Republic of the PhilippinesSUPREME COURT

ManilaEN BANC

G.R. No. L-11908            February 4, 1918ANTONIO M.A BARRETTO, plaintiff-appellant, vs.JOSE SANTA MARINA and "LA INSULAR," defendants-appellees.Alfredo Chcote and Jose Arnaiz for appellant.William A. Kincaid and Kincaid and Perkins for appellee.CARSON, J.:The material facts upon which our disposition of this appeal necessarily turns are set out at length in our opinion in the case of Barretto vs. Santa Marina, decided December 2, 1913 (26 Phil rep., 200). This court having ruled against the plaintiff's contention in the former case, he now sets up a claim for interest at the legal rate upon the amount of the purchase price of his share (participacion) in the business from the 1st day of July, 1909, to the 22d day of November, 1910, the day upon which it was turned over to him.The finding of facts, and the reasoning upon which we based our rulings in the former case, are manifestly conclusive in the present case as to the plaintiff's claim of a right to interest from the first of July, 1909, to the third of May, 1910.In the former case we held that the sale of plaintiff's share (participacion) in the tobacco factory was consummated on the latter date; that the valuation set upon his share (participacion) in business was determined as of that day by the committee charged with the duty of ascertaining the cash value of this share (participacion) in order to determine the exact amount which the parties had agreed upon as the purchase price to be paid therefor; and that the committee had included that the plaintiff's share of the profits of the business down to the third of May, 1910, in their estimate of the value of his share (participacion) in the business of that date.These rulings were made after a review of the same record which is now relied upon by the plaintiff in support of his claim of interest upon the amount fixed by the committee as the true value of his share (participacion) in the business. We find nothing in the record of the contention of counsel in this regard which would justify or necessitate a modification or reversal of the conclusions reached by us in our former opinion.Plaintiff's share (participacion) in the business having been sold on the 3rd day of May, 1910, for a stipulated price, that is to say, for its value on that day as fixed by the valuation committee, it is very clear that he is not entitled to interest on the amount fixed by the committee, prior to the date on which the sale was consummated (3rd of may, 1910).So also plaintiff's contention that he should be allowed interest on the amount of the purchase price from the date of the sale, May 3, 1910, down to the day upon which the money was actually turned over to him, November 22, 1910, cannot be sustained. Under the express terms of the agreement for the sale on May 3, 1910, the plaintiff agreed to accept, and the defendant to pay, the amount which the committee should find to be the true value of plaintiff's share (participacion) in the business as of that day. Under the agreement the defendant neither expressly nor impliedly obligated himself to pay interest on that amount pending the report of the committee. The only contractual obligation assumed by him was that he would pay the amount fixed by the committee in cash immediately upon the making of the award by the committee, and in accordance with its terms.The committee's report is dated November 14, 1910, and it appears that promptly upon the submission of this report, the amount awarded the plaintiff (P280,025.16) was paid over by the defendant to the plaintiff in cash; and the letter of counsel for plaintiff dated November 17, 1910, tendering a formal deed of sale of plaintiff's share (participacion) in the business and making demand for the purchase price as fixed by the committee, read together with the formal deed of sale executed November 22, 1910, with its acknowledgment of the receipt of

the purchase price, leaves no room for doubt that at that time the parties understood and accepted the purchase price therein set forth as full payment of plaintiff's share (participacion) in the business in exact conformity with the conditions imposed in the agreement consummated to May 3, 1910.The right to interest arises either by virtue of a contract or by way of damages for delay or failure (demora) to pay the principal on which interest is demanded, at the time when the debtor is obligated to make such payment. In the case at bar where was no contract, express or implied, for the payment of interest pending the award of the committee appointed to value the property sold on May 3, 1910, and there was no delay in the punctual compliance with defendant's obligation to make immediate payment, in cash, of the amount of the award, upon the filing of the report of the committee.We conclude that the judgment entered in the court below dismissing the complaint in this case sine die should be affirmed, with the costs of this instance against the appellant. So ordered.Arellano, C.J., Torres, Johnson, Street, Malcolm and Avanceña, JJ., concur.Araullo J., took no part.

Republic of the PhilippinesSUPREME COURT

ManilaFIRST DIVISION

 G.R. No. L-29746 November 26, 1973INTESTATE ESTATE OF THE LATE EMILIO CAMON. CONCEPCION EREÑETA, administratrix-appellee, vs.IGNATIUS HENRY BEZORE, ELWOOD KNICKERBOCKER, and MARY IRENE FALLON MCCORMICK,claimants-appellants; MARTINIANO O. DE LA CRUZ, administrator.Manuel T. Tonogbanua, Manuel S. Tonogbanua, Jr. and Hilado and Hilado for administratrix-appellee.Martiniano O. de la Cruz for Claimants-appellants. CASTRO, J.:This is a direct appeal from the order of the Court of First Instance of Negros Occidental, dated July 20, 1968, which denied a claim of the appellants Ignatius Henry Bezore, Elwood Knickerbocker and Mary Irene Fallon McCormick filed against the estate of the late Emilio Camon in Special Proceeding 8366 of the said court.Emilio Camon was the lessee of the hacienda Rosario, located in Pontevedra, Negros Occidental, for the period from crop year 1940-41 to crop year 1960-61. One-half (1/2) pro-indiviso of the said sugar plantation belonged to the above-named claimants-appellants (as their inheritance from the late Thomas Fallon), while the other half belonged to Petronila Alunan vda. de Sta. Romana, * Amparo Sta. Romana and Alberta vda. de Hopon (as their inheritance from their mother Rosario Sta. Romana).Upon the death of Emilio Camon in 1967, his widow, Concepcion Ereñeta, filed a petition in the court a quo(docketed as Special Proceeding 8366) praying for the grant to her of letters of administration of the estate of the deceased Camon. The petition was granted. Thereafter, the court issued an order requiring all persons with money claims against the estate to file their claims within the period prescribed in the order. The claimants-appellants Bezore, et al., thru their judicial administrator and counsel, Martiniano O. de la Cruz, filed a claim against the estate in the amounts of P62,065 as the money value of sugar allotments and allowances and P2,100 as the money value of palay and rentals, or a total of P64,165, appertaining to the claimants' half-share in the hacienda.

The appellants and the administratrix-appellee are agreed that the late Emilio Camon appropriated for himself the amounts claimed. The appellants had demanded payment of their claim from Emilio Camon when he was still alive, but the latter ignored the demands.At the trial, three documents, the authenticity of each of which is not controverted by the appellants, were submitted in evidence by the administratrix-appellee. These are:(1) An "Agreement to Sell" (exhibit "1"), executed on January 11, 1961, whereby the claimants Bezore, et al., agreed to sell their one-half (1/2) share in the hacienda Rosario to Amparo Sta. Romana and Alberta vda. de Hopon;(2) A "Release and Waiver of Claims" (exhibit "3"), executed on January 12, 1961, whereby Amparo Sta. Romana and Alberta vda. de Hopon, for and in consideration of "their gratitude for the various services, financial and personal" extended to them by Emilio Camon, released him from "any and all claims that may have accrued pertaining to the two-fourth (2/4) pro-indiviso share in Hacienda Rosario" owned by the appellants who had bound themselves "to sell their share in the said Hacienda Rosario" to Amparo and Alberta, "including rights accrued or accruing," and whereby Amparo and Alberta bound themselves "to waive in favor of Mr. Emilio Camon for his own use and benefit said rights accrued or accruing."(3) A "Deed of Sale" (exhibit "2"), executed on August 4, 1961, whereby the claimants Bezore, et al., for and in consideration of the sum of P78,000, to be paid in the manner stated in the instrument, sold, transferred and conveyed "all their rights, title, interest and participation, whether accrued or accruing in their two-fourth (2/4) pro-indiviso share" in the hacienda Rosario, "together with all the improvements now existing thereon, including its sugar quota," in favor of Amparo Sta. Romana and Alberta vda. de Hopon.The lower court rejected the appellants' contention that the sugar allotments and allowances, subject of their claim against the estate of Emilio Camon, were not included in the sale, and held that by the positive and categorical terms of the deed of sale, all benefits accrued and accruing to the appellants before of August 4, 1961 were included in the sale. The court then dismissed the claim per its order dated July 20, 1968.Two issues are here tendered for resolution, to wit: (1) whether the phrase "accrued or accruing" (in the deed of sale) having reference to the claimants' rights, title, interest and participation in the plantation, should be interpreted to exclude the sugar allotments and allowances adherent to the hacienda; and (2) whether, notwithstanding the absence of a written contract of lease for the crop years 1952-53 to 1960-61, Emilio Camon's continued cultivation of the hacienda created an express trust in favor of the claimants.The premises upon which the appellants would conclude that the allotments and allowances were not included in the sale are: that on January 12, 1961 there was then no sale and, therefore, by the "Release and Waiver of Claims" Amparo Sta. Romana and Alberta vda. de Hopon released and waived nothing in favor of Emilio Camon; that the waiver was made in advance, which is contrary to public policy; that Emilio Camon was not the vendee in the sale; that the vendees represented to Martiniano O. de la Cruz that the sugar quedans and palay claimed were not included in the sale and that such was the intention of the parties; that the words "accrued and accruing" in the deeds are obscure, and since the deeds were prepared by Ramon S. Ereñeta who is a brother of the administratix Concepcion Ereñeta who, in turn, is the widow of Emilio Camon, the obscure words should not favor the party which caused the obscurity; that the consideration in the sale, which is equivalent to P1,300 per hectare, is "cheap;" and that Camon's silence regarding the demands made upon him to pay the claim was an admission of his debt.The claimants-appellants' view that at the time of the execution, on January 12, 1961, of the deed of "Release and Waiver of Claims," Amparo Sta. Romana and Alberta vda. de Hopon could not release or waive accrued claims belonging the claimants, is correct because the right that Amparo and Alberta then had was a mere promise by the claimants to sell their share in the hacienda, not the right to the accrued claims. What was agreed to be sold in the future was different from what was purportedly waived; and even if the object in both contracts were the same, the waiver would still be invalid for it is essential that a right, in

order that it may be validly waived, must be in existence at the time of the waiver. 1 Nonetheless, whatever defect there was in the waiver was subsequently cured by the deed of sale of August 4, 1961 by virtue of which the appellants sold not only their  pro-indiviso half-share in the hacienda but also their accrued rights therein. It is immaterial that Emilio Camon was not the vendee since what mattered is that the appellants parted with their accrued rights for a valuable consideration. That the vendees represented to Martiniano O. de la Cruz that the sugar quedans and palay were not included in the sale and that such was the intention of the parties, involves a question of fact which is not reviewable in a direct appeal to the Supreme Court. 2 The words "accrued or accruing" the deed of sale are not obscure and, as the lower court declared, are in fact positive and categorical enough to include accrued allotments and allowances. Since the said words are not ambiguous, there is no need to interpret them.Art. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. ... (Civil Code)That the consideration in the sale was "cheap" is not a ground for the infirmity of the sale. Inadequacy of cause in a contract does not of itself invalidate the contract.  3 The appellants' stand that the silence of Camon with respect to the several demand letters sent to him was an admission of his debt, is without support or sanction in our law of evidence.Nor was there a change in the juridical relationship between the hacienda owners and Emilio Camon when, after the expiration of their written contract of lease, he continued cultivating the hacienda during the crop years 1952-53 to 1960-61. The continuance in the cultivation, with the acquiescence of the owners, did not convert the original relationship into an express trust, as contended by appellants, but merely implied a new lease over the property, with the same terms and conditions provided in the original contract, except as to the period of the lease.Art. 1670. If at the end of the contract the lessee should continue enjoying the thing leased for fifteen days with the acquiescence of the lessor, and unless a notice to the contrary by either party has previously been given, it is understood that there is an implied new lease, not for the period of the original contract, but for the time established in articles 1682 and 1687. The other terms of the original contract shall be revived. (Civil Code)There is nothing in the record that evidence the creation of a fiduciary relationship between the lessors and the lessee after the expiration of their written contract of lease, which fiduciary relationship is an essential characteristic of trust,  4 and no written instrument has been pointed to as establishing an express trust, which writing is required in express trusts over immovables. 5 There is therefore no basis for the appellants' claim that an express trust was created when Camon continued to cultivate the land after the expiration of the written contract of lease.ACCORDINGLY, the order a quo of July 20, 1966 is affirmed, at claimants-appellants' cost.Makalintal, C.J., Teehankee, Makasiar, Esguerra and Muñoz Palma, JJ., concur.

EN BANC

[G.R. No. L-30871. December 28, 1970.]

AURORA P. DE LEON, Petitioner, v. HON. SERAFIN SALVADOR, as Judge of Branch XIV of the Court of First Instance of Rizal (Caloocan City), and EUSEBIO BERNABE, ALBERTO A. VALINO, Special Deputy Sheriff of

the Office of the Provincial Sheriff, Province of Rizal, and the REGISTER OF DEEDS for Caloocan City, Respondents.

[G.R. No. L-31603. December 28, 1970]

EUSEBIO BERNABE, Petitioner, v. THE HONORABLE JUDGE FERNANDO A. CRUZ of the Court of First Instance of Rizal, Caloocan City, Branch XII, SPECIAL DEPUTY SHERIFF, ALBERTO A. VALINO of the Provincial Sheriff

of Rizal and AURORA P. DE LEON, Respondents.

Jose A. Garcia and Ismael M. Estrella for Petitioner.

De los Santos, De los Santos & De los Santos and Felipe L. Abel for Respondents.

Felipe L. Abel for Petitioner.

Ismael M. Estrella and Jose A. Garcia for Respondents.

D E C I S I O N

TEEHANKEE, J.:

Joint decision of two special civil actions which were ordered consolidated since they involve the same properties and the common issue of conflict of jurisdiction of the two Caloocan City branches of the Court of First Instance of Rizal.

Case L-30871 arose from the following facts: A judgment for P35,000.00-actual, moral and exemplary damages obtained by Enrique de Leon against private respondent Eusebio Bernabe in Civil Case No. C-189 of Branch XII of the Rizal court of first instance, Caloocan City branch presided by Judge Fernando A. Cruz, having become final and executory, a writ of execution was issued by said court. Pursuant thereto, the city sheriff, on November 8, 1966 levied on execution on two parcels of land of 682.5 square meters each registered in the names of Bernabe under T.C.T. Nos. 94985 and 94986 of Caloocan City. At the execution sale held on February 14, 1967, the city sheriff sold the said properties to herein petitioner, Aurora (sister of the judgment creditor) as the highest bidder for the total sum of P30,194.00, (the property then being subject to an existing mortgage lien in the amount of P120,000.00). The sheriff executed the corresponding certificate of sale in her favor, which was duly registered on February 21, 1967 with the Caloocan City register of deeds.

On February 7, 1968, just about two weeks before the expiration of the one-year period to redeem the properties sold in execution, the judgment debtor Bernabe filed a separate civil action docketed as Civil Case No. C-1217 against his judgment creditor Enrique de Leon, herein petitioner Aurora P. de Leon as purchaser and the sheriff as defendants for the setting aside or annulment of the execution sale on February 14, 1967 "for being anomalous and irregular," and for the ordering of a new auction sale. This second case, instead of being referred to Judge Cruz presiding over Branch XII which had issued the writ of execution, was assigned to Branch XIV, the other Caloocan City branch of the Rizal Court of First Instance presided by Judge Serafin Salvador, who issued on February 19, 1968 a writ of preliminary injunction enjoining therein defendants, particularly the sheriff to desist "from taking further proceedings against the properties of the plaintiff [Bernabe] that were sold at public auction on February 14, 1967, and from issuing a sheriff’s deed of sale at the expiration of the period of redemption on February 21, 1968 in favor of defendant Aurora P. de Leon." Aurora moved to dissolve the injunction and to dismiss this second case on the grounds of laches and lack of jurisdiction of Judge Salvador’s court to interfere with the execution proceedings pending in the first case before Judge Cruz’ court which is of equal and co-ordinate jurisdiction, but Judge Salvador denied the same for not being indubitable and tried the case, notwithstanding Aurora’s pleas before and after the trial to resolve the issue of his court’s lack of jurisdiction.

Pending his decision, Judge Salvador issued on May 20, 1969 an order granting two ex-parte motions of Bernabe of May 12, and May 15, 1969 and ordering the sheriff to allow Bernabe to redeem the two properties sold at public auction more than two years ago on February 14, 1967 under the writ of execution issued by Judge Cruz’ court in the first case. On the following day, May 21, 1969, Bernabe deposited with the sheriff the sum of P33,817.28 as the redemption price (P15,987,00 per lot plus interests), who issued a certificate of redemption. Bernabe then registered on the following day, May 22, 1969, the sheriff’s certificate of redemption with the register of deeds, who in turn cancelled the entry of the execution sale in favor of Aurora, as well as registered on one of the properties covered by T.C.T. No. 94986 a deed of first mortgage executed on May 20, 1969 by Bernabe in favor of one Antonio de Zuzuarregui to secure a loan of P130,000.00. Aurora’s motion of May 28, 1969 in the second case to set aside the order and certificate of redemption and registration of mortgage on the ground of lack of jurisdiction was denied by Judge Salvador, who ruled in his order of June 23, 1969 that "there is no question that this Court has jurisdiction to hear and determine this case which questions the regularity and legality of the auction sale of properties held on February 14, 1967, hence the authority granted by the Court to redeem said properties within the redemption period in order to write finis to the pending case." 1 Hence, this action for  certiorari filed by Aurora impleading the sheriff and the register of deeds for the annulment and setting aside for lack of jurisdiction of the questioned orders of Judge Salvador’s court as well as of the challenged actuations of the other respondent officials pursuant thereto. As prayed for, the Court issued a writ of preliminary

injunction enjoining said respondents from doing or taking any other act in connection with the said properties.

On May 30, 1969, Aurora also filed in the first case before Judge Cruz’ court a motion with proper notice for consolidation of title and for the court to order the sheriff to issue in her favor a final deed of sale over the subject parcels of land. Judge Cruz’ order of September 5, 1969, granting Aurora’s motion over Bernabe’s opposition that he had redeemed on May 21, 1969 the said properties by virtue of Judge Salvador’s order of May 20, 1969 in the second case and ordering Bernabe to surrender his owner’s duplicates of title for transfer to Aurora, in turn gave rise to Case L-31603 filed by Bernabe. After Bernabe’s motion for reconsideration urging Judge Cruz to hold in abeyance Aurora’s motion for consolidation of title until this Court’s decision in Case L-30871 "which will end once and for all the legal controversy" over the conflict of jurisdiction between the two courts, was denied by Judge Cruz’ order of January 8, 1970, he filed this action for certiorari, impleading the sheriff, for the annulment and revocation of the questioned orders of Judge Cruz, on the ground of the latter’s lack of jurisdiction to issue the same. As prayed for, the Court also issued a writ of preliminary injunction against the enforcement of Judge Cruz’ orders, until the conflict between the parties could be finally resolved.

The decisive issue at bar is a simple one of jurisdiction: which court, Branch XII presided by Judge Cruz or Branch XIV presided by Judge Salvador has exclusive jurisdiction to set aside for alleged irregularities the execution sale held on February 14, 1967 by virtue of the writ for the execution of the final judgment in the first case (No. C-189) issued by Judge Cruz’ court and to order a new auction sale — which was the relief sought by the judgment debtor in the second case (No. C-1217) in Judge Salvador’s court?

It is patent that such exclusive jurisdiction was vested in Judge Cruz’ court. Having acquired jurisdiction over Case No. C-189 and rendered judgment that had become final and executory, it retained jurisdiction over its judgment, to the exclusion of all other co-ordinate courts for its execution and all incidents thereof, and to control, in furtherance of justice, the conduct of its ministerial officers in connection therewith. 2 Execution of its judgment having been carried out by the sheriff with the levy and sale of the judgment debtor’s properties, Eusebio Bernabe as judgment debtor could not in the guise of a new and separate second action (Case No. 1217) ask another court of coordinate jurisdiction, Judge Salvador’s court, to interfere by injunction with the execution proceedings, to set them aside and to order the holding of a new execution sale — instead of seeking such relief by proper motion and application from Judge Cruz’ court which had exclusive jurisdiction over the execution proceedings and the properties sold at the execution sale.

As early as 1922, in Cabigao v. del Rosario, 3 this Court laid down the doctrine that "no court has power to interfere by injunction with the judgments or decrees of a court of concurrent or coordinate jurisdiction having power to grant the relief sought by injunction," pointing out that" (T)he various branches of the Court of First Instance of Manila are in a sense coordinate courts and to allow them to interfere with each other’s judgments or decrees by injunctions would obviously lead to confusion and might seriously hinder the administration of justice."cralaw virtua1aw library

The Court similarly ruled in Hubahib v. Insular Drug Co., Inc., 4 with reference to Branch II of the Cebu court of first instance having taken cognizance of an independent action for the annulment of a writ of execution issued by Branch III of the same court which has rendered the judgment, that "the institution of said action was not only improper but also absolutely unjustified, on the ground that the appellant had the remedy of applying to the same Branch III of the lower court, which issued the orders in question, for reconsideration thereof . . . or of appealing from said orders or from that denying his motion in case such order has been issued. The various branches of a Court of First Instance of a province or city, having as they have the same or equal authority and exercising as they do concurrent and coordinate jurisdiction, should not, cannot, and are not permitted to interfere with their respective cases, much less with their orders or judgments, by means of injunction." cralaw virtua1aw library

In National Power Corporation v. De Veyra, 5 the Court, through former Chief Justice Bengzon, thus explained that the garnishment or levy of property on execution brings the property into custodia legis of the court issuing the writ of execution, beyond the interference of all other co-ordinate courts, thereby avoiding conflicts of power between such courts:" (T)he garnishment of property to satisfy a writ of execution ‘operates as an attachment and fastens upon the property a lien by which the property is brought under the jurisdiction of the court issuing the writ." It is brought into custodia legis, under the sole control of such court. Property is in the custody of the court when it has been seized by an officer either under a writ of attachment on mesne process or under a writ of execution. A court which has control of such property, exercises exclusive jurisdiction over the same. No court, except one having a supervisory control or superior jurisdiction in the premises, has a right to interfere with and change that possession." cralaw virtua1aw

library

The Court in striking down the Baguio court’s issuance of a writ of preliminary injunction against the Baguio City sheriff’s garnishment of cash funds of Baguio City deposited in the Baguio branch of the Philippine National Bank pursuant to a writ of execution issued by the Manila court of first instance for the satisfaction of a final judgment rendered in favor of the National Power Corporation, and its assuming cognizance of the separate complaint filed with it, duly indicated the proper procedure in such cases and

the fundamental reason therefor:" (T)he reason advanced by the respondent court of Baguio City that it should grant relief when ‘there is apparently an illegal service of the writ’ (the property garnished being allegedly exempt from execution) may not be upheld, there being a better procedure to follow, i.e., a resort to the Manila court, wherein the remedy may be obtained, it being the court under whose authority the illegal levy had been made. Needless to say, an effective ordering of legal relationships in civil society is possible only when each court is granted exclusive jurisdiction over the property brought to it." 6 

The Court time and again has applied this long established doctrine admonishing court and litigant alike last year in Luciano v. Provincial Governor 7 that a judge of a branch of a court may not interfere with the proceedings before a judge of another branch of the same court.

The properties in question were brought into custodia legis of Judge Cruz court and came under its exclusive jurisdiction when they were levied upon by the sheriff pursuant to the writ for execution of the judgment rendered by said court. The levy is the essential act by which the judgment debtor s property is set apart for the satisfaction of the judgment and taken into custody of the law, and from such time the court issuing the execution acquires exclusive jurisdiction over the property and all subsequent claims of other parties are subordinated thereto, irrespective of the time when the property is actually sold. 8 The execution sale having been carried out upon order of Judge Cruz court, any and all questions concerning the validity and regularity of the sale necessarily had to be addressed to his court which had exclusive jurisdiction over the properties and were beyond interference by Judge Salvador s court. Justice Cruz court alone had jurisdiction — subject only to the supervisory control or appellate jurisdiction of superior courts — to rule upon the regularity and validity of the sale conducted by its ministerial officers from the sheriff’s office, and his affirmative ruling thereon could not be interfered with by injunction of, nor sought to be foreclosed by, the challenged orders of Judge Salvador’s court.

Bernabe’s contention that "he does not attempt to annul or nullify the judgment or order issued by (Judge Cruz’ court) . . . If (Judge Salvador’s Court) finds the allegations of the complaint to be true, then it has the jurisdiction to order a new auction sale, which has nothing to do with the judgments or decrees issued by Judge Cruz’ court)" 9 is untenable. As above stated, the properties upon being levied on and sold by virtue of Judge Cruz’ order of execution were brought into the exclusive custodia legis of Judge Cruz’ court This is but in accordance with the established principle that "A case in which an execution has been issued is regarded as still pending, so that all proceedings on the execution are proceedings in the suit" 10 and that" (A)n execution is the fruit and end of the suit, and is very aptly called the life of the law. The suit does not terminate with the judgment; and all proceedings on the execution, are proceedings in the suit, and which are expressly, by the act of Congress, put under the regulation and control of the Court of which it issues. It is a power incident to every Court from which process issues, when delivered to the proper officer, to enforce upon such officer a compliance with his duty." 11 Any and all questions involving the execution sale concerned the proceedings in Judge Cruz’ court and had to be raised and determined in that court, subject to review by the higher courts. They could not be improperly passed upon by another co-ordinate court — behind the back, as it were — of Judge Cruz’ court.

Judge Salvador’s order of May 20, 1969 granting two ex-parte motions of the judgment debtor Bernabe and directing the sheriff to allow the redemption of the properties notwithstanding that the one-year redemption period had already lapsed more than one year ago on February 21, 1968 (one year after registration on May 21, 1967 of the sheriff’s sale of May 14, 1967) was equally untenable. It must be noted that Bernabe’s action in Judge Salvador’s court filed on February 7, 1968 two weeks before the expiration of the redemption period sought to set aside the execution sale and to have a new auction sale ordered, on the grounds that the sheriff had allegedly sold the two parcels of land jointly instead of separately, and that the total sales price of P30,194.00 was shocking to the conscience, alleging that the two parcels, if sold separately, could easily be sold at P235,000.00 and P150,000.00. Pending decision and without ruling squarely on his court’s lack of jurisdiction over the properties, Judge Salvador peremptorily issued his redemption order on Bernabe’s bare manifestation that" (he) has but barely two days left of the one (1) year period granted by law to redeem" and that" (he) is now ready and willing to redeem" the properties.

Aside from the basic lack of jurisdiction of Judge Salvador’s court to issue the redemption order, the order per se suffered from other grave flaws. Bernabe’s motions in effect amounted to an abandonment of his position on the alleged irregularity of the execution sale, and the logical consequence thereof which have been the dismissal of his suit. (Thus, soon after Aurora’s filing of her action for  certiorari in this Court, Bernabe filed his so-called "Urgent Motion to Dismiss" of August 27, 1969 with Judge Salvador’s court praying for the dismissal of the very case filed by him on the ground that having redeemed the properties, "the case can therefore be considered closed and terminated considering that defendants [Aurora, Et. Al.] did not interpose any appeal" from the redemption order) But Bernabe’s motions were presented on May 12 and May 15, 1969 and it was self-evident from the record that the one-year period for redemption had long expired more than a year ago on February 21, 1968 as above stated and that Bernabe’s allegations that he had two days left — of the redemption period was a gratuitous one. Nothing in the record indicates that Bernabe had ever timely made a valid offer of redemption so as to safeguard his right thereto prior to his filing his separate action questioning the validity of the execution sale. It was therefore void and illogical for Judge Salvador to rule, in denying Aurora’s motion for reconsideration, that "there is no question that this Court has jurisdiction to hear and determine this case which questions the regularity and

legality of the auction sale of properties held on February 14, 1967, hence the authority granted by the Court to redeem said properties within the redemption period in order to write finis to the pending case." For Judge Salvador thereby begged the basic prejudicial questions of his court’s lack of jurisdiction and the expiration over a year ago of Bernabe’s alleged right of redemption, not to mention that any grant of such right to redeem could not be decreed in a summary unreasoned order but would have to be adjudged in a formal decision reciting the facts and the law on which it is based, and which may not be immediately executed, without a special order therefor. Under Judge Salvador’s void orders, all that a judgment debtor whose properties have been sold at execution sale but who does not have the funds to effect redemption has to do to unilaterally extend the one-year redemption period would be to file a separate action before another court of co-ordinate jurisdiction questioning the regularity of the execution sale and upon his getting the funds, notwithstanding the expiration of the redemption period, get an order of redemption and ask the court "to write finis to the pending case" — which should have been dismissed in the first instance for lack of jurisdiction.

The doctrine cited that a court or a branch thereof may not interfere with the proceedings before a judge of another court or branch of the same court since they are all courts of equal and co-ordinate jurisdiction is an elementary doctrine that has been established with the very system of courts. Understandable as Bernabe’s plight and financial predicament may be, still it is incomprehensible why he should futilely resort, as he did, to filing his separate action with Judge Salvador’s court which patently lacked jurisdiction over the properties sold in execution instead of questioning the regularity of the execution sale before Judge Cruz’ court as the court of competent and exclusive jurisdiction, and properly applying, if he had just grounds, for extension of the redemption period.

As to the alleged gross inadequacy of the price of P30,194.00 paid by Aurora when according to Bernabe the properties could have been easily sold for a total price of P385,000.00, Bernabe has admitted that there was an existing mortgage lien on the properties in the amount of P120,000,00 which necessarily affected their value. This question was not raised at all before Judge Cruz’ court nor did Judge Salvador rule thereupon, since he merely issued his void order of redemption. Suffice it to state on the basis of the record, however, that the failure of Bernabe to timely sell the properties for their fair value through negotiated sales with third persons either before or after the execution sale in order to be able to discharge his judgment debt or redeem the properties within the redemption period, or to raise the necessary amount therefrom to so effect redemption notwithstanding that they have been collecting the substantial monthly rentals thereof of P2,500.00 monthly even up to now 12 can be attributed only to his own failings and gross improvidence. They cannot be cited in law or in equity to defeat the lawful claim of Aurora nor to give validity to the void orders of Judge Salvador’s court. The applicable rule on forced sales where the law gives the owner the right of redemption was thus stated by the Court in Velasquez v. Coronel: 13 "However, while in ordinary sales for reasons of equity a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one’s conscience as to justify the courts to interfere, such does not follow when the law gives to the owner the right to redeem, as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption. And so it was aptly said: ‘When there is the right to redeem, inadequacy of price should not be material, because the judgment debtor may reacquire the property or also sell his right to redeem and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale.’" 

Bernabe’s petition challenging the jurisdiction of Judge Cruz’ court to issue its orders of September 5, 1969 and January 5, 1970, confirming Aurora’s acquisition of title to the properties by virtue of the execution sale and ordering Bernabe to transfer possession thereof to her, because of the separate civil action filed by him in Judge Salvador’s court, must necessarily fail — since said orders were within the exclusive competence and jurisdiction of Judge Cruz’ court.

ACCORDINGLY, in Case L-30871, the writ of certiorari prayed for his granted; respondent Judge Salvador’s court is declared without jurisdiction over Civil Case No. C-1217 other than to dismiss the same and the writ of preliminary injunction of February 19, 1968 therein issued and the orders of May 20, 1969 and June 23, 1969 therein issued, as well as respondent sheriff’s certificate of redemption issued on May 21, 1969 are set aside and declared null and void; and the writ of preliminary injunction issued by the Court on September 2, 1969, is made permanent. In Case L-31603, the petition forcertiorari is dismissed and the writ of preliminary injunction issued by this Court on February 11, 1970 is dissolved. No pronouncement as to costs.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Barredo, Villamor and Makasiar, JJ., concur.

Concepcion, C.J., concurs in the result.

Castro, J., did not take part.Republic of the Philippines

SUPREME COURTManila

EN BANC

G.R. No. L-21881             March 1, 1968PACIFIC OXYGEN & ACETYLENE COMPANY, plaintiff-appellee, vs.CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.Bienvenido L. Garcia for plaintiff-appellee. Nat. M. Balbao, F. E. Evangelista & M. Abaya for defendant-appellant.FERNANDO, J.:          In this suit for the recovery of a sum of money from defendant-appellant Central Bank, the sole legal issue before us, as before the lower court, is the validity "of the collection made by the defendant from the plaintiff in the amount of P30,839.49 constituting the margin fee for its commercial credit (letter of credit) in favor of the independent Engineering Co., Inc., O'Fallon, Illinois, U.S., in the amount of $63,964.00 which was increased later to $67,874.00."1 The lower court decided in favor of plaintiff. We do not see it that way and accordingly reverse the decision.          The facts as stated by the trial court were not in dispute. Its finding, moreover, cannot be controverted on appeal. Plaintiff Pacific Oxygen and Acetylene Co. applied on Sept. 21, 1961 with the Philippine Trust company, an agent of the Central Bank, for commercial credit in the amount of $63,964.00 in favor of the Independent Engineering Co., Inc., O'Fallon, a United States corporation located in Illinois,2 to cover the shipment of a plant. The application was approved on October 4, 1961, with the Philippine Trust Company establishing an irrevocable letter of credit at the free market rate of P3.01875 to every dollar, the letter of credit,3 expiring on February 1, 1962. The plaintiff also on September 21, 1961, applied with the Philippine Trust Company for the purchase of forward exchange in the same amount of $63,964.00 and for the same purpose.4 On October 5, 1961, the Philippine Trust Company applied with the Central Bank for the purchase of forward exchange in the amount of $63,694.00 to cover its U.S. dollar commitment against the letter of credit opened under free market rate for the plaintiff. Then on October 6, 1961, the Central Bank in turn executed a forward exchange contract for the sale of foreign exchange in the said amount to be delivered on January 2, 1962.5 On November 7, 1961, upon plaintiff's application, the letter of credit was amended to increase the amount by $3,910.00 to cover the estimated freight and ship charges,6 to be followed as in the case of the original letter of credit with the purchase; of forward exchange for a similar amount. On January 17, 1962, the Philippine Trust Company applied for the purchase of forward exchange with the Central Bank in the amount of $71,617.00 of which $67,874.00 would cover its U.S. dollar commitments against the letter of credit opened under free market rate for the plaintiff. Then the next day the Central Bank executed the corresponding forward exchange contract for the same amount to be delivered on March 17, 1962.7

          On January 21, 1962, the Central Bank suspended the margin levy. On February 8, 1962, the Independent Engineering Co., Inc., O'Fallon, Illinois, U.S.A., the beneficiary, drew two drafts against said letter of credit in the sums of $19,277.41 (Exh. A-5) and $48,596.59 (Exh. A-6), and the Continental Illinois National Bank and Trust Company of Chicago, Chicago, Illinois, correspondent of the Philippine Trust Company, Manila, honored the first draft on February 9, 1962, and the second draft on February 13, 1962, as shown by the debit advices on the same dates addressed to Philippine Trust Company.8 On February 18 and 23, 1962, the Philippine Trust Company sent to the plaintiff statements of account on the importation in which were included the 15% margin fee.9 On March 14, 1962, the plaintiff paid under protest to the Central Bank, thru the Philippine Trust Company, the amounts of P22,058.00 and P8,780.65, or a total of P30,839.49, representing the 15% margin fee, the amount sought to be recovered.          The applicable law is Republic Act No. 2609, which insofar as pertinent, empowers the Central Bank "in respect of all sales of foreign exchange by [it] and its authorized agent banks, . . . to establish a uniform margin of not more than 40% over the bank's selling rates stipulated by the Monetary Board . . .."10 After quoting the above legal provision referring to

the corresponding Central Bank circular that fixed the margin fee, and citing the doctrine in Belman Cia., Inc. v. Central Bank of the Philippines,11 "that the date of such payment or delivery of the amount in foreign currency to the creditor determines whether such amount of foreign currency is subject to tax imposed by the government"12 of the country issuing such letter of credit, the lower court rendered judgment in favor of the plaintiff and against the defendant ordering the refund of the above sum of P30,839.49. A motion to set aside judgment by defendant Central Bank having been filed and thereafter denied, this appeal was taken.          The appeal, as earlier mentioned, possesses merit. The language of the law is clear. A margin fee may be collected from "all sales of foreign exchange by the Central Bank and its authorized agent banks, . . . ." It was expressly found by the lower court: "On January 17, 1962, the Philippine Trust Company applied for the purchase of forward exchange with the Central Bank in the amount of $71,617.02, of which $67,874.00 to cover its U.S. dollar commitments against the letter of credit opened under free market rate for the plaintiff, and on the next day the Central Bank executed the corresponding forward exchange contract (No. 12145) for the same amount to be delivered on March 17, 1962 . . . ."13

          It is well-settled in our law that a contract of sale exists from the moment "one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent." 14 There is a perfection of such a contract "at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price" from which moment, "the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts."15 It is a fair restatement of the prevailing principle in American law that an agreement by one party to sell and deliver, and by the other to purchase at a mentioned price and terms certain personal property on or before a specified future date is a contract of sale and not an option.16

          With the categorical finding in the decision appealed from that the purchase of the forward exchange by the Central Bank occurred on January 17, 1962, prior to the suspension of the margin levy on January 21, 1962, it cannot be denied that deference must be paid to the legal provision calling for a margin fee "in respect of all sales of foreign exchange by the Central Bank and its authorized agents . . . ." From Lizarraga Hermanos v. Yap Tico,17 this Court has steadfastly adhered to the doctrine that its first and fundamental duty is the application of the law according to its express terms, interpretation being called for only when such literal application is impossible.18

          As thus viewed, the fact that it was not until February 9 and 13, 1962, that the Continental Illinois National Bank and Trust Company honored the above drafts cannot therefore be controlling. The plain and explicit command of the law is too categorical to be misinterpreted. A contrary impression that might be yielded by Belman Cia Inc. v. Central Bank of the Philippines dealing with the Seventeen (17%) percent excise tax cannot prove decisive of this controversy, as was erroneously held by the lower court. To the extent that there is an inconsistency between this decision and the Belman dictum, it cannot be considered authoritative, at least under the circumstances as herein disclosed.WHEREFORE, the appealed judgment is reversed. With costs against plaintiff-appellee. 1äwphï1.ñët

Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro and Angeles, JJ., concur.Concepcion, C.J., is on leave.Footnotes

Republic of the PhilippinesSUPREME COURT

ManilaEN BANC

G.R. No. L-11897            October 31, 1964FERNANDO A. FROILAN, plaintiff-appellee, vs.PAN ORIENTAL SHIPPING COMPANY, defendant-appellant, REPUBLIC OF THE PHILIPPINES, and COMPANIA MARITIMA, intervenors-appellees.Sycip, Salazar & Associates and Enrique Fernando & Emma Quisumbing-Fernando for defendant-appellant. The Government Corporate Counsel for intervenors-appellees. Rafael Dinglasan for plaintiff-appellee.BARRERA, J.:On March 7, 1947, Fernando A. Froilan purchased from the Shipping Administration a boat described as MV/FS 197 for the sum of P200,000.00, with a down payment of P50,000,00. To secure payment of the unpaid balance of the purchase price, a mortgage was constituted on the vessel in favor of the Shipping Administration in a contract which provides, among others, the following:In the event that the FIRST PARTY should elect to exercise its rights to rescind under the terms of this contract, it shall have the right to take possession of the vessel herein sold in the condition that it is at the time of rescission but in no case in a worse condition than when originally delivered to the second party, ordinary wear and tear excepted and in case at the time of rescission the condition of the vessel is not satisfactory to the FIRST PARTY, it shall have the right to have the vessel reconditioned, repaired, dry-docked at the expense of the SECOND PARTY. The same right is hereby granted to the FIRST PARTY in case the SECOND PARTY should for any reason refuse or fail to comply with this condition of sale and return the vessel herein sold in a condition not satisfactory to the FIRST PARTY.The right of rescission shall be considered as a cumulative remedy granted to the FIRST PARTY and shall not in any way prejudice his right to demand immediate and complete payment of the purchase price of the vessel under the terms herein provided, and to demand and collect from the SECOND PARTY such damages caused by the non-compliance with this contract.This contract was duly approved by the President of the Philippines.Froilan appeared to have defaulted in spite of demands, not only in the payment of the first installment on the unpaid balance of the purchase price and the interest thereon when they fell due, but also failed in his express undertaking to pay the premiums on the insurance coverage of the vessel, obliging the Shipping Administration to advance such payment to the insurance company. Consequently, the Shipping Administration requested the Commissioner of Customs on June 1, 1948 to refuse clearance on the vessel and the voyage thereof was ordered suspended.Thereafter, Froilan asked for a reconsideration of the action taken by the Shipping Administration, claiming that his failure to pay the required installments was due to the fact that he was awaiting the decision of the President on the petition of the shipowners for an extension of the period of payment of the purchased vessels, which petition was favorably acted upon.On July 3, 1948, the Shipping Administration and Froilan entered into an agreement whereby the latter undertook to liquidate immediately all of his outstanding accounts, including the insurance premiums, within 30 days, and have the vessel overhauled, and promised that in case of his default, he shall "waive, any formal notice of demand and to redeliver the said vessel peaceably and amicably without any other proceedings" (Exh. 39).Again, Froilan failed to settle his accounts within the prescribed period, thus, the Shipping Administration threatened to rescind the contract unless payment be immediately made. On

August 28, 1948, upon Froilan's request, the Shipping Administration agreed to release the vessel on condition that the same would be overhauled and repaired and the accrued interest on the first installment would be paid. The Administration also allowed the mortgagor to pay his overdue accounts, amounting now to P48,500.00 in monthly installments, with warming that in case of further default, it would immediately repossess the vessel and rescind the contract. Froilan failed to pay. On January 17, 1949, the Shipping Administration required him to return the vessel or else file a bond for P25,000.00 in five days. In a letter dated January 28, 1949, Froilan requested that the period for filing the bond be extended to February 15, 1949, upon the express condition and understanding that:... . If I fail to file the required bond on the said date, February 15, 1949, to the satisfaction of the Shipping Administration, I am willing to relinquish and I do hereby relinquish any and all rights I have or may have on the said vessel including any payments made thereon to the Shipping Administration, without prejudice to other rights the Shipping Administration may have against me under the contract of sale executed in my favor.I wish to reiterate that if I fail to file the bond within the period I have requested, any and all rights I have on the vessel and any payments made to the Shipping Administration shall be considered automatically forfeited in favor of the Shipping Administration and the ownership of the said vessel will be as it is hereby automatically transferred to the Shipping Administration which is then hereby authorized to take immediate possession of said vessel. (Exh. 66)This letter of Froilan was submitted by the General Manager of the Shipping Administration to the board of directors for proper consideration. By resolution of January 31, 1949, the petition was granted subject specifically to the conditions set forth therein. Froilan again failed to make good his promises. Hence, on February 18, 1949, the General Manager of the Shipping Ad-ministration wrote the Collector of Customs of Manila, advising the latter that the Shipping Administration, by action of its board, terminated the contract with Froilan, and requesting the suspension of the clearance of the boat effective that date (Exh. 70).On February 21, 1949, the General Manager directed its officers, Capt. Laconico and others, to take immediate possession of the vessel and to suspend the unloading of all cargoes on the same until the owners thereof made the corresponding arrangement with the Shipping Administration. Pursuant to these instructions, the boat was, not only actually repossessed, but the title thereto was registered again in the name of the Shipping Administration, thereby re-transferring the ownership thereof to the government.On February 22, 1949, Pan Oriental Shipping Co., hereinafter referred to as Pan Oriental, offered to charter said vessel FS-197 for a monthly rent of P3,000.00. Because the government was then spending for the guarding of the boat and subsistence of the crew-members since repossession, the Shipping Administration on April 1, 1949, accepted Pan Oriental's offer "in principle" subject to the condition that the latter shall cause the repair of the vessel, advancing the cost of labor and drydocking thereof, and the Shipping Administration to furnish the necessary spare parts. In accordance with this charter contract, the vessel was delivered to the possession of Pan Oriental.In the meantime, or on February 22, 1949, Froilan tried to explain his failure to comply with the obligations he assumed and asked that he be given another extension up to March 15, 1949 to file the necessary bond. Then on March 8, Froilan offered to pay all his overdue accounts. However, as he failed to fulfill even these offers made by him in these two communications, the Shipping Administration denied his petition for reconsideration (of the rescission of the contract) on March 22, 1949. It should be noted that while his petition for reconsideration was denied on March 22, it does not appear when he formally formulated his appeal. In the meantime, as already stated, the boat has being repossessed by the Shipping Administration and the title thereto re-registered in the name of the government, and delivered to the Pan Oriental in virtue of the charter agreement. On June 2, 1949, Froilan protested to the President against the charter of the vessel.

On the same date, the Executive Office advised the Administration and the Commissioner of Customs not to dispose of the vessel in favor of another party pending final decision by the President on the appeal of Froilan (Exhs. 93-A and 93-D). But since the vessel was already cleared in favor of Pan Oriental prior to the receipt of the foregoing communication, and allegedly in order to prevent its being made answerable for damages, the General Manager of the Shipping Administration advised the Collector of Customs not to suspend the voyage of the vessel pending final decision on the appeal of Froilan. Similar manifestation, to allow the Pan Oriental's operation of the vessel without prejudice to whatever action the President may take in the case, was also made by the Administration to the Executive Secretary.On June 4, 1949, the Shipping Administration and the Pan Oriental formalized the charter agreement and signed a bareboat contract with option to purchase, containing the following pertinent provisions:III. CHARTER HIRE, TIME OF PAYMENT. — The CHARTERER shall pay to the owner a monthly charter hire of THREE THOUSAND (P3,000.00) PESOS from date of delivery of the vessel, payable in advance on or before the 5th of every current month until the return of the vessel to OWNER or purchase of the vessel by CHARTERER.XII. RIGHT OF OPTION TO PURCHASE. — The right of option to purchase the vessel at the price of P150,000.00 plus the amount expended for its present repairs is hereby granted to the CHARTERER within 120 days from the execution of this Contract, unless otherwise extended by the OWNER. This right shall be deemed exercised only if, before the expiration of the said period, or its extension by the OWNER the CHARTERER completes the payment, including any amount paid as Charter hire, of a total sum of not less than twenty-five percentum (25%) of said price of the vessel.The period of option may be extended by the OWNER without in any way affecting the other provisions, stipulations, and terms of this contract.If, for any reason whatsoever, the CHARTERER fails to exercise its option to purchase within the period stipulated, or within the extension thereof by the OWNER, its right of option to purchase shall be deemed terminated, without prejudice to the continuance of the Charter Party provisions of this contract. The right to dispose of the vessel or terminate the Charter Party at its discretion is reserved to the OWNER.XIII. TRANSFER OF OWNERSHIP OF THE VESSEL. — After the CHARTERER has exercised his right of option as provided in the preceding paragraph (XII), the vessel shall be deemed conditionally sold to the purchaser, but the ownership thereof shall not be deemed transferred unless and until all the price of the vessel, together with the interests thereon, and any other obligation due and payable to the OWNER under this contract, have been fully paid by the CHARTERER.

xxx           xxx           xxxXXI. APPROVAL OF THE PRESIDENT. — This contract shall take effect only upon approval of His Excellency, the President.On September 6, 1949, the Cabinet revoked the cancellation of Froilan's contract of sale and restored to him all his rights thereunder, on condition that he would give not less than P10,000.00 to settle partially his overdue accounts and that reimbursement of the expenses incurred for the repair and drydocking of the vessel performed by Pan Oriental was to be made in accordance with future adjustment between him and the Shipping Administration (Exh. I). Later, pursuant to this reservation, Froilan's request to the Executive Secretary that the Administration advance the payment of the expenses incurred by Pan Oriental in the drydocking and repair of the vessel, was granted on condition that Froilan assume to pay the same and file a bond to cover said undertaking (Exh. 111).On September 7, 1949, the formal bareboat charter with option to purchase filed on June 4, 1949, in favor of the Pan Oriental was returned to the General Manager of the Shipping Administration without action (not disapproval), only because of the Cabinet resolution of September 6, 1949 restoring Froilan to his rights under the conditions set forth therein, namely, the payment of P10,000.00 to settle partially his overdue accounts and the filing of a

bond to guarantee the reimbursement of the expenses incurred by the Pan Oriental in the drydocking and repair of the vessel. But Froilan again failed to comply with these conditions. And so the Cabinet, considering Froilan's consistent failure to comply with his obligations, including those imposed in the resolution of September 6, 1949, resolved to reconsider said previous resolution restoring him to his previous rights. And, in a letter dated December 3, 1949, the Executive Secretary authorized the Administration to continue its charter contract with Pan Oriental in respect to FS-197 and enforce whatever rights it may still have under the original contract with Froilan (Exh. 188).Froilan, for his part, petitioned anew for a reconsideration of this action of the Cabinet, claiming that other ship purchasers, including the President-Treasurer of the Pan Oriental himself, had also defaulted in payment and yet no action to rescind their contracts had been taken against them. He also offered to make a cash partial payment of P10,000.00 on his overdue accounts and reimburse Pan Oriental of all its necessary expense on the vessel. Pan Oriental, however, not only expressed its unwillingness to relinquish possession of the vessel, but also tendered the sum of P15,000.00 which, together with its alleged expenses already made on the vessel, cover 25% of the cost of the vessel, as provided in the option granted in the bareboat contract (Exh. 122). This amount was accepted by the Administration as deposit, subject to the final determination of Froilan's appeal by the President. The Executive Secretary was also informed of the exercise by Pan Oriental of said option to purchase.On August 25, 1950, the Cabinet resolved once more to restore Froilan to his rights under the original contract of sale, on condition that he shall pay the sum of P10,000.00 upon delivery of the vessel to him, said amount to be credited to his outstanding accounts; that he shall continue paying the remaining installments due, and that he shall assume the expenses incurred for the repair and drydocking of the vessel (Exh. 134). Pan Oriental protested to this restoration of Froilan's rights under the contract of sale, for the reason that when the vessel was delivered to it, the Shipping Administration had authority to dispose of the said property, Froilan having already relinquished whatever rights he may have thereon. Froilan paid the required cash of P10,000.00, and as Pan Oriental refused to surrender possession of the vessel, he filed an action for replevin in the Court of First Instance of Manila (Civil Case No. 13196) to recover possession thereof and to have him declared the rightful owner of said property.Upon plaintiff's filing a bond of P400,000.00, the court ordered the seizure of the vessel from Pan Oriental and its delivery to the plaintiff. Pan Oriental tried to question the validity of this order in a petition for certiorari filed in this Court (G.R. No. L-4577), but the same was dismissed for lack of merit by resolution of February 22, 1951. Defendant accordingly filed an answer, denying the averments of the complaint.The Republic of the Philippines, having been allowed to intervene in the proceeding, also prayed for the possession of the vessel in order that the chattel mortgage constituted thereon may be foreclosed. Defendant Pan Oriental resisted said intervention, claiming to have a better right to the possession of the vessel by reason of a valid and subsisting contract in its favor, and of its right of retention, in view of the expenses it had incurred for the repair of the said vessel. As counterclaim, defendant demanded of the intervenor to comply with the latter's obligation to deliver the vessel pursuant to the provisions of the charter contract.Thereafter, and upon plaintiff's presenting proof that he had made payment to the intervenor Republic of the Philippines, of the sum of P162,576.96, covering the insurance premiums, unpaid balance of the purchase price of the vessel and interest thereon, the lower court by order of February 8, 1952, dismissed the complaint in intervention on the ground that the claim or demand therein had already been released. Said dismissal, however, was made without prejudice to the determination of defendant's right, and that the release and cancellation of the chattel mortgage did not "prejudge the question involved between the plaintiff and the defendant which is still the subject of determination in this case."

In view of the dismissal of its complaint, intervenor Republic of the Philippines also moved for the dismissal of defendant's counterclaims against it, which was granted by the court. On appeal by Pan Oriental to this Court (G.R. No. L-6060), said order was reversed and the case remanded to the lower court for further proceedings.Subsequently, Compañia Maritima, as purchaser of the vessel from Froilan, was allowed to intervene in the proceedings (in the lower court), said intervenor taking common cause with the plaintiff Froilan. In its answer to the complaint in intervention, defendant set up a counterclaim for damages in the sum of P50,000.00, alleging that plaintiff secured the Cabinet resolutions and the writ of replevin, resulting in its deprivation of possession of the, vessel, at the instigation and inducement of Compañia Maritima. This counterclaim was denied by both plaintiff and intervenor Maritima.On September 28, 1956, the lower court rendered a decision upholding Froilan's (and Compañia Maritima's) right to the ownership and possession of the FS-197. It was ruled that Froilan's violations of the conditions of the contract of sale in his favor did not automatically deprive him of his right of ownership of the vessel, which passed to him upon execution of the contract, but merely gave rise to the Shipping Administration's right either to foreclose the mortgage or rescind the contract by court action. As the Shipping Administration failed to avail itself of any of these remedies, Froilan's right of ownership remained unaffected. And the subsequent resolutions of the Cabinet, restoring him to his rights under the said contract, reaffirmed the same. The charter contract between the Shipping Administration and defendant was declared null and void, not only because the former could not have legally bound the vessel, but also due to the fact that said agreement has not been perfected for lack of approval by the President of the Philippines. And, even assuming that the said charter contract was valid, the lower court held that, as the owner (Republic of the Philippines) under the same agreement was given the right to terminate the charter or dispose of the vessel anytime, the action of the Cabinet in cancelling or withdrawing the rescission of Froilan's contract, had the effect of terminating the charter agreement with the defendant. The court also dismissed (1) defendant's counterclaims against plaintiff Froilan and intervenor Compañia Maritima, on the ground that it (defendant) was a possessor in bad faith, and consequently, not entitled to damages; (2) plaintiff's counterclaims against defendant, for the reason that the same should have been directed against intervenor Republic of the Philippines; and (3) defendant's counterclaims said intervenor Republic, on the ground that the order dismissing the complaint in intervention had already become final and it was materially impossible for the latter to secure possession of the vessel. From this decision, Pan Oriental brought the instant appeal.Contrary to appellant's contention, the ruling of the lower court that under the contract of sale with mortgage, ownership of the vessel passed to Froilan, upon delivery of the property to the latter, must be sustained. It is to be noted that unlike in the charter contract where it was specifically prescribed that ownership of the vessel shall be transferred to the vendee only upon full payment of the purchase price, no similar provision appears in the contract of sale in favor of Froilan. In the absence of stipulation to the contrary, the ownership of the thing sold passes to the vendee upon the actual or constructive delivery thereof (Art. 1477, new Civil Code). It is for this reason that Froilan was able to constitute a mortgage on the vessel in favor of the Administration, to secure payment of the unpaid balance of the purchase price.There is no gainsaying the fact that there was continuous violation by Froilan of the terms of said contract of sale. The records conclusively show that notwithstanding the numerous opportunities given him, Froilan had been remiss in the fulfillment of his obligations thereunder. Nevertheless, the lower court upheld his allegation that the Administration may not legally rescind the contract without filing the corresponding complaint in court.Under Article 11911 of the Civil Code, in case of reciprocal obligations, the power to rescind the contract where a party incurs in default, is impliedly given to the injured party. Appellee maintains however, that the law contemplates of rescission of contract by judicial action and

not a unilateral act by the injured party; consequently, the action of the Shipping Administration contravenes said provision of the law. This is not entirely correct, because there is also nothing in the law that prohibits the parties from entering into agreement that violation of the terms of the contract would cause cancellation thereof, even without court intervention. In other words, it is not always necessary for the injured party to resort to court for rescission of the contract. As already held2judicial action is needed where there, is absence of special provision in the contract granting to a party the right of rescission.In the instant case, while it may be true that the contract of sale did not expressly give to the mortgagee the right to cancel the agreement it was, nevertheless, provided therein that said party may rescind the contract as it may see fit in case of breach of the terms thereof by the mortgagor. Taking into account the promises, waivers and representations made by Froilan, to the extent that he agreed to the automatic transfer of ownership of the vessel to the Administration, should he fall to fulfill what was incumbent upon him, which did happen, the rescission of the contract without judicial action is proper.The next question to be determined is whether there had been a valid and enforceable charter contract in favor of appellant Pan Oriental, and what was the effect thereon of the subsequent restoration to Froilan by the Cabinet, of his rights under the original contract of sale with mortgage.It is not disputed that appellant Pan Oriental took possession of the vessel in question after it had been repossessed by the Shipping Administration and title thereto reacquired by the government, and operated the same from June 2, 1949 after it had repaired the vessel until it was dispossessed of the property on February 3, 1951, in virtue of a bareboat charter contract entered into between said company and the Shipping Administration. In the same agreement, appellant as charterer, was given the option to purchase the vessel, which may be exercised upon payment of a certain amount within a specified period. The President and Treasurer of the appellant company, tendered the stipulated initial payment on January 16, 1950. Appellant now contends that having exercised the option, the subsequent Cabinet resolutions restoring Froilan's rights on the vessel violated its existing rights over the same property. To the contention of plaintiff Froilan that the charter contract never became effective because it never received presidential approval, as required therein, Pan Oriental answers that the letter of the Executive Secretary dated December 3, 1949 (Exh. 118), authorizing the Shipping Administration to continue its charter contract with appellant, satisfies such requirement (of presidential approval). It is to be noted, however, that said letter was signed by the Executive Secretary only and not under authority of the President. The same, therefore, cannot be considered to have attached unto the charter contract the required consent of the Chief Executive for its validity.Upon the other hand, the Cabinet resolutions purporting to restore Froilan to his former rights under the deed of sale, cannot also be considered as an act of the President which is specifically required in all contracts relating to these vessels (Executive Order No. 31, series of 1946). Actions of the Cabinet are merely recommendatory or advisory in character. Unless afterwards specifically adopted by the President as his own executive act, they cannot be considered as equivalent to the act of approval of the President expressly required in cases involving disposition of these vessels.In the circumstances of this case, therefore, the resulting situation is that neither Froilan nor the Pan Oriental holds a valid contract over the vessel. However, since the intervenor Shipping Administration, representing the government practically ratified its proposed contract with Froilan by receiving the full consideration of the sale to the latter, for which reason the complaint in intervention was dismissed as to Froilan, and since Pan Oriental has no capacity to question this actuation of the Shipping Administration because it had no valid contract in its favor, the decision of the lower court adjudicating the vessel to FroiIan and its successor Compañia Maritima, must be sustained. Nevertheless, under the circumstances already adverted to, Pan Oriental cannot be considered a possessor in bad faith until after the institution of the instant case. However, since it is not disputed that said appellant made

useful and necessary expenses on the vessel, appellant is entitled to the refund of such expenses with the right to retain the vessel until he has been reimbursed therefor (Art. 546, Civil Code). As it is by the concerted acts of defendants and intervenor Republic of the Philippines that appellant was deprived of the possession of the vessel over which appellant had a lien for his expenses, appellees Froilan, Compañia Maritima, and the Republic of the Philippines3are declared liable for the reimbursement to appellant of its legitimate expenses, as allowed by law, with legal interest from the time of disbursement.Modified in this manner, the decision appealed from is affirmed, without costs. Case is remanded to the lower court for further proceedings in the matter of expenses. So ordered