Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-31025 August 15, 1929 FRANCISCO GUTIERREZ, ET AL., plaintiffs-appellees, vs. JUAN CARPIO, defendant-appellant. Eusebio Orense and Marcelino Aguas for appellant. Gutierrez David, Dizon & David for appellee. ROMUALDEZ, J.: The litigants herein compromised a civil case on July 13, 1928, agreeing that if within one month from the date thereof the plaintiffs failed to repurchase certain land, its ownership would vest in the defendant. The question now raised is whether or not the plaintiffs duly tendered the amount of the reimbursement agreed upon in the proper form of money to the defendant. The court below held in the affirmative, but the defendant, appealing from such judgment, maintains that on August 13, when the plaintiffs tendered it, the stipulated period had already elapsed; that the tender of reimbursement made by check is insufficient; and that the holding of the trial court that the land in question is valued at P27,000 is groundless. When did the stipulated month terminate? This is the first point in controversy, the determination of which depends upon the kind of month agreed upon by the parties, and on the day from its should be counted. As to the kind of month, it is to be noted that, according to the ruling in the case of Guzman vs. Lichauco (42 Phil., 291), article 7 of the Civil Code had been modified by section 13 of the Administrative Code, according to which "month" now means the civil or calendar month and not the regular thirty-day month. And the civil or calendar month is defined as follows : The civil or solar month is that which agrees with the Gregorian calendar; and these months are known by the names of January, February, March, etc. They are composed of unequal portions of time . . . (Bouvier's Law Dictionary.) A calendar month is a month as designated in the calendar, without regard to the number of days it may contain. In commercial transactions it means a month ending on the day in the succeeding month corresponding to the day in the preceding month from which the computation began, and if the last month have not so many days, then on the last day of that month. Daley vs. Anderson, 48 Pac.,
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Republic of the PhilippinesSUPREME COURT
Manila
EN BANC
G.R. No. L-31025 August 15, 1929
FRANCISCO GUTIERREZ, ET AL., plaintiffs-appellees, vs.JUAN CARPIO, defendant-appellant.
Eusebio Orense and Marcelino Aguas for appellant.Gutierrez David, Dizon & David for appellee.
ROMUALDEZ, J.:
The litigants herein compromised a civil case on July 13, 1928, agreeing that if within one month from the date thereof the plaintiffs failed to repurchase certain land, its ownership would vest in the defendant.
The question now raised is whether or not the plaintiffs duly tendered the amount of the reimbursement agreed upon in the proper form of money to the defendant.
The court below held in the affirmative, but the defendant, appealing from such judgment, maintains that on August 13, when the plaintiffs tendered it, the stipulated period had already elapsed; that the tender of reimbursement made by check is insufficient; and that the holding of the trial court that the land in question is valued at P27,000 is groundless.
When did the stipulated month terminate? This is the first point in controversy, the determination of which depends upon the kind of month agreed upon by the parties, and on the day from its should be counted.
As to the kind of month, it is to be noted that, according to the ruling in the case of Guzman vs. Lichauco (42 Phil., 291), article 7 of the Civil Code had been modified by section 13 of the Administrative Code, according to which "month" now means the civil or calendar month and not the regular thirty-day month.
And the civil or calendar month is defined as follows :
The civil or solar month is that which agrees with the Gregorian calendar; and these months are known by the names of January, February, March, etc. They are composed of unequal portions of time . . . (Bouvier's Law Dictionary.)
A calendar month is a month as designated in the calendar, without regard to the number of days it may contain. In commercial transactions it means a month ending on the day in the succeeding month corresponding to the day in the preceding month from which the computation began, and if the last month have not so many days, then on the last day of that month. Daley vs. Anderson, 48 Pac., 839, 840; 7 Wyo., 1; 75 Am. St. Rep., 870 (citing Migotti vs. Colvill, 4 C.P. Div., 233). (1 Words and Phrases, 943.)
Hence, this court held in the case of Villegas vs. Capistrano (9 Phil., 416), that the period of three months counted from February 13 did not expire on the 12th of the following May.
As to when said month began, said section 13 of the Administrative Code provides as follows:
In computing any fixed period of time, with reference to the performance of an act required by law or contract to be done at a certain time or within a certain limit of time, the day of date, or day from which the time is reckoned, is to be excluded and the date of performance included, unless otherwise provided. (Emphasis ours)
Similar provisions may be found in article 1130 of the Civil Code, and in section 4 of the Code of Civil Procedure.
There is nothing in the agreement under discussion providing otherwise, and according to the phrase therein contained, "one month from this date," said date, which was July 13, 1928, is exactly the date which must be excluded being the "day from which the time is reckoned," according to the words of the aforementioned section 13 of the Administrative Code, which we have italicized above.
Wherefore, that civil month of thirty-one days began on July 14 and terminated with the end of the thirteenth day of the following August. And as it has been proved without discussion that the plaintiffs offered to repurchase the land from the defendant on August 13th, it follows that such offer was made within the period stipulated.
But the defendant alleges that the offer to repurchase made by check was legally insufficient. We agree that the payment by check does not per se have the effect of such payment. (Section 189, Act No. 2031, on Negotiable Instruments; article 1170, Civil Code; Bryan, Landon Co. vs. American Bank, 7 Phil., 255; and Tan Sunco vs. Santos, 9 Phil., 44; 21 R.C.L., 60, 61.) But it appears from Felipe Gutierrez's testimony that the defendant told him on August 12th that he would accept the repurchase by check. Felipe Gutierrez is not very explicit about it, but we deem this to be the drift of his testimony. The defendant must have so understood it, seeing that he thought it necessary to rebut said detail in his testimony which, notwithstanding the defendant's denial, we hold to be established by a preponderance of evidence, considering all the circumstances of the case. The defendant having thus consented to the repurchase by check and having signified that by reason of such repurchase the plaintiffs could return to their home, said defendant was in estoppel, and could not, on the following day, refuse to accept such payment by check, because he induced the plaintiffs to act upon the belief that he had consented to said manner of payment.
From this it follows that by virtue of the defendant's having consented to that payment by check, which was neither alleged nor proved to be in any way defective, that offer to repurchase was legally effective and sufficient to compel the defendant to accept it.
We conclude that the offer to repurchase was made within the stipulated period and in the form of money accepted by the defendant, from whose refusal to allow the repurchase in such terms originates the plaintiffs' right of action herein.
The last assignment of error touching the value of the land, cannot be a cause for the reversal of the judgment appealed from for under the circumstances of the case, it has no bearing on the decision of the case nor affects the result thereof.
The judgment appealed from is modified, and it is hereby ordered that the plaintiffs may, within ten days from the date on which this judgment becomes final, repurchase the land, the subject matter of these proceedings, through the delivery to the defendant at the latter's residence in the municipality of Santa Rita, Pampanga, of the sum of fourteen thousand six hundred forty three pesos and forty-three centavos (P14,643.43), Philippine currency (in coin or paper money). The judgment appealed from is affirmed in all other respects, with costs against the appellant. So ordered.
Republic of the PhilippinesSUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 133498 April 18, 2002
C.F. SHARP & CO., INC., petitioner, vs.NORTHWEST AIRLINES, INC., respondent.
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court assailing the February 17, 1997 Decision1 and the April 2, 1998 Resolution2 of the Court of Appeals3 in CA-G.R. SP No. 40996.
The undisputed facts are as follows:
On May 9, 1974, respondent, through its Japan Branch, entered into an International Passenger Sales Agency Agreement with petitioner, authorizing the latter to sell its air transport tickets. Petitioner failed to remit the proceeds of the ticket sales, for which reason, respondent filed a collection suit against petitioner before the Tokyo District Court which rendered judgment on January 29, 1981, ordering petitioner to pay respondent the amount of "83,158,195 Yen and damages for the delay at the rate of 6% per annum from August 28, 1980 up to and until payment is completed."4 Unable to execute the decision in Japan, respondent filed a case to enforce said foreign judgment with the Regional Trial Court of Manila, Branch 54.5 However, the case was dismissed on the ground of failure of the Japanese Court to acquire jurisdiction over the person of the petitioner. Respondent appealed to the Court of Appeals, which affirmed the decision of the trial court.1âwphi1.nêt
Respondent filed a petition for review with this Court, docketed as G.R. No. 112573. On February 9, 1995, a decision was rendered, the dispositive portion of which reads:
WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied NORTHWEST’s claims for attorney’s fees, litigation expenses, and exemplary damages but REVERSED insofar as it sustained the trial court’s dismissal of NORTHWEST’s complaint in Civil Case No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and another in its stead is hereby rendered ORDERING private respondent C.F. SHARP & COMPANY, INC. to pay to NORTHWEST the amounts adjudged in the foreign judgment subject of said case, with interest thereon at the legal rate from the filing of the complaint therein until the said foreign judgment is fully satisfied.
Costs against the private respondent.
SO ORDERED.6
Accordingly, the Regional Trial Court of Manila, Branch 54, issued a writ of execution of the foregoing decision.7 On November 22, 1995, the trial court modified its order for the execution of the decision, viz:
WHEREFORE, in view of the foregoing, this Court hereby issues another order, as follows: the writ of execution is issued against defendant C.F. Sharp ordering said defendant to pay the plaintiff the sum of 83,158,195 Yen at the exchange rate prevailing on the date of the foreign judgment on January 29, 1981, plus 6% per annum until May 19, 1983; and from said date until full payment, 12% per annum (6% by way of damages and 6% interest) until the entire obligation is fully satisfied.
SO ORDERED.8
On December 18, 1995, petitioner filed a petition for certiorari under Rule 65, docketed as G.R. No. 122890, assailing the aforequoted order. On May 29, 1996, the case was referred to the Court of Appeals. Petitioner contended that it
had already made partial payments; hence, it was liable only for the amount of 61,734,633 Yen. Moreover, it argued that it was not liable to pay additional interest on top of the 6% interest imposed in the foreign judgment.
The Court of Appeals rendered the assailed decision on February 17, 1997. It sustained the imposition of additional interest on the liability of petitioner as adjudged in the foreign judgment. The appellate court likewise corrected the reckoning date of the imposition of the interests in accordance with the February 9, 1995 decision to be executed, but lowered the additional interest from 12% to 6% per annum. Further, it ruled that the basis of the conversion of petitioner’s liability in its peso equivalent should be the prevailing rate at the time of payment and not the rate on the date of the foreign judgment. The dispositive portion of the said decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated October 13, 1995 and November 22, 1995 are annulled and set aside on the ground that they varied the final judgment of the First Division of the Supreme Court in G.R. No. 112573, entitled, "NORTHWEST ORIENT AIRLINES, INC., Petitioner, versus, COURT OF APPEALS and C. F. SHARP & COMPANY, INC., Respondents".
Respondent court is enjoined to execute the said final judgment with an unpaid principal balance ofY61,734,633 plus damages for delay at the rate of 6% per annum from August 28, 1980, until fully paid, which may be paid in local currency based on the conversion rate prevailing at the time of payment; plus 6% legal interest per annum from August 28, 1980, the date of the filing of the complaint in the foreign judgment.
No costs.
SO ORDERED.9
On April 2, 1998, the Court of Appeals denied both the motion for reconsideration and the partial motion for reconsideration filed by petitioner and respondent, respectively.
In the present recourse, petitioner questions the applicable conversion rate of its liability, and claims that a ruling thereon by the Court of Appeals effectively deprived it of due process of law because said rate was not among the issues submitted for resolution.
The petition is without merit.
In ruling that the applicable conversion rate of petitioner’s liability is the rate at the time of payment, the Court of Appeals cited the case of Zagala v. Jimenez,10 interpreting the provisions of Republic Act No. 529, as amended by R.A. No. 4100. Under this law, stipulations on the satisfaction of obligations in foreign currency are void. Payments of monetary obligations, subject to certain exceptions, shall be discharged in the currency which is the legal tender in the Philippines. But since R.A. No. 529 does not provide for the rate of exchange for the payment of foreign currency obligations incurred after its enactment, the Court held in a number of cases11that the rate of exchange for the conversion in the peso equivalent should be the prevailing rate at the time of payment.
Petitioner, however, contends that with the repeal of R.A. No. 529 by R.A. No. 8183,12 the jurisprudence relied upon by the Court of Appeals is no longer applicable.
Republic Act No. 529, as amended by R.A. No. 4100, provides:
SECTION 1. Every provision contained in, or made with respect to, any domestic obligation to wit, any obligation contracted in the Philippines which provision purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount of money of the Philippines measured thereby, be as it is hereby declared against public policy, and null, void, and of no effect, and no such provision shall be contained in, or made with respect to, any obligation hereafter incurred. The above prohibition shall not apply to (a) transactions where the funds involved are the proceeds of loans or investments made directly or indirectly, through bona fide intermediaries or agents, by foreign governments, their agencies and instrumentalities, and international financial banking institutions so long as the funds are identifiable, as having emanated from the sources enumerated above; b) transactions affecting high-priority economic projects for agricultural, industrial and power development as may be determined by the National Economic Council which are financed by or through foreign funds; (c) forward exchange transactions entered into between banks or between banks and individuals or juridical persons;
(d) import-export and other international banking, financial investment and industrial transactions. With the exception of the cases enumerated in items (a), (b), (c) and (d) in the foregoing provision, in which cases the terms of the parties’ agreement shall apply, every other domestic obligation heretofore or hereafter incurred, whether or not any such provision as to payment is contained therein or made with respect thereto, shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts:Provided, That if the obligation was incurred prior to the enactment of this Act and required payment in a particular kind of coin or currency other than Philippine currency, it shall be discharged in Philippine currency, measured at the prevailing rates of exchange at the time the obligation was incurred, except in case of a loan made in a foreign currency stipulated to be payable in the same currency in which case the rate of exchange prevailing at the time of the stipulated date of payment shall prevail. All coin and currency, including Central Bank notes, heretofore or hereafter issued and declared by the Government of the Philippines shall be legal tender for all debts, public and private.
Pertinent portion of Republic Act No. 8183 states:
SECTION 1. All monetary obligations shall be settled in the Philippine currency which is legal tender in the Philippines. However, the parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment.
SEC. 2. Republic Act Numbered Five Hundred and Twenty-Nine (R.A. No. 529), as amended, entitled "An Act to Assure the Uniform Value of Philippine Coin and Currency" is hereby repealed.
The repeal of R.A. No. 529 by R.A. No. 8183 has the effect of removing the prohibition on the stipulation of currency other than Philippine currency, such that obligations or transactions may now be paid in the currency agreed upon by the parties. Just like R.A. No. 529, however, the new law does not provide for the applicable rate of exchange for the conversion of foreign currency-incurred obligations in their peso equivalent. It follows, therefore, that the jurisprudence established in R.A. No. 529 regarding the rate of conversion remains applicable. Thus, in Asia World Recruitment, Inc. v. National Labor Relations Commission,13 the Court, applying R.A. No. 8183, sustained the ruling of the NLRC that obligations in foreign currency may be discharged in Philippine currency based on the prevailing rate at the time of payment. The wisdom on which the jurisprudence interpreting R.A. No. 529 is based equally holds true with R.A. No. 8183. Verily, it is just and fair to preserve the real value of the foreign exchange- incurred obligation to the date of its payment.14
We find no denial of due process in the instant case. Contrary to the argument of petitioner, the matter of the applicable conversion rate was one of the issues submitted for resolution before the Court of Appeals. Moreover, opportunity to be heard, which is the very essence of due process, was afforded petitioner when it filed a motion for reconsideration of the Court of Appeals’ decision.
Petitioner’s contention that it is Article 125015 of the Civil Code that should be applied is untenable. The rule that the value of the currency at the time of the establishment of the obligation shall be the basis of payment finds application only when there is an official pronouncement or declaration of the existence of an extraordinary inflation or deflation.16
For its part, respondent prays for the modification of the Court of Appeals’ award of interest. While as a general rule, a party who has not appealed is not entitled to affirmative relief other than what was granted in the decision of the court below, law and jurisprudence authorize a tribunal to consider errors, although unassigned, if they involve (1) errors affecting the lower court’s jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical errors.17
In the case at bar, the Court of Appeal’s failure to apply the correct legal rate of interest, to which respondent is lawfully entitled, amounts to a "plain error." In Eastern Shipping Lines, Inc. v. Court of Appeals,18 it was held that absent any stipulation, the legal rate of interest in obligations which consists in the payment of a sum of money, as in the present case, is 12% per annum. As stated in the decision of the Court in G.R. No. 112573, which is final and executory, petitioner is liable to pay respondent the amount adjudged in the foreign judgment, with "interest thereon at the legal rate [12% per annum] from the filing of the complaint therein [on August 28, 1980] until the said foreign judgment is fully satisfied." Since petitioner already made partial payments, his obligation was reduced to 61,734,633 Yen. Thus, petitioner should pay respondent the amount of 61,734,633 Yen plus "damages for the delay at the rate of 6% per annum from August 28, 1980 up to and until payment is completed," with interest thereon at the rate of 12% per annum from the filing of the complaint on August 28, 1980, until fully satisfied.
The Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. Rules of procedure are mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must be avoided. Hence, substantive rights, like the applicable legal rate of interest on petitioner’s long due and demandable obligation, must not be prejudiced by a rigid and technical application of the rules.19
WHEREFORE, in view of all the foregoing, the instant petition is DENIED. The February 17, 1997 decision and the April 2, 1998 resolution of the Court of Appeals in CA-G.R. SP No. 40996 are AFFIRMED withMODIFICATION. Petitioner is directed to pay respondent 61,734,633 Yen plus damages for the delay at the rate of 6% per annum from August 28, 1980 up to and until payment is completed, with interest at the rate of 12%per annum counted from the date of filing of the complaint on August 28, 1980, until fully satisfied. Petitioner’s liability may be paid in Philippine currency, computed at the exchange rate prevailing at the time of payment.1âwphi1.nêt
SO ORDERED.
Republic of the PhilippinesSUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-43446 May 3, 1988
FILIPINO PIPE AND FOUNDRY CORPORATION, plaintiff-appellant, vs.NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, defendant-appellee.
GRIÑO-AQUINO, J.:
The plaintiff Filipino Pipe and Foundry Corporation (hereinafter referred to as "FPFC" for brevity) appealed the dismissal of its complaint against defendant National Waterworks and Sewerage Authority (NAWASA) by the Court of First Instance of Manila on September 5, 1973. The appeal was originally brought to the Court of Appeals. However, finding that the principal purpose of the action was to secure a judicial declaration that there exists 'extraordinary inflation' within the meaning of Article 1250 of the New Civil Code to warrant the application of that provision, the Court of Appeals, pursuant to Section 3, Rule 50 of the Rules of Court, certified the case to this Court for proper disposition.
On June 12,1961, the NAWASA entered into a contract with the plaintiff FPFC for the latter to supply it with 4" and 6" diameter centrifugally cast iron pressure pipes worth P270,187.50 to be used in the construction of the Anonoy Waterworks in Masbate and the Barrio San Andres-Villareal Waterworks in Samar. Defendant NAWASA paid in installments on various dates, a total of One Hundred Thirty-Four Thousand and Six Hundred Eighty Pesos (P134,680.00) leaving a balance of One Hundred Thirty-Five Thousand, Five Hundred Seven Pesos and Fifty centavos (P135,507.50) excluding interest. Having completed the delivery of the pipes, the plaintiff demanded payment from the defendant of the unpaid balance of the price with interest in accordance with the terms of their contract. When the NAWASA failed to pay the balance of its account, the plaintiff filed a collection suit on March 16, 1967 which was docketed as Civil Case No. 66784 in the Court of First Instance of Manila.
On November 23, 1967, the trial court rendered judgment in Civil Case No. 66784 ordering the defendant to pay the unpaid balance of P135,507.50 in NAWASA negotiable bonds, redeemable after ten years from their issuance with interest at 6% per annum, P40,944.73 as interest up to March 15, 1966 and the interest accruing thereafter to the issuance of the bonds at 6% per annum and the costs. Defendant, however, failed to satisfy the decision. It did not deliver the bonds to the judgment creditor. On February 18, 1971, the plaintiff FPFC filed another complaint which was docketed as Civil Case No. 82296, seeking an adjustment of the unpaid balance in accordance with the value of the Philippine peso when the decision in Civil Case No. 66784 was rendered on November 23, 1967.
On May 3, 1971, the defendant filed a motion to dismiss the complaint on the ground that it is barred by the 1967 decision in Civil Case No. 66784.
The trial court, in its order dated May 26, 1971, denied the motion to dismiss on the ground that the bar by prior judgment did not apply to the case because the causes of action in the two cases are different: the first action being for collection of the defendant's indebtedness for the pipes, while the second case is for adjustment of the value of said judgment due to alleged supervening extraordinary inflation of the Philippine peso which has reduced the value of the bonds paid to the plaintiff.
Article 1250 of the Civil Code provides:
In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary..
The court suggested to the parties during the trial that they present expert testimony to help it in deciding whether the economic conditions then, and still prevailing, would justify the application of Article 1250 of the Civil Code. The plaintiff presented voluminous records and statistics showing that a spiralling inflation has marked the progress of the country from 1962 up to the present. There is no denying that the price index of commodities, which is the usual evidence of the value of the currency has been rising.
The trial court pointed out, however, than this is a worldwide occurence, but hardly proof that the inflation is extraordinary in the sense contemplated by Article 1250 of the Civil Code, which was adopted by the Code Commission to provide "a just solution" to the "uncertainty and confusion as a result of Malabanan contracts entered into or payments made during the last war." (Report of the Code Commission, 132-133.)
Noting that the situation situation during the Japanese Occupation "cannot that the be compared with the economic conditions today," the a. Malabanan trial court, on September 5, 1973, rendered judgment dismissing the complaint.
The only issue before Us whether, on the basis of the continously spiralling price index indisputably shown by the plaintiff, there exists an extraordinary inflation of the currency justifying an adjustment of defendant appellee's unpaid judgment obligation the plaintiff-appellant.
Extraordinary inflation exists "when there is a decrease or increase in the purchasing power of the Philippine currency which is unusual or beyond the common fluctuation in the value said currency, and such decrease or increase could not have reasonably foreseen or was manifestly beyond contemplation the the parties at the time of the establishment of the obligation. (Tolentino Commentaries and Jurisprudence on the Civil Code Vol. IV, p. 284.)
An example of extraordinary inflation is the following description of what happened to the Deutschmark in 1920:
More recently, in the 1920's Germany experienced a case of hyperinflation. In early 1921, the value of the German mark was 4.2 to the U.S. dollar. By May of the same year, it had stumbled to 62 to the U.S. dollar. And as prices went up rapidly, so that by October 1923, it had reached 4.2 trillion to the U.S. dollar! (Bernardo M. Villegas & Victor R. Abola, Economics, An Introduction [Third Edition]).
As reported, "prices were going up every week, then every day, then every hour. Women were paid several times a day so that they could rush out and exchange their money for something of value before what little purchasing power was left dissolved in their hands. Some workers tried to beat the constantly rising prices by throwing their money out of the windows to their waiting wives, who would rush to upload the nearly worthless paper. A postage stamp cost millions of marks and a loaf of bread, billions." (Sidney Rutberg, "The Money Balloon" New York: Simon and Schuster, 1975, p. 19, cited in "Economics, An Introduction" by Villegas & Abola, 3rd Ed.)
While appellant's voluminous records and statistics proved that there has been a decline in the purchasing power of the Philippine peso, this downward fall of the currency cannot be considered "extraordinary." It is simply a universal trend that has not spared our country.
WHEREFORE, finding no reversible error in the appealed decision of the trial court, We affirm it in toto. No costs.
SO ORDERED.
THIRD DIVISION
[G.R. No. 137798. October 4, 2000]
LUCIA R. SINGSON, petitioner, vs. CALTEX (PHILIPPINES), INC. respondent.
D E C I S I O N
GONZAGA-REYES, J.:
Petitioner seeks a review on certiorari of the decision of the former Special Second Division of the Court of Appeals
dated November 27, 1998,[1] affirming the decision of the Regional Trial Court of Manila, Branch 25[2] which
dismissed petitioner's action for reformation of contract and adjustment of rentals.
The facts of the case are undisputed ---
Petitioner and respondent entered into a contract of lease on July 16, 1968 over a parcel of land in Cubao, Quezon
City. The land, which had an area of 1,400 square meters and was covered by Transfer Certificates of Title No.
43329 and 81636 issued by the Register of Deeds of Quezon City, was to be used by respondent as a gasoline
service station.
The contract of lease provides that the lease shall run for a period of twenty (20) years and shall abide by the
following rental rates:
xxx xxx xxx xxx
Rental. --- The LESSEE agrees to pay the following rental for said premises:
P2.50/sq.m. per month from the 1st to 10th years and P3.00/sq.m. per month from the 11th to 20th years, payable
monthly in advance within the 1st 15 days of each month; provided that the rentals for the 1st 5 years less a discount
of eleven (11) percent per annum computed on a monthly diminishing balance, shall be paid to LESSOR upon
compliance of the three (3) conditions provided in clause (2) above.
LESSEE also agrees to pay lessor, the sum of Six Thousand Pesos (P6,000.00) as demolition expenses, upon
effectivity of this lease.
The rental herein provided for is in any event the maximum rental which LESSOR may collect during the term of this
lease or any renewal or extension thereof. LESSEE further agrees for thirty (30) days after written notice of such
default has actually been delivered to the General Manager of Caltex (Philippines), Inc. LESSOR shall then have the
right to terminate this lease on thirty (30) days written notice to LESSEE. xxx xxx xxx [3]
Thus, based on the foregoing provisions of the lease contract, the monthly rental was fixed at P3,500.00 for the first
ten years, and at P4,200.00 for the succeeding ten years of the lease.
On June 23, 1983, or five years before the expiration of the lease contract, petitioner asked respondent to adjust or
increase the amount of rentals citing that the country was experiencing extraordinary inflation. In a letter dated August
3, 1983, respondent refused petitioner's request and declared that the terms of the lease contract are clear as to the
rental amounts therein provided being "the maximum rental which the lessor may collect during the term of the
lease."[4]
On September 21, 1983, petitioner instituted a complaint before the RTC praying for, among other things, the
payment by respondent of adjusted rentals based on the value of the Philippine peso at the time the contract of lease
was executed. The complaint invoked Article 1250 of the Civil Code, stating that since the execution of the contract of
lease in 1968 an extraordinary inflation had supervened resulting from the deterioration of worldwide economic
conditions, a circumstance that was not foreseen and could not have been reasonably foreseen by the parties at the
time they entered into contract.
To substantiate its allegation of extraordinary inflation, petitioner presented as witness Mr. Narciso Uy, Assistant
Director of the Supervising and Examining Sector of the Central Bank, who attested that the inflation rate increased
abruptly during the period 1982 to 1985, caused mainly by the devaluation of the peso.[5][6] Petitioner also submitted
into evidence a certification of the official inflation rates from 1966 to 1986 prepared by the National Economic
Development Authority ("NEDA") based on consumer price index, which reflected that at the time the parties entered
into the subject contract, the inflation rate was only 2.06%; then, it soared to 34.51% in 1974, and in 1984, reached a
high of 50.34%.
In a decision rendered on July 15, 1991, the RTC dismissed the complaint for lack of merit. This judgment was
affirmed by the Court of Appeals. Both courts found that petitioner was unable to prove the existence of extraordinary
inflation from 1968 to 1983 (or from the year of the execution of the contract up to the year of the filing of the
complaint before the RTC) as to justify an adjustment or increase in the rentals based upon the provisions of Article
1250 of the Civil Code.
The Court of Appeals declared that although, admittedly, there was an economic inflation during the period in
question, it was not such as to call for the application of Article 1250 which is made to apply only to "violent and
sudden changes in the price level or uncommon or unusual decrease of the value of the currency. (It) does not
contemplate of a normal or ordinary decline in the purchasing power of the peso."[7]
The Court of Appeals also found similarly with the trial court that the terms of rental in the contract of lease dated July
16, 1968 are clear and unequivocal as to the specific amount of the rental rates and the fact that the rentals therein
provided shall be the "maximum rental" which petitioner as lessor may collect. Absent any showing that such
contractual provisions are contrary to law, morals, good customs, public order or public policy, the Court of Appeals
held that there was no basis for not acknowledging their binding effect upon the parties. It also upheld the application
by the trial court of the ruling in Filipino Pipe and Foundry Corporation vs. National Waterworks and Sewerage
Authority, 161 SCRA 32, where the Court held that although there has been a decline in the purchasing power of the
Philippine peso during the period 1961 to 1971, such downward fall of the currency could not be considered
"extraordinary" and was simply a universal trend that has not spared the Philippines.
Thus, the dispositive portion of the decision of the Court of Appeals reads:
WHEREFORE, in view of the foregoing, the appeal is hereby DISMISSED and the decision appealed from is hereby
AFFIRMED.
SO ORDERED.[8]
Petitioner's motion for reconsideration of the above decision was denied by the Court of Appeals in a resolution dated
March 10, 1999.
Aggrieved, petitioner filed this petition for review on certiorariwhere she assails as erroneous the decision of the Court
of Appeals, specifically, (1) in ruling that Article 1250 of the Civil Code is inapplicable to the instant case, (2) in not
recognizing the applicability of the principle of rebus sic stantibus, and (3) in applying the ruling in Filipino Pipe and
Foundry Corporation vs. NAWASA.
Petitioner contends that the monthly rental of P3.00 per square meter is patently inequitable. Based on the inflation
rates supplied by NEDA, there was an unusual increase in inflation that could not have been foreseen by the parties;
otherwise, they would not have entered into a relatively long-term contract of lease. She argued that the rentals in this
case should not be regarded by their quantitative or nominal value, but as "debts of value", that is, the rental rates
should be adjusted to reflect the value of the peso at the time the lease was contracted.[9]
Petitioner also insists that the factual milieu of the present case is distinct from that in Filipino Pipe and Foundry
Corporation vs. NAWASA. She pointed out that the inflation experienced by the country during the period 1961 to
1971 (the pertinent time period in the Filipino Pipe case) had a lowest of 1.35% in 1969 and a highest of 15.03% in
1971, whereas in the instant case, involving the period 1968 to 1983, there had been highly abnormal inflation rates
like 34.51% in 1974 (triggered by the OPEC oil price increases in 1973) and 50.34% in 1984 (caused by the
assassination of Benigno Aquino, Jr. in 1983). Petitioner argues that the placing of the country under martial rule in
1972, the OPEC oil price increases in 1973, and the Aquino assassination which triggered the EDSA revolution, were
fortuitous events that drastically affected the Philippine economy and were beyond the reasonable contemplation of
the parties.
To further bolster her arguments, petitioner invokes by analogy the principle of rebus sic stantibus in public
international law, under which a vital change of circumstances justifies a state's unilateral withdrawal from a treaty. In
the herein case, petitioner posits that in pegging the monthly rental rates of P2.50 and P3.00 per square meter,
respectively, the parties were guided by the economic conditions prevalent in 1968, when the Philippines faced
robust economic prospects. Petitioner contends that between her and respondent, a corporation engaged in high
stakes business and employing economic and business experts, it is the latter who had the unmistakable advantage
to analyze the feasibility of entering into a 20-year lease contract at such meager rates.
The only issue crucial to the present appeal is whether there existed an extraordinary inflation during the period 1968
to 1983 that would call for the application of Article 1250 of the Civil Code and justify an adjustment or increase of the
rentals between the parties.
Article 1250 of the Civil Code states:
In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at
the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the
contrary.
Article 1250 was inserted in the Civil Code of 1950 to abate the uncertainty and confusion that affected contracts
entered into or payments made during World War II, and to help provide a just solution to future cases.[10] The Court
has, in more than one occasion, been asked to interpret the provisions of Article 1250, and to expound on the scope
and limits of "extraordinary inflation".
We have held extraordinary inflation to exist when there is a decrease or increase in the purchasing power of the
Philippine currency which is unusual or beyond the common fluctuation in the value of said currency, and such
increase or decrease could not have been reasonably foreseen or was manifestly beyond the contemplation of the
parties at the time of the establishment of the obligation.[11]
An example of extraordinary inflation, as cited by the Court inFilipino Pipe and Foundry Corporation vs.
NAWASA, supra, is that which happened to the deutschmark in 1920. Thus:
"More recently, in the 1920s, Germany experienced a case of hyperinflation. In early 1921, the value of the German
mark was 4.2 to the U.S. dollar. By May of the same year, it had stumbled to 62 to the U.S. dollar. And as prices went
up rapidly, so that by October 1923, it had reached 4.2 trillion to the U.S. dollar!" (Bernardo M. Villegas & Victor R.
Abola, Economics, An Introduction [Third Edition]).
As reported, "prices were going up every week, then every day, then every hour. Women were paid several times a
day so that they could rush out and exchange their money for something of value before what little purchasing power
was left dissolved in their hands. Some workers tried to beat the constantly rising prices by throwing their money out
of the windows to their waiting wives, who would rush to unload the nearly worthless paper. A postage stamp cost
millions of marks and a loaf of bread, billions." (Sidney Rutberg, "The Money Balloon", New York: Simon and
Schuster, 1975, p. 19, cited in "Economics, An Introduction" by Villegas & Abola, 3rd Ed.)
The supervening of extraordinary inflation is never assumed.[12] The party alleging it must lay down the factual basis
for the application of Article 1250.
Thus, in the Filipino Pipe case, the Court acknowledged that the voluminous records and statistics submitted by
plaintiff-appellant proved that there has been a decline in the purchasing power of the Philippine peso, but this
downward fall cannot be considered "extraordinary" but was simply a universal trend that has not spared our country.
[13] Similarly, in Huibonhoa vs. Court of Appeals,[14] the Court dismissed plaintiff-appellant's unsubstantiated
allegation that the Aquino assassination in 1983 caused building and construction costs to double during the period
July 1983 to February 1984. In Serra vs. Court of Appeals,[15] the Court again did not consider the decline in the
peso's purchasing power from 1983 to 1985 to be so great as to result in an extraordinary inflation.
Like the Serra and Huibonhoa cases, the instant case also raises as basis for the application of Article 1250 the
Philippine economic crisis in the early 1980s --- when, based on petitioner's evidence, the inflation rate rose to
50.34% in 1984. We hold that there is no legal or factual basis to support petitioner's allegation of the existence of
extraordinary inflation during this period, or, for that matter, the entire time frame of 1968 to 1983, to merit the
adjustment of the rentals in the lease contract dated July 16, 1968. Although by petitioner's evidence there was a
decided decline in the purchasing power of the Philippine peso throughout this period, we are hard put to treat this as
an "extraordinary inflation" within the meaning and intent of Article 1250. Rather, we adopt with approval the following
observations of the Court of Appeals on petitioner's evidence, especially the NEDA certification of inflation rates
based on consumer price index:
xxx (a) from the period 1966 to 1986, the official inflation rate never exceeded 100% in any single year; (b) the
highest official inflation rate recorded was in 1984 which reached only 50.34%; (c) over a twenty one (21) year period,
the Philippines experienced a single-digit inflation in ten (10) years (i.e., 1966, 1967, 1968, 1969, 1975, 1976, 1977,
1978, 1983 and 1986); (d) in other years (i.e., 1970, 1971, 1972, 1973, 1974, 1979, 1980, 1981, 1982, 1984 and
1989) when the Philippines experienced double-digit inflation rates, the average of those rates was only 20.88%; (e)
while there was a decline in the purchasing power of the Philippine currency from the period 1966 to 1986, such
cannot be considered as extraordinary; rather, it is a normal erosion of the value of the Philippine peso which is a
characteristic of most currencies.[16]
"Erosion" is indeed an accurate description of the trend of decline in the value of the peso in the past three to four
decades. Unfortunate as this trend may be, it is certainly distinct from the phenomenon contemplated by Article 1250.
Moreover, this Court has held that the effects of extraordinary inflation are not to be applied without an official
declaration thereof by competent authorities.[17]
Lastly, the provisions on rentals in the lease contract dated July 16, 1968 between petitioner and respondent are
clear and categorical, and we have no reason to suppose that such lease contract does not reflect or express their
true intention and agreement. The contract is the law between the parties and if there is indeed reason to adjust the
rent, the parties could have by themselves negotiated the amendment of the contract.[18]
WHEREFORE, the petition seeking the reversal of the decision of the Court of Appeals in CA-G.R. CV No. 54115 is
DENIED.
SO ORDERED.
Republic of the PhilippinesSUPREME COURT
Manila
EN BANC
G.R. No. L-18390 December 20, 1971
PEDRO J. VELASCO, plaintiff-appellant, vs.MANILA ELECTRIC CO., ET AL., defendants-appellees.
R E S O L U T I O N
REYES, J.B.L., J.:
Both appellant Velasco and appellee Manila Electric have filed their respective motions to reconsider the decision of this Court dated 6 August 1971. For the sake of clarity, the two motions will be here dealt with separately.
A — APPELLANT'S MOTION FOR RECONSIDERATION
The thrust of this motion is that the decision has incorrectly assessed appellant's damages and unreasonably reduced their amount. It is first argued that the decision erred in not taking into account, in computing appellant's loss of income, the appellant's undeclared income of P8,338.20, assessed by the Bureau of Internal Revenue for the year 1954, in addition to his declared income for that year (P10,975), it being argued that appellant never claim any other source of income besides his professional earnings. Several circumstances of record disprove this claim. (1) That the amount of P8,338.20 was kept apart from ordinary earnings of appellant for the year 1954 (P10,975), and not declared with it, is in itself circumstantial evidence that it was not of comparable character. (2) If it was part of his ordinary professional income, appellant was guilty of fraud in not declaring it and he should not be allowed to derive advantage from his own wrongdoing. (3) The decision pointed out that by including the undeclared amount in appellant's disclosed professional earning for 1954, to a grand total of P19,313.20, the income for said year becomes abnormally high (in fact, more that double), as compared to appellant's earnings for the preceding years, 1951-1953, that averaged not more that P7,000 per annum. Such abnormality justifies the Court's refusal to consider the undisclosed P8,338.20 as part of appellant's regular income for the purpose of computing the reduction in his earnings as a result of the complained acts of appellee. (4) Finally, the true source of the undeclared amount lay in appellant's own knowledge, but he chose not to disclose it; neither did he call upon the assessing revenue officer to reveal its character.
Appellant Velasco urges that the damages awarded him are inadequate considering the present high cost of living, and calls attention to Article 1250 of the present Civil Code, and to the doctrines laid down in People vs. Pantoja G.R. No. L-18793, 11 October 1968, 25 SCRA 468. We do not deem the rules invoked to be applicable. Article 1250 of the Civil Code is to the effect that:
ART. 1250. In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation shall be the basis of payment, unless there is an agreement to the contrary.
It can be seen from the employment of the words "extraordinary inflation or deflation of the currency stipulated" that the legal rule envisages contractual obligations where a specific currency is selected by the parties as the medium of payment; hence it is inapplicable to obligations arising from tort and not from contract, as in the case at bar, besides there being no showing that the factual assumption of the article has come into existence. As to the Pantoja ruling, the regard paid to the decreasing purchase of the peso was considered a factor in estimating the indemnity due for loss of life, which in itself is not susceptible of accurate estimation. It should not be forgotten that the damages awarded to herein appellant were by no means full compensatory damages, since the decision makes clear that
appellant, by his failure to minimize his damages by means easily within his reach, was declared entitled only to a reduced award for the nuisance sued upon (Steel vs. Rail & River Coal Co., 43 Ohio App. 228,182 N.E. 552); and the amount granted him had already taken into account the changed economic circumstances.
Nor is the fact that appellant lost a chance to sell his house for P95,000 to Jose Valencia constitute a ground for an award of damages in that amount. As remarked in the main decision, there is no adequate proof of loss, since there is no evidence of the depreciation in the market value of the house in question caused by the acts of defendant Meralco The house, after all, has remained with appellant and he admits in his motion for reconsideration (page 48) that properties have increased in value by 200% since then.
For the foregoing reasons, the motion for reconsideration is denied.
B — APPELLEE'S MOTION TO RECONSIDER
Appellee Manila Electric Company argues that in case the noise emitted by its substation can not be brought down to the 50 decibel level imposed by our decision in chief, the remedy of the appellant would be to compel appellee Company to acquire and pay for the value of the house, under the so-called doctrine of "inverse condemnation and cites in support our doctrines in Bengzon vs. Province of Pangasinan, 62 Phil. 816, and Republic vs. Philippine Long Distance Telephone Co., L-18841, 27 January 1969, 26 SCRA 620-634. But as pointed out by appellant in his opposition, this issue was not raised, nor was the inverse condemnation doctrine invoked in the trial court, so that it would be improper to consider it on appeal, and worse still, on a motion for reconsideration of the decision on the merits. Furthermore, there is no showing that it is impossible to reduce the substation noise to the level decreed by this Court in the main decision. On the contrary, appellee's own evidence is that the noise can be reduced by erecting a wall barrier on the line separating the substation lot and the property of appellant.
The version that appellee did not erect the wall because of the objections of appellant's wife was denied by her, and there is no preponderance of evidence in favor of appellee on this point. Moreover, since it was appellant Dr. Velasco who complained, his wife's objection would not suffice to constitute a waiver of his claim.
As to the petition to increase the sound level prescribed by his Court from 50 to 55 decibels on the ground that present "ambient sound already ranges from 44 to 55 decibels in the mornings", the same can not be granted. As shown by the evidence at the trial, the intensity of the noise emitted by appellee's transformers are most objectionable at night, when people are endeavoring to rest and sleep in compensation for the fatigue and tensions accumulated during daytime.
WHEREFORE, appellee's motion to reconsider is likewise denied.
Republic of the PhilippinesSUPREME COURT
Manila
FIRST DIVISION
G.R. No. 116805 June 22, 2000
MARIO S. ESPINA, petitioner,vs.THE COURT OF APPEALS and RENE G. DIAZ, respondents.
PARDO, J.:
The case before the Court is an appeal from a decision of the Court of Appeals 1 reversing that of the Regional Trial Court, Antipolo, Rizal, 2 affirming in all respects the decision of the Municipal Trial Court, Antipolo, Rizal, 3ordering respondent Rene G. Diaz to vacate the condominium unit owned by petitioner and to pay back current rentals, attorney's fees and costs.1âwphi1.nêt
The facts, as found by the Court of Appeals, are as follows:
Mario S. Espina is the registered owner of a Condominium Unit No. 403, Victoria Valley Condominium, Valley Golf Subdivision, Antipolo, Rizal. Such ownership is evidenced by Condominium Certificate of Title No. N-10 (p. 31, Rollo).
On November 29, 1991, Mario S. Espina, the private respondent as seller, and Rene G. Diaz, the petitioner as buyer, executed a Provisional Deed of Sale, whereby the former sold to the latter the aforesaid condominium unit for the amount of P100,000.00 to be paid upon the execution of the contract and the balance to be paid through PCI Bank postdated checks as follows:
1. P400,000.00
Check No. 301245
January 15, 1992
2. P200,000.00
Check No. 301246
February 1, 1992
3. P200,000.00
Check No. 301247
February 22, 1992
4. P200,000.00
Check No. 301248
March 14, 1992
5. P200,000.00
Check No. 301249
April 4, 1992
6. P200,000.00
Check No. 301250
April 25, 1992
(pp. 59-61, Rollo).
Subsequently, in a letter dated January 22, 1992, petitioner informed private respondent that his checking account with PCI Bank has been closed and a new checking account with the same drawee bank is opened for practical purposes. The letter further stated that the postdated checks issued will be replaced with new ones in the same drawee bank (p. 63, Rollo).
On January 25, 1992, petitioner through Ms. Socorro Diaz, wife of petitioner, paid private respondent Mario Espina P200,000.00, acknowledged by him as partial payment for the condominium unit subject of this controversy (p. 64, Rollo).
On July 26, 1992, private respondent sent petitioner a "Notice of Cancellation" of the Provisional Deed of Sale (p. 48, Rollo).
However, despite the Notice of Cancellation from private respondent, the latter accepted payment from petitioner per Metrobank Check No. 395694 dated and encashed on October 28, 1992 in the amount of P100,000.00 (p. 64, Rollo).
On February 24, 1993, private respondent filed a complaint docketed as Civil Case No. 2104 for Unlawful Detainer against petitioner before the Municipal Trial Court of Antipolo, Branch 1.
On November 12, 1993, the trial court rendered its decision, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered ordering the defendant and all persons claiming rights under him to vacate unit 403 of the Victoria Golf Valley Condominium, Valley Golf Subdivision, Antipolo, Rizal; to pay the total arrears of P126,000.00, covering the period July 1991 up to the filing (sic) complaint, and to pay P7,000.00 every month thereafter as rentals unit (sic) he vacates the premises; to pay the amount of P5,000.00 as and attorney's fees; the amount of P300.00 per appearance, and costs of suit.
However, the plaintiff may refund to the defendant the balance from (sic) P400,000.00 after deducting all the total obligations of the defendant as specified in the decision from receipt of said decision.
SO ORDERED. (Decision, Annex "B"; p. 27, Rollo).
From the said decision, petitioner appealed to the Regional Trial Court Branch 71, Antipolo, Rizal. On April 29, 1994, said appellate court affirmed in all respects the decision of the trial court. 4
On June 14, 1994, petitioner filed with the Court of Appeals a petition for review.
On July 20, 1994, the Court of Appeals promulgated its decision reversing the appealed decision and dismissing the complaint for unlawful detainer with costs against petitioner Espina.
On August 8, 1994, petitioner filed a motion for reconsideration of the decision of the Court of Appeals. 5
On August 19, 1994, the Court of Appeals denied the motion. 6
Hence, this appeal via petition for review on certiorari. 7
The basic issue raised is whether the Court of Appeals erred in ruling that the provisional deed of sale novated the existing contract of lease and that petitioner had no cause of action for ejectment against respondent Diaz.
We resolve the issue in favor of petitioner.
According to respondent Diaz, the provisional deed of sale that was subsequently executed by the parties novated the original existing contract of lease. The contention cannot be sustained. Respondent originally occupied the condominium unit in question in 1987 as a lessee. 8 While he occupied the premises as lessee, petitioner agreed to sell the condominium unit to respondent by installments. 9 The agreement to sell was provisional as the consideration was payable in installments.
The question is, did the provisional deed of sale novate the existing lease contract? The answer is no. The novation must be clearly proved since its existence is not presumed. 10 "In this light, novation is never presumed; it must be proven as a fact either by express stipulation of the parties or by implication derived from an irreconcilable incompatibility between old and new obligations or contracts." 11 Novation takes place only if the parties expressly so provide, otherwise, the original contract remains in force. In other words, the parties to a contract must expressly agree that they are abrogating their old contract in favor of a new one. 12 Where there is no clear agreement to create a new contract in place of the existing one, novation cannot be presumed to take place, unless the terms of the new contract are fully incompatible with the former agreement on every point. 13 Thus, a deed of cession of the right to repurchase a piece of land does not supersede a contract of lease over the same property. 14 In the provisional deed of sale in this case, after the initial down payment, respondent's checks in payment of six installments all bounced and were dishonored upon presentment for the reason that the bank account was closed. 15 Consequently, on July 26, 1992, petitioner terminated the provisional deed of sale by a notarial notice of cancellation. 16 Nonetheless, respondent Diaz continued to occupy the premises, as lessee, but failed to pay the rentals due. On October 28, 1992, respondent made a payment of P100,000.00 that may be applied either to the back rentals or for the purchase of the condominium unit. On February 13, 1993, petitioner gave respondent a notice to vacate the premises and to pay his back rentals. 17 Failing to do so, respondent's possession became unlawful and his eviction was proper. Hence, on February 24, 1993, petitioner filed with the Municipal Trial Court, Antipolo, Rizal, Branch 01 an action for unlawful detainer against respondent Diaz. 18
Now respondent contends that the petitioner's subsequent acceptance of such payment effectively withdrew the cancellation of the provisional sale. We do not agree. Unless the application of payment is expressly indicated, the payment shall be applied to the obligation most onerous to the debtor. 19 In this case, the unpaid rentals constituted the more onerous obligation of the respondent to petitioner. As the payment did not fully settle the unpaid rentals, petitioner's cause of action for ejectment survives. Thus, the Court of Appeals erred in ruling that the payment was "additional payment" for the purchase of the property.
WHEREFORE, the Court GRANTS the petition for review on certiorari, and REVERSES the decision of the Court of Appeals. 20 Consequently, the Court REVIVES the decision of the Regional Trial Court, Antipolo, Rizal, Branch 71, 21 affirming in toto the decision of the Municipal Trial Court, Antipolo, Rizal, Branch 01. 22
No costs.
SO ORDERED.1âwphi1.nêt
Republic of the PhilippinesSUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-58961 June 28, 1983
SOLEDAD SOCO, petitioner, vs.HON. FRANCIS MILITANTE, Incumbent Presiding Judge of the Court of First Instance of Cebu, Branch XII, Cebu City and REGINO FRANCISCO, JR., respondents.
Chua & Associates Law Office (collaborating counsel) and Andales, Andales & Associates Law Office for petitioner.
Francis M. Zosa for private respondent.
GUERRERO, J.:
The decision subject of the present petition for review holds the view that there was substantial compliance with the requisites of consignation and so ruled in favor of private respondent, Regino Francisco, Jr., lessee of the building owned by petitioner lessor, Soledad Soco in the case for illegal detainer originally filed in the City Court of Cebu City, declaring the payments of the rentals valid and effective, dismissed the complaint and ordered the lessor to pay the lessee moral and exemplary damages in the amount of P10,000.00 and the further sum of P3,000.00 as attorney's fees.
We do not agree with the questioned decision. We hold that the essential requisites of a valid consignation must be complied with fully and strictly in accordance with the law, Articles 1256 to 1261, New Civil Code. That these Articles must be accorded a mandatory construction is clearly evident and plain from the very language of the codal provisions themselves which require absolute compliance with the essential requisites therein provided. Substantial compliance is not enough for that would render only a directory construction to the law. The use of the words "shall" and "must" which are imperative, operating to impose a duty which may be enforced, positively indicate that all the essential requisites of a valid consignation must be complied with. The Civil Code Articles expressly and explicitly direct what must be essentially done in order that consignation shall be valid and effectual. Thus, the law provides:
1257. In order that the consignation of the thing due may release the obligor, it must first be announced to the persons interested in the fulfillment of the obligation.
The consignation shall be ineffectual if it is not made strictly in consonance with the provisions which regulate payment.
Art. 1258. Consignation shall be made by depositing the things due at the disposal of judicial authority, before whom the tender of payment shall be proved, in a proper case, and the announcement of the consignation in other cases.
The consignation having been made, the interested parties shall also be notified thereof.
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not possible to deliver such currency, then in the currency which is legal tender in the Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor they have been impaired.
In the meantime, the action derived from the original obligation shall be held in abeyance.
We have a long line of established precedents and doctrines that sustain the mandatory nature of the above provisions. The decision appealed from must, therefore, be reversed.
The antecedent facts are substantially recited in the decision under review, as follows:
It appears from the evidence that the plaintiff-appellee-Soco, for short-and the 'defendant-appellant-Francisco, for brevity- entered into a contract of lease on January 17, 1973, whereby Soco leased her commercial building and lot situated at Manalili Street, Cebu City, to Francisco for a monthly rental of P 800.00 for a period of 10 years renewable for another 10 years at the option of the lessee. The terms of the contract are embodied in the Contract of Lease (Exhibit "A" for Soco and Exhibit "2" for Francisco). It can readily be discerned from Exhibit "A" that paragraphs 10 and 11 appear to have been cancelled while in Exhibit "2" only paragraph 10 has been cancelled. Claiming that paragraph 11 of the Contract of Lease was in fact not part of the contract because it was cancelled, Soco filed Civil Case No. R-16261 in the Court of First Instance of Cebu seeking the annulment and/or reformation of the Contract of Lease. ...
Sometime before the filing of Civil Case No. R-16261 Francisco noticed that Soco did not anymore send her collector for the payment of rentals and at times there were payments made but no receipts were issued. This situation prompted Francisco to write Soco the letter dated February 7, 1975 (Exhibit "3") which the latter received as shown in Exhibit "3-A". After writing this letter, Francisco sent his payment for rentals by checks issued by the Commercial Bank and Trust Company. Obviously, these payments in checks were received because Soco admitted that prior to May, 1977, defendant had been religiously paying the rental. ....
1. The factual background setting of this case clearly indicates that soon after Soco learned that Francisco sub-leased a portion of the building to NACIDA, at a monthly rental of more than P3,000.00 which is definitely very much higher than what Francisco was paying to Soco under the Contract of Lease, the latter felt that she was on the losing end of the lease agreement so she tried to look for ways and means to terminate the contract. ...
In view of this alleged non-payment of rental of the leased premises beginning May, 1977, Soco through her lawyer sent a letter dated November 23, 1978 (Exhibit "B") to Francisco serving notice to the latter 'to vacate the premises leased.' In answer to this letter, Francisco through his lawyer informed Soco and her lawyer that all payments of rental due her were in fact paid by Commercial Bank and Trust Company through the Clerk of Court of the City Court of Cebu (Exhibit " 1 "). Despite this explanation, Soco filed this instant case of Illegal Detainer on January 8, 1979. ...
2. Pursuant to his letter dated February 7, 1975(Exhibit"3") and for reasons stated therein, Francisco paid his monthly rentals to Soco by issuing checks of the Commercial Bank and Trust Company where he had a checking account. On May 13, 1975, Francisco wrote the Vice-President of Comtrust, Cebu Branch (Exhibit "4") requesting the latter to issue checks to Soco in the amount of P 840.00 every 10th of the month, obviously for payment of his monthly rentals. This request of Francisco was complied with by Comtrust in its letter dated June 4, 1975 (Exhibit "5"). Obviously, these payments by checks through Comtrust were received by Soco from June, 1975 to April, 1977 because Soco admitted that an rentals due her were paid except the rentals beginning May, 1977. While Soco alleged in her direct examination that 'since May, 1977 he (meaning Francisco) stopped paying the monthly rentals' (TSN, Palicte, p. 6, Hearing of October 24, 1979), yet on cross examination she admitted that before the filing of her complaint in the instant case, she knew that payments for monthly rentals were deposited with the Clerk of Court except rentals for the months of May, June, July and August, 1977. ...
Pressing her point, Soco alleged that 'we personally demanded from Engr. Francisco for the months of May, June, July and August, but Engr. Francisco did not pay for the reason that he had no funds available at that time.' (TSN-Palicte, p. 28, Hearing October 24, 1979). This allegation of Soco is denied by Francisco because per his instructions, the Commercial Bank and Trust Company, Cebu Branch, in fact, issued checks in favor of Soco representing payments for monthly
rentals for the months of May, June, July and August, 1977 as shown in Debit Memorandum issued by Comtrust as follows:
(a) Exhibit "6"-Debit Memo dated May 11, 1977 for P926.10 as payment for May, 1977;
(b) Exhibit"7"-Debit Memo dated June l5, 197 7for P926.10 as payment for June, 1977;
(c) Exhibit "8"-Debit Memo dated July 11, 1977 for P1926.10 as payment for July, 1977;
(d) Exhibit "9"-Debit Memo dated August 10, 1977 for P926. 10 as payment for August, 1977.
These payments are further bolstered by the certification issued by Comtrust dated October 29, 1979 (Exhibit "13"). Indeed the Court is convinced that payments for rentals for the months of May, June, July and August, 1977 were made by Francisco to Soco thru Comtrust and deposited with the Clerk of Court of the City Court of Cebu. There is no need to determine whether payments by consignation were made from September, 1977 up to the filing of the complaint in January, 1979 because as earlier stated Soco admitted that the rentals for these months were deposited with the Clerk of Court. ...
Taking into account the factual background setting of this case, the Court holds that there was in fact a tender of payment of the rentals made by Francisco to Soco through Comtrust and since these payments were not accepted by Soco evidently because of her intention to evict Francisco, by all means, culminating in the filing of Civil Case R-16261, Francisco was impelled to deposit the rentals with the Clerk of Court of the City Court of Cebu. Soco was notified of this deposit by virtue of the letter of Atty. Pampio Abarientos dated June 9, 1977 (Exhibit "10") and the letter of Atty. Pampio Abarientos dated July 6. 1977 (Exhibit " 12") as well as in the answer of Francisco in Civil Case R-16261 (Exhibit "14") particularly paragraph 7 of the Special and Affirmative Defenses. She was further notified of these payments by consignation in the letter of Atty. Menchavez dated November 28, 1978 (Exhibit " 1 "). There was therefore substantial compliance of the requisites of consignation, hence his payments were valid and effective. Consequently, Francisco cannot be ejected from the leased premises for non-payment of rentals. ...
As indicated earlier, the above decision of the Court of First Instance reversed the judgment of the City Court of Cebu, Branch 11, the dispositive portion of the latter reading as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff, ordering the defendant, Regino Francisco, Jr.:
(1) To vacate immediately the premises in question, consisting of a building located at Manalili St., Cebu City;
(2) To pay to the plaintiff the sum of P40,490.46 for the rentals, covering the period from May, 1977 to August, 1980, and starting with the month of September, 1980, to pay to the plaintiff for one (1) year a monthly rental of P l,072.076 and an additional amount of 5 per cent of said amount, and for so much amount every month thereafter equivalent to the rental of the month of every preceding year plus 5 percent of same monthly rental until the defendant shall finally vacate said premises and possession thereof wholly restored to the plaintiff-all plus legal interest from date of filing of the complaint;
(3) To pay to the plaintiff the sum of P9,000.00 for attorney's fee;
(4) To pay to the plaintiff the sum of P5,000.00 for damages and incidental litigation expenses; and
(5) To pay the Costs.
SOORDERED.
Cebu City, Philippines, November 21, 1980.
According to the findings of fact made by the City Court, the defendant Francisco had religiously paid to the plaintiff Soco the corresponding rentals according to the terms of the Least Contract while enjoying the leased premises until one day the plaintiff had to demand upon the defendant for the payment of the rentals for the month of May, 1977 and of the succeeding months. The plaintiff also demanded upon the defendant to vacate the premises and from that time he failed or refused to vacate his possession thereof; that beginning with the month of May, 1977 until at present, the defendant has not made valid payments of rentals to the plaintiff who, as a consequence, has not received any rental payment from the defendant or anybody else; that for the months of May to August, 1977, evidence shows that the plaintiff through her daughter, Teolita Soco and salesgirl, Vilma Arong, went to the office or residence of defendant at Sanciangko St., Cebu City, on various occasions to effect payment of rentals but were unable to collect on account of the defendant's refusal to pay; that defendant contended that payments of rental thru checks for said four months were made to the plaintiff but the latter refused to accept them; that in 1975, defendant authorized the Commercial Bank and Trust Company to issue checks to the plaintiff chargeable against his bank account, for the payment of said rentals, and the delivery of said checks was coursed by the bank thru the messengerial services of the FAR Corporation, but the plaintiff refused to accept them and because of such refusal, defendant instructed said bank to make consignation with the Clerk of Court of the City Court of Cebu as regard said rentals for May to August, 1977 and for subsequent months.
The City Court further found that there is no showing that the letter allegedly delivered to the plaintiff in May, 1977 by Filomeno Soon, messenger of the FAR Corporation contained cash money, check, money order, or any other form of note of value, hence there could never be any tender of payment, and even granting that there was, but plaintiff refused to accept it without any reason, still no consignation for May, 1977 rental could be considered in favor of the defendant unless evidence is presented to establish that he actually made rental deposit with the court in cash money and prior and subsequent to such deposit, he notified the plaintiff thereof.
Notwithstanding the contradictory findings of fact and the resulting opposite conclusions of law by the City Court and the Court of First Instance, both are agreed, however, that the case presents the issue of whether the lessee failed to pay the monthly rentals beginning May, 1977 up to the time the complaint for eviction was filed on January 8, 1979. This issue in turn revolves on whether the consignation of the rentals was valid or not to discharge effectively the lessee's obligation to pay the same. The City Court ruled that the consignation was not valid. The Court of First Instance, on the other hand, held that there was substantial compliance with the requisites of the law on consignation.
Let us examine the law and consider Our jurisprudence on the matter, aside from the codal provisions already cited herein.
According to Article 1256, New Civil Code, if the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing or sum due. Consignation alone shall produce the same effect in the following cases: (1) When the creditor is absent or unknown, or does not appear at the place of payment; (2) When he is incapacitated to receive the payment at the time it is due; (3) When, without just cause, he refuses to give a receipt; (4) When two or more persons claim the same right to collect; (5) When the title of the obligation has been lost.
Consignation is the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment and it generally requires a prior tender of payment. (Limkako vs. Teodoro, 74 Phil. 313).
In order that consignation may be effective, the debtor must first comply with certain requirements prescribed by law. The debtor must show (1) that there was a debt due; (2) that the consignation of the obligation had been made because the creditor to whom tender of payment was made refused to accept it, or because he was absent or incapacitated, or because several persons claimed to be entitled to receive the amount due (Art. 1176, Civil Code); (3) that previous notice of the consignation had been given to the person interested in the performance of the obligation (Art. 1177, Civil Code); (4) that the amount due was placed at the disposal of the court (Art. 1178, Civil Code); and (5) that after the consignation had been made the person interested was notified thereof (Art. 1178, Civil Code). Failure in any of these requirements is enough ground to render a consignation ineffective. (Jose Ponce de Leon vs. Santiago Syjuco, Inc., 90 Phil. 311).
Without the notice first announced to the persons interested in the fulfillment of the obligation, the consignation as a payment is void. (Limkako vs. Teodoro, 74 Phil. 313),
In order to be valid, the tender of payment must be made in lawful currency. While payment in check by the debtor may be acceptable as valid, if no prompt objection to said payment is made (Desbarats vs. Vda. de Mortera, L-4915, May 25, 1956) the fact that in previous years payment in check was accepted does not place its creditor in estoppel from requiring the debtor to pay his obligation in cash (Sy vs. Eufemio, L-10572, Sept. 30, 1958). Thus, the tender of a check to pay for an obligation is not a valid tender of payment thereof (Desbarats vs. Vda. de Mortera, supra). See Annotation, The Mechanics of Consignation by Atty. S. Tabios, 104 SCRA 174-179.
Tender of payment must be distinguished from consignation. Tender is the antecedent of consignation, that is, an act preparatory to the consignation, which is the principal, and from which are derived the immediate consequences which the debtor desires or seeks to obtain. Tender of payment may be extrajudicial, while consignation is necessarily judicial, and the priority of the first is the attempt to make a private settlement before proceeding to the solemnities of consignation. (8 Manresa 325).
Reviewing carefully the evidence presented by respondent lessee at the trial of the case to prove his compliance with all the requirements of a valid tender of payment and consignation and from which the respondent Judge based his conclusion that there was substantial compliance with the law on consignation, We note from the assailed decision hereinbefore quoted that these evidences are: Exhibit 10, the letter of Atty. Pampio Abarintos dated June 9, 1977: Exhibit 12, letter of Atty. Pampio Abarintos dated July 6, 1977; Exhibit 14, the Answer of respondent Francisco in Civil Case R- 16261, particularly paragraph 7 of the Special and Affirmative Defenses; and Exhibit 1, letter of Atty. Eric Menchavez dated November 28, 1978. All these evidences, according to respondent Judge, proved that petitioner lessor was notified of the deposit of the monthly rentals.
We have analyzed and scrutinized closely the above exhibits and We find that the respondent Judge's conclusion is manifestly wrong and based on misapprehension of facts. Thus-
(1) Exhibit 10 reads: (see p. 17, Records)
June 9, 1977
Miss Soledad Soco Soledad Soco Retazo P. Gullas St., Cebu City
Dear Miss Soco:
This is in connection with the payment of rental of my client, Engr. Regino Francisco, Jr., of your building situated at Manalili St., Cebu City.
It appears that twice you refused acceptance of the said payment made by my client.
It appears further that my client had called your office several times and left a message for you to get this payment of rental but until the present you have not sent somebody to get it.
In this connection, therefore, in behalf of my client, you are hereby requested to please get and claim the rental payment aforestated from the Office of my client at Tagalog Hotel and Restaurant, Sanciangko St., Cebu City. within three (3) days from receipt hereof otherwise we would be constrained to make a consignation of the same with the Court in accordance with law.
Hoping for your cooperation on this matter, we remain.
Very truly yours,
(SGD.) PAMPIO A. ABARINTOSCounsel for Engr. REGINO FRANCISCO, Jr.
We may agree that the above exhibit proves tender of payment of the particular monthly rental referred to (the letter does not, however, indicate for what month and also the intention to deposit the rental with the court, which is the first notice. But certainly, it is no proof of tender of payment of other or subsequent monthly rentals. Neither is it proof that notice of the actual deposit or consignation was given to the lessor, which is the second notice required by law.
(2) Exhibit 12 (see p. 237, Records) states:
July 6, 1977
Miss Soledad SocoSoledad Soco RetaP. Gullas St., Cebu City
Dear Miss Soco:
This is to advise and inform you that my client, Engr. Regino Francisco, Jr., has consigned to you, through the Clerk of Court, City Court of Cebu, Cebu City, the total amount of Pl,852.20, as evidenced by cashier's checks No. 478439 and 47907 issued by the Commercial Bank and Trust Company (CBTC) Cebu City Branch, dated May 11, 1977 and June 15, 1977 respectively and payable to your order, under Official Receipt No. 0436936 dated July 6,1977.
This amount represents payment of the rental of your building situated at Manalili St., Cebu City which my client, Engr. Regino Francisco, Jr., is renting. You can withdraw the said amount from the Clerk of Court, City Court of Cebu, Cebu City at any time.
Please be further notified that all subsequent monthly rentals will be deposited to the Clerk of Court, City Court of Cebu, Cebu City.
Very truly yours,
(SGD.) PAMPIO A. ABARINTOS Counsel for ENGR. REGINO FRANCISCO, JR.
The above evidence is, of course, proof of notice to the lessor of the deposit or consignation of only the two payments by cashier's checks indicated therein. But surely, it does not prove any other deposit nor the notice thereof to the lessor. It is not even proof of the tender of payment that would have preceded the consignation.
(3) Exhibit 14, paragraph 7 of the Answer (see p. 246, Records) alleges:
7. That ever since, defendant had been religiously paying his rentals without any delay which, however, the plaintiff had in so many occasions refused to accept obviously in the hope that she may declare non-payment of rentals and claim it as a ground for the cancellation of the contract of lease. This, after seeing the improvements in the area which were effected, at no small expense by the defendant. To preserve defendant's rights and to show good faith in up to date payment of rentals, defendant had authorized his bank to issue regularly cashier's check in favor of the plaintiff as payment of rentals which the plaintiff had been accepting during the past years and even for the months of January up to May of this year, 1977 way past plaintiff's claim of lease expiration. For the months of June and July, however, plaintiff again started refusing to accept the payments in going back to her previous strategy which forced the defendant to consign his monthly rental with the City Clerk of Court and which is now the present state of affairs in so far as payment of rentals is concerned. These events only goes to show that the wily plaintiff had thought of this mischievous scheme only very recently and filed herein malicious and unfounded complaint.
The above exhibit which is lifted from Civil Case No. R-16261 between the parties for annulment of the lease contract, is self-serving. The statements therein are mere allegations of conclusions which are not evidentiary.
(4) Exhibit 1 (see p. 15, Records) is quoted thus:
November 28, 1978
Atty. Luis V. DioresSuite 504, SSS Bldg. Jones Avenue, Cebu City
Dear Compañero:
Your letter dated November 23, 1978 which was addressed to my client, Engr. Regino Francisco, Jr. has been referred to me for reply.
It is not true that my client has not paid the rentals as claimed in your letter. As a matter of fact, he has been religiously paying the rentals in advance. Payment was made by Commercial Bank and Trust Company to the Clerk of Court, Cebu City. Attached herewith is the receipt of payment made by him for the month of November, 1978 which is dated November 16, 1978.
You can check this up with the City Clerk of Court for satisfaction.
Regards.
(SGD.) ERIC MENCHAVEZ Counsel for Regino Francisco, Jr. 377-B Junquera St., Cebu City (new address)
Again, Exhibit 1 merely proves rental deposit for the particular month of November, 1978 and no other. It is no proof of tender of payment to the lessor, not even proof of notice to consign. We hold that the best evidence of the rental deposits with the Clerk of Court are the official receipts issued by the Clerk of Court. These the respondent lessee utterly failed to present and produce during the trial of the case. As pointed out in petitioner's Memorandum, no single official receipt was presented in the trial court as nowhere in the formal offer of exhibits for lessee Francisco can a single official receipt of any deposit made be found (pp. 8-9, Memorandum for Petitioner; pp. 163-164, Records).
Summing up Our review of the above four (4) exhibits, We hold that the respondent lessee has utterly failed to prove the following requisites of a valid consignation: First, tender of payment of the monthly rentals to the lessor except that indicated in the June 9, l977 Letter, Exhibit 10. In the original records of the case, We note that the certification, Exhibit 11 of Filemon Soon, messenger of the FAR Corporation, certifying that the letter of Soledad Soco sent last May 10 by Commercial Bank and Trust Co. was marked RTS (return to sender) for the reason that the addressee refused to receive it, was rejected by the court for being immaterial, irrelevant and impertinent per its Order dated November 20, 1980. (See p. 117, CFI Records).
Second, respondent lessee also failed to prove the first notice to the lessor prior to consignation, except the payment referred to in Exhibit 10.
In this connection, the purpose of the notice is in order to give the creditor an opportunity to reconsider his unjustified refusal and to accept payment thereby avoiding consignation and the subsequent litigation. This previous notice is essential to the validity of the consignation and its lack invalidates the same. (Cabanos vs. Calo, 104 Phil. 1058; Limkako vs. Teodoro, 74 Phil. 313).
There is no factual basis for the lower court's finding that the lessee had tendered payment of the monthly rentals, thru his bank, citing the lessee's letter (Exh. 4) requesting the bank to issue checks in favor of Soco in the amount of P840.00 every 10th of each month and to deduct the full amount and service fee from his current account, as well as Exhibit 5, letter of the Vice President agreeing with the request. But scrutinizing carefully Exhibit 4, this is what the lessee also wrote: "Please immediately notify us everytime you have the check ready so we may send somebody over to get it. " And this is exactly what the bank agreed: "Please be advised that we are in conformity to the above
arrangement with the understanding that you shall send somebody over to pick up the cashier's check from us." (Exhibit 4, see p. 230, Original Records; Exhibit 5, p. 231, Original Records)
Evidently, from this arrangement, it was the lessee's duty to send someone to get the cashier's check from the bank and logically, the lessee has the obligation to make and tender the check to the lessor. This the lessee failed to do, which is fatal to his defense.
Third, respondent lessee likewise failed to prove the second notice, that is after consignation has been made, to the lessor except the consignation referred to in Exhibit 12 which are the cashier's check Nos. 478439 and 47907 CBTC dated May 11, 1977 and June 15, 1977 under Official Receipt No. 04369 dated July 6, 1977.
Respondent lessee, attempting to prove compliance with the requisites of valid consignation, presented the representative of the Commercial Bank and Trust Co., Edgar Ocañada, Bank Comptroller, who unfortunately belied respondent's claim. We quote below excerpts from his testimony, as follows:
ATTY. LUIS DIORES:
Q What month did you say you made ,you started making the deposit? When you first deposited the check to the Clerk of Court?
A The payment of cashier's check in favor of Miss Soledad Soco was coursed thru the City Clerk of Court from the letter of request by our client Regino Francisco, Jr., dated September 8, 1977. From that time on, based on his request, we delivered the check direct to the City Clerk of Court.
Q What date, what month was that, you first delivered the check to the Clerk of Court.?
A We started September 12, 1977.
Q September 1977 up to the present time, you delivered the cashier's check to the City Clerk of Court?
A Yes.
Q You were issued the receipts of those checks?
A Well, we have an acknowledgment letter to be signed by the one who received the check.
Q You mean you were issued, or you were not issued any official receipt? My question is whether you were issued any official receipt? So, were you issued, or you were not issued?
A We were not issued.
Q On September, 1977, after you deposited the manager's check for that month with the Clerk of Court, did you serve notice upon Soledad Soco that the deposit was made on such amount for the month of September, 1977 and now to the Clerk of Court? Did you or did you not?
A Well, we only act on something upon the request of our client.
Q Please answer my question. I know that you are acting upon instruction of your client. My question was-after you made the deposit of the manager's check
whether or not you notified Soledad Soco that such manager's check was deposited in the Clerk of Court from the month of September, 1977?
A We are not bound to.
Q I am not asking whether you are bound to or not. I'masking whether you did or you did not?
A I did not.
Q Alright, for October, 1977, after having made a deposit for that particular month, did you notify Miss Soledad Soco that the deposit was in the Clerk of Court?
A No, we did not.
Q Now, on November, 1977, did you notify Soledad Soco that you deposited the manager's check to the City Clerk of Court for that month?
A I did not.
Q You did not also notify Soledad Soco for the month December, 1977, so also from January, February, March, April, May, June, July until December, 1978, you did not also notify Miss Soledad Soco all the deposits of the manager's check which you said you deposited with the Clerk of Court in every end of the month? So also from each and every month from January 1979 up to December 1979, you did not also serve notice upon Soledad Socco of the deposit in the Clerk of Court, is that correct?
A Yes.
Q So also in January 1980 up to this month 1980, you did not instructed by your client Mr. and Mrs. Regino Francisco, jr. to make also serve notice upon Soledad Soco of the Manager's check which you said you deposited to the Clerk of Court?
A I did not.
Q Now, you did not make such notices because you were not such notices after the deposits you made, is that correct?
A Yes, sir.
Q Now, from 1977, September up to the present time, before the deposit was made with the Clerk of Court, did you serve notice to Soledad Soco that a deposit was going to be made in each and every month?
A Not.
Q In other words, from September 1977 up to the present time, you did not notify Soledad Soco that you were going to make the deposit with the Clerk of Court, and you did not also notify Soledad Soco after the deposit was made, that a deposit has been made in each and every month during that period, is that correct?
A Yes
Q And the reason was because you were not instructed by Mr. and Mrs. Regino Francisco, Jr. that such notification should be made before the deposit and after the deposit was made, is that correct?
A No, I did not. (Testimony of Ocanada pp. 32-41, Hearing on June 3, 1980).
Recapitulating the above testimony of the Bank Comptroller, it is clear that the bank did not send notice to Soco that the checks will be deposited in consignation with the Clerk of Court (the first notice) and also, the bank did not send notice to Soco that the checks were in fact deposited (the second notice) because no instructions were given by its depositor, the lessee, to this effect, and this lack of notices started from September, 1977 to the time of the trial, that is June 3, 1980.
The reason for the notification to the persons interested in the fulfillment of the obligation after consignation had been made, which is separate and distinct from the notification which is made prior to the consignation, is stated in Cabanos vs. Calo, G.R. No. L-10927, October 30, 1958, 104 Phil. 1058. thus: "There should be notice to the creditor prior and after consignation as required by the Civil Code. The reason for this is obvious, namely, to enable the creditor to withdraw the goods or money deposited. Indeed, it would be unjust to make him suffer the risk for any deterioration, depreciation or loss of such goods or money by reason of lack of knowledge of the consignation."
And the fourth requisite that respondent lessee failed to prove is the actual deposit or consignation of the monthly rentals except the two cashier's checks referred to in Exhibit 12. As indicated earlier, not a single copy of the official receipts issued by the Clerk of Court was presented at the trial of the case to prove the actual deposit or consignation. We find, however, reference to some 45 copies of official receipts issued by the Clerk of Court marked Annexes "B-1 " to "B-40" to the Motion for Reconsideration of the Order granting execution pending appeal filed by defendant Francisco in the City Court of Cebu (pp, 150-194, CFI Original Records) as well as in the Motion for Reconsideration of the CFI decision, filed by plaintiff lessor (pp. 39-50, Records, marked Annex "E ") the allegation that "there was no receipt at all showing that defendant Francisco has deposited with the Clerk of Court the monthly rentals corresponding to the months of May and June, 1977. And for the months of July and August, 1977, the rentals were only deposited with the Clerk of Court on 20 November 1979 (or more than two years later)."... The deposits of these monthly rentals for July and August, 1977 on 20 November 1979, is very significant because on 24 October 1979, plaintiff Soco had testified before the trial court that defendant had not paid the monthly rentals for these months. Thus, defendant had to make a hurried deposit on the following month to repair his failure. " (pp. 43-44, Records).
We have verified the truth of the above claim or allegation and We find that indeed, under Official Receipt No. 1697161Z, the rental deposit for August, 1977 in cashier's check No. 502782 dated 8-10-77 was deposited on November 20, 1979 (Annex "B-15", p. 169, Original CFI Records) and under Official Receipt No. 1697159Z, the rental deposit for July under Check No. 479647 was deposited on November 20, 1979 (Annex "B-16", p. 170, Original CFI Records). Indeed, these two rental deposits were made on November 20, 1979, two years late and after the filing of the complaint for illegal detainer.
The decision under review cites Exhibits 6, 7, 8 and 9, the Debit Memorandum issued by Comtrust Bank deducting the amounts of the checks therein indicated from the account of the lessee, to prove payment of the monthly rentals. But these Debit Memorandums are merely internal banking practices or office procedures involving the bank and its depositor which is not binding upon a third person such as the lessor. What is important is whether the checks were picked up by the lessee as per the arrangement indicated in Exhibits 4 and 5 wherein the lessee had to pick up the checks issued by CBTC or to send somebody to pick them up, and logically, for the lessee to tender the same to the lessor. On this vital point, the lessee miserably failed to present any proof that he complied with the arrangement.
We, therefore, find and rule that the lessee has failed to prove tender of payment except that in Exh. 10; he has failed to prove the first notice to the lessor prior to consignation except that given in Exh. 10; he has failed to prove the second notice after consignation except the two made in Exh. 12; and he has failed to pay the rentals for the months of July and August, 1977 as of the time the complaint was filed for the eviction of the lessee. We hold that the evidence is clear, competent and convincing showing that the lessee has violated the terms of the lease contract and he may, therefore, be judicially ejected.
The other matters raised in the appeal are of no moment. The motion to dismiss filed by respondent on the ground of "want of specific assignment of errors in the appellant's brief, or of page references to the records as required in Section 16(d) of Rule 46," is without merit. The petition itself has attached the decision sought to be reviewed. Both
Petition and Memorandum of the petitioner contain the summary statement of facts; they discuss the essential requisites of a valid consignation; the erroneous conclusion of the respondent Judge in reversing the decision of the City Court, his grave abuse of discretion which, the petitioner argues, "has so far departed from the accepted and usual course of judicial proceeding in the matter of applying the law and jurisprudence on the matter." The Memorandum further cites other basis for petitioner's plea.
In Our mind, the errors in the appealed decision are sufficiently stated and assigned. Moreover, under Our rulings, We have stated that:
This Court is clothed with ample authority to review matters, even if they are not assigned as errors in the appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. Also, an unassigned error closely related to an error properly assigned or upon which the determination of the questioned raised by the error properly assigned is dependent, will be considered by the appellate court notwithstanding the failure to assign it as an error." (Ortigas, Jr. vs. Lufthansa German Airlines, L-28773, June 30, 1975, 64 SCRA 610)
Under Section 5 of Rule 53, the appellate court is authorized to consider a plain error, although it was not specifically assigned by appellants." (Dilag vs. Heirs of Resurreccion, 76 Phil. 649)
Appellants need not make specific assignment of errors provided they discuss at length and assail in their brief the correctness of the trial court's findings regarding the matter. Said discussion warrants the appellate court to rule upon the point because it substantially complies with Section 7, Rule 51 of the Revised Rules of Court, intended merely to compel the appellant to specify the questions which he wants to raise and be disposed of in his appeal. A clear discussion regarding an error allegedly committed by the trial court accomplishes the purpose of a particular assignment of error." (Cabrera vs. Belen, 95 Phil. 54; Miguel vs Court of Appeals, L- 20274, Oct. 30, 1969, 29 SCRA 760-773, cited in Moran, Comments on the Rules of Court, Vol. 11, 1970 ed., p. 534).
Pleadings as well as remedial laws should be construed liberally in order that the litigants may have ample opportunity to prove their respective claims, and that a possible denial of substantial justice, due to legal technicalities, may be avoided." (Concepcion, et al. vs. The Payatas Estate Improvement Co., Inc., 103 Phil. 10 17).
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the decision of the Court of First Instance of Cebu, 14th Judicial District, Branch XII is hereby REVERSED and SET ASIDE, and the derision of the City Court of Cebu, Branch II is hereby reinstated, with costs in favor of the petitioner.
SO ORDERED.
Republic of the PhilippinesSUPREME COURT
Manila
THIRD DIVISION
G.R. No. 106467-68 October 19, 1999
DOLORES LIGAYA DE MESA, petitioner,vs.THE COURT OF APPEALS, OSSA HOUSE, INC. AND DEVELOPMENT BANK OF THE PHILIPPINES, respondents.
PURISIMA, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court questioning the Decision 1 of the Court of Appeals 2 dated March 31, 1992 in CA-G.R. Nos. 19145 and 19146, which modified the decision of Branch 138 of the Regional Trial Court of Makati in Civil Case Nos. 41059 and 42381.
The antecedent facts are as follows:
Petitioner Dolores Ligaya de Mesa owns several parcels of land in Makati, Pasay City, Cavite, and General Santos City 3 which were mortgaged to the Development Bank of the Philippines (DBP) as security for a loan she obtained from the bank. Failing to pay her mortgage debt, all her mortgaged properties were foreclosed and sold at public auction held on different days. On April 30, 1977, the Makar property was sold and the corresponding certificate of sale inscribed on March 10, 1978. On August 25, 1977, the Naic, Cavite property was sold and the certificate of sale registered on the same day. On August 30, 1977, the two (2) parcels of land in Makati were sold at public auction and the certificate of sale was inscribed on November 25, 1977. And on January 12, 1978, the three (3) parcels of land in Pasay City were also sold and the certificate of sale was recorded on the same date. In all the said auction sales, DBP was the winning bidder.
In a letter dated May 29, 1978, petitioner de Mesa requested DBP that she be allowed to repurchase her foreclosed properties.1âwphi1.nêt
On October 23, 1978, Mrs. de Mesa, under a "Deed of Sale with Assumption of Mortgage," 4 sold the foreclosed properties to private respondent OSSA under the condition that the latter was to assume the payment of the mortgage debt by the repurchase of all properties mortgaged on installment basis, with an initial payment of P90,000.00 representing 20% of the total obligation.
On October 23, 1978, private respondent OSSA remitted to DBP the initial payment of P90,000.00, in addition to the amount of P10,000.00 previously paid to the petitioner.
On February 22, 1979, DBP granted petitioner's request to repurchase the foreclosed properties such that in March 1979 a "Deed of Conditional Sale" was executed under which DBP agreed to sell the said properties to the petitioner for the sum of P363,408.20, P90,000.00 of which was to be paid as initial payment and the balance in seven (7) years on a quarterly amortization plan, with a first quarterly installment of P15,475.17.
Private respondent OSSA paid DBP the first to eight quarterly installments from April 11, 1979 to May 8, 1991, in the total amount of P137,595.31, which installment payments were applied to petitioner's obligation with DBP pursuant to the Deed of Conditional Sale.
On March 11, 1981, petitioner de Mesa notified private respondent OSSA that she was rescinding the Deed of Sale with Assumption of Mortgage she executed in favor of the latter on the ground that OSSA failed to comply with the terms and conditions of their agreement, particularly the payment of installments to the Development Bank of the Philippines, the discharge and cancellation of the mortgage on the property listed in item IV of the first whereas
clause, and the payment of the balance of more or less P45,000.00 to petitioner, representing the difference between the purchase price of subject properties and the actual obligation to the DBP.
On April 11, 1981, OSSA offered to pay the amount of P34,363,08, which is the difference between the purchase price of P500,000.00 and the mortgage obligation to DBP of P455,636.92, after deducting the downpayment of P10,000.00 stipulated in said Deed of Sale with Assumption of Mortgage, but the petitioner refused to accept such payment. So, on April 28, 1981, OSSA brought a Complaint for Consignation against the petitioner, docketed as Civil Case No. 41059 before the then Court of First Instance of Rizal, Branch XV, and at the same time, deposited the amount of P34,363.08 with said court.
On August 5, 1981, DBP refused to accept the 9th quarterly installment paid by OSSA, prompting the latter to file against DBP and the petitioner, on August 11, 1981, Civil Case No. 42381 for specific performance and consignation, with the then Court of First Instance of Pasig, Rizal, depositing in said case the amount of P15,824.92.
On October 21, 1981, upon petitioner de Mesa's motion, Civil Case Nos. 41059 and 42381 were consolidated before the then Court of First Instance of Rizal, Branch XV, Makati, Metro Manila, now Regional Trial Court of Makati City, Brach CXXXVIII (138).
In an Order dated July 23, 1982, the lower court allowed OSSA to deposit with the Court a quo by way of consignation, all future quarterly installments without need of formal tenders of payment and service of notices of consignation. Correspondingly and over the period of time stipulated, OSSA deposited with the lower court the 10th to the 20th installments in the aggregate amount of P172,562.11.
After trial, the lower court came out with a Decision for the private respondent OSSA, holding thus:
WHEREFORE premises considered, judgment is hereby rendered (a) declaring the consignation made by plaintiff as proper and valid and ordering defendants Dolores Ligaya de Mesa and Development Bank of the Philippines to withdraw and receive said payments due them which plaintiff has consigned with the Court;
(b) Ordering defendant Development Bank of the Philippines to furnish plaintiff with a statement of payments and balance, if any, still due from defendant de Mesa after applying all payments already received, including the amounts placed under consignation;
(c) Upon payment by the plaintiff of the balance if any, still due on the properties, defendant Development Bank of the Philippines shall execute a Deed of Absolute Sale in favor of the plaintiff over the properties subject matter of the Deed of Absolute Sale with Assumption of Mortgage executed by and between plaintiff and defendant de Mesa;
(d) Ordering plaintiff to pay defendant de Mesa the difference, if any, between the agreed purchase price of P500,000.00 and the payments made to the defendant Development Bank of the Philippines, less the P10,000,00 down payment already paid and the P34,363.08 consigned with the Court; and
(e) Ordering defendant de Mesa to pay plaintiff the sum of P10,000.00 as attorneys fees.
SO ORDERED. 5
The petitioner appealed to the Court of Appeals which handed down on March 31, 1992, its decision modifying the challenged decision, as follows:
WHEREFORE, the decision appealed from is hereby MODIFIED:
(a) declaring the consignation made by OSSA as proper and valid as far as de Mesa is concerned, and ordering de Mesa to receive the said amount consigned with the court and pay DBP with the said amount;
(b) ordering DBP to furnish de Mesa with a statement of payments and the balance, if any, still due from de Mesa after applying all payments already received, including the amounts paid under consignation;
(c) ordering de Mesa to furnish OSSA with a copy of the statement of payments described in the preceding paragraph, and the balance appearing therein, if any, shall be paid by OSSA for the account of de Mesa;
(d) ordering DBP to execute a Deed of Absolute Sale in favor of de Mesa over the properties subject of the Deed of Conditional Sale;
(e) ordering Ossa to pay de Mesa the difference, if any, between the agreed purchase price of P500,000.00 and the payments made to DBP, less the P10,000.00 down payment and the P34,363.08 consigned with the court;
(f) ordering de Mesa thereafter, to execute a Deed of Absolute Sale in favor of OSSA over the properties subject of the Deed of Sale with assumption of Mortgage; and
(g) ordering de Mesa to pay OSSA the sum of P10,000.00 as and for attorney's fees.
No pronouncement as to costs.
SO ORDERED. 6
On May 5, 1992, petitioner interposed a motion for reconsideration of the aforesaid decision, theorizing that:
I
THIS COURT ERRED WHEN IT HELD THAT WHAT WAS SOLD UNDER THE "DEED OF SALE WITH ASSUMPTION OF MORTGAGE" WERE THE PROPERTIES LISTED THEREIN AND NOT MERELY THE RIGHT OF REDEMPTION DESPITE THE TESTIMONIES OF BOTH CONTRACTING PARTIES THAT WHAT SOLD AND BOUGHT WAS MERELY THE RIGHT OF REDEMPTION.
II
THIS COURT ERRED IN HOLDING THAT DE MESA'S REQUEST TO REPURCHASE THE FORECLOSED PROPERTIES FROM DBP REDOUNDED TO THE BENEFIT OF OSSA HOUSE, INC.
III
THIS COURT ERRED IN HOLDING DE MESA IN ESTOPPEL.
IV
THIS COURT ERRED IN RULING THAT THE MANDATORY REQUIREMENTS OF THE CIVIL CODE ON CONSIGNATION CAN BE WAIVED BY THE TRIAL COURT. 7
With the denial of her aforestated motion for reconsideration, petitioner found her way to this Court via the present petition, raising the issues:
(i) Whether or not the requirements of Articles 1256 to 1261 can be "relaxed" or "substantially complied with".
(ii) Whether or not the Court can supplant its own reading of an ambiguous contract for the actual intention of the contracting parties as testified to in open court and under oath.
(iii) Whether or not petitioner de Mesa can be held in estoppel for the acts of the DBP.
Art. 1370 of the New Civil Code, reads:
Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control.
xxx xxx xxx
When the words of a contract are plain and readily understood, there is no room for construction. As the agreement of the parties are reduced to writing, such agreement is considered as containing all its terms and there can be, between the parties and their successors-in-interest, no evidence of the terms of the written agreement other than the contents of the writing. 8
In the case under consideration, the terms of the "Deed of Sale with Assumption of Mortgage Debt" are clear and leave no doubt as to what were sold thereunder. It provided as follows:
WHEREAS, the VENDOR has agreed to sell to the VENDEE (plaintiff Ossa House, Inc.), and the VENDEE has agreed to purchase form the VENDOR, all the properties described in Items I, II, and III, of the First Whereas Clause, for the price and under the terms hereinafter contained;
NOW, THEREFORE, for and in consideration of the premises and the sum of TEN THOUSAND PESOS (P10,000.00), the receipt whereof is hereby acknowledged, and the assumption by the VENDEE of the total mortgage obligation of the VENDOR has sold, transferred, and conveyed, and by these presents does sell, transfer and convey, unto the said VENDEE, its administrators and assigns, free from all liens and encumbrances except as noted herein, the parcels of land hereinabove described in Items I, II, and III, together with all the buildings and improvements thereon;
The VENDEE does hereby assume the payment of the mortgage obligations by repurchase of all the properties mortgaged on installment, with an initial payment of P90,000.00 representing payment 20% of the total obligation; and consequently, the within sale is subject to the mortgage in favor of the Development Bank of the Philippines;
Nowhere is it provided in the aforequoted provisions, as the petitioner insists, that what she sold to respondent OSSA was merely the right to redeem the mortgaged properties and not the foreclosed properties themselves. On the contrary, the very words of the contract reveal that the subject of the sale were "all the properties described in items I, II, III of the First Whereas Clause."
Indeed, the contract under scrutiny is so explicit and unambiguous that it does not justify any attempt to read into it any supposed intention of the parties, as the said contract is to be understood literally, just as they appear on itsface. 9
Petitioner capitalizes on the following prefatory clause of the contract, to wit:
WHEREAS, the VENDOR (defendant De Mesa) is the registered owner with a preferential right of redemption of the following mortgaged properties with the Development Bank of the Philippines, more particularly described as follows:
However, not the slightest indication can be gleaned from the abovequoted provision that the subject of the "Deed of Sale with Assumption of Mortgage" was petitioner's right of redemption. The said provision merely speaks of the preferential right of the latter to redeem the real properties involved.
Furthermore, the court discerns no inconsistency between the contract's recognition of the preferential right of petitioner to redeem the mortgaged properties, and the sale of the said properties to respondent OSSA. Petitioner can validly redeem subject properties and still recognize the sale thereof to the respondent corporation because nothing therein is contrary to law, morals, good customs, public order or public policy. Besides, it is a well-settled doctrine that in the construction of an instrument where there are several provisions, or particulars, such a construction is, if possible, to be adopted as will give effect to all. 10 Thus, the recognition of both the preferential right of the petitioner to redeem the mortgaged properties and the sale of the same properties to respondent OSSA is in order, as it would harmonize and give effect to all the provisions of the "Deed of Sale with Assumption of Mortgage" under controversy.
As aptly ruled by the respondent court, the grant by DBP of petitioner's request to repurchase the mortgaged properties redounded to the benefit of respondent OSSA, the sale of the said properties having been previously agreed upon by the petitioner and respondent OSSA.1âwphi1.nêt
Petitioner contends that she is not estopped from questioning DBP's application to her account of OSSA's initial payment of P90,000.00 as well as the first to eight quarterly installments. It bears stressing, however, that the remittance of the said payment was made in implementation of the provisions of their contract. The belated claim of the petitioner, which was not given credence by the trial court, that she objected to the application by DBP to her account of all the remittances of OSSA is tainted with bad faith as this is an attempt to renegade against her contract with respondent OSSA. Besides, the issue of whether or not petitioner objected is a question of fact that has already been settled by the trial court which best performs the matter of assigning values to the testimony of witnesses, 11 and whose findings are accorded great weight especially when affirmed by the Court of Appeals 12, as in the case at bar.
Petitioner next argues that there was no notice to her regarding OSSA's consignation of the amounts corresponding to the 12th up to the 20th quarterly installments. The records, however, show that several tenders of payment were consistently turned down by the petitioner, so much so that the respondent OSSA found it pointless to keep on making formal tenders of payment and serving notices of consignation to petitioner. Moreover, in a motion dated May 7, 1987, OSSA prayed before the lower court that it be allowed to deposit by way of consignation all the quarterly installments, without making formal tenders of payment and serving notice of consignation, which prayer was granted by the trial court in the Order dated July 3, 1982. The motion and the subsequent court order served on the petitioner in the consignation proceedings sufficiently served as notice to petitioner of OSSA's willingness to pay the quarterly installments and the consignation of such payments with the court. For reasons of equity, the procedural requirements of consignation are deemed substantially complied with in the present case. 13
Petitioner also insists that there was no valid tender of payment because the amount tendered was P34,363.08, not P51,243.26, and assuming ex gratia argumenti that it was the correct amount, the tender thereof was still not valid, the same having been made by check. This claim, however, does not accord with the records on hand. Thus, the Court of Appeals ratiocinated:
The "Deed of Sale with Assumption of Mortgage", was for a consideration of P500,000.00, from which shall be deducted de Mesas's outstanding obligation, with the DBP pegged as of May 10, 1978, by the parties themselves, at P455,636,92. This amount of P455,636.92 owing DBP, is what OSSA agreed to assume. What remained to be paid de Mesa was P44,636.08, but OSSA made an advance payment of P10,000.00, hence the remaining amount payable to de Mesa is P34,363.08, which OSSA tendered in cash (Exhibits "X", "BB" and "CC"). 14
It is thus beyond cavil that the respondent OSSA tendered the correct amount, the tender of which was in cash and not by check, as theorized by petitioner.
Premises studiedly considered, the Court is of the ineluctable conclusion, and so holds, that the Court of Appeals erred not in affirming the decision of the trial court of origin.
WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals in CA-G.R. Nos. 19145 and 19156 dated March 31, 1992 AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Republic of the PhilippinesSUPREME COURT
Manila
EN BANC
G.R. No. L-28269 August 15, 1969
CONSUELO VDA. DE QUIRINO, petitioner, vs.JOSE PALARCA, respondent.
Rosendo J. Tansinsin for petitioner.Jose Palarca in his own behalf.
CONCEPCION, C.J.:
Appeal by certiorari, taken by Consuelo Vda. de Quirino, petitioner herein and defendant in the lower courts, from a decision of the Court of Appeals affirming that of the Court of First Instance of Manila, the dispositive part of which reads:
FOR THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment ordering the defendant within fifteen (15) days from the date this judgment becomes final, to execute a deed of conveyance in favor of the plaintiff Jose Palarca, of age, Filipino, married to Querubina Cristobal, over Lot 30, Block 84 of the Sulucan Subdivision, covered by TCT 59442 of the Manila Registry, with his postal address at 544 Corner Quezon Blvd., Manila, and directing said defendant to deliver the certificate of title, and ordering the plaintiff to deliver to the defendant at the time of receiving the aforesaid deed of sale and title, the amount of P12,000 in cash. Costs is charged against the defendant.
On October 4, 1947, said petitioner — hereinafter referred to as the lessor — and respondent Jose Palarca — hereinafter referred to as the lessee — entered into a lease contract whereby the former leased to the latter a parcel of land known as Lot 30 of block 84 of the Sulucan Subdivision, located at Sampaloc, Manila, with an area of about 150 square meters, and more particularly described in TCT No. 59442 of the Office of the Register of Deeds of Manila. In their written contract of lease it was stipulated, inter alia, that the term thereof would be ten (10) years, from November 1, 1947 to November 1, 1957; that the monthly rental would be P250, payable in advance; that the lessee could demolish the lessor's old building on the leased premises and construct thereon any building and/or improvements suitable for school purposes, which new building and/or improvements shall belong to the lessee; that within one (1) year after the expiration of the lease, the lessee would have "the right and option to buy the leased premises" for P12,000; that, should the lessee fail to exercise this option, said (new) building and/or improvements shall be evaluated by a committee organized therefor, as set forth in the contract; that, after such "valuation," the lessor shall "have the option to buy" said "building and/or improvements within ... one (1) year, after the expiration of the contract"; and that, should neither of the parties exercise their respective options, both "shall be free to look for a buyer for his or her respective property."
By a letter, dated September 15, 1958, the lessee informed the lessor that the former (lessee) was exercising "his right to buy the leased property for the agreed price of P12,000," and inquired "when" the latter (lessor) would be "ready to execute the deed of sale," so that the agreed price could be delivered to her. Soon thereafter, before the expiration of the term of his option, or on October 6, 1958, the lessee wrote a follow-up letter to the lessor, advising her that the former had in his "possession the amount of P12,000 with which to purchase" the leased premises, and, asked her, once more, "when" she would be ready to execute the corresponding deed of sale, in order that he (lessee) could pay said price. Through her counsel, the lessor replied, however, on October 10, 1958, that she "cannot accede" to the lessee's requests "because the ... contract of October 4, 1947, has been novated by another agreement, wherein the rent of P250 a month was reduced to P100.00."
Thereupon, that same month, the lessee instituted the present action to compel the lessor to comply with her obligation to execute the corresponding deed of sale in his (lessee's) favor, upon payment by him of said sum of P12,000. The lessor filed her answer admitting some allegations of the complaint and denying other allegations thereof, as well as alleging, as special defense, that the lease contract had been "modified" by a subsequent agreement of the parties, which had been observed and carried out by them, and that payment of the stipulated price
had not been properly tendered or validly consigned. The lessor, likewise, set up a counterclaim for damages, attorney's fees and expenses of litigation. After appropriate proceedings, the Court of First Instance rendered the decision adverted to above, which was affirmed by the Court of Appeals. Hence, this petition for review on certiorari, in which the lessor maintains: (1) that the lessee's option to purchase the leased premises was null and void for want of consideration; (2) that the lessee should have been sentenced to pay rentals, during the pendency of this case; and (3) that the lessee should have been sentenced, also, to pay damages, attorney's fees and the costs of the suit.
The first contention is clearly without merit. To begin with, it is based upon the premise that the option of the lessee is devoid of consideration, which is false. Indeed, in reciprocal contracts, like the one in question, the obligation or promise of each party is the consideration for that of the other. 1 In the language of Article 1350 of our Civil Code, "(i)n onerous contracts the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other ... ." As a consequence, "(t)he power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him." 2
In the case at bar, the consideration for the lessor's obligation to sell the leased premises to the lessee, should he choose to exercise his option to purchase the same, is the obligation of the lessee to sell to the lessor the building and/or improvements constructed and/or made by the former, if he fails to exercise his option to buy said premises. Then, again, the amount of the rentals agreed upon in the contract of October 4, 1947 — which amount turned out to be so burdensome upon the lessee, that the lessor agreed, five (5) years later, to reduce it —1 as well as the building and/or improvements contemplated to be constructed and/or introduced by the lessee, were, undoubtedly, part of the consideration for his option to purchase the leased premises.
Then, again, the alleged lack of consideration therefor was not set up as a defense or otherwise put in issue, either in the trial court or in the Court of Appeals. The appealed decisions of the Court of First Instance and the Court of Appeals, and the records before us show that the defenses mainly pressed in said courts were the alleged cancellation of the lessee's option and his failure to make a valid tender and consignation of the stipulated price. The cancellation of the option was sought to be deduced from a novation made in 1952, when, upon the lessee's request, the lessor agreed to reduce the monthly rental from P250 to P100. Neither defense was, however, sustained by said courts, and, we think, correctly.
Indeed, not being inconsistent with the lessee's option to purchase the leased premises, said agreement to reduce the rental did not necessarily cancel or extinguish the option. Although the lessor would have the Court believe that she consented to said reduction, condition that the option be cancelled, this claim had not been proven. What is more, it was refuted by her letter to the lessee, Exhibit D, dated January 29, 1952, stating that "in view of the fact that you (lessee) find it very difficult to pay the rental of P250, I am willing to reduce it to P100 from January 1952, on the condition that the remaining balance (of the rental) will be settled." The cancellation of the option was not, therefore, one of the conditions for the aforementioned reduction of the rental.
Then, too, the consignation referred to in Article 1256 of our Civil Code is inapplicable to the present case, because said provision refers to consignation as one of the means for the payment or discharge of a "debt," whereas the lessee was not indebted to the lessor for the price of the leased premises. 3 The lessee merely exercised a right of option and had no obligation to pay said price until the execution of the deed of sale in his favor, which the lessor refused to do.
Said want of consideration not having pleaded or otherwise alleged as one of her defenses in either one of the lower courts, the lessor may not set it up, for the first time, in her present second appeal. 4
As regards the rentals during the pendency of this case, suffice it to note that, had the lessor readily complied with her obligation to execute the corresponding deed of conveyance to the lessee, upon payment by him of the agreed price of P12,000, which he tendered in October, 1958, the premises in question would have become his property on or before November 1, 1958, and since then he would have had no obligation to pay rentals. As a consequence, it is neither just nor fair to impose such obligation upon him by reason of the lessor's illegal breach of their contract. Otherwise, she would be rewarded therefor and we would jeopardize the sanctity of contractual obligations.
The last point raised by the lessor is a mere corollary to those already disposed of. Hence, it needs no further discussion.
WHEREFORE, the decision appealed from should be, as it is hereby affirmed, with costs against the lessor, petitioner-appellant Consuelo Vda. de Quirino.
Republic of the Philippines SUPREME COURTManila
THIRD DIVISION
[G.R. No. 116896. May 5, 1997]
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION Petitioner, vs. COURT OF APPEALS, MA. TERESA S. RAYMUNDO-ABARRA, JOSE S. RAYMUNDO, ANTONIO S. RAYMUNDO, RENE S. RAYMUNDO, and AMADOR S. RAYMUNDO, Respondents.
D E C I S I O N
DAVIDE, JR., J.:chanroblesvirtualawlibrary
This petition for review on certiorari has its roots in Civil Case No. 53444, which was sparked by the petitioner's refusal to pay the rentals as stipulated in the contract of lease[1] on an undivided portion of 30,000 square meters of a parcel of land owned by the private respondents.chanroblesvirtualawlibrary
The lease contract, executed on 18 November 1985, reads in part as follows:chanroblesvirtualawlibrary
1. TERM OF LEASE - This lease shall be for a period of five (5) years, commencing on the date of issuance of the industrial clearance by the Ministry of Human Settlements, renewable for a like or other period at the option of the LESSEE under the same terms and conditions. chanroblesvirtualawlibrary
2. RATE OF RENT - LESSEE shall pay to the LESSOR rent at the monthly rate of TWENTY THOUSAND PESOS (P20,000.00), Philippine Currency, in the manner set forth in Paragraph 3 below. This rate shall be increased yearly by Five Percent (5%) based on the agreed monthly rate of P20,000.00 as follows: chanroblesvirtualawlibrary
Monthly Rate Period Applicablechanroblesvirtualawlibrary
P21,000.00 Starting on the 2nd yearchanroblesvirtualawlibrary
P22,000.00 Starting on the 3rd yearchanroblesvirtualawlibrary
P23,000.00 Starting on the 4th yearchanroblesvirtualawlibrary
P24,000.00 Starting on the 5th year chanroblesvirtualawlibrary
3. TERMS OF PAYMENT - The rent stipulated in Paragraph 2 above shall be paid yearly in advance by the LESSEE. The first annual rent in the amount of TWO HUNDRED FORTY THOUSAND PESOS (P240,000.00), Philippine currency, shall be due and payable upon the execution of this Agreement and the succeeding annual rents shall be payable every twelve (12) months thereafter during the effectivity of this Agreement. chanroblesvirtualawlibrary
4. USE OF LEASED PROPERTY - It is understood that the Property shall be used by the LESSEE as the site, grounds and premises of a rock crushing plant and field office, sleeping quarters and canteen/mess hall. The LESSORS hereby grant to the LESSEE the right to erect on the Leased Property such structure(s) and/or improvement(s) necessary for or incidental to the LESSEE's purposes. chanroblesvirtualawlibrary
... chanroblesvirtualawlibrary
11. TERMINATION OF LEASE - This Agreement may be terminated by mutual agreement of the parties. Upon the termination or expiration of the period of lease without the same being renewed, the LESSEE shall vacate the Leased Property at its expense. chanroblesvirtualawlibrary
On 7 January 1986, petitioner obtained from the Ministry of Human Settlements a Temporary Use Permit[2] for the proposed rock crushing project. The permit was to be valid for two years unless sooner revoked by the Ministry.chanroblesvirtualawlibrary
On 16 January 1986, private respondents wrote petitioner requesting payment of the first annual rental in the amount of P240,000 which was due and payable upon the execution of the contract. They also assured the latter that they had already stopped considering the proposals of other aggregates plants to lease the property because of the existing contract with petitioner.[3]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
In its reply-letter, petitioner argued that under paragraph 1 of the lease contract, payment of rental would commence on the date of the issuance of an industrial clearance by the Ministry of Human Settlements, and not from the date of signing of the contract. It then expressed its intention to terminate the contract, as it had decided to cancel or discontinue with the rock crushing project "due to financial, as well as technical, difficulties."[4]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
The private respondents refused to accede to petitioner's request for the pretermination of the lease contract. They insisted on the performance of petitioner's obligation and reiterated their demand for the payment of the first annual rental.[5]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
Petitioner objected to the claim of the private respondents and argued that it was "only obligated to pay... the amount of P20,000.00 as rental payments for the one-month period of lease, counted from 07 January 1986 when the Industrial Permit was issued by the Ministry of Human Settlements up to 07 February 1986 when the Notice of Termination was served"[6] on private respondents.chanroblesvirtualawlibrary
On 19 May 1986, the private respondents instituted with the Regional Trial Court of Pasig an action against petitioner for Specific Performance with Damages.[7] The case was docketed as Civil Case No. 53444 at Branch 160 of the said court. After the filing by petitioner of its Answer with Counterclaim, the case was set for trial on the merits.chanroblesvirtualawlibrary
What transpired next was summarized by the trial court in this wise:chanroblesvirtualawlibrary
Plaintiffs rested their case on September 7, 1987 (p. 87 rec.). Defendant asked for postponement of the reception of its evidence scheduled on August 10, 1988 and as prayed for, was reset to August 25, 1988 (p. 91 rec.) Counsel for defendant again asked for postponement, through representative, as he was presently indisposed. The case was reset, intransferable to September 15 and 26, 1988 (p. 94 rec.) On September 2, 1988, the office of the Government Corporate Counsel entered its appearance for defendant (p. 95, rec.) and the original counsel later withdrew his appearance. On September 15, 1988 the Government Corporate Counsel asked for postponement, represented by Atty. Elpidio de Vega, and with his conformity in open court, the hearing was reset, intransferable to September 26 and October 17, 1988. (p. 98, rec.) On September 26, 1988 during the hearing, defendant's counsel filed a motion for postponement (urgent) as he had "sore eyes", a medical certificate attached.chanroblesvirtualawlibrary
Counsel for plaintiffs objected to the postponement and the court considered the evidence of the government terminated or waived. The case was deemed submitted for decision upon the filing of the memorandum. Plaintiffs filed their memorandum on October 26, 1988. (p. 111, rec.).chanroblesvirtualawlibrary
On October 18, 1988 in the meantime, the defendant filed a motion for reconsideration of the order of the court on September 26, 1988 (p. 107, rec.) The motion was not asked to be set for hearing (p. 110 rec.) There was also no proof of notice and service to counsel for plaintiff. The court in the interest of justice set the hearing on the motion on November 29, 1988. (p. 120, rec.) but despite notice, again defendant's counsel was absent (p. 120-A, dorsal side, rec.) without reason. The court reset the motion to December 16, 1988, in the interest of justice. The motion for reconsideration was denied by the court. A second motion for reconsideration was filed and counsel set for hearing the motion on January 19, 1989. During the hearing, counsel for the government was absent. The motion was
deemed abandoned but the court at any rate, after a review of the incidents and the grounds relied upon in the earlier motion of defendant, found no reason to disturb its previous order.[8]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
On 12 April 1989, the trial court rendered a decision ordering petitioner to pay the private respondents the amount of P492,000 which represented the rentals for two years, with legal interest from 7 January 1986 until the amount was fully paid, plus attorney's fees in the amount of P20,000 and costs.[9]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
Petitioner then appealed to the Court of Appeals alleging that the trial court erred in ordering it to pay the private respondent the amount of P492,000 and in denying it the right to be heard.chanroblesvirtualawlibrary
Upon the affirmance of the trial court's decision[10] and the denial of its motion for reconsideration, petitioner came to this Court ascribing to the respondent Court of Appeals the same alleged errors and reiterating their arguments.chanroblesvirtualawlibrary
First. Petitioner invites the attention of this Court to paragraph 1 of the lease contract, which reads: "This lease shall be for a period of five (5) years, commencing on the date of issuance of the industrial clearance by the Ministry of Human Settlements...." It then submits that the issuance of an industrial clearance is a suspensive condition without which the rights under the contract would not be acquired. The Temporary Use Permit is not the industrial clearance referred to in the contract; for the said permit requires that a clearance from the National Production Control Commission be first secured, and besides, there is a finding in the permit that the proposed project does not conform to the Zoning Ordinance of Rodriguez, (formerly Montalban), Rizal, where the leased property is located. Without the industrial clearance the lease contract could not become effective and petitioner could not be compelled to perform its obligation under the contract.chanroblesvirtualawlibrary
Petitioner is now estopped from claiming that the Temporary Use Permit was not the industrial clearance contemplated in the contract. In its letter dated 24 April 1986, petitioner states:chanroblesvirtualawlibrary
We wish to reiterate PNCC Management's previous stand that it is only obligated to pay your clients the amount of P20,000.00 as rental payments for the one-month period of the lease, counted from 07 January 1986 when the Industrial Permit was issued by the Ministry of Human Settlements up to 07 February 1986 when the Notice of Termination was served on your clients.[11] (Underscoring Supplied). chanroblesvirtualawlibrary
The "Industrial Permit" mentioned in the said letter could only refer to the Temporary Use Permit issued by the Ministry of Human Settlements on 7 January 1986. And it can be gleaned from this letter that petitioner has considered the permit as industrial clearance; otherwise, petitioner could have simply told the private respondents that its obligation to pay rentals has not yet arisen because the Temporary Use Permit is not the industrial clearance contemplated by them. Instead, petitioner recognized its obligation to pay rental counted from the date the permit was issued.chanroblesvirtualawlibrary
Also worth noting is the earlier letter of petitioner; thus: chanroblesvirtualawlibrary
[P]lease be advised of PNCC Management's decision to cancel or discontinue with the rock crushing project due to financial as well as technical difficulties. In view thereof, we would like to terminate our Lease Contract dated 18 November, 1985. Should you agree to the mutual termination of our Lease Contract, kindly indicate your conformity hereto by affixing your signature on the space provided below. May we likewise request Messrs. Rene, Jose and Antonio, all surnamed Raymundo and Mrs. Socorro A. Raymundo as Attorney-in-Fact of Amador S. Raymundo to sign on the spaces indicated below.[12]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
It can be deduced from this letter that the suspensive condition - issuance of industrial clearance - has already been fulfilled and that the lease contract has become operative. Otherwise, petitioner did not have to solicit the conformity of the private respondents to the termination of the contract for the simple reason that no juridical relation was created because of the non-fulfillment of the condition.chanroblesvirtualawlibrary
Moreover, the reason of petitioner in discontinuing with its project and in consequently cancelling the lease contract was financial as well as technical difficulties, not the alleged insufficiency of the Temporary Use Permit.chanroblesvirtualawlibrary
Second. Invoking Article 1266 and the principle of rebus sic stantibus, petitioner asserts that it should be released from the obligatory force of the contract of lease because the purpose of the contract did not materialize due to unforeseen events and causes beyond its control, i.e., due to abrupt change in political climate after the EDSA Revolution and financial difficulties.chanroblesvirtualawlibrary
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.[13] But the law recognizes exceptions to the principle of the obligatory force of contracts. One exception is laid down in Article 1266 of the Civil Code, which reads: "The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor."chanroblesvirtualawlibrary
Petitioner cannot, however, successfully take refuge in the said article, since it is applicable only to obligations "to do", and not to obligations "to give".[14] An obligation "to do" includes all kinds of work or service; while an obligation "to give" is a prestation which consists in the delivery of a movable or an immovable thing in order to create a real right, or for the use of the recipient, or for its simple possession, or in order to return it to its owner.[15]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
The obligation to pay rentals[16] or deliver the thing in a contract of lease[17] falls within the prestation to give; hence, it is not covered within the scope of Article 1266. At any rate, the unforeseen event and causes mentioned by petitioner are not the legal or physical impossibilities contemplated in said article. Besides, petitioner failed to state specifically the circumstances brought about by the abrupt change in the political climate in the country except the alleged prevailing uncertainties in government policies on infrastructure projects.chanroblesvirtualawlibrary
The principle of rebus sic stantibus[18] neither fits in with the facts of the case. Under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist the contract also ceases to exist.[19] This theory is said to be the basis of Article 1267 of the Civil Code, which provides:chanroblesvirtualawlibrary
ART. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.chanroblesvirtualawlibrary
This article, which enunciates the doctrine of unforeseen events, is not, however, an absolute application of the principle of rebus sic stantibus, which would endanger the security of contractual relations. The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is therefore only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor.[20]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
In this case, petitioner wants this Court to believe that the abrupt change in the political climate of the country after the EDSA Revolution and its poor financial condition rendered the performance of the lease contract impractical and inimical to the corporate survival of the petitioner.chanroblesvirtualawlibrary
This Court cannot subscribe to this argument. As pointed out by private respondents:[21]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
It is a matter of record that petitioner PNCC entered into a contract with private respondents on November 18, 1985. Prior thereto, it is of judicial notice that after the assassination of Senator Aquino on August 21, 1983, the country has experienced political upheavals, turmoils, almost daily mass demonstrations, unprecedented, inflation, peace and order deterioration, the Aquino trial and many other things that brought about the hatred of people even against crony corporations. On November 3, 1985, Pres. Marcos, being interviewed live on U.S. television announced that there would be a snap election scheduled for February 7, 1986.chanroblesvirtualawlibrary
On November 18, 1985, notwithstanding the above, petitioner PNCC entered into the contract of lease with private respondents with open eyes of the deteriorating conditions of the country.chanroblesvirtualawlibrary
Anent petitioners alleged poor financial condition, the same will neither release petitioner from the binding effect of the contract of lease. As held in Central Bank v. Court of Appeals,[22] cited by the private respondents, mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation, nor does it constitute a defense to an action for specific performance.chanroblesvirtualawlibrary
With regard to the non-materialization of petitioners particular purpose in entering into the contract of lease, i.e., to use the leased premises as a site of a rock crushing plant, the same will not invalidate the contract. The cause or essential purpose in a contract of lease is the use or enjoyment of a thing.[23] As a general principle, the motive or particular purpose of a party in entering into a contract does not affect the validity or existence of the contract; an exception is when the realization of such motive or particular purpose has been made a condition upon which the contract is made to depend.[24] The exception is not apply here.chanroblesvirtualawlibrary
Third. According to petitioner, the award of P492,000 representing the rent for two years is excessive, considering that it did not benefit from the property. Besides, the temporary permit, conformably with the express provision therein, was deemed automatically revoked for failure of petitioner to use the same within one year from the issuance thereof. Hence, the rent payable should only be for one year.chanroblesvirtualawlibrary
Petitioner cannot be heard to complain that the award is excessive. The temporary permit was valid for two years but was automatically revoked because of its non-use within one year from its issuance. The non-use of the permit and the non-entry into the property subject of the lease contract were both imputable to petitioner and cannot, therefore, be taken advantage of in order to evade or lessen petitioners monetary obligation. The damage or prejudice to private respondents is beyond dispute. They unquestionably suffered pecuniary losses because of their inability to use the leased premises. Thus, in accordance with Article 1659 of the Civil Code,[25] they are entitled to indemnification for damages; and the award of P492,000 is fair and just under the circumstances of the case.chanroblesvirtualawlibrary
Finally, petitioner submits that the trial court gravely abused its discretion in denying petitioner the right to be heard.chanroblesvirtualawlibrary
We disagree. The trial court was in fact liberal in granting several postponements[26] to petitioner before it deemed terminated and waived the presentation of evidence in petitioners behalf.chanroblesvirtualawlibrary
It must be recalled that private respondents rested their case on 7 September 1987 yet.[27] Almost a year after, or on 10 August 1988 when it was petitioners turn to present evidence, petitioners counsel asked for postponement of the hearing to 25 August 1988 due to conflict of schedules,[28] and this was granted.[29] At the rescheduled hearing, petitioners counsel, through a representative, moved anew for postponement, as he was allegedly indisposed.[30] The case was then reset intransferable to September 15 and 26, 1988.[31] On 2 September 1988, the Office of the Government Corporate Counsel, through Atty. Elpidio J. Vega, entered its appearance for the petitioner,[32] and later the original counsel withdrew his appearance.[33] On 15 September 1988, Atty. Vega requested for postponement to enable him to go over the records of the case.[34] With his conformity, the hearing was reset intransferable to September 26 and October 17, 1988.[35] In the morning of 26 September 1988, the court received Atty. Vegas Urgent Motion for Postponement on the ground that he was afflicted with conjunctivitis or sore eyes.[36] This time, private respondents objected; and upon their motion, the court deemed terminated and waived the presentation of evidence for the petitioner.[37] Nevertheless, before the court considered the case submitted for decision, it required the parties to submit their respective memoranda within thirty days.[38] But petitioner failed to file one.chanroblesvirtualawlibrary
Likewise, the court was liberal in respect to petitioners motion for reconsideration. Notwithstanding the lack of request for hearing and proof of notice and service to private respondents, the court set the hearing of the said motion on 29 November 1988.[39] Upon the denial of the said motion for lack of merit,[40] petitioner filed a second motion for reconsideration. But during the hearing of the motion on a date selected by him, Atty. Vega was absent for no reason at all, despite due notice.[41]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
From the foregoing narration of procedural antecedents, it cannot be said that the petitioner was deprived of its day in court. The essence of due process is simply an opportunity to be heard.[42] To be heard does not only mean oral arguments in court; one may be heard also through pleadings. Where opportunity to be heard, either through oral arguments or pleadings, is accorded, there is no denial of procedural due process.[43]chanroblesvirtuallawlibrarychanroblesvirtualawlibrary
WHEREFORE, the instant petition is DENIED and the challenged decision of the Court of Appeals is AFFIRMED in toto.chanroblesvirtualawlibrary
No pronouncements as to costs.chanroblesvirtualawlibrary
SO ORDERED.chanroblesvirtualawlibrary
Republic of the PhilippinesSUPREME COURT
FIRST DIVISION
G.R. No. 124221 August 4, 2000
VICTORINO MAGAT, JR. substituted by heirs, OLIVIA D. MAGAT, and minors MA. DULCE MAGAT, MA. MAGNOLIA MAGAT, RONALD MAGAT and DENNIS MAGAT, petitioners, vs.COURT OF APPEALS and SANTIAGO A. GUERRERO, respondents.
PARDO, J.:
The case is an appeal1 from the decision of the Court of Appeals2 reversing the decision of the Regional Trial Court of Makati, Metro Manila,3 ruling in favor of respondent Santiago A. Guerrero and dismissing petitioners' complaint.
First, the facts.
Private respondent Santiago A. Guerrero (hereinafter referred to as "Guerrero") was President and Chairman of4 "Guerrero Transport Services", a single proprietorship.5
Sometime in 1972, Guerrero Transport Services won a bid for the operation of a fleet of taxicabs within the Subic Naval Base, in Olongapo. As highest bidder, Guerrero was to "provide radio-controlled taxi service within the U.S. Naval Base, Subic Bay, utilizing as demand requires . . . 160 operational taxis consisting of four wheel, four-door, four passenger, radio controlled, meter controlled, sedans, not more than one year . . . "6
On September 22, 1972, with the advent of martial law, President Ferdinand E. Marcos issued Letter of Instruction No. 1 (hereinafter referred to as "the LOI"). We reproduce the text, as follows:
"Letter of Instruction No. 1
"SUBJECT: SEIZURE AND CONTROL OF ALL PRIVATELY OWNED NEWSPAPERS, MAGAZINES, RADIO AND TELEVISION FACILITIES AND ALL OTHER MEDIA OF COMMUNICATION.
"To: 1. The Press Secretary Office of the President
Manila
"2. The Secretary Department of National
Defense
Camp E. Aguinaldo, Q.C.
"In view of the present national emergency which has been brought about by the activities of those who are actively engaged in a criminal conspiracy to seize political and state power in the Philippines and to take over the Government by force and violence the extent of which has now assumed the proportion of an actual war against our people and their legitimate Government, and pursuant to Proclamation No. 1081 dated September 21, 1972, and in my capacity as commander in chief of all the armed forces of the Philippines and in order to prevent the use of privately owned newspapers, magazines, radio and television facilities and all other media of communications, for propaganda purposes against the government and its duly constituted authorities or for any purpose that tend to undermine the faith and confidence of the people in our government and aggravate the present national emergency, you are hereby ordered forthwith to take over and control or cause the taking over and control of all such newspapers, magazines, radio and
television facilities and all other media of communications, wherever they are, for the duration of the present national emergency, or until otherwise ordered by me or by my duly designated representative.1âwphi1.nêt
"In carrying out the foregoing order you are hereby also directed to see to it that reasonable means are employed by you and your men and that injury to persons and property must be carefully avoided."
On September 25, 1972, pursuant to the aforequoted Letter of Instruction, the Radio Control Office issued Administrative Circular No. 4 (hereinafter referred to as "the Admin. Circular"), herein quoted in full:
"SUBJECT: SUSPENDING THE ACCEPTANCE AND PROCESSING OF APPLICATIONS FOR RADIO STATION CONSTRUCTION PERMITS AND FOR PERMITS TO OWN AND/OR POSSESS RADIO TRANSMITTERS OR TRANSCEIVERS.
"In view of the existence of a state of emergency and the declaration by the President of martial law in the entire country under Proclamation No. 1081 dated September 21, 1972, effective immediately the acceptance and processing by the radio control office of applications for radio stations constructions permits and for permits to possess, own, transfer, purchase and sale of radio transmitters and transreceivers as well as manufacturers and dealer's permits of said equipment is hereby suspended.
"Exempted from this circular are applications for radio station construction permits and for permits to possess, own, transfer, purchase and sell radio transmitters and transceivers for the following radio stations:
"1. Aeronautical Stations;
"2. Aeronautical Fixed Stations;
"3. Aircraft Stations;
"4. Coastal Stations; and
"5. Ship Stations.
"This circular shall be strictly observed until lifted upon proper instructions from higher authorities."
On September 25, 1972, Guerrero and Victorino D. Magat (hereinafter referred to as Victorino), as General Manager of Spectrum Electronic Laboratories, a single proprietorship, executed a letter-contract for the purchase of transceivers at a quoted price of US$77,620.59, FOB Yokohoma. Victorino was to deliver the transceivers within 60 to 90 days after receiving notice from Guerrero of the assigned radio frequency,7"taking note of Government Regulations."8
The contract was signed and Victorino contacted his Japanese supplier, Koide & Co., Ltd. and placed an order for the transceivers.
On September 29, 1972, Navy Exchange Officer, A. G. Mason confirmed that Guerrero won the bid for the commercial transportation contract.9
On October 4, 1972, middle man and broker10 Isidro Q. Aligada of Reliance Group Engineers, Inc. (hereinafter referred to as "Aligada"), wrote Victorino, informing him that a radio frequency was not yet assigned to Guerrero and that government regulations might complicate the importation of the transceivers. However, in the same letter, Victorino was advised to advise his supplier "to proceed (with) production pending frequency information." Victorino was also assured of Guerrero's financial capability to comply with the contract.11
On October 6, 1972, Guerrero informed Aligada of the frequency number12 assigned by Subic Naval Base authorities. Aligada was instructed to "proceed with the order thru Spectrum Electronics Laboratories."13
On October 7, 1972, Aligada informed Magat of the assigned frequency number. Aligada also advised Victorino to "proceed with the order upon receipt of letter of credit."14
On January 10, 1973, Guerrero applied for a letter of credit with the Metropolitan Bank and Trust Company.15 This application was not pursued.16
On March 27, 1973, Victorino, represented by his lawyer, Atty. Sinesio S. Vergara, informed Guererro that the order with the Japanese supplier has not been canceled. Should the contract be canceled, the Japanese firm would forfeit 30% of the deposit and charge a cancellation fee in an amount not yet known, Guerrero to bear the loss. Further, should the contract be canceled, Victorino would demand an additional amount equivalent to 10% of the contract price.17
Unable to get a letter of credit from the Central Bank due to the refusal of the Philippine government18 to issue a permit to import the transceivers,19 Guerrero commenced operation of the taxi cabs within Subic Naval Base, using radio units borrowed from the U.S. government (through the Subic Naval Base authorities).20 Victorino thus canceled his order with his Japanese supplier.
On May 22, 1973, Victorino filed with the Regional Trial Court, Makati a complaint for damages arising from breach of contract against Guerrero.21
On June 7, 1973, Guerrero moved to dismiss the complaint on the ground that it did not state a cause of action.22
On June 16, 1973, the trial court23 granted the motion and dismissed the complaint.24
On July 11, 1973, Victorino filed a petition for review on certiorari with this Court assailing the dismissal of the complaint.25
On April 20, 1983, this Court26 ruled that the complaint sufficiently averred a cause of action. We set aside the order of dismissal and remanded the case to the trial court for further proceedings, to wit:27
"ACCORDINGLY, the questioned order of dismissal is hereby set aside and the case ordered remanded to the court of origin for further proceedings. No costs.
"SO ORDERED."
On November 27, 1984, the trial court28 ordered that the case be archived for failure of Victorino to prosecute.29
On March 11, 1985, petitioners, Olivia, Dulce, Ma. Magnolia, Ronald and Dennis Magat (hereinafter referred to as "heirs of Victorino"), moved to reinstate the case and to substitute Victorino in its prosecution. Apparently, Victorino died on February 18, 1985.30
On April 29, 1985, the trial court granted the motion.31
On July 12, 1991, the trial court decided in favor of the heirs of Victorino and ordered Guerrero to pay temperate, moral and exemplary damages, and attorney's fees, disposing of the case in this wise:32
"WHEREFORE, judgment is rendered for the substituted plaintiffs and against the defendant
"1. Ordering defendant to pay substituted plaintiffs the sum of P25,000.00 for temperate damages for injury to plaintiff's business dealings with foreign and local businessmen;
"2. P50,000.00 as moral damages;
"3. P25,000.00 as exemplary
damages; and
"4. P20,000.00 as attorney's fees.
"SO ORDERED."
On August 21, 1991, Guerrero appealed to the Court of Appeals.33
On October 4, 1995, the Court of Appeals rendered the decision appealed from, disposing as follows:34
"WHEREFORE, judgment is hereby rendered DISMISSING the complaint.
"No pronouncements as to costs.
" SO ORDERED."
On October 26, 1995, the heirs of Victorino filed with the Court of Appeals a motion for reconsideration.35
On March 12, 1996, the Court of Appeals denied the motion for reconsideration.36
Hence, this appeal.37
The issue is whether the contract between Victorino and Guerrero for the purchase of radio transceivers was void. Stated differently, whether the transceivers subject of the contract were banned contraband items prohibited by the LOI and the Administrative Circular to import.
The contract was valid; the radio transceivers were not contraband.
"Contraband" generally refers to "any property which is unlawful to produce or possess." It refers to goods which are exported and imported into a country against its laws.38
In declaring the contract void ab initio, the Court of Appeals ruled that the importation of the transceivers meant the inevitable passing of such goods through Philippine Ports, where the LOI and the Administrative Circular have to be observed and applied with full force and effect.39 The Court of Appeals declared that the proposed importation of such goods was contrary to law, hence, the nullity of the contract.40
We do not agree. The contract was not void ab initio. Nowhere in the LOI and Admin. Circular is there an express ban on the importation of transceivers.
The LOI and Administrative Circular did not render "radios and transceivers" illegal per se. The Administrative Circular merely ordered the Radio Control Office to suspend the "acceptance and processing . . . . of applications . . . for permits to possess, own, transfer, purchase and sell radio transmitters and transceivers . . . "41 Therefore, possession and importation of the radio transmitters and transceivers was legal provided one had the necessary license for it.42 Transceivers were not prohibited but merely regulated goods. The LOI and Administrative Circular did not render the transceivers outside the commerce of man. They were valid objects of the contract.43
Affirming the validity of the contract, we next discuss whether the contract was breached.
Guerrero testified that a permit to import the transceivers from Japan was denied by the Radio Control Board. He stated that he, together with Aligada, Victorino and a certain John Dauden personally went to the Radio Control Office, and were denied a permit to import. They also went to the Office of the President, where Secretary Ronaldo B. Zamora explained that radios were "banned like guns because of martial law."44 Guerrero testified that this prevented him from securing a letter of credit from the Central Bank.45 This testimony was not rebutted.
The law provides that "[w]hen the service (required by the contract) has become so manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part."46 Here, Guerrero's inability to secure a letter of credit and to comply with his obligation was a direct consequence of the denial of the permit to import. For this, he cannot be faulted.
Even if we assume that there was a breach of contract, damages cannot be awarded. Damnum absque injuria.
There was no bad faith.47 Bad faith does not simply connote bad judgment or negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of wrong. It means a breach of a known duty through some motive or interest or ill will that partakes of the nature of fraud.48 Guerrero honestly relied on the representations of the Radio Control Office and the Office of the President.
True, Guerrero borrowed equipment from the Subic Naval Base authorities at zero cost.49 This does not automatically translate to bad faith. Guerrero was faced with the danger of the cancellation of his contract with Subic Naval Base. He borrowed equipment as a prudent and swift alternative. There was no proof that he resorted to this option with a deliberate and malicious intent to dishonor his contract with Victorino. An award of damages surely cannot be based on mere hypotheses, conjectures and surmises. Good faith is presumed, the burden of proving bad faith rests on the one alleging it.50 Petitioners did not effectively discharge the burden in this case.
To recover moral damages in an action for breach of contract, the breach must be palpably wanton, reckless, malicious, in bad faith, oppressive or abusive.51 This is not the case here.
Exemplary damages also cannot be awarded. Guerrero did not act in a wanton, fraudulent, reckless, oppressive or malevolent manner.52
Neither can actual damages be awarded. True, indemnification for damages contemplates not only actual loss suffered (damnum emergens) but unrealized profits (lucrum cessans) as well.53 However, to be entitled to adequate compensation for pecuniary loss, the loss must be actually suffered and duly proved.54 To recover actual damages, the amount of loss must not only be capable of proof, but must be proven with a reasonable degree of certainty. The claim must be premised upon competent proof or upon the best evidence obtainable,55 such as receipts56 or other documentary proof.
Only the testimony of Aligada was presented to substantiate petitioners' claim for unrealized profits.57 Aligada testified that as a result of the cancellation of the contract, Victorino had to suspend transactions with his Japanese supplier for six (6) months. Aligada stated that the volume of Victorino's business with Subic Naval Base also diminished significantly. Aligada approximated that Victorino's unrealized business opportunities amounted to P400,000.00.58 Being a witness for Victorino's heirs and standing to gain from the contract's fulfillment, Aligada's testimony is self-serving. It is also hearsay. We fail to see how this "evidence" proves actual damages with a "reasonable degree of certainty."59 If proof is "flimsy", we cannot award actual damages.60
WHEREFORE, we AFFIRM the decision of the Court of Appeals promulgated on October 11, 1995, in CA-G. R. CV No. 34952, dismissing the complaint.1âwphi1.nêt
No costs.
SO ORDERED.
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