G.R. No. L-44546 January 29, 1988RUSTICO ADILLE,petitioner,vs.THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA ASEJO and SANTIAGO ASEJO,respondents.SARMIENTO,J.:In issue herein are property and property rights, a familiar subject of controversy and a wellspring of enormous conflict that has led not only to protracted legal entanglements but to even more bitter consequences, like strained relationships and even the forfeiture of lives. It is a question that likewise reflects a tragic commentary on prevailing social and cultural values and institutions, where, as one observer notes, wealth and its accumulation are the basis of self-fulfillment and where property is held as sacred as life itself. "It is in the defense of his property," says this modern thinker, that one "will mobilize his deepest protective devices, and anybody that threatens his possessions will arouse his most passionate enmity."1The task of this Court, however, is not to judge the wisdom of values; the burden of reconstructing the social order is shouldered by the political leadership-and the people themselves.The parties have come to this Court for relief and accordingly, our responsibility is to give them that relief pursuant to the decree of law.The antecedent facts are quoted from the decision2appealed from:xxx xxx xxx... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi City with an area of some 11,325 sq. m. originally belonged to one Felisa Alzul as her own private property; she married twice in her lifetime; the first, with one Bernabe Adille, with whom she had as an only child, herein defendant Rustico Adille; in her second marriage with one Procopio Asejo, her children were herein plaintiffs, now, sometime in 1939, said Felisa sold the property inpacto de retroto certain 3rd persons, period of repurchase being 3 years, but she died in 1942 without being able to redeem and after her death, but during the period of redemption, herein defendant repurchased, by himself alone, and after that, he executed a deed of extra-judicial partition representing himself to be the only heir and child of his mother Felisa with the consequence that he was able to secure title in his name alone also, so that OCT. No. 21137 in the name of his mother was transferred to his name, that was in 1955; that was why after some efforts of compromise had failed, his half-brothers and sisters, herein plaintiffs, filed present case for partition with accounting on the position that he was only a trustee on an implied trust when he redeemed,-and this is the evidence, but as it also turned out that one of plaintiffs, Emeteria Asejo was occupying a portion, defendant counterclaimed for her to vacate that, Well then, after hearing the evidence, trial Judge sustained defendant in his position that he was and became absolute owner, he was not a trustee, and therefore, dismissed case and also condemned plaintiff occupant, Emeteria to vacate; it is because of this that plaintiffs have come here and contend that trial court erred in:I. ... declaring the defendant absolute owner of the property;II. ... not ordering the partition of the property; andIII. ... ordering one of the plaintiffs who is in possession of the portion of the property to vacate the land, p. 1 Appellant's brief.which can be reduced to simple question of whether or not on the basis of evidence and law, judgment appealed from should be maintained.3xxx xxx xxxThe respondent Court of appeals reversed the trial Court,4and ruled for the plaintiffs-appellants, the private respondents herein. The petitioner now appeals, by way of certiorari, from the Court's decision.We required the private respondents to file a comment and thereafter, having given due course to the petition, directed the parties to file their briefs. Only the petitioner, however, filed a brief, and the private respondents having failed to file one, we declared the case submitted for decision.The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property held in common?Essentially, it is the petitioner's contention that the property subject of dispute devolved upon him upon the failure of his co-heirs to join him in its redemption within the period required by law. He relies on the provisions of Article 1515 of the old Civil Article 1613 of the present Code, giving the vendeea retrothe right to demand redemption of the entire property.There is no merit in this petition.The right of repurchase may be exercised by a co-owner with aspect to his share alone.5While the records show that the petitioner redeemed the property in its entirety, shouldering the expenses therefor, that did not make him the owner of all of it. In other words, it did not put to end the existing state of co-ownership.Necessary expenses may be incurred by one co-owner, subject to his right to collect reimbursement from the remaining co-owners.6There is no doubt that redemption of property entails a necessary expense. Under the Civil Code:ART. 488. Each co-owner shall have a right to compel the other co-owners to contribute to the expenses of preservation of the thing or right owned in common and to the taxes. Any one of the latter may exempt himself from this obligation by renouncing so much of his undivided interest as may be equivalent to his share of the expenses and taxes. No such waiver shall be made if it is prejudicial to the co-ownership.The result is that the property remains to be in a condition of co-ownership. While a vendeea retro, under Article 1613 of the Code, "may not be compelled to consent to a partial redemption," the redemption by one co-heir or co-owner of the property in its totality does not vest in him ownership over it. Failure on the part of all the co-owners to redeem it entitles the vendeea retroto retain the property and consolidate title thereto in his name.7But the provision does not give to the redeeming co-owner the right to the entire property. It does not provide for a mode of terminating a co-ownership.Neither does the fact that the petitioner had succeeded in securing title over the parcel in his name terminate the existing co-ownership. While his half-brothers and sisters are, as we said, liable to him for reimbursement as and for their shares in redemption expenses, he cannot claim exclusive right to the property owned in common. Registration of property is not a means of acquiring ownership. It operates as a mere notice of existing title, that is, if there is one.The petitioner must then be said to be a trustee of the property on behalf of the private respondents. The Civil Code states:ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.We agree with the respondent Court of Appeals that fraud attended the registration of the property. The petitioner's pretension that he was the sole heir to the land in the affidavit of extrajudicial settlement he executed preliminary to the registration thereof betrays a clear effort on his part to defraud his brothers and sisters and to exercise sole dominion over the property. The aforequoted provision therefore applies.It is the view of the respondent Court that the petitioner, in taking over the property, did so either on behalf of his co-heirs, in which event, he had constituted himself anegotiorum gestorunder Article 2144 of the Civil Code, or for his exclusive benefit, in which case, he is guilty of fraud, and must act as trustee, the private respondents being the beneficiaries, under the Article 1456. The evidence, of course, points to the second alternative the petitioner having asserted claims of exclusive ownership over the property and having acted in fraud of his co-heirs. He cannot therefore be said to have assume the mere management of the property abandoned by his co-heirs, the situation Article 2144 of the Code contemplates. In any case, as the respondent Court itself affirms, the result would be the same whether it is one or the other. The petitioner would remain liable to the Private respondents, his co-heirs.This Court is not unaware of the well-established principle that prescription bars any demand on property (owned in common) held by another (co-owner) following the required number of years. In that event, the party in possession acquires title to the property and the state of co-ownership is ended .8In the case at bar, the property was registered in 1955 by the petitioner, solely in his name, while the claim of the private respondents was presented in 1974. Has prescription then, set in?We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership, must have been preceded by repudiation (of the co-ownership). The act of repudiation, in turn is subject to certain conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is clearly made known to the other co-owners; (3) the evidence thereon is clear and conclusive, and (4) he has been in possession through open, continuous, exclusive, and notorious possession of the property for the period required by law.9The instant case shows that the petitioner had not complied with these requisites. We are not convinced that he had repudiated the co-ownership; on the contrary, he had deliberately kept the private respondents in the dark by feigning sole heirship over the estate under dispute. He cannot therefore be said to have "made known" his efforts to deny the co-ownership. Moreover, one of the private respondents, Emeteria Asejo, is occupying a portion of the land up to the present, yet, the petitioner has not taken pains to eject her therefrom. As a matter of fact, he sought to recover possession of that portion Emeteria is occupying only as a counterclaim, and only after the private respondents had first sought judicial relief.It is true that registration under the Torrens system is constructive notice of title,10but it has likewise been our holding that the Torrens title does not furnish a shield for fraud.11It is therefore no argument to say that the act of registration is equivalent to notice of repudiation, assuming there was one, notwithstanding the long-standing rule that registration operates as a universal notice of title.For the same reason, we cannot dismiss the private respondents' claims commenced in 1974 over the estate registered in 1955. While actions to enforce a constructive trust prescribes in ten years,12reckoned from the date of the registration of the property,13we, as we said, are not prepared to count the period from such a date in this case. We note the petitioner'ssub rosaefforts to get hold of the property exclusively for himself beginning with his fraudulent misrepresentation in his unilateral affidavit of extrajudicial settlement that he is "the only heir and child of his mother Feliza with the consequence that he was able to secure title in his name also."14Accordingly, we hold that the right of the private respondents commenced from the time they actually discovered the petitioner's act of defraudation.15According to the respondent Court of Appeals, they "came to know [of it] apparently only during the progress of the litigation."16Hence, prescription is not a bar.Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in a motion to dismiss or in the answer otherwise it is deemed waived,17and here, the petitioner never raised that defense.18There are recognized exceptions to this rule, but the petitioner has not shown why they apply.WHEREFORE, there being no reversible error committed by the respondent Court of Appeals, the petition is DENIED. The Decision sought to be reviewed is hereby AFFIRMED in toto. No pronouncement as to costs.SO ORDERED,

[G.R. No. 124899. March 30, 2004]RENATO C. SALVADOR,petitioner, vs.COURT OF APPEALS, MARIA ROMAYNE MIRANDA and GILBERT MIRANDA,respondents.D E C I S I O NCARPIO,J.:The CaseBefore the Court is a petition for review[1]assailing the Decision[2]of 30 April 1996 of the Court of Appeals in CA-G.R. CV No. 39661. The Court of Appeals set aside the Decision[3]of 18 August 1992 of the Regional Trial Court of San Mateo, Rizal, Branch 76, in Civil Case No. 754. The trial court dismissed petitioners complaint and respondents counterclaims for insufficiency of basis. The appellate court found for respondents, and directed petitioner to pay damages.Antecedent FactsMaria Romayne Miranda (Romayne) is the owner of a parcel of land (Property) with an area of 17,748 square meters in Cabcaben, Mariveles, Bataan. The Property is registered with the Register of Deeds of Bataan under TCT No. T-129442.Romayne appointed her cousin, Gilbert Miranda (Gilbert), as her attorney-in-fact under a General Power of Attorney[4]dated 15 April 1990. Romayne authorized Gilbert to execute contracts on her behalf and to manage her properties, including the Property subject of the present case, and to perform other acts in her place.On 9 July 1990, Gilbert, as Romaynes agent, entered into a Development and Construction Contract[5](Contract) with Renato C. Salvador (Salvador), a duly licensed contractor and proprietor of Montariza Construction. The Contract was for the development of the Property into the Haven of Peace Memorial Park (Project) and the construction of several structures for that purpose. Salvador agreed to undertake the Project for the consideration ofP3,986,643.50 (Contract Price).Salvador undertook to complete the Project within 180 working days from receipt of the down payment, with a grace period of 45 working days. The Contract also contained the following provisions:17.In case of changes, alterations or deviations in the plans, specifications and bill of materials hereinabove mentioned as may be necessary in the course of the implementation of the development and construction, the same shall be mutually agreed upon by the herein parties in writing;18.In case of substantial increase/s of prices of the materials, like cement, G.I. corrugated sheets, the said contract price shall be adjusted accordingly as to the particular item/s of (sic) material/s involved in the increase/s of prices;xxx20.All other matters relating to the project not stipulated in this contract are deemed not included herein unless the parties may agree on said matters in writing;xxx.[6]Work on the Project began sometime in July 1990 upon Gilberts payment ofP797,328.70 as twenty per cent (20%) down payment. Salvador periodically submitted progress billings, which Gilbert promptly paid. The billings included work on the structures stipulated in the Contract, as well as additional works and change orders.In December 1990, however, Salvador demanded that Gilbert pay the following amounts in addition to the Contract Price: (1)P39,000 or a 20% fee onP196,000 worth of filling materials respondents themselves supplied for the Project; (2) a 20% escalation or adjustment of the unpaid balance of the Contract Price in the amount ofP637,862.96; and (3) billing for alleged additional works in the amount ofP399,190.46.Salvador was particularly insistent on the escalation of the Contract Price. In his first letter dated 18 December 1990, Salvador informed Gilbert that the prices of construction materials had increased by about forty (40%) percent.[7]Two days later, Salvador wrote again to advise Gilbert that although the Project was almost 90% completed, the latters failure to grant the escalation would leave Salvador with no choice but to stop operation and wait for you (Gilbert) to initiate a renegotiation.[8]Gilbert responded by requesting for a detailed computation of the proposed escalation. On 25 December 1990, Salvador submitted a breakdown of the services and construction work done on the Project. The breakdown included the total cost of each service and the portion of the Contract Price still due for each service. To arrive at the proposed escalation ofP637,862.96, the computation merely imposed a uniform increase of 20% on the outstanding balance still payable on each service.[9]Dissatisfied with the computation, Gilbert required Salvador to submit receipts showing the purchase of construction materials used in the Project, the dates of purchase of these materials, and the increase in their prices. Gilbert pointed out that he had already paid a total ofP3,775,804.80 for work on the Project and that the remaining balance due under the Contract wasP210,838.71. Salvador agreed to submit the required documents while Gilbert agreed to release an additionalP120,065.80. Thus, onlyP90,772.91 of the Contract Price remained unpaid.Gilbert also paid Salvador an additionalP100,000[10]andP150,000[11]as advances on the escalation of the Contract Price. However, citing paragraph 17 of the Contract, Gilbert contended that further demands for additional costs and escalation were baseless and unreasonable.On 11 January 1991, Salvador reiterated his last and final demand that Gilbert pay within 5 days a total ofP1,076,253.32 representing the 20% charge on filling materials, the 20% escalation of the Contract Price and the latest billing for additional works.Otherwise, Salvador would stop work on the Project because he had no more funds and resources to continue the operation.[12]Salvador ceased construction work on the Project on 14 January 1991.In a letter dated 16 January 1991, Salvador informed Gilbert that his office had received a notice of illegal construction (DPWH Notice) from the Balanga, Bataan district office of the Department of Public Works and Highways. The DPWH Notice,[13]copy of which Salvador attached to his letter, was dated 8 January 1991 and received by one of Salvadors engineers on 15 January 1991.[14]The DPWH Notice stated that the Project had no building permit and ordered Salvador to stop immediately all building activities and to contact the district office within 3 days. Salvador reminded Gilbert that it was the latters responsibility under the Contract to secure the necessary permits and licenses for the Project.A few days later, Gilbert received a demand letter from Salvadors counsel requiring the payment ofP1,076,253.32 and 10% attorneys fees within 3 days. On 31 January 1991, Salvador filed before the trial court a complaint for collection of sum of money and damages or for declaration of claim as lien against Romayne and Gilbert (respondents).In March 1991, Gilbert replaced Salvador with a new contractor and ejected Salvadors crew from the Project site.The Ruling of the Trial CourtAfter trial on the merits, the trial court dismissed Salvadors complaint and respondents counterclaims for insufficiency of basis.The trial court observed that the escalation clause in the Contract required Salvador to specify the materials the prices of which had increased. Since the documents submitted by Salvador did not specify these materials, the trial court held that there was no basis for an adjustment or escalation of the Contract Price.The trial court likewise ruled that Salvador failed to prove that the parties had agreed on theP399,190.46 worth of additional work performed on the Project. There was neither a written agreement nor notice to respondents that Salvador would undertake such additional work.The trial court denied Salvadors claim forP39,000 or 20% of the cost of filling materials for lack of basis. The evidence showed that respondents themselves purchased the filling materials forP196,000 and had them delivered to the Project site. Salvador merely caused the spreading of the filling materials. The trial court ruled that no provision in the Contract or subsequent written agreement justified the 20% charge on materials not procured or delivered by Salvador.The salient portion of the trial courts decision reads as follows:The totality of the evidence adduced in this case would show the need for the herein parties to make a true and honest accounting of all the expenses incurred in the implementation of the subject construction contract, in the presence of an independent third party. As it now stands, plaintiffs cause of action herein is insufficiently supported, wanting in fact [and] in credible and competent basis, as afore-discussed.WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant case for insufficiency of basis. No pronouncement as to costs.Defendants counterclaims are likewise dismissed for insufficiency of basis.SO ORDERED.[15]Salvador appealed the trial courts decision to the Court of Appeals.The Ruling of the Court of AppealsThe Court of Appeals upheld the denial of Salvadors claims. However, the appellate court ruled that the receipts submitted by respondents during the trial adequately established the damage respondents sustained when Salvador ceased work on the Project. The Court of Appeals also found Salvador in bad faith for stopping the construction of the Project without valid reasons.The Court of Appeals granted respondents counterclaims and awarded damages:WHEREFORE, premises considered, the judgment of the lower court is hereby REVERSED and SET ASIDE and a new one is entered:a)Dismissing the Complaint;b)Ordering plaintiff to reimburse defendant the amount ofP1,685,532.48 representing the amount spent by the defendant in completing the project herself less theP90,772.91 that defendant admitted to be the balance of her obligation to plaintiff as of December 28, 1990;c)Ordering plaintiff to pay defendantP100,000.00 moraldamages andP50,000.00 exemplary damages;d)Ordering plaintiff to pay defendantP20,000.00 as attorneys fees.Cost against plaintiff-appellant.[16]Hence, the instant petition.The IssuesThe petition contends that:1.THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING PETITIONER TO REIMBURSE THE PRIVATE RESPONDENTS OFP1,685,532.48[17]ALLEGEDLY SPENT IN COMPLETING THE PROJECT;2.THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS CLAIM FOR ADJUSTMENT OR ESCALATION OF THE CONTRACT PRICE HAD NO REASONABLE BASIS, IN THE LIGHT OF THE ADMISSION OF THE OBLIGATION BY PRIVATE RESPONDENTS AND CLEAR EVIDENCE;3.THE COURT OF APPEALS ERRED IN HOLDING THAT THE ADDITIONAL WORKS OF PETITIONER WERE NOT AUTHORIZED, IN THE LIGHT OF THE ADMISSION OF THE OBLIGATION BY PRIVATE RESPONDENTS AND THE CLEAR EVIDENCE.4.THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACT OF PETITIONER IN STOPPING WORK IN THE PROJECT WAS DUE TO NON-PAYMENT OF THE ESCALATED PRICE AND ADDITIONAL WORKS, CONTRARY TO THE CLEAR EVIDENCE.[18]The central issues left for the resolution of this Court are: (1) whether Salvadors claims for additional work, including the 20% charge on filling materials, and escalation of the Contract Price are valid; and (2) whether respondents are entitled to their counterclaim and damages.The Ruling of the CourtThe petition is partly meritorious.The Claims for Additional Works Done on the Projectand for Escalation of the Contract PriceIt is evident from the issues raised that the petition seeks a review of some of the factual findings of the Court of Appeals.Petitions for review oncertiorariunder Rule 45 are generally limited to questions of law. Moreover, factual findings of the Court of Appeals, particularly when they affirm those of the trial court, are binding on this Court.[19]Upon examining the evidence, the trial and appellate courts found that: (1) respondents did not authorize additional works on the Project nor agree to a price for such works; and (2) Salvador did not specify the particular items or materials which had increased in price. The Court will not disturb these factual findings absent compelling or exceptional reasons.[20]Given these facts, we rule that the law and the Contract do not allow petitioners claims for additional works and escalation of the Contract Price.There are two requisites in order that a contractor may claim additional costs:Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans and specifications agreed upon with the landowner, can neither withdraw from the contract nor demand an increase in the price on account of the higher cost of labor or materials, save when there has been a change in the plans and specifications, provided:(1)Such change has been authorized by the proprietor in writing; and(2)The additional price to be paid to the contractor has been determined in writing by both parties.[21]Compliance withbothof these requirements is a condition precedent to the recovery of additional costs.[22]Even the absence of one of the elements required by Article 1724 bars recovery.[23]In the present case, Salvador failed to present any written authority from respondents for any change in the plans or specifications agreed upon in the Contract. Salvador also failed to present any agreement on the price for such additional work. Salvador did not notify respondents in advance of the additional work he performed on the Project. The Contract did not authorize Salvador to determine unilaterally the changes to be made in the Project, or what price to charge for such changes. Not having fulfilled any of the requirements in Article 1724, Salvadors claim ofP399,190.46 for alleged additional works has no legal basis.On the other hand, Salvadors demand for an escalation of the Contract Price hinges on paragraph 18[24]of the Contract.Construction contracts may provide for the escalation or increase of the price originally agreed upon by the parties in certain instances. As the Court explained inBaylen Corporation v. Court of Appeals:[25]Escalation clauses in construction contracts commonly provide for increases in the contract priceunder certain specified circumstances, e.g., as the cost of selected commodities(cement, fuel, steel bars) or the cost of living in the general community (as measured by, for instance, the Consumer Price Index officially published regularly by the Central Bank)move up beyond specified levels. (Emphasis supplied)The parties may validly agree on an escalation clause.[26]However, the enforceability of an escalation clause is subject to the conditions stipulated in the contract.[27]Paragraph 18 of the Contract expressly provides for the escalation or adjustment of the Contract Price in the event ofsubstantial increase/s of pricesof the materials, like cement, G.I. corrugated sheets.[28]Clearly, paragraph 18 of the Contract authorizes an escalation of the Contract Price only if there are substantial increases in the prices of materials such as cement and G.I. corrugated sheets. Absent substantial increases in the prices of materials used in the Project, paragraph 18 would not apply.The records show that respondents were amenable to an escalation of the Contract Price, and that they in fact paid SalvadorP250,000 in anticipation of the escalation. Respondents were merely insisting that Salvador comply with what the Contract required, that is, specify the increase in the prices of particular materials purchased for the Project. Under paragraph 18, Salvador had the obligation to show that there were substantial increases in the prices of particular materials used in the Project. The trial and appellate courts found, and the records support the finding, that Salvador did not comply with this obligation.Salvador contends that the computation[29]he submitted dated 25 December 1990 sufficiently complied with the conditions of paragraph 18. He alleges that the 20% increase in the cost of the services enumerated in the computation necessarily included the increase in the prices of the materials used. He had also informed respondents earlier that the prices of construction materials had increased by as much as 40%. Salvador further argues that the burden of proof had shifted to respondents to present a counter-computation as to what they considered the correct escalation of the Contract Price.We do not agree.Salvador supplied the materials for the construction of the Project.[30]Salvador would thus be in the best position to provide the actual increases in the prices of the materials. Salvador also alleged that the prices of construction materials rose substantially since the Project began in July 1990. The rule is that he who alleges a fact has the burden of proving it.[31]Salvador never presented receipts, billings from suppliers or similar documents substantiating his claim. Indeed, Salvadors obdurate refusal to provide the simple details required by the Contract puzzles the Court.A contract is the law between the parties and they are bound by its stipulations.[32]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.[33]Under the terms of paragraph 18 of the Contract, the Contract Price shall beadjusted accordingly as to theparticular item/s o[r] materials involved in the increase/s of prices.[34]This stipulation is plainly worded, requiring no interpretation. The Contract Price could be adjusted only up to the actual increase in the prices ofparticular item/s or materialsused in the Project.Paragraph 18 of the Contract did not give Salvador the right to determine arbitrarily the proportion or amount of the escalation in the Contract Price. The Contract requires that any escalation in the Contract Price must result fromsubstantial increase/sin the prices ofparticular item/s or materialsused in the Project. This certainly excludes escalation based on estimates or blanket increases. The computation Salvador provided failed to identify the particular materials that had increased in price and the amount of such price increases. His general claim that the prices of construction materials had increased by 40% was not sufficient under the terms of paragraph 18. There was thus no basis for Salvadors demand of a blanket 20% increase on all materials.Assumingarguendothat the Contract authorized Salvador to determine unilaterally the escalation of the Contract Price, such a provision would be void for violating the principle of mutuality.[35]InPhilippine National Bank v. Court of Appeals,the Court struck down the increases in interest rates unilaterally imposed by Philippine National Bank pursuant to an escalation clause, and declared that:In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties based on their essential equality. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555). Hence, even assuming that theP1.8 million loan agreement between the PNB and private respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will during the term of the loan, that license would have been null and void for being violative of the principle of mutuality essential in contracts. It would have invested the loan agreement with the character of a contract of adhesion, where the parties do not bargain on equal footing, the weaker partys (the debtor) participation being reduced to the alternative to take it or leave it (Qua vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable trap for the weaker party whom the courts of justice must protect against abuse and imposition.[36]Moreover, the computation Salvador submitted plainly shows a 20% increase in the cost ofservices.The Contract does not authorize any escalation in the cost of services Salvador would render to the Project.We agree with the trial court that Salvador has no basis to charge respondents a fee of 20% orP39,000 on filling materials that respondents supplied to the Project. Salvador himself testified that: (1) respondents ordered and purchased the filling materials forP196,000; and (2) respondents caused the delivery of the materials to the Project site.[37]Neither the Contract nor any other document presented during trial provided for a 20% charge on materials that respondents supplied to the Project. On the contrary, under paragraph 20 of the Contract, matters relating to the Project not stipulated in this contract are deemed not included herein unless the parties may agree on said matters in writing. Under the Contract, Salvador had the obligation to supply the materials for the construction of the Project.[38]We cannot penalize respondents and reward Salvador for respondents act in assuming part of Salvadors obligation under the Contract when Salvador himself did not object to such act.Respondents Counterclaim and the DamagesAwarded by the Court of AppealsThe trial court ruled that respondents counterclaim had no basis. On appeal, the Court of Appeals reversed this ruling and ordered Salvador to reimburse respondentsP1,594,759.57, representing the amount allegedly spent by respondents in completing the Project less theP90,772.91 balance of the Contract Price. On the ground that Salvador was in bad faith, the appellate court also awarded respondentsP100,000 in moral damages,P50,000 in exemplary damages andP20,000 in attorneys fees.While factual findings of the lower courts are generally conclusive on this Court, the rule is subject to certain exceptions, as when the findings of fact of the trial court and Court of Appeals diverge.[39]The Court of Appeals concluded that Salvador stopped work on the Project due to respondents failure to accede to his demand for payment of the price escalation. The evidence on record supports this. Salvador sent respondents several letters threatening to halt construction of the Project precisely for this reason.Salvador maintains, however, that he was merely complying with the DPWH Notice when he stopped all construction activities on 14 January 1991. This argument does not convince us. Despite Salvadors claim that he received the DPWH Notice on 14 January 1991, the DPWH Notice itself shows that a certain Dennis Coronado received the notice on 15 January 1991,[40]the day after Salvador ceased to work on the Project.In a contract involving reciprocal obligations, the rules on when a party may be declared in default are found in Article 1169:Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.x x xIn reciprocal obligations,neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.From the moment one of the parties fulfills his obligation, delay by the other begins.[41](Emphasis supplied.)Although Salvador stopped work on the Project in breach of the Contract and in violation of the law,[42]respondents were likewise remiss in their obligations under the Contract. Paragraph 7 of the Contract states:7. The project owner shall be responsible in applying for and obtaining at his/her own expens/es (sic) whatever permits, licenses and/or documents as may be necessary from the Government or any of its agencies, or otherwise; xxxThe National Building Code requires a building permit on all construction projects.[43]In the present case, the parties were able to start and even almost complete the Project without a building permit. The failure of respondents to secure the required building permit constitutes a breach of their obligation under the Contract. Even if Salvador did not voluntarily stop working on the Project, he would not have been able to complete the Project because of the cease-and-desist order from the DPWH.Thus, we cannot attribute Salvadors failure to complete the Project within the contract period solely to his voluntary work stoppage. Paragraph 6 of the Contract provides:6.That should there be any restraining order and/or injunction from the court orany legal authority which will cause stoppage of the workof the CONTRACTOR relating to the said project, the same should be considered as [a] fortuitous event and/or force majeure, and thetime of stoppage of work shall be deducted from the agreed time of completionof the project;[44](Emphasis supplied)The DPWH Notice suspended the running of the period given to Salvador to complete the Project. Respondents were not able to show that the DPWH lifted the cease-and-desist order, or that they subsequently secured a building permit. Since respondents failed to prove that they had fulfilled their obligation under the Contract, Salvadors failure to complete the Project within the contract period cannot be attributed solely to his voluntary work stoppage.There is, therefore, no legal basis to grant respondents counterclaim forP1,685,532.48, the amount they allegedly spent to complete the Project.Respondents point out that when a new contractor took over to complete the Project, no one from the DPWH stopped the Project, showing that Salvador could also have completed the Project even without the required building permit.[45]Respondents betray a disturbingly cavalier attitude towards the strict requirements of the law, including the Sanitation Code,[46]in establishing a memorial park or cemetery. The State strictly regulates the establishment of memorial parks or cemeteries because they affect public health. Memorial parks or cemeteries must be located and constructed without contaminating rivers, underground water tables and the surrounding areas.[47]We also find untenable the award of moral and exemplary damages, as well as attorneys fees to respondents. A breach of contract may give rise to an award of moral damages if the party guilty of the breach acted fraudulently or in bad faith.[48]In this case, both parties did not comply with their obligations under the Contract. Respondents must share part of the blame for the stoppage of work on the Project, as the stoppage was partly due to respondents failure to obtain the necessary building permit. Likewise, a breach of contract may give rise to exemplary damages only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.[49]Neither the records nor the decisions of the trial and appellate courts indicate that Salvador behaved in such a manner and to such degree as to warrant the grant of exemplary damages. We also delete the award of attorneys fees since none of the grounds for awarding attorneys fees under Article 2208 of the Civil Code applies to the present case.WHEREFORE, the Decision of 30 April 1996 of the Court of Appeals in CA-G.R. CV No. 39661 is REVERSED. The Decision of 18 August 1992 of the Regional Trial Court of San Mateo, Rizal, Branch 76, in Civil Case No. 754, dismissing petitioner Renato C. Salvadors complaint as well as respondents Maria Romayne Miranda and Gilbert Mirandas counterclaims, is REINSTATED. No pronouncement as to costs.SO ORDERED.[G.R. No. 124899. March 30, 2004]RENATO C. SALVADOR,petitioner, vs.COURT OF APPEALS, MARIA ROMAYNE MIRANDA and GILBERT MIRANDA,respondents.D E C I S I O NCARPIO,J.:The CaseBefore the Court is a petition for review[1]assailing the Decision[2]of 30 April 1996 of the Court of Appeals in CA-G.R. CV No. 39661. The Court of Appeals set aside the Decision[3]of 18 August 1992 of the Regional Trial Court of San Mateo, Rizal, Branch 76, in Civil Case No. 754. The trial court dismissed petitioners complaint and respondents counterclaims for insufficiency of basis. The appellate court found for respondents, and directed petitioner to pay damages.Antecedent FactsMaria Romayne Miranda (Romayne) is the owner of a parcel of land (Property) with an area of 17,748 square meters in Cabcaben, Mariveles, Bataan. The Property is registered with the Register of Deeds of Bataan under TCT No. T-129442.Romayne appointed her cousin, Gilbert Miranda (Gilbert), as her attorney-in-fact under a General Power of Attorney[4]dated 15 April 1990. Romayne authorized Gilbert to execute contracts on her behalf and to manage her properties, including the Property subject of the present case, and to perform other acts in her place.On 9 July 1990, Gilbert, as Romaynes agent, entered into a Development and Construction Contract[5](Contract) with Renato C. Salvador (Salvador), a duly licensed contractor and proprietor of Montariza Construction. The Contract was for the development of the Property into the Haven of Peace Memorial Park (Project) and the construction of several structures for that purpose. Salvador agreed to undertake the Project for the consideration ofP3,986,643.50 (Contract Price).Salvador undertook to complete the Project within 180 working days from receipt of the down payment, with a grace period of 45 working days. The Contract also contained the following provisions:17.In case of changes, alterations or deviations in the plans, specifications and bill of materials hereinabove mentioned as may be necessary in the course of the implementation of the development and construction, the same shall be mutually agreed upon by the herein parties in writing;18.In case of substantial increase/s of prices of the materials, like cement, G.I. corrugated sheets, the said contract price shall be adjusted accordingly as to the particular item/s of (sic) material/s involved in the increase/s of prices;xxx20.All other matters relating to the project not stipulated in this contract are deemed not included herein unless the parties may agree on said matters in writing;xxx.[6]Work on the Project began sometime in July 1990 upon Gilberts payment ofP797,328.70 as twenty per cent (20%) down payment. Salvador periodically submitted progress billings, which Gilbert promptly paid. The billings included work on the structures stipulated in the Contract, as well as additional works and change orders.In December 1990, however, Salvador demanded that Gilbert pay the following amounts in addition to the Contract Price: (1)P39,000 or a 20% fee onP196,000 worth of filling materials respondents themselves supplied for the Project; (2) a 20% escalation or adjustment of the unpaid balance of the Contract Price in the amount ofP637,862.96; and (3) billing for alleged additional works in the amount ofP399,190.46.Salvador was particularly insistent on the escalation of the Contract Price. In his first letter dated 18 December 1990, Salvador informed Gilbert that the prices of construction materials had increased by about forty (40%) percent.[7]Two days later, Salvador wrote again to advise Gilbert that although the Project was almost 90% completed, the latters failure to grant the escalation would leave Salvador with no choice but to stop operation and wait for you (Gilbert) to initiate a renegotiation.[8]Gilbert responded by requesting for a detailed computation of the proposed escalation. On 25 December 1990, Salvador submitted a breakdown of the services and construction work done on the Project. The breakdown included the total cost of each service and the portion of the Contract Price still due for each service. To arrive at the proposed escalation ofP637,862.96, the computation merely imposed a uniform increase of 20% on the outstanding balance still payable on each service.[9]Dissatisfied with the computation, Gilbert required Salvador to submit receipts showing the purchase of construction materials used in the Project, the dates of purchase of these materials, and the increase in their prices. Gilbert pointed out that he had already paid a total ofP3,775,804.80 for work on the Project and that the remaining balance due under the Contract wasP210,838.71. Salvador agreed to submit the required documents while Gilbert agreed to release an additionalP120,065.80. Thus, onlyP90,772.91 of the Contract Price remained unpaid.Gilbert also paid Salvador an additionalP100,000[10]andP150,000[11]as advances on the escalation of the Contract Price. However, citing paragraph 17 of the Contract, Gilbert contended that further demands for additional costs and escalation were baseless and unreasonable.On 11 January 1991, Salvador reiterated his last and final demand that Gilbert pay within 5 days a total ofP1,076,253.32 representing the 20% charge on filling materials, the 20% escalation of the Contract Price and the latest billing for additional works.Otherwise, Salvador would stop work on the Project because he had no more funds and resources to continue the operation.[12]Salvador ceased construction work on the Project on 14 January 1991.In a letter dated 16 January 1991, Salvador informed Gilbert that his office had received a notice of illegal construction (DPWH Notice) from the Balanga, Bataan district office of the Department of Public Works and Highways. The DPWH Notice,[13]copy of which Salvador attached to his letter, was dated 8 January 1991 and received by one of Salvadors engineers on 15 January 1991.[14]The DPWH Notice stated that the Project had no building permit and ordered Salvador to stop immediately all building activities and to contact the district office within 3 days. Salvador reminded Gilbert that it was the latters responsibility under the Contract to secure the necessary permits and licenses for the Project.A few days later, Gilbert received a demand letter from Salvadors counsel requiring the payment ofP1,076,253.32 and 10% attorneys fees within 3 days. On 31 January 1991, Salvador filed before the trial court a complaint for collection of sum of money and damages or for declaration of claim as lien against Romayne and Gilbert (respondents).In March 1991, Gilbert replaced Salvador with a new contractor and ejected Salvadors crew from the Project site.The Ruling of the Trial CourtAfter trial on the merits, the trial court dismissed Salvadors complaint and respondents counterclaims for insufficiency of basis.The trial court observed that the escalation clause in the Contract required Salvador to specify the materials the prices of which had increased. Since the documents submitted by Salvador did not specify these materials, the trial court held that there was no basis for an adjustment or escalation of the Contract Price.The trial court likewise ruled that Salvador failed to prove that the parties had agreed on theP399,190.46 worth of additional work performed on the Project. There was neither a written agreement nor notice to respondents that Salvador would undertake such additional work.The trial court denied Salvadors claim forP39,000 or 20% of the cost of filling materials for lack of basis. The evidence showed that respondents themselves purchased the filling materials forP196,000 and had them delivered to the Project site. Salvador merely caused the spreading of the filling materials. The trial court ruled that no provision in the Contract or subsequent written agreement justified the 20% charge on materials not procured or delivered by Salvador.The salient portion of the trial courts decision reads as follows:The totality of the evidence adduced in this case would show the need for the herein parties to make a true and honest accounting of all the expenses incurred in the implementation of the subject construction contract, in the presence of an independent third party. As it now stands, plaintiffs cause of action herein is insufficiently supported, wanting in fact [and] in credible and competent basis, as afore-discussed.WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant case for insufficiency of basis. No pronouncement as to costs.Defendants counterclaims are likewise dismissed for insufficiency of basis.SO ORDERED.[15]Salvador appealed the trial courts decision to the Court of Appeals.The Ruling of the Court of AppealsThe Court of Appeals upheld the denial of Salvadors claims. However, the appellate court ruled that the receipts submitted by respondents during the trial adequately established the damage respondents sustained when Salvador ceased work on the Project. The Court of Appeals also found Salvador in bad faith for stopping the construction of the Project without valid reasons.The Court of Appeals granted respondents counterclaims and awarded damages:WHEREFORE, premises considered, the judgment of the lower court is hereby REVERSED and SET ASIDE and a new one is entered:a)Dismissing the Complaint;b)Ordering plaintiff to reimburse defendant the amount ofP1,685,532.48 representing the amount spent by the defendant in completing the project herself less theP90,772.91 that defendant admitted to be the balance of her obligation to plaintiff as of December 28, 1990;c)Ordering plaintiff to pay defendantP100,000.00 moraldamages andP50,000.00 exemplary damages;d)Ordering plaintiff to pay defendantP20,000.00 as attorneys fees.Cost against plaintiff-appellant.[16]Hence, the instant petition.The IssuesThe petition contends that:1.THE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING PETITIONER TO REIMBURSE THE PRIVATE RESPONDENTS OFP1,685,532.48[17]ALLEGEDLY SPENT IN COMPLETING THE PROJECT;2.THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS CLAIM FOR ADJUSTMENT OR ESCALATION OF THE CONTRACT PRICE HAD NO REASONABLE BASIS, IN THE LIGHT OF THE ADMISSION OF THE OBLIGATION BY PRIVATE RESPONDENTS AND CLEAR EVIDENCE;3.THE COURT OF APPEALS ERRED IN HOLDING THAT THE ADDITIONAL WORKS OF PETITIONER WERE NOT AUTHORIZED, IN THE LIGHT OF THE ADMISSION OF THE OBLIGATION BY PRIVATE RESPONDENTS AND THE CLEAR EVIDENCE.4.THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACT OF PETITIONER IN STOPPING WORK IN THE PROJECT WAS DUE TO NON-PAYMENT OF THE ESCALATED PRICE AND ADDITIONAL WORKS, CONTRARY TO THE CLEAR EVIDENCE.[18]The central issues left for the resolution of this Court are: (1) whether Salvadors claims for additional work, including the 20% charge on filling materials, and escalation of the Contract Price are valid; and (2) whether respondents are entitled to their counterclaim and damages.The Ruling of the CourtThe petition is partly meritorious.The Claims for Additional Works Done on the Projectand for Escalation of the Contract PriceIt is evident from the issues raised that the petition seeks a review of some of the factual findings of the Court of Appeals.Petitions for review oncertiorariunder Rule 45 are generally limited to questions of law. Moreover, factual findings of the Court of Appeals, particularly when they affirm those of the trial court, are binding on this Court.[19]Upon examining the evidence, the trial and appellate courts found that: (1) respondents did not authorize additional works on the Project nor agree to a price for such works; and (2) Salvador did not specify the particular items or materials which had increased in price. The Court will not disturb these factual findings absent compelling or exceptional reasons.[20]Given these facts, we rule that the law and the Contract do not allow petitioners claims for additional works and escalation of the Contract Price.There are two requisites in order that a contractor may claim additional costs:Art. 1724. The contractor who undertakes to build a structure or any other work for a stipulated price, in conformity with plans and specifications agreed upon with the landowner, can neither withdraw from the contract nor demand an increase in the price on account of the higher cost of labor or materials, save when there has been a change in the plans and specifications, provided:(1)Such change has been authorized by the proprietor in writing; and(2)The additional price to be paid to the contractor has been determined in writing by both parties.[21]Compliance withbothof these requirements is a condition precedent to the recovery of additional costs.[22]Even the absence of one of the elements required by Article 1724 bars recovery.[23]In the present case, Salvador failed to present any written authority from respondents for any change in the plans or specifications agreed upon in the Contract. Salvador also failed to present any agreement on the price for such additional work. Salvador did not notify respondents in advance of the additional work he performed on the Project. The Contract did not authorize Salvador to determine unilaterally the changes to be made in the Project, or what price to charge for such changes. Not having fulfilled any of the requirements in Article 1724, Salvadors claim ofP399,190.46 for alleged additional works has no legal basis.On the other hand, Salvadors demand for an escalation of the Contract Price hinges on paragraph 18[24]of the Contract.Construction contracts may provide for the escalation or increase of the price originally agreed upon by the parties in certain instances. As the Court explained inBaylen Corporation v. Court of Appeals:[25]Escalation clauses in construction contracts commonly provide for increases in the contract priceunder certain specified circumstances, e.g., as the cost of selected commodities(cement, fuel, steel bars) or the cost of living in the general community (as measured by, for instance, the Consumer Price Index officially published regularly by the Central Bank)move up beyond specified levels. (Emphasis supplied)The parties may validly agree on an escalation clause.[26]However, the enforceability of an escalation clause is subject to the conditions stipulated in the contract.[27]Paragraph 18 of the Contract expressly provides for the escalation or adjustment of the Contract Price in the event ofsubstantial increase/s of pricesof the materials, like cement, G.I. corrugated sheets.[28]Clearly, paragraph 18 of the Contract authorizes an escalation of the Contract Price only if there are substantial increases in the prices of materials such as cement and G.I. corrugated sheets. Absent substantial increases in the prices of materials used in the Project, paragraph 18 would not apply.The records show that respondents were amenable to an escalation of the Contract Price, and that they in fact paid SalvadorP250,000 in anticipation of the escalation. Respondents were merely insisting that Salvador comply with what the Contract required, that is, specify the increase in the prices of particular materials purchased for the Project. Under paragraph 18, Salvador had the obligation to show that there were substantial increases in the prices of particular materials used in the Project. The trial and appellate courts found, and the records support the finding, that Salvador did not comply with this obligation.Salvador contends that the computation[29]he submitted dated 25 December 1990 sufficiently complied with the conditions of paragraph 18. He alleges that the 20% increase in the cost of the services enumerated in the computation necessarily included the increase in the prices of the materials used. He had also informed respondents earlier that the prices of construction materials had increased by as much as 40%. Salvador further argues that the burden of proof had shifted to respondents to present a counter-computation as to what they considered the correct escalation of the Contract Price.We do not agree.Salvador supplied the materials for the construction of the Project.[30]Salvador would thus be in the best position to provide the actual increases in the prices of the materials. Salvador also alleged that the prices of construction materials rose substantially since the Project began in July 1990. The rule is that he who alleges a fact has the burden of proving it.[31]Salvador never presented receipts, billings from suppliers or similar documents substantiating his claim. Indeed, Salvadors obdurate refusal to provide the simple details required by the Contract puzzles the Court.A contract is the law between the parties and they are bound by its stipulations.[32]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.[33]Under the terms of paragraph 18 of the Contract, the Contract Price shall beadjusted accordingly as to theparticular item/s o[r] materials involved in the increase/s of prices.[34]This stipulation is plainly worded, requiring no interpretation. The Contract Price could be adjusted only up to the actual increase in the prices ofparticular item/s or materialsused in the Project.Paragraph 18 of the Contract did not give Salvador the right to determine arbitrarily the proportion or amount of the escalation in the Contract Price. The Contract requires that any escalation in the Contract Price must result fromsubstantial increase/sin the prices ofparticular item/s or materialsused in the Project. This certainly excludes escalation based on estimates or blanket increases. The computation Salvador provided failed to identify the particular materials that had increased in price and the amount of such price increases. His general claim that the prices of construction materials had increased by 40% was not sufficient under the terms of paragraph 18. There was thus no basis for Salvadors demand of a blanket 20% increase on all materials.Assumingarguendothat the Contract authorized Salvador to determine unilaterally the escalation of the Contract Price, such a provision would be void for violating the principle of mutuality.[35]InPhilippine National Bank v. Court of Appeals,the Court struck down the increases in interest rates unilaterally imposed by Philippine National Bank pursuant to an escalation clause, and declared that:In order that obligations arising from contracts may have the force of law between the parties, there must be mutuality between the parties based on their essential equality. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21 SCRA 555). Hence, even assuming that theP1.8 million loan agreement between the PNB and private respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will during the term of the loan, that license would have been null and void for being violative of the principle of mutuality essential in contracts. It would have invested the loan agreement with the character of a contract of adhesion, where the parties do not bargain on equal footing, the weaker partys (the debtor) participation being reduced to the alternative to take it or leave it (Qua vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a contract is a veritable trap for the weaker party whom the courts of justice must protect against abuse and imposition.[36]Moreover, the computation Salvador submitted plainly shows a 20% increase in the cost ofservices.The Contract does not authorize any escalation in the cost of services Salvador would render to the Project.We agree with the trial court that Salvador has no basis to charge respondents a fee of 20% orP39,000 on filling materials that respondents supplied to the Project. Salvador himself testified that: (1) respondents ordered and purchased the filling materials forP196,000; and (2) respondents caused the delivery of the materials to the Project site.[37]Neither the Contract nor any other document presented during trial provided for a 20% charge on materials that respondents supplied to the Project. On the contrary, under paragraph 20 of the Contract, matters relating to the Project not stipulated in this contract are deemed not included herein unless the parties may agree on said matters in writing. Under the Contract, Salvador had the obligation to supply the materials for the construction of the Project.[38]We cannot penalize respondents and reward Salvador for respondents act in assuming part of Salvadors obligation under the Contract when Salvador himself did not object to such act.Respondents Counterclaim and the DamagesAwarded by the Court of AppealsThe trial court ruled that respondents counterclaim had no basis. On appeal, the Court of Appeals reversed this ruling and ordered Salvador to reimburse respondentsP1,594,759.57, representing the amount allegedly spent by respondents in completing the Project less theP90,772.91 balance of the Contract Price. On the ground that Salvador was in bad faith, the appellate court also awarded respondentsP100,000 in moral damages,P50,000 in exemplary damages andP20,000 in attorneys fees.While factual findings of the lower courts are generally conclusive on this Court, the rule is subject to certain exceptions, as when the findings of fact of the trial court and Court of Appeals diverge.[39]The Court of Appeals concluded that Salvador stopped work on the Project due to respondents failure to accede to his demand for payment of the price escalation. The evidence on record supports this. Salvador sent respondents several letters threatening to halt construction of the Project precisely for this reason.Salvador maintains, however, that he was merely complying with the DPWH Notice when he stopped all construction activities on 14 January 1991. This argument does not convince us. Despite Salvadors claim that he received the DPWH Notice on 14 January 1991, the DPWH Notice itself shows that a certain Dennis Coronado received the notice on 15 January 1991,[40]the day after Salvador ceased to work on the Project.In a contract involving reciprocal obligations, the rules on when a party may be declared in default are found in Article 1169:Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation.x x xIn reciprocal obligations,neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.From the moment one of the parties fulfills his obligation, delay by the other begins.[41](Emphasis supplied.)Although Salvador stopped work on the Project in breach of the Contract and in violation of the law,[42]respondents were likewise remiss in their obligations under the Contract. Paragraph 7 of the Contract states:7. The project owner shall be responsible in applying for and obtaining at his/her own expens/es (sic) whatever permits, licenses and/or documents as may be necessary from the Government or any of its agencies, or otherwise; xxxThe National Building Code requires a building permit on all construction projects.[43]In the present case, the parties were able to start and even almost complete the Project without a building permit. The failure of respondents to secure the required building permit constitutes a breach of their obligation under the Contract. Even if Salvador did not voluntarily stop working on the Project, he would not have been able to complete the Project because of the cease-and-desist order from the DPWH.Thus, we cannot attribute Salvadors failure to complete the Project within the contract period solely to his voluntary work stoppage. Paragraph 6 of the Contract provides:6.That should there be any restraining order and/or injunction from the court orany legal authority which will cause stoppage of the workof the CONTRACTOR relating to the said project, the same should be considered as [a] fortuitous event and/or force majeure, and thetime of stoppage of work shall be deducted from the agreed time of completionof the project;[44](Emphasis supplied)The DPWH Notice suspended the running of the period given to Salvador to complete the Project. Respondents were not able to show that the DPWH lifted the cease-and-desist order, or that they subsequently secured a building permit. Since respondents failed to prove that they had fulfilled their obligation under the Contract, Salvadors failure to complete the Project within the contract period cannot be attributed solely to his voluntary work stoppage.There is, therefore, no legal basis to grant respondents counterclaim forP1,685,532.48, the amount they allegedly spent to complete the Project.Respondents point out that when a new contractor took over to complete the Project, no one from the DPWH stopped the Project, showing that Salvador could also have completed the Project even without the required building permit.[45]Respondents betray a disturbingly cavalier attitude towards the strict requirements of the law, including the Sanitation Code,[46]in establishing a memorial park or cemetery. The State strictly regulates the establishment of memorial parks or cemeteries because they affect public health. Memorial parks or cemeteries must be located and constructed without contaminating rivers, underground water tables and the surrounding areas.[47]We also find untenable the award of moral and exemplary damages, as well as attorneys fees to respondents. A breach of contract may give rise to an award of moral damages if the party guilty of the breach acted fraudulently or in bad faith.[48]In this case, both parties did not comply with their obligations under the Contract. Respondents must share part of the blame for the stoppage of work on the Project, as the stoppage was partly due to respondents failure to obtain the necessary building permit. Likewise, a breach of contract may give rise to exemplary damages only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.[49]Neither the records nor the decisions of the trial and appellate courts indicate that Salvador behaved in such a manner and to such degree as to warrant the grant of exemplary damages. We also delete the award of attorneys fees since none of the grounds for awarding attorneys fees under Article 2208 of the Civil Code applies to the present case.WHEREFORE, the Decision of 30 April 1996 of the Court of Appeals in CA-G.R. CV No. 39661 is REVERSED. The Decision of 18 August 1992 of the Regional Trial Court of San Mateo, Rizal, Branch 76, in Civil Case No. 754, dismissing petitioner Renato C. Salvadors complaint as well as respondents Maria Romayne Miranda and Gilbert Mirandas counterclaims, is REINSTATED. No pronouncement as to costs.SO ORDERED.

EPITACIO DELIMA, PACIANO DELIMA, FIDEL DELIMA, ET AL. VS. COURT OF APPEALS G.R. NO. L-46296201 SCRA 641SEPTEMBER 24, 1991PONENTE: MEDIALDEA, J.

Doctrine: No prescription shall run in favor of a co-owner against his co-owners or co-heirs as long as he expressly or impliedly recognizes the co-ownership. The exception however is that the from the moment one of the co-owners claims that he is the absolute and exclusive owner of the properties and denies the others any share therein, the question is no longer one of partition but of ownership.

Facts: Lino Delima acquired Lot. No. 7758 of the Talisay-Minglanilla Friar Lands Estate in Cebu by sale on installments from the government. After his demise in 1921 he had his three brothers and a sister listed as his heirs. The heirs were Eulalio Delima, Juanita Delima, Galileo Delima, and Vicente Delima. A new Transfer Certificate of Title was issued in the name of the Legal Heirs of Lino Delima represented by Galileo Delima. On September 22, 1953, Galileo executed an affidavit of Extra-judicial Declaration of Heirs adjudicating to himself the subject property excluding the other heirs. He declared the lot to be of his own and paid for its taxes. On February 29, 1968, the surviving heirs of Eulalio and Juanita Delima, filed with the Court of First Instance of Cebu an action for reconveyance and partition of property and for the annulment of the certificate of title issued plus damages against their Uncle Galileo. Vicente Delima was also later included as party defendant for his refusal to help in the action.

The trial court decided in favor of the petitioners rendering the TCT No. 3009 null and void and declaring Vicente, the Heirs of Juanita, the Heirs of Eulalio and the Heirs of Galileo to be owners of the property, each sharing a pro-indiviso share of one-fourth of the whole. The respondents, Heirs of Galileo Delima, appealed to the Court of Appeals which reversed the decision in their favor. It upheld the claim of Galileo that the other brothers and sisters have already waived their rights to the property being that it was Galileo alone that paid for the balance of the purchase price and the realty taxes for the property.Issue: Whether or not petitioners action for partition is already barred by the statutory period provided by law which shall enable Galileo Delima to perfect his claim of ownership by acquisitive prescription to the exclusion of petitioners from their shared in the disputed property?

Held: Yes, Article 494 (5) of the Civil Code provides that: No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognized the co-ownership. By this it is therefore understood that possession by a co-owner will not be presumed to be adverse to the others, but will be held to benefit all. Being that Galileo was holding the property in representation of the co-owners; he was therefore acting as an administrator who took care of the property yet still having the ultimate obligation to deliver the property to his co-owners.

However this rule shall no longer apply when one of the co-owners begin to claim the absolute and exclusive ownership and denies the others any share therein. The imprescriptability of the action for partition shall no longer apply since Galileo is adversely claiming lone ownership over the property. In order that a possession be considered adverse amounting to a repudiation of the co-ownership, the following elements must concur: (1) that the trustee has performed the unequivocal acts amounting to an ouster of the cestui que trust; (2) that such positive acts of repudiation had been made known to the cestui que trust; and (3) that the evidence thereon should be clear and conclusive.

Since Galileo, having executed a deed of partition and obtained subsequent to that the cancellation of the old title and the creation of a new one wherein he appears as the new owner of the property, he thereby in effect denied and repudiated the ownership of the other co-owners over their shares. From this act, the statute of limitations started to run. Since an action for reconveyance FIRST DIVISION

[G.R. No. 46296. September 24, 1991.]

EPITACIO DELIMA, PACIANO DELIMA, FIDEL DELIMA, VIRGILIO DELIMA, GALILEO DELIMA, JR., BIBIANO BACUS, OLIMPIO BACUS and PURIFICACION BACUS,Petitioners, v. HON. COURT OF APPEALS, GELILEO DELIMA (deceased), substituted by his legal heirs, namely; FLAVIANA VDA. DE DELIMA, LILY D. ARIAS, HELEN NIADAS, ANTONIO DELIMA, DIONISIO DELIMA, IRENEA DELIMA, ESTER DELIMA AND FELY DELIMA,Respondents.

Gabriel J. Canete, forPetitioners.

Emilio Lumontad, Jr. forPrivate Respondents.

D E C I S I O N

MEDIALDEA,J.:

This is a petition for review oncertiorariof the decision of the Court of Appeals reversing the trial courts judgment which declared as null and void the certificate of title in the name of respondents predecessor and which ordered the partition of the disputed lot among the parties as co-owners.

The antecedent facts of the case as found both by the respondent appellate court and by the trial court are as follows:chanrob1es virtual 1aw library

During his lifetime, Lino Delima acquired Lot No. 7758 of the Talisay-Minglanilla Friar Lands Estate in Cebu by sale on installments from the government. Lino Delima later died in 1921 leaving as his only heirs three brothers and a sister namely: Eulalio Delima, Juanita Delima, Galileo Delima and Vicente Delima. After his death, TCT No. 2744 of the property in question was issued on August 3, 1953 in the name of "The Legal Heirs of Lino Delima, deceased, represented by Galileo Delima."cralaw virtua1aw library

On September 22, 1953, Galileo Delima, now substituted by respondents, executed an affidavit of "Extra-judicial Declaration of Heirs." Based on this affidavit, TCT No. 2744 was cancelled and TCT No. 3009 was issued on February 4, 1954 in the name of Galileo Delima alone to the exclusion of the other heirs.

Galileo Delima declared the lot in his name for taxation purposes and paid the taxes thereon from 1954 to 1965.

On February 29, 1968,Petitioners, who are the surviving heirs of Eulalio and Juanita Delima, filed With the Court of First Instance of Cebu (now Regional Trial Court) an action for reconveyance and/or partition of property and for the annulment of TCT No. 3009 with damages against their uncles Galileo Delima and Vicente Delima,. Vicente Delima was joined as party defendant by the petitioners for his refusal to join the latter in their action.

On January 16, 1970, the trial court rendered a decision in favor of petitioners, the dispositive portion of which states:chanrobles virtual lawlibrary

"IN VIEW OF THE FOREGOING CONSIDERATIONS, the following are the declared owners of Lot No. 7758 of the Talisay-Minglanilla Friar Lands Estate presently covered by Transfer Certificate of Title No. 3009, each sharing a pro-indiviso share of one-fourth;

1) Vicente Delima (one-fourth)

2) Heirs of Juanita Delima, namely: Bibiano Bacus, Olimpio Bacus and Purificacion Bacus (one-fourth),

3) Heirs of Eulalio Delima, namely Epitacio, Paciano, Fidel, Virgilio and Galileo Jr., all surnamed Delima (one-fourth); and

4) The Heirs of Galileo Delima, namely Flaviana Vda. de Delima, Lily D. Arias, Helen Niadas, and Dionisio, Antonio, Eotu, Irenea, and Fely, all surnamed Delima (one-fourth).

"Transfer Certificate of Title No. 3009 is declared null and void and the Register of Deeds of Cebu is ordered to cancel the same and issue in lieu thereof another title with the above heirs as pro-indiviso owners.

"After the payment of taxes paid by Galileo Delima since 1958, the heirs of Galileo Delima are ordered to turn over to the other heirs their respective shares of the fruits of the lot in question computed at P170.00 per year up to the present time with legal (interest).

"Within sixty (60) days from receipt of this decision the parties are ordered to petition the lot in question and the defendants are directed to immediately turn over possession of the shares here awarded to the respective heirs.

"Defendants are condemned to pay the costs of the suit.

"The counterclaim is dismissed.

"SO ORDERED." (pp. 54-55, Rollo).

Not satisfied with the decision, respondents appealed to the Court of Appeals. On May 19, 1977, respondent appellate court reversed the trial courts decision and upheld the claim of Galileo Delima that all the other brothers and sister of Lino Delima, namely Eulalio, Juanita and Vicente, had already relinquished and waived their rights to the property in his favor, considering that he (Galileo Delima) alone paid the remaining balance of the purchase price of the lot and the realty taxes thereon (p. 26, Rollo).

Hence, this petition was filed with the petitioners alleging that the Court of Appeals erred:jgc:chanrobles.com.ph

"1) In not holding that the right of a co-heir to demand partition of inheritance is imprescriptible. If it does, the defenses of prescription and laches have already been waived.

"2) In disregarding the evidence of the petitioners." (p. 13, Rollo).

The issue to be resolved in the instant case is whether or not petitioners action for partition is already barred by the statutory period provided by law which shall enable Galileo Delima to perfect his claim of ownership by acquisitive prescription to the exclusion of petitioners from their shares in the disputed property.chanrobles law library : red

Article 494 of the Civil Code expressly provides:jgc:chanrobles.com.ph

"Art. 494. No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned.

"Nevertheless, an agreement to keep the thing undivided for a certain period of time, not exceeding ten years, shall be valid. This term may be extended by a new agreement.

"A donor or testator may prohibit partition for a period which shall not exceed twenty years.

"Neither shall there be any partition when it is prohibited by law.

"No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership."cralaw virtua1aw library

As a rule, possession by a co-owner will not be presumed to be adverse to the others, but will be held to benefit all. It is understood that the co-owner or co-heir who is in possession of an inheritance pro-indiviso for himself and in representation of his co-owners or co-heirs, if, as such owner, he administers or takes care of the rest thereof with the obligation of delivering it to his co-owners or co-heirs, is under the same situation as a depository, a lessee or a trustee (Bargayo v. Camumot, 40 Phil. 857; Segura v. Segura, No. L-29320, September 19, 1988, 165 SCRA 368). Thus, an action to compel partition may be filed at any time by any of the co-owners against the actual possessor. In other words, no prescription shall run in favor of a co-owner against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership (Del Blanco v. Intermediate Appellate Court, No. 72694, December 1 , 1987, 156 SCRA 55).

However, from the moment one of the co-owners claims that he is the absolute and exclusive owner of the properties and denies the others any share therein, the question involved is no longer one of partition but of ownership (De Castro v. Echarri, 20 Phil. 23; Bargayo v. Camumot, supra; De los Santos v. Santa Teresa, 44 Phil. 811). In such case, the imprescriptibility of the action for partition can no longer be invoked or applied when one of the co-owners has adversely possessed the property as exclusive owner for a period sufficient to vest ownership by prescription.

It is settled that possession by a co-owner or co-heir is that of a trustee. In order that such possession is considered adverse to the cestui que trust amounting to a repudiation of the co-ownership, the following elements must concur: 1) that the trustee has performed unequivocal acts amounting to an ouster of the cestui que trust; 2) that such positive acts of repudiation had been made known to the cestui que trust; and 3) that the evidence thereon should be clear and conclusive (Valdez v. Olorga, No. L-22571, May 25, 1973, 51 SCRA 71; Pangan v. Court of Appeals, No. L-39299, October 18, 1988, 166 SCRA 375).

We have held that when a co-owner of the property in question executed a deed of partition and on the strength thereof obtained the cancellation of the title in the name of their predecessor and the issuance of a new one wherein he appears as the new owner of the property, thereby in effect denying or repudiating the ownership of the other co-owners over their shares, the statute of limitations started to run for the purposes of the action instituted by the latter seeking a declaration of the existence of the co-ownership and of their rights thereunder (Castillo v. Court of Appeals, No. L-18046, March 31, 1964, 10 SCRA 549). Since an action for reconveyance of land based on implied or constructive trust prescribes after ten (10) years, it is from the date of the issuance of such title that the effective assertion of adverse title for purposes of the statute of limitations is counted (Jaramil v. Court of Appeals, No. L-31858, August 31, 1977, 78 SCRA 420).chanrobles law library

Evidence shows that TCT No. 2744 in the name of the legal heirs of Lino Delima, represented by Galileo Delima, was cancelled by virtue of an affidavit executed by Galileo Delima and that on February 4, 1954, Galileo Delima obtained the issuance of a new title in his name numbered TCT No. 3009 to the exclusion of his co-heirs. The issuance of this new title constituted an open and clear repudiation of the trust or co-ownership, and the lapse of ten (10) years of adverse possession by Galileo Delima from February 4, 1954 was sufficient to vest title in him by prescription. As the certificate of title was notice to the whole world of his exclusive title to the land, such rejection was binding on the other heirs and started as against them the period of prescription. Hence, when petitioners filed their action for reconveyance and/or to compel partition on February 29, 1963, such action was already barred by prescription. Whatever claims the other co-heirs could have validly asserted before can no longer be invoked by them at this time.

ACCORDINGLY, the petition is hereby DENIED and the assailed decision of the Court of Appeals dated May 19, 1977 is AFFIRMED.__________________________________________________________________Mariategui v. CA, 205 SCRA 337FACTS: Lupo Mariategui contracted three marriages during his lifetime. He had 4 children with his first wife, Eusebia Montellano. He had 1 child with his second wife, Flaviana Montellano. And he had 3 children with his third wife, Felipa Velasco. Lupo died instestate. Upon his death, descendants from his first and second marriages executed a deed of extrajudicial partition on Lot No. 163. However, the children on Lupos third marriage filed with the lower court an amended complaint claiming that they were deprive on the partition of Lot No. 163 which were owned by their common father. The petitioners, children on first and second marriage, filed a counterclaim to dismiss the said complaint. Trial court denied the motion to dismiss and also the complaint by the respondents, children on third marriage. Respondents elevated the case on CA on the ground that the trial court committed an error for not finding the third marriage to be lawfully married and also in holding respondents are not legitimate children of their said parents. CA rendered a decision declaring all the children and descendants of Lupo, including the respondents, are entitled to equal shares of estate of their father. However, petitioners filed a motion for reconsideration of said decision.

ISSUE: Whether or not respondents were able to prove their succession rights over the said estate.

HELD: With respect to the legal basis of private respondents' demand for partition of the estate of Lupo Mariategui, the Court of Appeals aptly held that the private respondents are legitimate children of the deceased. Lupo Mariategui and Felipa Velasco were alleged to have been lawfully married in or about 1930. This fact is based on the declaration communicated by Lupo Mariategui to Jacinto who testified that "when his father was still living, he was able to mention to him that he and his mother were able to get married before a Justice of the Peace of Taguig, Rizal." The spouses deported themselves as husband and wife, and were known in the community to be such. Although no marriage certificate was introduced to this effect, no evidence was likewise offered to controvert these facts. Moreover, the mere fact that no record of the marriage exists does not invalidate the marriage, provided all requisites for its validity are present. Under these circumstances, a marriage may be presumed to have taken place between Lupo and Felipa.

G.R. No. L-57062 January 24, 1992MARIA DEL ROSARIO MARIATEGUI, ET AL.,petitioners,vs.HON. COURT OF APPEALS, JACINTO MARIATEGUI, JULIAN MARIATEGUI and PAULINA MARIATEGUI,respondents.Montesa, Albon & Associates for petitioners.Parmenio B. Patacsil, Patacsil Twins Law Office for the heirs of the late Maria del Rosario Mariategui.Tinga, Fuentes & Tagle Firm for private respondents.BIDIN,J.:This is a petition for review oncertiorariof the decision*of the Court of Appeals dated December 24, 1980 in CA-G.R. No. 61841, entitled "Jacinto Mariategui, et al. v. Maria del Rosario Mariategui, et al.," reversing the judgment of the then Court of First Instance of Rizal, Branch VIII**at Pasig, Metro Manila.The undisputed facts are as follows:Lupo Mariategui died without a will on June 26, 1953 (Brief for respondents,Rollo, pp. 116; 8). During his lifetime, Lupo Mariategui contracted three (3) marriages. With his first wife, Eusebia Montellano, who died on November 8, 1904, he begot four (4) children, namely: Baldomera, Maria del Rosario, Urbana and Ireneo. Baldomera died and was survived by her children named Antero, Rufina, Catalino, Maria, Gerardo, Virginia and Federico, all surnamed Espina. Ireneo also died and left a son named Ruperto. With his second wife, Flaviana Montellano, he begot a daughter named Cresenciana who was born on May 8, 1910 (Rollo, Annex "A", p. 36).Lupo Mariategui and Felipa Velasco (Lupo's third wife) got married sometime in 1930. They had three children, namely: Jacinto, born on July 3, 1929, Julian, born on February 16, 1931 and Paulina, born on April 19, 1938. Felipa Velasco Mariategui died in 1941 (Rollo,Ibid).At the time of his death, Lupo Mariategui left certain properties which he acquired when he was still unmarried (Brief for respondents,Rollo, pp. 116; 4). These properties are described in the complaint as Lots Nos. 163, 66, 1346 and 156 of the Muntinglupa Estate (Rollo, Annex "A", p. 39).On December 2, 1967, Lupo's descendants by his first and second marriages, namely, Maria del Rosario, Urbana, Ruperto, Cresencia, all surnamed Mariategui and Antero, Rufina, Catalino, Maria, Gerardo, Virginia and Federico, all surnamed Espina, executed a deed of extrajudicial partition whereby they adjudicated unto themselves Lot No. 163 of the Muntinglupa Estate. Thereafter, Lot No. 163 was the subject of a voluntary registration proceedings filed by the adjudicatees under Act No. 496, and the land registration court issued a decree ordering the registration of the lot. Thus, on April 1, 1971, OCT No. 8828 was issued in the name of the above-mentioned heirs. Subsequently, the registered owners caused the subdivision of the said lot into Lots Nos. 163-A to 163-H, for which separate transfer certificates of title were issued to the respective parties (Rollo,ibid).On April 23, 1973, Lupo's children by his third marriage with Felipa Velasco (Jacinto, Julian and Paulina) filed with the lower court an amended complaint claiming that Lot No. 163 together with Lots Nos. 669, 1346 and 154 were owned by their common father, Lupo Mariategui, and that, with the adjudication of Lot No. 163 to their co-heirs, they (children of the third marriage) were deprived of their respective shares in the lots. Plaintiffs pray for partition of the estate of their deceased father and annulment of the deed of extrajudicial partition dated December 2, 1967 (Petition,Rollo, p. 10). Cresencia Mariategui Abas, Flaviana Mariategui Cabrera and Isabel Santos were impleaded in the complaint as unwilling defendants as they would not like to join the suit as plaintiffs although they acknowledged the status and rights of the plaintiffs and agreed to the partition of the parcels of land as well as the accounting of their fruits (Ibid.,Rollo, p. 8; Record on Appeal, p. 4).The defendants (now petitioners) filed an answer with counterclaim (Amended Record on Appeal, p. 13). Thereafter, they filed a motion to dismiss on the grounds of lack of cause of action and prescription. They specifically contended that the complaint was one for recognition of natural children. On August 14, 1974, the motion to dismiss was denied by the trial court, in an order the dispositive portion of which reads:It is therefore the opinion of the Court that Articles 278 and 285 of the Civil Code cited by counsel for the defendants are of erroneous application to this case. The motion to dismiss is therefore denied for lack of merit.SO ORDERED. (Ibid, p. 37).However, on February 16, 1977, the complaint as well as petitioners' counterclaim were dismissed by the trial court, in its decision stating thus:The plaintiffs' right to inherit depends upon the acknowledgment or recognition of their continuous enjoyment and possession of status of children of their supposed father. The evidence fails to sustain either premise, and it is clear that this action cannot be sustained. (Ibid,Rollo, pp. 67-68)The plaintiffs elevated the case to the Court of Appeals on the ground that the trial court committed an error ". . . in not finding that the parents of the appellants, Lupo Mariategui and Felipa Velasco (were) lawfully married, and in holding (that) they (appellants) are not legitimate children of their said parents, thereby divesting them of their inheritance . . . " (Rollo, pp. 14-15).On December 24, 1980, the Court of Appeals rendered a decision declaring all the children and descendants of Lupo Mariategui, including appellants Jacinto, Julian and Paulina (children of the third marriage) as entitled to equal shares in the estate of Lupo Mariategui; directing the adjudicatees in the extrajudicial partition of real properties who eventually acquired transfer certificates of title thereto, to execute deeds of reconveyance in favor, and for the shares, of Jacinto, Julian and Paulina provided rights of innocent third persons are not prejudiced otherwise the said adjudicatees shall reimburse the said heirs the fair market value of their shares; and directing all the parties to submit to the lower court a project of partition in the net estate of Lupo Mariategui after payment of taxes, other government charges and outstanding legal obligations.The defendants-appellees filed a motion for reconsideration of said decision but it was denied for lack of merit. Hence, this petition which was given due course by the court on December 7, 1981.The petitioners submit to the Court the following issues: (a) whether or not prescription barred private respondents' right to demand the p