RAZON vs. PHILIPPINE PORTS AUTHORITY

EN BANC

[G.R. No. 75197. June 22, 1987.]

E. RAZON, INC. and ENRIQUE RAZON, petitioners, vs. PHILIPPINE PORTS AUTHORITY, PRIMITIVO S. SOLIS, JR. and VICENTE T. SUAZO, JR., respondents. MARINA PORT SERVICES, INC., intervenor.

D E C I S I O N

FERNAN, J p:

Assailed in this petition for certiorari with prayer for a writ of preliminary injunction and/or restraining order as violative of petitioners’ right to due process is the unilateral cancellation by respondent Philippine Ports Authority (PPA) of the Management Contract of petitioner E. Razon, Inc. (ERI) to operate the arrastre service in all the ports at South Harbor, Manila and the subsequent appointment by respondent PPA of intervenor Marina Port Services, Inc. (Marina, for brevity) as interim operator of said arrastre service.

Petitioner E. Razon, Inc., also known as Metro Port Service, Inc. (MPSI), is a Philippine corporation organized on June 21, 1962 for the main purpose of bidding for the contract to manage all the piers in South Harbor, Manila. Co-petitioner Enrique Razon was allegedly the 100% equity owner, having paid for the subscriptions of the other incorporators who were mere nominees.

After a public bidding, petitioner ERI was awarded in 1966 a five-year contract to operate the arrastre service for Piers 3 and 5 at the South Harbor. Thereafter, it allegedly invested millions of pesos in acquiring port-handling equipment upon assurance from the government that its contract would be renewed without public bidding. Thus, when the Bureau of Customs informed petitioner ERI in 1971 of its decision to call for a new bidding and accordingly issued an invitation to bid for the operation of the arrastre service for any and all piers in South Harbor, including Piers 3 and 5, petitioner ERI instituted a special civil action for certiorari, prohibition, mandamus and injunction with preliminary and mandatory injunction and/or restraining order before the then Court of First Instance of Manila against the Secretary of Finance, Commissioner of Customs and members of the Bidding Committee to enjoin them from proceeding with the bidding and to compel them to renew petitioner ERI’s contract. The Court of First Instance, presided by Judge Juan Bocar, issued the writ prayed for whereupon then Secretary of Finance Cesar Virata elevated the case before this Court in G.R. No. 33426 entitled, “Cesar Virata, et al. vs. Hon. Juan Bocar, et al.”

In a resolution dated May 13, 1971, this Court ordered the holding of a public bidding for all the piers, conditioned that no final award should be given until further orders from the court.

An actual bidding was conducted for all the piers, with ERI emerging as the Bidding Committee’s unanimous choice. The selection was confirmed by this Court in Virata v. Bocar, 50 SCRA 468, 489, thus:

“IN VIEW OF ALL THE FOREGOING, herein petitioners are hereby directed to make the final award in favor of E. Razon, Inc., as the best and most advantageous bidder of the contract to operate the arrastre service for all the piers in the Manila South Harbor; . . .”

The management contract covering all the piers in the South Harbor was executed between petitioner ERI and the government on January 18, 1974 for a term of five years effective January 1, 1974, renewable for another five years. In August of the same year, petitioner ERI increased its capitalization from P2 Million to P20 Million.

In 1977 and early 1978, petitioner Razon allegedly initiated negotiations with respondent PPA either for the renewal of the management contract or for an immediate public bidding, if necessary, but respondent PPA, which was represented in the negotiations by the then General Manager, co-respondent Primitivo Solis, Jr., did not act on the request, reportedly due to the unconcealed desire of people close to then President Marcos to take over petitioner ERI.

Thereafter, in late 1978, petitioner Razon, who was then owner of about 93% of ERI’s equity was allegedly coerced by emissaries from then President Marcos into endorsing in blank ERI’s stock certificates covering 60% equity. It is further alleged that Razon did not receive a single centavo for these shares of stock as the checks purportedly payable to him as payment of the shares were immediately endorsed by Razon to and taken by unnamed parties close to President Marcos. The party close to President Marcos was later identified as Alfredo “Bejo” Romualdez, the president’s brother-in-law.

After the transfer, a new group reportedly took over the active control and management of petitioner company. Petitioner Razon, was, however, retained as President, allegedly because of his acceptability and rapport with the shipping lines, customs brokers and the unions, but without real powers as ERI’s By-Laws were amended to make the office of the executive vice-president more powerful than the president’s which was vested with mere recommendatory functions. Petitioner ERI’s corporate name was also changed to Metro Port Service, Inc. (MPSI).

On December 31, 1978, the contract of petitioner ERI/MPSI expired. It was extended in 1979 to June 30, 1980, during which month respondent PPA executed a new contract in favor of ERI for a term of eight (8) years, beginning July 1, 1980.

It is alleged that on February 26, 1986, after the ouster of the former government administration, petitioner Razon went to South Harbor and took active control, supervision and management of MPSI. He called a special stockholders’ meeting whereby he was able to re-organize the Board of Directors by seating therein his own nominees and to restore the powers of the President as well as the company’s name through corresponding amendments of the By-Laws. He was likewise able to convince the nominee company, Maximum Trading and Industrial Corporation (MATICO), in whose name the 60% equity appeared to have been registered, to return the same to him under a “Deed of Reconveyance with Irrevocable Power of Attorney” (Annex “B”, Petition, pp. 54-55, Rollo). He caused the books of accounts to be audited by the accounting firm of Sycip, Gorres and Velayo and exerted utmost efforts to improve service and revenue as well as to restore harmonious relations with the unions. He further undertook ways and means to restore to working condition the cargo-handling equipment in order to check delay in the delivery of cargoes, which efforts were acknowledged by respondent PPA in a letter dated July 9, 1986 (Annex “C”, Petition, p. 56, Rollo).

On July 18, 1986, some truckers staged a demonstration at the main gate of South Harbor to complain about Razon‘s management of the arrastre operations. The demonstration lasted until noon of the same day.

At about 5:30 in the afternoon of July 18, 1986, a Friday, respondent PPA sent to petitioner ERI/MPSI a letter signed by a co-respondent Solis, demanding explanation and reply to the complaints from shippers and-others enumerated in said letter and to the various violations of the management contract not later than 9:00 A.M. of the following day, July 19, 1986, (Annex “D”, Petition, pp. 57-60, Rollo). In a television newscast in the evening of July 18, 1986, then Minister of Transportation and Communications Hernando Perez was quoted to have given respondent PPA until Wednesday of the following week, July 23, 1986, within which to investigate the complaints against MPSI and to submit its findings and recommendations.

Apparently relying on the time frame announced by Minister Perez and finding the deadline set by respondent PPA in its letter of July 18, 1986 too short, apart from the fact that it had no staff, it being a week-end, petitioner ERI prepared a letter dated July 19, 1986, addressed to respondent PPA, stating that it would “reply early next week” (Annex “F”, p. 61, Rollo). It appears that this letter was never delivered to respondent PPA because there was allegedly no one in its office to receive the same.

On the same day, July 19, 1986, respondent PPA informed petitioner ERI/MPSI thru a letter of even date that it was cancelling the management contract and taking over the cargo handling operations as well as the equipment of petitioner “effective immediately” (Annex “G”, Petition, p. 62, Rollo). On July 21, 1986, respondent PPA appointed Marina Port Services, Inc. as interim operator of the arrastre service at South Harbor.

Meanwhile, at 10:05 A.M. of July 21, 1986, herein petitioners, thru counsels Atty. Rafael T. Durian and Florentino Tuason, Jr. of Cruz, Agabin, Atienza and Alday Law firm, instituted the instant petition for certiorari with prayer for the issuance of a preliminary restraining order and/or injunction. Less than an hour later or at 11:00 A.M., they filed a similar complaint before the Regional Trial Court of Manila, which issued a temporary restraining order against respondent PPA at 3:00 P.M. of the same day. Earlier, at 11:58 A.M., petitioners filed a “Withdrawal of Petition” with this Court. The “Withdrawal of Petition” was vigorously opposed by the Solicitor-General in behalf of respondents who denounced petitioners’ filing of the two petitions in this Court and in the Regional Trial Court as proscribed “forum-shopping and double-dealing.”

Pending action by the court on the “Withdrawal of Petition,” petitioners filed a supplemental complaint with the RTC of Manila to implead Manila Port Services, Inc. as corespondent therein. They likewise filed motu proprio a comment on the Opposition to the Withdrawal of Petition, stating in the main that they intended to withdraw the instant petition before filing the petition in the RTC but that there was a miscommunication between counsels and their messenger; that there was no intention to forum-shop and that they deeply apologize for the delayed filing of the “Withdrawal of Petition.”

Finding the explanation proferred by petitioners to be “feeble and untenable”, the Court resolved on July 31, 1986 to:

“. . . a) DENY the motion to withdraw the instant petition; b) summarily DISMISS both the petition at bar as well as the complaint in Civil Case No. 86-36754 of the Regional Trial Court of Manila and to SET ASIDE effective immediately the temporary restraining order and any other orders or processes issued in the latter case as void and of no effect; and c) SUSPEND Atty. Rafael T. Durian and Florentino Tuason, Jr. from the practice of law effective immediately and until further orders. Said Attys. Durian and Tuason Jr. are hereby REQUIRED to show cause within ten (10) days from notice hereof why the suspension should not stand, why no disbarment proceedings should be instituted against them and why no other liability should attach to them by reason of their above described acts of deceit, malpractice and gross misconduct.” (p. 122, Rollo).

On August 6, 1986, petitioners, assisted by Atty. Angel C. Cruz of the same Cruz, Agabin, Atienza and Alday Law Firm, filed a Manifestation that they were abiding by the resolution of July 31, 1986 but “with express reservation to their filing a new ordinary civil action before the competent RTC and the legal remedy to be availed of by Attys. Durian and Tuason, Jr. on the matter of the disciplinary action taken against them.” (pp. 147-148, Rollo).

On the same day, petitioners filed a third identical complaint before the RTC of Manila, docketed as Civil Case No. 86-37006. Upon motion of the Solicitor General, this Court issued on August 14, 1986 a temporary restraining order enjoining Judge Alfin S. Vicencio, RTC, Branch 50, Manila from acting on Civil Case No. 86-37006 and the petitioners from instituting further action elsewhere without leave of court. The Cruz, Agabin, Atienza and Alday Law Firm and Judge Vicencio were likewise required to show cause why they should not be severally held in contempt of court and/or be held administratively liable for malpractice (p. 233, Rollo). Both complied with this resolution, as did Attys. Durian and Tuason, Jr. with the resolution of July 31, 1986 by filing a “Compliance with Urgent Plea for Immediate Lifting of Suspension” (p. 150, Rollo).

Meanwhile, on August 18, 1986, petitioners thru new counsel N. J. Quisumbing and Associates, filed a motion for reconsideration of the resolution of August 14, 1986 and for leave to file suit whether in the Supreme Court or any court for judicial review of PPA’s cancellation of Petitioner ERI’s management contract. This was again opposed by the Solicitor-General.

On September 13, 1986, Marina Port Services, Inc. filed a motion for intervention, which was in turn opposed by petitioners.

On October 30, 1986, the Court resolved to: a) make permanent the temporary restraining order issued on August 14, 1986 inasmuch as this Court has resolved to entertain the instant petition to accord petitioners access to the courts: b) allow the intervention of Marina Port Services, Inc. in the present case; and c) to lift the suspension of Attys. Rafael T. Durian and Florentino A. Tuason, Jr. effective immediately. (p. 435-A, Rollo).

Petitioners contend that they were denied their right to due process when respondent PPA cancelled the Management Contract without prior hearing and investigation. In support of this contention, they advance the theory that the management contract is not an ordinary commercial contract, but more in the nature of a franchise or license, which, in this case, has been impressed with property rights by reason of the length of time petitioners have been enjoying it, and hence cannot be cancelled without according petitioners the opportunity to be heard on the alleged complaints and contract violations. As a corollary, petitioners further assert that respondent PPA was not exercising proprietary functions, i.e., as a party to a contract exercising its right to rescission or resolution when it cancelled petitioners’ contract, but as a regulatory body exercising adjudicatory powers in finding and concluding that petitioner ERI/IMPSI had violated the management contract. Hence, their contention that since said findings and conclusions were reached in violation of petitioners’ right to due process, the resultant cancellation is null and void.

Respondents PPA, et al. and intervenor Marina, on the other hand, submit in their joint memorandum the following arguments:

“1. Contrary to petitioners’ assertion, the cancelled arrastre contract was previously awarded, not to petitioner Enrique Razon or his old company, E. Razon, Inc., but to Metro Port Services, Inc. that President Marcos’ brother-in-law, Alfredo `Bejo’ Romualdez, admittedly controlled.

“2. Since the cancelled contract was the fruit of corruption in the Marcos government, it is a nullity and petitioners cannot sue for its enforcement;

“3. With his admission that he agreed to front for Romualdez with respect to the latter’s illegal dealings with the Philippine Port Authority, Razon forfeits his claim as having been a victim of the Marcos rule;

“4. Besides, since petitioners themselves admit the existence of sufficient grounds for PPA’s cancellation of Metro Port’s arrastre contract, they cannot complain;

“5. Under the circumstances, respondent PPA was not required to hear petitioners prior to its cancellation of the contract;

“6. Given the validity of PPA’s cancellation of that contract and its takeover of the arrastre operations, the designation of respondent Marina Port Services, Inc. to assist PPA in the operations is not for petitioner to question; and,

“7. At all events, respondent MARINA is qualified to handle the limited task PPA assigned to it.” (pp. 546-547, Rollo).

The Management Contract under consideration was executed by and between petitioner E. Razon, Inc. represented by its President, herein co-petitioner Enrique Razon, and respondent PPA, represented by its then General Manager. E.S. Baclig, Jr. on June 27, 1980 (Annex “A”, Petition, p. 18, Rollo). By petitioners’ own admission, at the time of the execution of the Management Contract, petitioner E. Razon, Inc. later known as Metro Port Services, Inc. was controlled by Alfredo “Bejo” Romualdez, brother-in-law of deposed President Marcos. Under Section 5 of the Anti-Graft and Corrupt Practices Act (R.A. No. 3019) Romualdez, by reason of his relationship with the then President of the Philippines, was prohibited from intervening, directly or indirectly, in any transaction or business with the government. Thus, the Management Contract, entered into by E. Razon, Inc., ostensibly owned by petitioner Enrique Razon, but in fact controlled by Alfredo Romualdez as 60% equity owner thereof, is null and void and of no effect, being one expressly prohibited by law (par. [7], Art. 1409, Civil Code of the Philippines). Furthermore, as will be shown later, the Management Contract is the direct result of a previous illegal contract and, therefore, is itself null and void under Article 1422 of the Civil Code.

Petitioners attempt to evade the consequence of the Romualdez connection by alleging that the 60% equity of petitioner E. Razon, Inc. was obtained thru force and duress and without any monetary consideration whatsoever. Otherwise stated, the transfer of the shares of stock to persons close to President Marcos, later disclosed to be Alfredo “Bejo” Romualdez was, at the very least, voidable for lack of consent, or altogether void for being absolutely fictitious or simulated.

Verily, the transfer of the shares of stock of petitioner E. Razon, Inc. representing 60% equity to persons fronting for Alfredo “Bejo” Romualdez was null and void. The invalidity springs not from vitiated consent nor absolute want of monetary consideration, but for its having had an unlawful cause — that of obtaining a government contract in violation of law. While the general rule is that the causa of the contract must not be confused with the motives of the parties, this case squarely fits into the exception that the motive may be regarded as causa when it predetermines the purpose of the contract. (Liguez v. Court of Appeals, 102 Phil. 577). On the part of Romualdez, the motive was to be able to contract with the government which he was then prohibited by law from doing, and on petitioner Razon‘s part, to be able to renew his management contract. For it is scarcely disputable that Enrique Razon would not have transferred said shares of stock to Romualdez without an assurance from the latter that he would be unduly favored with a renewal of the Management Contract. Thus, it came to pass that by transferring 60% of the shares in his company to Romualdez, petitioner Enrique Razon was able to secure an eight-year contract with respondent PPA and for six years before its cancellation benefit from the proceeds thereof.

Petitioners’ attempt to dissociate or divorce themselves from the illegality of the transfer and, consequently, of the management contract, as well as their claim of innocence or being a victim of the Marcos regime must fail for the “view has been taken . . . that a party is a participant in the unlawful intention where he knows and intends that the subject matter will be used for an illegal purpose and there would seem to be no doubt that one may be deemed to be a participant in the other’s unlawful design if he shares in the benefits of the violation of law. However, whether he is to derive any benefit from the unlawful use of the subject matter is not the sole test. A test which has been said to be more conformable to sound morality is whether he intends to aid the other in the unlawful object. He may be deemed to be a participant in the unlawful purpose if, with knowledge thereof, he does anything which facilitates the carrying out of such purpose.” (17 Am Jur 2d 515-516).

The transfer of the control of petitioner E. Razon, Inc. from petitioner Enrique Razon to Alfredo “Bejo” Romualdez, which We have resolved to be null and void, served as the direct link to petitioner company’s obtaining the Management Contract. Being the direct consequence and result of a previous illegal contract, the Management Contract itself is null and void as provided in Article 1422 of the Civil Code.

Elementary in the law of contracts is the principle that no judicial action is necessary for the annulment of a void contract. Any such action would be merely declaratory. [Tolentino, Civil Code of the Philippines, Vol. IV, 1973 ed., p. 594). Thus, it was well within the rights of respondent PPA to unilaterally cancel and treat as avoided the Management Contract and no arbitrariness may be attached to its exercise of this right.

Besides, even if the Management Contract were valid and subsisting, the violations ^** of the contract committed by its predecessor, Metro Port Services, Inc. which, except for the bare allegation that these were untrue, were not specifically denied by petitioners, but on the contrary, unwittingly admitted with the allegation that Metro Port Services Inc. mismanaged the arrastre operations, were grave and serious to justify immediate termination of the contract.

Respondent PPA is the government agency charged with the specific duty of supervising, controlling, regulating, constructing, maintaining, operating and providing such facilities or services as are necessary in the ports vested in, or belonging to it (Sec. 6, [ii], P.D. 857). It has the expertise to determine whether or not Marina Port Services Inc. has the capability of discharging the tasks assigned to it as interim operator of arrastre service in South Harbor. Except in cases of clear grave abuse of discretion, which has not been shown in the instant petition, the Court will not disturb such judgment and substitute its own. (Meralco Securities Corp. v. Savellano, 117 SCRA 804; Anglo-Fil Trading Corp. v. Lazaro, 124 SCRA 494.

WHEREFORE, the instant petition is hereby DISMISSED. Costs against petitioners.

SO ORDERED.

Teehankee, (C.J.), Yap, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, *** and Cortes, JJ., concur.

||| (E. Razon, Inc. v. Philippine Ports Authority, G.R. No. 75197, [June 22, 1987], 235 PHIL 223-237)

DE LA RIVA vs. ESCOBAR VDA. DE LIMJAP

EN BANC

[G.R. No. 27300. December 17, 1927.]

SERAFIN DE LA RIVA, plaintiff-appellee, vs. MARIA ESCOBAR VIUDA DE LIMJAP, defendant and appellant, and the BANK OF THE PHILIPPINE ISLANDS, defendant-appellee.

Roberto Concepcion, for appellant.

Araneta & Zaragoza, for the Bank of the Philippine Islands.

Alfredo Chicote and Jose Arnaiz, for the other appellee.

SYLLABUS

1. EVICTION AND WARRANTY; NOTICE TO VENDOR. — The notice to the vendor which article 1481 of the Civil Code requires for the effectiveness of warranty, must be given in the action for the eviction of the purchaser, and not in the action to enforce the warranty itself, which already supposes the eviction.

2. CIVIL PROCEDURE; PARTIES TO AN ACTION; DEMURRER. — The fact that a demurrer set up by one of the defendants has been sustained does not mean that said defendant is no longer a party to the action, nor is said action extinguished as against him, even if the complaint has not been amended within the period fixed, so long as no judgment has been rendered in accordance with the law and the evidence, as provided in section 102 of the Code of Civil Procedure. Under such circumstances said defendant, whose demurrer was sustained, continues to be a party to the action and a counterclaim may be filed against him. At any rate, a counterclaim may be filed against any person not originally a party to the action, if according to the allegations set forth in the answer, said persons is a necessary party for the complete settlement of the controversy. (Winter vs. McMillian, 87 Cal., 256; Eurekavs. Gates, 120 Cal., 54; Mackenzie vs. Hodgkin, 126 Cal., 591; 77 Am. Dec., 209; Lewis vs. Fox, 122 Cal., 244.)

3. CONTRACTS; EFFECTS OF; THIRD PERSONS. — Where warranty for eviction was expressly agreed upon in a contract of sale, and the purchaser sold the same land to a third party, expressly assigning to him the right to warranty, the second purchaser has a right of action against the vendor to demand such warranty. The rule set forth in article 1257 of the Civil Code, that a contract binds only the parties thereto and their heirs, is not applicable to this case.

D E C I S I O N

AVANCEÑA, C.J p:

On May 4, 1917, the Bank of the Philippine Islands sold some parcels of land situated on the Island of Catanduanes, Province of Albay, together with the improvements thereon to Mariano Limjap. It was agreed between them that Limjap was to have the lands surveyed and apply for their registration. It was furthermore stipulated in the second clause that should the registration of any of these lands be denied after due diligence on the part of Limjap, the bank would return to him the price of the parcel of land the registration of which had been denied. Pursuant to this clause the price of parcel No. 10 was fixed in the contract at P7,500.

Limjap applied for the registration of these lands, and during the course of the proceeding, sold them to Serafin de la Riva on September 9, 1919 for the same price, and with the special stipulation that he subrogated Serafin de la Riva in all the other terms of the document executed with the Bank of the Philippine Islands regarding and sum which the said bank might have to return in accordance with these stipulations. From that time De la Riva took Limjap’s place as applicant in the proceeding for the registration of these lands which was then pending. The court rendered judgment in that case denying the registration of lot marked No. 10 therein.

On February 17, 1925, Serafin de la Riva filed the complaint in the present case against the Bank of the Philippine Islands and Mariano Limjap praying that said defendants be ordered to pay the plaintiff jointly and severally the sum of P7,500, the price of the unregistered land, with legal interest from the time of the filing of the complaint.

The Bank of the Philippine Islands filed a demurrer, alleging that as it had not entered into any contract with the plaintiff, nor had taken any part in the execution of the contract between the plaintiff and Mariano Limjap, said plaintiff had no cause of action against it. The court below sustained this demurrer in its order of April 7, 1925. The plaintiff did not take any exception to this ruling nor amend his complaint.

On September 4, 1925, Mariano Limjap asked leave of the court to file a counterclaim against the Bank of the Philippine Islands. This petition was denied. On November 18th of the same year, in view of this adverse ruling, Mariano Limjap asked that the Bank of the Philippine Islands be included as a necessary party to this action. This petition also was denied. Exception was taken to both of these rulings.

On December 8th following, Mariano Limjap answered the complaint alleging, as special defense, that the plaintiff had no cause of action against him; that the Bank of the Philippine Islands was the only one liable to the plaintiff; that in the proceeding in which the registration of the land had been denied and to which the complaint made reference, this defendant was not made a party to the action for eviction. By way of counterclaim he prays that the plaintiff be ordered to pay him P2,000—the amount of a promissory note copied in the answer.

At the hearing of this case and just before the introduction of the evidence, the court dismissed the complaint with respect to the bank, assigning as the basis of such ruling, the fact that the demurrer to the complaint filed by this defendant had been sustained. Counsel for Limjap excepted to this ruling. This was on April 22, 1926, according to the transcript of the stenographic notes, and not on April 22, 1925, as stated in the bill of exceptions, which must be only a typographical error.

The court ordered the counsel for Mariano Limjap to pay the plaintiff the sum of P7,500 with legal interest from December 3, 1924, until fully paid, and it also ordered the plaintiff to pay to the estate of Mariano Limjap, who had substituted the latter as a party to the action, the sum of P2,000 with legal interest from December 10, 1925, until fully paid. The administratrix of Mariano Limjap’s estate appealed from this judgment.

Defendant’s appeal refers to that part of the judgment of the lower court on the merit, ordering her to pay the plaintiff the sum of P7,500; to the court’s ruling denying Mariano Limjap’s petition to file a counterclaim against the bank; to the ruling denying Mariano Limjap’s petition to include the Bank of the Philippine Islands as a necessary party to this case, and to the ruling dismissing the complaint as against the bank.

In view of the conclusion at which we have arrived in this case we deem it unnecessary to discuss the judgment on the merit, and we shall take up only the three last orders involved in this appeal.

The trial court denied in these two orders the petition of counsel for Mariano Limjap to file a counterclaim against the Bank of the Philippine Islands, and to have the latter included as a necessary party to this case on the ground that Limjap did not make the bank a party to the eviction proceeding at the opportune time, since he did not notify it that a complaint had been filed against him in this cause at the time of the filing of the complaint, nor during the time that elapsed from then until the court favorably ruled upon the bank’s demurrer on April 7, 1926, nor within the period provided by articles 5 and 8 of the rules of the Courts of First Instance, from the said date of April 7, 1925, which is understood to be the shortest time possible as provided for in article 1482 of the Civil Code. From these facts the trial court found that the defendant had renounced its right to the warranty in regard to the thing sold. This shows that the view of the trial court is that, in order that Limjap might have a right to enforce against the bank the warranty in regard to the thing sold, it was necessary that Limjap should have notified the bank of the eviction in this action. This is erroneous.

The vendor is bound to deliver and warrant the thing sold (article 1461, Civil Code) and by this obligation he is responsible to the purchaser for its legal and peaceful possession (article 1474, Civil Code) and if, by final judgment and by virtue of a previous right to the purchase, the purchaser is deprived of this thing purchased, the vendor shall be obliged to return the price (article 1478, Civil Code). According to this, the purchaser’s right to demand the return of the price implies two actions. First, an action brought by a third person against the purchaser, in which final judgment has been rendered, depriving the latter of the thing bought. Second, the purchaser’s action against the vendor for the return of the price. But in order that the vendor be obliged to return the price because of the purchaser having been deprived of the thing bought by virtue of a final judgment, the law requires that said vendor be notified of the action in which that judgment was rendered in order that he might defend the purchaser’s legal and peaceful possession, for which he is responsible (articles 1481, 1482, Civil Code). It is clear that this notification must be given in the action brought by the third party against the purchaser, because it is there that the vendor must defend the right he has transferred to the purchaser, to prevent the latter from being deprived of the peaceful possession of the thing sold. Consequently, this notification to the bank should have been given in this case during the registration proceeding in which judgment was rendered which, in accordance with the agreement between the parties, should give rise to the bank’s obligation to return the price.

It is also clear that it was not necessary to notify the bank in the present action. This is an action on the warranty to recover the price of the thing sold, of the legal and peaceful possession of which the purchaser has been deprived by reason of the eviction. The purchaser’s eviction is already a consummated fact by virtue of the judgment rendered in the registration proceeding. The present action is its result. Vendor’s opportunity to defend the right to the thing which he transferred to the purchaser has already passed. For such purpose it was useless to notify him in this action in which he can no longer make such a defense. This is an action now brought by the purchaser against the vendor to enforce the warranty of the thing sold, taking the eviction for granted, as the cause and basis of the right claimed. What has here caused some confusion is the fact that the plaintiff in the present case is Fermin de la Riva and the defendant Limjap. But, if it is well considered, there is no reason for this confusion. De la Riva’s action does not contemplate depriving Limjap of the land which he bought from the bank and there was no need to notify said bank of this action in order that it might defend that which is not attached. The action now brought by De la Riva against Limjap is the same as Limjap would have brought against the bank had he not transferred his rights to De la Riva.

Therefore, the trial court’s ground for denying Limjap’s petition to present a counterclaim against the bank and that the latter be included as a necessary party to this action is erroneous. Counsel for the bank argues in this instance that the law (section 98, Code of Civil Procedure) allows the defendant to file a counterclaim only against one of the parties, and that Limjap could not file a counterclaim against the bank because the latter was not a party to the action. And it is claimed that the bank was not a party to this action, even if it was included as defendant, because, having filed a demurrer to the complaint, on the ground of lack of cause of action, this demurrer was sustained without any exception being made to this ruling, nor was the complaint amended, which was afterwards dismissed as regards the bank. This contention is untenable. When Limjap registered his petition to file a counterclaim against the bank, although the demurrer of the latter had already been sustained and the period for amending the complaint had passed without any amendment being made, it not only did not dismiss the bank from the action but did not terminate the action as against it, since section 102 of the Code of Civil Procedure requires that under these circumstances the court has yet to render judgment according to the law and the facts shown in the record. It is true that on April 22, 1926, the lower court dismissed the complaint as against the bank, but that was a long time after Limjap’s petition to file a counterclaim was registered, and long after the court had denied this petition. Furthermore, even supposing that that dismissal was equivalent to the judgment which the court had to render, it is not yet final, since it was excepted to by Limjap’s counsel and is now one of the errors assigned in this appeal. In no sense can it be said that when Limjap’s counsel filed his petition to present a counterclaim against the bank, the latter was not a party to this action.

At all events, the counterclaim may be filed against a third person if, according to the allegations of the answer, such third person is a necessary party to the complete determination of the controversy (Winter vs. McMillian, 87 Cal., 256; Eureka vs. Gates, 120 Cal., 54; Mackenzie vs. Hodgkin, 126 Cal., 591; 77 Am. Dec., 209; Lewis vs. Fox, 122 Cal., 244). That the bank is, in this sense, a necessary party to this case, is beyond doubt.

The second clause of the contract between Limjap and the bank, to which reference has already been made, and by virtue of which the bank obligated itself to reimburse Limjap for the price of the land the registration of which might be denied, is, in substance, a warranty stipulation in case of eviction, peculiarly framed, so to speak, but legally made nevertheless, since the law allows the contracting parties to specify such conditions as they may deem fit (article 1475, Civil Code). Limjap expressly subrogated De la Riva in all his rights arising from this stipulation. The registration of parcel 10 having been denied, De la Riva brought this action against Limjap for the recovery of the price paid for this parcel. Limjap alleges that by virtue of this transfer, the bank is liable to De la Riva. The bank’s intervention is, therefore, necessary in this cause in order to determine who is really liable to the plaintiff. The fact that the bank did not enter into any contract with De la Riva is no bar to this intervention. The rule enunciated in article 1257 of the Civil Code that the contract binds only the parties thereto and their heirs, is not applicable to this case, since the basis of De la Riva’s action is Limjap’s transfer to him of his right to the warranty, a right which Limjap had against the bank. De la Riva’s action is the same as Limjap’s against the bank and he exercises it instead of Limjap, by virtue of the transfer. (Decision of the Supreme Court of Spain of January 27, 1897.)

In regard to the exception to the order of the trial court dismissing the complaint as against the bank, it appears that this dismissal was ordered because the bank’s demurrer to the complaint had been sustained and said complaint had not been amended within the period fixed by the court. The order in which the court sets forth its grounds for sustaining the demurrer has not been included in the bill of exceptions and for this reason we cannot consider whether it erred or not in dismissing the complaint against the bank. On the other hand, the decision on this point is unimportant in view of the disposition we are going to make of this case.

The judgment entered on the merits is set aside and the record in this case is ordered remanded to the court of origin in order that it may permit the administratrix of Mariano Limjap’s estate to present a counterclaim against the Bank of the Philippine Islands, and, after the proper legal proceedings, render judgment on the claims of all parties. It is so ordered without special pronouncement as to costs.

Johnson, Street, Malcolm, Johns, Romualdez and Villa-Real, JJ., concur.

||| (De la Riva v. Vda. de Limjap, G.R. No. 27300, [December 17, 1927], 51 PHIL 243-251)

SMITH BELL vs. VICENTE SOTELO MATTI

EN BANC

[G.R. No. 16570. March 9, 1922.]

SMITH, BELL & CO., LTD., plaintiff-appellant, vs. VICENTE SOTELO MATTI, defendant-appellant.

Ross & Lawrence and Ewald E. Selph for plaintiff-appellant.

Ramon Sotelo for defendant-appellant.

SYLLABUS

1. CONTRACTS; PURCHASE AND SALE OF MERCHANDISE; UNCERTAINTY OF TIME OF FULFILLMENT OF OBLIGATION. — As no definite date was fixed for the delivery of the goods, which the plaintiff undertook to deliver, the term which the parties attempted to establish being so uncertain that one cannot tell whether, as a matter of fact, the aforesaid goods could, or could not, be imported into Manila, the obligation must be regarded as conditional and not one with a term.

2. ID.; ID.; WHEN FULFILLMENT OF CONDITION NOT DEPENDENT ON THE WILL OF OBLIGOR. — Where the fulfillment of the condition does not depend on the will of the obligor, but on that of a third person who can in no way be compelled to carry it out, the obligor’s part of the contract is complied with, if he does all that is in his power, and it then becomes incumbent upon the other contracting party to comply with the terms of the contract.

3. ID.; ID.; WHEN TIME NOT ESSENTIAL. — Where no date is fixed in the contract for the delivery of the thing sold, time is considered unessential, and delivery must be made within a reasonable time to be determined by the courts in accordance with the circumstances of the case.

4. PRINCIPAL AND AGENT; THIRD PERSONS. — When an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted, or such persons against the principal. In such case, the agent is directly liable to the person with whom he has contracted, as if the transaction were his own. (Art. 1717, Civil Code.)

D E C I S I O N

ROMUALDEZ, J p:

In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente Sotelo, entered into contracts whereby the former obligated itself to sell, and the latter to purchase from it, two steel tanks, for the total price of twenty-one thousand pesos (21,000), the same to be shipped from New York and delivered at Manila “within three or four months;” two expellers at the price of twenty five thousand pesos (25,000) each, which were to be shipped from San Francisco in the month of September, 1918, or as soon as possible; and two electric motors at the price of two thousand pesos (2,000) each, as to the delivery of which stipulation was made, couched in these words: “Approximate delivery within ninety days. — This is not guaranteed.”

The tanks arrived at Manila on the 27th of April, 1919; the expellers on the 26th of October, 1918; and the motors on the 27th of February, 1919.

The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of these goods, but Mr. Sotelo refused to receive them and to pay the prices stipulated.

The plaintiff brought suit against the defendant, based on four separate causes of action, alleging, among other facts, that it immediately notified the defendant of the arrival of the goods, and asked instructions from him as to the delivery thereof, and that the defendant refused to receive any of them and to pay their price. The plaintiff, further, alleged that the expellers and the motors were in good condition. (Amended complaint, pages 16-30, Bill of Exceptions.)

In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila Oil Refining and By-Products Co., Inc., denied the plaintiff’s allegations as to the shipment of these goods and their arrival at Manila, the notification to the defendant, Mr. Sotelo, the latter’s refusal to receive them and pay their price, and the good condition of the expellers and the motors, alleging as special defense that Mr. Sotelo had made the contracts in question as Manager of the intervenor, the Manila Oil Refining and By-Products Co., Inc., which fact was known to the plaintiff, and that “it was only in May, 1919, that it notified the intervenor that said tanks had arrived, the motors and the expellers having arrived incomplete and long after the date stipulated.” As a counterclaim or set-off, they also allege that, as a consequence of the plaintiff’s delay in making delivery of the goods, which the intervenor intended to use in the manufacture of coconut oil, the intervenor suffered damages in the sums of one hundred sixteen thousand seven hundred eighty-three pesos and ninety-one centavos (116,788.91) for the nondelivery of the tanks, and twenty-one thousand two hundred and fifty pesos (21,250) on account of the expellers and the motors not having arrived in due time.

The case having been tried, the court below absolved the defendants from the complaint insofar as the tanks and the electric motors were concerned, but rendered judgment against them, ordering them to “receive the aforesaid expellers and pay the plaintiff the sum of fifty thousand pesos (50,000), the price of the said goods, with legal interest thereon from July 26, 1919, and costs.”

Both parties appeal from this judgment, each assigning several errors in the findings of the lower court.

The principal point at issue in this case is whether or not, under the contracts entered into and the circumstances established in the record, the plaintiff has fulfilled, in due time, its obligation to bring the goods in question to Manila. If it has, then it is entitled to the relief prayed for; otherwise, it must be held guilty of delay and liable for the consequences thereof.

To solve this question, it is necessary to determine what period was fixed for the delivery of the goods.

As regards the tanks, the contracts A and B (pages 61 and 62 of the record) are similar, and in both of them we find this clause:

“To be delivered within 3 or 4 months — The promise or indication of shipment carries with it absolutely no obligation on our part — Government regulations, railroad embargoes, lack of vessel space, the exigencies of the requirements of the United States Government, or a number of causes may act to entirely vitiate the indication of shipment as stated. In other words, the order is accepted on the basis of shipment at Mill’s convenience, time of shipment being merely an indication of what we hope to accomplish.”

“The following articles, herein below more particularly described, to be shipped at San Francisco within the month of September /18, or as soon as possible. — Two Anderson oil expellers . . .”

And in the contract relative to the motors (Exhibit D, page 64, rec.) the following appears:

“Approximate delivery within ninety days. — This is not guaranteed. — This sale is subject to our being able to obtain Priority Certificate, subject to the United States Government requirements and also subject to confirmation of manufactures.”

In all these contracts, there is a final clause as follows:

“The sellers are not responsible for delays caused by fires, riots on land or on the sea, strikes or other cause known as ‘Force Majeure’ entirely beyond the control of the sellers or their representatives.”

Under these stipulations, it cannot be said that any definite date was fixed for the delivery of the goods. As to the tanks, the agreement was that the delivery was to be made “within 3 or 4 months,” but that period was subject to the contingencies referred to in a subsequent clause. With regard to the expellers, the contract says “within the month of September, 1918,” but to this is added “or as soon as possible.” And with reference to the motors, the contract contains this expressions, “Approximate delivery within ninety days,” but right after this, it is noted that “this is not guaranteed.”

The oral evidence falls short of fixing such period.

From the record it appears that these contracts were executed at the time of the world war when there existed rigid restrictions on the export from the United States of articles like the machinery in question, and maritime, as well as railroad, transportation was difficult, which fact was known to the parties; hence clauses were inserted in the contracts, regarding “Government regulations, railroad embargoes, lack of vessel space, the exigencies of the requirements of the United States Government,” in connection with the tanks and “Priority Certificate, subject to the United States Government requirements,” with respect to the motors. At the time of the execution of the contracts, the parties were not unmindful of the contingency of the United States Government not allowing the export of the goods, nor of the fact that the other foreseen circumstances therein stated might prevent it.

Considering these contracts in the light of the civil law, we cannot but conclude that the term which the parties attempted to fix is so uncertain that one cannot tell just whether, as a matter of fact, those articles could be brought to Manila or not. If that is the case, as we think it is, the obligation must be regarded as conditional.

“Obligations for the performance of which a day certain has been fixed shall be demandable only when the day arrives.

“A day certain is understood to be one which must necessarily arrive, even though its date be unknown.

“If the uncertainty should consist in the arrival or non arrival of the day, the obligation is conditional and shall be governed by the rules of the next preceding section” (referring to pure and conditional obligations). (Art. 1125, Civ. Code.)

And as the export of the machinery in question was as stated in the contract, contingent upon the sellers obtaining certificate of priority and permission of the United States Government, subject to the rules and regulations, as well as to railroad embargoes, then the delivery was subject to a condition the fulfillment of which depended not only upon the effort of the herein plaintiff, but upon the will of third persons who could in no way be compelled to fulfill the condition. In cases like this, which are not expressly provided for, but impliedly covered, by the Civil Code, the obligor will be deemed to have sufficiently performed his part of the obligation, if he has done all that was in his power, even if the condition has not been fulfilled in reality.

“In such cases, the decisions prior to the Civil Code have held that the obligee having done all that was in his power, was entitled to enforce performance of the obligation. This performance, which is fictitious — not real — is not expressly authorized by the Code, which limits itself only to declare valid those conditions and the obligation thereby affected; but it is neither disallowed, and the Code being thus silent, the old view can be maintained as a doctrine.” (Manresa’s commentaries on the Civil Code [1907], vol. 8, page 132.)

The decisions referred to by Mr. Manresa are those rendered by the supreme court of Spain on November 19, 1866, and February 23, 1871.

In the former it is held:

“First. That when the fulfillment of the condition does not depend on the will of the obligor, but on that of a third person who can in no way be compelled to carry it out, and it is found by the lower court that the obligor has done all in his power to comply with the obligation, the judgment of the said court, ordering the other party to comply with his part of the contract, is not contrary to the law of contracts, or to law 1, Tit. I, Book 10, of the ‘Novisima Recopilacion,’ or Law 12, Tit. 11, of Partida 5, when in the said finding of the lower court, no law or precedent is alleged to have been violate.” (Jurisprudencia Civil published by the directors of the Revista General de Legislacion y Jurisprudencia [1866], vol. 14, page 656.)

In the second decision, the following doctrine is laid down:

“Second. That when the fulfillment of the condition does not depend on the will of the obligor, but on that of a third person, who can in no way be compelled to carry it out, the obligor’s part of the contract is complied with if he does all that is in his power, and has the right to demand performance of the contract by the other party, which is the doctrine laid down also by the supreme court.”

(The same publication [1871]. vol. 23, page 492.)

It is sufficiently proven in the record that the plaintiff has made all the efforts it could possibly by expected to make under the circumstances, to bring the goods in question to Manila, as soon as possible. And, as a matter of fact, through such efforts, it succeeded in importing them and placing them at the disposal of the defendant, Mr. Sotelo, in April, 1919. Under the doctrine just cited, which, as we have seen is of the same juridical origin as our Civil Code, it is obvious that the plaintiff has complied with its obligation.

In connection with this obligation to deliver, occurring in a contract of sale like those in question, the rule in North America is that when the time of delivery is not fixed in the contract, time is regarded unessential.

“When the time of delivery is not fixed or is stated in general and indefinite terms, time is not of the essence of the contract.” (35 Cyc., 179. And see Montgomery vs. Thompson, 152 Cal., 319; 92 Pac., 866; O’Brien vs. Higley, 162 Ind., 316; 70 N. E., 242; Pratt vs. Lincoln [Me. 1888], 13 Atl., 689; White vs. McMillan, 114 N. c., 349; 19 S. E., 234; Ballantyne vs. Watson, 30 U. C. C. P., 529.)

In such case, the delivery must be made within a reasonable time.

“The law implies, however, that if no time is fixed, delivery shall be made within a reasonable time, in the absence of anything to show that an immediate delivery intended.” (35 Cyc., 179, 180.)

“When the contract provides for delivery as soon as possible’ the seller is entitled to a reasonable time, in view of all the circumstances, such as the necessities of manufacture, or of putting the goods in condition for delivery. The term does not men immediately or that the seller must stop all his other work and devote himself to that particular order. But the seller must nevertheless act with all reasonable diligence or without unreasonable delay. It has been held that a requirement that the shipment of goods should be the earliest possible’ must be construed as meaning that the goods should be sent as soon as the seller could possibly send them, and that it signified rather more than that the goods should be sent within a reasonable time.

“Delivery ‘Shortly.’ — In a contract for the sale of personal property to be delivered ‘shortly,’ it is the duty of the seller to tender delivery within a reasonable time and if he tenders delivery after such time the buyer may reject.

xxx xxx xxx

“The question as to what is a reasonable time for the delivery of the goods by the seller is to be determined by the circumstances attending the particular transaction, such as the character of the goods, and the purpose for which they are intended, the ability of the seller to produce the goods if they are to be manufactured, the facilities available for transportation, and the distance the goods must be carried, and the usual course of business in the particular trade.” (35 Cyc., 181-184.)

Whether or not the delivery of the machinery in litigation was offered to the defendant within a reasonable time, is a question to be determined by the court.

“Applications of rule. — A contract for delivery ‘about Nov. 1’ is complied with by delivery on November 10 (White vs. McMillan, 114 N. C., 349; 19 S. E., 234. And see O’Brien vs. Higley, 162 Ind., 316; 70 N. E., 242); and a contract to deliver ‘about the last of May or June’ is complied with by delivery on the last days of June (New Bedford Copper Co. vs. Southard, 95 Me., 209; 49 Atl., 1062, holding also that if the goods were to be used for a ship to arrive ‘about April’ and the vessel was delayed, the seller might deliver within a reasonable time after her arrival, although such reasonable time extended beyond the last of June); so under a contract to deliver goods sold ‘about June, 1906,’ delivery may be made during the month of June, or in a reasonable time thereafter (Loomis vs. Norman Printers’ Supply Co., 81 Conn., 343; 71 Atl., 358).” (35 Cyc., 180, note 16.)

The record shows, as we have stated, that the plaintiff did all within its power to have the machinery arrive at Manila as soon as possible, and immediately upon its arrival it notified the purchaser of the fact and offered to deliver it to him. Taking these circumstances into account, we hold that the said machinery was brought to Manila by the plaintiff within a reasonable time.

Therefore, the plaintiff has not been guilty of any delay in the fulfillment of its obligation, and, consequently, it could not have incurred any of the liabilities mentioned by the intervenor in its counterclaim or set-off.

Besides, it does not appear that the intervenor, the Manila Oil Refining and By-Products Co., Inc., has in any way taken part in these contracts. These contracts were signed by the defendant, Mr. Vicente Sotelo, in his individual capacity and own name. If he was then acting as agent of the intervenor, the latter has no right of action against the herein plaintiff.

“When an agent acts in his own name, the principal shall have no right of action against the persons with whom the agent has contracted, or such persons against the principal.

“In such case, the agent is directly liable to the person with whom he has contracted, as if the transaction were his own. Cases involving things belonging to the principal are excepted.

“The provisions of this article shall be understood to be without prejudice to actions between principal and agent.” (Civil Code, art. 1717.)

“When the agent transacts business in his own name, it shall not be necessary for him to state who is the principal and he shall be directly liable, as if the business were for his own account, to the persons with whom he transacts the same, said persons not having any right of action against the principal, nor the latter against the former, the liabilities of the principal and of the agent to each other always being reserved.” (Code of Com., art, 246.)

“If the agent transacts business in the name of the principal, he must state that fact; and if the contract is in writing, he must state it therein or in the subscribing clause, giving the name, surname, and domicile of said principal.

“In the case prescribed in the foregoing paragraph, the contract and the actions arising therefrom shall be effective between the principal and the persons or person who may have transacted business with the agent; but the latter shall be liable to the persons with whom he transacted business during the time he does not prove the commission, if the principal should deny it, without prejudice to the obligation and proper actions between the principal and agent.” (Code of Com., art. 247.)

The foregoing provisions lead us to the conclusion that the plaintiff is entitled to the relief prayed for in its complaint, and that the intervenor has no right of action, the damages alleged to have been sustained by it not being imputable t the plaintiff.

Wherefore, the judgment appealed from is modified, and the defendant, Mr. Vicente Sotelo Matti, sentenced to accept and receive from the plaintiff the tanks, the expellers and the motors is question, and to pay the plaintiff the sum of ninety-six thousand pesos (96,000), with legal interest thereon from July 17, 1919, the date of the filing of the complaint, until fully paid , and the costs of both instances. So ordered.

Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor, Ostrand, and Johns, JJ., concur.

||| (Smith, Bell & Co., Ltd. v. Matti, G.R. No. 16570, [March 9, 1922], 44 PHIL 874-885)

TRILLANA vs. QUEZON COLLEGE

EN BANC

[G.R. No. L–5003. June 27, 1953.]

NAZARIO TRILLANA, administrator-appellee, vs. QUEZON COLLEGE, INC., claimant-appellant.

Singson, Barnes, Yap & Blanco for appellant.

Delgado, Flores & Macapagal for appellee.

SYLLABUS

1. OBLIGATIONS AND CONTRACTS STOCK SUBSCRIPTION; OFFER AND ACCEPTANCE; FACULTATIVE CONDITION. — As the appellant offered its stock for subscription on the terms stated in a form letter, and D. C. applied for subscription fixing her own plan of payment, the relation, in the absence of acceptance by the appellant of the counter offer of D. C., had not ripened into an enforceable contract. There was imperative need for express acceptance on appellant’s part, because the proposal of D. C. to pay the value of the subscription after she had harvested fish, was a condition obviously dependent upon her sole will and, therefore, facultative in nature, rendering the obligation void under article 1115 of the old Civil Code.

D E C I S I O N

PARAS, J p:

Damasa Crisostomo sent the following letter to the Board of Trustees of the Quezon College:

 June 1, 1948

“The BOARD OF TRUSTEES
“Quezon College
“Manila.
“Gentlemen:

“Please enter my subscription to dalawang daan (200) shares of your capital stock with a par value of P100 each. Enclosed you will find (Babayaran kong lahat pagkatapos na ako ay makapagpahuli ng isda) pesos as my initial payment and the balance payable in accordance with law and the rules and regulations of the Quezon College. I hereby agree to shoulder the expenses connected with said shares of stock. I further submit myself to all lawful demands, decisions or directives of the Board of Trustees of the Quezon College and all its duly constituted officers or authorities (ang nasa itaas ay binasa at ipinaliwanag sa akin sa wikang tagalog na aking nalalaman).

 “Very respectfully,

 “(Sgd.) DAMASA CRISOSTOMO
  Signature of subscriber

“Nilagdaan sa aming harapan:
 “JOSE CRISOSTOMO
 “EDUARDO CRISOSTOMO”

Damasa Crisostomo died on October 26, 1948. As no payment appears to have been made on the subscription mentioned in the foregoing letter, the Quezon College, Inc. presented a claim before the Court of First Instance of Bulacan in her testate proceeding, for the collection of the sum of P20,000, representing the value of the subscription to the capital stock of the Quezon College, Inc. This claim was opposed by the administrator of the estate, and the Court of First Instance of Bulacan, after hearing, issued an order dismissing the claim of the Quezon College, Inc., on the ground that the subscription in question was neither registered in nor authorized by the Securities and Exchange Commission. From this order the Quezon College, Inc. has appealed.

It is not necessary for us to discuss at length appellant’s various assignments of error relating to the propriety of the ground relied upon by the trial court, since, as pointed out in the brief for the administrator and appellee, there are other decisive considerations which, though not touched by the lower court, amply sustained the appealed order.

It appears that the application sent by Damasa Crisostomo to the Quezon College, Inc. was written on a general form indicating that an applicant will enclose an amount as initial payment and will pay the balance in accordance with law and the rules or regulations of the College. On the other hand, in the letter actually sent by Damasa Crisostomo, the latter (who requested that her subscription for 200 shares be entered) not only did not enclose any initial payment but stated that “babayaran kong lahat pagkatapos na ako ay makapagpahuli ng isda.” There is nothing in the record to show that the Quezon College, Inc. accepted the term of payment suggested by Damasa Crisostomo, or that if there was any acceptance the same came to her knowledge during her lifetime. As the application of Damasa Crisostomo is obviously at variance with the terms evidenced in the form letter issued by the Quezon College, Inc., there was absolute necessity on the part of the College to express its agreement to Damasa’s offer in order to bind the latter. Conversely, said acceptance was essential, because it would be unfair to immediately obligate the Quezon College, Inc. under Damasa’s promise to pay the price of the subscription after she had caused fish to be caught. In other words, the relation between Damasa Crisostomo and the Quezon College, Inc. had only thus reached the preliminary stage whereby the latter offered its stock for subscription on the terms stated in the form letter, and Damasa applied for subscription fixing her own plan of payment, — a relation, in the absence as in the present case of acceptance by the Quezon College, Inc. of the counter offer of Damasa Crisostomo, that had not ripened into an enforceable contract.

Indeed, the need for express acceptance on the part of the Quezon College, Inc. becomes the more imperative, in view of the proposal of Damasa Crisostomo to pay the value of the subscription after she had harvested fish, a condition obviously dependent upon her sole will and, therefore, facultative in nature, rendering the obligation void, under article 1115 of the old Civil Code which provides as follows: “If the fulfillment of the condition should depend upon the exclusive will of the debtor, the conditional obligation shall be void. If it should depend upon chance, or upon the will of a third person, the obligation shall produce all its effects in accordance with the provisions of this code.” It cannot be argued that the condition solely is void, because it would have served to create the obligation to pay, unlike a case, exemplified by Osmeña vs. Rama (14 Phil., 99), wherein only the potestative condition was held void because it referred merely to the fulfillment of an already existing indebtedness.

In the case of Taylor vs. Uy Tieng Piao et al. (43 Phil., 873, 879), this Court already held that “a condition, facultative as to the debtor, is obnoxious to the first sentence contained in article 1115 and renders the whole obligation void.”

Wherefore, the appealed order is affirmed, and it is so ordered with costs against the appellant.

Tuason, Montemayor, Jugo, Bautista Angelo and Labrador, JJ., concur.

||| (Trillana v. Quezon College, Inc., G.R. No. L-5003, [June 27, 1953], 93 PHIL 383-386)

PEREZ vs. POMAR

N BANC

[G.R. No. 1299. November 16, 1903.]

VICENTE PEREZ, plaintiff-appellee, vs. EUGENIO POMAR, Agent of the Compania-General de Tabacos, defendant-appellant.

Francisco Dominguez for appellant.

Ledesma, Sumulong & Quintos for appellee.

SYLLABUS

1. CONTRACTS; CONSENT. — Contracts resulting from an implied consent of the parties are valid and enforceable.

2. ID.; ID.; HIRING. — Where one has rendered services to another, and these services are accepted by the latter, in the absence of proof that the service was rendered gratuitously, an obligation results to pay the reasonable worth of the services rendered upon the implied contract of hiring.

3. ID.; ID.; ID. — Although no fixed amount may have been determined as the consideration for the contract of hiring, the contract is nevertheless valid if the amount of the implied compensation can be determined by custom or frequent use in the place where the services were rendered.

D E C I S I O N

TORRES, J p:

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

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

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

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

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

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

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

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

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

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

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

In contracts the will of the contracting parties is law, this being a legal doctrine based upon the provisions of articles 1254, 1258, 1262, 1278, 1281, 1282, and 1289 of the Civil Code. If it is a fact sufficiently proven that the defendant, Pomar, on various occasions consented to accept an interpreter’s services, rendered in his behalf and not gratuitously, it is but just that he should pay a reasonable remuneration therefor, because it is a well-known principle of law that no one should be permitted to enrich himself to the damage of another.

With respect to the value of the services rendered on different occasions, the most important of which was the first, as it does not appear that any salary was fixed upon by the parties at the time the services were accepted, it devolves upon the court to determine, upon the evidence presented, the value of such services, taking into consideration the few occasions on which they were rendered. The fact that no fixed or determined consideration for the rendition of the services was agreed upon does not necessarily involve a violation of the provisions of article 1544 of the Civil Code, because at the time of the agreement this consideration was capable of being made certain. The discretionary power of the court, conferred upon it by the law, is also supported by the decisions of the supreme court of Spain, among which may be cited that of October 18, 1899, which holds as follows: “That as stated in the article of the Code cited, which follows the provisions of law 1 title 8, of the fifth partida, the contract for lease of services is one in which one of the parties undertakes to make some thing or to render some service to the other for a certain price, the existence of such a price being understood, as this court has held not only when the price has been expressly agreed upon but also when it may be determined by the custom and frequent use of the place in which such services were rendered.”

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

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

For the reasons stated, we are of the opinion that judgment should be rendered against Don Eugenio Pomar for the payment to the plaintiff of the sum of 200 Mexican pesos, from which will be deducted the sum of 50 pesos due the defendant by the plaintiff. No special declaration is made as to the costs of this instance. The judgment below is accordingly affirmed in so far as it agrees with this opinion, and reversed in so far as it may be in conflict therewith. Judgment will be entered accordingly twenty days after this decision is filed.

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

Separate Opinions

McDONOUGH, J ., with whom concurs COOPER, J ., dissenting:

I dissent from the opinion of the majority. In my opinion there is no legal evidence in the case from which the court may conclude that the recovery should be 200 Mexican pesos. I am therefore in favor of affirming the judgment.

Johnson, J ., did not sit in this case.

||| (Perez v. Pomar, G.R. No. 1299, [November 16, 1903], 2 PHIL 682-689)

TIPTON vs. VELASCO

Tipton v. Velasco
G.R. No. 2220
April 4, 1906
6 PHIL 67-70

Actual Decision:
MAPA, J p:
The doctrine laid down by this court in the case of W. M Tipton vs. Roman Martinez y Andueza, 1 No. 2070, decided January 2, 1906, is applicable to the case at bar. Both cases turn upon the same question — i. e., whether a certain lease executed by the administrator of the San Lazaro Hospital for a term of ten years without special authority therefor was void. The terms of the lease in such case are substantially the same in so far as the question raised by the parties is concerned. We refer, therefore, to that part of the decision of this court in that case which relates to the intrinsic validity or nullity of the contract in question.
The only point to be considered is that relating to the alleged ratification of the lease by the Government whom the parties have apparently recognized as the owner of the property pertaining to the San Lazaro Hospital.
It was alleged as an act of ratification of the lease that the lessor had received from the lease the rent due for the various years following the execution of the contract. Upon this point the court below found that “the Government at the time this action was brought had collected rent for a period of five years without raising any objection as to the validity of the lease.” The appellant contends that the lower court erred in making this finding because there is no evidence in the case to support it.
We think that appellant’s contention is correct. Both parties waived their right to introduce any evidence and instead agreed upon a written stipulation of facts. There is nothing in the said stipulation having any connection with the finding in question, nor was such fact admitted by the pleadings. The plaintiff in his complaint expressed his willingness to return to the defendant the rent already collected. This could not have been construed as an admission of the fact found by the court. Nowhere does it appear whether the Government received the money. So far as the record shows, the administrators of the San Lazaro Hospital, and not the Government, received the rent due for the years 1900, 1901, 1902, and 1903. It is so expressly stated in the first paragraph of the answer. It also appears from the answer that the various administrators of the hospital (not the Government) had recognized the validity of the contract. There is, therefore, no evidence that the government ever collected rent or that it at any time ratified the lease. Whatever the administrator of the San Lazaro Hospital did in this connection could not have had the effect of making the lease valid. It was not even shown that the administrators were duly authorized to ratify the contract. A contract which is void because of the absence of authority on the part of one of the contracting parties may be ratified by the persn in whose behalf it was executed or by his duly authorized agent and not by any other person not so empowered. (Art. 1259 of the Civil Code.)
It is also alleged by the appellee that more than four years had elapsed since the execution of the contract and that plaintiff’s action to have the lease declared void was therefore barred by the statute of limitations (art. 1301 of the Civil Code), which provides that “an action to have a contract declared void must be brought within four years.” This provision is applicable to the contracts referred to in article 1300 of the Civil Code – at is to say, to contracts which, although having all of the elements required by article 1261, have some defect which renders them void according to law. It is not, however, applicable to contracts executed in the name of another without his authority, as was the case with the lease now under consideration in so far as the administrator of the San Lazaro Hospital exceeded his authority. Article 1259 of the Civil Code applies to such contracts. It provides that they shall be considered void unless subsequently ratified by the person in whose behalf they were executed. The nullity of these contracts is of a permanent nature and it will exist as long as they are not duly ratified. The mere lapse of time can not give efficacy to such contracts. The defect is such that it can not be cured except by the subsequent ratification of the person in whose name the contract was executed.
The judgment appealed from should be reversed, and it is declared that the lease in question was valid only for six years from the 1st of January, 1899, to the 31st of December, 1904, and void as to, the last four years of the contract term — that is to say, the effects of its nullity should date from the 1st day of January, 1905. The defendant shall return the land in the form and manner provided for in the lease together with the proceeds derived from its possession since the last-mentioned date. The plaintiff will return to the defendant the rent received during the same period, provided the rent has in fact been paid to him, with legal interest thereon at the rate of 6 per cent per annum. No costs will be allowed to either party in either instance. After, the expiration of twenty days let judgment be entered in accordance herewith and let the case be remanded to the trial court for proper action. So ordered.
Arellano, C. J., Torres, Carson, and Willard, JJ., concur.
Johnson, J., concurs in the result.

PASCUAL vs. REALTY INVESTMENT, INC.

Pascual v. Realty Investment, Inc.

G.R. No. L-4002

May 12, 1952

91 PHIL 257-260

Facts:

Plaintiff filed an action in the Court of First Instance of Manila to compel the defendant to sell to him a parcel of land upon prior payment of the purchase price at the rate of P25 per square meter.

Plaintiff alleges that since 1912 he has occupied said parcel of land as tenant while the same was still under the administration of Angel Tuason; that in 1941, said property was transferred to the defendant to be subdivided and sold to the public; that when plaintiff came to know that the property was for sale he offered to buy it from the defendant, and the latter, through its manager, one Mr. Aquino, verbally agreed to sell the same to the plaintiff provided that he would agree to pay the price at the rate of P15 per square meter; that the plaintiff agreed to pay the price fixed by the defendant which however failed to perfect the sale and instead asked for more time to prepare the necessary papers; that in February 1948, the defendant increased the price to P25 per square meter to which increase the plaintiff agreed, but this notwithstanding the defendant failed to carry out the sale.

Issue: Whether or not the alleged agreement is enforceable.

Ruling:

No. Thus, while it is alleged that plaintiff has occupied the land since 1912, there is nothing alleged therein to the effect that he has taken possession thereof in view of a supposed verbal contract he had with the defendant to purchase it, nor is there any allegation that he has made improvements thereon because and as a consequence of said supposed contract to sell. This case having been dismissed on a mere motion to dismiss, the merits of the order of the court can only be gauged upon a consideration of the allegations appearing in the complaint, and upon no other. We agree with counsel that where a parol contract of sale is adduced not for the purpose of enforcing it, but as a basis of the possession of the person claiming to be the owner of the land, the statute of frauds is not applicable (Almirol et al., vs. Monserrat, 48 Phil., 67), in the same way that it does not apply to contracts which are either totally or partially performed upon the theory that there is a wide field for the commission of frauds in executory contracts which can only be prevented by requiring them to be in writing, a fact which is reduced to a minimum in executed contracts because the intention of the parties become apparent by their execution (Hernandez vs. Andal, 44 Off. Gaz. (No. 8), 2672. III Moran on the Rules of Court, 3rd ed., pp. 181-182). But, as we have already pointed out, this situation does not here obtain for the reason that the complaint does not contain the requisite allegations. On the contrary, it alleges that plaintiff occupied the land as a tenant since 1912. There is, therefore, no room for the application of the theory advanced by counsel for the appellant.

Actual Decision:

BAUTISTA ANGELO, J p:

Plaintiff filed an action in the Court of First Instance of Manila to compel the defendant to sell to him a parcel of land with an area of 450 square meters, more or less, upon prior payment of the purchase price at the rate of P25 per square meter.

Plaintiff alleges that since 1912 he has occupied said parcel of land as tenant while the same was still under the administration of Angel Tuason; that in 1941, said property was transferred to the defendant to be subdivided and sold to the public; that when plaintiff came to know that the property was for sale he offered to buy it from the defendant, and the latter, through its manager, one Mr. Aquino, verbally agreed to sell the same to the plaintiff provided that he would agree to pay the price at the rate of P15 per square meter; that the plaintiff agreed to pay the price fixed by the defendant which however failed to perfect the sale and instead asked for more time to prepare the necessary papers; that in February 1948, the defendant increased the price to P25 per square meter to which increase the plaintiff agreed, but this notwithstanding the defendant failed to carry out the sale. Hence this action.

Instead of answering the complaint, defendant filed a motion to dismiss on the ground that “whatever cause of action is alleged therein the same is unenforceable under the provisions of the statute of frauds”. Defendant contends that the purpose of the action is to compel the said defendant to execute a deed of sale of a parcel of land on a supposed verbal agreement to sell and inasmuch as under section 21(e), Rule 123, of the Rules of Court, an agreement to sell real property should be made in writing, or at least it should appear in a note or a memorandum, in order that a suit based thereon may be enforceable, the present action cannot be maintained and should be dismissed.

The court granted the motion and, accordingly, dismissed the complaint without pronouncement as to costs. The case is now before this Court in view of the appeal interposed by the plaintiff.

After a careful perusal of the allegations of the complaint, we are of the opinion that the lower court did not err in dismissing the complaint for the reason that the purpose of this action is to enforce an alleged verbal agreement to sell to the plaintiff a parcel of land which is claimed to have been occupied by the plaintiff as a tenant since 1912, it appearing that under the statute of frauds said verbal agreement cannot be enforced, nor evidence thereon presented, because it has not been made in writing, nor does it appear in a note or memorandum, as required by said statute (Rule 123, section 21(e), Rules of Court).

But plaintiff contends that this transaction does not come under the statute of frauds in view of the fact that (1) he took possession of the property as a consequence of the verbal contract to sell he had with the defendant, and (2) he has made substantial improvements thereon upon the realization that he had already acquired the right to purchase the same by virtue of said agreement. And this is so, he contends, because where there is a partial performance of the contract to sell, or where possession of the land has been taken by a purchaser and improvements thereon made as a consequence of said contract to sell, the rule prohibiting the presentation of oral evidence does not apply because the statute does not render the contract void or without effect but merely unavailable for the purpose of enforcing the contract itself.

The theory advanced by counsel would be tenable if the requisite facts that would take this case out of the rule were present, for then it will be considered as one of those cases that are excepted from the operation of the statute; but no such facts appear in the complaint, as can be seen from a perusal thereof. Thus, while it is alleged that plaintiff has occupied the land since 1912, there is nothing alleged therein to the effect that he has taken possession thereof in view of a supposed verbal contract he had with the defendant to purchase it, nor is there any allegation that he has made improvements thereon because and as a consequence of said supposed contract to sell. This case having been dismissed on a mere motion to dismiss, the merits of the order of the court can only be gauged upon a consideration of the allegations appearing in the complaint, and upon no other. We agree with counsel that where a parol contract of sale is adduced not for the purpose of enforcing it, but as a basis of the possession of the person claiming to be the owner of the land, the statute of frauds is not applicable (Almirol et al., vs. Monserrat, 48 Phil., 67), in the same way that it does not apply to contracts which are either totally or partially performed upon the theory that there is a wide field for the commission of frauds in executory contracts which can only be prevented by requiring them to be in writing, a fact which is reduced to a minimum in executed contracts because the intention of the parties become apparent by their execution (Hernandez vs. Andal, 44 Off. Gaz. (No. 8), 2672. III Moran on the Rules of Court, 3rd ed., pp. 181-182). But, as we have already pointed out, this situation does not here obtain for the reason that the complaint does not contain the requisite allegations. On the contrary, it alleges that plaintiff occupied the land as a tenant since 1912. There is, therefore, no room for the application of the theory advanced by counsel for the appellant.

Wherefore, the order appealed from is affirmed, with costs against the appellant.

Paras, C.J., Feria, Pablo, Bengzon, Montemayor and Labrador, JJ., concur.

FRANCISCO vs. GOVERNMENT SERVICE INSURANCE SYSTEM

Francisco v. Government Service Insurance System

G.R. No. L-18287, L-18155

March 30, 1963

Facts:

The plaintiff, Trinidad J. Francisco, in consideration of a loan mortgaged in favor of the defendant, Government Service Insurance System a parcel of land known as Vic-Mari Compound, located at Baesa, Quezon City. The System extrajudicially foreclosed the mortgage on the ground that up to that date the plaintiff-mortgagor was in arrears on her monthly instalments. The System itself was the buyer of the property in the foreclosure sale. The plaintiff’s father, Atty. Vicente J. Francisco, sent a letter to the general manager of the defendant corporation, Mr. Rodolfo P. Andal. And latter the System approved the request of Francisco to redeem the land through a telegram. Defendant received the payment and it did not, however, take over the administration of the compound. The System then sent a letter to Francisco informing of his indebtedness and the 1 year period of redemption has been expired. And the System argued that the telegram sent to Francisco saying that the System has approved the request in redeeming the property is incorrect due to clerical problems.

Issue:

WON the payment ratified the original agreement.

Held:

Yet, notwithstanding this notice, the defendant System pocketed the amount, and kept silent about the telegram not being in accordance with the true facts, as it now alleges. This silence, taken together with the unconditional acceptance of three other subsequent remittances from plaintiff, constitutes in itself a binding ratification of the original agreement.

Actual Decision:

REYES, J.B.L., J p:

Appeal by the Government Service Insurance System from the decision of the Court of First Instance of Rizal (Hon. Angel H. Mojica, presiding), in its Civil Case No. 2088-P, entitled “Trinidad J. Francisco, plaintiff, vs. Government Service Insurance System, defendant”, the dispositive part of which reads as follows:

“WHEREFORE, judgment is hereby rendered: (a) Declaring null and void the consolidation in the name of the defendant, Government Service Insurance System, of the title of the VIC-MARI compound; said title shall be restored to the plaintiff; and all payments made by the plaintiff; after her offer had been accepted by the defendant, must be credited as amortizations on her loans; and (b) Ordering the defendant to abide by the terms of the contract created by plaintiff’s offer and its unconditional acceptance, with costs against the defendant.”

The plaintiff, Trinidad J. Francisco, likewise appealed separately (L-18155), because the trial court did not award the P535,000.00 damages and attorney’s fees she claimed. Both appeals are, therefore, jointly treated in this decision.

The following facts are admitted by the parties. On 10 October 1956, the plaintiff, Trinidad J. Francisco, in consideration of a loan in the amount of P400,000.00, out of which the sum of P336,100.00 was released to her, mortgaged in favor of the defendant, Government Service Insurance System (hereinafter referred to as the System), a parcel of land containing an area of 18,232 square meters, with twenty-one (21) bungalows, known as Vic-Mari Compound, located at Baesa, Quezon City, payable within ten (10) years in monthly installments of P3,902.41, and with interest of 7% per annum compounded monthly.

On 6 January 1959, the System extrajudicially foreclosed the mortgage on the ground that up to that date the plaintiff-mortgagor was in arrears on her monthly installments in the amount of P52,000.00. Payments made by the plaintiff at the time of foreclosure amounted to P130,000.00. The System itself was the buyer of the property in the foreclosure sale.

On 20 February 1959, the plaintiff’s father, Atty. Vicente J. Francisco, sent a letter to the general manager of the defendant corporation, Mr. Rodolfo P. Andal, the material portion of which recited as follows:

 

“Yesterday, I was finally able to collect what the Government owed me and I now propose to pay said amount of P30,000 to the GSIS if it would agree that after such payment the foreclosure of my daughter’s mortgage would be set aside. I am aware that the amount of P30,000 which I offer to pay will not cover the total arrearage of P52,000 but as regards the balance, I propose this arrangement: for the GSIS to take over the administration of the mortgaged property and to collect the monthly installments, amounting to about P5,000, due on the unpaid purchase price of more than 31 lots and houses therein and the monthly installments collected shall be applied to the payment of Miss Francisco’s arrearage until the same is fully covered. It is requested, however, that from the amount of the monthly installments collected, the sum of P350.00 be deducted for necessary expenses, such as to pay the security guard, the street caretaker, the Meralco Bill for the street lights and sundry items.

It will be noted that the collectible income each month from the mortgaged property, which as I said consists of installments amounting to about P5,000, is more than enough to cover the monthly amortization on Miss Francisco’s loan. Indeed, had she not encountered difficulties, due to unforeseen circumstances, in collecting the said installments, she could have paid the amortizations as they fell due and there would have been really no need for the GSIS to resort to foreclosure.

The proposed administration by the GSIS of the mortgaged property will continue even after Miss Francisco’s account shall have been kept up to date. However, once the arrears shall have been paid, whatever amount of the monthly installments collected in excess of the amortization due on the loan will be turned over to Miss Francisco.

I make the foregoing proposal to show Miss Francisco’s sincere desire to work out any fair arrangement for the settlement of her obligation. I trust that the GSIS, under the broad-minded policies of your administration, would give it serious consideration.

Sincerely,

s/Vicente J. Francisco

t/VICENTE J. FRANCISCO

On the same date, 20 February 1959, Atty. Francisco received the following telegram:

“VICENTE FRANCISCO

SAMANILLO BLDG. ESCOLTA

GSIS BOARD APPROVE YOUR REQUEST RE REDEMPTION OF FORECLOSED PROPERTY OF YOUR DAUGHTER

ANDAL”

 

On 28 February 1959, Atty. Francisco remitted to the System, through Andal, a check for P30,000.00, with an accompanying letter, which reads:

“I am sending you herein BPI Check No. B-299484 for Thirty thousand pesos (P30,000.00) in accordance with my letter of February 20th and your reply thereto of the same date, which reads:

“GSIS BOARD APPROVED YOUR REQUEST RE REDEMPTION OF FORECLOSED PROPERTY OF YOUR DAUGHTER’

xxx xxx xxx”

The defendant received the amount of P30,000.00, and issued therefor its official receipt No. 1209874, dated 4 March 1959. It did not, however, take over the administration of the compound. In the meantime, the plaintiff received the monthly payments of some of the occupants thereat; then, on 4 March 1960, she remitted, through her father, the amount of P44,121.29, representing the total monthly installments that she received from the occupants for the period from March to December 1959 and January to February 1960, minus expenses and real estate taxes. The defendant also received this amount, and issued the corresponding official receipt.

Remittances, all accompanied by letters, corresponding to the months of March, April, May, and June, 1960 and totalling P24,604.81 were also sent by the plaintiff to the defendant from time to time, all of which were received and duly receipted for.

Then the System sent three (3) letters, one dated 29 January 1960, which was signed by its assistant general manager, and the other two letters, dated 19 and 26 February 1960, respectively, which were signed by Andal, asking the plaintiff for a proposal for the payment of her indebtedness, since according to the System the one-year period for redemption had expired.

In reply, Atty. Francisco sent a letter, dated 11 March 1960, protesting against the System’s request for proposal of payment and inviting its attention to the concluded contract generated by his offer of 20 February 1959, and its acceptance by telegram of the same date, the compliance of the terms of the offer already commenced by the plaintiff, and the misapplication by the System of the remittances she had made, and requesting the proper corrections.

By letter, dated 31 May 1960, the defendant countered the preceding protest that, by all means, the plaintiff should pay attorney’s fees of P35,644.14, publication expenses, filing fee of P301.00, and surcharge of P23.64 for the foreclosure work done; that the telegram should be disregarded in view of its failure to express the contents of the board resolution due to the error of its minor employees in couching the correct wording of the telegram, A copy of the excerpts of the resolution of the Board of Directors (No. 380, February 20, 1959) was attached to the letter, showing the approval of Francisco’s offer —

“. . . subject to the condition that Mr. Vicente J. Francisco shall pay all expenses incurred by the GSIS in the foreclosure of the mortgage.”

Inasmuch as, according to the defendant, the remittances previously made by Atty. Francisco were allegedly not sufficient to pay off her daughter’s arrears, including attorney’s fees incurred by the defendant in foreclosing the mortgage, and the one-year period for redemption has expired, said defendant, on 5 July 1960, consolidated the title to the compound in its name, and gave notice thereof to the plaintiff on 26 July 1960 and to each occupant of the compound.

Hence, the plaintiff instituted the present suit, for specific performance and damages. The defendant answered, pleading that the binding acceptance of Francisco’s offer was the resolution of the Board, and that Andal’s telegram, being erroneous, should be disregarded. After trial, the court below found that the offer of Atty. Francisco, dated 20 February 1959, made on behalf of his daughter, had been unqualifiedly accepted, and was binding, and rendered judgment as noted at the start of his opinion.

The defendant-appellant corporation assigns six (6) errors allegedly committed by the lower court, all of which, however, are resolvable on the single issue as to whether or not the telegram generated a contract that is valid and binding upon the parties.

We find no reason for altering the conclusion reached by the court below that the offer of compromise made by plaintiff in the letter, Exhibit “A”, had been validly accepted, and was binding on the defendant. The terms of the offer were clear, and over the signature of defendant’s general manager, Rodolfo Andal, plaintiff was informed telegraphically that her proposal had been accepted. There was nothing in the telegram that hinted at any anomaly, or gave ground to suspect its veracity, and the plaintiff, therefore, can not be blamed for relying upon it. There is no denying that the telegram was within Andal’s apparent authority, but the defense is that he did not sign it, but that it was sent by the Board Secretary in his name and without his knowledge. Assuming this to be true, how was appellee to know it? Corporate transactions would speedily come to a standstill were every person dealing with a corporation held duty-bound to disbelieve every act of its responsible officers, no matter how regular they should appear on their face. This Court has observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655, that —

“In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the situation as it presents itself to the third party with whom the contract is made. Naturally he can have little or no information as to what occurs in corporate meetings; and he must necessarily rely upon the external manifestations of corporate consent. The integrity of commercial transactions can only be maintained by holding the corporation strictly to the liability fixed upon it by its agents in accordance with law; and we would be sorry to announce a doctrine which would permit the property of a man in the city of Paris to be whisked out of his hands and carried into a remote quarter of the earth without recourse against the corporation whose name and authority had been used in the manner disclosed in this case. As already observed, it is familiar doctrine that if a corporation knowingly permits one of its officers, or any other agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as possessing power to do those acts, the corporation will, as against any one who has in good faith dealt with the corporation through such agent, be estopped from denying his authority; and where it is said “if the corporation permits” his means the same as “if the thing is permitted by the directing power of the corporation.”

It has also been decided that —

“A very large part of the business of the country is carried on by corporations. It certainly is not the practice of persons dealing with officers or agents who assume to act for such entities to insist on being shown the resolution of the board of directors authorizing the particular officer or agent to transact the particular business which he assumes to conduct. A person who knows that the officer or agent of the corporation habitually transacts certain kinds of business for such corporation under circumstances which necessarily show knowledge on the part of those charged with the conduct of the corporate business assumes, as he has the right to assume, that such agent or officer is acting within the scope of his authority.” (Curtis Land & Loan Co. vs. Interior Land Co., 137 Wis. 341, 118 N. W. 853, 129 Am. St. Rep. 1068; as cited in 2 Fletcher’s Encyclopedia, Priv. Corp. 263, Perm. Ed).

Indeed, it is well-settled that —

“If a private corporation intentionally or negligently clothes its officers or agents with apparent power to perform acts for it, the corporation will be estopped to deny that such apparent authority is real, as to innocent third persons dealing in good faith with such officers or agents.” (2 Fletcher’s Encyclopedia, Priv. Corp. 255, Perm. Ed).

Hence, even if it were the board secretary who sent the telegram, the corporation could not evade the binding effect produced by the telegram.

The defendant-appellant does not disown the telegram, and even asserts that it came from its offices, as may be gleaned from the letter, dated 31 May 1960, to Atty. Francisco, and signed “R. P. Andal, general manager by Leovigildo Monasterial, legal counsel”, wherein these phrases occur: “the telegram sent . . . by this office” and “the telegram we sent you” (emphasis supplied), but it alleges mistake in couching the correct wording. This alleged mistake cannot be taken seriously, because while the telegram is dated 20 February 1959, the defendant informed Atty. Francisco of the alleged mistake only on 31 May 1960, and all the while it accepted the various other remittances, starting on 28 February 1959, sent by the plaintiff to it in compliance with her performance of her part of the new contract.

The inequity of permitting the System to deny its acceptance becomes more patent when account is taken the fact that in remitting the payment of P30,000 advanced by her father, plaintiff’s letter to Mr. Andal quoted verbatim the telegram of acceptance. This was in itself notice to the corporation of the terms of the allegedly unauthorized telegram, for as Ballentine says:

“Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not.” (Ballentine, Law on Corporations, section 112).

since a corporation cannot see, or know, anything except through its officers.

Yet, notwithstanding this notice, the defendant System pocketed the amount, and kept silent about the telegram not being in accordance with the true facts, as it now alleges. This silence, taken together with the unconditional acceptance of three other subsequent remittances from plaintiff, constitutes in itself a binding ratification of the original agreement (Civil Code, Art. 1393).

“ART. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right.”

Nowhere else do the circumstances call more insistently for the application of the equitable maxim that between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss.

The defendant’s assertion that the telegram came from it but that it was incorrectly worded renders unnecessary to resolve the other point in controversy as to whether the said telegram constitutes an actionable document.

Since the terms offered by the plaintiff in the letter of 20 February 1959 (Exhibit “A”) provided for the setting aside of the foreclosure affected by the defendant System, the acceptance of the offer left the account of plaintiff in the same condition as if no foreclosure had taken place. It follows, as the lower court has correctly held, that the right of the System to collect attorney’s fees equivalent to 10% of the sum due (P35,694.14) and the expenses and charges of P3,300.00 may no longer be enforced, since by the express terms of the mortgage contract, these sums were collectible only “in the event of foreclosure.”

The court a quo also called attention to the unconscionability of the defendant’s charging the attorney’s fees, totalling over P35,000.00; and this point appears well-taken, considering that the foreclosure was merely extra-judicial, and the attorney’s work was limited to requiring the sheriff to effectuate the foreclosure. However, in view of the parties’ agreement to set the same aside, with the consequential elimination of such incidental charges, the matter of unreasonableness of the counsel fees need not be labored further.

 

Turning now to the plaintiff’s separate appeal (Case G. R. No. L-18155): Her prayer for an award of actual or compensatory damages for P83,333.33 is predicated on her alleged unrealized profits due to her inability to sell the compound for the price of P750,000.00 offered by one Vicente Alunan, which sale was allegedly blocked because the System consolidated the title to the property in its name. Plaintiff reckons the amount of P83,333.33 by placing the actual value of the property at P666,666.67, a figure arrived at by assuming that the System’s loan of P400,000.00 constitutes 60% of the actual value of the security. The court a quo correctly refused to award such actual or compensatory damages because it could not determine with reasonable certainty the difference between the offered price and the actual value of the property, for lack of competent evidence. Without proof we cannot assume, or take judicial notice, as suggested by the plaintiff, that the practice of lending institutions in the country is to give out as loan 60% of the actual value of the collateral. Nor should we lose sight of the fact that the price offered by Alunan was payable in installments covering five years, so that it may not actually represent true market values.

Nor was there error in the appealed decision in denying moral damages, not only on account of the plaintiff’s failure to take the witness stand and testify to her social humiliation, wounded feelings, anxiety, etc., as the decision holds, but primarily because a breach of contract like that of defendant, not being malicious or fraudulent, does not warrant the award of moral damages under Article 2220 of the Civil Code (Ventanilla vs. Centeno, L-14333, 28 Jan. 1961; Fores vs. Miranda, L-12163, 4 March 1959).

There is no basis for awarding exemplary damages either, because this species of damages is only allowed in addition to moral, temperate, liquidated, or compensatory damages, none of which have been allowed in this case, for reasons hereinbefore discussed (Art. 2234, Civil Code; Velayo vs. Shell Co. of P.I., L-7817, Res. July 30, 1957; Singson, et al. vs. Aragon and Lorza, L-5164, Jan. 27, 1953; 49 O.G. No. 2, 515).

s to attorney’s fees, we agree with the trial court’s stand that in view of the absence of gross and evident bad faith in defendant’s refusal to satisfy the plaintiff’s claim, and there being none of the other grounds enumerated in Article 2208 of the Civil Code, such absence precludes a recovery. The award of attorney’s fees is essentially discretionary in the trial court, and no abuse of discretion has been shown.

FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with costs against the defendant Government Service Insurance System in G.R. No. L-18287.

Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.

VDA. DE PORTUGAL vs. INTERMEDIATE APPELLATE COURT

Vda. de Portugal v. Intermediate Appellate Court

G.R. No. 73564

[March 25, 1988]

242 PHIL 709-716

Facts:

Hugo Portugal, a son of the spouses Portugal borrowed from his mother, Cornelia, the certificates of title to several parcels of land registered under the name of the spouses. Later, when Pascual Portugal died, the heirs of the deceased wished to have all the properties of the spouses collated. So, Cornelia asked Hugo for the return of the titles. However, Hugo manifested that the said titles no longer exist. Instead, he showed Cornelia Transfer Certificate of Title registered in his and his brother Emiliano’s names. The said title was brought about by a deed of sale by which the spouses Portugal purportedly sold the parcels of land to their two sons. When confronted by his mother of the fraud, Emiliano denied any participation, and reconveyed the portion of the subject lot conveyed to him in the void deed of sale. Hugo, on the other hand, refused to do the same. Consequently, the heirs filed the present action for annulment of title.

Issue:

Whether the contract of sale is merely voidable on the ground of fraud.

Ruling:

1. The alleged contract of sale is void for total absence of a valid cause or consideration. A closer scrutiny of the records of the case readily supports a finding that fraud and mistake are not the only vices present in the assailed contract of sale. Cornelia never knew of the existence of the questioned deed of sale, and came to know of the supposed sale only after Hugo showed to her the controversial deed of sale and certificate of title. More than that, Hugo’s brother Emiliano, who was allegedly his co-vendee in the transaction, disclaimed any knowledge or participation therein.

Actual Case:

SARMIENTO, J p:

Seeking the reversal of the decision 1 dated October 21, 1985 of the former Intermediate Appellate Court in CA-G.R. CV No. 70247, entitled “Cornelia Clanor Vda. de Portugal, et al. vs. Hugo Portugal,” and the reinstatement of the decision 2 in their favor, dated June 30, 1980, of the Court of First Instance of Cavite in Civil Case No. NC-699 entitled “Cornelia Vda. de Portugal, et al. vs. Hugo Portugal,” the petitioners now come to us by way of this petition for review by certiorari.

The factual background that gave rise to the present controversy is summarized as follows:

Petitioner Cornelia Clanor and her late husband Pascual Portugal, during the lifetime of the latter, were able to accumulate several parcels of real property. Among these were a parcel of residential land situated in Poblacion, Gen. Trias, Cavite, designated as Lot No. 3201, consisting of 2,069 square meters, more or less, and covered by T.C.T. No. RT-9355, in their names, and an agricultural land located at Pasong Kawayan, Gen. Trias, Cavite, with an area of 43,587 square meters, more or less, known as Lot No. 2337, and also registered in their names under T.C.T, No. RT-9356 of the Registry of Deeds for the province of Cavite.

Sometime in January, 1967, the private respondent Hugo Portugal, a son of the spouses, borrowed from his mother, Cornelia, the certificates of Title to the above-mentioned parcels of land on the pretext that he had to use them in securing a loan that he was negotiating. Cornelia, the loving and helpful mother that she was, assented and delivered the titles to her son. The matter was never again brought up until after Pascual Portugal died on November 17, 1974. (Cornelia herself died on November 12, 1987.) When the other heirs of the deceased Pascual Portugal, the petitioners herein, for the purposes of executing an extra-judicial partition of Pascual’s estate, wished to have all the properties of the spouses collated, Cornelia asked the private respondent for the return of the two titles she previously loaned, Hugo manifested that the said titles no longer exist. When further questioned, Hugo showed the petitioners Transfer Certificate of Title (T.C.T.) No. 23539 registered in his and his brother Emiliano Portugal’s names, and which new T.C.T. cancelled the two previous ones. This falsification was triggered by a deed of sale by which the spouses Pascual Portugal and Cornelia Clanor purportedly sold for P8,000.00 the two parcels of land adverted to earlier to their two sons, Hugo and Emiliano. Confronted by his mother of this fraud, Emiliano denied any participation. And to show his good faith, Emiliano caused the reconveyance of Lot No. 2337 previously covered by TCT No. RT-9356 and which was conveyed to him in the void deed of sale. Hugo, on the other hand, refused to make the necessary restitution thus compelling the petitioners, his mother and other brothers and sisters, to institute an action for the annulment of the controversial deed of sale and the reconveyance of the title over Lot No. 3201 (the residential land). After hearing, the trial court rendered its decision, the dispositive portion of which reads:

xxx xxx xxx

WHEREFORE, under our present perspectives, judgment is hereby rendered; and the Court hereby declares inoperative the Deed of Sale (Exhibit A and Exhibit 1) and all its appertaining and subsequent documents corresponding with Transfer Certificate of Title No. T-23539 of the Register of Deeds for the Province of Cavite, as well as all subsequent Transfer Certificates of Title which may have been produced corresponding to the parcels of land, subject matter hereof.

SO ORDERED. 3

From this decision, Hugo Portugal, the private respondent herein and the defendant in the trial court, appealed to the respondent appellate court which reversed, hence the present petition. LLphil

The issues raised by the petitioners are:

1. Whether or not the present action has prescribed;
2. Whether or not the respondent court was justified in disturbing the trial court’s findings on the credibility of the witnesses presented during the trial; and
3. Whether or not the appellate court could entertain the defense of prescription which was not raised by the private respondents in their answer to the complaint nor in a motion to dismiss.

We find the petition meritorious.

There is really nothing novel in this case as all the issues raised had been, on several occasions, ruled upon by the Court. Apropos the first issue, which is the timeliness of the action, the trial court correctly ruled that the action instituted by the petitioners has not yet prescribed. Be that as it may, the conclusion was reached through an erroneous rationalization, i.e., the case is purely for reconveyance based on an implied or constructive trust. Obviously, the trial court failed to consider the lack of consideration or cause in the purported deed of sale by which the residential lot was allegedly transferred to the private respondents by his parents. On the other hand, the respondent Intermediate Appellate Court held that since the action for reconveyance was fathered by a fraudulent deed of sale, Article 1391 of the Civil Code which lays down the rule that an action to annul a contract based on fraud prescribes in four years, applies. Hence, according to the respondent court, as more than four years had elapsed from January 23, 1967 when the assailed deed was registered and the petitioners’ cause of action supposedly accrued, the suit has already become stale when it was commenced on October 26, 1976, in the Court of First Instance of Cavite. For reasons shortly to be shown, we can not give our imprimatur to either view.

The case at bar is not purely an action for reconveyance based on an implied or constructive trust. Neither is it one for the annulment of a fraudulent contract. A closer scrutiny of the records of the case readily support a finding that fraud and mistake are not the only vices present in the assailed contract of sale as held by the trial court. More than these, the alleged contract of sale is vitiated by a total absence of a valid cause or consideration. The petitioners in their complaint, assert that they, particularly Cornelia, never knew of the existence of the questioned deed of sale. They claim that they came to know of the supposed sale only after the private respondent upon their repeated entreaties to produce and return the owner’s duplicate copy of the transfer certificate of title covering the two parcels of land, showed to them the controversial deed. And their claim was immeasurably bolstered when the private respondent’s co-defendant below, his brother Emiliano Portugal, who was allegedly his co-vendee in the transaction, disclaimed any knowledge or participation therein. If this is so, and this is not contradicted by the decisions of the courts below, the inevitable implication of the allegations is that contrary to the recitals found in the assailed deed, no consideration was ever paid at all by the private respondent. Applying the provisions of Article 1350, 1352, and 1409 of the new Civil Code in relation to the indispensable requisite of a valid cause or consideration in any contract, and what constitutes a void or inexistent contract, we rule that the disputed deed of sale is void ab initio or inexistent, not merely voidable. And it is provided in Article 1410 of the Civil Code that “(T)he action or defense for the declaration of the inexistence of a contract does not prescribe.”

But even if the action of the petitioners is for reconveyance of the parcel of land based on an implied or constructive trust, still it has been seasonably filed. For as heretofore stated, it is now settled that actions of this nature prescribe in ten years, the point of reference being the date of registration of the deed or the date of the issuance of the certificate of title over the property. 4

Amerol v. Bagumbaran, No. L-33261, September 30, 1987.

In this case, the petitioner commenced the instant action for reconveyance in the trial court on October 26, 1976, or less than ten years from January 23, 1967 when the deed of sale was registered with the Register of Deeds. 5 Clearly, even on this basis alone, the present action has not yet prescribed.

On the credibility of witnesses presented in court, there is no doubt that the trial court’s findings on this score deserves full respect and we do not have any reason to disturb it here now. 6 After all, the trial court judge is in better position to make that appreciation for having heard personally the witnesses and observed their deportment and manner of testifying during the trial. 7 The exceptions to this time honored policy are: when the trial court plainly overlooked certain facts of substantial import and value which if only correctly considered by the court might change the outcome of the case, 8 and, if the judge who rendered the decision was not the one who heard the evidence. 9 Neither of these exceptions is present here. Therefore, the respondent appellate court’s ruling questioning the credibility of petitioner Cornelia Clanor Vda. de Portugal must be reversed. LLpr

Anent the last issue raised by the petitioner, we have already ruled that the defense of prescription although not raised by the defendant may nevertheless be passed upon by the court when its presence is plainly apparent on the face of the complaint itself. 10 At any rate, in view of our earlier finding that the deed of sale in controversy is not simply fraudulent but void ab initio, or inexistent, our ruling on this third issue would not have any material bearing on the overall outcome of this petition. The petitioner’s action remains to be seasonably instituted.

WHEREFORE, the petition is hereby GRANTED; the Decision dated October 21, 1985 and the Resolution dated January 24, 1986 of the Intermediate Appellate Court are hereby REVERSED and SET ASIDE; the deed of sale dated January 23, 1967 evidencing the sale of Lot No. 3201 to private respondent Hugo Portugal is declared VOID AB INITIO; and the private respondent is ORDERED to reconvey to petitioners the title over the said Lot No. 3201 which is now under TCT No. T-23539. Costs against private respondent.

SO ORDERED.

Yap, Melencio-Herrera, Paras and Padilla, JJ., concur.

||| (Vda. de Portugal v. Intermediate Appellate Court, G.R. No. 73564, [March 25, 1988], 242 PHIL 709-716)

PICART v. SMITH

PICART v. SMITH

G.R. No. 12219

March 15, 1918

The test for determining whether a person is negligent in doing an act whereby injury or damage results to the person or property of another is this: Would a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the person injured as a reasonable consequence of the course about to the pursued? If so, the law imposes the duty on the actor to refrain from that course or to take precaution against its mischievous results, and the failure to do so constitutes negligence. Reasonable foresight of harm followed by the ignoring of the admonition born of this provision, is the constitutive fact of negligence.

CASE DIGEST

by: Jayson Calventas

Facts:

• Amado PICART was riding on his pony on the Carlatan Bridge in San Fernando, La Union when the Frank SMITH, riding on his car, approached.

• SMITH blew his horn to give warning.
• PICART moved the horse to the right instead of moving to the left, reasoning that he had no sufficient time to move to the right direction.
• SMITH continued to approach, and when he had gotten quite near, he quickly turned to the left.
• The horse was frightened that it turned his body across the bridge. His limb was broken and the rider was thrown off and got injured. The horse died.
• An action for damages was filed against the SMITH.

Issue/s:

• Whether or not the defendant in maneuvering his car in the manner above described was guilty of negligence such as that gives rise to a civil obligation to repair the damage done

Ruling:

• As SMITH started across the bridge, he had the right to assume that the horse and rider would pass over to the proper side; but as he moved toward the center of the bridge it was demonstrated to his eyes that this would NOT be done; and he must in a moment have perceived that it was too late for the horse to cross with safety in front of the moving vehicle.

• In the nature of things, this change of situation occurred while the automobile was yet some distance away; and from this moment it was NO longer within the power of PICART to escape being run down by going to a place of greater safety. The control of the situation had then passed entirely to the SMITH.
• The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the SMITH in doing the alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing the conduct or guarding against its consequences.
• It goes without saying that the PICART himself was NOT free from fault, for he was guilty of antecedent negligence in planting himself on the wrong side of the road. But as we have already stated, the SMITH was also negligent; and in such case the problem always is to discover which agent is immediately and directly responsible. It will be noted that the negligent acts of the two parties were not contemporaneous, since the negligence of SMITH succeeded the negligence of the PICART by an appreciable interval. Under these circumstances the law is that the person who has the last fair chance to avoid the impending harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of the other party.