon in the bill of lading is the measure of the
respective rights and obligations of the parties.

WHEREFORE, the lower court decision of March 29, 1968 is affirmed. With costs against plaintiff-
appellant.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Teehankee, Barredo, Villamor and Makasiar,
JJ., concur.

Dizon, J., is on leave.

Castro, J., took no part.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 156437 March 1, 2004

NATIONAL HOUSING AUTHORITY, petitioner,

vs.
GRACE BAPTIST CHURCH and the COURT OF APPEALS, respondents.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the Rules of Court, seeking to reverse the Decision of
the Court of Appeals dated February 26, 2001,1 and its Resolution dated November 8, 2002,2 which
modified the decision of the Regional Trial Court of Quezon City, Branch 90, dated February 25,
1997.3

On June 13, 1986, respondent Grace Baptist Church (hereinafter, the Church) wrote a letter to
petitioner National Housing Authority (NHA), manifesting its interest in acquiring Lots 4 and 17 of the
General Mariano Alvarez Resettlement Project in Cavite.4 In its letter-reply dated July 9, 1986,
petitioner informed respondent:

In reference to your request letter dated 13 June 1986, regarding your application for Lots 4
and 17, Block C-3-CL, we are glad to inform you that your request was granted and you may
now visit our Project Office at General Mariano Alvarez for processing of your application to
purchase said lots.

We hereby advise you also that prior to approval of such application and in accordance with our
existing policies and guidelines, your other accounts with us shall be maintained in good standing.5

Respondent entered into possession of the lots and introduced improvements thereon.6

On February 22, 1991, the NHA’s Board of Directors passed Resolution No. 2126, approving the
sale of the subject lots to respondent Church at the price of P700.00 per square meter, or a total
price of P430,500.00.7 The Church was duly informed of this Resolution through a letter sent by the
NHA.8

On April 8, 1991, the Church tendered to the NHA a manager’s check in the amount of P55,350.00,
purportedly in full payment of the subject properties.9 The Church insisted that this was the price
quoted to them by the NHA Field Office, as shown by an unsigned piece of paper with a handwritten
computation scribbled thereon.10Petitioner NHA returned the check, stating that the amount was
insufficient considering that the price of the properties have changed. The Church made several
demands on the NHA to accept their tender of payment, but the latter refused. Thus, the Church
instituted a complaint for specific performance and damages against the NHA with the Regional Trial
Court of Quezon City,11 where it was docketed as Civil Case No. Q-91-9148.

On February 25, 1997, the trial court rendered its decision, the dispositive portion of which reads:
 WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the defendant to reimburse to the plaintiff the amount of P4,290.00

representing the overpayment made for Lots 1, 2, 3, 18, 19 and 20;

2. Declaring that there was no perfected contract of sale with respect to Lots 4 and
17 and ordering the plaintiff to return possession of the property to the defendant and
to pay the latter reasonable rental for the use of the property at P200.00 per month
computed from the time it took possession thereof until finally vacated. Costs against
defendant.

SO ORDERED.12

On appeal, the Court of Appeals, affirmed the trial court’s finding that there was indeed no contract
of sale between the parties. However, petitioner was ordered to execute the sale of the lots to Grace
Baptist Church at the price of P700.00 per square meter, with 6% interest per annum from March
1991. The dispositive portion of the Court of Appeals’ decision, dated February 26, 2001, reads:

WHEREFORE, the appealed Decision is hereby AFFIRMED with the MODIFICATION that
defendant-appellee NHA is hereby ordered to sell to plaintiff-appellant Grace Baptist Church
Lots 4 and 17 at the price of P700.00 per square meter, or a total cost P430,000.00 with 6%
interest per annum from March, 1991 until full payment in cash.

SO ORDERED.13

The appellate court ruled that the NHA’s Resolution No. 2126, which earlier approved the sale of the
subject lots to Grace Baptist Church at the price of P700.00 per square meter, has not been revoked
at any time and was therefore still in effect. As a result, the NHA was estopped from fixing a different
price for the subject properties. Considering further that the Church had been occupying the subject
lots and even introduced improvements thereon, the Court of Appeals ruled that, in the interest of
equity, it should be allowed to purchase the subject properties.14

Petitioner NHA filed a Motion for Reconsideration which was denied in a Resolution dated November
8, 2002. Hence, the instant petition for review on the sole issue of: Can the NHA be compelled to sell
the subject lots to Grace Baptist Church in the absence of any perfected contract of sale between
the parties?

Petitioner submits that the Court cannot compel it to sell the subject property to Grace Baptist
Church without violating its freedom to contract.15 Moreover, it contends that equity should be
applied only in the absence of any law governing the relationship between the parties, and that the
law on sales and the law on contracts in general apply to the present case.16

We find merit in petitioner’s submission.

Petitioner NHA is not estopped from selling the subject lots at a price equal to their fair market value,
even if it failed to expressly revoke Resolution No. 2126. It is, after all, hornbook law that the
principle of estoppel does not operate against the Government for the act of its agents,17 or, as in
this case, their inaction.

On the application of equity, it appears that the crux of the controversy involves the characterization
of equity in the context of contract law. Preliminarily, we reiterate that this Court, while aware of its
equity jurisdiction, is first and foremost, a court of law. While equity might tilt on the side of one party,
the same cannot be enforced so as to overrule positive provisions of law in favor of the other.18 Thus,
before we can pass upon the propriety of an application of equitable principles in the case at bar, we
must first determine whether or not positive provisions of law govern.

It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations
arising therefrom have the force of law between the parties and should be complied with in good
faith.19 However, it must be understood that contracts are not the only source of law that govern the
rights and obligations between the parties. More specifically, no contractual stipulation may
contradict law, morals, good customs, public order or public policy.20 Verily, the mere inexistence of a
contract, which would ordinarily serve as the law between the parties, does not automatically
authorize disposing of a controversy based on equitable principles alone. Notwithstanding the
absence of a perfected contract between the parties, their relationship may be governed byother
existing laws which provide for their reciprocal rights and obligations.

It must be remembered that contracts in which the Government is a party are subject to the same
rules of contract law which govern the validity and sufficiency of contract between individuals. All the
essential elements and characteristics of a contract in general must be present in order to create a
binding and enforceable Government contract.21

It appearing that there is no dispute that this case involves an unperfected contract, the Civil Law
principles governing contracts should apply. In Vda. de Urbano v. Government Service Insurance
System,22 it was ruled that a qualified acceptance constitutes a counter-offer as expressly stated by
Article 1319 of the Civil Code. In said case, petitioners offered to redeem mortgaged property and
requested for an extension of the period of redemption. However, the offer was not accepted by the
GSIS. Instead, it made a counter-offer, which petitioners did not accept. Petitioners again offer to
pay the redemption price on staggered basis. In deciding said case, it was held that when there is
absolutely no acceptance of an offer or if the offer is expressly rejected, there is no meeting of the
minds. Since petitioners’ offer was denied twice by GSIS, it was held that there was clearly no
meeting of the minds and, thus, no perfected contract. All that is established was a counter-offer.23

In the case at bar, the offer of the NHA to sell the subject property, as embodied in Resolution No.
2126, was similarly not accepted by the respondent.24 Thus, the alleged contract involved in this
case should be more accurately denominated as inexistent. There being no concurrence of the offer
and acceptance, it did not pass the stage of generation to the point of perfection.25 As such, it is
without force and effect from the very beginning or from its incipiency, as if it had never been entered
into, and hence, cannot be validated either by lapse of time or ratification.26 Equity can not give
validity to a void contract,27 and this rule should apply with equal force to inexistent contracts.

We note from the records, however, that the Church, despite knowledge that its intended contract of
sale with the NHA had not been perfected, proceeded to introduce improvements on the disputed
land. On the other hand, the NHA knowingly granted the Church temporary use of the subject
properties and did not prevent the Church from making improvements thereon. Thus, the Church
and the NHA, who both acted in bad faith, shall be treated as if they were both in good faith.28 In this
connection, Article 448 of the Civil Code provides:

The owner of the land on which anything has been built, sown or planted in good faith, shall
have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to
pay the price of the land, and the one who sowed, the proper rent. However, the builder or
planter cannot be obliged to buy the land and if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the land does
 not choose to appropriate the building or trees after proper indemnity. The parties shall agree
upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.

Pursuant to our ruling in Depra v. Dumlao,29 there is a need to remand this case to the trial court,
which shall conduct the appropriate proceedings to assess the respective values of the
improvements and of the land, as well as the amounts of reasonable rentals and indemnity, fix the
terms of the lease if the parties so agree, and to determine other matters necessary for the proper
application of Article 448, in relation to Articles 546 and 548, of the Civil Code.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The Court of Appeals’ Decision
dated February 26, 2001 and Resolution dated November 8, 2002 are REVERSED and SET ASIDE.
The Decision of the Regional Trial Court of Quezon City-Branch 90, dated February 25, 1997, is
REINSTATED. This case is REMANDED to the Regional Trial Court of Quezon City, Branch 90, for
further proceedings consistent with Articles 448 and 546 of the Civil Code.

No costs.

SO ORDERED.

Davide, Jr., C.J., Carpio, and Azcuna, JJ., concur.

Panganiban, J., on official leave.
QUASI CONTRACTS

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;

ARGUMENT

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):

ORDER

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:

ORDER

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:

COMPLAINT

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:

ORDER

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.

PRAYER

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

THIRD DIVISION

G.R. No. 124267 January 31, 2003

NATIONAL COMMERCIAL BANK OF SAUDI ARABIA, petitioner,

vs.
COURT OF APPEALS and PHILIPPINE BANKING CORPORATION, respondents.

CARPIO MORALES, J.:

May the unrippled doctrine that a motion filed without the requisite notice of hearing is a useless
piece of paper with no legal effect1 be, under the facts of the case, relaxed?

Petitioner National Commercial Bank of Saudi Arabia (NCBSA) filed a case against respondent
Philippine Banking Corporation (PBC) in the Regional Trial Court (RTC) of Makati on December 4,
1985 to recover "the duplication in the payment of the proceeds of a letter of credit [NCBSA] has
issued . . . brought about by the fact that both the head office and the Makati branch of [PBC, the
negotiating bank,] collected the proceeds of the letter of credit."2

On August 24, 1993, the RTC of Makati rendered a decision in favor of NCBSA.3 PBC received a
copy of the decision on September 3, 19934 and on the 12th day of the period of appeal or on
September 15, 1993, it filed a Motion for Reconsideration.5 The motion, however, did not contain a
notice of hearing.6

On September 21, 1993, NCBSA filed a Manifestation pointing out that PBC's Motion for
Reconsideration did not contain any notice of hearing.7

On September 27, 1993, NCBSA filed a Motion for Writ of Execution of the decision of the trial
court.8 On even date, PBC filed a Motion to Set "Motion for Reconsideration" for Hearing9 alleging as
follows:

xxx xxx xxx

2. The Motion for Reconsideration raised both questions of facts and law arising from the
erroneous findings made by the Honorable Court in the said Decision;

3. In order that defendant can fully amplify and expound on the issues raised on the said
motions, there is a need to set the Motion for Hearing.

xxx xxx xxx10

NCBSA opposed this motion vigorously, it praying that it be stricken off the records.11

By Order of February 1, 1994, the trial court struck from the records of the case PBC's Motion for
Reconsideration of its decision and granted NCBSA's Motion for Writ of Execution.12
PBC filed a Motion for Reconsideration of said Order of February 1, 1994, this time alleging that
PBC's failure to comply with the 3-day notice rule "was essentially an honest mistake or oversight of
counsel."13 This motion was just as vigorously opposed by NCBSA.14

By Order of March 2, 1994, the trial court denied PBC's Motion for Reconsideration of its Order of
February 1, 1994, finding that "[t]here are no compelling reasons to warrant a liberal construction of
the rules on Motions."15

PBC assailed before the Court of Appeals via Petition for Certiorari the trial court's March 2, 1994
Order.16

By Decision of February 27, 1995, the Court of Appeals dismissed PBC's Petition for Certiorari.17 On
PBC's Motion for Reconsideration, however, the Court of Appeals, by Amended Decision of March 8,
1996, set aside its February 27, 1995 Decision and granted PBC's Petition for Certiorari and directed
the trial court to resolve PBC's Motion for Reconsideration (of the trial court's August 24, 1993
Decision).18

Justifying its setting aside of its February 27, 1995 Decision, the Court of Appeals held in its
Amended Decision:

. . . [T]o deny petitioner's motion for reconsideration on the ground of failure to contain a
notice of hearing is too harsh an application of procedural rules especially so when petitioner
has filed a motion to set the motion for reconsideration for hearing and had furnished private
respondent a copy of the motion, a fact which is not denied by the latter.19

NCBSA thus comes to this Court assailing the Court of Appeals' Amended Decision.

The petition is impressed with merit.

The requirement of notice under Sections 4 and 5, Rule 15 in connection with Section 2, Rule 37 of
the Revised Rules of Court20 is mandatory. The absence of a notice of hearing is fatal and, in cases
of motions to reconsider a decision, the running of the period to appeal is not tolled by their filing or
pendency.21 In the case at bar, it is not disputed that PBC's Motion for Reconsideration of the August
24, 1993 decision of the trial court did not contain the requisite notice of hearing.

In an attempt to cure the defect, PBC filed on Motion to Set the "Motion for Reconsideration" for
Hearing on September 27, 1993, or 9 days after the period for filing the Notice of Appeal had
expired.

The motion for reconsideration, however, being fatally defective for lack of notice of hearing, cannot
be cured by a belated filing of a notice of hearing.22 More so in the case at bar where the Motion to
Set the "Motion for Reconsideration" was filed after the expiration of the period for filing an appeal.

NCBSA thus calls for the strict application of our rules of procedure to avoid further delays in the
disposition of the case,23 which has remained pending for more than 17 years.

PBC, on the other hand, invokes a just and fair determination of the case.24

PBC's appeal for justice and fairness does not lie, however, there being nothing on record to show
that it has been a victim of injustice or unfairness. On the contrary, as found by the Court of Appeals
in its original decision, PBC had the opportunity to participate in the trial and present its defense and
had actually made full use of the remedies under our rules of procedure.25 More importantly, there
was no oppressive exercise of judicial authority that would call for the annulment of the trial court's
resolutions.26

The finality of the decision of the trial court cannot be set aside purely on the basis of liberality for
while it is true that a litigation is not a game of technicalities, this does not mean that the Rules of
Court may be ignored at will and at random. Only for the most persuasive of reasons should the
court allow a relaxation of its procedural rules.27

PBC, however, has not advanced any persuasive or exceptional reason in failing to set its Motion for
Reconsideration of the trial court's decision for hearing. In fact, in its Motion to Set "Motion for
Reconsideration" for Hearing, PBC was completely silent on why it did not set the Motion for
Reconsideration for hearing. It just alleged that, as earlier quoted, "[i]n order that defendant can fully
amplify and expound on the issues raised on said motion, there is a need to set the Motion [for
Reconsideration] for Hearing."28 This allegation conveys that, if there was no need for PBC to "fully
amplify and expound on the issues raised" in the Motion for Reconsideration, no setting for hearing
of said motion was needed. But as earlier stated, the requirement of notice in this kind of motion is
mandatory. The Motion for Reconsideration thus remained a mere scrap of paper which deserved no
consideration.

But assuming that PBC had presented exceptional reason or excuse for its failure to comply with the
notice requirement, the Motion for Reconsideration would be denied on the ground that it is pro
forma.

In its Rejoinder29 to NCBSA's Reply to Comment to the petition at bar, PBC alleged that it was, in its
Motion for Reconsideration of the trial court's decision, raising "serious questions involving findings
of fact and conclusions of law by the trial court," thus "questioning the decision as being contrary to
law and the evidence on record."30 A reading of the records will show, however, that the same three
issues raised by PBC during the trial — prescription, laches and lack of double payment — are what
are being raised in its Motion for Reconsideration of the decision of the trial court.

PBC's Motion for Reconsideration of the trial court's decision was thus "in substance . . . a reiteration
of reasons and arguments"31 raised before the trial court for the dismissal of NCBSA's complaint,
which reasons and arguments had already been considered and resolved against it on the merits by
the trial court. The Motion for Reconsideration was thus merely pro forma.

Technicality aside, en passant, on the merits of PBC's Motion for Reconsideration of the trial court's
decision, the trial court did not err in brushing aside its main defense of prescription — that NCBSA's
complaint is "based on the quasi-contract of solutio indebiti,"32 hence, it prescribes in six years and,
therefore, when NCBSA filed its complaint nine years after the cause of action arose, it had
prescribed.

Solutio indebiti applies where: (1) a payment is made when there exists no binding relation between
the payor, who has no duty to pay, and the person who received the payment, and (2) the payment
is made through mistake, and not through liberality or some other cause33 In the case at bar, PBC
and NCBSA were bound by their contract, the letter of credit, under which NCBSA obliged itself to
pay PBC, subject to compliance by the latter with certain conditions provided therein. As such, the
cause of action was based on a contract, and the prescriptive period is ten,34 not six years.

Even PBC's defense of laches is bereft of merit, the cause of action not having yet prescribed at the
time NCBSA's complaint was filed.
Courts should never apply the doctrine of laches earlier than the expiration of time limited for the
commencement of actions at law.35

And as to PBC's allegation that the trial court erred in finding the existence of double payment,
suffice it to state that PBC, while denying that there was double payment, itself admitted having
received a second set of payment for the same amount covered by the letter of credit. Thus, in its
petition for certiorari36 filed with the Court of Appeals, it alleged, quoted verbatim:

The second set for the same amount, although it was received and credited to [PBC's] account with
Chemical Bank New York, were to be and subsequently transmitted to the account of Labroco
(International, Philippines) . . .37 (Emphasis supplied.)

WHEREFORE, the instant petition for review on certiorari is GRANTED. The Amended Decision of
the Court of Appeals dated March 8, 1996 is SET ASIDE and the Resolutions of the Regional Trial
Court declaring the Motion for Reconsideration filed by the Philippine Banking Corporation as pro
forma is REINSTATED.

SO ORDERED.

Puno, Panganiban, Sandoval-Gutierrez, and Corona JJ., concur.

 THIRD DIVISION

SEBASTIAN SIGA-AN, G.R. No. 173227

Petitioner,
Present:

YNARES-SANTIAGO,
Chairperson,
AUSTRIA-MARTINEZ,
-versus CHICO-NAZARIO,
NACHURA, and
LEONARDO-DE CASTRO,* JJ.

Promulgated:
ALICIA VILLANUEVA,
Respondent. January 20, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition[1] for Review on Certiorari under Rule 45 of the

Rules of Court seeking to set aside the Decision,[2] dated 16 December 2005, and
Resolution,[3] dated 19 June 2006 of the Court of Appeals in CA-G.R. CV No.
71814, which affirmed in toto the Decision,[4] dated 26 January 2001, of the Las
Pinas City Regional Trial Court, Branch 255, in Civil Case No. LP-98-0068.

The facts gathered from the records are as follows:

On 30 March 1998, respondent Alicia Villanueva filed a complaint [5] for

sum of money against petitioner Sebastian Siga-an before the Las Pinas City
Regional Trial Court (RTC), Branch 255, docketed as Civil Case No. LP-98-
0068. Respondent alleged that she was a businesswoman engaged in supplying
office materials and equipments to the Philippine Navy Office (PNO) located at
Fort Bonifacio, Taguig City, while petitioner was a military officer and comptroller
of the PNO from 1991 to 1996.

Respondent claimed that sometime in 1992, petitioner approached her inside

the PNO and offered to loan her the amount of P540,000.00. Since she needed
capital for her business transactions with the PNO, she accepted petitioners
proposal. The loan agreement was not reduced in writing. Also, there was no
stipulation as to the payment of interest for the loan.[6]

On 31 August 1993, respondent issued a check worth P500,000.00 to

petitioner as partial payment of the loan. On 31 October 1993, she issued another
check in the amount of P200,000.00 to petitioner as payment of the remaining
balance of the loan. Petitioner told her that since she paid a total amount
of P700,000.00 for the P540,000.00 worth of loan, the excess amount
of P160,000.00 would be applied as interest for the loan. Not satisfied with the
amount applied as interest, petitioner pestered her to pay additional
interest. Petitioner threatened to block or disapprove her transactions with the PNO
if she would not comply with his demand. As all her transactions with the PNO
were subject to the approval of petitioner as comptroller of the PNO, and fearing
that petitioner might block or unduly influence the payment of her vouchers in the
PNO, she conceded. Thus, she paid additional amounts in cash and checks as
interests for the loan. She asked petitioner for receipt for the payments but
petitioner told her that it was not necessary as there was mutual trust and
confidence between them. According to her computation, the total amount she paid
to petitioner for the loan and interest accumulated to P1,200,000.00.[7]

Thereafter, respondent consulted a lawyer regarding the propriety of paying

interest on the loan despite absence of agreement to that effect. Her lawyer told her
that petitioner could not validly collect interest on the loan because there was no
agreement between her and petitioner regarding payment of interest. Since she paid
petitioner a total amount of P1,200,000.00 for the P540,000.00 worth of loan, and
upon being advised by her lawyer that she made overpayment to petitioner, she
sent a demand letter to petitioner asking for the return of the excess amount
of P660,000.00. Petitioner, despite receipt of the demand letter, ignored her claim
for reimbursement.[8]

Respondent prayed that the RTC render judgment ordering petitioner to pay
respondent (1) P660,000.00 plus legal interest from the time of demand;
(2) P300,000.00 as moral damages; (3) P50,000.00 as exemplary damages; and (4)
an amount equivalent to 25% of P660,000.00 as attorneys fees.[9]

In his answer[10] to the complaint, petitioner denied that he offered a loan to

respondent. He averred that in 1992, respondent approached and asked him if he
could grant her a loan, as she needed money to finance her business venture with
the PNO. At first, he was reluctant to deal with respondent, because the latter had a
spotty record as a supplier of the PNO. However, since respondent was an
acquaintance of his officemate, he agreed to grant her a loan. Respondent paid the
loan in full.[11]

Subsequently, respondent again asked him to give her a loan. As respondent

had been able to pay the previous loan in full, he agreed to grant her another
loan. Later, respondent requested him to restructure the payment of the loan
because she could not give full payment on the due date. He acceded to her
request. Thereafter, respondent pleaded for another restructuring of the payment of
the loan. This time he rejected her plea. Thus, respondent proposed to execute a
promissory note wherein she would acknowledge her obligation to him, inclusive
of interest, and that she would issue several postdated checks to guarantee the
payment of her obligation. Upon his approval of respondents request for
restructuring of the loan, respondent executed a promissory note dated 12
September 1994 wherein she admitted having borrowed an amount
of P1,240,000.00, inclusive of interest, from petitioner and that she would pay said
amount in March 1995. Respondent also issued to him six postdated checks
amounting to P1,240,000.00 as guarantee of compliance with her obligation.
Subsequently, he presented the six checks for encashment but only one check was
honored. He demanded that respondent settle her obligation, but the latter failed to
do so. Hence, he filed criminal cases for Violation of the Bouncing Checks Law
(Batas Pambansa Blg. 22) against respondent. The cases were assigned to the
Metropolitan Trial Court of Makati City, Branch 65 (MeTC).[12]

Petitioner insisted that there was no overpayment because respondent

admitted in the latters promissory note that her monetary obligation as of 12
September 1994 amounted to P1,240,000.00 inclusive of interests. He argued that
respondent was already estopped from complaining that she should not have paid
any interest, because she was given several times to settle her obligation but failed
to do so. He maintained that to rule in favor of respondent is tantamount to
concluding that the loan was given interest-free. Based on the foregoing averments,
he asked the RTC to dismiss respondents complaint.

After trial, the RTC rendered a Decision on 26 January 2001 holding that
respondent made an overpayment of her loan obligation to petitioner and that the
latter should refund the excess amount to the former. It ratiocinated that
respondents obligation was only to pay the loaned amount of P540,000.00, and that
the alleged interests due should not be included in the computation of respondents
total monetary debt because there was no agreement between them regarding
payment of interest. It concluded that since respondent made an excess payment to
petitioner in the amount of P660,000.00 through mistake, petitioner should return
the said amount to respondent pursuant to the principle of solutio indebiti.[13]

The RTC also ruled that petitioner should pay moral damages for the
sleepless nights and wounded feelings experienced by respondent. Further,
petitioner should pay exemplary damages by way of example or correction for the
public good, plus attorneys fees and costs of suit.

The dispositive portion of the RTC Decision reads:

WHEREFORE, in view of the foregoing evidence and in the light of the

provisions of law and jurisprudence on the matter, judgment is hereby rendered in
favor of the plaintiff and against the defendant as follows:
 (1) Ordering defendant to pay plaintiff the amount of P660,000.00
plus legal interest of 12% per annum computed from 3 March 1998 until the
amount is paid in full;
(2) Ordering defendant to pay plaintiff the amount of P300,000.00 as
moral damages;

(3) Ordering defendant to pay plaintiff the amount of P50,000.00 as

exemplary damages;

(4) Ordering defendant to pay plaintiff the amount equivalent to 25%

of P660,000.00 as attorneys fees; and

(5) Ordering defendant to pay the costs of suit.[14]

Petitioner appealed to the Court of Appeals. On 16 December 2005, the

appellate court promulgated its Decision affirming in toto the RTC Decision, thus:

WHEREFORE, the foregoing considered, the instant appeal is hereby

DENIED and the assailed decision [is] AFFIRMED in toto.[15]

Petitioner filed a motion for reconsideration of the appellate courts decision

but this was denied.[16] Hence, petitioner lodged the instant petition before us
assigning the following errors:
I.

THE RTC AND THE COURT OF APPEALS ERRED IN RULING THAT NO

INTEREST WAS DUE TO PETITIONER;

II.

THE RTC AND THE COURT OF APPEALS ERRED IN APPLYING THE

PRINCIPLE OF SOLUTIO INDEBITI.[17]

Interest is a compensation fixed by the parties for the use or forbearance of

money. This is referred to as monetary interest. Interest may also be imposed by
law or by courts as penalty or indemnity for damages. This is called compensatory
interest.[18] The right to interest arises only by virtue of a contract or by virtue of
damages for delay or failure to pay the principal loan on which interest is
demanded.[19]

Article 1956 of the Civil Code, which refers to monetary

interest,[20] specifically mandates that no interest shall be due unless it has been
expressly stipulated in writing. As can be gleaned from the foregoing provision,
payment of monetary interest is allowed only if: (1) there was an express
stipulation for the payment of interest; and (2) the agreement for the payment of
interest was reduced in writing. The concurrence of the two conditions is required
for the payment of monetary interest. Thus, we have held that collection of interest
without any stipulation therefor in writing is prohibited by law.[21]

It appears that petitioner and respondent did not agree on the payment of
interest for the loan. Neither was there convincing proof of written agreement
between the two regarding the payment of interest. Respondent testified that
although she accepted petitioners offer of loan amounting to P540,000.00, there
was, nonetheless, no verbal or written agreement for her to pay interest on the
loan.[22]

Petitioner presented a handwritten promissory note dated 12 September

1994[23] wherein respondent purportedly admitted owing petitioner capital and
interest. Respondent, however, explained that it was petitioner who made a
promissory note and she was told to copy it in her own handwriting; that all her
transactions with the PNO were subject to the approval of petitioner as comptroller
of the PNO; that petitioner threatened to disapprove her transactions with the PNO
if she would not pay interest; that being unaware of the law on interest and fearing
that petitioner would make good of his threats if she would not obey his instruction
to copy the promissory note, she copied the promissory note in her own
handwriting; and that such was the same promissory note presented by petitioner
as alleged proof of their written agreement on interest.[24] Petitioner did not rebut
the foregoing testimony. It is evident that respondent did not really consent to the
payment of interest for the loan and that she was merely tricked and coerced by
petitioner to pay interest. Hence, it cannot be gainfully said that such promissory
note pertains to an express stipulation of interest or written agreement of interest
on the loan between petitioner and respondent.

Petitioner, nevertheless, claims that both the RTC and the Court of Appeals
found that he and respondent agreed on the payment of 7% rate of interest on the
loan; that the agreed 7% rate of interest was duly admitted by respondent in her
testimony in the Batas Pambansa Blg. 22 cases he filed against respondent; that
despite such judicial admission by respondent, the RTC and the Court of Appeals,
citing Article 1956 of the Civil Code, still held that no interest was due him since
the agreement on interest was not reduced in writing; that the application of Article
1956 of the Civil Code should not be absolute, and an exception to the application
of such provision should be made when the borrower admits that a specific rate of
interest was agreed upon as in the present case; and that it would be unfair to allow
respondent to pay only the loan when the latter very well knew and even admitted
in the Batas Pambansa Blg. 22 cases that there was an agreed 7% rate of interest on
the loan.[25]

We have carefully examined the RTC Decision and found that the RTC did
not make a ruling therein that petitioner and respondent agreed on the payment of
interest at the rate of 7% for the loan. The RTC clearly stated that although
petitioner and respondent entered into a valid oral contract of loan amounting
to P540,000.00, they, nonetheless, never intended the payment of interest
thereon.[26] While the Court of Appeals mentioned in its Decision that it concurred
in the RTCs ruling that petitioner and respondent agreed on a certain rate of
interest as regards the loan, we consider this as merely an inadvertence because, as
earlier elucidated, both the RTC and the Court of Appeals ruled that petitioner is
not entitled to the payment of interest on the loan. The rule is that factual findings
of the trial court deserve great weight and respect especially when affirmed by the
appellate court.[27] We found no compelling reason to disturb the ruling of both
courts.

Petitioners reliance on respondents alleged admission in the Batas Pambansa

Blg. 22 cases that they had agreed on the payment of interest at the rate of 7%
deserves scant consideration. In the said case, respondent merely testified that after
paying the total amount of loan, petitioner ordered her to pay
interest.[28] Respondent did not categorically declare in the same case that she and
respondent made an express stipulation in writing as regards payment of interest at
the rate of 7%. As earlier discussed, monetary interest is due only if there was
an express stipulation in writing for the payment of interest.

There are instances in which an interest may be imposed even in the absence
of express stipulation, verbal or written, regarding payment of interest. Article
2209 of the Civil Code states that if the obligation consists in the payment of a sum
of money, and the debtor incurs delay, a legal interest of 12% per annum may be
imposed as indemnity for damages if no stipulation on the payment of interest was
agreed upon. Likewise, Article 2212 of the Civil Code provides that interest due
shall earn legal interest from the time it is judicially demanded, although the
obligation may be silent on this point.

All the same, the interest under these two instances may be imposed only as
a penalty or damages for breach of contractual obligations. It cannot be charged as
a compensation for the use or forbearance of money. In other words, the two
instances apply only to compensatory interest and not to monetary interest. [29] The
case at bar involves petitioners claim for monetary interest.

Further, said compensatory interest is not chargeable in the instant case

because it was not duly proven that respondent defaulted in paying the loan. Also,
as earlier found, no interest was due on the loan because there was no written
agreement as regards payment of interest.

Apropos the second assigned error, petitioner argues that the principle
of solutio indebiti does not apply to the instant case. Thus, he cannot be compelled
to return the alleged excess amount paid by respondent as interest.[30]

Under Article 1960 of the Civil Code, if the borrower of loan pays interest
when there has been no stipulation therefor, the provisions of the Civil Code
concerning solutio indebiti shall be applied. Article 2154 of the Civil Code
explains the principle of solutio indebiti. Said provision provides that if something
is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises. In such a case, a creditor-debtor
relationship is created under a quasi-contract whereby the payor becomes the
creditor who then has the right to demand the return of payment made by mistake,
and the person who has no right to receive such payment becomes obligated to
return the same. The quasi-contract of solutio indebiti harks back to the ancient
principle that no one shall enrich himself unjustly at the expense of another. [31] The
principle of solutio indebiti applies where (1) a payment is made when there exists
no binding relation between the payor, who has no duty to pay, and the person who
received the payment; and (2) the payment is made through mistake, and not
through liberality or some other cause.[32] We have held that the principle of solutio
indebiti applies in case of erroneous payment of undue interest.[33]

It was duly established that respondent paid interest to

petitioner. Respondent was under no duty to make such payment because there
was no express stipulation in writing to that effect. There was no binding relation
between petitioner and respondent as regards the payment of interest. The payment
was clearly a mistake. Since petitioner received something when there was no right
to demand it, he has an obligation to return it.

We shall now determine the propriety of the monetary award and damages
imposed by the RTC and the Court of Appeals.

Records show that respondent received a loan amounting to P540,000.00

from petitioner.[34] Respondent issued two checks with a total worth
of P700,000.00 in favor of petitioner as payment of the loan.[35] These checks were
subsequently encashed by petitioner.[36] Obviously, there was an excess
of P160,000.00 in the payment for the loan. Petitioner claims that the excess
of P160,000.00 serves as interest on the loan to which he was entitled. Aside from
issuing the said two checks, respondent also paid cash in the total amount
of P175,000.00 to petitioner as interest.[37] Although no receipts reflecting the same
were presented because petitioner refused to issue such to respondent, petitioner,
nonetheless, admitted in his Reply-Affidavit[38] in the Batas Pambansa Blg. 22
cases that respondent paid him a total amount of P175,000.00 cash in addition to
the two checks. Section 26 Rule 130 of the Rules of Evidence provides that the
declaration of a party as to a relevant fact may be given in evidence against
him. Aside from the amounts of P160,000.00 and P175,000.00 paid as interest, no
other proof of additional payment as interest was presented by respondent. Since
we have previously found that petitioner is not entitled to payment of interest and
that the principle of solutio indebiti applies to the instant case, petitioner should
return to respondent the excess amount of P160,000.00 and P175,000.00 or the
total amount of P335,000.00. Accordingly, the reimbursable amount to respondent
fixed by the RTC and the Court of Appeals should be reduced from P660,000.00
to P335,000.00.

As earlier stated, petitioner filed five (5) criminal cases for violation of Batas
Pambansa Blg. 22 against respondent. In the said cases, the MeTC found
respondent guilty of violating Batas Pambansa Blg. 22 for issuing five dishonored
checks to petitioner. Nonetheless, respondents conviction therein does not affect
our ruling in the instant case. The two checks, subject matter of this case,
totaling P700,000.00 which respondent claimed as payment of the P540,000.00
worth of loan, were not among the five checks found to be dishonored or bounced
in the five criminal cases. Further, the MeTC found that respondent made an
overpayment of the loan by reason of the interest which the latter paid to
petitioner.[39]

Article 2217 of the Civil Code provides that moral damages may be
recovered if the party underwent physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation
and similar injury. Respondent testified that she experienced sleepless nights and
wounded feelings when petitioner refused to return the amount paid as interest
despite her repeated demands. Hence, the award of moral damages is
justified. However, its corresponding amount of P300,000.00, as fixed by the RTC
and the Court of Appeals, is exorbitant and should be equitably reduced. Article
2216 of the Civil Code instructs that assessment of damages is left to the discretion
of the court according to the circumstances of each case. This discretion is limited
by the principle that the amount awarded should not be palpably excessive as to
indicate that it was the result of prejudice or corruption on the part of the trial
court.[40] To our mind, the amount of P150,000.00 as moral damages is fair,
reasonable, and proportionate to the injury suffered by respondent.

Article 2232 of the Civil Code states that in a quasi-contract, such as solutio
indebiti, exemplary damages may be imposed if the defendant acted in an
oppressive manner. Petitioner acted oppressively when he pestered respondent to
pay interest and threatened to block her transactions with the PNO if she would not
pay interest. This forced respondent to pay interest despite lack of agreement
thereto. Thus, the award of exemplary damages is appropriate. The amount
of P50,000.00 imposed as exemplary damages by the RTC and the Court is fitting
so as to deter petitioner and other lenders from committing similar and other
serious wrongdoings.[41]

Jurisprudence instructs that in awarding attorneys fees, the trial court must
state the factual, legal or equitable justification for awarding the same. [42] In the
case under consideration, the RTC stated in its Decision that the award of attorneys
fees equivalent to 25% of the amount paid as interest by respondent to petitioner is
reasonable and moderate considering the extent of work rendered by respondents
lawyer in the instant case and the fact that it dragged on for several
years.[43] Further, respondent testified that she agreed to compensate her lawyer
handling the instant case such amount.[44] The award, therefore, of attorneys fees
and its amount equivalent to 25% of the amount paid as interest by respondent to
petitioner is proper.

Finally, the RTC and the Court of Appeals imposed a 12% rate of legal
interest on the amount refundable to respondent computed from 3 March 1998
until its full payment. This is erroneous.
 We held in Eastern Shipping Lines, Inc. v. Court of Appeals, [45] that when an
obligation, not constituting a loan or forbearance of money is breached, an interest
on the amount of damages awarded may be imposed at the rate of 6% per
annum.We further declared that when the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal interest, whether it is a
loan/forbearance of money or not, shall be 12% per annum from such finality until
its satisfaction, this interim period being deemed equivalent to a forbearance of
credit.

In the present case, petitioners obligation arose from a quasi-contract

of solutio indebiti and not from a loan or forbearance of money. Thus, an interest
of 6% per annum should be imposed on the amount to be refunded as well as on
the damages awarded and on the attorneys fees, to be computed from the time of
the extra-judicial demand on 3 March 1998,[46] up to the finality of this Decision.
In addition, the interest shall become 12% per annum from the finality of this
Decision up to its satisfaction.

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No.

71814, dated 16 December 2005, is hereby AFFIRMED with the
following MODIFICATIONS: (1) the amount of P660,000.00 as refundable
amount of interest is reduced to THREE HUNDRED THIRTY FIVE THOUSAND
PESOS (P335,000.00); (2) the amount of P300,000.00 imposed as moral damages
is reduced to ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00); (3)
an interest of 6% per annum is imposed on the P335,000.00, on the damages
awarded and on the attorneys fees to be computed from the time of the extra-
judicial demand on 3 March 1998 up to the finality of this Decision; and (4) an
interest of 12% per annum is also imposed from the finality of this Decision up to
its satisfaction. Costs against petitioner.

SO ORDERED.

MINITA V. CHICO-NAZARIO
 Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons Attestation, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of
the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice