Oblicon PDF - A and B w:o Velasco

8/18/2019 Oblicon PDF - A and B w:o Velasco

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A. In General

EN BANC //G.R. No. L-25071 July 29, 1972 GEORGE W. BATCHELDER, doing business under the name and style ofBatchelder Equipment,plaintiff-appellant,vs.THE CENTRAL BANK OF THE PHILIPPINES,defendant-appellant.

R E S O L U T I O N

FERNANDO, J.: p An ably-written motion for the reconsideration of our decision of March 29,1972 was submitted by plaintiff-appellant through its counsel, Delegate

Mauro Baradi. It is based primarily on this contention: "Said decision failed toconsider that if there was no contract obligating the defendant to resellUS$154,094.56 to plaintiff at the exchange rate of P2.00375 to US$1.00, the judgment of the lower court can and should nevertheless be sustained on thebasis of there being such an obligation araising from law ." 1 It is cleartherefore that there is a retreat from the untenable position taken by it, bothin the lower court and here on appeal, that there was a contract between itand defendant Central Bank of the Philippines that gave rise to such a dutyon the part of the latter. This time, it would predicate its alleged right to the

exchange rate of P2.00375 to US$1.00 to an obligation of defendant CentralBank arising from law. This point, while strongly pressed in a pleading that isnot without its plausibility, loses sight of the ratio decidendi of our decision ofMarch 29, 1972 that the Central Bank acted not as a juridical person withpower to enter into contracts but as a regulatory agency entrusted with thedelicate function of managing the currency. It is far-fetched to assume thatsuch an administrative body by the issuance of the circulars in question didtransform itself into just another party to a juridical relation, called upon tosatisfy a credit. As will be more fully explained, the motion for

reconsideration cannot suffice to call for a reversal of our judgment. Ourdecision of March 29, 1972 therefore stands.Plaintiff-appellant would sustain its principal contention thus: " 'Laws', asused in the Civil Code, include Administrative orders and regulations 'notcontrary to the laws or the Constitution.' Thus, in his Outlines on Civil Law, adistinguished member of this Court, Hon. Jose B. L. Reyes (with JudgeRicardo Puno as co-author), in outlining the 'sources from which the rule of


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law applicable to a given controversy is to be found', states: '... 'B. Statute(laws) applicable to the point in controversy. The word includes enactmentsby the legislative authority, original or delegated (executive or administrativeorders or regulations). But the latter shall be valid only when they are not

contrary to the laws or the Constitution.' In People v. Que Po Lay , thisHonorable Court held: '... It is true that Circular No. 20 of the Central Bank isnot a statute or law but being issued for the implementation of the lawauthorizing its issuance, it has the force and effect of law according to settled

jurisprudence. ( See U.S. v. Tupasi Molina, 29 Phil. 119 and authorities citedtherein). [Emphasis supplied].' The various resolutions and memorandaissued by the defendant, having 'the force and effect of law,' if notthemselves laws, therefore can be the sources of obligations." 2 It is, of course, true that obligations arise from 1) law; 2) contracts; 3) quasi-

contracts; 4) acts or omissions punished by law and 5) quasi-delicts . 3 One ofthe sources an obligation then is a law. A legal norm could so require that a

particular party be chargeable with a prestation or undertaking to give or todeliver or to do or to render some service. It is an indispensable requisitethough that such a provision, thus in fact exists. There must be a showing tothat effect. As early as 1909 in Pelayo v. Lauron , 4 Court through JusticeTorres, categorically declared: "Obligation arising from law are notpresumed." 5 For in the language of Justice Street in Leung Ben v. O'Brien , 6 a1918 decision, such an obligation is "a creation of the positive law." 7 Theyare ordinarily traceable to code or statute.

8 It is true though, as noted in themotion for reconsideration following People v. Que Po Lay , 9 that a Central

Bank circular may have the force and effect of law, especially when issued inpursuance of its quasi-legislative power. That of itself, however, is no

justification to conclude that it has thereby assumed an obligation. To beimpressed with such a character, however, it must be categoricallydemonstrated that the very administrative agency, which is the source of suchregulation, would place such a burden on itself.Here certainly, it cannot be so plausibly maintained. As was noted in thedecision sought to be reconsidered after recital of the statutory objectives ofdefendant Central Bank to maintain monetary stability as well as to preserveinternational value of the peso: "It would be then to set at naughtfundamental concepts in administrative law that accord due recognition tothe vesting of quasi-legislative and quasi-judicial power in administrative lawfor the purpose of attaining statutory objectives, especially now that


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government is saddled with greater responsibilities due to complex situationof the modern era if the lower court is to be upheld. For if such be the casethen, by the judiciary failing to exercise due care in its oversight of anadministrative agency, substituting its own discretion for what usually is the

more expert appraisal of such an instrumentality, there may even be afrustration if not a nullification of the objective of the law." 10 The assertionthat there is such a self-imposed obligation on the part of defendant CentralBank is thus lacking in persuasiveness. 11 With the above disposition of the principal contention, the two other pointsof the motion for reconsideration that there was in fact such compliance withthe rules and regulations of defendant Central Bank and that he has acquireda vested right, likewise fall to the ground. It is not to be lost sight of that allthe while defendant Central Bank precisely had denied that there was such a

compliance, indicating in order what respect such deficiency was incurred.No reliance could be placed on the lower court decision reversed by usbased on the assumption that there was a contract between plaintiff anddefendant. Commendably, plaintiff-appellant in this motion forreconsideration appears to be of the same mind. Necessarily any claim that avested right has accrued is likewise untenable. It cannot be said then that ourdecision of March 29, 1972 should be overturned.WHEREFORE, the motion for reconsideration is denied.Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Teehankee,Barredo, Makasiar, Antonio and Esguerra, JJ., concur.

B. Characteristics/Principles of Contracts

EN BANC //G.R. No. L-18841 January 27, 1969 REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,vs.PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, defendant-

appellant.Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio A. Torres and Solicitor Camilo D. Quiason for plaintiff-appellant.Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant-appellant. REYES, J.B.L., J.:


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Direct appeals, upon a joint record on appeal, by both the plaintiff and thedefendant from the dismissal, after hearing, by the Court of First Instance ofManila, in its Civil Case No. 35805, of their respective complaint andcounterclaims, but making permanent a preliminary mandatory injunction

theretofore issued against the defendant on the interconnection of telephonefacilities owned and operated by said parties.The plaintiff, Republic of the Philippines, is a political entity exercising

governmental powers through its branches and instrumentalities, one ofwhich is the Bureau of Telecommunications. That office was created on 1

July 1947, under Executive Order No. 94, with the following powers andduties, in addition to certain powers and duties formerly vested in theDirector of Posts: 1awphil.ñêt

SEC. 79. The Bureau of Telecommunications shall exercise the following

powers and duties:(a) To operate and maintain existing wire-telegraph and radio-telegraphoffices, stations, and facilities, and those to be established to restore thepre-war telecommunication service under the Bureau of Posts, as wellas such additional offices or stations as may hereafter be established toprovide telecommunication service in places requiring such service;(b) To investigate, consolidate, negotiate for, operate and maintainwire-telephone or radio telephone communication service throughoutthe Philippines by utilizing such existing facilities in cities, towns, andprovinces as may be found feasible and under such terms andconditions or arrangements with the present owners or operatorsthereof as may be agreed upon to the satisfaction of all concerned;(c) To prescribe, subject to approval by the Department Head,equitable rates of charges for messages handled by the system and/orfor time calls and other services that may be rendered by said system;(d) To establish and maintain coastal stations to serve ships at sea oraircrafts and, when public interest so requires, to engage in theinternational telecommunication service in agreement with othercountries desiring to establish such service with the Republic of thePhilippines; and(e) To abide by all existing rules and regulations prescribed by theInternational Telecommunication Convention relative to theaccounting, disposition and exchange of messages handled in theinternational service, and those that may hereafter be promulgated by


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said convention and adhered to by the Government of the Republic ofthe Philippines. 1

The defendant, Philippine Long Distance Telephone Company (PLDT forshort), is a public service corporation holding a legislative franchise, Act

3426, as amended by Commonwealth Act 407, to install, operate andmaintain a telephone system throughout the Philippines and to carry on thebusiness of electrical transmission of messages within the Philippines andbetween the Philippines and the telephone systems of other countries. 2 TheRCA Communications, Inc., (which is not a party to the present case but hascontractual relations with the parties) is an American corporation authorizedto transact business in the Philippines and is the grantee, by assignment, of alegislative franchise to operate a domestic station for the reception andtransmission of long distance wireless messages (Act 2178) and to operate

broadcasting and radio-telephone and radio-telegraphic communicationsservices (Act 3180). 3 Sometime in 1933, the defendant, PLDT, and the RCA Communications,

Inc., entered into an agreement whereby telephone messages, coming fromthe United States and received by RCA's domestic station, couldautomatically be transferred to the lines of PLDT; and vice-versa, for callscollected by the PLDT for transmission from the Philippines to the UnitedStates. The contracting parties agreed to divide the tolls, as follows: 25% toPLDT and 75% to RCA. The sharing was amended in 1941 to 30% for PLDT

and 70% for RCA, and again amended in 1947 to a 50-50 basis. Thearrangement was later extended to radio-telephone messages to and fromEuropean and Asiatic countries. Their contract contained a stipulation thateither party could terminate it on a 24-month notice to the other. 4 On 2February 1956, PLDT gave notice to RCA to terminate their contract on 2February 1958. 5

Soon after its creation in 1947, the Bureau of Telecommunications set up itsown Government Telephone System by utilizing its own appropriation andequipment and by renting trunk lines of the PLDT to enable governmentoffices to call private parties. 6 Its application for the use of these trunk lineswas in the usual form of applications for telephone service, containing astatement, above the signature of the applicant, that the latter will abide bythe rules and regulations of the PLDT which are on file with the PublicService Commission. 7 One of the many rules prohibits the public use of theservice furnished the telephone subscriber for his private use. 8 The Bureau


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has extended its services to the general public since 1948, 9 using the sametrunk lines owned by, and rented from, the PLDT, and prescribing its (theBureau's) own schedule of rates. 10 Through these trunk lines, a GovernmentTelephone System (GTS) subscriber could make a call to a PLDT subscriber

in the same way that the latter could make a call to the former.On 5 March 1958, the plaintiff, through the Director ofTelecommunications, entered into an agreement with RCA Communications,Inc., for a joint overseas telephone service whereby the Bureau wouldconvey radio-telephone overseas calls received by RCA's station to and fromlocal residents. 11 Actually, they inaugurated this joint operation on 2February 1958, under a "provisional" agreement. 12

On 7 April 1958, the defendant Philippine Long Distance TelephoneCompany, complained to the Bureau of Telecommunications that said

bureau was violating the conditions under which their Private BranchExchange (PBX) is inter-connected with the PLDT's facilities, referring to therented trunk lines, for the Bureau had used the trunk lines not only for the useof government offices but even to serve private persons or the general public,in competition with the business of the PLDT; and gave notice that if saidviolations were not stopped by midnight of 12 April 1958, the PLDT wouldsever the telephone connections. 13 When the PLDT received no reply, itdisconnected the trunk lines being rented by the Bureau at midnight on 12April 1958. 14 The result was the isolation of the Philippines, on telephone

services, from the rest of the world, except the United States. 15 At that time, the Bureau was maintaining 5,000 telephones and had 5,000

pending applications for telephone connection. 16 The PLDT was alsomaintaining 60,000 telephones and had also 20,000 pendingapplications. 17Through the years, neither of them has been able to fill up thedemand for telephone service.

The Bureau of Telecommunications had proposed to the PLDT on 8 January1958 that both enter into an interconnecting agreement, with the governmentpaying (on a call basis) for all calls passing through the interconnectingfacilities from the Government Telephone System to the PLDT. 18 The PLDTreplied that it was willing to enter into an agreement on overseas telephoneservice to Europe and Asian countries provided that the Bureau would submitto the jurisdiction and regulations of the Public Service Commission and inconsideration of 37 1/2% of the gross revenues. 19 In its memorandum in lieuof oral argument in this Court dated 9 February 1964, on page 8, the


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defendant reduced its offer to 33 1/3 % (1/3) as its share in the overseastelephone service. The proposals were not accepted by either party.

On 12 April 1958, plaintiff Republic commenced suit against the defendant,Philippine Long Distance Telephone Company, in the Court of First Instance

of Manila (Civil Case No. 35805), praying in its complaint for judgmentcommanding the PLDT to execute a contract with plaintiff, through theBureau, for the use of the facilities of defendant's telephone systemthroughout the Philippines under such terms and conditions as the courtmight consider reasonable, and for a writ of preliminary injunction againstthe defendant company to restrain the severance of the existing telephoneconnections and/or restore those severed.

Acting on the application of the plaintiff, and on the ground that theseverance of telephone connections by the defendant company would isolate

the Philippines from other countries, the court a quo, on 14 April 1958,issued an order for the defendant:

(1) to forthwith reconnect and restore the seventy-eight (78) trunk linesthat it has disconnected between the facilities of the GovernmentTelephone System, including its overseas telephone services, and thefacilities of defendant; (2) to refrain from carrying into effect its threat tosever the existing telephone communication between the Bureau ofTelecommunications and defendant, and not to make connection overits telephone system of telephone calls coming to the Philippines fromforeign countries through the said Bureau's telephone facilities and theradio facilities of RCA Communications, Inc.; and (3) to accept andconnect through its telephone system all such telephone calls comingto the Philippines from foreign countries — until further order of thisCourt.

On 28 April 1958, the defendant company filed its answer, withcounterclaims.

It denied any obligation on its part to execute a contrary of services with theBureau of Telecommunications; contested the jurisdiction of the Court of FirstInstance to compel it to enter into interconnecting agreements, and averredthat it was justified to disconnect the trunk lines heretofore leased to theBureau of Telecommunications under the existing agreement because itsfacilities were being used in fraud of its rights. PLDT further claimed that theBureau was engaging in commercial telephone operations in excess of


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authority, in competition with, and to the prejudice of, the PLDT, usingdefendants own telephone poles, without proper accounting of revenues.

After trial, the lower court rendered judgment that it could not compel thePLDT to enter into an agreement with the Bureau because the parties were

not in agreement; that under Executive Order 94, establishing the Bureau ofTelecommunications, said Bureau was not limited to servicing governmentoffices alone, nor was there any in the contract of lease of the trunk lines,since the PLDT knew, or ought to have known, at the time that their use bythe Bureau was to be public throughout the Islands, hence the Bureau wasneither guilty of fraud, abuse, or misuse of the poles of the PLDT; and, inview of serious public prejudice that would result from the disconnection ofthe trunk lines, declared the preliminary injunction permanent, although itdismissed both the complaint and the counterclaims.

Both parties appealed.Taking up first the appeal of the Republic, the latter complains of the action

of the trial court in dismissing the part of its complaint seeking to compel thedefendant to enter into an interconnecting contract with it, because theparties could not agree on the terms and conditions of the interconnection,and of its refusal to fix the terms and conditions therefor.

We agree with the court below that parties can not be coerced to enter intoa contract where no agreement is had between them as to the principal termsand conditions of the contract. Freedom to stipulate such terms andconditions is of the essence of our contractual system, and by expressprovision of the statute, a contract may be annulled if tainted by violence,intimidation, or undue influence (Articles 1306, 1336, 1337, Civil Code ofthe Philippines). But the court a quo has apparently overlooked that while theRepublic may not compel the PLDT to celebrate a contract with it, theRepublic may, in the exercise of the sovereign power of eminent domain,require the telephone company to permit interconnection of the governmenttelephone system and that of the PLDT, as the needs of the governmentservice may require, subject to the payment of just compensation to bedetermined by the court. Nominally, of course, the power of eminent domainresults in the taking or appropriation of title to, and possession of, theexpropriated property; but no cogent reason appears why the said power maynot be availed of to impose only a burden upon the owner of condemnedproperty, without loss of title and possession. It is unquestionable that realproperty may, through expropriation, be subjected to an easement of right of


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way. The use of the PLDT's lines and services to allow inter-serviceconnection between both telephone systems is not much different. In eithercase private property is subjected to a burden for public use and benefit. If,under section 6, Article XIII, of the Constitution, the State may, in the interest

of national welfare, transfer utilities to public ownership upon payment of just compensation, there is no reason why the State may not require a publicutility to render services in the general interest, provided just compensation ispaid therefor. Ultimately, the beneficiary of the interconnecting servicewould be the users of both telephone systems, so that the condemnationwould be for public use.

The Bureau of Telecommunications, under section 78 (b) of Executive OrderNo. 94, may operate and maintain wire telephone or radio telephonecommunications throughout the Philippines by utilizing existing facilities in

cities, towns, and provinces under such terms and conditions or arrangementwith present owners or operators as may be agreed upon to the satisfaction ofall concerned; but there is nothing in this section that would exclude resort tocondemnation proceedings where unreasonable or unjust terms andconditions are exacted, to the extent of crippling or seriously hampering theoperations of said Bureau.

A perusal of the complaint shows that the Republic's cause of action ispredicated upon the radio telephonic isolation of the Bureau's facilities fromthe outside world if the severance of interconnection were to be carried out

by the PLDT, thereby preventing the Bureau of Telecommunications fromproperly discharging its functions, to the prejudice of the general public. Savefor the prayer to compel the PLDT to enter into a contract (and the prayer isno essential part of the pleading), the averments make out a case forcompulsory rendering of inter-connecting services by the telephone companyupon such terms and conditions as the court may determine to be just. Andsince the lower court found that both parties "are practically at one thatdefendant (PLDT) is entitled to reasonable compensation from plaintiff for thereasonable use of the former's telephone facilities" (Decision, Record on

Appeal, page 224), the lower court should have proceeded to treat the caseas one of condemnation of such services independently of contract andproceeded to determine the just and reasonable compensation for the same,instead of dismissing the petition.

This view we have taken of the true nature of the Republic's petitionnecessarily results in overruling the plea of defendant-appellant PLDT that the


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court of first instance had no jurisdiction to entertain the petition and that theproper forum for the action was the Public Service Commission. That body,under the law, has no authority to pass upon actions for the taking of privateproperty under the sovereign right of eminent domain. Furthermore, while

the defendant telephone company is a public utility corporation whosefranchise, equipment and other properties are under the jurisdiction,supervision and control of the Public Service Commission (Sec. 13, PublicService Act), yet the plaintiff's telecommunications network is a publicservice owned by the Republic and operated by an instrumentality of theNational Government, hence exempt, under Section 14 of the Public ServiceAct, from such jurisdiction, supervision and control. The Bureau ofTelecommunications was created in pursuance of a state policy reorganizingthe government offices —

to meet the exigencies attendant upon the establishment of the freeand independent Government of the Republic of the Philippines, andfor the purpose of promoting simplicity, economy and efficiency in itsoperation (Section 1, Republic Act No. 51) —

and the determination of state policy is not vested in the Commission(Utilities Com. vs. Bartonville Bus Line, 290 Ill. 574; 124 N.E. 373).

Defendant PLDT, as appellant, contends that the court below was in error innot holding that the Bureau of Telecommunications was not empowered toengage in commercial telephone business, and in ruling that said defendantwas not justified in disconnecting the telephone trunk lines it had previouslyleased to the Bureau. We find that the court a quo ruled correctly in rejectingboth assertions.

Executive Order No. 94, Series of 1947, reorganizing the Bureau ofTelecommunications, expressly empowered the latter in its Section 79,subsection (b), to "negotiate for, operate and maintain wire telephone orradio telephone communication service throughout the Philippines", and, insubsection (c), "to prescribe, subject to approval by the Department Head,equitable rates of charges for messages handled by the system and/or for timecalls and other services that may be rendered by the system". Nothing inthese provisions limits the Bureau to non-commercial activities or prevents itfrom serving the general public. It may be that in its original prospectuses theBureau officials had stated that the service would be limited to governmentoffices: but such limitations could not block future expansion of the system,as authorized by the terms of the Executive Order, nor could the officials of


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the Bureau bind the Government not to engage in services that areauthorized by law. It is a well-known rule that erroneous application andenforcement of the law by public officers do not block subsequent correctapplication of the statute (PLDT vs. Collector of Internal Revenue, 90 Phil.

676), and that the Government is never estopped by mistake or error on thepart of its agents (Pineda vs. Court of First Instance of Tayabas, 52 Phil. 803,807; Benguet Consolidated Mining Co. vs. Pineda, 98 Phil. 711, 724).

The theses that the Bureau's commercial services constituted unfaircompetition, and that the Bureau was guilty of fraud and abuse under itscontract, are, likewise, untenable.

First, the competition is merely hypothetical, the demand for telephoneservice being very much more than the supposed competitors can supply. Aspreviously noted, the PLDT had 20,000 pending applications at the time, and

the Bureau had another 5,000. The telephone company's inability to meetthe demands for service are notorious even now. Second, the charter of thedefendant expressly provides:

SEC. 14. The rights herein granted shall not be exclusive, and therights and power to grant to any corporation, association or personother than the grantee franchise for the telephone or electricaltransmission of message or signals shall not be impaired or affected bythe granting of this franchise: — (Act 3436)

And third, as the trial court correctly stated, "when the Bureau ofTelecommunications subscribed to the trunk lines, defendant knew or shouldhave known that their use by the subscriber was more or less public and allembracing in nature, that is, throughout the Philippines, if not abroad"(Decision, Record on Appeal, page 216).

The acceptance by the defendant of the payment of rentals, despite itsknowledge that the plaintiff had extended the use of the trunk lines tocommercial purposes, continuously since 1948, implies assent by thedefendant to such extended use. Since this relationship has been maintainedfor a long time and the public has patronized both telephone systems, andtheir interconnection is to the public convenience, it is too late for thedefendant to claim misuse of its facilities, and it is not now at liberty tounilaterally sever the physical connection of the trunk lines.

..., but there is high authority for the position that, when such physicalconnection has been voluntarily made, under a fair and workablearrangement and guaranteed by contract and the continuous line has


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come to be patronized and established as a great public convenience,such connection shall not in breach of the agreement be severed byone of the parties. In that case, the public is held to have such aninterest in the arrangement that its rights must receive due

consideration. This position finds approval in State ex rel. vs.Cadwaller, 172 Ind. 619, 636, 87 N.E. 650, and is stated in theelaborate and learned opinion of Chief Justice Myers as follows: "Suchphysical connection cannot be required as of right, but if suchconnection is voluntarily made by contract, as is here alleged to be thecase, so that the public acquires an interest in its continuance, the actof the parties in making such connection is equivalent to a declarationof a purpose to waive the primary right of independence, and itimposes upon the property such a public status that it may not be

disregarded" — citing Mahan v. Mich. Tel. Co., 132 Mich. 242, 93N.W. 629, and the reasons upon which it is in part made to rest arereferred to in the same opinion, as follows: "Where private property isby the consent of the owner invested with a public interest or privilegefor the benefit of the public, the owner can no longer deal with it asprivate property only, but must hold it subject to the right of the publicin the exercise of that public interest or privilege conferred for theirbenefit." Allnut v. Inglis (1810) 12 East, 527. The doctrine of this earlycase is the acknowledged law. (Clinton-Dunn Tel. Co. v. Carolina Tel.

& Tel. Co., 74 S.E. 636, 638).It is clear that the main reason for the objection of the PLDT lies in the factthat said appellant did not expect that the Bureau's telephone system wouldexpand with such rapidity as it has done; but this expansion is no ground forthe discontinuance of the service agreed upon.

The last issue urged by the PLDT as appellant is its right to compensation forthe use of its poles for bearing telephone wires of the Bureau ofTelecommunications. Admitting that section 19 of the PLDT charter reservesto the Government —

the privilege without compensation of using the poles of the granteeto attach one ten-pin cross-arm, and to install, maintain and operatewires of its telegraph system thereon; Provided, however , That theBureau of Posts shall have the right to place additional cross-arms andwires on the poles of the grantee by paying a compensation, the rate ofwhich is to be agreed upon by the Director of Posts and the grantee; —


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the defendant counterclaimed for P8,772.00 for the use of its poles by theplaintiff, contending that what was allowed free use, under the aforequotedprovision, was one ten-pin cross-arm attachment and only for plaintiff'stelegraph system, not for its telephone system; that said section could not

refer to the plaintiff's telephone system, because it did not have suchtelephone system when defendant acquired its franchise. The implication ofthe argument is that plaintiff has to pay for the use of defendant's poles ifsuch use is for plaintiff's telephone system and has to pay also if it attachesmore than one (1) ten-pin cross-arm for telegraphic purposes.

As there is no proof that the telephone wires strain the poles of the PLDTmore than the telegraph wires, nor that they cause more damage than thewires of the telegraph system, or that the Government has attached to thepoles more than one ten-pin cross-arm as permitted by the PLDT charter, we

see no point in this assignment of error. So long as the burden to be borne bythe PLDT poles is not increased, we see no reason why the reservation infavor of the telegraph wires of the government should not be extended to itstelephone lines, any time that the government decided to engage also in thiskind of communication.

In the ultimate analysis, the true objection of the PLDT to continue the linkbetween its network and that of the Government is that the latter competes"parasitically" (sic) with its own telephone services. Considering, however,that the PLDT franchise is non-exclusive; that it is well-known that defendant

PLDT is unable to adequately cope with the current demands for telephoneservice, as shown by the number of pending applications therefor; and thatthe PLDT's right to just compensation for the services rendered to theGovernment telephone system and its users is herein recognized andpreserved, the objections of defendant-appellant are without merit. Touphold the PLDT's contention is to subordinate the needs of the generalpublic to the right of the PLDT to derive profit from the future expansion of itsservices under its non-exclusive franchise.

WHEREFORE, the decision of the Court of First Instance, now under appeal,is affirmed, except in so far as it dismisses the petition of the Republic of thePhilippines to compel the Philippine Long Distance Telephone Company tocontinue servicing the Government telephone system upon such terms, andfor a compensation, that the trial court may determine to be just, includingthe period elapsed from the filing of the original complaint or petition. Andfor this purpose, the records are ordered returned to the court of origin for


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further hearings and other proceedings not inconsistent with this opinion. Nocosts.Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando,Capistrano, Teehankee and Barredo, JJ., concur.

FIRST DIVISION //G.R. No. L-40424 June 30, 1980 R. MARINO CORPUS,petitioner,vs.COURT OF APPEALS and JUAN T. DAVID,respondents

MAKASIAR, J.: This is a petition for review on certiorari of the decision of the Court of

Appeals promulgated on February 14, 1975 in CA-G.R. No. 40583-R,affirming the decision of the court of Instance of Manila, Branch V. datedseptember 4, 1967, in Civil Case no. 61802 entitled "Juan T. David,plaintiff,versus R. Mariano Corpus, defendant', for the recovery of attorneys fees forprofessional services rendered by the plaintiff, private respondent herein, todefendant, petitioner herein.AHaving been close friends, aside from being membres Civil Liberties Union,petitioner Corpus intimately calls respondent David by his nickname

"Juaning" and the latter addresses the former simply as "Marino".The factual setting of this case is stated in the decision of the lower court,thus:

It appears that in March, 1958, the defendant was chargedadministratively by several employee of the Central Bank ExportDepartment of which the defendant is the director. The defendantwas represented by Atty. Rosauro Alvarez. Pending theinvestigation and effective March 18, 1958, he defendant wassuspended from office. After the investigating committee foundthe administrative charges to be without merit, and subsequentlyrecommended the immediate reinstatement of the defendant, thethen Governor of Central Bank, Miguel Cuaderno, Sr.,recommended that the defendant be considered resigned as onthe ground that he had lost confidence in him. The Monetary


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Board, by a resolution of July 20, 1959, declared the defendantas resigned as of the date of suspension.On August 18, 1959, the defendant, thru Atty. Alvarez, filed theCourt of First Instance of Manila a petition for certiorari,

mandamus and quo warranto with preliminary mandatoryinjuction and damages against Miguel Cuaderno, Sr., the CentralBank and Mario Marcos who was appointed to the position of thedefendant, said case having been docketed as Civil Case No.41226 and assigned to Branch VII presided over by JudgeGregorio T. Lantin. On September 7, 1959, the respondent filed amotion to dismiss the petition, alleging among other grounds, thefailure of the defendant to exhaust, available administrativeremedies (Exh. X). On September 25, 1959, the defendant, thru

Atty. Alvarez, filed his opposition to the said motion. On March17, 1960, during the course of the presentation of the evidencefor the petition for a writ of preliminary mandatory injunction,Atty. Alvarez manifested that the defendant was abandoning hisprayer for a writ of preliminary mandatory injunction and askedfor a ruling on the motion to dismiss. On June 14, 1960, JudgeLantin dismissed Civil Case No. 41226 for failure to exhaust sheadministrative remedies available to the herein defendant.On June 24, 1960, Atty. Alverez received a copy of the order of

dismissal It was at this state that the plaintiff entered into the caseunder circumstances about which the parties herein have givendivergent versions.According to the plaintiff, six or seven days prior to the expirationof the period for appeal from the order of dismissal, he chancedto meet the late Rafael Corpus, father of the defendant, at theTaza de Oro coffee shop. After they talked about the defendant'shaving lost his case before Judge Lantin, and knowing that theplaintiff and the defendant were both members of the CivilLiberties Union, Rafael Corpus requested the plaintiff to go overthe case and further said that he would send his son, the hereindefendant, to the plaintiff to find out what could be done aboutthe case. The defendant called up the plaintiff the followingmorning for an appointment, and the plaintiff agreed to am himin the latter's office. At said conference, the defendant requested


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the plaintiff to handle the case because Atty. Alvarez had alreadybeen disenchanted and wanted to give up the case. Although atfirst reluctant to handle the case, the plaintiff finally agreed oncondition that he and Atty. Alverez would collaborate in the

case.The defendant's version of how the plaintiff came into the case isas follows:After the order of dismissal issued by Judge Lantin was publishedin the newspapers, the plaintiff sought a conference with thedefendant at Taza de Oro, but the defendant told him that hewould rather meet the plaintiff at the Swiss Inn. Even before thecase was dismissed the plaintiff had shown interest in the sameby being present during the hearings of said case in the sala of

Judge Lantin When the plaintiff and the defendant met at theSwiss Inn, the plaintiff handed the defendant a memorandumprepared by him on how he can secure the reversal of the orderof dismissal by means of a formula stated in said memorandum.During the said occasion the plaintiff scribbled some notes on apaper napkin (Exhibit 19). On June 28, 1960, the defendantwrote the plaintiff, sending with it a copy of the order of JudgeLantin dated June 14, 1960 (Exhibit S Inasmuch as said letter,Exhibit S already mentions the 'memorandum' of the plaintiff, the

defendant contends that it was not six or seven days prior to theexpiration of the period of appeal (which should be on or about

July 2 or 3, 1960) but on a date even earlier than June 28, 1960that the plaintiff and the defendant met together to discuss thelatter's case.Laying aside for the moment the true circumstances under whichthe plaintiff started rendering professional services to thedefendant, the undisputed evidence shows that on July 7, 1960,the plaintiff filed a motion for reconsideration of the order ofdismissal under the joint signatures of the plaintiff and Atty.Alverez (Exhibit B). The plaintiff argued the said motion duringthe hearing thereof On August 8, 1960, he file a 13-page'Memorandum of Authorities in support of said motion forreconsideration (Exhibit C). A 3-page supplemental memorandum


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of authorities was filed by the plaintiff on September 6, 1960(Exhibit D)On November 15, 1960, Judge Lantin denied the motion forreconsideration. On November 19, 1960, the plaintiff perfected

the appeal from the order of dismissal dated June 14, 1960. Forpurposes of said appeal the plaintiff prepared a 232-page briefand submitted the same before the Supreme Court in Baguio Cityon April 20, 1961. The plaintiff was the one who orally arguedthe case before the Supreme Court. In connection with the trip toBaguio for the said oral argument, the plaintiff used his car hichbroke down and necessitated extensive repairs paid for by theplaintiff himself.On March 30, 1962, the Supreme Court promulgated its decision

reversing the order of dismissal and remanding the case forfurther proceedings. On April 18, 1962, after the promulgation ofthe decision of the Supreme Court reversing the dismissal of thecase the defendant wrote the plaintiff the following letter, Exhibit'Q'. .x x x x x x x x xDear JuaningWill you please accept the attached check in the amount of TWOTHOUSAND P2,000.00) PESOS for legal services in the handlingof L-17860 recently decided by the Court? I wish I could givemore but as y u know we were banking on a SC decisionreinstating me and reimburse my backstage I had been wantingto offer some token of my appreciation of your legal fight for andin my behalf, and it was only last week that I receivedsomething on account of a pending claim.Looking forward to a continuation of the case in the lower court, Iremain

Sincerely yours, Illegiblex x x x x x x x xIn a reply letter dated April 25, 1962, the plaintiff returned thecheck, explaining said act as follows:April 25, 1962My dear Marino:


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Yesterday, I received your letter of April 18th with its enclosure. Iwished thank you for your kind thoughts, however, please don'ttake offense if I have to return the check. I will explain.When I decided to render professional services in your case, I

was motivated by the value to me of the very intimate relationswhich you and I have enjoyed during the past many years. It wasnor primarily, for a professional fee. Although we were not fortunate to have obtained a decision inyour case which should have put an end to it. I feel that we havereason to be jubilant over the outcome, because, the finalfavorable outcome of the case seems certain irrespective of thelength of time required to terminate the same.Your appreciation of the efforts I have invested in your case isenough compensation therefor, however, when you shall haveobtained a decision which would have finally resolved the case inyour favor, remembering me then will make me happy. In themeantime, you will make me happier by just keeping the check.Sincerely yours,

JUANINGx x x x x x x x xWhen the case was remanded for further proceedings before

Judge Lantin, the evidence for the defendant was presented by Atty. 'Alvarez with the plaintiff cooperating in the same-'On June24, 1963, Judge Lantin rendered his decision in favor of thedefendant declaring illegal the resolution of the Monetary Boardof July 20, 1959, and ordering the defendant's reinstatement andthe payment of his back salaries and allowances - Therespondents in said Civil Case No. 41226 filed a motion forreconsideration which was opposed by the herein plaintiff. Thesaid decision was appealed by the respondents, as well as by the

herein defendant with respect to the award of P5, 000. 00attorney's feed The plaintiff prepared two briefs for submission tothe Court of Appeals one as appellee (Exhibit H) and the other asappellant (Exhibit H-1). The Court of Appeal however, certifiedthe case to the Supreme Court in 1964 .On March 31, 1965, the Supreme Court rendered a decisionaffirming the judgment of the Court of first Instance of Manila.


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On April 19, 1965 the plaintiffs law office made a formal decommand upon the defendant for collection of 50% of theamount recovered by the defendant as back salaries and otheremoluments from the Central Bank (Exhibit N). This letter was

written after the defendant failed to appear at an appointmentwith the plaintiff so that they could go together to the CentralBank to claim the possession of the office to which the defendantwas reinstated and after a confrontation in the office of the plaintiff wherein the plaintiff was remanding 50% of the backsalaries and other emoluments amounting to P203,000.00recoverable by the defendant. The defendant demurred to thisdemand inasmuch as he had plenty of outstanding obligationsand that his tax liability for said back salaries was around

P90,000.00, and that he expected to net only around P10,000.00after deducting all expenses and taxes.On the same date, April 19,1965 the plaintiff wrote the Governorfor of Central Bank requesting that the amount representing thesack salaries of the defendant be made out in two one in favor ofthe defendant and the other representing the professional feesequivalent to 50% of the said back salaries being claimed by theplaintiff (Exhibit 8). F to obtain the relief from the Governor ofCentral Bank, the plaintiff instituted this action before this Court

on July 20, 1965 (Emphasis supplied).As therein defendant, herein petitioner Marino Corpus filed in August 5, 1965an answer with counter-claim. On August 30, 1965, private respondent Atty.

Juan T. David, plaintiff therein, filed a reply with answer to the counterclaimof petitioner.After due trial, the lower court rendered judgment on September 4, 1967, thedispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, ordering thedefendant to pay plaintiff the sum of P30,000.00 in the conceptof professional fees, and to pay the costs (pp. 112-113, CARecord on Appeal p. 54, rec.)

After receipt on September 7, 1967 of a copy of the aforequoted judgment,petitioner Marino Corpus, defendant therein, filed on October 7, 1967 anotice of appeal from said judgment to the Court of Appeals. In his appeal,he alleged that the lower court erred:


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1. In not holding that the plaintiff's professional services wereoffered and rendered gratuitously;2. Assuming that plaintiff is entitled to compensation — inholding that he was entitled to attorney's fees in the amount of

P30,000.00 when at most he would be entitled to onlyP2,500.00;3. In not dismissing plaintiff's complaint; and4. In not awarding damages and attorney's fees to the defendant(p. 2, CA Decision, p. 26, rec.)

Likewise, private respondent Atty. Juan T. David, plaintiff therein, appealedto the Court of Appeals on October 9, 1967 assigning one error, to wit:

The lower court erred in ordering the defendant to pay theplaintiff only the sum of P30,000.00 in the concept of attorney'sfees (p. 1, CA Decision, p. 25, rec.).

On February 14, 1975, respondent Court of Appeals promulgated its decisionaffirming in toto the decision of the lower court, with costs against petitionerMarino Corpus (Annex A, Petition for Certiorari, p. 25, rec.)Hence, the instant petition for review on certiorari, petitioner — contendingthat the respondent Court of Appeals erred in finding that petitioner acceptedprivate respondent's services "with the understanding of both that he (privaterespondent) was to be compensated" in money; and that the fee of private

respondent was contingent (pp. 3 & 5, Petition for Certiorari, pp. 17 & 19,rec.).On October 1, 1975, the case was deemed submitted for decision (p. 177,rec.), after the parties filed their respective memoranda.BOn January 31, 1978, private respondent Atty. Juan T. David filed a petitionto remand the case to the court a quo for execution of the latter's decision inCivil Case No. 61802, dated September 4, 1967, alleging that said decision isalready deemed affirmed pursuant to Section 11(2), Article X of the New

Constitution by reason of the failure of this Tribunal to decide the case within18 months. Then on July 7, 1978, another petition to remand the case to thelower court to execution was filed by herein private respondent.Subsequently, private respondent Atty. Juan T. David filed with The court aquo a motion dated September 13, 1978 for the issuance of a writ ofexecution of the lower court's decision in the aforesaid civil case, also


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invoking Section 11 (2), Article X of the 1973 Constitution. In an order datedSeptember 19, 1978, the lower court, through Judge Jose H. Tecson, directedthe issuance of a writ of execution. The writ of execution was issued onOctober 2, 1978 and a notice of garnishment was also issued n October 13,

1978 to garnish the bank deposits of herein petitioner Marino Corpus in theCommercial Bank and Trust Company, Makati Branch.It appears that on October 13, 1978, herein petitioner filed a motion forreconsideration of the September 19, 1978 order. Private respondent Atty.

Juan T. David filed on October 19, 1978 an opposition to said motion andherein petitioner filed a reply on October 30, 1978. The lower court deniedsaid motion for reconsideration in its over dated November 7, 1978.It appears also that in a letter dated October 18, 1978, herein petitionerMarino Corpus requested this Court to inquire into what appears to be an

irregularity in the issuance of the aforesaid garnishment notice to theCommercial Bank and Trust Company, by virtue of which his bank depositswere garnished and he was prevented from making withdrawals from hisbank account.In OUR resolution of November 3, 1978, WE required private respondentAtty. Juan T. David and the Commercial Bank and Trust Company tocomment on petitioner's letter, and for the bank to explain why it did nothonor petitioner's withdrawals from his bank deposits when no garnishmentorder has been issued by the Supreme Court. This Court further inquired fromthe lower court whether it has issued any garnishment order during thependency of the present case.On November 27, 1978, the Commercial Bank and Trust Company filed itscomment which was noted in the Court's resolution of December 4, 1978. Insaid resolution, the Court also required Judge Jose H. Tecson to comply withthe resolution of November 3, 1978, inquiring as to whether he had issuedany garnishment order, and to explain why a writ of execution was issueddespite the pendency of the present case before the Supreme Court.Further, WE required private respondent Atty. Juan T. David Lo explain hisfailure to file his comment, and to file the same as directed by the resolutionof the Court dated November 3, 1978. Private respondent's compliance cameon December 13, 1978, requesting to be excused from the filing of hiscomment because herein petitioner's letter was unverified. Judge Tecson'scompliance was filed on December 15, 1978, to which herein petitionerreplied on January 11, 1979.


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In OUR resolution dated January 3, 1979, WE set aside the order of Judge Jose H. Tecson dated September 19, 1978, the writ of execution as well asthe notice of garnishment, and required private respondent Atty. Juan T.David to show cause why he should not be cited for contempt for his failure

to file his comment as directed by the resolution of the Court datedDecember 4, 1978, and for filing a motion for execution knowing that thecase is pending appeal and review before this Court Likewise, the Courtrequired Judge Jose H. Tecson to show cause why he should not be cited forcontempt for issuing an order directing the issuance of a writ of executionand for issuing such writ despite the pendency of the present case in theSupreme Court.On January 12, 1979, Judge Jose H. Tecson filed his compliance explanationas directed by the aforesaid resolution of January 3, 1979, while private

respondent Atty. Juan T. David filed on January 30, 19 79 his complianceand motion for reconsideration after the Court has granted him an extensionof time to file his compliance.Private respondent Atty. Juan T. David filed on February 28, 1979, a petitionpraying that the merits of his compliance be resolved by the Court en banc .Subsequently, on March 26, 1979, another petition was filed by hereinprivate respondent asking the Chief

Justice and the members of the First Division to inhibit themselves fromparticipating in the determination of the merits of his compliance and for itsmerits to be resolved by the Court en banc .CThe main thrust of this petition for review is whether or not privaterespondent Atty. Juan T. David is entitled to attorney's fees.Petitioner Marino Corpus contends that respondent David is not entitled toattorney's fees because there was no contract to that effect. On the otherhand, respondent David contends that the absence of a formal contract forthe payment of the attorney's fees will not negate the payment thereofbecause the contract may be express or implied, and there was an impliedunderstanding between the petitioner and private respondent that the formerwill pay the latter attorney's fees when a final decision shall have beenrendered in favor of the petitioner reinstating him to -his former position inthe Central Bank and paying his back salaries.I


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WE find respondent David's position meritorious. While there was expressagreement between petitioner Corpus and respondent David as regardsattorney's fees, the facts of the case support the position of respondent Davidthat there was at least an implied agreement for the payment of attorney's

fees.Petitioner's act of giving the check for P2,000.00 through his aforestated April18, 1962 letter to respondent David indicates petitioner's commitment to paythe former attorney's fees, which is stressed by expressing that "I wish I couldgive more but as you know we were banking on a SC decision reinstating meand reimbursing my back salaries This last sentiment constitutes a promise topay more upon his reinstatement and payment of his back salaries. Petitionerended his letter that he was "looking forward to a continuation of the case inthe lower court, ... to which the certiorari-mandamus-quo warranto case was

remanded by the Supreme Court for further proceedings.Moreover, respondent David's letter-reply of April 25, 1962 confirms thepromise of petitioner Corpus to pay attorney's fees upon his reinstatementand payment of back salaries. Said reply states that respondent Daviddecided to be his counsel in the case because of the value to him of theirintimate relationship over the years and "not, primarily, for a professionalfee." It is patent then, that respondent David agreed to render professionalservices to petitioner Corpus secondarily for a professional fee. This isstressed by the last paragraph of said reply which states that "however, when

you shall have obtained a decision which would have finally resolved thecase in your favor, remembering me then will make me happy. In themeantime, you will make me happier by just keeping the check." Thereafter,respondent David continued to render legal services to petitioner Corpus, incollaboration with Atty. Alverez until he and Atty. Alvarez secured thedecision directing petitioner's reinstatement with back salaries, which legalservices were undisputedly accepted by, and benefited petitioner.Moreover, there is no reason to doubt respondent David's assertion that DonRafael Corpus, the late father of petitioner Corpus, requested respondent tohelp his son, whose suit for reinstatement was dismissed by the lower court;that pursuant to such request, respondent conferred in his office withpetitioner, who requested respondent to handle the case as his lawyer, Atty.Alvarez, was already disenchanted and wanted to give up the case; and thatrespondent agreed on the case. It would have been unethical for respondentto even offer his services when petitioner had a competent counsel in the


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person of Atty. Alvarez, who has been teaching political, constitutional andadministrative law for over twenty years.Likewise, it appears that after the Supreme Court affirmed on March 31, 1965the order of the lower court reinstating petitioner Corpus with back salaries

and awarding attorney's fees of P5,000.00, respondent David made a writtendemand on April 19, 1965 upon petitioner Corpus for the payment of hisattorney's fees in an amount equivalent to 50% of what was paid as backsalaries (Exh. N p. 75, Folder of Exhibits, Civil Case No. 61802). PetitionerCorpus, in his reply dated May 7, 1965 to the aforesaid written demand,while disagreeing as to the amount of attorney's fees demanded, did notcategorically deny the right of respondent David to attorney's fees but on thecontrary gave the latter the amount of P2,500.00, which is one-half ( ! ) of thecourt-awarded attorney's fees of P5,000.00, thus impliedly admitting the right

of respondent David to attorney's fees (Exh. K, p. 57, Folder of Exhibits, CivilCase No. 61802).It is further shown by the records that in the motion filed on March 5, 1975by petitioner Corpus before the Court of Appeals for the reconsideration of itsdecision the order of the lower court granting P30,000.00 attorney's fee's torespondent David, he admitted that he was the first to acknowledge thatrespondent David was entitled to tion for legal services rendered when hesent the chock for P2,000.00 in his letter of April 18, 1962, and he is still tocompensate the respondent but only to the extent of P10,000.00 (p. 44, rec.).

This admission serves only to further emphasize the fact that petitionerCorpus was aware all the time that he was liable to pay attorney's fees torespondent David which is therefore inconsistent with his position that theservices of respondent David were gratuitous, which did not entitle saidrespondent to compensation.It may be advanced that respondent David may be faulted for not reducingthe agreement for attorney's fees with petitioner Corpus in writing. However,this should be viewed from their special relationship. It appears that bothhave been friends for several years and were co-members of the CivilLiberties Union. In addition, respondent David and petitioner's father, thelate Rafael Corpus, were also close friends. Thus, the absence of an expresscontract for attorney's fees between respondent David and petitioner Corpusis no argument against the payment of attorney's fees, considering their closerelationship which signifies mutual trust and confidence between them.II


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Moreover, the payment of attorney's fees to respondent David may also be justified by virtue of the innominate contract of facio ut des (I do and yougive which is based on the principle that "no one shall unjustly enrich himselfat the expense of another." innominate contracts have been elevated to a

codal provision in the New Civil Code by providing under Article 1307 thatsuch contracts shall be regulated by the stipulations of the parties, by thegeneral provisions or principles of obligations and contracts, by the rulesgoverning the most analogous nominate contracts, and by the customs of thepeople. The rationale of this article was stated in the 1903 case of Perez vs.Pomar (2 Phil. 982). In that case, the Court sustained the claim of plaintiffPerez for payment of services rendered against defendant Pomar despite theabsence of an express contract to that effect, thus:

It does not appear that any written contract was entered into

between the parties for the employment of the plaintiff asinterpreter, or that any other innominate contract was enteredinto butwhethertheplaintiffsservicesweresolicitedorwhethertheywereoffered to the defendant for his assistance, inasmuch as these serviceswere accepted and made use of by the latter, we must considerthat there was a tacit and mutual consent as to the rendition ofthe services. This gives rise to the obligation upon the personbenefited by the services to make compensation therefor, since

the bilateral obligation to render service as interpreter, on the onehand, and on the other to pay for the service rendered, is therebyincurred. (Arts. 1088, 1089, and 1262 of the Civil Code).x x x x x x x x x... Whether the service was solicited or offered, the fact remainsthat Perez rendered to Pomar services as interpreter. As it doesnot appear that he did this gratuitously, the duty is imposed uponthe defendant, he having accepted the benefit of the service, topay a just compensation therefor, by virtue of the innominatecontract of facio ut des implicitly established.x x x x x x x x x... because it is a well-known principle of law that no one shouldpermitted to enrich himself to the damage of another" (emphasissupplied; see also Tolentino, Civil Code of the Philippines, p.388, Vol. IV 119621, citing Estate of Reguera vs. Tandra 81 Phil.


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404 [1948]; Arroyo vs. Azur 76 Phil. 493119461; and Perez vs.Pomar. 2 Phil. 682 [1903]).

WE reiterated this rule in Pacific Merchandising Corp. vs. ConsolacionInsurance & Surety Co., Inc . (73 SCRA 564 [1976]) citing the case of Perez v.

Pomar, supra thus:Where one has rendered services to another, and these servicesare accepted by the latter, in the absence of proof that the servicewas rendered gratuitously, it is but just that he should pay areasonable remuneration therefor because 'it is a well-knownprinciple of law, that no one should be permitted to enrichhimself to the damage of another (emphasis supplied).

Likewise, under American law, the same rule obtains (7 CJS 1079; FL Still &Co. v. Powell, 114 So 375).IIIThere was no contract for contingent fee between Corpus and respondentDavid. Contingent fees depend on an express contract therefor. Thus, "anattorney is not entitled to a percentage of the amount recovered by his clientin the absence of an express contract to that effect" (7 C.J.S. 1063 citingThurston v. Travelers Ins. Co., 258 N.W. 66, 128 Neb. 141).

Where services were rendered without any agreement whateveras to the amount or terms of compensation, the attorney is notacting under a contract for a contingent fee, and a letter by theattorney to the client stating that a certain sum would be areasonable amount to charge for his services and adding that arate of not less than five percent nor more than ten would bereasonable and customary does not convert the originalagreement into a contract for a contingent fee (7 C.J.S. 1063citing Fleming v. Phinizy 134 S.E. 814).

While there was no express contract between the parties for the payment ofattorney's fees, the fact remains that respondent David rendered legal

services to petitioner Corpus and therefore as aforestated, is entitled tocompensation under the innominate contract of facio lit des And such beingthe case, respondent David is entitled to a reasonable compensation.IVIn determining a reasonable fee to be paid to respondent David ascompensation for his services, on a quantum meruit basis, it is proper to


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consider all the facts and circumstances obtaining in this case particularly thefollowing:The extent of the services rendered by respondent David should beconsidered together with the extent of the services of Petitioner's other

counsel, Atty. Rosauro Alvarez, It is undisputed that Atty. Rosauro Alvarezhad rendered legal services as principal counsel for more shall six (6) yearswhile respondent David has rendered legal services as collaborating counselfor almost four (4) years. It appears that Atty. Alvarez started to render legalservices after the administrative case was filed on March 7, 1958 againstpetitioner Corpus. He represented petitioner Corpus in the hearing of saidcase which was conducted from May 5, 1958 to October 8, 1958, involving56 sessions, and this resulted in the complete exoneration by theInvestigating Committee of all the charges against the petitioner. It appears

further that after the Monetary Board, in its resolution of July 20, 1959,declared petitioner Corpus as being considered resigned from the service,Atty. Alvarez instituted on August 18, 1958 Civil Case No. 41126 in theCourt of First Instance of Manila for the setting aside of the aforestatedresolution and for the reinstatement of petitioner Corpus. Atty. Alvarezactively participated in the proceedings.On the other hand, respondent David entered his appearance as counsel forpetitioner Corpus sometime after the dismissal on June 14, 1960 of theaforesaid civil case. From the time he entered his appearance, both he and

Atty. Alvarez rendered legal services to petitioner Corpus in connection withthe appeals of the aforementioned civil case to the Court of Appeals and tothe Supreme Court. The records disclose that in connection with the appealfrom the June 14, 1960 order of dismissal, respondent David prepared andsigned pleadings although the same were made for and on behalf of Atty.Alvarez and himself And it is not far-fetched to conclude that all appearanceswere made by both counsels considering that Atty. Alverez was the principalcounsel and respondent David was the collaborating counsel. Thus, whenthe case was called for oral argument on April 20, 1961 before the Supreme

Court, respondent David and Atty. Alverez appeared for petitioner Corpusalthough it was David who orally argued the case.When the Supreme Court, in its decision of March 30, 1962, remanded thecase to the lower court for further it was Atty. Alverez who conducted thepresentation of evidence while respondent David assisted him The recordsalso review that respondent David prepared and signed for Atty. Alverez and


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himself. certain pleadings, including a memorandum. Moreover, after thelower court rendered judgment on June 2 4, 1963 ordering the reinstatementand payment of back salaries to petitioner Corpus and awarding himP5,000.00 by way of attorney's fees, both petitioner Corpus and the

respondents in said case appealed the judgment. At that stage, respondentDavid again prepared and signed for Atty. Alvarez and himself, the necessarypleadings, including two appeal briefs. And in addition, he made oralarguments in the hearings of motions filed in the lower court before therecords of the case were forwarded to the appellate court. Furthermore, whileit appears that it was Atty. Alvarez who laid down the basic theory andfoundation of the case of petitioner Corpus in the administrative case andlater in the civil case, respondent David also advanced legal propositions.Petitioner Corpus contends that said legal propositions were invariably

rejected by the courts. This is, however, of no moment because the factremains that respondent David faithfully rendered legal services for thesuccess of petitioner's case.The benefits secured for petitioner Corpus may also be considered inascertaining what should be the compensation of respondent David. It cannotbe denied that both Atty. Alvarez and respondent David were instrumental inobtaining substantial benefits for petitioner Corpus which consisted primarilyof his reinstatement, recovery of back salaries and the vindication of hishonor and reputation. But, note should also be taken of the fact that

respondent David came at the crucial stage when the case of petitionerCorpus was dismissed by the lower court.Atty. Rosauro Alvarez admittedly was paid by petitioner Corpus the sum ofP20,000.00 or at most P22,500.00 (T.s.n., Jan. 11, 1967, pp. 34-35; T.s.n.,Feb. 10, 1967, pp. 48-49). On the other hand, petitioner Corpus, after WEsuggested on August 15, 1975 that they settle the case amicably has, in hisSeptember 15, 1975 pleading filed before this Court (p. 166, rec.), manifestedhis willingness to pay P10,000.00 for the services of respondent David.However, respondent David has not manifested his intention to accept the

offer.In his complaint in the instant case, he asked for P75,000.00 as his attorney'sfees. The records reveal that petitioner Corpus actually received onlyP150,158.50 as back salaries and emoluments after deducting taxes as wellas retirement and life insurance premiums due to the GSIS. The amount thusclaimed by respondent David represents 50% of the amount actually


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received by petitioner Corpus. The lower court, however, awarded onlyP30,000.00 and it was affirmed by the Court of Appeals.Considering the aforestated circumstances, WE are of the opinion that thereasonable compensation of respondent David should be P20,000.00.

VWE find private respondent Juan T. David and Judge Jose H. Tecson,Presiding Judge of the Court of First Instance of Manila, Branch V, guilty ofcontempt of court.Respondent David filed on or about September 13, 1978 a motion with thecourt a quo for the issuance of a writ of execution to enforce its decision inCivil Case No 61802, subject of the present petition, knowing fully well thatit was then still pending appeal before this Court. In addition, no certificationthat the aforesaid decision is already deemed affirmed had as yet been issuedby the Chief Justice pursuant to Section 11, paragraph 2, Article X of the NewConstitution; because respondent David's petitions filed with the SupremeCourt on January 31, 1978 and on July 7, 1978 to remand the case to the trialcourt for execution and for the issuance of such certification had not yet beenacted upon as the same were still pending consideration by this Court. Infact, this Court has not as of this time made any pronouncement on theaforesaid provision of the New Constitution.This act of respondent David constitutes disrespect to, as well as disregard of,the authority of this Court as the final arbiter of all cases duly appealed to it,especially constitutional questions. It must be emphasized that as a memberof the Philippine Bar he is required "to observe and maintain the respect dueto the court of justice and judicial officers" (Section 20 (b), 138 of the RevisedRules of Court). Likewise, Canon 1 of. the Canons of Professional Ethicexpressly provide that: "It is the duty of the lawyer to maintain towards theCourts a respectful attitude, not for the sake of the temporary incumbent ofthe judgement office, but for the maintenance of its supreme importance."And this Court had stressed that "the duty of an attorney to the courts 'canonly be maintained by rendering no service involving any disrespect to the

judicial office which he is bound to uphold'" (Rheem of the Philippines v.Ferrer, 20 SCRA 441, 444 [1967] citing the case of Lualhati v. Albert, 67 Phil.86, 92 [1932]).Moreover, this Court takes judicial notice of the fact that herein respondentDavid, in the previous case of Integrated Construction Services, Inc. andEngineering Construction, Inc. v. Relova (65 SCRA 638 [1975]), had sent


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letters addressed to the then Chief Justice Querube C. Makalintal and later tothe late Chief Justice Fred Ruiz Castro, requesting for the issuance ofcertification on the basis of the aforementioned provision of the NewConstitution which were not given due consideration. And knowing this,

respondent David should have been more prudent and cautious in g with thecourt a quo any motion for execution.Furthermore, there was even a taint of arrogance and defiance on the part ofrespondent David in not filing his comment to the letter- complaint datedOctober 18, 1978 of petitioner Corpus, as required by this Court in itsNovember 3, 1978 and December 4,1978 resolutions which were dulyreceived by him, and instead, he sent on December 13, 1978 a letterrequesting to be excused from the filing of his comment on the lame excusethat petitioner's letter-complaint was not verified.

On the part of Judge Jose H. Tecson, his presumptuous and precipitate act ofgranting the motion for execution of dent David likewise constitutesdisrespect to, as well as of, the authority of this Court because he know for athat the case was still pending apply as the had not yet been remanded to itand that no certification has been issued by this Court. As a judicial officer,

Judge Tecson is charged with the knowledge of the fact that this Court has yetto make a definite pronouncement on Section 11, paragraph 2, Article X ofthe New Constitution. Judge Tecson should know that only the SupremeCourt can authoritatively interpret Section 11 (2) of Article X of the 1973

Constitution. Yet, Judge Tecson assumed the role of the Highest Court of theLand. He should be reminded of what Justice Laurel speaking for the Court,has said in People v. Vera (65 Phil 56, 82 [1937]):

A becoming modesty of inferior courts demands consciousrealization of the position that they occupy in the interrelationand operation of the integrated judged system of the nation.

It may also be added that the improvident act of respondent David in firingthe motion for execution and the precipitate act of Judge Tecson in issuingthe writ of execution are intriguing as they invite suspicion that there wasconnivance between the two. Respondent David would seem to imply thathis claim for attorney's fees should be given preference over the other camsnow pending in this Court. Certainly, such should not be the case becausethere are cases which by their nature require immediate or preferentialattention by this Tribunal like habeas corpus cases, labor cases and c casesinvolving death sentence, let alone cases involving properties and property


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rights of poor litigants pending decision or resolution long before the NewConstitution of 1973. Nobility and exempt forbearance were expected ofAtty. David, who is old and experienced in the practice of the legalprofession, from which he has derived a great measure. of economic well-

being and independenceConsequently, the filing of the motion for immediate tion and the issuance ofthe writ of execution constitute a defiance and usurpation of the jurisdictionof the Supreme Court. As a disciplinary measure for the preservation andvindication of the dignity of this Supreme Tribunal respondent Atty. Juan T.David should be REPRIMANDED for his precipitate action of filing a motionfor execution as well as Judge Jose H. Tecson for his improvident issuance ofa writ of execution while the case is pending appeal before the SupremeCourt, and a repetition of said acts would be dealt with more severely.

WHEREFORE, PETITIONER R. MARINO CORPUS IS HEREBY DIRECTED TOPAY RESPONDENT ATTY. JUAN T. DAVID THE SUM OF TWENTYTHOUSAND (P20,000.00) PESOS AS ATTORNEY'S FEES.RESPONDENT ATTY. JUAN T. DAVID AND JUDGE JOSE H. TECSON OFTHE COURT OF FIRST INSTANCE OF MANILA, BRANCH V, ARE HEREBYDECLARED GUILTY OF CONTEMPT AND ARE HEREBY REPRIMANDED,WITH A WARNING THAT REPETITION TION OF THE SAME OR SIMILARACTS WILL BE DEALT WITH MORE SEVERELY.COSTS AGAINST PETITIONER.SO ORDERED.

EN BANC //G.R. No. L-15127 May 30, 1961 EMETERIO CUI, plaintiff-appellant,vs.ARELLANO UNIVERSITY, defendant-appellee.G.A.S. Sipin, Jr., for plaintiff-appellant.E. Voltaire Garcia for defendant-appellee.

CONCEPCION, J .: Appeal by plaintiff Emeterio Cui from a decision of the Court of First Instanceof Manila, absolving defendant Arellano University from plaintiff's complaint,with costs against the plaintiff, and dismissing defendant's counter claim, forinsufficiency of proof thereon.In the language of the decision appealed from:


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The essential facts of this case are short and undisputed. As establishedby the agreement of facts Exhibits X and by the respective oral anddocumentary evidence introduced by the parties, it appears conclusivethat plaintiff, before the school year 1948-1949 took up preparatory

law course in the defendant University. After finishing his preparatorylaw course plaintiff enrolled in the College of Law of the defendantfrom the school year 1948-1949. Plaintiff finished his law studies in thedefendant university up to and including the first semester of the fourthyear. During all the school years in which plaintiff was studying law indefendant law college, Francisco R. Capistrano, brother of the motherof plaintiff, was the dean of the College of Law and legal counsel of thedefendant university. Plaintiff enrolled for the last semester of his lawstudies in the defendant university but failed to pay his tuition fees

because his uncle Dean Francisco R. Capistrano having severed hisconnection with defendant and having accepted the deanship andchancellorship of the College of Law of Abad Santos University,plaintiff left the defendant's law college and enrolled for the lastsemester of his fourth year law in the college of law of the Abad SantosUniversity graduating from the college of law of the latter university.Plaintiff, during all the time he was studying law in defendant universitywas awarded scholarship grants, for scholastic merit, so that hissemestral tuition fees were returned to him after the ends of semester

and when his scholarship grants were awarded to him. The wholeamount of tuition fees paid by plaintiff to defendant and refunded tohim by the latter from the first semester up to and including the firstsemester of his last year in the college of law or the fourth year, is intotal P1,033.87. After graduating in law from Abad Santos Universityhe applied to take the bar examination. To secure permission to takethe bar he needed the transcripts of his records in defendant ArellanoUniversity. Plaintiff petitioned the latter to issue to him the neededtranscripts. The defendant refused until after he had paid back the

P1,033 87 which defendant refunded to him as above stated. As hecould not take the bar examination without those transcripts, plaintiffpaid to defendant the said sum under protest. This is the sum whichplaintiff seeks to recover from defendant in this case.Before defendant awarded to plaintiff the scholarship grants as abovestated, he was made to sign the following contract covenant andagreement:


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"In consideration of the scholarship granted to me by the University, Ihereby waive my right to transfer to another school without havingrefunded to the University (defendant) the equivalent of my scholarshipcash.

(Sgd.) Emeterio Cui".

It is admitted that, on August 16, 1949, the Director of Private Schools issuedMemorandum No. 38, series of 1949, on the subject of "Scholarship,"addressed to "All heads of private schools, colleges and universities," reading:

1. School catalogs and prospectuses submitted to this, Bureau showthat some schools offer full or partial scholarships to deserving students— for excellence in scholarship or for leadership in extra-curricularactivities. Such inducements to poor but gifted students should beencouraged. But to stipulate the condition that such scholarships aregood only if the students concerned continue in the same schoolnullifies the principle of merit in the award of these scholarships.2. When students are given full or partial scholarships, it is understoodthat such scholarships are merited and earned. The amount in tuitionand other fees corresponding to these scholarships should not besubsequently charged to the recipient students when they decide toquit school or to transfer to another institution. Scholarships should notbe offered merely to attract and keep students in a school.3. Several complaints have actually been received from students whohave enjoyed scholarships, full or partial, to the effect that they couldnot transfer to other schools since their credentials would not bereleased unless they would pay the fees corresponding to the period ofthe scholarships. Where the Bureau believes that the right of thestudent to transfer is being denied on this ground, it reserves the right toauthorize such transfer.

that defendant herein received a copy of this memorandum; that plaintiffasked the Bureau of Private Schools to pass upon the issue on his right tosecure the transcript of his record in defendant University, without beingrequired to refund the sum of P1,033.87; that the Bureau of Private Schoolsupheld the position taken by the plaintiff and so advised the defendant; andthat, this notwithstanding, the latter refused to issue said transcript of records,unless said refund were made, and even recommended to said Bureau that itissue a written order directing the defendant to release said transcript of


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record, "so that the case may be presented to the court for judicial action." Asabove stated, plaintiff was, accordingly, constrained to pay, and did payunder protest, said sum of P1,033.87, in order that he could take the barexamination in 1953. Subsequently, he brought this action for the recovery of

said amount, aside from P2,000 as moral damages, P500 as exemplarydamages, P2,000 as attorney's fees, and P500 as expenses of litigation.In its answer, defendant reiterated the stand it took, vis-a-vis the Bureau ofPrivate Schools, namely, that the provisions of its contract with plaintiff arevalid and binding and that the memorandum above-referred to is null andvoid. It, likewise, set up a counterclaim for P10,000.00 as damages, andP3,000 as attorney's fees.The issue in this case is whether the above quoted provision of the contractbetween plaintiff and the defendant, whereby the former waived his right to

transfer to another school without refunding to the latter the equivalent of hisscholarships in cash, is valid or not. The lower court resolved this question inthe affirmative, upon the ground that the aforementioned memorandum ofthe Director of Private Schools is not a law; that the provisions thereof areadvisory, not mandatory in nature; and that, although the contractualprovision "may be unethical, yet it was more unethical for plaintiff to quitstudying with the defendant without good reasons and simply because hewanted to follow the example of his uncle." Moreover, defendant maintainsin its brief that the aforementioned memorandum of the Director of Private

Schools is null and void because said officer had no authority to issue it, andbecause it had been neither approved by the corresponding department headnor published in the official gazette.We do not deem it necessary or advisable to consider as the lower court did,the question whether plaintiff had sufficient reasons or not to transfer fromdefendant University to the Abad Santos University. The nature of the issuebefore us, and its far reaching effects, transcend personal equations anddemand a determination of the case from a high impersonal plane. Neitherdo we deem it essential to pass upon the validity of said Memorandum No.38, for, regardless of the same, we are of the opinion that the stipulation inquestion is contrary to public policy and, hence, null and void. The aforesaidmemorandum merely incorporates a sound principle of public policy. As theDirector of Private Schools correctly pointed, out in his letter, Exhibit B, tothe defendant,


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There is one more point that merits refutation and that is whether or notthe contract entered into between Cui and Arellano University onSeptember 10, 1951 was void as against public policy. In the case ofZeigel vs. Illinois Trust and Savings Bank, 245 Ill. 180, 19 Ann. Case

127, the court said: 'In determining a public policy of the state, courtsare limited to a consideration of the Constitution, the judicial decisions,the statutes, and the practice of government officers. ' It might take morethan a government bureau or office to lay down or establish a publicpolicy, as alleged in your communication, but courts consider thepractices of government officials as one of the four factors indetermining a public policy of the state. It has been consistently held inAmerica that under the principles relating to the doctrine of publicpolicy, as applied to the law of contracts, courts of justice will not

recognize or uphold a transaction which its object, operation, ortendency is calculated to be prejudicial to the public welfare, to soundmorality or to civic honesty (Ritter vs. Mutual Life Ins. Co., 169 U.S.139; Heding vs. Gallaghere 64 L.R.A. 811; Veazy vs. Allen, 173 N.Y.359). If Arellano University understood clearly the real essence ofscholarships and the motives which prompted this office to issueMemorandum No. 38, s. 1949, it should have not entered into acontract of waiver with Cui on September 10, 1951, which is a directviolation of our Memorandum and an open challenge to the authority

of the Director of Private Schools because the contract was repugnantto sound morality and civic honesty. And finally, in Gabriel vs. Montede Piedad, Off. Gazette Supp. Dec. 6, 1941, p. 67 we read: 'In order todeclare a contract void as against public policy, a court must find thatthe contract as to consideration or the thing to be done, contravenessome established interest of society, or is inconsistent with sound policyand good morals or tends clearly to undermine the security of individualrights. The policy enunciated in Memorandum No. 38, s. 1949 is soundpolicy. Scholarship are awarded in recognition of merit not to keep

outstanding students in school to bolster its prestige . In theunderstanding of that university scholarships award is a businessscheme designed to increase the business potential of an educationinstitution . Thus conceived it is not only inconsistent with sound policybut also good morals. But what is morals? Manresa has this definition. Itis good customs; those generally accepted principles of morality whichhave received some kind of social and practical confirmation. The


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practice of awarding scholarships to attract students and keep them inschool is not good customs nor has it received some kind of social andpractical confirmation except in some private institutions as in ArellanoUniversity. The University of the Philippines which implements Section

5 of Article XIV of the Constitution with reference to the giving of freescholarships to gifted children, does not require scholars to reimbursethe corresponding value of the scholarships if they transfer to otherschools. So also with the leading colleges and universities of the UnitedStates after which our educational practices or policies are patterned. Inthese institutions scholarships are granted not to attract and to keepbrilliant students in school for their propaganda mine but to rewardmerit or help gifted students in whom society has an establishedinterest or a first lien. (Emphasis supplied.)

WHEREFORE, the decision appealed from is hereby reversed and anotherone shall be entered sentencing the defendant to pay to the plaintiff the sumof P1,033.87, with interest thereon at the legal rate from September 1, 1954,date of the institution of this case, as well as the costs, and dismissingdefendant's counterclaim. It is so ordered.Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Barrera, Parades, Dizon, DeLeon and Natividad, JJ., concur.Bautista Angelo, J., reserves his vote.

EN BANC //G.R. No. L-13403 March 23, 1960 RAMON E. SAURA, plaintiff-appellant,vs.ESTELA P. SINDICO, defendant-appellee. Anacleto Magno for appellant.Espeque and Jalandoni for appellee. REYES, J. B. L., J .: Appeal on issues of law from an order of the Court of First Instance of

Pangasinan dismissing plaintiff's complaint for damages.From the records it appears that Ramon E. Saura and Estela P. Sindico werecontesting for nomination as the official candidate of the Nacionalista Partyin the fourth district of Pangasinan in the congressional elections ofNovember 12, 1957. On August 23, 1957, the p

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