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Kinds of Civil Obligations: As to perfection/extinguishment

G.R. No. L-17587 September 12, 1967

PHILIPPINE BANKING CORPORATION, representing the estate of JUSTINA

SANTOS Y CANON FAUSTINO, deceased,plaintiff-appellant,vs.LUI SHE in her own behalf and as administratrix of the intestate estate of WongHeng, deceased,defendant-appellant.

Nicanor S. Sison for plaintiff-appellant.

Ozaeta, Gibbs & Ozaeta for defendant-appellant.

CASTRO,J.:

Justina Santos y Canon Faustino and her sister Lorenzo were the owners incommon of a piece of land in Manila. This parcel, with an area of 2,582.30 square meters,

is located on Rizal Avenue and opens into Florentino Torres street at the back and

Katubusan street on one side. In it are two residential houses with entrance on Florentino

Torres street and the Hen Wah Restaurant with entrance on Rizal Avenue. The sisters

lived in one of the houses, while Wong Heng, a Chinese, lived with his family in the

restaurant. Wong had been a long-time lessee of a portion of the property, paying a

monthly rental of P2,620.

On September 22, 1957 Justina Santos became the owner of the entire property as

her sister died with no other heir. Then already well advanced in years, being at the time

90 years old, blind, crippled and an invalid, she was left with no other relative to live

with. Her only companions in the house were her 17 dogs and 8 maids. Her otherwise

dreary existence was brightened now and then by the visits of Wong's four children whohad become the joy of her life. Wong himself was the trusted man to whom she delivered

various amounts for safekeeping, including rentals from her property at the corner of

Ongpin and Salazar streets and the rentals which Wong himself paid as lessee of a part of

the Rizal Avenue property. Wong also took care of the payment; in her behalf, of taxes,

lawyers' fees, funeral expenses, masses, salaries of maids and security guard, and her

household expenses.

"In grateful acknowledgment of the personal services of the lessee to her," Justina

Santos executed on November 15, 1957 a contract of lease (Plff Exh. 3) in favor of

Wong, covering the portion then already leased to him and another portion fronting

Florentino Torres street. The lease was for 50 years, although the lessee was given the

right to withdraw at any time from the agreement; the monthly rental was P3,120. The

contract covered an area of 1,124 square meters. Ten days later (November 25), the

contract was amended (Plff Exh. 4) so as to make it cover the entire property, including

the portion on which the house of Justina Santos stood, at an additional monthly rental of

P360. For his part Wong undertook to pay, out of the rental due from him, an amount not

exceeding P1,000 a month for the food of her dogs and the salaries of her maids.

On December 21 she executed another contract (Plff Exh. 7) giving Wong the

option to buy the leased premises for P120,000, payable within ten years at a monthly

installment of P1,000. The option, written in Tagalog, imposed on him the obligation to

pay for the food of the dogs and the salaries of the maids in her household, the charge not

to exceed P1,800 a month. The option was conditioned on his obtaining Philippine

citizenship, a petition for which was then pending in the Court of First Instance of Rizal.

It appears, however, that this application for naturalization was withdrawn when it was

discovered that he was not a resident of Rizal. On October 28, 1958 she filed a petition to

adopt him and his children on the erroneous belief that adoption would confer on them

Philippine citizenship. The error was discovered and the proceedings were abandoned.

On November 18, 1958 she executed two other contracts, one (Plff Exh. 5)

extending the term of the lease to 99 years, and another (Plff Exh. 6) fixing the term of

the option of 50 years. Both contracts are written in Tagalog.

In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279), she bade

her legatees to respect the contracts she had entered into with Wong, but in a codicil (Plff

Exh. 17) of a later date (November 4, 1959) she appears to have a change of heart.

Claiming that the various contracts were made by her because of machinations and

inducements practiced by him, she now directed her executor to secure the annulment of

the contracts.

On November 18 the present action was filed in the Court of First Instance of

Manila. The complaint alleged that the contracts were obtained by Wong "through fraud,

misrepresentation, inequitable conduct, undue influence and abuse of confidence andtrust of and (by) taking advantage of the helplessness of the plaintiff and were made to

circumvent the constitutional provision prohibiting aliens from acquiring lands in the

Philippines and also of the Philippine Naturalization Laws." The court was asked to direct

the Register of Deeds of Manila to cancel the registration of the contracts and to order

Wong to pay Justina Santos the additional rent of P3,120 a month from November 15,

1957 on the allegation that the reasonable rental of the leased premises was P6,240 a

month.

In his answer, Wong admitted that he enjoyed her trust and confidence as proof of

which he volunteered the information that, in addition to the sum of P3,000 which he said

she had delivered to him for safekeeping, another sum of P22,000 had been deposited in a


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joint account which he had with one of her maids. But he denied having taken advantage

of her trust in order to secure the execution of the contracts in question. As counterclaim

he sought the recovery of P9,210.49 which he said she owed him for advances.

Wong's admission of the receipt of P22,000 and P3,000 was the cue for the filing

of an amended complaint. Thus on June 9, 1960, aside from the nullity of the contracts,

the collection of various amounts allegedly delivered on different occasions was sought.

These amounts and the dates of their delivery are P33,724.27 (Nov. 4, 1957); P7,344.42

(Dec. 1, 1957); P10,000 (Dec. 6, 1957); P22,000 and P3,000 (as admitted in his answer).

An accounting of the rentals from the Ongpin and Rizal Avenue properties was also

demanded.

In the meantime as a result of a petition for guardianship filed in the Juvenile and

Domestic Relations Court, the Security Bank & Trust Co. was appointed guardian of the

properties of Justina Santos, while Ephraim G. Gochangco was appointed guardian of her

person.

In his answer, Wong insisted that the various contracts were freely and voluntarily

entered into by the parties. He likewise disclaimed knowledge of the sum of P33,724.27,admitted receipt of P7,344.42 and P10,000, but contended that these amounts had been

spent in accordance with the instructions of Justina Santos; he expressed readiness to

comply with any order that the court might make with respect to the sums of P22,000 in

the bank and P3,000 in his possession.

The case was heard, after which the lower court rendered judgment as follows:

[A]ll the documents mentioned in the first cause of action, with the

exception of the first which is the lease contract of 15 November 1957, are

declared null and void; Wong Heng is condemned to pay unto plaintiff thru

guardian of her property the sum of P55,554.25 with legal interest from the date

of the filing of the amended complaint; he is also ordered to pay the sum of

P3,120.00 for every month of his occupation as lessee under the document oflease herein sustained, from 15 November 1959, and the moneys he has

consigned since then shall be imputed to that; costs against Wong Heng.

From this judgment both parties appealed directly to this Court. After the case was

submitted for decision, both parties died, Wong Heng on October 21, 1962 and Justina

Santos on December 28, 1964. Wong was substituted by his wife, Lui She, the other

defendant in this case, while Justina Santos was substituted by the Philippine Banking

Corporation.

Justina Santos maintained now reiterated by the Philippine Banking Corporation

that the lease contract (Plff Exh. 3) should have been annulled along with the four

other contracts (Plff Exhs. 4-7) because it lacks mutuality; because it included a portion

which, at the time, was in custodia legis; because the contract was obtained in violation

of the fiduciary relations of the parties; because her consent was obtained through undue

influence, fraud and misrepresentation; and because the lease contract, like the rest of the

contracts, is absolutely simulated.

Paragraph 5 of the lease contract states that "The lessee may at any time withdraw

from this agreement." It is claimed that this stipulation offends article 1308 of the Civil

Code which provides that "the contract must bind both contracting parties; its validity or

compliance cannot be left to the will of one of them."

We have had occasion to delineate the scope and application of article 1308 in the

early case ofTaylor v. Uy Tieng Piao.1 We said in that case:

Article 1256 [now art. 1308] of the Civil Code in our opinion creates no

impediment to the insertion in a contract for personal service of a resolutory

condition permitting the cancellation of the contract by one of the parties. Sucha stipulation, as can be readily seen, does not make either the validity or the

fulfillment of the contract dependent upon the will of the party to whom is

conceded the privilege of cancellation; for where the contracting parties have

agreed that such option shall exist, the exercise of the option is as much in the

fulfillment of the contract as any other act which may have been the subject of

agreement. Indeed, the cancellation of a contract in accordance with conditions

agreed upon beforehand is fulfillment.2

And so it was held inMelencio v. Dy Tiao Lay 3 that a "provision in a lease contract

that the lessee, at any time before he erected any building on the land, might rescind the

lease, can hardly be regarded as a violation of article 1256 [now art. 1308] of the Civil

Code."

The case ofSingson Encarnacion v. Baldomar 4 cannot be cited in support of the

claim of want of mutuality, because of a difference in factual setting. In that case, the

lessees argued that they could occupy the premises as long as they paid the rent. This is

of course untenable, for as this Court said, "If this defense were to be allowed, so long as

defendants elected to continue the lease by continuing the payment of the rentals, the

owner would never be able to discontinue it; conversely, although the owner should

desire the lease to continue the lessees could effectively thwart his purpose if they should

prefer to terminate the contract by the simple expedient of stopping payment of the

rentals." Here, in contrast, the right of the lessee to continue the lease or to terminate it is

so circumscribed by the term of the contract that it cannot be said that the continuance of

the lease depends upon his will. At any rate, even if no term had been fixed in the


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agreement, this case would at most justify the fixing of a period5 but not the annulment of

the contract.

Nor is there merit in the claim that as the portion of the property formerly owned

by the sister of Justina Santos was still in the process of settlement in the probate court at

the time it was leased, the lease is invalid as to such portion. Justina Santos became the

owner of the entire property upon the death of her sister Lorenzo on September 22, 1957

by force of article 777 of the Civil Code. Hence, when she leased the property on

November 15, she did so already as owner thereof. As this Court explained in upholding

the sale made by an heir of a property under judicial administration:

That the land could not ordinarily be levied upon while in custodia legis

does not mean that one of the heirs may not sell the right, interest or

participation which he has or might have in the lands under administration. The

ordinary execution of property in custodia legis is prohibited in order to avoid

interference with the possession by the court. But the sale made by an heir of

his share in an inheritance, subject to the result of the pending administration,

in no wise stands in the way of such administration.6

It is next contended that the lease contract was obtained by Wong in violation of

his fiduciary relationship with Justina Santos, contrary to article 1646, in relation to

article 1941 of the Civil Code, which disqualifies "agents (from leasing) the property

whose administration or sale may have been entrusted to them." But Wong was never an

agent of Justina Santos. The relationship of the parties, although admittedly close and

confidential, did not amount to an agency so as to bring the case within the prohibition of

the law.

Just the same, it is argued that Wong so completely dominated her life and affairs

that the contracts express not her will but only his. Counsel for Justina Santos cites the

testimony of Atty. Tomas S. Yumol who said that he prepared the lease contract on the

basis of data given to him by Wong and that she told him that "whatever Mr. Wong wants

must be followed."7

The testimony of Atty. Yumol cannot be read out of context in order to warrant a

finding that Wong practically dictated the terms of the contract. What this witness said

was:

Q Did you explain carefully to your client, Doa Justina, the contents of this

document before she signed it?

A I explained to her each and every one of these conditions and I also told her

these conditions were quite onerous for her, I don't really know if I have

expressed my opinion, but I told her that we would rather not execute any

contract anymore, but to hold it as it was before, on a verbal month to month

contract of lease.

Q But, she did not follow your advice, and she went with the contract just the

same?

A She agreed first . . .

Q Agreed what?

A Agreed with my objectives that it is really onerous and that I was really right,

but after that, I was called again by her and she told me to follow the wishes of

Mr. Wong Heng.

x x x x x x x x x

Q So, as far as consent is concerned, you were satisfied that thisdocument was perfectly proper?

x x x x x x x x x

A Your Honor, if I have to express my personal opinion, I would say she

is not, because, as I said before, she told me "Whatever Mr. Wong wants

must be followed."8

Wong might indeed have supplied the data which Atty. Yumol embodied in the

lease contract, but to say this is not to detract from the binding force of the contract. For

the contract was fully explained to Justina Santos by her own lawyer. One incident,

related by the same witness, makes clear that she voluntarily consented to the lease

contract. This witness said that the original term fixed for the lease was 99 years but that

as he doubted the validity of a lease to an alien for that length of time, he tried to

persuade her to enter instead into a lease on a month-to-month basis. She was, however,

firm and unyielding. Instead of heeding the advice of the lawyer, she ordered him, "Just

follow Mr. Wong Heng."9 Recounting the incident, Atty. Yumol declared on cross

examination:

Considering her age, ninety (90) years old at the time and her condition,

she is a wealthy woman, it is just natural when she said "This is what I want

and this will be done." In particular reference to this contract of lease, when I

said "This is not proper," she said "You just go ahead, you prepare that, I am


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the owner, and if there is any illegality, I am the only one that can question the

illegality."10

Atty. Yumol further testified that she signed the lease contract in the presence of

her close friend, Hermenegilda Lao, and her maid, Natividad Luna, who was constantly

by her side.11 Any of them could have testified on the undue influence that Wong

supposedly wielded over Justina Santos, but neither of them was presented as a witness.

The truth is that even after giving his client time to think the matter over, the lawyer

could not make her change her mind. This persuaded the lower court to uphold the

validity of the lease contract against the claim that it was procured through undue

influence.

Indeed, the charge of undue influence in this case rests on a mere inference 12 drawn

from the fact that Justina Santos could not read (as she was blind) and did not understand

the English language in which the contract is written, but that inference has been

overcome by her own evidence.

Nor is there merit in the claim that her consent to the lease contract, as well as to

the rest of the contracts in question, was given out of a mistaken sense of gratitude toWong who, she was made to believe, had saved her and her sister from a fire that

destroyed their house during the liberation of Manila. For while a witness claimed that

the sisters were saved by other persons (the brothers Edilberto and Mariano Sta. Ana) 13 it

was Justina Santos herself who, according to her own witness, Benjamin C. Alonzo, said

"very emphatically" that she and her sister would have perished in the fire had it not been

for Wong.14 Hence the recital in the deed of conditional option (Plff Exh. 7) that "[I]tong

si Wong Heng ang siyang nagligtas sa aming dalawang magkapatid sa halos ay tiyak na

kamatayan", and the equally emphatic avowal of gratitude in the lease contract (Plff Exh.

3).

As it was with the lease contract (Plff Exh. 3), so it was with the rest of the

contracts (Plff Exhs. 4-7) the consent of Justina Santos was given freely and

voluntarily. As Atty. Alonzo, testifying for her, said:

[I]n nearly all documents, it was either Mr. Wong Heng or Judge Torres

and/or both. When we had conferences, they used to tell me what the

documents should contain. But, as I said, I would always ask the old woman

about them and invariably the old woman used to tell me: "That's okay. It's all

right."15

But the lower court set aside all the contracts, with the exception of the lease

contract of November 15, 1957, on the ground that they are contrary to the expressed

wish of Justina Santos and that their considerations are fictitious. Wong stated in his

deposition that he did not pay P360 a month for the additional premises leased to him,

because she did not want him to, but the trial court did not believe him. Neither did it

believe his statement that he paid P1,000 as consideration for each of the contracts

(namely, the option to buy the leased premises, the extension of the lease to 99 years, and

the fixing of the term of the option at 50 years), but that the amount was returned to him

by her for safekeeping. Instead, the court relied on the testimony of Atty. Alonzo in

reaching the conclusion that the contracts are void for want of consideration.

Atty. Alonzo declared that he saw no money paid at the time of the execution of the

documents, but his negative testimony does not rule out the possibility that the

considerations were paid at some other time as the contracts in fact recite. What is more,

the consideration need not pass from one party to the other at the time a contract is

executed because the promise of one is the consideration for the other. 16

With respect to the lower court's finding that in all probability Justina Santos could

not have intended to part with her property while she was alive nor even to lease it in its

entirety as her house was built on it, suffice it to quote the testimony of her own witness

and lawyer who prepared the contracts (Plff Exhs. 4-7) in question, Atty. Alonzo:

The ambition of the old woman, before her death, according to her

revelation to me, was to see to it that these properties be enjoyed, even to own

them, by Wong Heng because Doa Justina told me that she did not have any

relatives, near or far, and she considered Wong Heng as a son and his children

her grandchildren; especially her consolation in life was when she would hear

the children reciting prayers in Tagalog.17

She was very emphatic in the care of the seventeen (17) dogs and of the

maids who helped her much, and she told me to see to it that no one could

disturb Wong Heng from those properties. That is why we thought of the

ninety-nine (99) years lease; we thought of adoption, believing that thru

adoption Wong Heng might acquire Filipino citizenship; being the adopted

child of a Filipino citizen.18

This is not to say, however, that the contracts (Plff Exhs. 3-7) are valid. For the

testimony just quoted, while dispelling doubt as to the intention of Justina Santos, at the

same time gives the clue to what we view as a scheme to circumvent the Constitutional

prohibition against the transfer of lands to aliens. "The illicit purpose then becomes the

illegal causa"19 rendering the contracts void.

Taken singly, the contracts show nothing that is necessarily illegal, but considered

collectively, they reveal an insidious pattern to subvert by indirection what the

Constitution directly prohibits. To be sure, a lease to an alien for a reasonable period is


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valid. So is an option giving an alien the right to buy real property on condition that he is

granted Philippine citizenship. As this Court said in Krivenko v. Register of Deeds:20

[A]liens are not completely excluded by the Constitution from the use of

lands for residential purposes. Since their residence in the Philippines is

temporary, they may be granted temporary rights such as a lease contract

which is not forbidden by the Constitution. Should they desire to remain here

forever and share our fortunes and misfortunes, Filipino citizenship is not

impossible to acquire.

But if an alien is given not only a lease of, but also an option to buy, a piece of

land, by virtue of which the Filipino owner cannot sell or otherwise dispose of his

property,21 this to last for 50 years, then it becomes clear that the arrangement is a virtual

transfer of ownership whereby the owner divests himself in stages not only of the right to

enjoy the land ( jus possidendi, jus utendi, jus fruendi and jus abutendi) but also of the

right to dispose of it ( jus disponendi) rights the sum total of which make up

ownership. It is just as if today the possession is transferred, tomorrow, the use, the next

day, the disposition, and so on, until ultimately all the rights of which ownership is made

up are consolidated in an alien. And yet this is just exactly what the parties in this case

did within the space of one year, with the result that Justina Santos' ownership of her

property was reduced to a hollow concept. If this can be done, then the Constitutional ban

against alien landholding in the Philippines, as announced in Krivenko v. Register of

Deeds,22 is indeed in grave peril.

It does not follow from what has been said, however, that because the parties are in

pari delicto they will be left where they are, without relief. For one thing, the original

parties who were guilty of a violation of the fundamental charter have died and have

since been substituted by their administrators to whom it would be unjust to impute their

guilt.23 For another thing, and this is not only cogent but also important, article 1416 of

the Civil Code provides, as an exception to the rule on pari delicto, that "When the

agreement is not illegal per se but is merely prohibited, and the prohibition by law is

designed for the protection of the plaintiff, he may, if public policy is thereby enhanced,

recover what he has paid or delivered." The Constitutional provision that "Save in cases

of hereditary succession, no private agricultural land shall be transferred or assigned

except to individuals, corporations, or associations qualified to acquire or hold lands of

the public domain in the Philippines"24 is an expression of public policy to conserve lands

for the Filipinos. As this Court said in Krivenko:

It is well to note at this juncture that in the present case we have no

choice. We are construing the Constitution as it is and not as we may desire it

to be. Perhaps the effect of our construction is to preclude aliens admitted

freely into the Philippines from owning sites where they may build their homes.

But if this is the solemn mandate of the Constitution, we will not attempt to

compromise it even in the name of amity or equity . . . .

For all the foregoing, we hold that under the Constitution aliens may not

acquire private or public agricultural lands, including residential lands, and,

accordingly, judgment is affirmed, without costs.25

That policy would be defeated and its continued violation sanctioned if, instead of

setting the contracts aside and ordering the restoration of the land to the estate of the

deceased Justina Santos, this Court should apply the general rule ofpari delicto. To the

extent that our ruling in this case conflicts with that laid down inRellosa v. Gaw Chee

Hun 26 and subsequent similar cases, the latter must be considered as pro tanto qualified.

The claim for increased rentals and attorney's fees, made in behalf of Justina

Santos, must be denied for lack of merit.

And what of the various amounts which Wong received in trust from her? It

appears that he kept two classes of accounts, one pertaining to amount which she

entrusted to him from time to time, and another pertaining to rentals from the Ongpinproperty and from the Rizal Avenue property, which he himself was leasing.

With respect to the first account, the evidence shows that he received P33,724.27

on November 8, 1957 (Plff Exh. 16); P7,354.42 on December 1, 1957 (Plff Exh. 13);

P10,000 on December 6, 1957 (Plff Exh. 14) ; and P18,928.50 on August 26, 1959 (Def.

Exh. 246), or a total of P70,007.19. He claims, however, that he settled his accounts and

that the last amount of P18,928.50 was in fact payment to him of what in the liquidation

was found to be due to him.

He made disbursements from this account to discharge Justina Santos' obligations

for taxes, attorneys' fees, funeral services and security guard services, but the checks (Def

Exhs. 247-278) drawn by him for this purpose amount to only P38,442.84.27 Besides, if

he had really settled his accounts with her on August 26, 1959, we cannot understand

why he still had P22,000 in the bank and P3,000 in his possession, or a total of P25,000.

In his answer, he offered to pay this amount if the court so directed him. On these two

grounds, therefore, his claim of liquidation and settlement of accounts must be rejected.

After subtracting P38,442.84 (expenditures) from P70,007.19 (receipts), there is a

difference of P31,564 which, added to the amount of P25,000, leaves a balance of

P56,564.3528 in favor of Justina Santos.

As to the second account, the evidence shows that the monthly income from the

Ongpin property until its sale in Rizal Avenue July, 1959 was P1,000, and that from the


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Rizal Avenue property, of which Wong was the lessee, was P3,120. Against this account

the household expenses and disbursements for the care of the 17 dogs and the salaries of

the 8 maids of Justina Santos were charged. This account is contained in a notebook (Def.

Exh. 6) which shows a balance of P9,210.49 in favor of Wong. But it is claimed that the

rental from both the Ongpin and Rizal Avenue properties was more than enough to pay

for her monthly expenses and that, as a matter of fact, there should be a balance in her

favor. The lower court did not allow either party to recover against the other. Said thecourt:

[T]he documents bear the earmarks of genuineness; the trouble is that

they were made only by Francisco Wong and Antonia Matias, nick-named

Toning, which was the way she signed the loose sheets, and there is no clear

proof that Doa Justina had authorized these two to act for her in such

liquidation; on the contrary if the result of that was a deficit as alleged and

sought to be there shown, of P9,210.49, that was not what Doa Justina

apparently understood for as the Court understands her statement to the

Honorable Judge of the Juvenile Court . . . the reason why she preferred to stay

in her home was because there she did not incur in any debts . . . this being the

case, . . . the Court will not adjudicate in favor of Wong Heng on his

counterclaim; on the other hand, while it is claimed that the expenses weremuch less than the rentals and there in fact should be a superavit, . . . this Court

must concede that daily expenses are not easy to compute, for this reason, the

Court faced with the choice of the two alternatives will choose the middle

course which after all is permitted by the rules of proof, Sec. 69, Rule 123 for

in the ordinary course of things, a person will live within his income so that the

conclusion of the Court will be that there is neither deficit nor superavit and

will let the matter rest here.

Both parties on appeal reiterate their respective claims but we agree with the lower

court that both claims should be denied. Aside from the reasons given by the court, we

think that the claim of Justina Santos totalling P37,235, as rentals due to her after

deducting various expenses, should be rejected as the evidence is none too clear about the

amounts spent by Wong for food29 masses30 and salaries of her maids.31 His claim forP9,210.49 must likewise be rejected as his averment of liquidation is belied by his own

admission that even as late as 1960 he still had P22,000 in the bank and P3,000 in his

possession.

ACCORDINGLY, the contracts in question (Plff Exhs. 3-7) are annulled and set

aside; the land subject-matter of the contracts is ordered returned to the estate of Justina

Santos as represented by the Philippine Banking Corporation; Wong Heng (as substituted

by the defendant-appellant Lui She) is ordered to pay the Philippine Banking Corporation

the sum of P56,564.35, with legal interest from the date of the filing of the amended

complaint; and the amounts consigned in court by Wong Heng shall be applied to the

payment of rental from November 15, 1959 until the premises shall have been vacated by

his heirs. Costs against the defendant-appellant.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and

Angeles, JJ., concur.

Separate Opinions

FERNANDO,J.,concurring:

With the able and well-written opinion of Justice Castro, I am in full agreement.

The exposition of the facts leaves nothing to be desired and the statement of the law is

notable for its comprehensiveness and clarity. This concurring opinion has been written

solely to express what I consider to be the unfortunate and deplorable consequences ofapplying the pari delicto concept, as was, to my mind, indiscriminately done, to alien

landholding declared illegal under the Krivenko doctrine in some past decisions.

It is to be remembered that in Krivenko v. The Register of Deeds of Manila,1 this

Court over strong dissents held that residential and commercial lots may be considered

agricultural within the meaning of the constitutional provision prohibiting the transfer of

any private agricultural land to individuals, corporations or associations not qualified to

acquire or hold lands of the public domain in the Philippines save in cases of hereditary

succession.

That provision of the Constitution took effect on November 15, 1935 when the

Commonwealth Government was established. The interpretation as set forth in the

Krivenko decision was only handed down on November 15, 1947. Prior to that date therewere many who were of the opinion that the phrase agricultural landshould be construed

strictly and not be made to cover residential and commercial lots. Acting on that belief,

several transactions were entered into transferring such lots to alien vendees by Filipino-

vendors.

After the Krivenko decision, some Filipino vendors sought recovery of the lots in

question on the ground that the sales were null and void. No definite ruling was made by

this Court until September of 1953, when on the 29th of said month, Rellosa v. Gaw Chee

Hun,2Bautista v. Uy Isabelo,3Talento v. Makiki,4Caoile v. Chiao Peng5 were decided.


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Of the four decisions in September, 1953, the most extensive discussion of the

question is found inRellosa v. Gaw Chee Hun, the opinion being penned by retired

Justice Bautista Angelo with the concurrence only of one Justice, Justice Labrador, also

retired. Former Chief Justice Paras as well as the former Justices Tuason and

Montemayor concurred in the result. The necessary sixth vote for a decision was given by

the then Justice Bengzon, who had a two-paragraph concurring opinion disagreeing with

the main opinion as to the force to be accorded to the two cases, 6 therein cited. Therewere two dissenting opinions by former Justices Pablo and Alex Reyes. The doctrine as

announced in theRellosa case is that while the sale by a Filipino-vendor to an alien-

vendee of a residential or a commercial lot is null and void as held in the Krivenko case,

still the Filipino-vendor has no right to recover under a civil law doctrine, the parties

being in pari delicto. The only remedy to prevent this continuing violation of the

Constitution which the decision impliedly sanctions by allowing the alien vendees to

retain the lots in question is either escheat or reversion. Thus: "By following either of

these remedies, or by approving an implementary law as above suggested, we can enforce

the fundamental policy of our Constitution regarding our natural resources without doing

violence to the principle ofpari delicto."7

Were the parties really in pari delicto? Had the sale by and between Filipino-

vendor and alien-vendee occurred after the decision in the Krivenko case, then the aboveview would be correct that both Filipino-vendor and alien-vendee could not be

considered as innocent parties within the contemplation of the law. Both of them should

be held equally guilty of evasion of the Constitution.

Since, however, the sales in question took place prior to the Krivenko decision, at a

time when the assumption could be honestly entertained that there was no constitutional

prohibition against the sale of commercial or residential lots by Filipino-vendor to alien-

vendee, in the absence of a definite decision by the Supreme Court, it would not be doing

violence to reason to free them from the imputation of evading the Constitution. For

evidently evasion implies at the very least knowledge of what is being evaded. The new

Civil Code expressly provides: "Mistakes upon a doubtful or difficult question of law

may be the basis of good faith." 8

According to theRellosa opinion, both parties are equally guilty of evasion of the

Constitution, based on the broader principle that "both parties are presumed to know the

law." This statement that the sales entered into prior to the Krivenko decision were at that

time already vitiated by a guilty knowledge of the parties may be too extreme a view. It

appears to ignore a postulate of a constitutional system, wherein the words of the

Constitution acquire meaning through Supreme Court adjudication.1awphl.nt

Reference may be made by way of analogy to a decision adjudging a statute void.

Under the orthodox theory of constitutional law, the act having been found

unconstitutional was not a law, conferred no rights, imposed no duty, afforded no

protection.9 As pointed out by former Chief Justice Hughes though in Chicot County

Drainage District v. Baxter State Bank:10 "It is quite clear, however, that such broad

statements as to the effect of a determination of unconstitutionality must be taken with

qualifications. The actual existence of a statute, prior to such a determination, is an

operative fact and may have consequences which cannot justly be ignored. The past

cannot always be erased by a new judicial declaration. The effect of subsequent ruling as

to invalidity may have to be considered in various aspects, with respect to particularrelations, individual and corporate, and particular conduct, private and official. Questions

of rights claimed to have become vested, of status, of prior determinations deemed to

have finality and acted upon accordingly, of public policy in the light of the nature both

of the statute and of its previous application, demand examination."

After the Krivenko decision, there is no doubt that continued possession by alien-

vendee of property acquired before its promulgation is violative of the Constitution. It is

as if an act granting aliens the right to acquire residential and commercial lots were

annulled by the Supreme Court as contrary to the provision of the Constitution

prohibiting aliens from acquiring private agricultural land.

The question then as now, therefore, was and is how to divest the alien of such

property rights on terms equitable to both parties. That question should be justly resolved

in accordance with the mandates of the Constitution not by a wholesale condemnation of

both parties for entering into a contract at a time when there was no ban as yet arising

from the Krivenko decision, which could not have been anticipated. Unfortunately, under

theRellosa case, it was assumed that the parties, being in pari delicto, would be left in

the situation in which they were, neither being in a position to seek judicial redress.

Would it not have been more in consonance with the Constitution, if instead the

decision compelled the restitution of the property by the alien-vendee to the Filipino-

vendor? Krivenko decision held in clear, explicit and unambigous language that: "We are

deciding the instant case under section 5 of Article XIII of the Constitution which is more

comprehensive and more absolute in the sense that it prohibits the transfer to aliens of

any private agricultural land including residential land whatever its origin might have

been . . . . This prohibition [Rep. Act No. 133] makes no distinction between private

lands that are strictly agricultural and private lands that are residential or commercial.

The prohibition embraces the sale of private lands of any kind in favor of aliens, which is

again a clear implementation and a legislative interpretation of the constitutional

prohibition. . . . It is well to note at this juncture that in the present case we have no

choice. We are construing the Constitution as it is and not as we may desire it to be.

Perhaps the effect of our construction is to preclude aliens, admitted freely into the

Philippines, from owning sites where they may build their homes. But if this is the

solemn mandate of the Constitution, we will not attempt to compromise it even in the

name of amity or equity."11


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Alien-vendee is therefore incapacitated or disqualified to acquire and hold real

estate. That incapacity and that disqualification should date from the adoption of the

Constitution on November 15, 1935. That incapacity and that disqualification, however,

was made known to Filipino-vendor and to alien-vendee only upon the promulgation of

the Krivenko decision on November 15, 1947. Alien-vendee, therefore, cannot be allowed

to continue owning and exercising acts of ownership over said property, when it is clearly

included within the Constitutional prohibition. Alien-vendee should thus be made torestore the property with its fruits and rents to Filipino-vendor, its previous owner, if it

could be shown that in the utmost good faith, he transferred his title over the same to

alien-vendee, upon restitution of the purchase price of course.

The Constitution bars alien-vendees from owning the property in question. By

dismissing those suits, the lots remained in alien hands. Notwithstanding the solution of

escheat or reversion offered, they are still at the moment of writing, for the most part in

alien hands. There have been after almost twenty years no proceedings for escheat or

reversion.

Yet it is clear that an alien-vendee cannot consistently with the constitutional

provision, as interpreted in the Krivenko decision, continue owning and exercising acts of

ownership over the real estate in question. It ought to follow then, if such a continuing

violation of the fundamental law is to be put an end to, that the Filipino-vendor, who in

good faith entered into, a contract with an incapacitated person, transferring ownership of

a piece of land after the Constitution went into full force and effect, should, in the light of

the ruling in the Krivenko case, be restored to the possession and ownership thereof,

where he has filed the appropriate case or proceeding. Any other construction would

defeat the ends and purposes not only of this particular provision in question but the rest

of the Constitution itself.

The Constitution frowns upon the title remaining in the alien-vendees. Restoration

of the property upon payment of price received by Filipino vendor or its reasonable

equivalent as fixed by the court is the answer. To give the constitutional provision full

force and effect, in consonance with the dictates of equity and justice, the restoration to

Filipino-vendor upon the payment of a price fixed by the court is the better remedy. He

thought he could transfer the property to an alien and did so. After the Krivenko case had

made clear that he had no right to sell nor an alien-vendee to purchase the property in

question, the obvious solution would be for him to reacquire the same. That way the

Constitution would be given, as it ought to be given, respect and deference.

It may be said that it is too late at this stage to hope for such a solution, the Rellosa

opinion, although originally concurred in by only one justice, being too firmly imbedded.

The writer however sees a welcome sign in the adoption by the Court in this case of the

concurring opinion of the then Justice, later Chief Justice, Bengzon. Had it been followed

then, the problem would not be still with us now. Fortunately, it is never too late not

even in constitutional adjudication.

G.R. No. L-34338 November 21, 1984

LOURDES VALERIO LIM, petitioner,vs.PEOPLE OF THE PHILIPPINES, respondent.

RELOVA, J.:

Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and wassentenced "to suffer an imprisonment of four (4) months and one (1) day asminimum to two (2) years and four (4) months as maximum, to indemnify theoffended party in the amount of P559.50, with subsidize imprisonment in case ofinsolvency, and to pay the costs." (p. 14, Rollo)

From this judgment, appeal was taken to the then Court of Appeals which

affirmed the decision of the lower court but modified the penalty imposed bysentencing her "to suffer an indeterminate penalty of one (1) month and one (1)day ofarresto mayoras minimum to one (1) year and one (1) day ofprisioncorreccionalas maximum, to indemnify the complainant in the amount ofP550.50 without subsidiary imprisonment, and to pay the costs of suit." (p. 24,Rollo)

The question involved in this case is whether the receipt, Exhibit "A", is a contractof agency to sell or a contract of sale of the subject tobacco between petitionerand the complainant, Maria de Guzman Vda. de Ayroso, thereby precludingcriminal liability of petitioner for the crime charged.

The findings of facts of the appellate court are as follows:

... The appellant is a businesswoman. On January 10, 1966,the appellant went to the house of Maria Ayroso and proposedto sell Ayroso's tobacco. Ayroso agreed to the proposition ofthe appellant to sell her tobacco consisting of 615 kilos atP1.30 a kilo. The appellant was to receive the overprice for

which she could sell the tobacco. This agreement was made inthe presence of plaintiff's sister, Salud G. Bantug. SalvadorBantug drew the document, Exh. A, dated January 10, 1966,which reads:


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To Whom It May Concern:

This is to certify that I have received from

Mrs. Maria de Guzman Vda. de Ayroso. ofGapan, Nueva Ecija, six hundred fifteen kilosof leaf tobacco to be sold at Pl.30 per kilo.The proceed in the amount of SevenHundred Ninety Nine Pesos and 50/100 (P799.50) will be given to her as soon as it wassold.

This was signed by the appellant and witnessed by thecomplainant's sister, Salud Bantug, and the latter's maid,Genoveva Ruiz. The appellant at that time was bringing a jeep,and the tobacco was loaded in the jeep and brought by theappellant. Of the total value of P799.50, the appellant had paidto Ayroso only P240.00, and this was paid on three differenttimes. Demands for the payment of the balance of the value of

the tobacco were made upon the appellant by Ayroso, and

particularly by her sister, Salud Bantug. Salud Bantug furthertestified that she had gone to the house of the appellantseveral times, but the appellant often eluded her; and that the"camarin" the appellant was empty. Although the appellantdenied that demands for payment were made upon her, it is afact that on October 19, 1966, she wrote a letter to SaludBantug which reads as follows:

Dear Salud,

Hindi ako nakapunta dian noon a 17 nitongnakaraan, dahil kokonte pa ang nasisingil

kong pera, magintay ka hanggang dito salinggo ito at tiak na ako ay magdadala sa iyo.Gosto ko Salud ay makapagbigay man langako ng marami para hindi masiadongkahiyahiya sa iyo. Ngayon kung gosto mo aykahit konte muna ay bibigyan kita. Pupuntalang kami ni Mina sa Maynila ngayon. Saludkung talagang kailangan mo ay bukas ay

dadalhan kita ng pera.

Medio mahirap ang maningil sa palengke ngCabanatuan dahil nagsisilipat ang mga suki

ko ng puesto. Huwag kang mabahala at tiyakna babayaran kita.

Patnubayan tayo ng mahal na panginoonDios. (Exh. B).

Pursuant to this letter, the appellant sent a money order forP100.00 on October 24, 1967, Exh. 4, and another for P50.00on March 8, 1967; and she paid P90.00 on April 18, 1967 asevidenced by the receipt Exh. 2, dated April 18, 1967, or a total

of P240.00. As no further amount was paid, the complainantfiled a complaint against the appellant for estafa. (pp. 14, 15,

16, Rollo)

In this petition for review by certiorari, Lourdes Valerio Lim poses the followingquestions of law, to wit:

1. Whether or not the Honorable Court of Appeals was legallyright in holding that the foregoing document (Exhibit "A") "fixeda period" and "the obligation was therefore, immediatelydemandable as soon as the tobacco was sold" (Decision, p. 6)as against the theory of the petitioner that the obligation doesnot fix a period, but from its nature and the circumstances it

can be inferred that a period was intended in which case theonly action that can be maintained is a petition to ask the court

to fix the duration thereof;

2. Whether or not the Honorable Court of Appeals was legallyright in holding that "Art. 1197 of the New Civil Code does not

apply" as against the alternative theory of the petitioner that thefore. going receipt (Exhibit "A") gives rise to an obligationwherein the duration of the period depends upon the will of thedebtor in which case the only action that can be maintained isa petition to ask the court to fix the duration of the period; and


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3. Whether or not the honorable Court of Appeals was legallyright in holding that the foregoing receipt is a contract ofagency to sell as against the theory of the petitioner that it is acontract of sale. (pp. 3-4, Rollo)

It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the

tobacco should be turned over to the complainant as soon as the same was sold,or, that the obligation was immediately demandable as soon as the tobacco wasdisposed of. Hence, Article 1197 of the New Civil Code, which provides that thecourts may fix the duration of the obligation if it does not fix a period, does notapply.

Anent the argument that petitioner was not an agent because Exhibit "A" doesnot say that she would be paid the commission if the goods were sold, the Courtof Appeals correctly resolved the matter as follows:

... Aside from the fact that Maria Ayroso testified that theappellant asked her to be her agent in selling Ayroso's

tobacco, the appellant herself admitted that there was anagreement that upon the sale of the tobacco she would begiven something. The appellant is a businesswoman, and it isunbelievable that she would go to the extent of going toAyroso's house and take the tobacco with a jeep which shehad brought if she did not intend to make a profit out of the

transaction. Certainly, if she was doing a favor to Maria Ayrosoand it was Ayroso who had requested her to sell her tobacco, itwould not have been the appellant who would have gone to thehouse of Ayroso, but it would have been Ayroso who wouldhave gone to the house of the appellant and deliver thetobacco to the appellant. (p. 19, Rollo)

The fact that appellant received the tobacco to be sold at P1.30 per kilo and theproceeds to be given to complainant as soon as it was sold, strongly negatestransfer of ownership of the goods to the petitioner. The agreement (Exhibit "A')constituted her as an agent with the obligation to return the tobacco if the samewas not sold.

ACCORDINGLY, the petition for review on certiorari is dismissed for lack ofmerit. With costs.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr. and De laFuente, JJ., concur.

G.R. No. L-22558 May 31, 1967

GREGORIO ARANETA, INC.,petitioner,vs.THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO., LTD.,respondent.

Araneta and Araneta for petitioner.

Rosauro Alvarez and Ernani Cruz Pao for respondent.

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

Petition for certiorari to review a judgment of the Court of Appeals, in its CA-G.R. No.

28249-R, affirming with modification, an amendatory decision of the Court of First

Instance of Manila, in its Civil Case No. 36303, entitled "Philippine Sugar Estates

Development Co., Ltd., plaintiff, versus J. M. Tuason & Co., Inc. and Gregorio Araneta,

Inc., defendants."

As found by the Court of Appeals, the facts of this case are:

J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon City,

otherwise known as the Sta. Mesa Heights Subdivision, and covered by a Torrens title in

its name. On July 28, 1950, through Gregorio Araneta, Inc., it (Tuason & Co.) sold a

portion thereof with an area of 43,034.4 square meters, more or less, for the sum of

P430,514.00, to Philippine Sugar Estates Development Co., Ltd. The parties stipulated,

among in the contract of purchase and sale with mortgage, that the buyer will

Build on the said parcel land the Sto. Domingo Church and Convent

while the seller for its part will

Construct streets on the NE and NW and SW sides of the land herein sold so

that the latter will be a block surrounded by streets on all four sides; and the

street on the NE side shall be named "Sto. Domingo Avenue;"

The buyer, Philippine Sugar Estates Development Co., Ltd., finished the construction of

Sto. Domingo Church and Convent, but the seller, Gregorio Araneta, Inc., which began

constructing the streets, is unable to finish the construction of the street in the Northeast

side named (Sto. Domingo Avenue) because a certain third-party, by the name of Manuel


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Abundo, who has been physically occupying a middle part thereof, refused to vacate the

same; hence, on May 7, 1958, Philippine Sugar Estates Development Co., Lt. filed its

complaint against J. M. Tuason & Co., Inc., and instance, seeking to compel the latter to

comply with their obligation, as stipulated in the above-mentioned deed of sale, and/or to

pay damages in the event they failed or refused to perform said obligation.

Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc. answered the

complaint, the latter particularly setting up the principal defense that the action was

premature since its obligation to construct the streets in question was without a definite

period which needs to he fixed first by the court in a proper suit for that purpose before a

complaint for specific performance will prosper.

The issues having been joined, the lower court proceeded with the trial, and upon its

termination, it dismissed plaintiff's complaint (in a decision dated May 31, 1960),

upholding the defenses interposed by defendant Gregorio Araneta, Inc.1wph1.t

Plaintiff moved to reconsider and modify the above decision, praying that the court fix a

period within which defendants will comply with their obligation to construct the streets

in question.

Defendant Gregorio Araneta, Inc. opposed said motion, maintaining that plaintiff's

complaint did not expressly or impliedly allege and pray for the fixing of a period to

comply with its obligation and that the evidence presented at the trial was insufficient to

warrant the fixing of such a period.

On July 16, 1960, the lower court, after finding that "the proven facts precisely warrants

the fixing of such a period," issued an order granting plaintiff's motion for reconsideration

and amending the dispositive portion of the decision of May 31, 1960, to read as follows:

WHEREFORE, judgment is hereby rendered giving defendant Gregorio

Araneta, Inc., a period of two (2) years from notice hereof, within which to

comply with its obligation under the contract, Annex "A".

Defendant Gregorio Araneta, Inc. presented a motion to reconsider the above quoted

order, which motion, plaintiff opposed.

On August 16, 1960, the lower court denied defendant Gregorio Araneta, Inc's. motion;

and the latter perfected its appeal Court of Appeals.

In said appellate court, defendant-appellant Gregorio Araneta, Inc. contended mainly that

the relief granted, i.e., fixing of a period, under the amendatory decision of July 16, 1960,

was not justified by the pleadings and not supported by the facts submitted at the trial of

the case in the court below and that the relief granted in effect allowed a change of theory

after the submission of the case for decision.

Ruling on the above contention, the appellate court declared that the fixing of a period

was within the pleadings and that there was no true change of theory after the submission

of the case for decision since defendant-appellant Gregorio Araneta, Inc. itself squarely

placed said issue by alleging in paragraph 7 of the affirmative defenses contained in its

answer which reads

7. Under the Deed of Sale with Mortgage of July 28, 1950, herein defendant

has a reasonable time within which to comply with its obligations to construct

and complete the streets on the NE, NW and SW sides of the lot in question;

that under the circumstances, said reasonable time has not elapsed;

Disposing of the other issues raised by appellant which were ruled as not meritorious and

which are not decisive in the resolution of the legal issues posed in the instant appeal

before us, said appellate court rendered its decision dated December 27, 1963, the

dispositive part of which reads

IN VIEW WHEREOF, judgment affirmed and modified; as a consequence,

defendant is given two (2) years from the date of finality of this decision to

comply with the obligation to construct streets on the NE, NW and SW sides of

the land sold to plaintiff so that the same would be a block surrounded by

streets on all four sides.

Unsuccessful in having the above decision reconsidered, defendant-appellant Gregorio

Araneta, Inc. resorted to a petition for review by certiorari to this Court. We gave it due

course.

We agree with the petitioner that the decision of the Court of Appeals, affirming that of

the Court of First Instance is legally untenable. The fixing of a period by the courts under

Article 1197 of the Civil Code of the Philippines is sought to be justified on the basis that

petitioner (defendant below) placed the absence of a period in issue by pleading in its

answer that the contract with respondent Philippine Sugar Estates Development Co., Ltd.

gave petitioner Gregorio Araneta, Inc. "reasonable time within which to comply with its

obligation to construct and complete the streets." Neither of the courts below seems to

have noticed that, on the hypothesis stated, what the answer put in issue was not whether

the court should fix the time of performance, but whether or not the parties agreed that

the petitioner should have reasonable time to perform its part of the bargain. If the

contract so provided, then there was a period fixed, a "reasonable time;" and all that the

court should have done was to determine if that reasonable time had already elapsed


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when suit was filed if it had passed, then the court should declare that petitioner had

breached the contract, as averred in the complaint, and fix the resulting damages. On the

other hand, if the reasonable time had not yet elapsed, the court perforce was bound to

dismiss the action for being premature. But in no case can it be logically held that under

the plea above quoted, the intervention of the court to fix the period for performance was

warranted, for Article 1197 is precisely predicated on the absence of any period fixed by

the parties.

Even on the assumption that the court should have found that no reasonable time or no

period at all had been fixed (and the trial court's amended decision nowhere declared any

such fact) still, the complaint not having sought that the Court should set a period, the

court could not proceed to do so unless the complaint in as first amended; for the original

decision is clear that the complaint proceeded on the theory that the period for

performance had already elapsed, that the contract had been breached and defendant was

already answerable in damages.

Granting, however, that it lay within the Court's power to fix the period of performance,

still the amended decision is defective in that no basis is stated to support the conclusion

that the period should be set at two years after finality of the judgment. The list paragraph

of Article 1197 is clear that the period can not be set arbitrarily. The law expresslyprescribes that

the Court shall determine such period as may under the circumstances been

probably contemplated by the parties.

All that the trial court's amended decision (Rec. on Appeal, p. 124) says in this respect is

that "the proven facts precisely warrant the fixing of such a period," a statement

manifestly insufficient to explain how the two period given to petitioner herein was

arrived at.

It must be recalled that Article 1197 of the Civil Code involves a two-step process. The

Court must first determine that "the obligation does not fix a period" (or that the period ismade to depend upon the will of the debtor)," but from the nature and the circumstances

it can be inferred that a period was intended" (Art. 1197, pars. 1 and 2). This preliminary

point settled, the Court must then proceed to the second step, and decide what period was

"probably contemplated by the parties" (Do., par. 3). So that, ultimately, the Court can

not fix a period merely because in its opinion it is or should be reasonable, but must set

the time that the parties are shown to have intended. As the record stands, the trial Court

appears to have pulled the two-year period set in its decision out of thin air, since no

circumstances are mentioned to support it. Plainly, this is not warranted by the Civil

Code.

In this connection, it is to be borne in mind that the contract shows that the parties were

fully aware that the land described therein was occupied by squatters, because the fact is

expressly mentioned therein (Rec. on Appeal, Petitioner's Appendix B, pp. 12-13). As the

parties must have known that they could not take the law into their own hands, but must

resort to legal processes in evicting the squatters, they must have realized that the

duration of the suits to be brought would not be under their control nor could the same be

determined in advance. The conclusion is thus forced that the parties must have intendedto defer the performance of the obligations under the contract until the squatters were

duly evicted, as contended by the petitioner Gregorio Araneta, Inc.

The Court of Appeals objected to this conclusion that it would render the date of

performance indefinite. Yet, the circumstances admit no other reasonable view; and this

very indefiniteness is what explains why the agreement did not specify any exact periods

or dates of performance.

It follows that there is no justification in law for the setting the date of performance at any

other time than that of the eviction of the squatters occupying the land in question; and in

not so holding, both the trial Court and the Court of Appeals committed reversible error.

It is not denied that the case against one of the squatters, Abundo, was still pending in the

Court of Appeals when its decision in this case was rendered.

In view of the foregoing, the decision appealed from is reversed, and the time for the

performance of the obligations of petitioner Gregorio Araneta, Inc. is hereby fixed at the

date that all the squatters on affected areas are finally evicted therefrom.

Costs against respondent Philippine Sugar Estates Development, Co., Ltd. So ordered.

Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and Castro, JJ.,

concur.

G.R. No. L-55480 June 30, 1987

PACIFICA MILLARE, petitioner,vs.HON. HAROLD M. HERNANDO, In his capacity as Presiding Judge, Court ofInstance of Abra, Second Judicial District, Branch I, ANTONIO CO andELSA CO, respondents.

FELICIANO, J.:


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On 17 June 1975, a five-year Contract of Lease 1 was executed betweenpetitioner Pacifica Millare as lessor and private respondent Elsa Co, married toAntonio Co, as lessee. Under the written agreement, which was scheduled toexpire on 31 May 1980, the lessor-petitioner agreed to rent out to thelessee at amonthly rate of P350.00 the "People's Restaurant", a commercial establishment

located at the corner of McKinley and Pratt Streets in Bangued, Abra.

The present dispute arose from events which transpired during the months ofMay and July in 1980. According to the Co spouses, sometime during the lastweek of May 1980, the lessor informed them that they could continue leasing thePeople's Restaurant so long as they were amenable to paying creased rentals of

P1,200.00 a month. In response, a counteroffer of P700.00 a month was madeby the Co spouses. At this point, the lessor allegedly stated that the amount ofmonthly rentals could be resolved at a later time since "the matter is simpleamong us", which alleged remark was supposedly taken by the spouses Co tomean that the Contract of Lease had been renewed, prompting them to continueoccupying the subject premises and to forego their search for a substitute placeto rent.

2In contrast, the lessor flatly denied ever having considered, much less

offered, a renewal of the Contract of Lease.

The variance in versions notwithstanding, the record shows that on 22 July 1980,Mrs. Millare wrote the Co spouses requesting them to vacate the leasedpremises as she had no intention of renewing the Contract of Lease which had,in the meantime, already expirecl.

3In reply, the Co spouses reiterated their

unwillingness to pay the Pl,200.00 monthly rentals supposedly sought bv Mrs.Millare which they considered "highly excessive, oppressive and contrary to

existing laws". They also signified their intention to deposit the amount of rentalsin court, in view of Mrs. Millare's refusal to accept their counter-offer.

4Another

letter of demand from Mrs. Millare was received on 28 July 1980 by the Cospouses, who responded by depositing the rentals for June and July (at 700.00 amonth) in court.

On 30 August 1980, a Saturday, the Co spouses jumped the gun, as it were, andfiled a Complaint

5(docketed as Civil Case No. 1434) with the then Court of First

Instance of Abra against Mrs. Millare and seeking judgment (a) ordering therenewal of the Contract of Lease at a rental rate of P700.00 a nionth and for aperiod of ten years, (b) ordering the defendant to collect the sum of P1,400.00deposited by plaintiffs with the court, and (c) ordering the defendant to paydamages in the amount of P50,000.00. The following Monday, on 1 September1980, Mrs. Millare filed an ejectment case against the Co spouses in theMunicipal Court of Bangued, Abra, docketed as Civil Case No. 661. The spouses

Co, defendants therein, sut)sequently set up lis pendens as a Civil Case No. 661.The spouses Co, defendants therein, subsequently set up lis pendens as adefense against the complaint for ejectment.

Mrs. Millare, defendant in Civil Case No. 1434, countered with an OmnibusMotion to Dismiss

6rounded on (a) lack of cause of action due to plaintiffs' failure

to establish a valid renewal of the Contract of Lease, and (b) lack of jurisdictionby the trial court over the complaint for failure of plaintiffs to secure a certificationfrom the Lupong Tagapayapa of the barangay wherein both disputants reside

attesting that no amicable settlement between them had been reached despite

efforts to arrive at one, as required by Section 6 of Presidential Decree No. 1508.The Co spouses opposed the motion to dismiss.

7

In an Order dated 15 October 1980, respondent judge denied the motion todismiss and ordered the renewal of the Contract of Lease. Furthermore plaintiffs

were allowed to deposit all accruing monthly rentals in court, while defendantMillare was directed to submit her answer to the complaint.

8A motion for

reconsideration9

was subsequently filed which, however, was likewise denied.10 Hence, on 13 November 1980, Mrs. Millare filed the instant Petition forCertiorari, Prohibition and Mandamus, seeking injunctive relief from theabovementioned orders. This Court issued a temporary restraining order on 21November 1980 enjoining respondent, judge from conducting further proceedingsin Civil Case No. 1434. 11Apparently, before the temporary restraining order

could be served on the respondent judge, he rendered a "Judgment by Default"dated 26 November 1980 ordering the renewal of the lease contract for a term of5 years counted from the expiration date of the original lease contract, and fixingmonthly rentals thereunder at P700.00 a month, payable in arrears. On18 March1981, this Court gave due course to the Petition for Certiorari, Prohibition andMandamus. 12

Two issues are presented for resolution: (1) whether or not the trial courtacquired jurisdiction over Civil Case No. 1434; and (2) whether or not privaterespondents have a valid cause of action against petitioner.

Turning to the first issue, petitioner's attack on the jurisdiction of the trial courtmust fail, though for reasons different from those cited by the respondent judge.

13 We would note firstly that the conciliation procedure required under P.D. 1508is not a jurisdictional requirement in the sense that failure to have prior recourseto such procedure would not deprive a court of its jurisdiction either over thesubject matter or over the person of the defendant.14 Secondly, the acord showsthat two complaints were submitted to the barangay authorities for conciliation one by petitioner for ejectment and the other by private respondents for renewalof the Contract of Lease. It appears further that both complaints were, in fact,heard by the Lupong Tagapayapa in the afternoon of 30 August 1980. Afterattempts at conciliation had proven fruitless, Certifications to File Action

authorizing the parties to pursue their respective claims in court were then issuedat 5:20 p.m. of that same aftemoon, as attested to by the Barangay Captain in aCertification presented in evidence by petitioner herself. 15


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Petitioner would, nonetheless, assail the proceedings in the trial court on atechnicaety, i.e., private respondents allegedly filed their complaint at 4:00 p.m.of 30 August 1980, or one hour and twenty minutes before the issuance of therequisite certification by the Lupng Tagapayapa. The defect in procedureadmittedly initially present at that particular moment when private respondents

first filed the complaint in the trial court, was cured by the subsequent issuance of

the Certifications to File Action by the barangay Lupong Tagapayapa Suchcertifications in any event constituted substantial comphance with therequirement of P.D. 1508.

We turn to the second issue, that is, whether or not the complaint in Civil Case

No. 1434 filed by the respondent Co spouses claiming renewal of the contract oflease stated a valid cause of action. Paragraph 13 of the Contract of Lease readsas follows:

13. This contract of lease is subject to the laws and regulationsofthe goverrunent; and that this contract of lease may berenewed after a period of five (5) years under the terms and

conditions as will be mutually agreed upon by the parties at the

time of renewal; ... (Emphasis supplied.)

The respondent judge, in his Answer and Comment to the Petition, urges thatunder paragraph 13 quoted above.

there was already a consummated and finished mutualagreement of the parties to renew the contract of lease afterfive years; what is only left unsettled between the parties to thecontract of lease is the amount of the monthly rental; the lessorinsists Pl,200 a month, while the lessee is begging P700 amonth which doubled the P350 monthly rental under theoriginal contract .... In short, the lease contract has never

expired because paragraph 13 thereof had expresslymandated that it is renewable. ... 16

In the "Judgment by Default" he rendered, the respondent Judge elaborated hisviews obviously highly emotional in character in the following extraordinarytatements:

However, it is now the negative posture of the defendant-lessorto block, reject and refuse to renew said lease contract. It is thedefendant-lessor's assertion and position that she can at themere click of her fingers, just throw-out the plaintiffs-lesseesfrom the leased premises and any time after the original term

of the lease contract had already expired; This negativeposition of the defendantlessor, to the mind of this Court doesnot conform to the principles and correct application of thephilosophy underlying the law of lease; for indeed, the law oflease is impressed with public interest, social justice and

equity; reason for which, this Court cannot sanction lot owner's

business and commercial speculations by allowing them with"unbridled discretion" to raise rentals even to the extent of"extraordinary gargantuan proportions, and calculated tounreasonably and unjustly eject the helpless lessee becausehe cannot afford said inflated monthly rental and thereby saidlessee is placed without any alternative, except to surrenderand vacate the premises mediately,-" Many business

establishments would be closed and the public would directlysuffer the direct consequences; Nonetheless, this is not thecorrect concept or perspective the law of lease, that is, to placethe lessee always at the mercy of the lessor's "Merchant ofVenice"and to agit the latter's personal whims and caprices;the defendant-lessor's hostile attitude by imposing upon thelessee herein an "unreasonable and extraordinary gargantuanmonthly rental of P1,200.00", to the mind of this Court, is "fly-

by night unjust enrichment"at the expense of said lessees; but,no Man should unjustly enrich himself at the expense ofanother; under these facts and circumstances surrounding thiscase, the action therefore to renew the lease contract! is"tenable" because it falls squarely within the coverage andcommand of Articles 1197 and 1670 of the New Civil Code, towit:

xxx xxx xxx

The term "to be renewed" as expressly stipulated by the herein

parties in the original contract of lease means that the leasemay be renewed for another term of five (5) years; its

equivalent to a promise made by the lessor to the lessee, andas a unilateral stipulation, obliges the lessor to fulfill herpromise; of course the lessor is free to comply and honor hercommitment or back-out from her promise to renew the leasecontract; but, once expressly stipulated, the lessor shall not beallowed to evade or violate the obligation to renew the leasebecause, certainly, the lessor may be held hable for damagescaused to the lessee as a consequence of the unjustifiable

termination of the lease or renewal of the same; In other words,the lessor is guilty of breach of contract: Since the original


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lease was fixed for five (5) years, it follows, therefore, that thelease contract is renewable for another five (5) years and thelessee is not required before hand to give express notice of thisfact to the lessor because it was expressly stipulated in theoriginal lease contract to be renewed; Wherefore, the bare

refusal of the lessor to renew the lease contract unless the

monthly rental is P1,200.00 is contrary to law, morals, goodcustoms, public policy, justice and equity because no oneshould unjustly enrich herself at the expense of another. Article1197 and 1670 of the New Civil Code must therefore governthe case at bar and whereby this Court is authorized to fix theperiod thereof by ordering the renewal of the lease contract toanother fixed term of five (5) years. 17

Clearly, the respondent judge's grasp of both the law and the Enghsh language istenuous at best. We are otherwise unable to comprehend how he arrived at thereading set forth above. Paragraph 13 of the Contract of Lease can only meanthat the lessor and lessee may agree to renew the contract upon their reachingagreement on the terms and conditions to be embodied in such renewal contract.

Failure to reach agreement on the terms and conditions of the renewal contractwill of course prevent the contract from being renewed at all. In the instant case,the lessor and the lessee conspicuously failed to reach agreement both on theamount of the rental to be payable during the renewal term, and on the term ofthe renewed contract.

The respondent judge cited Articles 1197 and 1670 of the Civil Code to sustain

the "Judgment by Default" by which he ordered the renewal of the lease foranother term of five years and fixed monthly rentals thereunder at P700.00 amonth. Article 1197 of the Civil Code provides as follows:

If the obligation does not fix a period, but from its nature andthe circumstances it can be inferred that a period was

intended, the courts may fix the duration thereof.

The courts shall also fix the duration of the period when itdepends upon the will of the debtor.

In every case, the courts shall determine such period as may,under the circumstances, have been probably contemplated bythe parties. Once fixed by the courts, the period cannot bechanged by them. (Emphasis supplied.)

The first paragraph of Article 1197 is clearly inapplicable, since the Contract ofLease did in fact fix an original period of five years, which had expired. It is alsoclear from paragraph 13 of the Contract of Lease that the parties reserved tothemselves the faculty of agreeing upon the period of the renewal contract. Thesecond paragraph of Article 1197 is equally clearly inapplicable since the

duration of the renewal period was not left to the wiu of the lessee alone, but

rather to the will of both the lessor and the lessee. Most importantly, Article 1197applies only where a contract of lease clearly exists. Here, the contract was notrenewed at all, there was in fact no contract at all the period of which could havebeen fixed.

Article 1670 of the Civil Code reads thus:

If at the end of the contract the lessee should continue enjoyingthe thing left for 15 days with the acquiescence of the lessorand unless a notice to the contrary by either party haspreviously been given. It is understood that there is an impliednew lease, not for the period of the original contract but for the

time established in Articles 1682 and 1687. The ther terms of

the original contract shall be revived. (Emphasis suplied.)

The respondents themselves, public and private, do not pretend that thecontinued occupancy of the leased premises after 31 May 1980, the date ofexpiration of the contract, was with the acquiescence of the lessor. Even if it be

assumed that tacite reconduccion had occurred, the implied new lease could notpossibly have a period of five years, but rather would have been a month-to-month lease since the rentals (under the original contract) were payable on amonthly basis. At the latest, an implied new lease (had one arisen) would haveexpired as of the end of July 1980 in view of the written demands served by thepetitioner upon the private respondents to vacate the previously leased premises.

It follows that the respondent judge's decision requiring renewal of the lease hasno basis in law or in fact. Save in the limited and exceptional situations envisagedinArticles ll97 and 1670 of the Civil Code, which do not obtain here, courts haveno authority to prescribe the terms and conditions of a contract for the parties. Aspointed out by Mr. Justice J.B.L. Reyes in Republic vs. Philippine Long DistanceTelephone,Co., 18

[P]arties cannot be coerced to enter into a contract where noagreement is had between them as to the principal terms andconditions of the contract. Freedom to stipulate such terms andconditions is of the essence of our contractual system, and byexpress provision of the statute, a contract may be annulled if


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tainted by violence, intimidation or undue influence (Article1306, 1336, 1337, Civil Code of the Philippines).

Contractual terms and conditions created by a court for two parties are acontradiction in terms. If they are imposed by a judge who draws upon his ownprivate notions of what morals, good customs, justice, equity and public policy"

demand, the resulting "agreement" cannot, by definition, be consensual orcontractual in nature. It would also follow that such coerced terms and conditionscannot be the law as between the parties themselves. Contracts spring from thevolition of the parties. That volition cannot be supplied by a judge and a judgewho pretends to do so, acts tyrannically, arbitrarily and in excess of his

jurisdiction. 19

WHEREFORE, the Petition for Certiorari, Prohibition and mandamus is granted.The Orders of the respondent judge in Civil Case No. 1434 dated 26 September1980 (denying petitioner's motion to dismiss) and 4 November 1980 (denyingpetitioner's motion for reconsideration), and the "Judgment by Default" renderedby the respondent judge dated 26 November 1980, are hereby annulled and set

aside and Civil Case No. 1434 is hereby dismissed. The temporary restraining

order dated 21 November 1980 issued by this ourt, is hereby made permanent.No pronouncement as to costs.

SO ORDERED.

Yap (Chairman), Narvasa, Melencio-Herrera, Cruz, Gancayco and Sarmiento,JJ., concur.

As to rights and obligations of multiple parties: joint, solidary, disjunctive

THIRD DIVISION

[G.R. No. 190696 : August 03, 2010]

ROLITO CALANG AND PHILTRANCO SERVICE ENTERPRISES, INC.,PETITIONERS, VS. PEOPLE OF THE PHILIPPINES, RESPONDENT.

R E S O L U T I O N

BRION,J.:

We resolve the motion for reconsideration filed by the petitioners, Philtranco Service

Enterprises, Inc. (Philtranco) and Rolito Calang, to challenge our Resolution of February

17, 2010. Our assailed Resolution denied the petition for review on certiorari for failure to

show any reversible error sufficient to warrant the exercise of this Court's discretionary

appellate jurisdiction.

Antecedent Facts

At around 2:00 p.m. of April 22, 1989, Rolito Calang was driving Philtranco Bus No. 7001,

owned by Philtranco along Daang Maharlika Highway inBarangay Lambao, Sta. Margarita,Samar when its rear left side hit the front left portion of a Sarao jeep coming from the

opposite direction. As a result of the collision, Cresencio Pinohermoso, the jeep's driver, lost

control of the vehicle, and bumped and killed Jose Mabansag, a bystander who was standing

along the highway's shoulder. The jeep turned turtle three (3) times before finally stopping

at about 25 meters from the point of impact. Two of the jeep's passengers, Armando Nablo

and an unidentified woman, were instantly killed, while the other passengers sustained

serious physical injuries.

The prosecution charged Calang with multiple homicide, multiple serious physical injuries

and damage to property thru reckless imprudence before the Regional Trial Court (RTC),

Branch 31, Calbayog City. The RTC, in its decision dated May 21, 2001, found Calang

guilty beyond reasonable doubt of reckless imprudence resulting to multiple homicide,

multiple physical injuries and damage to property, and sentenced him to suffer an

indeterminate penalty of thirty days ofarresto menor, as minimum, to four years and two

months ofprision correccional, as maximum. The RTC ordered Calang and Philtranco,

ointly and severally, to pay P50,000.00 as death indemnity to the heirs of Armando;P50,000.00 as death indemnity to the heirs of Mabansag; and P90,083.93 as actual damages

to the private complainants.

The petitioners appealed the RTC decision to the Court of Appeals ( CA), docketed as CA-

G.R. CR No. 25522. The CA, in its decision dated November 20, 2009, affirmed the RTC

decision intoto. The CA ruled that petitioner Calang failed to exercise due care and

precaution in driving the Philtranco bus. According to the CA, various eyewitnesses

testified that the bus was traveling fast and encroached into the opposite lane when it evaded

a pushcart that was on the side of the road. In addition, he failed to slacken his speed,

despite admitting that he had already seen the jeep coming from the opposite direction when

it was still half a kilometer away. The CA further ruled that Calang demonstrated a recklessattitude when he drove the bus, despite knowing that it was suffering from loose

compression, hence, not roadworthy.

The CA added that the RTC correctly held Philtranco jointly and severally liable with

petitioner Calang, for failing to prove that it had exercised the diligence of a good father of

the family to prevent the accident.

The petitioners filed with this Court a petition for review on certiorari. In our Resolution

dated February 17, 2010, we denied the petition for failure to sufficiently show any

reversible error in the assailed decision to warrant the exercise of this Court's discretionary

appellate jurisdiction.


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The Motion for Reconsideration

In the present motion for reconsideration, the petitioners claim that there was no basis to

hold Philtranco jointly and severally liable with Calang because the former was not a party

in the criminal case (for multiple homicide with multiple serious physical injuries and

damage to property thru reckless imprudence) before the RTC.

The petitioners likewise maintain that the courts below overlooked several relevant facts,

supported by documentary exhibits, which, if considered, would have shown that Calang

was not negligent, such as the affidavit and testimony of witness Celestina Cabriga; the

testimony of witness Rodrigo Bocaycay; the traffic accident sketch and report; and the

jeepney's registration receipt. The petitioners also insist that the jeep's driver had the last

clear chance to avoid the collision.

We partly grant the motion.

iability of Calang

We see no reason to overturn the lower courts' finding on Calang's culpability. The finding

of negligence on his part by the trial court, affirmed by the CA, is a question of fact that we

cannot pass upon without going into factual matters touching on the finding of

negligence. In petitions for review on certiorari under Rule 45 of the Revised Rules of

Court, this Court is limited to reviewing only errors of law, not of fact, unless the factual

findings complained of are devoid of support by the evidence on record, or the assailed

judgment is based on a misapprehension of facts.

iability of Philtranco

We, however, hold that the RTC and the CA both erred in holding Philtrancojointly and

severally liable with Calang. We emphasize that Calang was charged criminally before the

RTC. Undisputedly, Philtranco was not a direct party in this case. Since the cause of action

agains

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