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    1267 DOCTRINE OF UNFORTUNATE EVENTS

    PHILIPPINE NATIONAL CONSTRUCTION CORPORATION petitioner, vs . COURT OFAPPEALS, MA. TERESA S. RAYMUNDO-ABARRA, JOSE S. RAYMUNDO, ANTONIOS. RAYMUNDO, RENE S. RAYMUNDO, an AMADOR S. RAYMUNDO, respondents.

    D E C I S I O N

    DAVIDE, JR., J .!

    This petition for review on certiorari has its roots in Civil Case No. 53444, which wassparked by the petitioner's refusal to pay the rentals as stipulated in the contract of lease [ ! on anundivided portion of 3",""" s#uare $eters of a parcel of land owned by the private respondents.

    The lease contract, e%ecuted on & Nove$ber &5, reads in part as follows(

    . T)*+ - )/0) 1 This lease shall be for a period of five 25 years, co$$encin on thedate of issuance of the industrial clearance by the +inistry of u$an 0ettle$ents,renewable for a like or other period at the option of the )00)) under the sa$e ter$sand conditions.

    6. */T) - *)NT 1 )00)) shall pay to the )00 * rent at the $onthly rate ofT7)NT8 T 90/N: ;)0 0 2;6","""."" , ;hilippine Currency, in the $anner setforth in ;ara raph 3 below. This rate shall be increased yearly by -ive ;ercent 25$ess hall. The )00 *0 hereby rant to the )00))

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    the ri ht to erect on the eased ;roperty such structure2s and>or i$prove$ent2snecessary for or incidental to the )00))'s purposes.

    . . .

    . T)*+=N/T= N - )/0) 1 This / ree$ent $ay be ter$inated by $utual a ree$entof the parties. 9pon the ter$ination or e%piration of the period of lease without thesa$e bein renewed, the )00)) shall vacate the eased ;roperty at its e%pense.

    n ? @anuary &A, petitioner obtained fro$ the +inistry of u$an 0ettle$ents aTe$porary 9se ;er$it [6! for the proposed rock crushin proBect. The per$it was to be valid for two years unless sooner revoked by the +inistry.

    n A @anuary &A, private respondents wrote petitioner re#uestin pay$ent of the firstannual rental in the a$ount of ; 64",""" which was due and payable upon the e%ecution of thecontract. They also assured the latter that they had already stopped considerin the proposalsof other a re ates plants to lease the property because of the e%istin contract with petitioner.[3!

    =n its reply1letter, petitioner ar ued that under para raph of the lease contract, pay$ent of rental would co$$ence on the date of the issuance of an industrial clearance by the +inistry of

    u$an 0ettle$ents, and not fro$ the date of si nin of the contract. =t then e%pressed itsintention to ter$inate the contract, as it had decided to cancel or discontinue with the rockcrushin proBect due to financial, as well as technical, difficulties. [4!

    The private respondents refused to accede to petitioner's re#uest for the preter$ination of the lease contract. They insisted on the perfor$ance of petitioner's obli ation and reiteratedtheir de$and for the pay$ent of the first annual rental. [5!

    ;etitioner obBected to the clai$ of the private respondents and ar ued that it was onlyobli ated to pay ... the a$ount of ; 6","""."" as rental pay$ents for the one1$onth period of lease, counted fro$ "? @anuary &A when the =ndustrial ;er$it was issued by the +inistry of

    u$an 0ettle$ents up to "? -ebruary &A when the Notice of Ter$ination was served [A! onprivate respondents.

    n +ay &A, the private respondents instituted with the *e ional Trial Court of ;asian action a ainst petitioner for 0pecific ;erfor$ance with :a$a es. [?! The case was docketedas Civil Case No. 53444 at Dranch A" of the said court. /fter the filin by petitioner of its

    /nswer with Counterclai$, the case was set for trial on the $erits.

    7hat transpired ne%t was su$$ariEed by the trial court in this wise(

    ;laintiffs rested their case on 0epte$ber ?, &? 2p. &? rec. . :efendant asked forpostpone$ent of the reception of its evidence scheduled on /u ust ", && and as prayed for,was reset to /u ust 65, && 2p. rec. Counsel for defendant a ain asked for postpone$ent,throu h representative, as he was presently indisposed. The case was reset, intransferable to0epte$ber 5 and 6A, && 2p. 4 rec. n 0epte$ber 6, &&, the office of the Fovern$ent

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    Corporate Counsel entered its appearance for defendant 2p. 5, rec. and the ori inal counsellater withdrew his appearance. n 0epte$ber 5, && the Fovern$ent Corporate Counselasked for postpone$ent, represented by /tty. )lpidio de Ge a, and with his confor$ity in opencourt, the hearin was reset, intransferable to 0epte$ber 6A and ctober ?, &&. 2p. &,rec. n 0epte$ber 6A, && durin the hearin , defendant's counsel filed a $otion for

    postpone$ent 2ur ent as he had sore eyes , a $edical certificate attached.Counsel for plaintiffs obBected to the postpone$ent and the court considered the evidence of the

    overn$ent ter$inated or waived. The case was dee$ed sub$itted for decision upon the filinof the $e$orandu$. ;laintiffs filed their $e$orandu$ on ctober 6A, &&. 2p. , rec. .

    n ctober &, && in the $eanti$e, the defendant filed a $otion for reconsideration of theorder of the court on 0epte$ber 6A, && 2p. "?, rec. The $otion was not asked to be set forhearin 2p. " rec. There was also no proof of notice and service to counsel for plaintiff. Thecourt in the interest of Bustice set the hearin on the $otion on Nove$ber 6 , &&. 2p. 6",rec. but despite notice, a ain defendant's counsel was absent 2p. 6"1/, dorsal side,rec. without reason. The court reset the $otion to :ece$ber A, &&, in the interest of

    Bustice. The $otion for reconsideration was denied by the court. / second $otion forreconsideration was filed and counsel set for hearin the $otion on @anuary , & . :urinthe hearin , counsel for the overn$ent was absent. The $otion was dee$ed abandoned butthe court at any rate, after a review of the incidents and the rounds relied upon in the earlier$otion of defendant, found no reason to disturb its previous order. [&!

    n 6 /pril & , the trial court rendered a decision orderin petitioner to pay the privaterespondents the a$ount of ; 4 6,""" which represented the rentals for two years, with le alinterest fro$ ? @anuary &A until the a$ount was fully paid, plus attorney's fees in the a$ountof ;6",""" and costs .[ !

    ;etitioner then appealed to the Court of /ppeals alle in that the trial court erred inorderin it to pay the private respondent the a$ount of;4 6,""" and in denyin it the ri ht to beheard.

    9pon the affir$ance of the trial court's decision [ "! and the denial of its $otion for reconsideration, petitioner ca$e to this Court ascribin to the respondent Court of /ppeals thesa$e alle ed errors and reiteratin their ar u$ents.

    -irst. ;etitioner invites the attention of this Court to para raph of the lease contract,which reads( This lease shall be for a period of five 25 years, co$$encin on the date of issuance of the industrial clearance by the +inistry of u$an 0ettle$ents.... =t then sub$itsthat the issuance of an industrial clearance is a suspensive condition without which the ri htsunder the contract would not be ac#uired. The Te$porary 9se ;er$it is not the industrialclearance referred to in the contractH for the said per$it re#uires that a clearance fro$ theNational ;roduction Control Co$$ission be first secured, and besides, there is a findin in theper$it that the proposed proBect does not confor$ to the Ionin rdinance of *odri ueE,2for$erly +ontalban , *iEal, where the leased property is located. 7ithout the industrialclearance the lease contract could not beco$e effective and petitioner could not be co$pelledto perfor$ its obli ation under the contract.

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    ;etitioner is now estopped fro$ clai$in that the Te$porary 9se ;er$it was not theindustrial clearance conte$plated in the contract. =n its letter dated 64 /pril &A, petitioner states(

    7e wish to reiterate ;NCC +ana e$ent's previous stand that it is only obli ated to pay

    your clients the a$ount of ;6","""."" as rental pay$ents for the one1$onth period of thelease, counted fro$ "? @anuary &A when the =ndustrial ;er$it was issued by the +inistryof u$an 0ettle$ents up to "? -ebruary &A when the Notice of Ter$ination was servedon your clients. [ ! 29nderscorin 0upplied .

    The =ndustrial ;er$it $entioned in the said letter could only refer to the Te$porary 9se ;er$itissued by the +inistry of u$an 0ettle$ents on ? @anuary &A. /nd it can be leaned fro$this letter that petitioner has considered the per$it as industrial clearanceH otherwise, petitioner could have si$ply told the private respondents that its obli ation to pay rentals has not yetarisen because the Te$porary 9se ;er$it is not the industrial clearance conte$plated bythe$. =nstead, petitioner reco niEed its obli ation to pay rental counted fro$ the date the per$itwas issued.

    /lso worth notin is the earlier letter of petitionerH thus(

    [;!lease be advised of ;NCC +ana e$ent's decision to cancel or discontinue with therock crushin proBect due to financial as well as technical difficulties. =n view thereof, wewould like to ter$inate our ease Contract dated & Nove$ber, &5. 0hould you a reeto the $utual ter$ination of our ease Contract, kindly indicate your confor$ity heretoby affi%in your si nature on the space provided below. +ay we likewise re#uest+essrs. *ene, @ose and /ntonio, all surna$ed *ay$undo and +rs. 0ocorro /.*ay$undo as /ttorney1in1-act of /$ador 0. *ay$undo to si n on the spaces indicatedbelow. [ 6!

    =t can be deduced fro$ this letter that the suspensive condition 1 issuance of industrialclearance 1 has already been fulfilled and that the lease contract has beco$eoperative. therwise, petitioner did not have to solicit the confor$ity of the private respondentsto the ter$ination of the contract for the si$ple reason that no Buridical relation was createdbecause of the non1fulfill$ent of the condition.

    +oreover, the reason of petitioner in discontinuin with its proBect and in conse#uentlycancellin the lease contract was Jfinancial as well as technical difficulties,K not the alle edinsufficiency of the Te$porary 9se ;er$it.

    0econd. =nvokin /rticle 6AA and the principle of rebus sic stantibus , petitioner assertsthat it should be released fro$ the obli atory force of the contract of lease because the purposeof the contract did not $aterialiEe due to unforeseen events and causes beyond its control, i.e. ,due to abrupt chan e in political cli$ate after the ):0/ *evolution and financial difficulties.

    =t is a funda$ental rule that contracts, once perfected, bind both contractin parties, andobli ations arisin therefro$ have the force of law between the parties and should be co$pliedwith in ood faith. [ 3! Dut the law reco niEes e%ceptions to the principle of the obli atory force of

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    n Nove$ber &, &5, notwithstandin the above, petitioner ;NCC entered into thecontract of lease with private respondents with open eyes of the deterioratin conditionsof the country.

    /nent petitionerLs alle ed poor financial condition, the sa$e will neither release petitioner

    fro$ the bindin effect of the contract of lease. /s held in Central Dank v. Court of /ppeals,[66! cited by the private respondents, $ere pecuniary inability to fulfill an en a e$ent does notdischar e a contractual obli ation, nor does it constitute a defense to an action for specificperfor$ance.

    7ith re ard to the non1$aterialiEation of petitionerLs particular purpose in enterin into thecontract of lease, i.e. , to use the leased pre$ises as a site of a rock crushin plant, the sa$ewill not invalidate the contract. The cause or essential purpose in a contract of lease is the useor enBoy$ent of a thin . [63! /s a eneral principle, the $otive or particular purpose of a party inenterin into a contract does not affect the validity or e%istence of the contractH an e%ception iswhen the realiEation of such $otive or particular purpose has been $ade a condition uponwhich the contract is $ade to depend. [64! The e%ception is not apply here.

    Third. /ccordin to petitioner, the award of ; 4 6,""" representin the rent for two years ise%cessive, considerin that it did not benefit fro$ the property. Desides, the te$porary per$it,confor$ably with the e%press provision therein, was dee$ed auto$atically revoked for failure of petitioner to use the sa$e within one year fro$ the issuance thereof. ence, the rent payableshould only be for one year.

    ;etitioner cannot be heard to co$plain that the award is e%cessive. The te$porary per$itwas valid for two years but was auto$atically revoked because of its non1use within one year fro$ its issuance. The non1use of the per$it and the non1entry into the property subBect of thelease contract were both i$putable to petitioner and cannot, therefore, be taken advanta e of inorder to evade or lessen petitionerLs $onetary obli ation. The da$a e or preBudice to privaterespondents is beyond dispute. They un#uestionably suffered pecuniary losses because of their inability to use the leased pre$ises. Thus, in accordance with /rticle A5 of the CivilCode, [65! they are entitled to inde$nification for da$a esH and the award of; 4 6,""" is fair and

    Bust under the circu$stances of the case.

    -inally, petitioner sub$its that the trial court ravely abused its discretion in denyinpetitioner the ri ht to be heard.

    7e disa ree. The trial court was in fact liberal in rantin several postpone$ents [6A! topetitioner before it dee$ed ter$inated and waived the presentation of evidence in petitionerLsbehalf.

    =t $ust be recalled that private respondents rested their case on ? 0epte$ber &? yet.[6?! /l$ost a year after, or on " /u ust && when it was petitionerLs turn to present evidence,petitionerLs counsel asked for postpone$ent of the hearin to 65 /u ust && due to conflict of schedules ,[6&! and this was ranted. [6 ! /t the rescheduled hearin , petitionerLs counsel, throu ha representative, $oved anew for postpone$ent, as he was alle edly indisposed. [3"! The casewas then reset JintransferableK to 0epte$ber 5 and 6A, &&. [3 ! n 6 0epte$ber &&, the

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    ffice of the Fovern$ent Corporate Counsel, throu h /tty. )lpidio @. Ge a, entered itsappearance for the petitioner ,[36! and later the ori inal counsel withdrew his appearance. [33! n

    5 0epte$ber &&, /tty. Ge a re#uested for postpone$ent to enable hi$ to o over therecords of the case. [34! 7ith his confor$ity, the hearin was reset JintransferableK to 0epte$ber 6A and ctober ?, &&. [35! =n the $ornin of 6A 0epte$ber &&, the court received /tty.

    Ge aLs 9r ent +otion for ;ostpone$ent on the round that he was afflicted with conBunctivitis or sore eyes. [3A! This ti$e, private respondents obBectedH and upon their $otion, the court dee$edter$inated and waived the presentation of evidence for the petitioner. [3?! Nevertheless, beforethe court considered the case sub$itted for decision, it re#uired the parties to sub$it their respective $e$oranda within thirty days. [3&! Dut petitioner failed to file one.

    ikewise, the court was liberal in respect to petitionerLs $otion for reconsideration. Notwithstandin the lack of re#uest for hearin and proof of notice and serviceto private respondents, the court set the hearin of the said $otion on 6 Nove$ber &&.[3 ! 9pon the denial of the said $otion for lack of $erit, [4"! petitioner filed a second $otion for reconsideration. Dut durin the hearin of the $otion on a date selected by hi$, /tty. Ge a wasabsent for no reason at all, despite due notice. [4 !

    -ro$ the fore oin narration of procedural antecedents, it cannot be said that the petitioner was deprived of its day in court. The essence of due process is si$ply an opportunity to beheard. [46! To be heard does not only $ean oral ar u$ents in courtH one $ay be heard alsothrou h pleadin s. 7here opportunity to be heard, either throu h oral ar u$ents or pleadin s,is accorded, there is no denial of procedural due process. [43!

    "HEREFORE , the instant petition is :)N=): and the challen ed decision of the Court of /ppeals is /--=*+): in toto .

    No pronounce$ents as to costs.

    SO ORDERED.

    VICTORINO MA#AT, JR. $%&$'('%') &* +)( $, OLIVIA D. MA#AT, an (n $ MA. DULCEMA#AT, MA. MA#NOLIA MA#AT, RONALD MA#AT an DENNISMA#AT, petitioners, vs . COURT OF APPEALS an SANTIA#O A.#UERRERO, respondents .

    D E C I S I O N

    PARDO, J.!

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    The case is an appea l[ ! fro$ the decision of the Court of /ppeals [6! reversin the decision of the *e ional Trial Court of +akati, +etro +anila, [3!rulin in favor of respondent 0antia o /.Fuerrero and dis$issin petitioners' co$plaint.

    -irst, the facts.

    ;rivate respondent 0antia o /. Fuerrero 2hereinafter referred to as Fuerrero was;resident and Chair$an of [4! JFuerrero Transport 0ervices , a sin le proprietorship. [5!

    0o$eti$e in ?6, Fuerrero Transport 0ervices won a bid for the operation of a fleet of ta%icabs within the 0ubic Naval Dase, in lon apo. /s hi hest bidder, Fuerrero was to provideradio1controlled ta%i service within the 9. 0. Naval Dase, 0ubic Day, utiliEin as de$andre#uires... A" operational ta%is consistin of four wheel, four1door, four passen er, radiocontrolled, $eter controlled, sedans, not $ore than one year... [A!

    n 0epte$ber 66, ?6, with the advent of $artial law, ;resident -erdinand ). +arcosissued etter of =nstruction No. 2hereinafter referred to as the = . 7e reproduce the te%t,as follows(

    etter of =nstruction No.

    09D@)CT( 0)=I9*) /N: C NT* - / ;*=G/T) 8 7N): N)70;/;)*0,+/F/I=N)0, */:= /N: T) )G=0= N -/C= =T=)0 /N: / T )*+):=/

    - C ++9N=C/T= N.

    To( .The ;ress 0ecretary

    ffice of the ;resident

    +anila

    6. The 0ecretary

    :epart$ent of National :efense

    Ca$p ). / uinaldo, M.C.

    =n view of the present national e$er ency which has been brou ht about by the activities ofthose who are actively en a ed in a cri$inal conspiracy to seiEe political and state power in the;hilippines and to take over the Fovern$ent by force and violence the e%tent of which has nowassu$ed the proportion of an actual war a ainst our people and their le iti$ate Fovern$ent,and pursuant to ;rocla$ation No. "& dated 0epte$ber 6 , ?6, and in $y capacity asco$$ander in chief of all the ar$ed forces of the ;hilippines and in order to prevent the use ofprivately owned newspapers, $a aEines, radio and television facilities and all other $edia ofco$$unications, for propa anda purposes a ainst the overn$ent and its duly constitutedauthorities or for any purpose that tend to under$ine the faith and confidence of the people inour overn$ent and a ravate the present national e$er ency, you are hereby ordered

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    forthwith to take over and control or cause the takin over and control of all such newspapers,$a aEines, radio and television facilities and all other $edia of co$$unications, wherever theyare, for the duration of the present national e$er ency, or until otherwise ordered by $e or by$y duly desi nated representative.

    =n carryin out the fore oin order you are hereby also directed to see to it that reasonable$eans are e$ployed by you and your $en and that inBury to persons and property $ust becarefully avoided.

    n 0epte$ber 65, ?6, pursuant to the afore#uoted etter of =nstruction, the *adioControl ffice issued /d$inistrative Circular No. 4 2hereinafter referred to as the /d$in.Circular , herein #uoted in full(

    09D@)CT( 090;)N:=NF T ) /CC);T/NC) /N: ;* C)00=NF - /;; =C/T= N0- * */:= 0T/T= N C N0T*9CT= N ;)*+=T0 /N: - * ;)*+=T0 T

    7N /N:> * ; 00)00 */:= T*/N0+=TT)*0 * T*/N0C)=G)*0.

    =n view of the e%istence of a state of e$er ency and the declaration by the ;resident of $artiallaw in the entire country under ;rocla$ation No. "& dated 0epte$ber 6 , ?6, effectivei$$ediately the acceptance and processin by the radio control office of applications for radiostations constructions per$its and for per$its to possess, own, transfer, purchase and sale ofradio trans$itters and transreceivers as well as $anufacturers and dealerLs per$its of saide#uip$ent is hereby suspended. )%e$pted fro$ this circular are applications for radio stationconstruction per$its and for per$its to possess, own, transfer, purchase and sell radiotrans$itters and transceivers for the followin radio stations(

    . /eronautical 0tationsH

    6. /eronautical -i%ed 0tationsH

    3. /ircraft 0tationsH

    4. Coastal 0tationsH and

    5. 0hip 0tations.

    This circular shall be strictly observed until lifted upon proper instructions fro$ hi herauthorities.

    n 0epte$ber 65, ?6, Fuerrero and Gictorino :. +a at 2hereinafter referred to asGictorino , as Feneral +ana er of 0pectru$ )lectronic aboratories, a sin le proprietorship,e%ecuted a letter1contract for the purchase of transceivers at a #uoted price of 90 ??,A6".5 ,- D 8okoho$a. Gictorino was to deliver the transceivers within A" to " days after receivinnotice fro$ Fuerrero of the assi ned radio fre#uency, [?! takin note of Fovern$ent*e ulations. [&!

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    The contract was si ned and Gictorino contacted his @apanese supplier, Ooide P Co., td.and placed an order for the transceivers.

    n 0epte$ber 6 , ?6, Navy )%chan e fficer, /. F. +ason confir$ed that Fuerrero wonthe bid for the co$$ercial transportation contract. [ !

    n ctober 4, ?6, $iddle $an and broker [ "! =sidro M. /li ada of *eliance Froup)n ineers, =nc. 2hereinafter referred to as /li ada , wrote Gictorino, infor$in hi$ that a radiofre#uency was not yet assi ned to Fuerrero and that overn$ent re ulations $i ht co$plicatethe i$portation of the transceivers. owever, in the sa$e letter, Gictorino was advised to advisehis supplier to proceed 2with production pendin fre#uency infor$ation. Gictorino was alsoassured of Fuerrero's financial capability to co$ply with the contract. [ !

    n ctober A, ?6, Fuerrero infor$ed /li ada of the fre#uency nu$ber [ 6! assi ned by0ubic Naval Dase authorities. /li ada was instructed to proceed with the order thru 0pectru$)lectronics aboratories. [ 3!

    n ctober ?, ?6, /li ada infor$ed +a at of the assi ned fre#uency nu$ber. /li adaalso advised Gictorino to proceed with the order upon receipt of letter of credit. [ 4!

    n @anuary ", ?3, Fuerrero applied for a letter of credit with the +etropolitan Dank andTrust Co$pany. [ 5! This application was not pursued. [ A!

    n +arch 6?, ?3, Gictorino, represented by his lawyer, /tty. 0inesio 0. Ger ara, infor$edFuererro that the order with the @apanese supplier has not been canceled. 0hould the contractbe canceled, the @apanese fir$ would forfeit 3"< of the deposit and char e a cancellation fee inan a$ount not yet known, Fuerrero to bear the loss. -urther, should the contract be canceled,Gictorino would de$and an additional a$ount e#uivalent to "< of the contract price. [ ?!

    9nable to et a letter of credit fro$ the Central Dank due to the refusal of the ;hilippineovern$ent [ &! to issue a per$it to i$port the transceivers, [ ! Fuerrero co$$enced operation of

    the ta%i cabs within 0ubic Naval Dase, usin radio units borrowed fro$ the 9.0. overn$ent2throu h the 0ubic Naval Dase authorities . [6"! Gictorino thus canceled his order with his@apanese supplier.

    n +ay 66, ?3, Gictorino filed with the *e ional Trial Court, +akati a co$plaint for da$a es arisin fro$ breach of contract a ainst Fuerrero .[6 !

    n @une ?, ?3, Fuerrero $oved to dis$iss the co$plaint on the round that it did notstate a cause of action. [66!

    n @une A, ?3, the trial court [63! ranted the $otion and dis$issed the co$plaint. [64!

    n @uly , ?3, Gictorino filed a petition for review on certiorari with this Court assailinthe dis$issal of the co$plaint. [65!

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    n /pril 6", &3, this Court [6A! ruled that the co$plaint sufficiently averred a cause of action. 7e set aside the order of dis$issal and re$anded the case to the trial court for further proceedin s, to wit( [6?!

    /CC *:=NF 8, the #uestioned order of dis$issal is hereby set aside and the case ordered

    re$anded to the court of ori in for further proceedin s. No costs.0 *:)*):.

    n Nove$ber 6?, &4, the trial court [6&! ordered that the case be archived for failure of Gictorino to prosecute. [6 !

    n +arch , &5, petitioners, livia, :ulce, +a. +a nolia, *onald and :ennis +a at2hereinafter referred to as heirs of Gictorino , $oved to reinstate the case and to substituteGictorino in its prosecution. /pparently, Gictorino died on -ebruary &, &5. [3"!

    n /pril 6 , &5, the trial court ranted the $otion. [3 !

    n @uly 6, , the trial court decided in favor of the heirs of Gictorino and orderedFuerrero to pay te$perate, $oral and e%e$plary da$a es, and attorney's fees, disposin of the case in this wise ([36!

    7 )*)- *), Bud $ent is rendered for the substituted plaintiffs and a ainst the defendant

    . rderin defendant to pay substituted plaintiffs the su$ of 1;65,"""."" for te$perateda$a es for inBury to plaintiff's business dealin s with forei n and local business$enH

    6. ;5","""."" as $oral da$a esH

    3. ;65,"""."" as e%e$plary da$a esH and

    4. ;6","""."" as attorney's fees.

    0 *:)*):.

    n /u ust 6 , , Fuerrero appealed to the Court of /ppeals. [33!

    n ctober 4, 5, the Court of /ppeals rendered the decision appealed fro$, disposinas follows( [34!

    7 )*)- *), Bud $ent is hereby rendered :=0+=00=NF the co$plaint.

    No pronounce$ents as to costs.

    0 *:)*):.

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    n ctober 6A, 5, the heirs of Gictorino filed with the Court of /ppeals a $otion for reconsideration. [35!

    n +arch 6, A, the Court of /ppeals denied the $otion for reconsideration. [3A!

    ence, this appeal.[3?!

    The issue is whether the contract between Gictorino and Fuerrero for the purchase of radiotransceivers was void. 0tated differently, whether the transceivers subBect of the contract werebanned> contraband ite$s prohibited by the = and the /d$inistrative Circular to i$port.

    The contract was validH the radio transceivers were not contraband.

    Contraband enerally refers to any property which is unlawful to produce or possess. =trefers to oods which are e%ported and i$ported into a country a ainst its laws. [3&!

    =n declarin the contract void ab initio, the Court of /ppeals ruled that the i$portation of thetransceivers $eant the inevitable passin of such oods throu h ;hilippine ;orts, where the

    = and the /d$inistrative Circular have to be observed and applied with full force and effect.[3 ! The Court of /ppeals declared that the proposed i$portation of such oods was contrary tolaw, hence, the nullity of the contract. [4"!

    7e do not a ree. The contract was not void ab initio. Nowhere in the = and /d$in.Circular is there an e%press ban on the i$portation of transceivers.

    The = and /d$inistrative Circular did not render radios and transceivers ille al per se. The /d$inistrative Circular $erely ordered the *adio Control ffice to suspend the

    acceptance and processin .... of applications... for per$its to possess, own, transfer, purchaseand sell radio trans$itters and transceivers... [4 ! Therefore, possession and i$portation of theradio trans$itters and transceivers was le al provided one had the necessary license for it.[46! Transceivers were not prohibited but $erely re ulated oods. The = and /d$inistrativeCircular did not render the transceivers outside the co$$erce of $an. They were valid obBectsof the contract. [43!

    /ffir$in the validity of the contract, we ne%t discuss whether the contract was breached.

    Fuerrero testified that a per$it to i$port the transceivers fro$ @apan was denied by the*adio Control Doard. e stated that he, to ether with /li ada, Gictorino and a certain @ohn:auden personally went to the *adio Control ffice, and were denied a per$it to i$port. Theyalso went to the ffice of the ;resident, where 0ecretary *onaldo D. Ia$ora e%plained thatradios were banned like uns because of $artial law. [44! Fuerrero testified that this preventedhi$ fro$ securin a letter of credit fro$ the Central Dank .[45! This testi$ony was not rebutted.

    The law provides that [w!hen the service 2re#uired by the contract has beco$e so$anifestly beyond the conte$plation of the parties, the obli or $ay also be released therefro$,in whole or in part. [4A! ere, Fuerrero's inability to secure a letter of credit and to co$ply with his

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    obli ation was a direct conse#uence of the denial of the per$it to i$port. -or this, he cannot befaulted.

    )ven if we assu$e that there was a breach of contract, da$a es cannot beawarded. Damnum absque injuria.

    There was no bad faith. [4?! Dad faith does not si$ply connote bad Bud $ent or ne li ence. =ti$ports a dishonest purpose or so$e $oral obli#uity and conscious doin of wron . =t $eans abreach of a known duty throu h so$e $otive or interest or ill will that partakes of the nature of fraud. [4&!Fuerrero honestly relied on the representations of the *adio Control ffice and the

    ffice of the ;resident.

    True, Fuerrero borrowed e#uip$ent fro$ the 0ubic Naval Dase authorities at Eero cost.[4 ! This does not auto$atically translate to bad faith. Fuerrero was faced with the dan er of thecancellation of his contract with 0ubic Naval Dase. e borrowed e#uip$ent as a prudent andswift alternative. There was no proof that he resorted to this option with a deliberate and$alicious intent to dishonor his contract with Gictorino. /n award of da$a es surely cannot bebased on $ere hypotheses, conBectures and sur$ises. Food faith is presu$ed, the burden of provin bad faith rests on the one alle in it. [5"! ;etitioners did not effectively dischar e theburden in this case.

    To recover $oral da$a es in an action for breach of contract, the breach $ust be palpablywanton, reckless, $alicious, in bad faith, oppressive or abusive. [5 ! This is not the case here.

    )%e$plary da$a es also cannot be awarded. Fuerrero did not act in a wanton, fraudulent,reckless, oppressive or $alevolent $anner. [56!

    Neither can actual da$a es be awarded. True, inde$nification for da$a es conte$platesnot only actual loss suffered (damnum emergens) but unrealiEed profits (lucrum cessans) aswell.[53! owever, to be entitled to ade#uate co$pensation for pecuniary loss, the loss $ust beactually suffered and duly proved .[54! To recover actual da$a es, the a$ount of loss $ust notonly be capable of proof, but $ust be proven with a reasonable de ree of certainty. The clai$$ust be pre$ised upon co$petent proof or upon the best evidence obtainable, [55! such asreceipts [5A! or other docu$entary proof.

    nly the testi$ony of /li ada was presented to substantiate petitioners' clai$ for unrealiEedprofits. [5?! /li ada testified that as a result of the cancellation of the contract, Gictorino had tosuspend transactions with his @apanese supplier for si% 2A $onths. /li ada stated that thevolu$e of Gictorino's business with 0ubic Naval Dase also di$inished si nificantly. /li adaappro%i$ated that Gictorino's unrealiEed business opportunities a$ounted to ; 4"","""."".[5&! Dein a witness for Gictorino's heirs and standin to ain fro$ the contract's fulfill$ent,

    /li ada's testi$ony is self1servin . =t is also hearsay. 7e fail to see how this evidence provesactual da$a es with a reasonable de ree of certainty. [5 ! =f proof is fli$sy , we cannot awardactual da$a es. [A"!

    "HEREFORE , we /--=*+ the decision of the Court of /ppeals pro$ul ated on ctober , 5, in C/1F. *. CG No. 34 56, dis$issin the co$plaint.

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    No costs.

    SO ORDERED.

    127/-120 COMPENSATION

    BAN OF THE PHILIPPINE ISLANDS an #RACE ROMERO, petitioners, vs. COURT OFAPPEALS an EDVIN F. REYES, respondents.

    D E C I S I O N

    PUNO, J.:

    ;etitioners seek a review of the :ecision of respondent Court of /ppeals in C/1F.*. CG

    No. 4 543 reversin the :ecision6

    of the *e ional Trial Court of MueEon City, Dranch ? , andorderin petitioners to credit private respondentLs 0avin s

    /ccount No. 3 &51" ?615A with ; ",55A."" plus interest.

    The facts reveal that on 0epte$ber 25, &5, private respondent )dvin -. *eyes opened0avin s /ccount No. 3 &51" ?615A at petitioner Dank of the ;hilippine =slands 2D;= Cubao,0hoppin Center Dranch. =t is a 3 (n' 4AND5OR a %n' 8('+ +($ 8(9), S n(a 0. *eyes.

    ;rivate respondent also held a Boint 4AND5OR Sa:(n;$ A %n' N .

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    n -ebruary , , private respondent received a ;T P T ur ent tele ra$ fro$petitioner bank re#uestin hi$ to contact +ana er Frace 0. *o$ero or /ssistant +ana er Car$en Dernardo. 7hen he called up the bank, he was infor$ed that the treasury check wasthe subBect of a clai$ by Citibank N/, correspondent of petitioner bank. e assured petitionersthat he would drop by the bank to look into the $atter. e also :) &a * a%'+ (>) '+) to

    debit fro$ his other Boint account the a$ount stated in the dishonored 9.0. Treasury7arrant. ? n the sa$e day, petitioner bank debited the a$ount of ; ",55A."" fro$ privaterespondentLs 0avin s /ccount No. 3 &51" ?615A.

    n -ebruary 6 , , private respondent with his lawyer u$phrey Tu$anen visited thepetitioner bank and the refund docu$ents were shown to the$. 0urprisin ly, private respondentde$anded fro$ petitioner bank restitution of the debited a$ount. e clai$ed that because of the debit, he failed to withdraw his $oney when he needed the$. e then filed a suit for :a$a es & a ainst petitioners before the *e ional Trial Court of MueEon City, Dranch ? .

    ;etitioners contested the co$plaint and counter1clai$ed for $oral and e%e$plaryda$a es. Dy way of 0pecial and /ffir$ative :efense, they averred that private respondent

    ave the$ his ) )$$ :) &a a%'+ (>a'( n to debit the #uestioned a$ount. They clai$edthat private respondent later refused to e%ecute a written authority.

    =n a :ecision dated @anuary 6", 3, the trial court dis$issed the co$plaint of privaterespondent for lack of cause of action. "

    ;rivate respondent appealed to the respondent Court of /ppeals. n /u ust A, 4, the0i%teenth :ivision of respondent court in /C1F.*. CG No. 4 543 reversed the i$pu neddecision, viE(

    J7 )*)- *), the Bud $ent appealed fro$ is set aside, and another one entered orderindefendant 2petitioner to credit plaintiffLs 2private respondentLs 0./. No. 3 &51" ?615A with; ",55A."" plus interest at the applicable rates for e%press teller savin s accountsfro$ -ebruary , , until co$pliance herewith. The clai$ and counterclai$ for da$a es aredis$issed for lack of $erit.

    0 *:)*):.K

    ;etitioners now contend that respondent Court of /ppeals erred(

    4I

    *)0; N:)NT C 9*T - /;;)/ 0 F*/G) 8 )**): =N N T :=NF T /T*)0; N:)NT *)8)0 F/G) )Q;*)00 /9T *=T8 T ;)T=T= N)* D/NO T :)D=T =0@ =NT /CC 9NT 7=T =0 7=-) - * T ) G/ 9) - T ) *)T9*N): 9.0. T*)/09*87/**/NT.

    II

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    *)0; N:)NT C 9*T - /;;)/ 0 F*/G) 8 )**): =N N T :=NF T /T;)T=T= N)* D/NO /0 )F/ *=F T T /;; 8 T ) :); 0=T - *)0; N:)NT*)8)0 T =0 9T0T/N:=NF D =F/T= N T ;)T=T= N)* D/NO D* 9F T /D 9T D8T ) *)T9*N - T ) 9.0.T*)/09*8 7/**/NT ) )/* =)* :); 0=T): 9N:)* T );*=NC=; ) - J )F/ C +;)N0/T= N.K

    III

    *)0; N:)NT C 9*T - /;;)/ 0 F*/G) 8 )**): =N N T /;; 8=NF C **)CT 8T ) ;*=NC=; )0 )N9NC=/T): D8 T ) 09;*)+) C 9*T =N T ) C/0) -F9 /0 V. ;ND, A6 ; = . 5 .

    IV

    *)0; N:)NT C 9*T - /;;)/ 0 F*/G) 8 )**): =N N T /;;*)C=/T=NF T ) -/CTT /T T ) + N)8 :)D=T): D8 ;)T=T= N)* D/NO 7/0 T ) 0/+) + N)8T*/N0-)**): D8 *)0; N:)NT *)8)0 -* + =0 @ =NT J/N:> *K /CC 9NT 7=T

    =0 F*/N:+ T )* T =0 @ =NT J/N:> *K /CC 9NT 7=T =0 7=-).K 6

    7e find $erit in the petition.

    The first issue for resolution is whether private respondent verbally a%'+ (>) petitioner bank to debit his Boint account with his wife for the a$ount of the returned 9.0. Treasury7arrant. 7e find that petitioners were able ' :) '+($ :) &a a%'+ ('* &* ) n ) an )

    9 ):( )n ). The testi$onies of Dernardo and *o$ero deserve credence. Dernardo testified(

    %%% %%% %%%

    Q: /fter that, what happenedR

    /( % % % :r. *eyes called $e up and = infor$ed hi$ about the return of the 9.0.Treasury 7arrant and we are re#uested to rei$burse for the a$ount.

    M( 7hat was his response if anyR

    /( D n ' * % 8 * a& %' (', '+) ) ($ n ) $ na & ) .

    %%% %%% %%%

    Q: /nd so what was his responseR

    /( H) $a( '+a' n ' * % 8 * a& %' ('.

    %%% %%% %%%

    Q: 8ou said that you asked hi$ the advice and he did not answer, what advice areyou referrin toR

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    /( In % n:) $a'( n, +) ($) ) '+a' +) 8( ;(:) ) 8 ('')nn9( a'( n a%'+ (>a'( n. 3

    The conversation was pro$ptly relayed to *o$ero who testified(

    %%% %%% %%%JM( % % % 7as there any opportunity wherein said +rs. Dernardo was able to convey to

    you the contents of their conversationR

    /( This was i$$ediately relayed to $e as $ana er of the Dank of the ;hilippine=slands, sir.

    M( 7hat, if any was the content of her conversation, if you knowR

    /( M . R)*)$ (n$' % ') M $. B) na ' )&(' +($ a %n' 8('+ '+) &anG. H($a %n' 8a$ a(n'a(n) 3 (n' * 8('+ +($ 8(9) '+)n +) ($) ' &* ';(:) %$ a 8 ('')n n9( a'( n, $( .

    %%% %%% %%%

    Q: 8ou said that you authoriEed the debitin of the account on -ebruary , , isthat correctR

    /( I ( n ' a%'+ (>), 8) ) ) * 9 8) '+) (n$' % '( n 9 M . R)*)$, $( . 4

    7e are not disposed to believe private respondentLs alle ation that he did not ive anyverbal authoriEation. is testi$ony is %n & a') . Nor does he inspire credence. is pastand fraudulent conduct is an evidence a ainst hi$. 5 e concealed fro$ petitioner bank thedeath of -ernandeE on D) ) &) 2/, 10/0. A /s of that date, he knew that -ernandeE was nolon er entitled to receive any pension. Nonetheless, he still received the 9.0. Treasury 7arrantof -ernandeE, and on @anuary 4, " deposited the sa$e in 0avin s /ccount No. 3 &51" 6&1&6. To pre1e$pt a refund, private respondent closed his Boint account with -ernandeE 20avin s

    /ccount No. 3 1&51 " 6&1&6 on Ma + /, 100 and ' an$9) ) its balance to his Boint accountwith his wife 20avin s /ccount No. 3 &51" ?615A . 7orse, private respondent declared under the penalties of perBury in the withdrawal slip ? dated +arch &, " that his co1depositor,-ernandeE, is still livin . Dy his acts, private respondent has stripped hi$self of credibility.

    +ore i$portantly, the respondent court erred when it failed to rule that le al co$pensationis proper. C )n$a'( n shall take place when two persons, in their own ri ht, are creditorsand debtors of each other. & A '( ) 120 of the Civil Code provides that Jwhen all the re#uisites$entioned in A '( ) 1270 a ) )$)n', )n$a'( n 'aG)$ )99) ' &* ) a'( n 9 a8, an) '(n;%($+)$ & '+ )&'$ ' '+) n % )n' a %n', ):)n '+ %;+ '+) ) (' $ an

    )&' $ a ) n ' a8a ) 9 '+) )n$a'( n. e al co$pensation operates even a ainst thewill of the interested parties and even 8('+ %' '+) n$)n' 9 '+) . 0ince this co$pensationtakes place ipso jure, its effects arise on the very day on which all its re#uisites concur. 6" 7henused as a defense, it retroacts to the date when its re#uisites are fulfilled. 6

    http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn19http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn20http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn21http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn13http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn14http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn15http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn16http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn17http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn18http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn19http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn20http://sc.judiciary.gov.ph/jurisprudence/1996/mar1996/116792.htm#_edn21
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    of ;&?,3&".44. The defendant's evidence on this point 2)%hs. thru , 4 and 5H see also /nne%es C and ) to defendant's /nswer , were never refuted nor i$pu ned by the plaintiff. eclai$s, however, that plaintiffLs clai$ has prescribed.

    '2e :efendant ;ND $ade a de$and upon the plaintiff for refund of the double or duplicated

    credits erroneously $ade on plaintiff's account, by $eans of a letter 2)%h. 6 dated ctober 63,&A or 5 years and $onths fro$ Nove$ber &", and 5 years and $onths fro$ @anuary& . 0uch letter was answered by the plaintiff on :ece$ber 6, &A 2/nne% C,

    Co$plaint . This plaintiff's letter was likewise replied to by the defendant throu h )%h. 3H

    '2f The deduction of ;34,34".3& was $ade by the defendant not without the knowled e andconsent of the plaintiff, who was issued a receipt No. &5?5?A dated -ebruary &, &? 2)%h. )by the defendant.KS

    'There is no #uestion that the two erroneous double pay$ents $ade to plaintiff's accounts in&" and & created an e%tra1contractual obli ation on the part of the plaintiff in favor of the

    defendant, under the principle of solutio indebiti, as follows(

    '=f so$ethin is received when there is no ri ht to de$and it, and it was unduly deliveredthrou h 2sic $istake, the obli ation to return it arises. ' 2/rticle 6 54, Civil Code of the ;hil.

    Two issues were raised before the trial court, na$ely, irst, whether the herein petitioner was le ally Bustified in $akin the co$pensation or set1off a ainst the two re$ittances coursedthrou h it in favor of private respondent to recover on the double credits it erroneously $ade in

    &" and & , based on the principle of solutio indebiti, and second, whether or not petitioner'sclai$ is barred by the statute of li$itations. The trial court's ratiocination, as #uoted by theappellate Court, follows( [5!

    '/rticle 6? of the Civil Code provides(

    '=n order that co$pensation $ay prosper, it is necessary(

    2 That each one of the obli ors be bound principally, and that he be at the sa$e ti$ea principal creditor of the otherH

    26 That both debts consists in a su$ of $oney, or if the thin s due are consu$able,they be of the sa$e kind, and also of the sa$e #uality if the latter has been statedH

    23 That the two debts be dueH

    24 That they be li#uidated and de$andableH

    25 That over neither of the$ there by any retention or controversy, co$$enced bythird persons and co$$unicated in due ti$e to the debtor. '

    '=n the case of the 6,A6?. , re#uisites Nos. 6 throu h 5 are apparently present, for both debtsconsist in a su$ of $oney, are both due, li#uidated and de$andable, and over neither of the$

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    is there a retention or controversy co$$enced by third persons and co$$unicated in due ti$eto the debtor. The #uestion, however, is, where both of the obli ors bound principally, and waseach one of the$ a debtor and creditor of the other at the sa$e ti$eR

    '/nalyEin now the relationship between the parties, it appears that(

    '2a 7ith respect to the plaintiff's bein a depositor of the defendant bank, they are creditor anddebtor respectively 2Fuin ona, et al . vs. City -iscal, et al ., 6& 0C*/ 5?? H

    '2b /s to the relationship created by the tele%ed fund transfers fro$ abroad( / contractbetween a forei n bank and local bank askin the latter to pay an a$ount to a beneficiary is astipulation pour autrui. 2Dank of /$erica NT P 0/ vs. =/C, 45 0C*/ 4 .

    '/ stipulation pour autrui is a stipulation in favor of a third person 2-lorentino vs . )ncarnacion,? 0C*/ 3H Donifacio Drothers vs. +ora, 6" 0C*/ 6A H 9y Ta$ vs. eonard, 3" ;hils. 4?5 .

    'Thus between the defendant bank 2as the local correspondent of the National Co$$ercialDank of @eddah and the plaintiff as beneficiary, there is created an i$plied trust pursuant to /rt.

    453 of the Civil Code, #uoted as follows(

    '7hen the property is conveyed to a person in reliance upon his declared intention to hold it for,or transfer it to another or the rantor, there is an i$plied trust in favor of the person whosebenefit is conte$plated 2sic .

    'c Dy the principle of solutio indebiti 2/rt. 6 54, Civil Code , the plaintiff who unduly receivedso$ethin 2sic by $istake 2i.e., the 6 double credits, althou h he had no ri ht to de$and it ,beca$e obli ated to the defendant to return what he unduly received. Thus, there was createdbetween the$ a relationship of obli or and obli ee, or of debtor and creditor under a #uasi1contract.

    =n view of the fore oin , the Court is of the opinion that the parties are not both principallybound with respect to the 6,A6?. fro$ @eddah neither are they at the sa$e ti$e principalcreditor of the other. Therefore, as $atters stand, the parties' obli ations are not subBect toco$pensation or set off under /rt. 6? of the Civil Code, for the reason that the defendant isnot a principal debtor nor is the plaintiff a principal creditor insofar as the a$ount of 6,A6?. isconcerned. They are debtor and creditor only with respect to the double pay$entsH but aretrustee1beneficiary as to the fund transfer of 6,A6?. .

    ' nly the plaintiff is principally bound as a debtor of the defendant to the e%tent of the doublecredits. n the other hand, the defendant was an i$plied trustee, who was obli ed to deliver tothe Citibank for the benefit of the plaintiff the su$ of 6,A6?. .

    'Thus while it $ay be concluded that the plaintiff owes the defendant the e#uivalent of the su$sof 5, ? .63 and 5,&&5.3& erroneously doubly credited to his account, the defendant'sactuation in interceptin the a$ount of 6,A6?. supposed to be re$itted to another bank is notonly i$properH it will also erode the trust and confidence of the international bankin co$$unity

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    in the bankin syste$ of the country, so$ethin we can ill afford at this ti$e when we need toattract and invite deposits of forei n currencies. '

    =t would have been different has the tele% advice fro$ NCD of @eddah been for deposit of6,A6?. to plaintiffs account No. &3"164 " with the defendant bank. owever, the defendant

    alle ed this for the first ti$e in its +e$orandu$ 2;ls. see par. A, p. A of defendant's+e$orandu$ . There was neither any alle ation thereof in its pleadin s, nor was there anyevidence to prove such fact. n the contrary, the defendant ad$itted that the tele% advice wasfor credit of the a$ount of 6,A6?. to plaintiffs account with Citibank, Freenhills, 0an @uan,+etro+anila 2;ls. see par. of defendant's /nswer with Co$pulsory Counterclai$, in relation toplaintiff's Co$plaint . ence, it is sub$itted that the set1off or co$pensation of 6,A6?.a ainst the double pay$ents to plaintiff's account is not in accordance with law.

    ' n this point, the Court finds the plaintiff's theory of a ency to be untenable. -or one thin ,there was no e%press contract of a ency. n the other hand, were we to infer that there was ani$plied a ency, the sa$e would not be between the plaintiff and defendant, but rather, betweenthe National Co$$ercial Dank of @eddah as principal on the one hand, and the defendant asa ent on the other. Thus, in case of violation of the a ency, the cause of action would accrue tothe NCD and not to the plaintiff.

    'The ;34,34".3& subBect of the supple$ental co$plaint is #uite another thin . The plaintiff's)%h. ) , which is a receipt issued to the plaintiff by the defendant for the a$ount of ;34,34".""in full settle$ent of accounts receivables with *=CD -und Transfer :epart$ent, ;ND1)scoltabase on e al :epart$ent +e$o dated -ebruary 6&, &? see$s to uphold the defendant'stheory that the said a$ount was voluntarily delivered by the plaintiff to the defendant as alle edin the last para raph of defendant's $e$orandu$. The sa$e is in accordance with thedefendant's answer, as follows(

    The retention and application of the a$ount of ;34,34".3& was done in a $anner consonantwith basic due process considerin thatplaintiff was not only furnisheddocu$ented proof of the cause but was also iven the opportunity to con2tro vert such ;roof .

    +oreover, plaintiff, throu h counsel, co$$unicated his une#uivocal and unconditional consentto the retention and application of the a$ount in #uestion. 2;ls. see para raphs &1 ,defendant's /nswer with Co$pulsory Counterclai$ to ;laintiff's 0upple$ental Co$plaint .

    JSThis conclusion is borne by the fact that the receipt is in the hands of the plaintiff, indicatinthat such receipt was handed over to the plaintiff when he paid or allowed the deduction fro$the a$ount of 6&,3 6.3& fro$ ibya.

    '/t any rate, the plaintiff in his +e$orandu$, stated that the subse#uent fund transfer fro$Dre a ;etroleu$ +arketin Co$pany of ibya 2fro$ where the ;34,34".3& was deducted wasintended for credit and deposit in plaintiff's account at the defendant's Dank C/ No. &3"164 "2per par. , pa e 6, +e$orandu$ for the plaintiff . 0uch bein the case, the Court believes thatinsofar as the a$ount of ;34,34".3& is concerned, all the re#uire$ents of /rt. 6? of the CivilCode are present, and the said a$ount $ay properly be the subBect of co$pensation or set1

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    off. /nd since all the re#uisites of /rt. 6? of the Civil Code are present 2insofar as the a$ountof ;34,3 6.3& is concerned , co$pensation takes place by operation of law 2/rt.

    6&A,!bid.), albeit only partial with respect to plaintiff's indebtedness of ;?,3&".44.

    LNow, on the #uestion of prescription, the Court believes that /rt. 4 as cited by the plaintiff is

    not applicable in this case. *ather, the applicable law is /rt. 45, which fi%es the prescriptiveperiod for actions upon a #uasi1contract 2such as solutio indebiti) at si% years.

    =n the dispositive portion of its decision, the trial court ruled that the herein petitioner wasobli ated to pay private respondent the a$ount of 90 6,A6?. or its peso e#uivalent, withinterest at the le al rate. The court dis$issed all other clai$s and counterclai$s.

    n appeal to the respondent Court, petitioner bank continued to insist that it validly retainedthe 90 6,A6?. in pay$ent of the private respondent's indebtedness by way of co$pensationor set1off, as provided under /rt. 6? of the Civil Code.

    The respondent Court of /ppeals reBected such ar u$ent, sayin (

    The tele raphic $oney transfer was sent by the =DN, plaintiff's principal in @eddah, 0audi /rabia, thru the National Co$$ercial Dank of @eddah, 0audi /rabia 2NCD, for short , for thecredit>account of ;laintiff with the Citibank, Freenhills Dranch, 0an @uan, +etro +anila, coursedthru the ;ND's head office, the NCD's corresponden2t bank in the ;hilippines.

    The credit account, or si$ply account $eansthat the a$ount stated in the tele raphic $oney transfer is to be credited in the account of plaintiff with the Citibank,and, in that sense, presupposes a creditor1debtor relationship between the plaintiff, as creditor and the Citibank, as debtor. 7ithal the tele raphic $oney transfer, nosuch cr editor1debtor relationship could have been created between the plaintiff and defendant .

    The tele raphic $oney transfer, or si$ply tele raphic transfer2, was purchased by the =DNfro$ the NCD in 0audi /rabia, and since the ;ND is the NCD's corresponden2t bank in the;hilippines, there is created between the two banks a sort of co$$unication e%chan e for thecorresponden2t bank to trans$it and>or re$it and>or pay the value of the tele raphic transfer inaccordance with the dictate of the correspondence e%chan e. 0o$e such responsibility of thecorresponden2t bank is akin to 0ection ? of the *ules and *e ulations =$ple$entin ). . &5?,as a$ended by ). . 65, % % % to take char e of the pro$pt pay$ent of the tele raphictransfer, that is,by trans$ittin the tele raphic $oney transfer to the Citibank so that the a$ount can be pro$ptly credited to the account of the plaintiffwith the said bank. That is all that the ;ND can do underthe re$ittance arran e$ent that it has with the NCD . 7ith its responsibility as defined as wellas by the nature of its bankin business and the responsibility attached to it, and throu h whichthe industry, trade and co$$erce of all countries and co$$unities are carried on, the ;ND'sliability as corresponden2t bank continues until it has co$plet ely 2sic perfor$ed anddischar ed it2s obli ation thereunder. 2underscorin ours

    ence, the respondent Court affir$ed the trial court's holdin in toto.

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    :issatisfied, petitioner bank co$es before this Court seekin a review of the assailed:ecision.

    T+) I$$%)

    ;etitioner's ar u$ents revolve around one sin le issue([A!

    7 = ) T ) *)0; N:)NT C 9*T C **)CT 8 - 9N: ;*=G/T) *)0; N:)NT)F/ 8 D 9N: 29N:)* T ) ;*=NC=; ) - 0 9T= =N:)D=T= T *)T9*N T ;ND

    T ) 09+ - 90 6,A6?. , =T )**): =N N T *9 =NF T /T )F/ C +;)N0/T= N /0T/O)N ; /C) 7 )N ;ND 7/0 *:)*): D8 T ) T*=/ C 9*T T *)T9*N T;*=G/T) *)0; N:)NT T ) 0/+) /+ 9NT. 09C C 9*0) - /CT= N =0 =NC N0 N/NC) 7=T 0;)):8 /N: 09D0T/NT=/ @90T=C), /N: 7 9 : ;*)G)NT T )9NN)C)00/*8 -= =NF - / 09D0)M9)NT 09=T D8 ;ND - * T ) C )CT= N - T )0/+) /+ 9NT -* + ;*=G/T) *)0; N:)NT.

    T+) C % ' $ R% (n;

    7e note that in fra$in the issue in the $anner aforecited, the petitioner ( ( (' *a ('$ the correctness of the respondent Court's affir$ance of the trial court's rulin findinherein petitioner liable to private respondent for the su$ of 90 6,A6?. or its pesoe#uivalent. /nd it could not have done otherwise. /fter a careful scrutiny of both the decisionof the trial court and that of the appellate court, we find no reversible error whatsoever in either rulin , and see no need to add to the e%tensive discussions already $ade re ardin the non1e%istence of all the re#uisites for le al co$pensation to take place.

    Dut petitioner has adopted a novel theory, contendin that since respondent Court foundthat private respondent is an obli or of ;ND and the latter, as aforesaid, has beco$e an obli or of private respondent 2resultin in le al co$pensation , the 2h onorable respondent court shouldhave ordered private respondent to pay ;ND what the latter is bound by the trial court's decisionto return the for$er.K [?!

    Dy this si$plistic approach, petitioner in effect seeks to render nu atory the decisions of thetrial court and the appellate Court, and have this Court validate its ori inal $isdeed, thereby$akin a $ockery of the entire Budicial process of this country. 7hat the petitioner bank iseffectively sayin is that since the respondent Court of /ppeals ruled that petitioner bank couldnot do a shortcut and si$ply intercept funds bein coursed throu h it, for trans$ittal to another bank, and eventually to be deposited to the account of an individual who happens to owe so$ea$ount of $oney to the petitioner, and because respondent Court ordered petitioner bank toreturn the intercepted a$ount to said individual, who in turn was found by the appellate Court tobe indebted to petitioner bank, T )*)- *), there $ust now be le al co$pensation of thea$ounts each owes the other, and hence, there is no need for petitioner bank to actuallyreturn the a$ount, and finally, that petitioner bank ends up in e%actly the sa$e position as whenit first took the i$proper and unwarranted shortcut by interceptin the said $oney transfer,notwithstandin the assailed :ecision sayin that this could not be done

    http://sc.judiciary.gov.ph/jurisprudence/1996/jul1996/108052.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1996/jul1996/108052.htm#_edn7http://sc.judiciary.gov.ph/jurisprudence/1996/jul1996/108052.htm#_edn6http://sc.judiciary.gov.ph/jurisprudence/1996/jul1996/108052.htm#_edn7
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    7e see in this petition a clever ploy to use this Court to validate or le aliEe an i$proper actof the petitioner bank, with the not i$possible intention of usin this case as a precedent for si$ilar acts of interception in the future. This piratical attitude of the nation's pre$ier bankdeserves a warnin that it should not abuse the Bustice syste$ in its collection efforts,particularly since we are aware that if the petitioner bank had been in ood faith, it could have

    easily disposed of this controversy in ten $inutes flat by $eans of an e%chan e of checks withprivate respondent for the sa$e a$ount. The liti ation could have ended there, but it didnot. =nstead, this plainly un$eritorious case had to clo our docket and take up the valuableti$e of this Court.

    "HEREFORE, the instant petition is herewith :)N=): for bein plainly un$eritorious, andthe assailed :ecision is /--=*+): in toto. Costs a ainst petitioner.

    SO ORDERED.

    E.#.V. REALTY DEVELOPMENT CORPORATION an CRISTINA CONDOMINIUMCORPORATION, petitioners, vs . COURT OF APPEALS an UNISHPEREINTERNATIONAL, INC. respondents.

    D E C I S I O N

    APUNAN, J.:

    This petition for review on certiorari seeks to set aside the decision and resolution of theCourt of /ppeals rendered on -ebruary ?, 5 and on +ay 5, 5, respectively, in C/1F.*.0; No. 66?35 reversin the order of the 0ecurities and )%chan e Co$$ission 20)C in 0)C1

    /C No. 6? issued on /u ust 6 , ".

    The followin facts are not disputed(

    ;etitioner ).F.G. *ealty :evelop$ent Corporation 2hereinafter referred to as ).F.G.*ealty is the owner>developer of a seven1storey condo$iniu$ buildin known as CristinaCondo$iniu$. Cristina Condo$iniu$ Corporation 2hereinafter referred to as CCC holds title toall co$$on areas of Cristina Condo$iniu$ and is in char e of $ana in , $aintainin andad$inisterin the condo$iniu$Ls co$$on areas and providin for the buildin Ls security.

    *espondent 9nisphere =nternational, =nc. 2hereinafter referred to as 9nisphere is theowner>occupant of 9nit 3" of said condo$iniu$.

    n Nove$ber 6&, & , respondent 9nisphereLs 9nit 3" was alle edly robbed of variousite$s valued at ; A, A5."". The incident was reported to petitioner CCC.

    n @uly 65, &6, another robbery alle edly occurred at 9nit 3" where the ite$s cartedaway were valued at ; A, 3"."", brin in the total value of ite$s lost to ; 6,6 5."". Thisincident was likewise reported to petitioner CCC.

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    n ctober 5, &6, respondent 9nisphere de$anded co$pensation and rei$burse$entfro$ petitioner CCC for the losses incurred as a result of the robbery.

    ;etitioner CCC denied any liability for the losses clai$ed to have been incurred byrespondent 9nisphere, statin that the oods lost belon ed to /$trade, a third party.

    /s a conse#uence of the denial, respondent 9nisphere withheld pay$ent of its $onthlydues startin Nove$ber &6.

    n 0epte$ber 3, &3, respondent 9nisphere received a letter fro$ petitioner CCCde$andin pay$ent of past dues.

    n :ece$ber 5, &4, petitioner ).F.G. *ealty e%ecuted a :eed of /bsolute 0ale over 9nit3" in favor of respondent 9nisphere. Thereafter, Condo$iniu$ Certificate of Title No. ?" "was issued in respondent 9nisphereLs na$e bearin the annotation of a lien in favor of petitioner ).F.G. *ealty for the unpaid condo$iniu$ dues in the a$ount of ; 3, 46.A?.

    n @anuary 6&, &?, petitioners ).F.G. *ealty and CCC Bointly filed a petition with the0ecurities and )%chan e Co$$ission 20)C for the collection of the unpaid $onthly dues in thea$ount of ; 3, 46.A? a ainst respondent 9nisphere.

    =n its answer, respondent 9nisphere alle ed that it could not be dee$ed in default in thepay$ent of said unpaid dues because its tardiness was occasioned by the petitioners' failure toco$ply with what was incu$bent upon the$, that is, to provide security for the buildinpre$ises in order to prevent, if not to stop, the robberies takin place therein. =t asserted ascounterclai$ that the a$ount of ; 6,6 5."" representin the total value of its loss due to thetwo robberies be awarded to it by way of da$a es for the latterLs failure to secure the pre$ises.

    n @anuary , & , 0)C earin fficer /ntero -. . Gillaflor, @r. rendered a decisionwhich dispositively read as follows(

    7 )*)- *), r espondent is hereby ordered to pay petitioner the su$ of ; 3, 46.A? withinfifteen 2 5 days fro$ receipt of this :ecision. -urther, petitioner is hereby ordered to payrespondent within fifteen 2 5 days fro$ receipt of this :ecision, the su$ of ; 6,6 5."".

    et copy of this :ecision be furnished the *e ister of :eeds of +akati, +etro +anila for thepurpose of cancellation of the lien in favor of Cristina Condo$iniu$ found at the back of Title for unpaid $onthly dues in the su$ of ; 3, 46.A?, upon full pay$ent of respondent of said a$ountunto petitioner.

    0 *:)*):. [ !

    Doth parties filed their respective $otions for reconsideration.

    n @uly ?, & , the decision of earin fficer Gillaflor was $odified and a$ended byearin fficer )nri#ue . -lores, @r. to read as follows(

    http://sc.judiciary.gov.ph/jurisprudence/1999/jul99/120236.htm#_edn1http://sc.judiciary.gov.ph/jurisprudence/1999/jul99/120236.htm#_edn1
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    7 )*)- *), respondentLs $otion for reconsideration should be, as it is, hereby :)N=): andthe petitionersL $otion for reconsideration is hereby F*/NT):.

    /ccordin ly, the decision dated @anuary , & , is partially reconsidered to the effect thatpetitioners are not $ade liable for the value of the ite$s>articles bur lariEed fro$ respondentLs

    condo$iniu$ unit.0 *:)*):. [6!

    n @uly &, & , respondent 9nisphere filed a notice of appeal with the 0)C enbanc #uestionin the above1$entioned decision.

    n /u ust 5, & , it filed a $otion for an e%tension of thirty 23" days to file its$e$orandu$ on appeal thirty 23" days fro$ the stated deadline of /u ust &, & .

    0aid $otion was ranted on /u ust ?, & .

    n 0epte$ber &, & , respondent 9nisphere filed a second $otion for e%tension of ti$eto file its $e$orandu$ on appeal for another twenty 26" days.

    The $otion was likewise ranted on 0epte$ber 6A, & .

    n ctober , & , respondent 9nisphere filed its $e$orandu$ on appeal.

    /fter the petitioners filed their reply thereto, the 0)C en banc issued the rder dated-ebruary 63, " which is #uoted hereunder(

    Defore this Co$$ission en banc is an appeal fro$ the rder dated @uly ?, & of the earinfficer in 0)C Case No. 3 entitled S).F.G. *ealty :evelop$ent Corporation and Cristina

    Condo$iniu$ Corporation vs. 9nisphere =nternational , =nc.L

    The records of the case show that respondent1appellant received a copy of the above order on@uly &, & and filed its Notice of /ppeal on @uly 6 , & . n /u ust 5, & , respondentasked for an e%tension of thirty 23" days to file its +e$orandu$ on /ppeal which was rantedon /u ust ?, & .

    n 0epte$ber &, & , respondent asked for an additional period of twenty 26" days untilctober &, & to file his /ppeal which was also ranted.

    *espondent filed his +e$orandu$ on ctober 3, & , five days after the due date.

    The penulti$ate para raph of 0ection A of ;residential :ecree no. "61/ 2as a$ended clearlyprovides(

    % % % The decision, rulin or order of any such Co$$issioner, bodies, boards, co$$ittees,and>or officer as $ay be appealed to the Co$$ission sittin en banc within thirty 23" days after receipt by the appellant of notice of such decision, rulin or order. The Co$$ission shall

    http://sc.judiciary.gov.ph/jurisprudence/1999/jul99/120236.htm#_edn2http://sc.judiciary.gov.ph/jurisprudence/1999/jul99/120236.htm#_edn2
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    pro$ul ate rules or procedure to overn the proceedin s, hearin s and appeals of cases fallinwithin its Burisdiction.

    ;ursuant to the above provision, the Co$$ission pro$ul ated the *evised *ules of ;rocedureof the 0ecurities and )%chan e Co$$isison, 0ection 3, *ule QG= of said *ules reiterates the

    thirty 23" 1day period provided for under the above provision( /ppeal $ay be taken by filin with the earin fficer who pro$ul ated the decision, order orrulin within thirty 23" days fro$ notice thereof, and servin upon the adverse party, a notice ofappeal and a $e$orandu$ on appeal and payin the correspondin docket fee therefor. Theappeal shall be considered perfected upon the filin of the $e$orandu$ on appeal andpay$ent of the docket fee within the period hereinabove fi%ed.

    The Co$$ission en banc notes that respondent had, e%tensions included, a total of ei hty 2&"days to file its /ppeal $e$orandu$ but failed to do so.

    7 )*)- *), pre$ises considered, the instant appeal is hereby dis$issed for havin beenfiled out of ti$e.

    0 *:)*):. [3!

    *espondent 9nisphere $oved for a reconsideration of the above1#uoted order but thesa$e was denied, and so was it its second $otion for reconsideration.

    n 0epte$ber A, ", respondent 9nisphere filed a notice of appeal to the 0)C enbanc in order to #uestion the latterLs rulin to the Court of /ppeals pursuant to *ule 43 of the*ules of Court, as a$ended by *epublic /ct No. 5434.

    n 0epte$ber ", ", it filed a notice of appeal to the Court of /ppeals.

    The Court of /ppeals reversed the 0)C en banc"s rder of /u ust 6 , " in its :ecisiondated -ebruary ?, 5 which dispositively reads as follows(

    7 )*)- *), the instant petition is F*/NT): and the assailed rder dated /u ust 6 , &is hereby *)G)*0): and 0)T /0=:). /nother Bud $ent is entered declarin that the appeal$e$orandu$ before the 0)C 2en banc of appellant 9nisphere was filed on ti$e and that thea$ount of ; 3, 46.A?, the unpaid $onthly dues of 9nisphere to the Corporation should beoffset by the losses suffered by the 9nisphere in the a$ount of ; 6,6 5."". 9nisphere ishereby ordered to pay the Cristina Condo$iniu$ Corporation the a$ount of ;&4?.A?representin the balance after offsettin the a$ount of ; 6,6 5."" a ainst the said ; 3, 46.A?,with 6< interest per annu$ fro$ @anuary 6&, &? when the @oint ;etition of the petitioners1appellees was filed before the 0)C 2for collection and da$a es until fully paid.

    No pronounce$ent as to costs.

    0 *:)*):. [4!

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    ;etitioners $oved for reconsideration of the said decision but the sa$e was denied by theappellate court on +ay 5, 5.

    ence, the instant petition for review interposed by petitioners ).F.G. *ealty and CCCchallen in the decision of the Court of /ppeals on the followin rounds( 2a the Court of

    /ppeals did not ac#uire Burisdiction over respondent 9nisphereLs appeal because the latter failed to co$ply with the prescribed $ode of appealH 2b even if the Burisdictional infir$ity isbrushed aside, the 0)C en banc rder dated -ebruary 63, " has already attained finalityHand 2c the rulin of the Court of /ppeals on the offsettin of the partiesL clai$s is unfounded.

    / perusal of the fore oin issues readily reveals that petitioners raise two 26 aspects of thecase for consideration, that is, the procedural aspect and the substantive aspect.

    7e will discuss the procedural aspect first. ;etitioners contend that 2a the Court of /ppeals did not ac#uire Burisdiction over the appeal because respondent failed to co$ply withthe prescribed $ode of appealH and 2b assu$in that the Court of /ppeals has Burisdiction, theassailed 0)C en banc rder of -ebruary 63, " had already beco$e final and e%ecutory.

    /nent the first contention, petitioners clai$ that respondent 9nisphere erred in $erely filina notice of appeal as in ordinary civil cases fro$ the re ular courts instead of a petition for review with the Court of /ppeals.

    Contrary to petitionersL contention, respondent 9nisphere co$plied with the prescribed$ode of appeal. /t the ti$e the appeal was elevated to the Court of /ppeals in ", the rule

    overnin recourse to the Court of /ppeals fro$ the decision, resolution or final order of a#uasi1Budicial body was *ule 43 of the *evised *ules of Court, as a$ended by *epublic /ct No.5434 as e$bodied in Datas ;a$bansa Dl . 6 and its =nteri$ *ules and Fuidelines. [5! The ruleprovided for a unifor$ procedure for appeals fro$ the specified ad$inistrative tribunals, 0)Cincluded, to the Court of /ppeals by filin a notice of appeal with the appellate court and with thecourt, officer, board, co$$ission or a ency that $ade or rendered the assailed rulin withinfifteen 2 5 days fro$ notice thereof. *ecords bear out that respondent 9nisphere co$pliedwith the fore oin rules when it filed a notice of appeal with the 0)C en banc on 0epte$ber A,

    " and with the Court of /ppeals on 0epte$ber ", ". Clearly therefore, respondent9nisphere co$plied with the proper $ode of appeal as $andated by the rules.

    7ith respect to the second contention, petitioners asseverate that the -ebruary 63, "order of the 0)C en banc has already beco$e final and unappealable, therefore can no lon er be reversed, a$ended or $odified. They $aintain that respondent 9nisphere received a copyof said order on -ebruary 6A, " and that ten 2 " days thereafter, it filed its $otion for reconsideration. 0aid $otion was denied by the 0)C on +ay 4, " which was received byrespondent 9nisphere on +ay 5, ". Conse#uently, they assert that respondent 9nispherehad only the re$ainin five 25 days or on +ay 6", " within which to file a notice of appeal. owever, instead of appealin therefro$, respondent 9nisphere filed a second $otionfor reconsideration on +ay 65, " with the 0)C en banc. ;etitioners contend that no second$otion for reconsideration is allowed by 0)C *ules unless with e%press prior to leave of thehearin officer. 0aid second $otion for reconsideration was likewise denied on /u ust 6 ,

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    ". -ifteen 2 5 days later or on 0epte$ber 5, ", respondent 9nisphere filed its notice of appeal.

    0ection &, *ule Q== of the *evised *ules of ;rocedure of the 0)C provides that(

    0)C. &. #econsideration .11 7ithin thirty 23" days fro$ receipt of the order or decision of theearin fficer, the a rieved party $ay file a $otion for reconsideration of such order ordecision to ether with proof of service thereof upon the adverse party. No $ore than one$otion for reconsideration shall be allowed unless with the e%press prior leave of the earin

    fficer.

    *espondent 9nisphereLs non1observance of the fore oin rule rendered the -ebruary 63, "and the +ay 4, " orders of the 0)C en banc final and unappealable. =ts failure to perfectits appeal in the $anner and within the period fi%ed by law rendered the decision sou ht to beappealed final, with the result that no court can e%ercise appellate Burisdiction to review thedecision. [A! Contrary to petitionersL view, the appeal to the Court of /ppeals in this case shouldhave been perfected within fifteen 2 5 days fro$ receipt of the order denyin the $otion for reconsideration on +ay 5, ". Dut instead of appealin , respondent 9nisphere filed aprohibited second $otion for reconsideration without e%press prior leave of th