AMADOR TAJANLANGIT, ET AL., plaintiff-appellants, vs.SOUTHERN MOTORS, INC., ET AL., defendants-appellees.

BENGZON, J.:

The case. Appellants seek to reverse the order of Hon. Pantaleon Pelayo, Judge of the Iloilo court of first instance refusing to interfere with the alias writ of execution issued in Civil Case No. 2942 pending in another sala of the same court.

The facts. In April 1953 Amador Tajanlangit and his wife Angeles, residents of Iloilo, bought, from the Southern Motors Inc. of Iloilo two tractors and a thresher. In payment for the same, they executed the promissory note Annex A whereby they undertook to satisfy the total purchase price of P24,755.75 in several installments (with interest) payable on stated dates from May 18, 1953 December 10, 1955. The note stipulated that if default be made in the payment of interest or of any installment, then the total principal sum still unpaid with interest shall at once become demandable etc. The spouse failed to meet any installment. Wherefore, they were sued, in the above Civil Case No. 2942, for the amount of the promissory note.1 The spouses defaulted, and the court, after listening to the Southern Motors' evidence entered Judgment for it in the total sum of P24,755.75 together with interest at 12 per cent, plus 10 per cent of the total amount due as attorney's fees and costs of collection.

Carrying out the order of execution, the sheriff levied on the same machineries and farm implements which had been bought by the spouses; and later sold them at public auction to the highest bidder — which turned out to be the Southern Motors itself — for the total sum of P10,000.

As its judgment called for much more, the Southern Motors subsequently asked and obtained, an alias writ of execution; and pursuant thereto, the provincial sheriff levied attachment on the Tajanlangits' rights and interests in certain real properties — with a view to another sale on execution.

To prevent such sale, the Tajanlangits instituted this action in the Iloilo court of first instance for the purpose among others, of annulling the alias writ of execution and all proceedings subsequent thereto. Their two main theories: (1) They had returned the machineries and farm implements to the Southern Motors Inc., the latter accepted them, and had thereby settled their accounts; for that reason, said spouses did not contest the action in Civil Case No. 2942; and (2) as the Southern Motors Inc. had repossessed the machines purchased on installment (and mortgaged) the buyers were

thereby relieved from further responsibility, in view of the Recto Law, now article 1484 of the New Civil Code.

For answer, the company denied the alleged "settlement and understanding" during the pendency of civil case No. 2949. It also denied having repossessed the machineries, the truth being that they were attached by the sheriff and then deposited by the latter in its shop for safekeeping, before the sale at public auction.

The case was submitted for decision mostly upon a stipulation of facts. Additional testimony was offered together with documentary evidence. Everything considered the court entered judgment, saying in part;

The proceedings in Civil Case No. 2942 above referred to, were had in the Court of First Instance (Branch 1) of the Province and of the City of Iloilo. While this court (Branch IV) sympathizes with plaintiffs, it cannot grant, in this action, the relief prayed for the complaint because courts of similar jurisdiction cannot invalidate the judgments and orders of each other. Plaintiffs have not pursued the proper remedy. This court is without authority and jurisdiction to declare null and void the order directing the issuance of aliaswrit of execution because it was made by another court of equal rank and category (see Cabiao and Izquierdo vs. Del Rosario and Lim, 44 Phil., 82-186).

WHEREFORE, judgement is hereby rendered dismissing the complaint with costs against plaintiffs costs against plaintiffs. Let the writ of preliminiary injunction issued on August 26, 1954, be lifted.

The plaintiffs reasonably brought the matter to the Court of Appeals, but the latter forwarded the expediente, being of the opinion that the appeal involved questions of jurisdiction and/or law

Discussion. Appellants' brief elaborately explains in the nine errors assigned, their original two theories although their "settlement" idea appears to be somewhat modified.

"What is being sought in this present action" say appellants "is to prohibit and forbid the appellee Sheriff of Iloilo from attaching and selling at public auction sale the real properties of appellants because that is now forbidden by our law after the chattels that have been purchased and duly mortgagee had already been repossessed by the same vendor-mortgagee and later on sold at public auction sale and purchased by the same at such meager sum of P10,000."

"Our law" provides,

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (New Civil Code.)

Appellants would invoke the last paragraph. But there has been no foreclosure of the chattel mortgage nor a foreclosure sale. Therefore the prohibition against further collection does not apply.

At any rate it is the actual sale of the mortgaged chattel in accordance with section 14 Act No. 1508 that would bar the creditor (who chooses to foreclose) from recovering any unpaid balance. (Pacific Com. Co.vs. De la Rama, 72 Phil. 380.) (Manila Motor Co. vs. Fernandez, 99 Phil., 782.).

It is true that there was a chattel mortgage on the goods sold. But the Southern Motors elected to sue on the note exclusively, i.e. to exact fulfillment of the obligation to pay. It had a right to select among the three remedies established in Article 1484. In choosing to sue on the note, it was not thereby limited to the proceeds of the sale, on execution, of the mortgaged good.2

In Southern Motors Inc. vs. Magbanua, (100 Phil., 155) a similar situation arose in connection with the purchase on installment of a Chevrolet truck by Magbanua. Upon the latter's default, suit on the note was filed, and the truck levied on together with other properties of the debtor. Contending that the seller was limited to the truck, the debtor obtained a discharge of the other properties. This court said:

By praying that the defendant be ordered to pay the sum of P4,690 together with the stipulated interest at 12% per annum from 17 March 1954 until fully paid, plus 10 per cent of the total amount due as attorney's fees and cost of

collection, the plaintiff acted to exact the fulfillment of the obligation and not to foreclosethe mortgage on the truck. . . .

As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the former may enforce execution of the judgement rendered in its favor on the personal and real properties of the latter not exempt from execution sufficient to satisfy the judgment. That part of the judgement depriving the plaintiff of its right to enforce judgment against the properties of the defendant except the mortgaged truck and discharging the writ of attachment on his other properties is erroneous. (Emphasis ours.)

Concerning their second theory, — settlement or cancellation — appellants allege that the very implements sold "were duly returned" by them, and "were duly received and accepted by the said vendor-mortgagee". Therefore they argue, "upon the return of the same chattels and due acceptance of the same by the vendor-mortgagee, the conditional sale is ipso facto cancelled, with the right of the vendor-mortgagee to appropriate whatever downpayment and posterior monthly installments made by the purchaser as it did happen in the present case at bar."

The trouble with the argument is that it assumes that acceptance of the goods by the Southern Motors Co, with a view to "cancellation" of the sale. The company denies such acceptance and cancellation, asserting the goods, were deposited in its shop when the sheriff attached them in pursuance of the execution. Its assertion is backed up by the sheriff, of whose credibility there is no reason to doubt. Anyway this cancellation or settlement theory may not be heeded now, because it would contravene the decision in Civil Case No. 2942 above-mentioned — it would show the Tajanlangits owned nothing to Southern Motors Inc. Such decision is binding upon them, unless and until they manage to set it aside in a proper proceeding — and this is not it.

There are other points involved in the case, such as the authority of the judge of one branch of a court of first instance to enjoin proceedings in another branch of the same court. As stated, Judge Pelayo refused to interfere on that ground. Appellants insist this was error on several counts. We deem it unnecessary to deal with this procedural aspect, inasmuch as we find that, on the merits, plaintiffs are not entitled to the relief demanded.

Judgment. The decision dismissing the complaint, is affirmed, with costs against appellants. So ordered.

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners, vs.PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETA CANILAO and CLAUDIA TAGUNICAR, respondents.

PUNO, J.:

This petition for review seeks a reversal of the 31 August 1995 Decision 1 and 11 January 1998 Resolution 2 of the Court of Appeals holding private respondent Claudia Tagunicar solely liable for moral and exemplary damages and attorney's fees, and deleting the trial court's award for actual damages.

The facts as found by the trial court are as follows:

Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In connection with [this] business, he travels from time to time to Malaysia, Taipei and Hongkong. On July 10, 1976, plaintiffs bought plane tickets (Exhs. A & B) from defendant Claudia Tagunicar who represented herself to be an agent of defendant Tourist World Services, Inc. (TWSI). The destination[s] are Hongkong, Tokyo, San Francisco, U.S.A., for the amount of P25,000.00 per computation of said defendant Claudia Tagunicar (Exhs. C & C-1). The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to buy to two (2) lines of infrared heating system processing textured plastic article (Exh. K).

On said date, only the passage from Manila to Hongkong, then to Tokyo, were confirmed. [PAA] Flight 002 from Tokyo to San Francisco was on "RQ" status, meaning "on request". Per instruction of defendant Claudia Tagunicar, plaintiffs returned after a few days for the confirmation of the Tokyo-San Francisco segment of the trip. After calling up Canilao of TWSI, defendant Tagunicar told plaintiffs that their flight is now confirmed all the way. Thereafter, she attached the confirmation stickers on the plane tickets (Exhs. A & B).

A few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am office to verify the status of the flight. According to said Adrian Yu, a personnel of defendant Pan Am told him over the phone that plaintiffs' booking[s] are confirmed.

On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days. They left Hongkong for Tokyo on July 28, 1978. Upon their arrival in Tokyo, they called up Pan-Am office for reconfirmation of their flight to San Francisco. Said office, however, informed them that their names are not in the manifest. Since plaintiffs were supposed to leave on the 29th of July, 1978, and could not remain in

Japan for more than 72 hours, they were constrained to agree to accept airline tickets for Taipei instead, per advise of JAL officials. This is the only option left to them because Northwest Airlines was then on strike, hence, there was no chance for the plaintiffs to obtain airline seats to the United States within 72 hours. Plaintiffs paid for these tickets.

Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, they were forced to return back to Manila on August 3, 1978, instead of proceeding to the United States. [Japan] Air Lines (JAL) refunded the plaintiffs the difference of the price for Tokyo-Taipei [and] Tokyo-San Francisco (Exhs. I & J) in the total amount of P2,602.00.

In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc. cancelled Yu Eng Cho's option to buy the two lines of infra-red heating system (Exh. K). The agreement was for him to inspect the equipment and make final arrangement[s] with the said company not later than August 7, 1978. From this business transaction, plaintiff Yu Eng Cho expected to realize a profit of P300,000.00 to P400,000.00.

[A] scrutiny of defendants' respective evidence reveals the following:

Plaintiffs, who were intending to go to the United States, were referred to defendant Claudia Tagunicar, an independent travel solicitor, for the purchase of their plane tickets. As such travel solicitor, she helps in the processing of travel papers like passport, plane tickets, booking of passengers and some assistance at the airport. She is known to defendants Pan-Am, TWSI/Julieta Canilao, because she has been dealing with them in the past years. Defendant Tagunicar advised plaintiffs to take Pan-Am because Northwest Airlines was then on strike and plaintiffs are passing Hongkong, Tokyo, then San Francisco and Pan-Am has a flight from Tokyo to San Francisco. After verifying from defendant TWSI, thru Julieta Canilao, she informed plaintiffs that the fare would be P25,093.93 giving them a discount of P738.95 (Exhs. C, C-1). Plaintiffs, however, gave her a check in the amount of P25,000.00 only for the two round trip tickets. Out of this transaction, Tagunicar received a 7% commission and 1% commission for defendant TWSI.

Defendant Claudia Tagunicar purchased the two round-trip Pan-Am tickets from defendant Julieta Canilao with the following schedules:

Origin Destination Airline Date Time/Travel

Manila Hongkong CX900 7-23-78 1135/1325hrs

Hongkong Tokyo CS500 7-28-78 1615/2115hrs

Tokyo San Francisco PA002 7-29-78 1930/1640hrs

The use of another airline, like in this case it is Cathay Pacific out of Manila, is allowed, although the tickets issued are Pan-Am tickets, as long as it is in connection with a Pan-Am flight. When the two (2) tickets (Exhs. A & B) were issued to plaintiffs, the letter "RQ" appears below the printed word "status" for the flights from Tokyo to San Francisco which means "under request," (Exh. 3-A, 4-A Pan-Am). Before the date of the scheduled departure, defendant Tagunicar received several calls from the plaintiffs inquiring about the status of their bookings. Tagunicar in turn called up TWSI/Canilao to verify; and if Canilao would answer that the bookings are not yet confirmed, she would relate that to the plaintiffs.

Defendant Tagunicar claims that on July 13, 1978, a few days before the scheduled flight, plaintiff Yu Eng Cho personally went to her office, pressing her about their flight. She called up defendant Julieta Canilao, and the latter told her "o sige Claudia, confirm na." She even noted this in her index card (Exh. L), that it was Julieta who confirmed the booking (Exh. L-1). It was then that she allegedly attached the confirmation stickers (Exhs. 2, 2-B TWSI) to the tickets. These stickers came from TWSI.

Defendant Tagunicar alleges that it was only in the first week of August, 1978 that she learned from Adrian Yu, son of plaintiffs, that the latter were not able to take the flight from Tokyo to San Francisco, U.S.A. After a few days, said Adrian Yu came over with a gentleman and a lady, who turned out to be a lawyer and his secretary. Defendant Tagunicar claims that plaintiffs were asking for her help so that they could file an action against Pan-Am. Because of plaintiffs' promise she will not be involved, she agreed to sign the affidavit (Exh. M) prepared by the lawyer.

Defendants TWSI/Canilao denied having confirmed the Tokyo-San Francisco segment of plaintiffs' flight because flights then were really tight because of the on-going strike at Northwest Airlines. Defendant Claudia Tagunicar is very much aware that [said] particular segment was not confirmed, because on the very day of plaintiffs' departure, Tagunicar called up TWSI from the airport; defendant Canilao asked her why she attached stickers on the tickets when in fact that portion of the flight was not yet confirmed. Neither TWSI nor Pan-Am confirmed the flight and never authorized defendant Tagunicar to attach the confirmation stickers. In fact, the confirmation stickers used by defendant Tagunicar are stickers exclusively for use of Pan-Am only. Furthermore, if it is the travel agency that confirms the booking, the IATA number of said agency should appear on the validation or confirmation stickers. The IATA number that appears on the stickers attached to

plaintiffs' tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A TWSI), when in fact TWSI's IATA number is 2-83-0770 (Exhs. 5, 5-A TWSI). 3

A complaint for damages was filed by petitioners against private respondents Pan American World Airways, Inc. (Pan Am), Tourist World Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets and hotel accommodations when petitioners were compelled to stay in Hongkong and then in Tokyo by reason of the non-confirmation of their booking with Pan-Am. In a Decision dated November 14, 1991, the Regional Trial Court of Manila, Branch 3, held the defendants jointly and severally liable, except defendant Julieta Canilao, thus:

WHEREFORE, judgment is hereby rendered for the plaintiffs and ordering defendants Pan American World Airways, Inc., Tourist World Services, Inc. and Claudia Tagunicar, jointly and severally, to pay plaintiffs the sum of P200,000.00 as actual damages, minus P2,602.00 already refunded to the plaintiffs; P200,000.00 as moral damages; P100,000.00 as exemplary damages; an amount equivalent to 20% of the award for and as attorney's fees, plus the sum of P30,000.00 as litigation expenses.

Defendants' counterclaims are hereby dismissed for lack of merit.

SO ORDERED.

Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August 1995, the appellate court rendered judgment modifying the amount of damages awarded, holding private respondent Tagunicar solely liable therefor, and absolving respondents Pan Am and TWSI from any and all liability, thus:

PREMISES CONSIDERED, the decision of the Regional Trial Court is hereby SET ASIDE and a new one entered declaring appellant Tagunicar solely liable for:

1) Moral damages in the amount of P50,000.00;

2) Exemplary damages in the amount of P25,000.00; and

3) Attorney's fees in the amount of P10,000.00 plus costs of suit.

The award of actual damages is hereby DELETED.

SO ORDERED.

In so ruling, respondent court found that Tagunicar is an independent travel solicitor and is not a duly authorized agent or representative of either Pan Am or TWSI. It held that their business transactions are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as its agent and sub-agent, respectively. It further held that Tagunicar was not authorized to confirm the bookings of, nor issue validation stickers to, herein petitioners and hence, Pan Am and TWSI cannot be held responsible for her actions. Finally, it deleted the award for actual damages for lack of proof.

Hence this petition based on the following assignment of errors:

1. the Court of Appeals, in reversing the decision of the trial court, misapplied the ruling in Nicos Industrial Corporation vs. Court of Appeals, et. al. [206 SCRA 127]; and

2. the findings of the Court of Appeals that petitioners' ticket reservations in question were not confirmed and that there is no agency relationship among PAN-AM, TWSI and Tagunicar are contrary to the judicial admissions of PAN-AM, TWSI and Tagunicar and likewise contrary to the findings of fact of the trial court.

We affirm.

I. The first issue deserves scant consideration. Petitioners contend that contrary to the ruling of the Court of Appeals, the decision of the trial court conforms to the standards of an ideal decision set in Nicos Industrial Corporation, et. al. vs. Court of Appeals, et. al., 4 as "that which, with welcome economy of words, arrives at the factual findings, reaches the legal conclusions, renders its ruling and, having done so, ends." It is averred that the trial court's decision contains a detailed statement of the relevant facts and evidence adduced by the parties which thereafter became the bases for the court's conclusions.

A careful scrutiny of the decision rendered by the trial court will show that after narrating the evidence of the parties, it proceeded to dispose of the case with a one-paragraph generalization, to wit:

On the basis of the foregoing facts, the Court is constrained to conclude that defendant Pan-Am is the principal, and defendants TWSI and Tagunicar, its authorized agent and sub-agent, respectively. Consequently, defendants Pan-Am, TWSI and Claudia Tagunicar should be held jointly and severally liable to plaintiffs for damages. Defendant Julieta Canilao, who acted in her official capacity as Office Manager of defendant TWSI should not be held personally liable. 5

The trial court's finding of facts is but a summary of the testimonies of the witnesses and the documentary evidence presented by the parties. It did not distinctly and clearly set

forth, nor substantiate, the factual and legal bases for holding respondents TWSI, Pan Am and Tagunicar jointly and severally liable. In Del Mundo vs. CA, et al. 6 where the trial court, after summarizing the conflicting asseverations of the parties, disposed of the kernel issue in just two (2) paragraphs, we held:

It is understandable that courts, with their heavy dockets and time constraints, often find themselves with little to spare in the preparation of decisions to the extent most desirable. We have thus pointed out that judges might learn to synthesize and to simplify their pronouncements. Nevertheless, concisely written such as they may be, decisions must still distinctly and clearly express, at least in minimum essence, its factual and legal bases.

For failing to explain clearly and well the factual and legal bases of its award of moral damages, we set it aside in said case. Once more, we stress that nothing less than Section 14 of Article VIII of the Constitution requires that "no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based." This is demanded by the due process clause of the Constitution. In the case at bar, the decision of the trial court leaves much to be desired both in form and substance. Even while said decision infringes the Constitution, we will not belabor this infirmity and rather examine the sufficiency of the evidence submitted by the petitioners.

II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized ticketing agent of Pan Am. Proceeding from this premise, they contend that TWSI and Pan Am should be held liable as principals for the acts of Tagunicar. Petitioners stubbornly insist that the existence of the agency relationship has been established by the judicial admissions allegedly made by respondents herein, to wit: (1) the admission made by Pan Am in its Answer that TWSI is its authorized ticket agent; (2) the affidavit executed by Tagunicar where she admitted that she is a duly authorized agent of TWSI; and (3) the admission made by Canilao that TWSI received commissions from ticket sales made by Tagunicar.

We do not agree. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. 7 The elements of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the scope of his authority. 8 It is a settled rule that persons dealing with an assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. 9

In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated that she is an authorized agent of TWSI. This affidavit, however, has weak probative

value in light of respondent Tagunicar's testimony in court to the contrary. Affidavits, being taken ex parte, are almost always incomplete and often inaccurate, sometimes from partial suggestion, or for want of suggestion and inquiries. Their infirmity as a species of evidence is a matter of judicial experience and are thus considered inferior to the testimony given in court. 10Further, affidavits are not complete reproductions of what the declarant has in mind because they are generally prepared by the administering officer and the affiant simply signs them after the same have been read to her. 11Respondent Tagunicar testified that her affidavit was prepared and typewritten by the secretary of petitioners' lawyer, Atty. Acebedo, who both came with Adrian Yu, son of petitioners, when the latter went to see her at her office. This was confirmed by Adrian Yu who testified that Atty. Acebedo brought his notarial seal and notarized the affidavit of the same day. 12 The circumstances under which said affidavit was prepared put in doubt petitioners' claim that it was executed voluntarily by respondent Tagunicar. It appears that the affidavit was prepared and was based on the answers which respondent Tagunicar gave to the questions propounded to her by Atty. Acebedo. 13 They never told her that the affidavit would be used in a case to be filed against her. 14 They even assured her that she would not be included as defendant if she agreed to execute the affidavit. 15Respondent Tagunicar was prevailed upon by petitioners' son and their lawyer to sign the affidavit despite her objection to the statement therein that she was an agent of TWSI. They assured her that "it is immaterial"16   and that "if we file a suit against you we cannot get anything from you." 17 This purported admission of respondent Tagunicar cannot be used by petitioners to prove their agency relationship. At any rate, even if such affidavit is to be given any probative value, the existence of the agency relationship cannot be established on its sole basis. The declarations of the agent alone are generally insufficient to establish the fact or extent of his authority. 18 In addition, as between the negative allegation of respondents Canilao and Tagunicar that neither is an agent nor principal of the other, and the affirmative allegation of petitioners that an agency relationship exists, it is the latter who have the burden of evidence to prove their allegation, 19 failing in which, their claim must necessarily fail.

We stress that respondent Tagunicar categorically denied in open court that she is a duly authorized agent of TWSI, and declared that she is an independent travel agent. 20 We have consistently ruled that in case of conflict between statements in the affidavit and testimonial declarations, the latter command greater weight. 21

As further proofs of agency, petitioners call our attention to TWSI's Exhibits "7", "7-A", and "8" which show that Tagunicar and TWSI received sales commissions from Pan Am. Exhibit "7" 22 is the Ticket Sales Report submitted by TWSI to Pan Am reflecting the commissions received by TWSI as an agent of Pan Am. Exhibit "7-A" 23 is a listing of the routes taken by passengers who were audited to TWSI's sales report. Exhibit "8" 24 is a receipt issued by TWSI covering the payment made by Tagunicar for the tickets she bought from TWSI. These documents cannot justify the decision that Tagunicar was paid a commission either by TWSI or Pan Am. On the contrary, Tagunicar testified that when she pays TWSI, she already deducts in advance her commission and merely gives the net

amount to TWSI. 25 From all sides of the legal prism, the transaction is simply a contract of sale wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to her clients.

III. Petitioners included respondent Pan Am in the complainant on the supposition that since TWSI is its duly authorized agent, and respondent Tagunicar is an agent of TWSI, then Pan Am should also be held responsible for the acts of respondent Tagunicar. Our disquisitions above show that this contention lacks factual and legal bases. Indeed, there is nothing in the records to show that respondent Tagunicar has been employed by Pan Am as its agent, except the bare allegation of petitioners. The real motive of petitioners in suing Pan Am appears in its Amended Complaint that "[d]efendants TWSI, Canilao and Tagunicar may not be financially capable of paying plaintiffs the amounts herein sought to be recovered, and in such event, defendant Pan Am, being their ultimate principal, is primarily and/or subsidiary liable to pay the said amounts to plaintiffs." 26 This lends credence to respondent Tagunicar's testimony that she was persuaded to execute an affidavit implicating respondents because petitioners knew they would not be able to get anything of value from her. In the past, we have warned that this Court will not tolerate an abuse of judicial process by passengers in order to pry on international airlines for damage awards, like "trophies in a safari." 27

This meritless suit against Pan Am becomes more glaring with petitioner' inaction after they were bumped off in Tokyo. If petitioners were of the honest belief that Pan Am was responsible for the misfortune which beset them, there is no evidence to show that they lodged a protest with Pan Am's Tokyo office immediately after they were refused passage for the flight to San Francisco, or even upon their arrival in Manila. The testimony of petitioner Yu Eng Cho in this regard is of title value, viz:

Atty. Jalandoni: . . .

q Upon arrival at the Tokyo airport, what did you do if any in connection with your schedule[d] trip?

a I went to the Hotel, Holiday Inn and from there I immediately called up Pan Am office in Tokyo to reconfirm my flight, but they told me that our names were not listed in the manifest, so next morning, very early in the morning I went to the airport, Pan Am office in the airport to verify and they told me the same and we were not allowed to leave.

q You were scheduled to be in Tokyo for how long Mr. Yu?

a We have to leave the next day 29th.

q In other words, what was your status as a passenger?

a Transient passengers. We cannot stay for more than 72 hours.

x x x           x x x          x x x

q As a consequence of the fact that you claimed that the Pan Am office in Tokyo told you that your names were not in the manifest, what did you do, if any?

a I ask[ed] them if I can go anywhere in the State? They told me I can go to LA via Japan Airlines and I accepted it.

q Do you have the tickets with you that they issued for Los Angels?

a It was taken by the Japanese Airlines instead they issue[d] me a ticket to Taipei.

x x x           x x x          x x x

q Were you able to take the trip to Los Angeles via Pan Am tickets that was issued to you in lieu of the tickets to San Francisco?

a No, sir.

q Why not?

a The Japanese Airlines said that there were no more available seats.

q And as a consequence of that, what did you do, if any?

a I am so much scared and worried, so the Japanese Airlines advised us to go to Taipei and I accepted it.

x x x           x x x          x x x

q Why did you accept the Japan Airlines offer for you to go to Taipei?

a Because there is no chance for us to go to the United States within 72 hours because during that time Northwest Airlines [was] on strike so the seats are very scarce. So they advised me better left (sic) before the 72 hours otherwise you will have trouble with the Japanese immigration.

q As a consequence of that you were force[d] to take the trip to Taipei?

a Yes, sir. 28 (emphasis supplied)

It grinds against the grain of human experience that petitioners did not insist that they be allowed to board, considering that it was then doubly difficult to get seats because of the ongoing Northwest Airlines strike. It is also perplexing that petitioners readily accepted whatever the Tokyo office had to offer as an alternative. Inexplicably too, no demand letter was sent to respondents TWSI and Canilao. 29 Nor was a demand letter sent to respondent Pan Am. To say the least, the motive of petitioners in suing Pan Am is suspect.

We hasten to add that it is not sufficient to prove that Pan Am did not allow petitioners to board to justify petitioners' claim for damages. Mere refusal to accede to the passenger's wishes does not necessarily translate into damages in the absence of bad faith. 30 The settled rule is that the law presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill motive. 31 In the case at bar, we find the evidence presented by petitioners insufficient to overcome the presumption of good faith. They have failed to show any wanton, malevolent or reckless misconduct imputable to respondent Pan Am in its refusal to accommodate petitioners in its Tokyo-San Francisco flight. Pan Am could not have acted in bad faith because petitioners did not have confirmed tickets and more importantly, they were not in the passenger manifest.

In not a few cases, this Court did not hesitable to hold an airline liable for damages for having acted in bad faith in refusing to accommodate a passenger who had a confirmed ticket and whose name appeared in the passenger manifest. In Ortigas Jr. v. Lufthansa German Airlines Inc., 32 we ruled that there was a valid and binding contract between the airline and its passenger after finding that validating sticker on the passenger's ticket had the letters "O.K." appearing in the "Res. Status" box which means "space confirmed" and that the ticket is confirmed or validated. In Pan American World Airways Inc. v. IAC, et al. 33 where a would-be-passenger had the necessary ticket, baggage claim and clearance from immigration all clearly showing that she was a confirmed passenger and included in the passenger manifest and yet was denied accommodation in said flight, we awarded damages. InArmovit, et al. v. CA, et al., 34 we upheld the award of damages made against an airline for gross negligence committed in the issuance of tickets with erroneous entries as to the time of flight. In Alitalia Airways v. CA, et al.,35 we held that when airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of contract of carriage. And finally, an award of damages was held proper in the case of Zalamea, et al. v. CA, et al., 36 where a confirmed passenger included in the manifest was denied accommodation in such flight.

On the other hand, the respondent airline in Sarreal, Sr. v. Japan Airlines Co., Ltd., 37 was held not liable for damages where the passenger was not allowed to board the plane because his ticket had not been confirmed. We ruled that "[t]he stub that the lady employee put on the petitioner's ticket showed among other coded items, under the column "status" the letters "RQ" — which was understood to mean "Request." Clearly, this does not mean a confirmation but only a request. JAL Traffic Supervisor explained that it would have been different if what was written in the stub were the letter "ok" in which case the petitioner would have been assured of a seat on said flight. But in this case, the petitioner was more of a wait-listed passenger than a regularly booked passenger."

In the case at bar, petitioners' ticket were on "RQ" status. They were not confirmed passengers and their names were not listed in the passenger manifest. In other words, this is not a case where Pan Am bound itself to transport petitioners and thereafter reneged on its obligation. Hence, respondent airline cannot be held liable for damages.

IV. We hold that respondent Court of Appeals correctly rules that the tickets were never confirmed for good reasons: (1) The persistent calls made by respondent Tagunicar to Canilao, and those made by petitioners at the Manila, Hongkong and Tokyo offices in Pan Am, are eloquent indications that petitioners knew that their tickets have not been confirmed. For, as correctly observed by Pan Am, why would one continually try to have one's ticket confirmed if it had already been confirmed? (2) The validation stickers which respondent Tagunicar attached to petitioners' tickets were those intended for the exclusive use of airline companies. She had no authority to use them. Hence, said validation stickers, wherein the word "OK" appears in the status box, are not valid and binding. (3) The names of petitioners do not appear in the passengers manifest. (4) Respondent Tagunicar's "Exhibit 1" 38 shows that the status of the San Francisco-New York segment was "Ok", meaning it was confirmed, but that the status of the Tokyo-San Francisco segment was still "on request". (5) Respondent Canilao testified that on the day that petitioners were to depart for Hongkong, respondent Tagunicar called her from the airport asking for confirmation of the Tokyo-San Francisco flight, and that when she told respondent Tagunicar that she should not have allowed petitioners to leave because their tickets have not been confirmed, respondent Tagunicar merely said "Bahala na." 39 This was never controverted nor refuted by respondent Tagunicar. (6) To prove that it really did not confirm the bookings of petitioners, respondent Canilao pointed out that the validation stickers which respondent Tagunicar attached to the tickets of petitioners had IATA No. 2-82-0770 stamped on it, whereas the IATA number of TWSI is 28-30770. 40

Undoubtedly, respondent Tagunicar should be liable for having acted in bad faith in misrepresenting to petitioners that their tickets have been confirmed. Her culpability, however, was properly mitigated. Petitioner Yu Eng Cho testified that he repeatedly tried to follow up on the confirmation of their tickets with Pan Am because he doubted the confirmation made by respondent Tagunicar. 41 This is clear proof that petitioners knew that they might be bumped off at Tokyo when they decided to proceed with the trip. Aware of

this risk, petitioners exerted efforts to confirm their tickets in Manila, then in Hongkong, and finally in Tokyo. Resultantly, we find the modification as to the amount of damages awarded just and equitable under the circumstances.

WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners.1âwphi1.nêt

SO ORDERED.

SOUTHERN MOTORS, INC., plaintiff-appellee, vs.ANGELO MOSCOSO, defendant-appellant.

PAREDES, J.:

The case was submitted on agreed statement of facts.

On June 6, 1957, plaintiff-appellee Southern Motors, Inc. sold to defendant-appellant Angel Moscoso one Chevrolet truck, on installment basis, for P6,445.00. Upon making a down payment, the defendant executed a promissory note for the sum of P4,915.00, representing the unpaid balance of the purchase price (Annex A, complaint), to secure the payment of which, a chattel mortgage was constituted on the truck in favor of the plaintiff (Annex B). Of said account of P4,915.00, the defendant had paid a total of P550.00, of which P110.00 was applied to the interest up to August 15, 1957, and P400.00 to the principal, thus leaving an unpaid balance of P4,475.00. The defendant failed to pay 3 installments on the balance of the purchase price.

On November 4, 1957, the plaintiff filed a complaint against the defendant, to recover the unpaid balance of the promissory note. Upon plaintiff's petition, embodied in the complaint, a writ of attachment was issued by the lower court on the properties Of the defendant. Pursuant thereto, the said Chevrolet truck, and a house and lot belonging to defendant, were attached by the Sheriff of San Jose, Antique, where defendant was residing on November 25, 1957, and said truck was brought to the plaintiff's compound in Iloilo City, for safe keeping.

After attachment and before the trial of the case on the merits, acting upon the plaintiff's motion dated December 23, 1957, for the immediate sale of the mortgaged truck, the Provincial Sheriff of Iloilo on January 2, 1958, sold the truck at public auction in which plaintiff itself was the only bidder for P1,000.00. The case had not been set for hearing, then.

The trial court on March 27, 1958, condemned the defendant to pay the plaintiff the amount of P4,475.00 with interest at the rate of 12% per annum from August 16, 1957, until fully paid, plus 10% thereof as attorneys fees and costs against which defendant interposed the present appeal, contending that the trial court erred —

(1) In not finding that the attachment caused to be levied on the truck and its immediate sale at public auction, was tantamount to the foreclosure of the chattel mortgage on said truck; and

(2) In rendering judgment in favor of the plaintiff-appellee.

Both parties agreed that the case is governed by Article 1484 of the new Civil Case, which provides: —

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay; .

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

While the appellee claims that in filing the complaint, demanding payment of the unpaid balance of the purchase price, it has availed of the first remedy provided in said article i.e. to exact fulfillment of the obligation (specific performance); the appellant, on the other hand, contends that appellee had availed itself of the third remedy viz, the foreclosure of the chattel mortgage on the truck.

The appellant argues that considering history of the law, the circumstances leading to its enactment, the evil that the law was intended to correct and the remedy afforded (Art. 1454-A of the old Civil Code; Act No. 4122; Bachrach Motor Co. vs. Reyes, 62 Phil. 461, 466-469); that the appellee did not content itself by waiting for the judgment on the complaint and then executed the judgment which might be rendered in its favor, against the properties of the appellant; that the appellee obtained a preliminary attachment on the subject of the chattel mortgage itself and caused said truck to be sold at public auction petition, in which he was bidder for P1,000.00; the result of which, was similar to what would have happened, had it

foreclosed the mortgage pursuant to the provisions of Sec. 14 of Act No. 1508 (Chattel Mortgage Law) the said appellee had availed itself of the third remedy aforequoted. In other words, appellant submits that the matter should be looked at, not by the allegations in the complaint, but by the very effect and result of the procedural steps taken and that appellee tried to camouflage its acts by filing a complaint purportedly to exact the fulfillment of an obligation petition, in an attempt to circumvent the provisions of Article 1484 of the new Civil Code. Appellant concludes that under his theory, a deficiency judgment would be without legal basis.

We do not share the views of the appellant on this matter. Manifestly, the appellee had chosen the first remedy. The complaint is an ordinary civil action for recovery of the remaining unpaid balance due on the promissory note. The plaintiff had not adopted the procedure or methods outlined by Sec. 14 of the Chattel Mortgage Law but those prescribed for ordinary civil actions, under the Rules of Court. Had appellee elected the foreclosure, it would not have instituted this case in court; it would not have caused the chattel to be attached under Rule 59, and had it sold at public auction, in the manner prescribed by Rule 39. That the herein appellee did not intend to foreclose the mortgage truck, is further evinced by the fact that it had also attached the house and lot of the appellant at San Jose, Antique. In the case of Southern Motors, Inc. vs. Magbanua, G.R. No. L-8578, Oct. 29, 1956, we held:

By praying that the defendant be ordered to pay it the sum of P4,690.00 together with the stipulated interest of 12% per annum from 17 March 1954 until fully paid, plus 10% of the total amount due as attorney's fees and cost of collection, the plaintiff elected to exact the fulfillment of the obligation, and not to foreclose the mortgage on the truck. Otherwise, it would not have gone to court to collect the amount as prayed for in the complaint. Had it elected to foreclose the mortgage on the truck, all the plaintiff had to do was to cause the truck to be sold at public auction pursuant to section 14 of the Chattel Mortgage Law. The fact that aside from the mortgaged truck, another Chevrolet truck and two parcels of land belonging to the defendant were attached, shows that the plaintiff did not intend to foreclose the mortgage.

As the plaintiff has chosen to exact the fulfillment of the defendant's obligation, the former may enforce execution of the judgment rendered in its favor on the personal and real property of the latter not exempt from execution sufficient to satisfy the judgment. That part of the judgment

against the properties of the defendant except the mortgaged truck and discharging the writ of attachment on his other properties is erroneous.

We perceive nothing unlawful or irregular in appellee's act of attaching the mortgaged truck itself. Since herein appellee has chosen to exact the fulfillment of the appellant's obligation, it may enforce execution of the judgment that may be favorably rendered hereon, on all personal and real properties of the latter not exempt from execution sufficient to satisfy such judgment. It should be noted that a house and lot at San Jose, Antique were also attached. No one can successfully contest that the attachment was merely an incident to an ordinary civil action. (Sections 1 & 11, Rule 59; Sec. 16, Rule 39). The mortgage creditor may recover judgment on the mortgage debt and cause an execution on the mortgaged property and may cause an attachment to be issued and levied on such property, upon beginning his civil action (Tizon vs. Valdez, 48 Phil. 910-911).

IN VIEW HEREOF, the judgment appealed from hereby is affirmed, with costs against the defendant-appellant.

NICOLAS SANCHEZ, plaintiff-appellee, vs.SEVERINA RIGOS, defendant-appellant.

 

CONCEPCION, C.J.:p

Appeal from a decision of the Court of First Instance of Nueva Ecija to the Court of Appeals, which certified the case to Us, upon the ground that it involves a question purely of law.

The record shows that, on April 3, 1961, plaintiff Nicolas Sanchez and defendant Severina Rigos executed an instrument entitled "Option to Purchase," whereby Mrs. Rigos "agreed, promised and committed ... to sell" to Sanchez the sum of P1,510.00, a parcel of land situated in the barrios of Abar and Sibot, municipality of San Jose, province of Nueva Ecija, and more particularly described in Transfer Certificate of Title No. NT-12528 of said province, within two (2) years from said date with the understanding that said option shall be deemed "terminated and elapsed," if "Sanchez shall fail to exercise his right to buy the property" within the stipulated period. Inasmuch as several tenders of payment of the sum of Pl,510.00, made by Sanchez within said period, were rejected by Mrs. Rigos, on March 12, 1963, the former deposited said amount with the Court of First Instance of Nueva Ecija and commenced against the latter the present action, for specific performance and damages.

After the filing of defendant's answer — admitting some allegations of the complaint, denying other allegations thereof, and alleging, as special defense, that the contract between the parties "is a unilateral promise to sell, and the same being unsupported by any valuable consideration, by force of the New Civil Code, is null and void" — on February 11, 1964, both parties, assisted by their respective counsel, jointly moved for a judgment on the pleadings. Accordingly, on February 28, 1964, the lower court rendered judgment for Sanchez, ordering Mrs. Rigos to accept the sum judicially consigned by him and to execute, in his favor, the requisite deed of conveyance. Mrs. Rigos was, likewise, sentenced to pay P200.00, as attorney's fees, and other costs. Hence, this appeal by Mrs. Rigos.

This case admittedly hinges on the proper application of Article 1479 of our Civil Code, which provides:

ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.

In his complaint, plaintiff alleges that, by virtue of the option under consideration, "defendant agreed and committed to sell" and "the plaintiff agreed and committed to buy" the land described in the option, copy of which was annexed to said pleading as Annex A thereof and is quoted on the margin. 1 Hence, plaintiff maintains that the promise contained in the contract is "reciprocally demandable," pursuant to the first paragraph of said Article 1479. Although defendant had really "agreed, promised and committed" herself to sell the land to the plaintiff, it is not true that the latter had, in turn, "agreed and committed himself " to buy said property. Said Annex A does not bear out plaintiff's allegation to this effect. What is more, since Annex A has been made "an integral part" of his complaint, the provisions of said instrument form part "and parcel" 2 of said pleading.

The option did not impose upon plaintiff the obligation to purchase defendant's property. Annex A is not a "contract to buy and sell." It merely granted plaintiff an "option" to buy. And both parties so understood it, as indicated by the caption, "Option to Purchase," given by them to said instrument. Under the provisions thereof, the defendant "agreed, promised and committed" herself to sell the land therein described to the plaintiff for P1,510.00, but there is nothing in the contract to indicate that her aforementioned agreement, promise and undertaking is supported by a consideration "distinct from the price" stipulated for the sale of the land.

Relying upon Article 1354 of our Civil Code, the lower court presumed the existence of said consideration, and this would seem to be the main factor that influenced its decision in plaintiff's favor. It should be noted, however, that:

(1) Article 1354 applies to contracts in general, whereas the second paragraph of Article 1479 refers to "sales" in particular, and, more specifically, to "an accepted unilateral promise to buy or to sell." In other words, Article 1479 is controlling in the case at bar.

(2) In order that said unilateral promise may be "binding upon the promisor, Article 1479 requires the concurrence of a condition, namely, that the promise be "supported by a consideration distinct from the price." Accordingly, the promisee

can not compel the promisor to comply with the promise, unless the former establishes the existence of said distinct consideration. In other words, the promisee has the burden of proving such consideration. Plaintiff herein has not even alleged the existence thereof in his complaint.

(3) Upon the other hand, defendant explicitly averred in her answer, and pleaded as a special defense, the absence of said consideration for her promise to sell and, by joining in the petition for a judgment on the pleadings, plaintiff has impliedly admitted the truth of said averment in defendant's answer. Indeed as early as March 14, 1908, it had been held, in Bauermann v. Casas, 3 that:

One who prays for judgment on the pleadings without offering proof as to the truth of his own allegations, and without giving the opposing party an opportunity to introduce evidence, must be understood to admit the truth of all the material and relevant allegations of the opposing party, and to rest his motion for judgment on those allegations taken together with such of his own as are admitted in the pleadings. (La Yebana Company vs. Sevilla, 9 Phil. 210). (Emphasis supplied.)

This view was reiterated in Evangelista v. De la Rosa 4 and Mercy's Incorporated v. Herminia Verde. 5

Squarely in point is Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 6 from which We quote:

The main contention of appellant is that the option granted to appellee to sell to it barge No. 10 for the sum of P30,000 under the terms stated above has no legal effect because it is not supported by any consideration and in support thereof it invokes article 1479 of the new Civil Code. The article provides:

"ART. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.

An accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price."

On the other hand, Appellee contends that, even granting that the "offer of option" is not supported by any consideration, that option became binding on appellant when the appellee gave notice to it of its acceptance, and that having accepted it within the period of option, the offer can no longer be withdrawn and in any event such withdrawal is ineffective. In support this contention, appellee invokes article 1324 of the Civil Code which provides:

"ART. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn any time before acceptance by communicating such withdrawal, except when the option is founded upon consideration as something paid or promised."

There is no question that under article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to sell," as used in said article, to be valid must be "supported by a consideration distinct from the price." This is clearly inferred from the context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by consideration. In other words, "an accepted unilateral promise can only have a binding effect if supported by a consideration which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. It is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance of it by appellee.

It is true that under article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the option is founded upon consideration, but this general rule must be interpreted as modified by the provision of article 1479 above referred to, which applies to "a promise to buy and sell" specifically. As already stated, this rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price.

We are not oblivious of the existence of American authorities which hold that an offer, once accepted, cannot be withdrawn, regardless

of whether it is supported or not by a consideration (12 Am. Jur. 528). These authorities, we note, uphold the general rule applicable to offer and acceptance as contained in our new Civil Code. But we are prevented from applying them in view of the specific provision embodied in article 1479. While under the "offer of option" in question appellant has assumed a clear obligation to sell its barge to appellee and the option has been exercised in accordance with its terms, and there appears to be no valid or justifiable reason for appellant to withdraw its offer, this Court cannot adopt a different attitude because the law on the matter is clear. Our imperative duty is to apply it unless modified by Congress.

However, this Court itself, in the case of Atkins, Kroll and Co., Inc. v. Cua Hian Tek, 8 decided later that Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 9 saw no distinction between Articles 1324 and 1479 of the Civil Code and applied the former where a unilateral promise to sell similar to the one sued upon here was involved, treating such promise as an option which, although not binding as a contract in itself for lack of a separate consideration, nevertheless generated a bilateral contract of purchase and sale upon acceptance. Speaking through Associate Justice, later Chief Justice, Cesar Bengzon, this Court said:

Furthermore, an option is unilateral: a promise to sell at the price fixed whenever the offeree should decide to exercise his option within the specified time. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. He is free either to buy or not to buy later. In this case, however, upon accepting herein petitioner's offer a bilateral promise to sell and to buy ensued, and the respondent ipso facto assumed the obligation of a purchaser. He did not just get the right subsequently to buy or not to buy. It was not a mere option then; it was a bilateral contract of sale.

Lastly, even supposing that Exh. A granted an option which is not binding for lack of consideration, the authorities hold that:

"If the option is given without a consideration, it is a mere offer of a contract of sale, which is not binding until accepted. If, however, acceptance is made before a withdrawal, it constitutes a binding contract of sale, even though the option was not supported by a

sufficient consideration. ... . (77 Corpus Juris Secundum, p. 652. See also 27 Ruling Case Law 339 and cases cited.)

"It can be taken for granted, as contended by the defendant, that the option contract was not valid for lack of consideration. But it was, at least, an offer to sell, which was accepted by letter, and of the acceptance the offerer had knowledge before said offer was withdrawn. The concurrence of both acts — the offer and the acceptance — could at all events have generated a contract, if none there was before (arts. 1254 and 1262 of the Civil Code)." (Zayco vs. Serra, 44 Phil. 331.)

In other words, since there may be no valid contract without a cause or consideration, the promisor is not bound by his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his accepted promise partakes, however, of the nature of an offer to sell which, if accepted, results in a perfected contract of sale.

This view has the advantage of avoiding a conflict between Articles 1324 — on the general principles on contracts — and 1479 — on sales — of the Civil Code, in line with the cardinal rule of statutory construction that, in construing different provisions of one and the same law or code, such interpretation should be favored as will reconcile or harmonize said provisions and avoid a conflict between the same. Indeed, the presumption is that, in the process of drafting the Code, its author has maintained a consistent philosophy or position. Moreover, the decision in Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co., 10 holding that Art. 1324 is modified by Art. 1479 of the Civil Code, in effect, considers the latter as an exception to the former, and exceptions are not favored, unless the intention to the contrary is clear, and it is not so, insofar as said two (2) articles are concerned. What is more, the reference, in both the second paragraph of Art. 1479 and Art. 1324, to an option or promise supported by or founded upon a consideration, strongly suggests that the two (2) provisions intended to enforce or implement the same principle.

Upon mature deliberation, the Court is of the considered opinion that it should, as it hereby reiterates the doctrine laid down in the Atkins, Kroll & Co. case, and that, insofar as inconsistent therewith, the view adhered to in theSouthwestern Sugar & Molasses Co. case should be deemed abandoned or modified.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-appellant Severina Rigos. It is so ordered.

Reyes, J.B.L., Makalintal, Zaldivar, Teehankee, Barredo and Makasiar, JJ., concur.

Castro, J., took no part.

 

 LUIS RIDAD and LOURDES RIDAD, plaintiffs-appellees, vs.FILIPINAS INVESTMENT and FINANCE CORPORATION, JOSE D. SEBASTIAN and JOSE SAN AGUSTIN, in his capacity as Sheriff, defendants-appellants.

DE CASTRO, J:

Appeal from the decision of the Court of First Instance of Rizal, Branch I, in Civil Case No. 9140 for annulment of contract, originally filed with the Court of Appeals but was subsequently certified to this Court pursuant to Section 3 of Rule 50 of the Rules of Court, there being no issue of fact involved in this appeal.

The materials facts of the case appearing on record may be stated as follows: On April 14, 1964, plaintiffs purchased from the Supreme Sales arid Development Corporation two (2) brand new Ford Consul Sedans complete with accessories, for P26,887 payable in 24 monthly installments. To secure payment thereof, plaintiffs executed on the same date a promissory note covering the purchase price and a deed of chattel mortgage not only on the two vehicles purchased but also on another car (Chevrolet) and plaintiffs' franchise or certificate of public convenience granted by the defunct Public Service Commission for the operation of a taxi fleet. Then, with the conformity of the plaintiffs, the vendor assigned its rights, title and interest to the above-mentioned promissory note and chattel mortgage to defendant Filipinas Investment and Finance Corporation.

Due to the failure of the plaintiffs to pay their monthly installments as per promissory note, the defendant corporation foreclosed the chattel mortgage extra-judicially, and at the public auction sale of the two Ford Consul cars, of which the plaintiffs were not notified, the defendant corporation was the highest bidder and purchaser. Another auction sale was held on November 16, 1965, involving the remaining properties subject of the deed of chattel mortgage since plaintiffs' obligation was not fully satisfied by the sale of the aforesaid vehicles, and at the public auction sale, the franchise of plaintiffs to operate five units of taxicab service was sold for P8,000 to the highest bidder, herein defendant corporation, which subsequently sold and conveyed the same to herein defendant Jose D. Sebastian, who then filed with the Public Service Commission an application for approval of said sale in his favor.

On February 21, 1966, plaintiffs filed an action for annulment of contract before the Court of First Instance of Rizal, Branch I, with Filipinas Investment and Finance

Corporation, Jose D. Sebastian and Sheriff Jose San Agustin, as party-defendants. By agreement of the parties, the case was submitted for decision in the lower court on the basis of the documentary evidence adduced by the parties during the pre-trial conference. Thereafter, the lower court rendered judgment as follows:

IN VIEW OF THE ABOVE CONSIDERATIONS, this Court declares the chattel mortgage, Exhibit "C", to be null and void in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are concerned, and the sale at public auction conducted by the City Sheriff of Manila concerning said taxicab franchise, to be of no legal effect.1äwphï1.ñët The certificate of sale issued by the City Sheriff of Manila in favor of Filipinas Investment and Finance Corporation concerning plaintiffs' taxicab franchise for P8,000 is accordingly cancelled and set aside, and the assignment thereof made by Filipinas Investment in favor of defendant Jose Sebastian is declared void and of no legal effect. (Record on Appeal, p. 128).

From the foregoing judgment, defendants appealed to the Court of Appeals which, as earlier stated, certified the appeal to this Court, appellants imputing to the lower court five alleged errors, as follows:

I

THE LOWER COURT ERRED IN DECLARING THE CHATTEL MORTGAGE, EXHIBIT "C", NULL AND VOID.

II

THE LOWER COURT ERRED IN HOLDING THAT THE SALE AT PUBLIC AUCTION CONDUCTED BY THE CITY SHERIFF OF MANILA CONCERNING THE TAXICAB FRANCHISE IS OF NO LEGAL EFFECT.

III

THE LOWER COURT ERRED IN SETTING ASIDE THE CERTIFICATE OF SALE ISSUED BY THE CITY SHERIFF OF MANILA IN FAVOR OF FILIPINAS INVESTMENT AND FINANCE CORPORATION COVERING PLAINTIFFS' TAXICAB FRANCHISE.

IV

THE LOWER COURT ERRED IN DECLARING VOID AND OF NO LEGAL EFFECT THE ASSIGNMENT OF THE TAXICAB FRANCHISE MADE BY FILIPINAS INVESTMENT AND FINANCE CORPORATION IN FAVOR OF DEFENDANT.

V

THE LOWER COURT (sic) IN NOT DECIDING THE CASE IN FAVOR OF THE DEFENDANTS. Appellants' Brief, pp. 9 & 10)

From the aforequoted assignment of errors, the decisive issue for consideration is the validity of the chattel mortgage in so far as the franchise and the subsequent sale thereof are concerned.

The resolution of said issue is unquestionably governed by the provisions of Article 1484 of the Civil Code which states:

Art. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise y of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

Under the above-quoted article of the Civil Code, the vendor of personal property the purchase price of which is payable in installments, has the right, should the vendee default in the payment of two or more of the agreed installments, to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was

constituted. 1 Whichever right the vendor elects, he cannot avail of the other, these remedies being alternative, not cumulative. 2 Furthermore, if the vendor avails himself of the right to foreclose his mortgage, the law prohibits him from further bringing an action against the vendee for the purpose of recovering whatever balance of the debt secured not satisfied by the foreclosure sale. 3 The precise purpose of the law is to prevent mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment, otherwise, the mortgagor-buyer would find himself without the property and still owing practically the full amount of his original indebtedness. 4

In the instant case, defendant corporation elected to foreclose its mortgage upon default by the plaintiffs in the payment of the agreed installments. Having chosen to foreclose the chattel mortgage, and bought the purchased vehicles at the public auction as the highest bidder, it submitted itself to the consequences of the law as specifically mentioned, by which it is deemed to have renounced any and all rights which it might otherwise have under the promissory note and the chattel mortgage as well as the payment of the unpaid balance.

Consequently, the lower court rightly declared the nullity of the chattel mortgage in question in so far as the taxicab franchise and the used Chevrolet car of plaintiffs are concerned, under the authority of the ruling in the case of Levy Hermanos, Inc. vs. Pacific Commercial Co., et al., 71 Phil. 587, the facts of which are similar to those in the case at bar. There, we have the same situation wherein the vendees offered as security for the payment of the purchase price not only the motor vehicles which were bought on installment, but also a residential lot and a house of strong materials. This Court sustained the pronouncement made by the lower court on the nullity of the mortgage in so far as it included the house and lot of the vendees, holding that under the law, should the vendor choose to foreclose the mortgage, he has to content himself with the proceeds of the sale at the public auction of the chattels which were sold on installment and mortgaged to him and having chosen the remedy of foreclosure, he cannot nor should he be allowed to insist on the sale of the house and lot of the vendees, for to do so would be equivalent to obtaining a writ of execution against them concerning other properties which are separate and distinct from those which were sold on installment. This would indeed be contrary to public policy and the very spirit and purpose of the law, limiting the vendor's right to foreclose the chattel mortgage only on the thing sold.

In the case of Cruz v. Filipinos Investment & Finance Corporation, 23 SCRA 791, this Court ruled that the vendor of personal property sold on the installment basis is precluded, after foreclosing the chattel mortgage on the thing sold from having a

recourse against the additional security put up by a third party to guarantee the purchaser's performance of his obligation on the theory that to sustain the same would overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, said guarantor will in turn be entitled to recover what he has paid from the debtor-vendee, and ultimately it will be the latter who will be made to bear the payment of the of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him, thereby indirectly subverting the protection given the latter. Consequently, the additional mortgage was ordered cancelled. Said ruling was reiterated in the case of Pascual v. Universal Motors Corporation, 61 SCRA 121. If the vendor under such circumstance is prohibited from having a recourse against the additional security for reasons therein stated, there is no ground why such vendor should not likewise be precluded from further extrajudicially foreclosing the additional security put up by the vendees themselves, as in the instant case, it being tantamount to a further action 5 that would violate Article 1484 of the Civil Code, for then is actually no between an additional security put up by the vendee himself and such security put up by a third party insofar as how the burden would ultimately fall on the vendee himself is concerned.

Reliance on the ruling in Southern Motors, inc. v. Moscoso, 2 SCRA 168, that in sales on installments, where the action instituted is for and the mortgaged property is subsequently attached and sold, the sales thereof does not amount to a foreclosure of the mortgage, hence, the seller creditor is entitled to a deficiency judgment, does not for the stand of the appellants for that case is entirely different from the case at bar. In that case, the vendor has availed of the first remedy provided by Article 1484 of the Civil Code, i.e., to exact fulfillment of the obligation whereas in the present case, the remedy availed of was foreclosure of the chattel mortgage.

The foregoing disposition renders superfluous a determination of the other issue raised by the parties as to the validity of the auction sale, in so far as the franchise of plaintiffs is concerned, which sale had been admittedly held without any notice to the plaintiffs.

IN VIEW HEREOF, the judgment appealed from is hereby affirmed, with costs against the appellants.

SO ORDERED.

ANDRES QUIROGA, plaintiff-appellant, vs.PARSONS HARDWARE CO., defendant-appellee.

AVANCEÑA, J.:

On January 24, 1911, in this city of manila, a contract in the following tenor was entered into by and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the present defendant later subrogated itself), as party of the second part:

CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.

ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons under the following conditions:

(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen, whether of the same or of different styles.

(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty days from the date of their shipment.

(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight, insurance, and cost of unloading from the vessel at the point where the beds are received, shall be paid by Mr. Parsons.

(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice.

The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash.

(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds, and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be affected by said alteration

if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which the order was given.

(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.

ART. 2. In compensation for the expenses of advertisement which, for the benefit of both contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give the preference to Mr. Parsons in case anyone should apply for the exclusive agency for any island not comprised with the Visayan group.

ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval.

ART. 4. This contract is made for an unlimited period, and may be terminated by either of the contracting parties on a previous notice of ninety days to the other party.

Of the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. As may be seen, with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. The whole question, therefore, reduced itself to a determination as to whether the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or an agent of the plaintiff for the sale of his beds.

In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of

purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds.

It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides, examining the clauses of this contract, none of them is found that substantially supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale.

The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant corporation and who established and managed the latter's business in Iloilo. It appears that this witness, prior to the time of his testimony, had serious trouble with the defendant, had maintained a civil suit against it, and had even accused one of its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted the contract Exhibit A, and, when questioned as to what was his purpose in contracting with the plaintiff, replied that it was to be an agent for his beds and to collect a commission on sales. However, according to the defendant's evidence, it was Mariano Lopez Santos, a director of the corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has stated the truth, his statement as to what was his idea in contracting with the plaintiff is of no importance, inasmuch as the agreements contained in Exhibit A which he claims to have drafted, constitute, as we have said, a contract of purchase and sale, and not one of commercial agency. This only means that Ernesto Vidal was mistaken in his classification of the contract. But it must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties.

The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they

performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. Furthermore, the return made was of certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was not considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds, such sales were to be considered as a result of that advertisement.

In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.

For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law.

The judgment appealed from is affirmed, with costs against the appellant. So ordered.

ERLINDA L. PONCE, petitioner, vs.VALENTINO L. LEGASPI and THE HON. COURT OF APPEALS, respondents.

GUTIERREZ, JR., J.:

This controversy calls for the balancing of two conflicting interests: the petitioner's right to litigate versus the respondent's right to be protected from malicious prosecution.

The present case stemmed from the filing before the Supreme Court on October 3, 1977 of a complaint for disbarment against respondent Atty. Valentino Legaspi by petitioner Erlinda Ponce.

At the time of the filing of the disbarment proceedings, petitioner Ponce, together with her husband Manuel, owned forty three percent (43%) of the stockholdings of L'NOR Marine Services, Inc. (L'NOR). She was then Treasurer and director of the Board of Directors of L'NOR while her husband was a director. Forty eight percent (48%) of L'NOR's stocks was owned by the spouses Edward and Norma Porter who were then serving as President/General Manager and Secretary respectively.

The pertinent portions of the complaint are reproduced below:

xxx xxx xxx

10. During the time or period while respondent is the legal counsel of the aforecited corporation, there occurred certain fraudulent manipulations, anomalous management and prejudicial operations by certain officers of said corporation, namely: Edward J. Porter, President/General Manager; Norma Y. Porter, Secretary; and Zenaida T. Manaloto, Director, who caused great damage and prejudice which will be related hereunder;

xxx xxx xxx

14. About July, 1976, said spouses Edward J. Porter and Norma Y. Porter, together with Zenaida T. Manaloto, facilitated, assisted and

aided by herein respondent Legaspi (Annexes "B" and "B-1" herewith), incorporated the Yrasport Drydocks, Inc., hereinafter designated YRASPORT, which they control with the following stockholdings:

Edward J. Porter 180 sharesNorma Y. Porter 180 sharesEriberto F. Yrastorza 16 sharesZenaida T. Manaloto 8 sharesRoman M. Maceda 8 sharesAndres A. Nombrado 8 shares

and whose line of business is in direct competition with L'NOR;

15. YRASPORT, like Yrasport Enterprises, was launched without the knowledge of the minority stockholders owning 43% of L'NOR, and was really designed to compete, if not eliminate, L'NOR as a competitor;

16. That as a matter of fact attempts were made to secure one of L'NOR jobs in favor of YRASPORT, which fraudulent scheme was however frustrated only by the timely opposition of herein complainant;

17. YRASPORT likewise availed of and used the office space, equipment, personnel, funds, other physical facilities, and goodwill of L'NOR while competing at the same time against and causing the latter great damage and irreparable injury;

xxx xxx xxx

21. Edward J. Porter, President-General Manager of L'NOR, purchased from ISECOR (Industrial Supply Corporation) on November 3, 1974 one skaagit winch with its cables for P10,000.00; that on November 18, 1974 said Edward J. Porter assigned the purchase of said skaagit winch with its cables in favor of L'NOR at the price of P10,000.00; and that the latter corporation then assumed the agreed obligation covering the P10,000.00 purchase price in favor of ISECOR;

22. Subsequently, on or about October 18, 1975, said President-General Manager Edward J. Porter misrepresented facts regarding the acquisition cost of said skaagit winch with its cables to the effect that the same was sold by ISECOR at the cost of P20,000.00; that he collected the sum from L'NOR for direct payment to ISECOR allegedly to liquidate in full the obligation of P20,000.00 in favor of ISECOR, when, in truth and in fact, the obligation is only P10,000.00 and not more;

23. On account of the aforecited flagrant fraud, a charge of Estafa was filed against Edward J. Porter and the office of the City Fiscal handed down a resolution to prosecute him in court, copy of pertinent exhibits herewith marked as Annexes "C", "C-1", "C-2", "C-3", "C-4" and "C-5";

24. In view of the aforesaid illegal manipulations, illicit schemes, palpable frauds and estafa committed by said President-General Manager Edward J. Porter, in confabulation and conspiracy with the other officers of the corporation, namely: his wife Norma Y. Porter and Zenaida T. Manaloto, herein complainant requested respondent Valentino Legaspi to take and pursue appropriate local steps and seasonable actions in order to protect the paramount interest of L'NOR of which he is the legal counsel by retainer, but the latter, without any valid excuse whatsoever, refused to do so, although he is still collecting his monthly retainer;

25. On account of the refusal of said corporate attorney of L'NOR, respondent Legaspi, complainant was forced to retain the services of another counsel to prosecute the appropriate derivative suit in the Court of First Instance of Cebu, copy herewith marked Annex "D"; and that, in opposition to the same, respondent Legaspi appeared as legal counsel and attorney of Edward J. Porter and his confederates, copy of exhibits marked Annex "D-1" herewith;

26. In the Criminal Case filed against Edward J. Porter for Estafa (Annex "C" supra), respondent Legaspi likewise appeared as counsel for respondent Porter despite the fact that he is the legal counsel of L'NOR which is the prejudiced party and for whose

benefit the criminal case was really being prosecuted, copy of letter of respondent, marked as Annex "C-6" herewith;

27. Up to the present time respondent is still collecting his monthly retainer, and for his appearance for Edward J. Porter, et. als. in the derivative suit, he collected the sum of P2,000.00 from L'NOR as payment for his illicit legal services in defending the Porters and Manaloto against the very interest of the corporation paying him monthly retainer;

28. Said Edward J. Porter and his confederates, in their respective capacity as such officers of L'NOR, continue and persist in perpetrating malicious acts, anomalous management and fraudulent operations against the interest of L'NOR, and that respondent Legaspi was duly adviced verbally and also in writing by complainant to take the necessary action in his capacity as legal counsel of L'NOR to protect zealously the interest of the latter, but respondent Legaspi has done absolutely nothing, and grossly neglected and flagrantly violated his duties as legal counsel up to the present time, pertinent exhibits herewith marked as Annexes "E", "E-1", "E-2", "E-4", "E-5", "E-6";

29. That, on the contrary, respondent Legaspi in his dual capacity as legal counsel of L'NOR and YRASPORT, and at the same time acting in his capacity as corporate secretary of YRASPORT, facilitated, assisted, aided or otherwise abetted the illegal manipulations, illicit schemes, fraudulent operations and grave frauds committed by said Edward J. Porter and his confederates who are officers of L'NOR against the interest of the latter and to further the malicious competitive sabotage of YRASPORT alleged heretofore; and

30. That, upon the foregoing, we most respectfully prefer against respondent Valentino Legaspi the following charges:

First Specification:

That respondent Valentino Legaspi has committed gross misconduct in office as a practicing lawyer and member of the Philippine Bar,

because, as legal counsel, he violated his duty to and the trust of his client, L'NOR Marine Services, Inc., whom he is professionally duty bound to represent with entire devotion faithfully as such attorney, and whose paramount interest he should protect in all good faith with absolute fidelity, but that, in truth and in fact, he did not do so.

Second Specification:

That respondent Valentino Legaspi, while acting as legal counsel of L'NOR under continuing monthly retainer, has acted at the same time as lawyer of Edward J. Porter, et. als., who have committed anomalous acts, prejudicial manipulations and grave frauds against his client L'NOR Marine services, Inc., that he therefore represented professionally conflicting interest; and that he committed grave malpractice that is in flagrant violation of the recognized canons of legal ethics.

Third Specification:

That respondent Valentino Legaspi committed grossly corrupt or dishonest conduct while under retainer and acting as attorney of L'NOR Marine Services, Inc., when he facilitated, assisted, aided or otherwise abetted the organization, registration and operation of another competing entity, Yrasport Drydocks, Inc., in which he is also the lawyer and corporate Secretary, at the expense of and to which the business and transactions of L'NOR are being diverted or otherwise appropriated, including the pirating of skilled personnel and also facilities, and that respondent committed the same with evident bad faith and absolute lack of fidelity to his client L'NOR, thereby degrading the good esteem, integrity and honor of the profession. (Records, Administrative Case No. 1819, pp. 4-13)

In his comment, Atty. Legaspi denied the allegations in paragraphs 10, 21, 22, 23, 24, 28, 29 and 30. He qualifiedly admitted the allegations in paragraphs 14 and 15, stating that Yrasport was not organized to compete directly with L'NOR. He averred that L'NOR could not cope up with the business and Yrasport was formed for the purpose of complementing L'NOR's business. He added that there is nothing in the law nor contract which prohibits a stockholder from competing with the business of the corporation.

Atty. Legaspi admitted the allegations in paragraphs 26 and 27 that he appeared for Edward Porter in the estafa case filet against the latter, reasoning that his appearances were direct orders of management and that it was not improper for counsel to represent both the corporate officers when they are being sued at the same time.

As to the allegations in paragraphs 16 and 17, Atty. Legaspi declared that he has no sufficient knowledge to form a belief as to the truth or falsity of the statements contained therein.

On January 23, 1978, the Court issued a resolution dismissing the disbarment complaint against Legaspi. The resolution is quoted hereunder:

Administrative Case No. 1819 (Erlinda L. Ponce v. Valentino L. Legaspi). –– Considering the complaint for disbarment against Atty. Valentino L. Legaspi as well as said respondent's comment thereon, the Court Resolved to DISMISS the complaint for lack of merit. (Records, Administrative Case No. 1819 p. 91)

The petitioner filed a motion for reconsideration which was denied by the Court on March 31, 1978.

On February 10, 1978, Atty. Legaspi filed before the Court of First Instance (now Regional Trial Court of Cebu) a complaint for damages against the petitioner.

The petitioner filed a motion to dismiss which was denied by the trial court.

On July 18, 1983, the lower court rendered judgment the dispositive portion of which reads as follows:

WHEREFORE, this court being satisfied that the material allegations of the complaint have been proved and remained uncontradicted with the testimonial and documentary evidence introduced and admitted by the court, judgment is hereby rendered in favor of the plaintiff and against the defendant Erlinda L. Ponce ordering the defendant to pay Valentino L. Legaspi, plaintiff herein, the amount of P1,000.00 as actual damages, P50,000.00 as moral damages and P25,000.00 as exemplary damages and to pay the costs. (Rollo, p. 115)

The petitioner appealed to the Court of Appeals. On May 26, 1987, the Court of Appeals affirmed the lower court's judgment. In affirming the appealed decision, the Court of Appeals reasoned:

Defendant-appellant contends that plaintiff-appellee's action for damages is purely retaliatory in character and stems from an alleged feeling of wounded pride or amor proprio; that granting without admitting that the appellee has suffered certain adverse effects in his reputation because of the disbarment case, it does not constitute malicious prosecution as would otherwise perhaps render the appellant liable for damages; that the facts on record indubitably show that the appellant was merely exercising her right of access to courts for redress of legitimate grievances when she filed the disbarment case believing then as she still does, that appellee committed a breach of his professional duties as a lawyer. In refutation, appellee alleges that appellant belittles this action for damages as "purely retaliatory in character and stems from an alleged feeling of wounded pride or amor proprio"; that by such statement, appellant has unmasked herself as to how little regard she has for the feelings of others and how she clings to the law if only to secure her purpose; that what is being sought by appellee is compensation for appellee's malice, falsehoods and deceit in trying to destroy the professional standing of a humble practitioner just because he did better than the other.

While free access to the courts is guaranteed under Section 9, Article IV of the 1973 Constitution (now Section 11, Article III of the 1986 Constitution), it does not give unbridled license to file any case, whatever the motives are. Whoever files a case shall be responsible for the consequences thereof whenever his act of filing infringes upon the rights of others. In the same way that although freedom of speech is guaranteed, one cannot claim to be protected under such freedom when he is being held liable for the libel he commits.

The case at bar cannot be considered as one for recovery of damages arising from malicious prosecution, for a disbarment proceeding is not a criminal action. (De Jesus-Paras v. Vailoces, 111 Phil. 569; 1 SCRA 954, 957). However, we should not lose sight of the fact that utterances made in the course of judicial proceedings,

including all kinds of pleadings, petitions and motions, belong to the class of communications that are absolutely privileged. (Sison v. David, 110 Phil. 662; 1 SCRA 60, 71 citing authorities) and no civil action for libel or slander may arise therefrom unless the contents of the petition are irrelevant to the subject matter thereof. (1 SCRA 71). It has also been held that a privileged communication should not be subjected to microscopic examination to discover grounds of malice or falsity. Such excessive scrutiny would defeat the protection which the law throws over privileged communications. The ultimate test is that of bona fides. (Deles v. Aragona, Jr., 27 SCRA 633, 642). The privileged character of her complaint filed with the Supreme Court must have been what defendant had in mind when she invokes her right to free access to the courts. However, defendant's actuations before and after the filing of administrative complaint with the Supreme Court disprove her bona fides. On this issue, the trial court found:

Yet, the uncontroverted evidence before the court belie these allegations because there are antecedent incidents between plaintiff and defendant that speak otherwise; that she filed this disbarment complaint against plaintiff with malice aforethought. This conclusion is founded on the fact that defendant was embittered against him for failing to obtain a compromise against Eduardo Coronel before the military due to plaintiff's defense of his client; that she wanted to dissolve the L'Nor Corporation in order to repossess the premises leased to the former upon the corporation's dissolution and Porter's ouster which was thwarted by plaintiff's advice as counsel for L'Nor; plaintiff's letter (Exhibit "H") that she was not authorized to use the title of Chairman of the Board; not counter-signing plaintiff's check (Exhibits I, I-1, and I-2); her insistence to have the surplus profits declared as cash dividend which likewise failed due to plaintiff's advice; her letter (Exh. J) asking plaintiff to desist from defending the corporation and its officers; plaintiff's refusal to give her advice without authority from the Board of Directors; numerous cases filed with the Security and Exchange Commission which were all

dismissed and with the Court of First Instance and Circuit Criminal Court which plaintiff ably defended causing their eventual dismissal and other acts against plaintiff which demonstrated palpably defendant's hatred for the plaintiff acts clearly evidencing malice contrary to her averments in the Answer.

To top it all, notwithstanding her evident support and advice by counsel, she cleverly hid the identity of said counsel prosecuting all her acts of vilification and harassment in her own name. Furthermore, the testimony of plaintiff that she distributed copies of her complaint for disbarment against plaintiff to his clients remain uncontradicted. Finally, instead of coming to court in good faith she instead moved from her residence at Seaview Heights, Lawaan, Talisay, Cebu without informing the court nor her counsel and has not been heard from. From the foregoing, malice is evident.

Appellant claims that the finding of the lower court that appellant disseminated information regarding the filing of her complaint for disbarment and caused a copy of the same to be furnished appellee's clients is totally unsupported by any evidence on record. The contention is untenable. Plaintiff declared that he came to know of the complaint against him even before the Supreme Court required him to comment because two or three of his clients told him that they had a copy given to them. (p. 8, t.s.n., June 3, 1983).

The foregoing acts committed by the defendant violate the conduct that she should have observed in her relation to plaintiff, as provided in the following provisions of the Civil Code of the Philippines, to wit:

Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.

Art. 26. Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention and other relief;

(1) Prying into the privacy of another's residence;

(2) Meddling with or disturbing the private life or family relations of another;

(3) Intriguing to cause another to be alienated from his friends;

(4) Vexing or humiliating another on account of his religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition. (Rollo, pp. 45-48)

The petitioner's motion for reconsideration was denied by the respondent Court in its resolution dated July 7, 1987. Hence, this petition.

The petitioner assigns the following errors:

I

THE RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT OF CEBU, BRANCH XXI, WHICH FOUND THE HEREIN PETITIONER GUILTY OF BAD FAITH IN INSTITUTING A COMPLAINT FOR DISBARMENT AGAINST THE PRIVATE RESPONDENT.

II

THE RESPONDENT COURT OF APPEALS ERRED IN ORDERING THE PETITIONER TO PAY THE PRIVATE RESPONDENT ACTUAL, MORAL AND EXEMPLARY DAMAGES TO PAY THE COSTS. (Rollo, p. 21)

Before proceeding with the merits of the case, the scope of an action for damages arising from malicious prosecution needs to be clarified. Both the Court of Appeals

and the petitioner are of the belief that the suit for damages filed by Atty. Legaspi is not one arising from malicious prosecution because "a disbarment proceeding is not a criminal action. (De Jesus-Paras v. Vailoces, 1 SCRA 954 [1961])." The obvious inference is that only an unsuccessful criminal action may subsequently give rise to a claim for damages based on malicious prosecution. This is not correct. While generally, malicious prosecution refers to unfounded criminal actions and has been expanded to include unfounded civil suits just to vex and humiliate the defendant despite the absence of a cause of action or probable cause (Equitable Banking Corporation v. Intermediate Appellate Court, 133 SCRA 138 [1984]) the foundation of an action for malicious prosecution is an original proceeding, judicial in character. (Lorber v. Storrow, 70 P. 2d 513 [1937]; Shigeru Hayashida v. Tsunehachi Kakimoto, 23 P. 2d 311 [1933]; Graves v. Rudman, 257 N.Y.S. 212 [1932]). A disbarment proceeding is, without doubt, judicial in character and therefore may be the basis for a subsequent action for malicious prosecution.

A perusal of the allegations in Atty. Legaspi's complaint for damages, particularly paragraphs 10, 11, 12 and 15 thereof (Rollo, pp. 56-59) shows that his main cause of action was predicated on injury resulting from the institution of the disbarment case against him. This being the case, we find that the suit filed by the respondent lawyer makes out a case of damages for malicious prosecution.

An action for damages arising from malicious prosecution is anchored on the provisions of Article 21, 2217 and 2219 [8] of the New Civil Code. Under these Articles:

Art. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for damages.

Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act or omission.

Art. 2219. Moral damages may be recovered in the following and analogous cases:

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(8) Malicious prosecution.

In order, however, for the malicious prosecution suit to prosper, the plaintiff must prove: (1) the fact of the prosecution and the further fact that the defendant was himself the prosecutor, and that the action finally terminated with an acquittal; (2) that in bringing the action, the prosecutor acted without probable cause; and (3) that the prosecutor was actuated or impelled by legal malice, that is by improper or sinister motive. (Lao v. Court of Appeals, 199 SCRA 58 [1991]; Rehabilitation Finance Corporation v. Kohl, 4 SCRA 535 [1962]; Buchanan v. Viuda de Esteban, 32 Phil. 363 [1915]).

The foregoing requisites are necessary safeguards to preserve a person's right to litigate which may otherwise be emasculated by the undue filing of malicious prosecution cases. Thus, as further held in the aforecited case ofBuchanan v. Viuda. de Esteban, supra: "Malice is essential to the maintenance of an action for malicious prosecution and not merely to the recovery of exemplary damages. But malice alone does not make one liable for malicious prosecution, where probable cause is shown, even where it appears that the suit was brought for the mere purpose of vexing, harassing and injuring his adversary. In other words, malice and want of probable causemust both exist in order to justify the action." (Emphasis supplied; see also Rehabilitation Finance Corp. v. Koh,supra)

Probable cause is the existence of such facts and circumstances as would excite the belief, in a reasonable mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime (or in this case, the wrongdoing) for which he was prosecuted. (See Buchanan v. Viuda de Esteban, supra)

The general rule is well settled that one cannot be held liable in damages for maliciously instituting a prosecution where he acted with probable cause. In other words, a suit will lie only in cases where a legal prosecution has been carried on without probable cause. (Id.; emphasis supplied)

The petitioner, at the time of her filing of the administrative complaint against the respondent, held substantial stockholdings in L'NOR. She believed that L'NOR was defrauded by its President/General Manager, Edward Porter, and filed a complaint

for estafa against the latter. Porter was convicted by the trial court but, upon appeal, was acquitted by the appellate court.

Respondent did not deny that he represented Porter during the preliminary investigation and trial of the criminal case. In his comment in the disbarment complaint against him, he justified his action by saying that they were "direct orders of management" and that there is "nothing improper for counsel to represent both the corporation and corporate officers at the same time they are being sued." (Records, Administrative Case No. 1819, p. 64)

It is of no moment now that Porter was acquitted of the estafa charge. Apparently, at that time, petitioner Ponce saw a conflict of interest situation. To her mind, the act of the respondent in appearing as counsel for Porter, who had allegedly swindled L'NOR, the interest of which he was duty bound to protect by virtue of the retainer contract, constituted grave misconduct and gross malpractice.

Atty. Legaspi did not deny that he aided the Porters in facilitating the incorporation of YRASPORT and that he himself was its corporate secretary. He emphasized, though, that due to L'NOR'S limited capitalization, YRASPORT was organized to complement L'NOR'S business and not to compete with the latter's undertakings.

Since the petitioner, however, was of the honest perception that YRASPORT was actually organized to appropriate for itself some of L'NOR's business, then we find that she had probable cause to file the disbarment suit.

We take exception to the respondent's comment that, assuming the petitioner's accusation to be true, "there is nothing in Philippine law which considers as unethical the formation of competitive corporations and neither can it be considered with evident bad faith and absolute lack of fidelity." (Records, Administrative Case No. 1819, p. 69)

The circumstances of the case do not depict a simple case of formation of competitive corporations. What the petitioner objects to is the fact that both the respondent lawyer and Porter are fiduciaries of L'NOr and are at the same time fiduciaries of YRASPORT, both of which are engaged in the same line of business.

True, at that time, the Corporation Law did not prohibit a director or any other person occupying a fiduciary position in the corporate hierarchy from engaging in a venture which competed with that of the corporation. But as a lawyer, Atty. Legaspi

should have known that while some acts may appear to be permitted through sheer lack of statutory prohibition, these acts are nevertheless circumscribed upon ethical and moral considerations. And had Atty. Legaspi turned to American jurisprudence which then, as now, wielded a persuasive influence on our law on corporations, he would have known that it was unfair for him or for Porter, acting as fiduciary, to take advantage of an opportunity when the interest of the corporation justly calls for protection. (See Ballantine, Corporations, 204, Callaghan & Co., N. Y. [1946])

Parenthetically, this lapse in the old Corporation Law is now cured by sections 31 and 34 of the Corporation Code which provide:

Sec. 31. Liability of directors, trustees or officers. — Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall he liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.

When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise have accrued to the corporation.

Sec. 34. Disloyalty of a director. — Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture.

The Court finds it unnecessary to discuss all the other charges imputed to the respondent lawyer in the disbarment complaint. From the foregoing discussion, we have sufficient basis to declare that the petitioner had probable cause in filing the administrative case against Atty. Legaspi. Facts and circumstances existed which excited belief in Mrs. Ponce's mind that the respondent indeed committed unethical acts which warranted the imposition of administrative sanctions. Whether or not the petitioner's perception of these facts and circumstances is actually correct is irrelevant to our inquiry, the only issue being whether or not the petitioner had probable cause in filing the complaint.

The above discussion should not be construed as a re-opening of the disbarment proceeding against Atty. Legaspi. References to the complaint for disbarment and the respondent's comment thereto are made only for the purpose of determining the existence of probable cause.

Since we adjudge that petitioner Ponce was moved by probable cause, we need not anymore ascertain whether or not the petitioner acted with malice in filing the complaint. The existence of probable cause alone, regardless of considerations of malice, is sufficient to defeat the charge of malicious prosecution.

The respondent court treated Atty. Legaspi's complaint as one for damages arising from libel and applied the test of bona fides, citing the case of Deles v. Aragona (27 SCRA 633 [1969]). This is incorrect.

In the first place, allegations and averments in pleadings are absolutely privileged as long as they are relevant or pertinent to the issues (See Montenegro v. Medina, 73 Phil. 602 [1942]). The test of good faith applies only to a qualified privileged communication. Had the respondent court studied the Deles case more closely, it would have traced the "bona fides" test to the case of U.S. v. Bustos, (37 Phil. 731 [1918]). In the latter case, the Court was referring to a qualified privileged communication when it formulated the "bona fides" test.

Moreover, the test to break through the protective barrier of an absolutely privileged communication is not "bona fides" but relevance. In the present case, Atty. Legaspi's complaint nowhere alleged that the statements made by the petitioner were irrelevant. Thus, we find that the petitioner's complaint for disbarment is still covered by the privilege and may not be the basis of a damage suit arising from libel.

We disagree with the findings of the two lower courts that it was the petitioner who distributed copies of the complaint for disbarment to Atty. Legaspi's clients. It should be noted that Atty. Legaspi did not even present these alleged clients in court to testify to the source of these copies. Considering that a complaint for disbarment becomes of public record once it is filed with the Court, then the petitioner may not be pinpointed as the sole and indisputable source of the copies received by the respondent's clients.

Atty. Legaspi may have suffered injury as a consequence of the disbarment proceedings. But the adverse result of an action does not per se make the action wrongful and subject the actor to make payment of damages for the law could not have meant to impose a penalty on the right to litigate (Saba v. Court of Appeals, 189 SCRA 50 [1990], citing Rubio v. Court of Appeals, 141 SCRA 488 [1986]; see also Salao v. Salao, 70 SCRA 65 [1976] and Ramos v. Ramos, 61 SCRA 284 [1974], citing Barreto v. Arevalo, 99 Phil. 771 [1956]). One who exercises his rights does no injury. (Saba v. Court of Appeals, supra, citing Auyong Hian v. Court of Tax Appeals, 59 SCRA 110 [1974]). If damage results from a person's exercising his legal rights, it is damnum absque injuria. [Id.]

WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals is SET ASIDE and REVERSED.

SO ORDERED.

PHILIPPINE VIRGINIA TOBACCO ADMINISTRATION, petitioner, vs.HON. WALFRIDO DE LOS ANGELES, Judge of the Court of First Instance of Rizal, Branch IV (Quezon City) and TIMOTEO A. SEVILLA, doing business under the name and style of PHILIPPINE ASSOCIATED RESOURCES and PRUDENTIAL BANK AND TRUST COMPANY, respondents.

 

PARAS, J.:

In these petition and supplemental petition for Certiorari, Prohibition and mandamus with Preliminary Injunction, petitioner Philippine Virginia Tobacco Administration seeks to annul and set aside the following Orders of respondent Judge of the Court of First Instance of Rizal, Branch IV (Quezon City) in Civil Case No. Q-10351 and prays that the Writ of Preliminary Injunction (that may be) issued by this Court enjoining enforcement of the aforesaid Orders be made permanent. (Petition, Rollo, pp. 1-9)

They are:

The Order of July 17, 1967:

AS PRAYED FOR, the Prudential Bank & Trust Company is hereby directed to release and deliver to the herein plaintiff, Timoteo A. Sevilla, the amount of P800,000.00 in its custody representing the marginal deposit of the Letters of Credit which said bank has issued in favor of the defendant, upon filing by the plaintiff of a bond in the um of P800,000.00, to answer for whatever damage that the defendant PVTA and the Prudential Bank & Trust Company may suffer by reason of this order. (Annex "A," Rollo, p. 12)

The Order of November 3,1967:

IN VIEW OF THE FOREGOING, the petition under consideration is granted, as follows: (a) the defendant PVTA is hereby ordered to issue the corresponding certificate of Authority to the plaintiff, allowing him to export the remaining balance of his tobacco quota at the current world market price and to make the corresponding import

of American high-grade tobacco; (b) the defendant PVTA is hereby restrained from issuing any Certificate of Authority to export or import to any persons and/or entities while the right of the plaintiff to the balance of his quota remains valid, effective and in force; and (c) defendant PVTA is hereby enjoined from opening public bidding to sell its Virginia leaf tobacco during the effectivity of its contract with the plaintiff.

xxx xxx xxx

In order to protect the defendant from whatever damage it may sustain by virtue of this order, the plaintiff is hereby directed to file a bond in the sum of P20,000.00. (Annex "K," Rollo, pp. 4-5)

The Order of March 16, 1968:

WHEREFORE, the motion for reconsideration of the defendant against the order of November 3, 1967 is hereby DENIED. (Annex "M," Rollo, P. 196)

The facts of the case are as follows:

Respondent Timoteo Sevilla, proprietor and General Manager of the Philippine Associated Resources (PAR) together with two other entities, namely, the Nationwide Agro-Industrial Development Corp. and the Consolidated Agro-Producers Inc. were awarded in a public bidding the right to import Virginia leaf tobacco for blending purposes and exportation by them of PVTA and farmer's low-grade tobacco at a rate of one (1) kilo of imported tobacco for every nine (9) kilos of leaf tobacco actually exported. Subsequently, the other two entities assigned their rights to PVTA and respondent remained the only private entity accorded the privilege.

The contract entered into between the petitioner and respondent Sevilla was for the importation of 85 million kilos of Virginia leaf tobacco and a counterpart exportation of 2.53 million kilos of PVTA and 5.1 million kilos of farmer's and/or PVTA at P3.00 a kilo. (Annex "A," p. 55 and Annex "B," Rollo, p. 59) In accordance with their contract respondent Sevilla purchased from petitioner and actually exported 2,101.470 kilos of tobacco, paying the PVTA the sum of P2,482,938.50 and leaving a balance of P3,713,908.91. Before respondent Sevilla could import

the counterpart blending Virginia tobacco, amounting to 525,560 kilos, Republic Act No. 4155 was passed and took effect on June 20, 1 964, authorizing the PVTA to grant import privileges at the ratio of 4 to 1 instead of 9 to 1 and to dispose of all its tobacco stock at the best price available.

Thus, on September 14, 1965 subject contract which was already amended on December 14, 1963 because of the prevailing export or world market price under which respondent will be exporting at a loss, (Complaint, Rollo, p. 3) was further amended to grant respondent the privileges under aforesaid law, subject to the following conditions: (1) that on the 2,101.470 kilos already purchased, and exported, the purchase price of about P3.00 a kilo was maintained; (2) that the unpaid balance of P3,713,908.91 was to be liquidated by paying PVTA the sum of P4.00 for every kilo of imported Virginia blending tobacco and; (3) that respondent Sevilla would open an irrevocable letter of credit No. 6232 with the Prudential Bank and Trust Co. in favor of the PVTA to secure the payment of said balance, drawable upon the release from the Bureau of Customs of the imported Virginia blending tobacco.

While respondent was trying to negotiate the reduction of the procurement cost of the 2,101.479 kilos of PVTA tobacco already exported which attempt was denied by petitioner and also by the Office of the President, petitioner prepared two drafts to be drawn against said letter of credit for amounts which have already become due and demandable. Respondent then filed a complaint for damages with preliminary injunction against the petitioner in the amount of P5,000,000.00. Petitioner filed an answer with counterclaim, admitting the execution of the contract. It alleged however that respondent, violated the terms thereof by causing the issuance of the preliminary injunction to prevent the former from drawing from the letter of credit for amounts due and payable and thus caused petitioner additional damage of 6% per annum.

A writ of preliminary injunction was issued by respondent judge enjoining petitioner from drawing against the letter of credit. On motion of respondent, Sevilla, the lower court dismissed the complaint on April 19, 1967 without prejudice and lifted the writ of preliminary injunction but petitioner's motion for reconsideration was granted on June 5,1967 and the Order of April 19,1967 was set aside. On July 1, 1967 Sevilla filed an urgent motion for reconsideration of the Order of June 5, 1967 praying that the Order of dismissal be reinstated. But pending the resolution of respondent's motion and without notice to the petitioner, respondent judge issued the assailed Order of July 17, 1967 directing the Prudential Bank & Trust Co. to

make the questioned release of funds from the Letter of Credit. Before petitioner could file a motion for reconsideration of said order, respondent Sevilla was able to secure the releaseof P300,000.00 and the rest of the amount. Hence this petition, followed by the supplemental petition when respondent filed with the lower court an urgent ex-parte petition for the issuance of preliminary mandatory and preventive injunction which was granted in the resolution of respondent Judge on November 3, 1967, above quoted. On March 16, 1968, respondent Judge denied petitioner's motion for reconsideration. (Supp. Petition, Rollo, pp. 128- 130)

Pursuant to the resolution of July 21, 1967, the Supreme Court required respondent to file an answer to the petition within 10 days from notice thereof and upon petitioner's posting a bond of fifty thousand pesos (P50,000.00), a writ of preliminary mandatory injunction was issued enjoining respondent Judge from enforcing and implementing his Order of July 17,1967 and private respondents Sevilla and Prudential Bank and Trust Co. from complying with and implementing said order. The writ further provides that in the event that the said order had already been complied with and implemented, said respondents are ordered to return and make available the amounts that might have been released and taken delivery of by respondent Sevilla. (Rollo, pp. 16-17)

In its answer, respondent bank explained that when it received the Order of the Supreme Court to stop the release of P800,000.00 it had already released the same in obedience to ailieged earlier Order of the lower Court which was reiterated with ailieged admonition in a subsequent Order. (Annex "C," Rollo, pp. 37-38) A Manifestation to that effect has already been filed c,irrency respondent bank (Rollo, pp. 19-20) which was noted c,irrency this Court in the resolution of August 1, 1967, a copy of which was sent to the Secretary of Justice. (Rollo, p. 30)

Before respondent Sevilla could file his answer, petitioner filed a motion to declare him and respondent bank in contempt of court for having failed to comply with the resolution to this court of July 21, 1967 to the effect that the assailed order has already been implemented but respondents failed to return and make available the amounts that had been released and taken delivery of by respondent Sevilla. (Rollo, pp. 100-102)

In his answer to the petition, respondent Sevilla claims that petitioner demanded from him a much higher price for Grades D and E tobacco than from the other awardees; that petitioner violated its contract by granting indiscriminately to numerous buyers the right to export and import tobacco while his agreement is

being implemented, thereby depriving respondent of his exclusive right to import the Virginia leaf tobacco for blending purposes and that respondent Judge did not abuse his discretion in ordering the release of the amount of P800,000.00 from the Letter of Credit, upon his posting a bond for the same amount. He argued further that the granting of said preliminary injunction is within the sound discretion of the court with or without notice to the adverse party when the facts and the law are clear as in the instant case. He insists that petitioner caretaker.2 claim from him a price higher than the other awardees and that petitioner has no more right to the sum in controversy as the latter has already been overpaid when computed not at the price of tobacco provided in the contract which is inequitable and therefore null and void but at the price fixed for the other awardees. (Answer of Sevilla, Rollo, pp. 105-111)

In its Answer to the Motion for Contempt, respondent bank reiterates its allegations in the Manifestation and Answer which it filed in this case. (Rollo, pp. 113-114)

In his answer, (Rollo, pp. 118-119) to petitioner's motion to declare him in contempt, respondent Sevilla explains that when he received a copy of the Order of this Court, he had already disbursed the whole amount withdrawn, to settle his huge obligations. Later he filed a supplemental answer in compliance with the resolution of this Court of September 15, 1967 requiring him to state in detail the amounts allegedly disbursed c,irrency him out of the withdrawn funds. (Rollo, pp. 121-123)

Pursuant to the resolution of the Supreme Court on April 25, 1968, a Writ of Preliminary Injunction was issued upon posting of a surety bond in the amount of twenty thousand pesos (P20,000.00) restraining respondent Judge from enforcing and implementing his orders of November 3, 1967 and March 16, 1968 in Civil Case No. Q-10351 of the Court of First Instance of Rizal (Quezon City).

Respondent Sevilla filed an answer to the supplemental petition (Rollo, pp. 216-221) and so did respondent bank (Rollo, p. 225). Thereafter, all the parties filed their respective memoranda (Memo for Petitioners, Rollo, pp. 230-244 for Resp. Bank, pp. 246-247; and for Respondents, Rollo, pp. 252-257). Petitioners filed a rejoinder (rollo, pp. 259-262) and respondent Sevilla filed an Amended Reply Memorandum (Rollo, pp. 266274). Thereafter the case was submitted for decision:' in September, 1968 (Rollo, p. 264).

Petitioner has raised the following issues:

1. Respondent Judge acted without or in excess of jurisdiction or with grave abuse of discretion when he issued the Order of July 17, 1967, for the following reasons: (a) the letter of credit issued by respondent bank is irrevocable; (b) said Order was issued without notice and (c) said order disturbed the status quo of the parties and is tantamount to prejudicing the case on the merits. (Rollo, pp. 7-9)

2. Respondent Judge likewise acted without or in excess of jurisdiction or with grave abuse of discretion when he issued the Order of November 3, 1967 which has exceeded the proper scope and function of a Writ of Preliminary Injunction which is to preserve the status quo and caretaker.2 therefore assume without hearing on the merits, that the award granted to respondent is exclusive; that the action is for specific performance a d that the contract is still in force; that the conditions of the contract have already been complied with to entitle the party to the issuance of the corresponding Certificate of Authority to import American high grade tobacco; that the contract is still existing; that the parties have already agreed that the balance of the quota of respondent will be sold at current world market price and that petitioner has been overpaid.

3. The alleged damages suffered and to be suffered by respondent Sevilla are not irreparable, thus lacking in one essential prerequisite to be established before a Writ of Preliminary Injunction may be issued. The alleged damages to be suffered are loss of expected profits which can be measured and therefore reparable.

4. Petitioner will suffer greater damaaes than those alleged by respondent if the injunction is not dissolved. Petitioner stands to lose warehousing storage and servicing fees amounting to P4,704.236.00 yearly or P392,019.66 monthly, not to mention the loss of opportunity to take advantage of any beneficial change in the price of tobacco.

5. The bond fixed by the lower court, in the amount of P20,000.00 is grossly inadequate, (Rollo, pp. 128-151)

The petition is impressed with merit.

In issuing the Order of July 17, 1967, respondent Judge violated the irrevocability of the letter of credit issued by respondent Bank in favor of petitioner. An irrevocable letter of credit caretaker.2 during its lifetime be cancelled or modified Without the express permission of the beneficiary (Miranda and Garrovilla, Principles of Money Credit and Banking, Revised Edition, p. 291). Consequently, if

the finding agricul- the trial on the merits is that respondent Sevilla has ailieged unpaid balance due the petitioner, such unpaid obligation would be unsecured.

In the issuance of the aforesaid Order, respondent Judge likewise violated: Section 4 of Rule 15 of the Relatiom, Rules of Court which requires that notice of a motion be served by the applicant to all parties concerned at least three days before the hearing thereof; Section 5 of the same Rule which provides that the notice shall be directed to the parties concerned; and shall state the time and place for the hearing of the motion; and Section 6 of the same Rule which requires proof of service of the notice thereof, except when the Court is satisfied that the rights of the adverse party or parties are not affected, (Sunga vs. Lacson, L-26055, April 29, 1968, 23 SCRA 393) A motion which does not meet the requirements of Sections 4 and 5 of Rule 15 of the Relatiom, Rules of Court is considered a worthless piece of paper which the Clerk has no right to receiver and the respondent court a quo he has no authority to act thereon. (Vda. de A. Zarias v. Maddela, 38 SCRA 35; Cledera v. Sarn-j-iento, 39 SCRA 552; and Sacdalan v. Bautista, 56 SCRA 175). The three-day notice required by law in the filing of a motion is intended not for the movant's benefit but to avoid surprises upon the opposite party and to give the latter time to study and meet the arguments of the motion. (J.M. Tuason and Co., Inc. v. Magdangal, L-1 5539. 4 SCRA 84).

More specifically, Section 5 of Rule 58 requires notice to the defendant before a preliminary injunction is granted unless it shall appear from facts shown bv affidavits or by the verified complaint that great or irreparable injury would result to the applyin- before the matter can be heard on notice. Once the application is filed with the Judge, the latter must cause ailieged Order to be served on the defendant, requiring him to show cause at a given time and place why the injunction should not be granted. The hearing is essential to the legality of the issuance of a preliminary injunction. It is ailieged abuse of discretion on the part of the court to issue ailieged injunction without hearing the parties and receiving evidence thereon (Associated Watchmen and Security Union, et al. v. United States Lines, et al., 101 Phil. 896).

In the issuance of the Order of November 3, 1967, with notice and hearing notwithstanding the discretionary power of the trial court to Issue a preliminary mandatory injunction is not absolute as the issuance of the writ is the exception rather than the rule. The party appropriate for it must show a clear legal right the violation of which is so recent as to make its vindication an urgent one (Police Commission v. Bello, 37 SCRA 230). It -is granted only on a showing that (a) the

invasion of the right is material and substantial; (b) the right of the complainant is clear and unmistakable; and (c) there is ailieged urgent and permanent necessity for the writ to prevent serious decision ( Pelejo v. Court of Appeals, 117 SCRA 665). In fact, it has always been said that it is improper to issue a writ of preliminary mandatory injunction prior to the final hearing except in cases of extreme urgency, where the right of petitioner to the writ is very clear; where considerations of relative inconvenience bear strongly in complainant's favor; where there is a willful and unlawful invasion of plaintiffs right against his protest and remonstrance the injury being a contributing one, and there the effect of the mandatory injunctions is rather to re-establish and maintain a pre-existing continuing relation between the parties, recently and arbitrarily interrupted c,irrency the defendant, than to establish a new relation (Alvaro v. Zapata, 11 8 SCRA 722; Lemi v. Valencia, February 28, 1963, 7 SCRA 469; Com. of Customs v. Cloribel, L-20266, January 31, 1967,19 SCRA 234.

In the case at bar there appears no urgency for the issuance of the writs of preliminary mandatory injunctions in the Orders of July 17, 1967 and November 3, 1967; much less was there a clear legal right of respondent Sevilla that has been violated by petitioner. Indeed, it was ailieged abuse of discretion on the part of respondent Judge to order the dissolution of the letter of credit on the basis of assumptions that cannot be established except by a hearing on the merits nor was there a showing that R.A. 4155 applies retroactively to respondent in this case, modifying his importation / exportation contract with petitioner. Furthermore, a writ of preliminary injunction's enjoining any withdrawal from Letter of Credit 6232 would have been sufficient to protect the rights of respondent Sevilla should the finding be that he has no more unpaid obligations to petitioner.

Similarly, there is merit in petitioner's contention that the question of exclusiveness of the award is ailieged issue raised by the pleadings and therefore a matter of controversy, hence a preliminary mandatory injunction directing petitioner to issue respondent Sevilla a certificate of authority to import Virginia leaf tobacco and at the same time restraining petitioner from issuing a similar certificate of authority to others is premature and improper.

The sole object of a preliminary injunction is to preserve the status quo until the merit can be heard. It is the last actual peaceable uncontested status which precedes the pending controversy (Rodulfo v. Alfonso, L-144, 76 Phil. 225), in the instant case, before the Case No. Q-10351 was filed in the Court of First Instance of Rizal. Consequently, instead of operating to preserve the status quo until the

parties' rights can be fairly and fully investigated and determined (De los Reyes v. Elepano, et al., 93 Phil. 239), the Orders of July 17, 1966 and March 3, 1967 serve to disturb the status quo.

Injury is considered irreparable if it is of such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a court of law (Allundorff v. Abrahanson, 38 Phil. 585) or where there is no standard c,irrency which their amount can be measured with reasonable accuracy, that is, it is not susceptible of mathematical computation (SSC v. Bayona, et al., L-13555, May 30, 1962).

Any alleged damage suffered or might possibly be suffered by respondent Sevilla refers to expected profits and claimed by him in this complaint as damages in the amount of FIVE Million Pesos (P5,000,000.00), a damage that can be measured, susceptible of mathematical computation, not irreparable, nor do they necessitate the issuance of the Order of November 3, 1967.

Conversely, there is truth in petitioner's claim that it will suffer greater damage than that suffered by respondent Sevilla if the Order of November 3, 1967 is not annulled. Petitioner's stock if not made available to other parties will require warehouse storage and servicing fees in the amount of P4,704,236.00 yearly or more than P9,000.000.00 in two years time.

Parenthetically, the alleged insufficiency of a bond fixed by the Court is not by itself ailieged adequate reason for the annulment of the three assailed Orders. The filing of ailieged insufficient or defective bond does not dissolve absolutely and unconditionally ailieged injunction. The remedy in a proper case is to order party to file a sufficient bond (Municipality of La Trinidad v. CFI of Baguio - Benguet, Br. I, 123 SCRA 81). However, in the instant case this remedy is not sufficient to cure the defects already adverted to.

PREMISES CONSIDERED, the petition is given due course and the assailed Orders of July 17, 1967 and November 3, 1967 and March 16, 1968 are ANNULLED and SET ASIDE; and the preliminary injunctions issued c,irrency this Court should continue until the termination of Case No. Q-10351 on the merits.

SO ORDERED,

PELAYO VS PEREZ

This resolves the petition for review on certiorari seeking the reversal of the Decision[1] of the Court of Appeals (CA) promulgated on April 20, 1999 which reversed the Decision of the Regional Trial Court (RTC) of Panabo, Davao, Branch 34, in Civil Case No. 91-46; and the CA Resolution dated December 17, 1999 denying petitioners motion for reconsideration.

 The antecedent facts as aptly narrated by the CA are as follows: 

David Pelayo (Pelayo),by a Deed of Absolute Sale executed on January 11, 1988, conveyed to Melki Perez (Perez) two parcels of agricultural land (the lots) situated in Panabo, Davao which are portions of Lot 4192, Cad. 276 covered by OCT P-16873.

 Loreza Pelayo (Loreza), wife of Pelayo, and another one whose

signature is illegible witnessed the execution of the deed. Loreza, however, signed only on the third page in the space

provided for witnesses on account of which Perez application for registration of the deed with the Office of the Register of Deeds in Tagum, Davao was denied.

 Perez thereupon asked Loreza to sign on the first and second

pages of the deed but she refused, hence, he instituted on August 8, 1991 the instant complaint for specific performance against her and her husband Pelayo (defendants).

 The defendants moved to dismiss the complaint on the ground

that it stated no cause of action, citing Section 6 of RA 6656 otherwise known as the Comprehensive Agrarian Reform Law which took effect on June 10, 1988 and which provides that contracts executed prior

thereto shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act.

 The questioned deed having been executed on January 10, 1988,

the defendants claimed that Perez had at least up to September 10, 1988 within which to register the same, but as they failed to, it is not valid and, therefore, unenforceable.

 The trial court thus dismissed the complaint. On appeal to this

Court, the dismissal was set aside and the case was remanded to the lower court for further proceedings.

 In their Answer, the defendants claimed that as the lots were

occupied illegally by some persons against whom they filed an ejectment case, they and Perez who is their friend and known at the time as an activist/leftist, hence feared by many, just made it appear in the deed that the lots were sold to him in order to frighten said illegal occupants, with the intentional omission of Lorezas signature so that the deed could not be registered; and that the deed being simulated and bereft of consideration is void/inexistent.

 Perez countered that the lots were given to him by defendant

Pelayo in consideration of his services as his attorney-in-fact to make the necessary representation and negotiation with the illegal occupants-defendants in the ejectment suit; and that after his relationship with defendant Pelayo became sour, the latter sent a letter to the Register of Deeds of Tagum requesting him not to entertain any transaction concerning the lots title to which was entrusted to Perez who misplaced and could [not] locate it.

 Defendant Pelayo claimed in any event, in his Pre-trial brief filed

on March 19, 1996, that the deed was without his wife Lorezas consent, hence, in light of Art. 166 of the Civil Code which provides:

 Article 166. Unless the wife has been declared a

non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband

cannot alienate or encumber any real property of the conjugal partnership without the wifes consent . . .

 it is null and void. 

The trial court, finding, among others, that Perez did not possess, nor pay the taxes on the lots, that defendant Pelayo was indebted to Perez for services rendered and, therefore, the deed could only be considered as evidence of debt, and that in any event, there was no marital consent to nor actual consideration for the deed, held that the deed was null and void and accordingly rendered judgment the dispositive portion of which reads:

 WHEREFORE, judgment is hereby rendered

ordering and directing the defendants to pay plaintiff Melki Perez the sum of TEN THOUSAND (P10,000.00) Pesos as principal with 12% interest per annum starting from the date of filing of the complaint on August 1, 1991 until plaintiff is fully paid.

 The defendants shall likewise pay to plaintiff the

sum of THREE THOUSAND (P3,000.00) as attorneys fees.

 The court further orders that the Deed of

Absolute Sale, (Annex A) of the complaint and (Annex C) of the plaintiffs Motion for Summary Judgment is declared null and void and without force and it is likewise removed as a cloud over defendants title and property in suit. . . .[2]

  The RTC Decision was appealed by herein respondent Perez to the

CA. Petitioners failed to file their appellees brief. The CA then

promulgated its Decision on April 20, 1999 whereby it ruled that by Lorenzas signing as witness to the execution of the deed, she had knowledge of the transaction and is deemed to have given her consent to the same; that herein petitioners failed to adduce sufficient proof to overthrow the presumption that there was consideration for the deed, and that petitioner David Pelayo, being a lawyer, is presumed to have acted with due care and to have signed the deed with full knowledge of its contents and import. The CA reversed and set aside the RTC Decision, declaring as valid and enforceable the questioned deed of sale and ordering herein petitioner Lorenza Pelayo to affix her signature on all pages of said document.

 Petitioners moved for reconsideration of the decision but the same

was denied per Resolution dated December 17, 1999. The CA found said motion to have been filed out of time and ruled that even putting aside technicality, petitioners failed to present any ground bearing on the merits of the case to justify a reversal or setting aside of the decision.

 Hence, this petition for review on certiorari on the following

grounds: 1. The CA erred in ignoring the specific provision of Section 6, in

relation to Section 4 of R.A. No. 6657 otherwise known as the Comprehensive Agrarian Reform Law of 1988 which took effect on June

15, 1988 and which provides that contracts executed prior thereto shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act.

 2. The CA erred in holding that the deed of sale was valid and

considering the P10,000.00 adjudged by the trial court as Perezs remuneration as the consideration for the deed of sale, instead of declaring the same as null and void for being fictitious or simulated and on the basis of Art. 491, Par. 2 of the New Civil Code which prohibits agents from acquiring by purchase properties from his principal under his charge.

 3. The CA made a novel ruling that there was implied marital

consent of the wife of petitioner David Pelayo. 4. Petitioners should have been allowed to file their appellees brief

to ventilate their side, considering the existence of peculiar circumstances which prevented petitioners from filing said brief.

 On the other hand, respondent points out that the CA, in resolving

the first appeal docketed as CA-G.R. SP No. 38700[3] brought by respondent assailing the RTC Order granting herein petitioners motion to dismiss, already ruled that under R.A. No. 6657, the sale or transfer of private agricultural land is allowed only when the area of the land being conveyed constitutes or is a part of, the landowner-seller retained area and

when the total landholding of the purchaser-transferee, including the property sold, does not exceed five (5) hectares; that in this case, the land in dispute is only 1.3 hectares and there is no proof that the transferees (herein respondent) total landholding inclusive of the subject land will exceed 5 hectares, the landholding ceiling prescribed by R.A. No. 6657; that the failure of respondent to register the instrument was not due to his fault or negligence but can be attributed to Lorenzas unjustified refusal to sign two pages of the deed despite several requests of respondent; and that therefore, the CA ruled that the deed of sale subject of this case is valid under R.A. No. 6657.

 Respondent further maintains that the CA correctly held in its

assailed Decision that there was consideration for the contract and that Lorenza is deemed to have given her consent to the deed of sale.

 Respondent likewise opines that the CA was right in denying

petitioners motion for reconsideration where they prayed that they be allowed to file their appellees brief as their counsel failed to file the same on account of said counsels failing health due to cancer of the liver. Respondent emphasized that in petitioners motion for reconsideration, they did not even cite any errors made by the CA in its Decision.

 The issues boil down to the question of whether or not the deed of

sale was null and void on the following grounds: (a) for not complying

with the provision in R.A. No. 6657 that such document must be registered with the Register of Deeds within three months after the effectivity of said law; (b) for lack of marital consent; (c) for being prohibited under Article 1491 (2) of the Civil Code; and (d) for lack of consideration.

We rule against petitioners. The issue of whether or not the deed of sale is null and void under

R.A. No. 6657, for respondents failure to register said document with the Register of Deeds within three months after the effectivity of R.A. No. 6657, had been resolved with finality by the CA in its Decision dated November 24, 1994 in CA-G.R. SP No. 38700.[4] Herein petitioners no longer elevated said CA Decision to this Court and the same became final and executory on January 7, 1995.[5]

 In said decision, the CA interpreted Section 4, in relation to Section

70 of R.A. No. 6657, to mean thus: 

. . . the proper interpretation of both sections is that under R.A. No. 6657, the sale or transfer of a private agricultural land is allowed only when said land area constitutes or is a part of the landowner-seller retained area and only when the total landholdings of the purchaser-transferee, including the property sold does not exceed five (5) hectares.  

Aside from declaring that the failure of respondent to register the deed was not of his own fault or negligence, the CA ruled that respondents failure to

register the deed of sale within three months after effectivity of The Comprehensive Agrarian Reform Law did not invalidate the deed of sale as the transaction over said property is not proscribed by R.A. No. 6657. 

Thus, under the principle of law of the case, said ruling of the CA is now binding on petitioners. Such principle was elucidated in Cucueco vs. Court of Appeals,[6] to wit:

 Law of the case has been defined as the opinion delivered on a

former appeal.  It is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court.   

Petitioners not having questioned the Decision of the CA dated November 24, 1994 which then attained finality, the ruling that the deed of sale subject of this case is not among the transactions deemed as invalid under R.A. No. 6657, is now immutable. 

We agree with the CA ruling that petitioner Lorenza, by affixing her signature to the Deed of Sale on the space provided for witnesses, is deemed to have given her implied consent to the contract of sale.

 

Sale is a consensual contract that is perfected by mere consent, which may either be express or implied.[7] A wifes consent to the husbands disposition of conjugal property does not always have to be explicit or set forth in any particular document, so long as it is shown by acts of the wife that such consent or approval was indeed given.[8] In the present case, although it appears on the face of the deed of sale that Lorenza signed only as an instrumental witness, circumstances leading to the execution of said document point to the fact that Lorenza was fully aware of the sale of their conjugal property and consented to the sale.

 In their Pre-Trial Brief,[9] petitioners admitted that even prior to

1988, they have been having serious problems, including threats to the life of petitioner David Pelayo, due to conflicts with the illegal occupants of the property in question, so that respondent, whom many feared for being a leftist/activist, offered his help in driving out said illegal occupants.

 Human experience tells us that a wife would surely be aware of

serious problems such as threats to her husbands life and the reasons for such threats. As they themselves stated, petitioners problems over the subject property had been going on for quite some time, so it is highly improbable for Lorenza not to be aware of what her husband was doing to remedy such problems. Petitioners do not deny that Lorenza Pelayo was present during the execution of the deed of sale as her signature appears

thereon. Neither do they claim that Lorenza Pelayo had no knowledge whatsoever about the contents of the subject document. Thus, it is quite

 certain that she knew of the sale of their conjugal property between her husband and respondent. 

Under the rules of evidence, it is presumed that a person takes ordinary care of his concerns.[10] Petitioners did not even attempt to overcome the aforementioned presumption as no evidence was ever presented to show that Lorenza was in any way lacking in her mental faculties and, hence, could not have fully understood the ramifications of signing the deed of sale. Neither did petitioners present any evidence that Lorenza had been defrauded, forced, intimidated or threatened either by her own husband or by respondent into affixing her signature on the subject document. If Lorenza had any objections over the conveyance of the disputed property, she could have totally refrained from having any part in the execution of the deed of sale. Instead, Lorenza even affixed her signature thereto.

 Moreover, under Article 173, in relation to Article 166, both of the

New Civil Code, which was still in effect on January 11, 1988 when the deed in question was executed, the lack of marital consent to the disposition of conjugal property does not make the contract void ab initio but merely voidable. Said provisions of law provide:

 Art. 166. Unless the wife has been declared a non compos

mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal property without the wifes consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same. . . . 

Art. 173. The wife may, during the marriage, and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs, after the dissolution of the marriage, may demand the value of property fraudulently alienated by the husband.  Hence, it has been held that the contract is valid until the court

annuls the same and only upon an action brought by the wife whose consent was not obtained.[11] In the present case, despite respondents repeated demands for Lorenza to affix her signature on all the pages of the deed of sale, showing respondents insistence on enforcing said contract, Lorenza still did not file a case for annulment of the deed of sale. It was only when respondent filed a complaint for specific performance on August 8, 1991 when petitioners brought up Lorenzas alleged lack of consent as an affirmative defense. Thus, if the transaction was indeed entered into without Lorenzas consent, we find it quite puzzling why for

more than three and a half years, Lorenza did absolutely nothing to seek the nullification of the assailed contract.

 The foregoing circumstances lead the Court to believe that Lorenza

knew of the full import of the transaction between respondent and her 

husband; and, by affixing her signature on the deed of sale, she, in effect, signified her consent to the disposition of their conjugal property. 

With regard to petitioners asseveration that the deed of sale is invalid under Article 1491, paragraph 2 of the New Civil Code, we find such argument unmeritorious. Article 1491 (2) provides:

 Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: . . . (2) Agents, the property whose administration or sale may have been entrusted to them, unless the consent of the principal has been given; . . .  In Distajo vs. Court of Appeals,[12] a landowner, Iluminada Abiertas,

designated one of her sons as the administrator of several parcels of her land. The landowner subsequently executed a Deed of Certification of Sale

of Unregistered Land, conveying some of said land to her son/administrator. Therein, we held that:

 Under paragraph (2) of the above article, the prohibition against

agents purchasing property in their hands for sale or management is not absolute. It does not apply if the principal consents to the sale of the property in the hands of the agent or administrator. In this case, the deeds of sale signed by Iluminada Abiertas shows that she gave consent to the sale of the properties in favor of her son, Rufo, who was the administrator of the properties. Thus, the consent of the principal Iluminada Abiertas removes the transaction out of the prohibition contained in Article 1491(2).[13]

 The above-quoted ruling is exactly in point with this case before us.

Petitioners, by signing the Deed of Sale in favor of respondent, are also deemed to have given their consent to the sale of the subject property in favor of respondent, thereby making the transaction an exception to the general rule that agents are prohibited from purchasing the property of their principals.

 Petitioners also argue that the CA erred in ruling that there was

consideration for the sale. We find no error in said appellate courts ruling. The element of consideration for the sale is indeed present. Petitioners, in adopting the trial courts narration of antecedent facts in their petition,[14] thereby admitted that they authorized respondent to represent them in negotiations with the squatters occupying the disputed property and, in consideration of respondents services, they executed the subject deed of

sale. Aside from such services rendered by respondent, petitioners also acknowledged in the deed of sale that they received in full the amount of Ten Thousand Pesos. Evidently, the consideration for the sale is respondents services plus the aforementioned cash money.

 Petitioners contend that the consideration stated in the deed of sale is

excessively inadequate, indicating that the deed of sale was merely simulated. We are not persuaded. Our ruling in Buenaventura vs. Court of Appeals[15] is pertinent, to wit:

 . . . Indeed, there is no requirement that the price be equal to the

exact value of the subject matter of sale. . . . As we stated in Vales vs. Villa:

 Courts cannot follow one every step of his life and

extricate him from bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not because one person has been defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose money by them indeed, all they have in the world; but not for that alone can the law intervene and restore. There must be, in addition, a violation of the law, the commission of what the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it.[16]

  

Verily, in the present case, petitioners have not presented proof that there has been fraud, mistake or undue influence exercised upon them by respondent. It is highly unlikely and contrary to human experience that a layman like respondent would be able to defraud, exert undue influence, or in any way vitiate the consent of a lawyer like petitioner David Pelayo who is expected to be more knowledgeable in the ways of drafting contracts and other legal transactions. 

Furthermore, in their Reply to Respondents Memorandum,[17] petitioners adopted the CAs narration of fact that petitioners stated in a letter they sent to the Register of Deeds of Tagum that they have entrusted the titles over subject lots to herein respondent. Such act is a clear indication that they intended to convey the subject property to herein respondent and the deed of sale was not merely simulated or fictitious.

 Lastly, petitioners claim that they were not able to fully ventilate

their defense before the CA as their lawyer, who was then suffering from cancer of the liver, failed to file their appellees brief. Thus, in their motion for reconsideration of the CA Decision, they prayed that they be allowed to submit such appellees brief. The CA, in its Resolution dated December 17, 1999, stated thus:

 By movant-defendant-appellees own information, his counsel

received a copy of the decision on May 5, 1999. He, therefore, had fifteen (15) days from said date or up to May 20, 1999 to file the motion. The motion, however, was sent through a private courier and, therefore,

considered to have been filed on the date of actual receipt on June 17, 1999 by the addressee Court of Appeals, was filed beyond the reglementary period.

 Technicality aside, movant has not proffered any ground bearing

on the merits of the case why the decision should be set aside.  Petitioners never denied the CA finding that their motion for

reconsideration was filed beyond the fifteen-day reglementary period. On that point alone, the CA is correct in denying due course to said motion. The motion having been belatedly filed, the CA Decision had then attained finality. Thus, in Abalos vs. Philex Mining Corporation,[18] we held that:

 . . . Nothing is more settled in law than that once a

judgment attains finality it thereby becomes immutable and unalterable. It may no longer be modified in any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest court of the land.  Moreover, it is pointed out by the CA that said motion did not

present any defense or argument on the merits of the case that could have convinced the CA to reverse or modify its Decision.

 We have consistently held that a petitioners right to due process is

not violated where he was able to move for reconsideration of the order or

decision in question.[19] In this case, petitioners had the opportunity to fully expound on their defenses through a motion for reconsideration. Petitioners did file such motion but they wasted such opportunity by failing to present therein whatever errors they believed the CA had committed in its Decision. Definitely, therefore, the denial of petitioners motion for reconsideration, praying that they be allowed to file appellees brief, did not infringe petitioners right to due process as any issue that petitioners wanted to raise could and should have been contained in said motion for reconsideration.

 IN VIEW OF THE FOREGOING, the petition is DENIED and

the Decision of the Court of Appeals dated April 20, 1999 and its Resolution dated December 17, 1999 are hereby AFFIRMED.

 SO ORDERED.

SPOUSES RESTITUTO NONATO and ESTER NONATO, petitioners, vs.

THE HONORABLE INTERMEDIATE APPELLATE COURT and INVESTOR'S FINANCE CORPORATIONrespondents.

 

ESCOLIN, J.:

The issue posed in this petition for review of the decision of the respondent appellate court is whether a vendor, or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer to pay two or more of the stipulated installments, may also demand payment of the balance of the purchase price.

The pertinent facts are summarized by the respondent appellate court as follows:

On June 28, 1976, defendant spouses Restituto Nonato and Ester Nonato purchased one (1) unit of Volkswagen Sakbayan from the People's Car, Inc., on installment basis. To secure complete payment, the defendants executed a promissory note (Exh. A or 1) and a chattel mortgage in favor of People's Car, Inc, (Exh. B or 2). People's Car, Inc., assigned its rights and interests over the note and mortgage in favor of plaintiff Investor's Finance Corporation (FNCB) Finance). For failure of defendants to pay two or more installments, despite demands, the car was repossessed by plaintiff on March 20, 1978 (Exh. E or 4).

Despite repossession, plaintiff demanded from defendants that they pay the balance of the price of the car (Exhs. F and C). Finally, on June 9, 1978, plaintiff filed before the Court of First Instance of Negros Occidental the present complaint against defendants for the latter to pay the balance of the price of the car, with damages and attorney's fees. (Records, pp. 36-37)

In their answer, the spouses Nonato alleged by way of defense that when the company repossessed the vehicle, it had, by that act, effectively cancelled the sale of the vehicle. It is therefore barred from exacting recovery of the unpaid balance of the purchase price, as mandated by the provisions of Article 1484 of the Civil Code.

After due hearing, the trial court rendered a decision in favor of the IFC and against the Nonatos, as follows:

PREMISES CONSIDERED, the Court hereby renders judgment ordering the defendant to pay to the plaintiff the amount of P 17,537.60 with interest at the rate of 14% per annum from July 28, 1976 until fully paid, 10% of the amount due as attorney's fees, litigation expenses in the amount of P 133.05 plus the costs of this suit. No pronouncement as to other charges and damages, the same not having been proven to the satisfaction of the Court. 1

On appeal, the respondent appellate court affirmed the j judgment.

Hence, this petition for review on certiorari.

The applicable law in the case at bar, involving as it does a sale of personal property on installment, is Article 1484 of the Civil Code which provides:

In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

The meaning of the aforequoted provision has been repeatedly enunciated in a long line of cases. Thus: "Should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any of these three remedies-either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These

remedies have been recognized as alternative, not cumulative, that the exercise of one would bar the exercise of the others. 2

It is not disputed that the respondent company had taken possession of the car purchased by the Nonatos on installments. But while the Nonatos maintain that the company had, by that act, exercised its option to cancel the contract of sale, the company contends that the repossession of the vehicle was only for the purpose of appraising its value and for storage and safekeeping pending full payment by the Nonatos of the purchasing price. The company thus denies having exercised its right to cancel the sale of the repossessed car. The records show otherwise.

The receipt issued by the respondent company to the Nonatos when it took possession of the vehicle states that the vehicle could be redeemed within fifteen [151 days. 3 This could only mean that should petitioners fail to redeem the car within the aforesaid period by paying the balance of the purchase price, the company would retain permanent possession of the vehicle, as it did in fact. This was confirmed by Mr. Ernesto Carmona, the company's witness, who testified, to wit:

ATTY. PAMPLONA:

So that Mr. Witness, it is clear now that, per your receipt and your answer, the company will not return the unit without paying a sum of money, more particularly the balance of the account?

WITNESS: Yes, sir. 4

Respondent corporation further asserts that it repossessed the vehicle merely for the purpose of appraising its current value. The allegation is untenable, for even after it had notified the Nonatos that the value of the car was not sufficient to cover the balance of the purchase price, there was no attempt at all on the part of the company to return the repossessed car,

Indeed, the acts performed by the corporation are wholly consistent with the conclusion that it had opted to cancel the contract of sale of the vehicle. It is thus barred from exacting payment from petitioners of the balance of the price of the vehicle which it had already repossessed. It cannot have its cake and eat it too.

WHEREFORE, the judgment of the appellate court in CA-G.R. No. 69276-R is hereby set aside and the complaint filed by respondent Investors Finance

Corporation against petitioner in Civil Case No. 13852 should be, as it is hereby, dismissed. No costs.

SO ORDERED.

FILIPINAS INVESTMENT & FINANCE CORPORATION, plaintiff-appellant, vs.JULIAN R. VITUG, JR. and SUPREME SALES & DEVELOPMENT CORPORATION, defendants-appellees.

Wilhelmina V. Joven for plaintiff-appellant.Antonio V. Borromeo for defendants-appellants.

BARREDO, J.:

Appeal from an order of dismissal by the Court of First Instance of Manila, in its Civil Case No. 60915, entitled Filipinas Investment & Finance Corporation vs. Julian R. Vitug, Jr. and Supreme Sales & Development Corporation, of the amended complaint of July 16, 1965 of plaintiff-appellant Filipinas Investment & Finance Corporation whereby it sought to recover from defendant-appellee Supreme Sales & Development Corporation the deficiency that resulted after it had foreclosed the chattel mortgage on and sold at public auction, the car of the other defendant, Julian Vitug, Jr. who had failed to pay to appellee installments due on the promissory note representing the purchase price of said car which he had bought from the same, appellant being the assignee of appellee of its rights in the said promissory note.

The material allegations in appellant's amended complaint are:

The defendant, Julian R. Vitug, executed and delivered to appellee a promissory note in the amount of P14,605.00 payable in monthly installments according to a schedule of payments; the payment of the aforesaid amount which was the purchase price of a motor vehicle, a 4-door Consul sedan, bought by said defendant from appellee, was secured by a chattel mortgage over such automobile; on the same day, appellee negotiated the above-mentioned promissory note in favor of appellant Filipinas Investment & Finance Corporation, assigning thereto all its rights, title and interests to the same, the assignment including the right of recourse against appellee; defendant Vitug defaulted in the payment of part of the installment which fell due on January 6, 1965, as well as the subsequent three consecutive monthly installments which he was supposed to have paid on February 6, March 6 and April 6, 1965; there being a provision in the aforesaid promissory note and chattel mortgage that failure to pay the installments due would result in the entire obligation becoming due and demandable, appellant demanded from appellee the payment of such outstanding balance; in turn,

appellee "authorized (appellant) to take such action as may be necessary to enable (it) to take possession of the ... motor vehicle." Pursuant to such authority, appellant secured possession of the mortgaged vehicle by means of a writ of replevin duly obtained from the court, preparatory to the foreclosure of the mortgage, but said writ became unnecessary because upon learning of the same, defendant Vitug voluntarily surrendered the car to appellant; thereafter, the said car was sold at public auction, but the proceeds still left a deficiency of P8,349.35, plus interest of 12% per annum from April 21, 1965; and appellant, the above foreclosure and sale notwithstanding, would hold appellee liable for the payment of such outstanding balance, plus attorney's fees and costs.

On August 4, 1965, appellee filed an urgent motion to dismiss on the ground, inter alia, that under Article 1484 of the Civil Code of the Philippines, which particular provision is otherwise known as the Recto Law, appellant has no cause of action against appellee. Said provision is as follows:

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

In its order of August 30, 1965, subject of this appeal, the lower court found the aforesaid ground to be meritorious and, as already stated, the amended complaint was dismissed as to appellee Supreme Sales & Development Corporation. According to the order of dismissal:

It is undisputed in the instant case that the amount of P14,605.00 mentioned as consideration in both the promissory note and the chattel mortgage in the instant case represents the selling price of one (1) automobile New Ford Consul 315 4-door Sedan, payable in the installments mentioned in said documents. Under pars. 5 and 9 of the amended complaint, the writ of replevin was obtained in the instant case for purposes of foreclosure of mortgage. In applying for a writ of replevin, the plaintiff thereby made his choice, namely, to foreclose the mortgage covering said

automobile; and having accepted said automobile from defendant Julian R. Vitug, Jr., what remains is for the plaintiff to sell said automobile through either a judicial or an extrajudicial foreclosure of said mortgage, without benefit of a deficiency judgment or deficiency collection ... should the proceeds of the foreclosure sale be less than the balance of the installment sale price of said automobile due and collectible.

On September 23, 1965, appellant filed a motion for reconsideration but this was denied on October 26, 1965, hence, this appeal.

The principal error assigned by appellant has reference to the applicability of Art. 1484 of the Civil Code, as amended, to the facts of this case. Appellant maintains that: .

II

THE TRIAL COURT ERRED IN HOLDING THAT ARTICLE 1484 OF THE CIVIL CODE OF THE PHILIPPINES IS APPLICABLE TO THE

TRANSACTION BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE.

Under the facts alleged in the amended complaint which are deemed admitted by the motion to dismiss, 1 this assignment of error must be sustained.

The specific allegations in the amended complaint which have material bearing on the issue herein are:

4. On November 4, 1964, defendant Supreme Sales & Development Corporation, with notice to defendantJulian R. Vitug, Jr. negotiated in favor of (endorsed and delivered to) plaintiff the above-mentioned promissory note, Annex "A", on a with recourse basis whereby in case of the failure and/or refusal of the maker thereof, defendant Julian R. Vitug, Jr. to pay the obligation under the said promissory note, plaintiff shall have the right to recourse against the said defendant corporation.

On the same date, the said defendant corporation, with notice to defendant Julian R. Vitug, Jr., assigned to plaintiff its rights, title, and interests to the aforesaid promissory note and chattel mortgage, Annexes "A" and "B" hereof, as shown by the Deed of Assignment executed by

defendant Supreme Sales & Development Corporation in favor of plaintiff, a copy of which is hereto attached as Annex "C" and made an integral part hereof, which assignment is also subject to the right of recourse above-mentioned.

13. The defendant corporation is liable to plaintiff for the entire balance of the obligation covered by the promissory note, Annex "A", and secured by the chattel mortgage, Annex "B", as a general endorser of the promissory note, Annex "A", and assignor of the chattel mortgage on a with- recourse basis. But should plaintiff be able to sell the above-described motor vehicle, then the said defendant corporation is liable to the plaintiff for the payment of the balance of the obligation after applying thereto the proceeds of the sale of the said vehicle. (Record on Appeal, pp. 12 and 15.)

Thus it can be seen that the assignment made by appellee to appellant of the promissory note and mortgage of defendant Vitug was on a with-recourse basis. In other words, there was a definite and clear agreement between appellant and appellee that should appellant fail to secure full recovery from defendant Vitug, the right was reserved to appellant to seek recourse for the deficiency against appellee. Accordingly, the question for resolution by the Court now is whether or not this provision regarding recourse contained in the agreement between appellant and appellee violates the Recto Law which declares null and void any agreement in contravention thereof. We do not believe that it does.

As pointed out in appellant's brief, the transaction between appellant and appellee was purely an ordinary discounting transaction whereby the promissory note executed by defendant Vitug was negotiated by appellee in favor of appellant for a valuable consideration at a certain discount, accompanied by an assignment also of the chattel mortgage executed by said defendant to secure the payment of his promissory note and with the express stipulation that should there be any deficiency, recourse could be had against appellee. Stated otherwise, the remedy presently being sought is not against the buyer of the car or the defendant Vitug but against the seller, independent of whether or not such seller may have a right of recovery against the buyer, which, in this case, he does not have under the Recto Law. It is clear to Us, on the other hand, that under said law, what Congress seeks to protect are only the buyers on installment who more often than not have been victimized by sellers who, before the enactment of this law, succeeded in unjustly enriching themselves at the expense of the buyers because aside from recovering the goods sold, upon default of the buyer in the payment of two

installments, still retained for themselves all amounts already paid, in addition, furthermore, to other damages, such as attorney's fees, and costs. Surely, Congress could not have intended to impair and much less do away with the right of the seller to make commercial use of his credit against the buyer, provided said buyer is not burdened beyond what this law allows. 1awphil.nêt

We are not unmindful that in the case of Cruz, et al. vs. the same Filipinas Investment & Finance Corporation, L-24772, May 27, 1968, 23 SCRA 791, this Court broadened the scope of the Recto Law beyond its letter and held that within its spirit, a seller of goods on installment does not have any right of action against a third party who, in addition to the buyer's mortgage of the goods sold, furnishes additional security for the payment of said installments or the purchase price of said goods. In that case, it was held:.

It is here agreed that plaintiff Cruz failed to pay several installments as provided in the contract; that there was extrajudicial foreclosure of the chattel mortgage on the said motor vehicle; and that defendant-appellant itself bought it at the public auction duly held thereafter, for a sum less than the purchaser's outstanding obligation. Defendant-appellant, however, sought to collect the supposed deficiency by going against the real estate mortgage which was admittedly constituted on the land of plaintiff Reyes as additional security to guarantee the performance of Cruz' obligation, claiming that what is being withheld from the vendor, by the proviso of Article 1484 of the Civil Code, is only the right to recover against the purchaser, and not a recourse to the additional security put up, not by the purchaser himself, but by a third person.

There is no merit in this contention. To sustain appellants argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she had paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned.

As can be seen, that ease of Cruz was entirely different from this one at bar. In that case, herein appellant Filipinas Investment & Finance Corporation was trying to recover from the guarantor of the buyer, whereas in the present case, it is precisely

stipulated in effect, that the Filipinas Investment & Finance Corporation had a right of recourse against the seller should the buyer fail to pay the assigned credit in full.

It is the contention of appellee that since what were assigned to appellant were only whatever rights it had against the buyer, it should follow that inasmuch as appellee has no right to recover from the defendant beyond the proceeds of the foreclosure sale, the appellant, as assignee, should also have no right to recover any deficiency. We do not view the matter that way. The very fact that the assignee was given the stipulated right of recourse against the assignor negates the idea that the parties contemplated to limit the recovery of the assignee to only the proceeds of the mortgage sale.

ACCORDINGLY, the order of dismissal of the lower court is reversed and this case is ordered remanded to the lower court for further proceedings, with costs against appellee Supreme Sales & Development Corporation.

EQUATORIAL REALTY DEVELOPMENT, INC., petitioner,vs.MAYFAIR THEATER, INC., respondent.

 

PARDO, J.:

Before us is an appeal from the decision 1 of the Court of Appeals 2 dismissing the petition for certiorari and prohibition initiated by petitioner and the resolution 3 modifying the aforementioned decision, thus:

WHEREFORE, the Decision of this Court of March 24, 1998 is hereby modified, thus —

1. Mayfair to deposit with the Clerk of Court of Manila the amount of P847,000.00 in addition to the P10,452,500.00 already deposited therein, within ten (10) days from receipt hereof;

2. The Clerk of Court of Manila, to turn over to petitioner Equatorial the full amount of P11,300,000.00, within ten (10) days from completion of said amount by Mayfair.

SO ORDERED. 4

The facts are as follows:

On November 21, 1996, the Supreme Court promulgated its decision in Equatorial Realty Development, Inc. and Carmelo and Bauermann, Inc. vs. Mayfair Theater, Inc., 5 the decretal portion of which reads:

WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby deemed rescinded; petitioner Carmelo and Bauermann is ordered to return to petitioner Equatorial Realty Development the purchase price. The latter is directed to execute the deeds and documents necessary to return ownership to Carmelo & Bauermann

of the disputed lots. Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc. to buy the lots for P11,300,000.00.

SO ORDERED.

In due time, Equatorial filed a motion for reconsideration of the above decision. On January 28, 1997, the Court denied the motion with finality. A second motion for reconsideration filed by Equatorial was denied on March 4, 1997.

On March 17, 1997, the decision became final and executory. Equatorial filed a third motion for reconsideration, and on April 22, 1997, the Court noted the same without action since the decision had become final and executory. To stress the finality of the decision, on June 17, 1997, the Court issued a resolution emphasizing its finality and warning the parties that no further pleadings or motions regarding the matter would be entertained.

On April 25, 1997, Mayfair Theater, Inc. (hereinafter Mayfair) filed with the Regional Trial Court, Manila, Branch 07 6 a motion for execution.

On May 20, 1997, the trial court granted respondent's motion for execution, as follows:

WHEREFORE, acting on Plaintiff's Motion dated, April 24, 1997, let a Writ of Execution be issued —

1. ORDERING defendant CARMELO and BAUERMANN, INC. to return within 10 days to Defendant EQUATORIAL REALTY and DEVELOPMENT the amount of P11,300,000.00 the total purchase price of properties covered by:

a T.C.T. No. 130410, formerly T.C.T. No. 17350;

b T.C.T. No. 130407, formerly T.C.T. No. 118612;

c T.C.T. No. 130408, formerly T.C.T. No. 60936; and

d T.C.T. No. 130409, formerly T.C.T. No. 52571;

subject of sale date, July 30, 1978 which the Court of Appeals in CA-GR CV No. 32918 ordered rescinded, and to execute another Deed of transfer over said properties in favor of Plaintiff, MAYFAIR THEATER, INC.;

2. ORDERING MAYFAIR THEATER, INC. to pay Defendant CARMELO BAUERMANN INC. the amount of Eleven Million Three Hundred Thousand Pesos (P11,300,000.00), Philippine Currency upon the latter's execution of such Deed of Transfer;

3. ORDERING Defendant EQUATORIAL REALTY DEVELOPMENT to accept this Eleven Million Three Hundred Thousand Pesos (P11,300,000.00), Philippine Currency from defendant CARMELO and BAUERMANN, INC. and to execute also in 10 days time "the deeds and documents necessary to return ownership of these properties to CARMELO and BAUERMANN, INC."

4. ORDERING both Plaintiff and Defendants to submit thereafter their corresponding manifestations of compliance.

SO ORDERED. 7

On the same date, the trial court issued a writ of execution. 8

On May 21, 1997, Sheriff IV Manuelito P. Viloria of the trial court issued to Carmelo and Bauermann a notice to comply with the trial court's order and writ of execution. However, Carmelo did not receive both the writ and notice to comply since it could not be located.

On June 9, 1997, Equatorial filed a motion for reconsideration of the order dated May 20, 1997, the recall and/or quashal of the writ of execution and the notice to comply, on the ground that the order of execution did not conform to the dispositive portion of the Supreme Court's decision dated November 21, 1996. Equatorial specifically averred the following variance:

a. The ten (10) — day period given by the Court to defendant Carmelo & Bauermann, Inc. (Carmelo, for brevity) within which to return the purchase price to Equatorial, and the same period given to Equatorial to execute the documents necessary to return ownership

of the subject properties to Carmelo, do not appear in the dispositive portion of the Supreme Court Decision;

b. The order of execution makes reference to TCT No. 130410, TCT No. 130407, TCT No. 130408, and TCT No. 130409, which are not mentioned in the Supreme Court Decision;

c. The order of execution directs defendant Carmelo to execute a deed of transfer over the subject properties in favor of plaintiff, while the Supreme Court decision merely orders Carmelo to allow plaintiff to buy the same for P11,300,000.00;

d. The order of execution orders plaintiff to pay Carmelo the amount of P11,300,000.00 upon the latter's execution of such deed of transfer, but no such directive appears in the dispositive portion of the Supreme Court Decision;

e. The order of execution directs Equatorial to accept the amount of P11,300,000.00 from Carmelo, but this directive is not contained in the dispositive portion of the Supreme Court Decision; and

f. The dispositive portion of the Supreme Court decision refers to "disputed lots", while the order of execution refers to "properties". 9

On August 25, 1997, the trial court denied Equatorial's motion for reconsideration, the dispositive portion of the order reads:

WHEREFORE, the Motion for Reconsideration filed by defendant Equatorial Realty Development, Inc. is hereby denied for lack of merit. Pursuant to Section 10 (a), Rule 39 of the 1997 Rules of Civil Procedure, Acting Clerk of Court, Atty. Jennifer N. dela Cruz-Buendia, who was directed by the Hon. Roberto A. Barrios, Executive Judge to immediately assume and perform the duties and functions of Atty. Jesusa Maningas, Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Manila in view of the latter's indefinite leave of absence, is hereby appointed and directed to execute in behalf of defendant Equatorial Realty and Development, Inc. all the deeds and documents necessary to return ownership of the subject properties to Carmelo & Bauermann, Inc.,

and thereupon to execute on behalf of defendant Carmelo & Bauermann, Inc. a deed of transfer over the same properties in favor of plaintiff, upon receipt from plaintiff of the purchase price of P11,300,000.00 which the Office of the Clerk of Court shall thereafter hold in trust for defendant Carmelo or its order. All costs incidental to the execution of these conveyances shall be borne by defendants. Finally, the Register of Deeds for the City of Manila is hereby ordered to register the aforementioned deeds and documents of transfer executed by acting Clerk of Court Atty. Jennifer N. dela Cruz-Buendia of the regional Trial Court of Manila upon proof of payment of such fees and taxes as may be due, including documentary stamp and transfer taxes; to cancel in its registry TCT No. 130410, TCT No. 130407, TCT No. 130408 and TCT No. 130409, as well as the owner's duplicates thereof in the possession of defendant Equatorial; and to issue in lieu thereof corresponding new titles and owner's duplicates in the name of plaintiff Mayfair Theater, Inc. 10

Thereafter, Mayfair deposited with the Clerk of Court, Regional Trial Court, Manila its payment to Carmelo, amounting to P10,452,500.00 (P11,300,000.00 less P847,000.00, as withholding tax). 11

On August 27, 1997, pursuant to the aforesaid order, the acting clerk of court, Regional Trial Court, Manila executed a deed of re-conveyance of the subject property in favor of Carmelo, and a deed of absolute sale in favor of Mayfair. 12

On August 28, 1997, both the deed of re-conveyance and deed of absolute sale were submitted to the Register of Deeds of Manila for registration. On the same date, the Register of Deeds of Manila registered the documents, cancelled the transfer certificates of title (TCTs) of Equatorial over the subject property, and issued new TCTs in the name of Mayfair. 1

On September 5, 1997, Equatorial filed with the trial court an urgent motion for reconsideration of the denial. Equatorial contended that the trial court erred in applying Section 10 (a) of Rule 39 since both Carmelo and Equatorial had not yet failed to comply with the order of execution, hence it was erroneous to designate the acting clerk of court to execute the deed of re-conveyance. In fact, Carmelo had not received the notice to comply. Equatorial maintained that the order of execution should not be implemented because it varied with the Supreme Court's

November 21, 1996 decision. Equatorial stressed that since Carmelo had not returned the "purchase price" as ordered by the Court, it could not be compelled to execute the deed of re-conveyance in favor of Carmelo. 14

On November 6, 1997, the trial court denied the motion for lack of merit. 15

On December 16, 1997, Equatorial filed with the Court of Appeals, 16 a petition for certiorari and prohibition seeking the annulment of the trial court's orders dated May 20, August 25, and November 6, 1997, the writ of execution dated May 20, 1997, the sheriff's notice to comply dated May 21, 1997, the deeds of re-conveyance and transfer, sale and the certificates of title in favor of Mayfair.

Equatorial contended that the trial court acted with grave of discretion in issuing a writ of execution, which was at variance with the dispositive portion of the Court's decision.

Equatorial averred that Carmelo's failure to receive the writ of execution and notice to comply was tantamount to denial of due process. Equatorial further stated that the trial court erred in applying Section 10 (a), Rule 39, 1997 Rules of Civil Procedure in issuing the writ of execution, since the parties did not fail to comply within the time specified.

Equatorial also submitted that it would be grossly and unconscionably unjust, unfair and inequitable to compel it to accept P11,300,000.00 for land which was worth more than P400 million, due to the appreciation of the property or the depreciation of the peso.

On March 24, 1998, the Court of Appeals rendered decision dismissing the petition, to wit:

WHEREFORE, the petition is hereby DISMISSED for being dilatory and for lack of merit. The challenged orders and acts of the public respondents and the questioned notices and processes, writ of execution, deeds of re-conveyance and absolute sale, and transfer certificates of title are validated and AFFIRMED.

SO ORDERED. 17

On April 8, 1998, petitioner filed with the Court of Appeals a motion for reconsideration of the decision. 18

On November 20, 1998, the Court of Appeals issued a resolution as follows:

WHEREFORE, the Decision of this Court of March 24, 1998 is hereby modified, thus —

1. Mayfair to deposit with the Clerk of Court of Manila the amount of P847,000.00 in addition to the P10,452,500.00 already deposited therein, within ten (10) days from receipt hereof;

2. The Clerk of Court of Manila, to turn over to petitioner Equatorial the full amount of P11,300,000.00, within ten (10) days from completion of said amount by Mayfair.

SO ORDERED. 19

The Court of Appeals explained that Mayfair had no right to deduct P847,000.00 as withholding tax which must be paid by Carmelo, as the seller. Carmelo must return the amount of P11,300,000.00 to Equatorial as a consequence of the rescission. However, since Carmelo could not be located, Mayfair must complete the full amount of P11,300,000.00 deposited with the Clerk of Court, Manila by depositing an additional P847,000.00. Thereafter, the full amount of P11,300,000.00 must be turned over to Equatorial. The Court of Appeals explained that the judge could not stand idly while Carmelo and Bauermann took time accepting the P11,300,000.00 from Mayfair and returning the amount to Equatorial.

Hence, this petition for review 20 assailing the decision of the Court of Appeals dated March 24, 1998, and its resolution dated November 20, 1998.

Petitioner Equatorial contends that the Court of Appeals erred in upholding the applicability of Rule 39, Section 10 (a), 1997 Rules of Civil Procedure, since it did not fail to comply with the order, as it did not receive the writ of execution and notice to comply. Petitioner submits that the application of Rule 39, Section 10 (a) violated Carmelo and Bauermann's constitutional right to due process.

Petitioner maintains that the writ of execution varies with the dispositive portion of the Supreme Court decision and cannot be implemented. Petitioner stresses that

the Register of Deeds erred in cancelling its certificates of titles and issuing new titles to Mayfair, since Carmelo and Bauermann has not returned the purchase price. The money deposited by Mayfair with the Office of the Clerk of Court was for the account of Carmelo and cannot be considered as a sufficient tender of payment to Equatorial.

The Supreme Court's decision in G.R. No. 106063 is clear. Having attained finality, there is nothing left for the parties to do but adhere to the mandates of the decision.

It is a fundamental rule that when a judgment becomes final and executory, it thereby becomes immutable and unalterable and any amendment or alteration, which substantially affects a final and executory judgment, is null and void for lack of jurisdiction, including the entire proceedings held for that purpose. 21

A writ of execution must conform to the judgment to be executed 22 and adhere strictly to the very essential particulars. 2 An order of execution, which varies the tenor of the judgment or exceeds the terms thereof is a nullity. 24 The writ of execution "may not vary the terms of the judgment it seeks to enforce. Nor may it go beyond the terms of the judgment sought to be executed. Where the execution is not in harmony with the judgment which gives it life, and in fact exceeds it, has pro tanto no validity. To maintain otherwise would be to ignore the constitutional provision against depriving a person of his property without due process of law." 25 Having attained finality, the decision in G. R. No. 106063 is beyond review or modification even by the Supreme Court. 26

In issuing the questioned orders, the trial court exceeded its authority by altering the essential portions of the Supreme Court decision. Thus, the proceedings held below and the orders issued therein inconsistent with the Supreme Court decision are null and void for want of jurisdiction.

We agree that Carmelo and Bauermann is obliged to return the entire amount of eleven million three hundred thousand pesos (P11,300,000.00) to Equatorial. On the other hand, Mayfair may not deduct from the purchase price the amount of eight hundred forty-seven thousand pesos (P847,000.00) as withholding tax. The duty to withhold taxes due, if any, is imposed on the seller, Carmelo and Bauermann, Inc.

WHEREFORE, the petition is partially GRANTED; decision is hereby rendered setting aside the decision and resolution of the Court of Appeals 27 and the orders of execution of the trial court 28 inconsistent and at variance with the dispositive portion of our decision in G.R. No. 106036.

Let the trial court carry out the execution following strictly the terms of the aforesaid Supreme Court decision.

No costs.

SO ORDERED.

FILIPINAS INVESTMENT & FINANCE CORPORATION, plaintiff-appellant, vs.JULIAN R. VITUG, JR. and SUPREME SALES & DEVELOPMENT CORPORATION, defendants-appellees.

Wilhelmina V. Joven for plaintiff-appellant.Antonio V. Borromeo for defendants-appellants.

BARREDO, J.:

Appeal from an order of dismissal by the Court of First Instance of Manila, in its Civil Case No. 60915, entitled Filipinas Investment & Finance Corporation vs. Julian R. Vitug, Jr. and Supreme Sales & Development Corporation, of the amended complaint of July 16, 1965 of plaintiff-appellant Filipinas Investment & Finance Corporation whereby it sought to recover from defendant-appellee Supreme Sales & Development Corporation the deficiency that resulted after it had foreclosed the chattel mortgage on and sold at public auction, the car of the other defendant, Julian Vitug, Jr. who had failed to pay to appellee installments due on the promissory note representing the purchase price of said car which he had bought from the same, appellant being the assignee of appellee of its rights in the said promissory note.

The material allegations in appellant's amended complaint are:

The defendant, Julian R. Vitug, executed and delivered to appellee a promissory note in the amount of P14,605.00 payable in monthly installments according to a schedule of payments; the payment of the aforesaid amount which was the purchase price of a motor vehicle, a 4-door Consul sedan, bought by said defendant from appellee, was secured by a chattel mortgage over such automobile; on the same day, appellee negotiated the above-mentioned promissory note in favor of appellant Filipinas Investment & Finance Corporation, assigning thereto all its rights, title and interests to the same, the assignment including the right of recourse against appellee; defendant Vitug defaulted in the payment of part of the installment which fell due on January 6, 1965, as well as the subsequent three consecutive monthly installments which he was supposed to have paid on February 6, March 6 and April 6, 1965; there being a provision in the aforesaid promissory note and chattel mortgage that failure to pay the installments due would result in the entire obligation becoming due and demandable, appellant demanded from appellee the payment of such outstanding balance; in turn,

appellee "authorized (appellant) to take such action as may be necessary to enable (it) to take possession of the ... motor vehicle." Pursuant to such authority, appellant secured possession of the mortgaged vehicle by means of a writ of replevin duly obtained from the court, preparatory to the foreclosure of the mortgage, but said writ became unnecessary because upon learning of the same, defendant Vitug voluntarily surrendered the car to appellant; thereafter, the said car was sold at public auction, but the proceeds still left a deficiency of P8,349.35, plus interest of 12% per annum from April 21, 1965; and appellant, the above foreclosure and sale notwithstanding, would hold appellee liable for the payment of such outstanding balance, plus attorney's fees and costs.

On August 4, 1965, appellee filed an urgent motion to dismiss on the ground, inter alia, that under Article 1484 of the Civil Code of the Philippines, which particular provision is otherwise known as the Recto Law, appellant has no cause of action against appellee. Said provision is as follows:

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) Exact fulfillment of the obligation should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

In its order of August 30, 1965, subject of this appeal, the lower court found the aforesaid ground to be meritorious and, as already stated, the amended complaint was dismissed as to appellee Supreme Sales & Development Corporation. According to the order of dismissal:

It is undisputed in the instant case that the amount of P14,605.00 mentioned as consideration in both the promissory note and the chattel mortgage in the instant case represents the selling price of one (1) automobile New Ford Consul 315 4-door Sedan, payable in the installments mentioned in said documents. Under pars. 5 and 9 of the amended complaint, the writ of replevin was obtained in the instant case for purposes of foreclosure of mortgage. In applying for a writ of replevin, the plaintiff thereby made his choice, namely, to foreclose the mortgage covering said

automobile; and having accepted said automobile from defendant Julian R. Vitug, Jr., what remains is for the plaintiff to sell said automobile through either a judicial or an extrajudicial foreclosure of said mortgage, without benefit of a deficiency judgment or deficiency collection ... should the proceeds of the foreclosure sale be less than the balance of the installment sale price of said automobile due and collectible.

On September 23, 1965, appellant filed a motion for reconsideration but this was denied on October 26, 1965, hence, this appeal.

The principal error assigned by appellant has reference to the applicability of Art. 1484 of the Civil Code, as amended, to the facts of this case. Appellant maintains that: .

II

THE TRIAL COURT ERRED IN HOLDING THAT ARTICLE 1484 OF THE CIVIL CODE OF THE PHILIPPINES IS APPLICABLE TO THE

TRANSACTION BETWEEN PLAINTIFF-APPELLANT AND DEFENDANT-APPELLEE.

Under the facts alleged in the amended complaint which are deemed admitted by the motion to dismiss, 1 this assignment of error must be sustained.

The specific allegations in the amended complaint which have material bearing on the issue herein are:

4. On November 4, 1964, defendant Supreme Sales & Development Corporation, with notice to defendantJulian R. Vitug, Jr. negotiated in favor of (endorsed and delivered to) plaintiff the above-mentioned promissory note, Annex "A", on a with recourse basis whereby in case of the failure and/or refusal of the maker thereof, defendant Julian R. Vitug, Jr. to pay the obligation under the said promissory note, plaintiff shall have the right to recourse against the said defendant corporation.

On the same date, the said defendant corporation, with notice to defendant Julian R. Vitug, Jr., assigned to plaintiff its rights, title, and interests to the aforesaid promissory note and chattel mortgage, Annexes "A" and "B" hereof, as shown by the Deed of Assignment executed by

defendant Supreme Sales & Development Corporation in favor of plaintiff, a copy of which is hereto attached as Annex "C" and made an integral part hereof, which assignment is also subject to the right of recourse above-mentioned.

13. The defendant corporation is liable to plaintiff for the entire balance of the obligation covered by the promissory note, Annex "A", and secured by the chattel mortgage, Annex "B", as a general endorser of the promissory note, Annex "A", and assignor of the chattel mortgage on a with- recourse basis. But should plaintiff be able to sell the above-described motor vehicle, then the said defendant corporation is liable to the plaintiff for the payment of the balance of the obligation after applying thereto the proceeds of the sale of the said vehicle. (Record on Appeal, pp. 12 and 15.)

Thus it can be seen that the assignment made by appellee to appellant of the promissory note and mortgage of defendant Vitug was on a with-recourse basis. In other words, there was a definite and clear agreement between appellant and appellee that should appellant fail to secure full recovery from defendant Vitug, the right was reserved to appellant to seek recourse for the deficiency against appellee. Accordingly, the question for resolution by the Court now is whether or not this provision regarding recourse contained in the agreement between appellant and appellee violates the Recto Law which declares null and void any agreement in contravention thereof. We do not believe that it does.

As pointed out in appellant's brief, the transaction between appellant and appellee was purely an ordinary discounting transaction whereby the promissory note executed by defendant Vitug was negotiated by appellee in favor of appellant for a valuable consideration at a certain discount, accompanied by an assignment also of the chattel mortgage executed by said defendant to secure the payment of his promissory note and with the express stipulation that should there be any deficiency, recourse could be had against appellee. Stated otherwise, the remedy presently being sought is not against the buyer of the car or the defendant Vitug but against the seller, independent of whether or not such seller may have a right of recovery against the buyer, which, in this case, he does not have under the Recto Law. It is clear to Us, on the other hand, that under said law, what Congress seeks to protect are only the buyers on installment who more often than not have been victimized by sellers who, before the enactment of this law, succeeded in unjustly enriching themselves at the expense of the buyers because aside from recovering the goods sold, upon default of the buyer in the payment of two

installments, still retained for themselves all amounts already paid, in addition, furthermore, to other damages, such as attorney's fees, and costs. Surely, Congress could not have intended to impair and much less do away with the right of the seller to make commercial use of his credit against the buyer, provided said buyer is not burdened beyond what this law allows. 1awphil.nêt

We are not unmindful that in the case of Cruz, et al. vs. the same Filipinas Investment & Finance Corporation, L-24772, May 27, 1968, 23 SCRA 791, this Court broadened the scope of the Recto Law beyond its letter and held that within its spirit, a seller of goods on installment does not have any right of action against a third party who, in addition to the buyer's mortgage of the goods sold, furnishes additional security for the payment of said installments or the purchase price of said goods. In that case, it was held:.

It is here agreed that plaintiff Cruz failed to pay several installments as provided in the contract; that there was extrajudicial foreclosure of the chattel mortgage on the said motor vehicle; and that defendant-appellant itself bought it at the public auction duly held thereafter, for a sum less than the purchaser's outstanding obligation. Defendant-appellant, however, sought to collect the supposed deficiency by going against the real estate mortgage which was admittedly constituted on the land of plaintiff Reyes as additional security to guarantee the performance of Cruz' obligation, claiming that what is being withheld from the vendor, by the proviso of Article 1484 of the Civil Code, is only the right to recover against the purchaser, and not a recourse to the additional security put up, not by the purchaser himself, but by a third person.

There is no merit in this contention. To sustain appellants argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she had paid from the debtor vendee (Art. 2066, Civil Code); so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned.

As can be seen, that ease of Cruz was entirely different from this one at bar. In that case, herein appellant Filipinas Investment & Finance Corporation was trying to recover from the guarantor of the buyer, whereas in the present case, it is precisely

stipulated in effect, that the Filipinas Investment & Finance Corporation had a right of recourse against the seller should the buyer fail to pay the assigned credit in full.

It is the contention of appellee that since what were assigned to appellant were only whatever rights it had against the buyer, it should follow that inasmuch as appellee has no right to recover from the defendant beyond the proceeds of the foreclosure sale, the appellant, as assignee, should also have no right to recover any deficiency. We do not view the matter that way. The very fact that the assignee was given the stipulated right of recourse against the assignor negates the idea that the parties contemplated to limit the recovery of the assignee to only the proceeds of the mortgage sale.

ACCORDINGLY, the order of dismissal of the lower court is reversed and this case is ordered remanded to the lower court for further proceedings, with costs against appellee Supreme Sales & Development Corporation.

RUPERTO G. CRUZ, ET AL., plaintiffs-appellees, vs.FILIPINAS INVESTMENT and FINANCE CORPORATION, defendant-appellant.

Villareal, Almacen, Navarra and Associates for plaintiffs-appellees.Sycip, Salazar, Luna, Manalo and Feliciano for defendant-appellant.

REYES, J.B.L., J.:

Appeal interposed by Filipinas Investment & Finance Corporation from the decision of the Court of First Instance of Rizal (Quezon City) in Civil Case No. Q-7949. 1ªvvphi1.nêt

In the action commenced by Ruperto G. Cruz and Felicidad V. Vda. de Reyes in the Court of First Instance of Rizal (Civil Case No. Q-7949), for cancellation of the real estate mortgage constituted on the land of the latter 1 in favor of defendant Filipinas Investment & Finance Corporation (as assignee of the Far East Motor Corporation), the parties submitted the case for decision on the following stipulation of facts:

1. Their personal circumstances and legal capacities to sue and be sued;

2. That on July 15, 1963, plaintiff Ruperto G. Cruz purchased on installments, from the Far East Motor Corporation, one (1) unit of Isuzu Diesel Bus, described in the complaint, for P44,616.24, Philippine Currency, payable in installments of P1,487.20 per month for thirty (30) months, beginning October 22, 1963, with 12 % interest per annum, until fully paid. As evidence of said indebtedness, plaintiff Cruz executed and delivered to the Far East Motor Corporation a negotiable promissory note in the sum of P44,616.24, ...;

3. That to secure the payment of the promissory note, Annex "A", Cruz executed in favor of the seller, Far East Motor Corporation, a chattel mortgage over the aforesaid motor vehicle...;

4. That as no down payment was made by Cruz, the seller, Far East Motor Corporation, on the very improvements thereon, in San Miguel, Bulacan...; same date, July 15, 1963, required and Cruz agreed to give, additional security for his obligation besides the chattel mortgage, Annex "B"; that said additional security was given by plaintiff Felicidad Vda. de Reyes in the form

of SECOND MORTGAGE on a parcel of land owned by her, together with the building and

5. That said land has an area of 68,902 square meters, more or less, and covered by Transfer Certificate of Title No. 36480 of the Registry of Deeds of Bulacan in the name of plaintiff Mrs. Reyes; and that it was at the time mortgaged to the Development Bank of the Philippines to secure a loan of P2,600.00 obtained by Mrs. Reyes from that bank;

6. That also on July 15, 1963, the Far East Motor Corporation for value received indorsed the promissory note and assigned all its rights and interest in the Deeds of Chattel Mortgage and in the Deed of Real Estate Mortgage (Annexes "A", "B" and "B-l") to the defendant, Filipinas Investment & Finance Corporation, with due notice of such assignment to the plaintiffs...;

7. That plaintiff Cruz defaulted in the payment of the promisory note (Annex "A") ; that the only sum ever paid to the defendant was Five Hundred Pesos (P500.00) on October 2, 1963, which was applied as partial payment of interests on his principal obligation; that, notwithstanding defendant's demands, Cruz made no payment on any of the installments stipulated in the promissory note;

8. That by reason of Cruz's default, defendant took steps to foreclose the chattel mortgage on the bus; that said vehicle had been damaged in an accident while in the possession of plaintiff Cruz;

9. That at the foreclosure sale held on January 31, 1964 by the Sheriff of Manila, the defendant was the highest bidder, defendant's bid being for Fifteen Thousand Pesos (P15,000.00)...;

10. That the proceeds of the sale of the bus were not sufficient to cover the expenses of sale, the principal obligation, interests, and attorney's fees, i.e., they were not sufficient to discharge fully the indebtedness of plaintiff Cruz to the defendant;

11. That on February 12, 1964, preparatory to foreclosing its real estate mortgage on Mrs. Reyes' land, defendant paid the mortgage indebtedness

of Mrs. Reyes to the Development Bank of the Philippines, in the sum of P2,148.07, the unpaid balance of said obligation...;

12. That pursuant to a provision in the real estate mortgage contract, authorizing the mortgagee to foreclose the mortgage judicially or extra-judicially, defendant on February 29, 1964 requested the Provincial Sheriff of Bulacan to take possession of, and sell, the land subject of the Real Estate Mortgage, Annex "B-1", to satisfy the sum of P43,318.92, the total outstanding obligation of the plaintiffs to the defendant, as itemized in the Statement of Account, which is made a part hereof as Annex "F"...;

13. That notices of sale were duly posted and served to the Mortgagor, Mrs. Reyes, pursuant to and in compliance with the requirements of Act 3135...;

14. That on March 20, 1964, plaintiff Reyes through counsel, wrote a letter to the defendant asking for the cancellation of the real estate mortgage on her land, but defendant did not comply with such demand as it was of the belief that plaintiff's request was without any legal basis;

15. That at the request of the plaintiffs, the provincial Sheriff of Bulacan held in abeyance the sale of the mortgaged real estate pending the result of this action.

Passing upon the issues which, by agreement of the parties, were limited to — (1) "Whether defendant, which has already extrajudicially foreclosed the chattel mortgage executed by the buyer, plaintiff Cruz, on the bus sold to him on installments, may also extrajudicially foreclose the real estate mortgage constituted by plaintiff Mrs. Reyes on her own land, as additional security, for the payment of the balance of Cruz' Obligation, still remaining unpaid"; and (2) whether or not the contending parties are entitled to attorney's fees — the court below, in its decision of April 21, 1965, sustained the plaintiffs' stand and declared that the extrajudicial foreclosure of the chattel mortgage on the bus barred further action against the additional security put up by plaintiff Reyes. Consequently, the real estate mortgage constituted on the land of said plaintiff was ordered cancelled and defendant was directed to pay the plaintiffs attorney's fees in the sum of P200.00. Defendant filed the present appeal raising the same questions presented in the lower court.

There is no controversy that, involving as it does a sale of personal property on installments, the pertinent legal provision in this case is Article 1484 of the Civil Code of the Philippines, 2 which reads:

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

The aforequoted provision is clear and simple: should the vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or seller has the option to avail of any one of these three remedies — either to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, 3 that the exercise of one would bar the exercise of the others.  4 It may also be stated that the established rule is to the effect that the foreclosure and actual sale of a mortgaged chattel bars further recovery by the vendor of any balance on the purchaser's outstanding obligation not so satisfied by the sale.  5 And the reason for this doctrine was aptly stated in the case of Bachrach Motor Co. vs. Millan, supra, thus:

Undoubtedly the principal object of the above amendment 6 was to remedy the abuses committed in connection with the foreclosure of chattel mortgages. This amendment prevents mortgagees from seizing the mortgaged property, buying it at foreclosure sale for a low price and then bringing suit against the mortgagor for a deficiency judgment. The almost invariable result of this procedure was that the mortgagor found himself minus the property and still owing practically the full amount of his original indebtedness. Under this amendment the vendor of personal property, the purchase price of which is payable in installments, has the right to cancel the sale or foreclose the mortgage if one has been given on the property. Whichever right the vendor elects he need not return to the purchaser the amount of the installments already paid, "if there be in agreement to that effect". Furthermore, if the vendor avails himself of the right to foreclose the mortgage the amendment prohibits him from bringing an action against the purchaser for the unpaid balance.

It is here agreed that plaintiff Cruz failed to pay several installments as provided in the contract; that there was extrajudicial foreclosure of the chattel mortgage on the said motor vehicle; and that defendant-appellant itself bought it at the public auction duly held thereafter, for a sum less than the purchaser's outstanding obligation. Defendant-appellant, however, sought to collect the supported deficiency by going against the real estate mortgage which was admittedly constituted on the land of plaintiff Reyes as additional security to guarantee the performance of Cruz' obligation, claiming that what is being withheld from the vendor, by the proviso of Article 1484 of the Civil Code, is only the right to recover "against the purchaser", and not a recourse to the additional security put up, not by the purchaser himself, but by a third person.

There is no merit in this contention. To sustain appellant's argument is to overlook the fact that if the guarantor should be compelled to pay the balance of the purchase price, the guarantor will in turn be entitled to recover what she has paid from the debtor vendee (Art. 2066, Civil Code) ; so that ultimately, it will be the vendee who will be made to bear the payment of the balance of the price, despite the earlier foreclosure of the chattel mortgage given by him. Thus, the protection given by Article 1484 would be indirectly subverted, and public policy overturned.

Neither is there validity to appellant's allegation that, since the law speaks of "action", the restriction should be confined only to the bringing of judicial suits or proceedings in court.

The word "action" is without a definite or exclusive meaning. It has been invariably defined as —

... the legal demand of one's right, or rights; the lawful demand of one's rights in the form given by law; a demand of a right in a court of justice; the lawful demand of one's right in a court of justice; the legal and formal demand of ones rights from another person or party, made and insisted on in a court of justice; a claim made before a tribunal; an assertion in a court of justice of a right given by law; a demand or legal proceeding in a court of justice to secure one's rights; the prosecution of some demand in a court of justice; the means by which men litigate with each other; the means that the law has provided to put the cause of action into effect;.... (Gutierrez Hermanos vs. De la Riva, 46 Phil. 827, 834-835).

Considering the purpose for which the prohibition contained in Article 1484 was intended, the word "action" used therein may be construed as referring to any judicial or extrajudicial proceeding by virtue of which the vendor may lawfully be enabled to exact recovery of the supposed unsatisfied balance of the purchase price from the purchaser or his privy. Certainly, an extrajudicial foreclosure of a real estate mortgage is one such proceeding.

The provision of law and jurisprudence on the matter being explicit, so that this litigation could have been avoided, the award by the lower court of attorney's fees to the plaintiff's in the sum of P200.00 is reasonable and in order.

However, we find merit in appellant's complaint against the trial court's failure to order the reimbursement by appellee Vda. de Reyes of the amount which the former paid to the Development Bank of the Philippines, for the release of the first mortgage on the land of said appellee. To the extent that she was benefited by such payment, plaintiff-appellee Vda. de Reyes should have been required to reimburse the appellant.

WHEREFORE, the decision appealed from is modified, by ordering plaintiff-appellee Felicidad Vda. de Reyes to reimburse to defendant-appellant Filipinas Investment & Finance Corporation the sum of P2,148.07, with legal interest thereon from the finality of this decision until it is fully paid. In all other respects, the judgment of the court below is affirmed, with costs against the defendant-appellant.

TEODORO ACAP, petitioner, vs.COURT OF APPEALS and EDY DE LOS REYES, respondents.

 

PADILLA, J.:

This is a petition for review on certiorari of the decision 1 of the Court of Appeals, 2nd Division, in CA-G.R. No. 36177, which affirmed the decision 2 of the Regional Trial Court of Himamaylan, Negros Occidental holding that private respondent Edy de los Reyes had acquired ownership of Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental based on a document entitled "Declaration of Heirship and Waiver of Rights", and ordering the dispossession of petitioner as leasehold tenant of the land for failure to pay rentals.

The facts of the case are as follows:

The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT No. R-12179. The lot has an area of 13,720 sq. meters. The title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized document entitled "Declaration of Heirship and Deed of Absolute Sale" in favor of Cosme Pido.

The evidence before the court a quo established that since 1960, petitioner Teodoro Acap had been the tenant of a portion of the said land, covering an area of nine thousand five hundred (9,500) meters. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pido's death, to his widow Laurenciana.

The controversy began when Pido died intestate and on 27 November 1981, his surviving heirs executed a notarized document denominated as "Declaration of Heirship and Waiver of Rights of Lot No. 1130 Hinigaran Cadastre," wherein they declared; to quote its pertinent portions, that:

. . . Cosme Pido died in the Municipality of Hinigaran, Negros Occidental, he died intestate and without any known debts and obligations which the said parcel of land is (sic) held liable.

That Cosme Pido was survived by his/her legitimate heirs, namely: LAURENCIANA PIDO, wife, ELY, ERVIN, ELMER, and ELECHOR all surnamed PIDO; children;

That invoking the provision of Section 1, Rule 74 of the Rules of Court, the above-mentioned heirs do hereby declare unto [sic] ourselves the only heirs of the late Cosme Pido and that we hereby adjudicate unto ourselves the above-mentioned parcel of land in equal shares.

Now, therefore, We LAURENCIANA 3, ELY, ELMER, ERVIN and ELECHOR all surnamed PIDO, do hereby waive, quitclaim all our rights, interests and participation over the said parcel of land in favor of EDY DE LOS REYES, of legal age, (f)ilipino, married to VIRGINIA DE LOS REYES, and resident of Hinigaran, Negros Occidental, Philippines. . . . 4 (Emphasis supplied)

The document was signed by all of Pido's heirs. Private respondent Edy de los Reyes did not sign said document.

It will be noted that at the time of Cosme Pido's death, title to the property continued to be registered in the name of the Vasquez spouses. Upon obtaining the Declaration of Heirship with Waiver of Rights in his favor, private respondent Edy de los Reyes filed the same with the Registry of Deeds as part of a notice of an adverse claimagainst the original certificate of title.

Thereafter, private respondent sought for petitioner (Acap) to personally inform him that he (Edy) had become the new owner of the land and that the lease rentals thereon should be paid to him. Private respondent further alleged that he and petitioner entered into an oral lease agreement wherein petitioner agreed to pay ten (10) cavans of palay per annum as lease rental. In 1982, petitioner allegedly complied with said obligation. In 1983, however, petitioner refused to pay any further lease rentals on the land, prompting private respondent to seek the assistance of the then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR invited petitioner to a conference scheduled on 13 October 1983. Petitioner did not attend the conference but sent his wife instead to the conference. During the meeting, an officer of the Ministry informed Acap's wife about private respondent's ownership of the said land but she stated that she and her husband (Teodoro) did not recognize private respondent's claim of ownership over the land.

On 28 April 1988, after the lapse of four (4) years, private respondent filed a complaint for recovery of possession and damages against petitioner, alleging in the main that as his leasehold tenant, petitioner refused and failed to pay the agreed annual rental of ten (10) cavans of palay despite repeated demands.

During the trial before the court a quo, petitioner reiterated his refusal to recognize private respondent's ownership over the subject land. He averred that he continues to recognize Cosme Pido as the owner of the said land, and having been a registered tenant therein since 1960, he never reneged on his rental obligations. When Pido died, he continued to pay rentals to Pido's widow. When the latter left for abroad, she instructed him to stay in the landholding and to pay the accumulated rentals upon her demand or return from abroad.

Petitioner further claimed before the trial court that he had no knowledge about any transfer or sale of the lot to private respondent in 1981 and even the following year after Laurenciana's departure for abroad. He denied having entered into a verbal lease tenancy contract with private respondent and that assuming that the said lot was indeed sold to private respondent without his knowledge, R.A. 3844, as amended, grants him the right to redeem the same at a reasonable price. Petitioner also bewailed private respondent's ejectment action as a violation of his right to security of tenure under P.D. 27.

On 20 August 1991, the lower court rendered a decision in favor of private respondent, the dispositive part of which reads:

WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, Edy de los Reyes, and against the defendant, Teodoro Acap, ordering the following, to wit:

1. Declaring forfeiture of defendant's preferred right to issuance of a Certificate of Land Transfer under Presidential Decree No. 27 and his farmholdings;

2. Ordering the defendant Teodoro Acap to deliver possession of said farm to plaintiff, and;

3. Ordering the defendant to pay P5,000.00 as attorney's fees, the sum of P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual damages. 5

In arriving at the above-mentioned judgment, the trial court stated that the evidence had established that the subject land was "sold" by the heirs of Cosme Pido to private respondent. This is clear from the following disquisitions contained in the trial court's six (6) page decision:

There is no doubt that defendant is a registered tenant of Cosme Pido. However, when the latter died their tenancy relations changed since ownership of said land was passed on to his heirs who, by executing a Deed of Sale, which defendant admitted in his affidavit, likewise passed on their ownership of Lot 1130 to herein plaintiff (private respondent). As owner hereof, plaintiff has the right to demand payment of rental and the tenant is obligated to pay rentals due from the time demand is made. . . . 6

xxx xxx xxx

Certainly, the sale of the Pido family of Lot 1130 to herein plaintiff does not of itself extinguish the relationship. There was only a change of the personality of the lessor in the person of herein plaintiff Edy de los Reyes who being the purchaser or transferee, assumes the rights and obligations of the former landowner to the tenant Teodoro Acap, herein defendant. 7

Aggrieved, petitioner appealed to the Court of Appeals, imputing error to the lower court when it ruled that private respondent acquired ownership of Lot No. 1130 and that he, as tenant, should pay rentals to private respondent and that failing to pay the same from 1983 to 1987, his right to a certificate of land transfer under P.D. 27 was deemed forfeited.

The Court of Appeals brushed aside petitioner's argument that the Declaration of Heirship and Waiver of Rights (Exhibit "D"), the document relied upon by private respondent to prove his ownership to the lot, was excluded by the lower court in its order dated 27 August 1990. The order indeed noted that the document was not identified by Cosme Pido's heirs and was not registered with the Registry of Deeds of Negros Occidental. According to respondent court, however, since the Declaration of Heirship and Waiver of Rights appears to have been duly notarized, no further proof of its due execution was necessary. Like the trial court, respondent court was also convinced that the said document stands as prima facie proof of appellee's (private respondent's) ownership of the land in dispute.

With respect to its non-registration, respondent court noted that petitioner had actual knowledge of the subjectsale of the land in dispute to private respondent because as early as 1983, he (petitioner) already knew of private respondent's claim over the said land but which he thereafter denied, and that in 1982, he (petitioner) actually paid rent to private respondent. Otherwise stated, respondent court considered this fact of rental payment in 1982 as estoppel on petitioner's part to thereafter refute private respondent's claim of ownership over the said land. Under these circumstances, respondent court ruled that indeed there was deliberate refusal by petitioner to pay rent for a continued period of five years that merited forfeiture of his otherwise preferred right to the issuance of a certificate of land transfer.

In the present petition, petitioner impugns the decision of the Court of Appeals as not in accord with the law and evidence when it rules that private respondent acquired ownership of Lot No. 1130 through the aforementioned Declaration of Heirship and Waiver of Rights.

Hence, the issues to be resolved presently are the following:

1. WHETHER OR NOT THE SUBJECT DECLARATION OF HEIRSHIP AND WAIVER OF RIGHTS IS A RECOGNIZED MODE OF ACQUIRING OWNERSHIP BY PRIVATE RESPONDENT OVER THE LOT IN QUESTION.

2. WHETHER OR NOT THE SAID DOCUMENT CAN BE CONSIDERED A DEED OF SALE IN FAVOR OF PRIVATE RESPONDENT OF THE LOT IN QUESTION.

Petitioner argues that the Regional Trial Court, in its order dated 7 August 1990, explicitly excluded the document marked as Exhibit "D" (Declaration of Heirship, etc.) as private respondent's evidence because it was not registered with the Registry of Deeds and was not identified by anyone of the heirs of Cosme Pido. The Court of Appeals, however, held the same to be admissible, it being a notarized document, hence, a prima facie proof of private respondents' ownership of the lot to which it refers.

Petitioner points out that the Declaration of Heirship and Waiver of Rights is not one of the recognized modes of acquiring ownership under Article 712 of the Civil Code. Neither can the same be considered a deed of sale so as to transfer

ownership of the land to private respondent because no consideration is stated in the contract (assuming it is a contract or deed of sale).

Private respondent defends the decision of respondent Court of Appeals as in accord with the evidence and the law. He posits that while it may indeed be true that the trial court excluded his Exhibit "D" which is the Declaration of Heirship and Waiver of Rights as part of his evidence, the trial court declared him nonetheless owner of the subject lot based on other evidence adduced during the trial, namely, the notice of adverse claim (Exhibit "E") duly registered by him with the Registry of Deeds, which contains the questioned Declaration of Heirship and Waiver of Rights as an integral part thereof.

We find the petition impressed with merit.

In the first place, an asserted right or claim to ownership or a real right over a thing arising from a juridical act, however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be completed by fulfilling certain conditions imposed by law. Hence, ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question.  8

Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual creation) and thederivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum).

In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale. They are not the same.

In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. 9

Upon the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they

see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court. 10

Quite surprisingly, both the trial court and public respondent Court of Appeals concluded that a "sale" transpired between Cosme Pido's heirs and private respondent and that petitioner acquired actual knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to discuss private respondent's claim over the lot in question. This conclusion has no basis both in fact and in law.

On record, Exhibit "D", which is the "Declaration of Heirship and Waiver of Rights" was excluded by the trial court in its order dated 27 August 1990 because the document was neither registered with the Registry of Deeds nor identified by the heirs of Cosme Pido. There is no showing that private respondent had the same document attached to or made part of the record. What the trial court admitted was Annex "E", a notice of adverse claim filed with the Registry of Deeds which contained the Declaration of Heirship with Waiver of rights and was annotated at the back of the Original Certificate of Title to the land in question.

A notice of adverse claim, by its nature, does not however prove private respondent's ownership over the tenanted lot. "A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner, the validity of which is yet to be established in court at some future date, and is no better than a notice of lis pendenswhich is a notice of a case already pending in court."  15

It is to be noted that while the existence of said adverse claim was duly proven, there is no evidence whatsoever that a deed of sale was executed between Cosme Pido's heirs and private respondent transferring the rights of Pido's heirs to the land in favor of private respondent. Private respondent's right or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title the same in private respondent's name.

Consequently, while the transaction between Pido's heirs and private respondent may be binding on both parties, the right of petitioner as a registered tenant to the land cannot be perfunctorily forfeited on a mere allegation of private respondent's ownership without the corresponding proof thereof.

Petitioner had been a registered tenant in the subject land since 1960 and religiously paid lease rentals thereon. In his mind, he continued to be the

registered tenant of Cosme Pido and his family (after Pido's death), even if in 1982, private respondent allegedly informed petitioner that he had become the new owner of the land.

Under the circumstances, petitioner may have, in good faith, assumed such statement of private respondent to be true and may have in fact delivered 10 cavans of palay as annual rental for 1982 to private respondent. But in 1983, it is clear that petitioner had misgivings over private respondent's claim of ownership over the said land because in the October 1983 MAR conference, his wife Laurenciana categorically denied all of private respondent's allegations. In fact, petitioner even secured a certificate from the MAR dated 9 May 1988 to the effect that he continued to be the registered tenant of Cosme Pido and not of private respondent. The reason is that private respondent never registered the Declaration of Heirship with Waiver of Rights with the Registry of Deeds or with the MAR. Instead, he (private respondent) sought to do indirectly what could not be done directly,i.e., file a notice of adverse claim on the said lot to establish ownership thereover.

It stands to reason, therefore, to hold that there was no unjustified or deliberate refusal by petitioner to pay the lease rentals or amortizations to the landowner/agricultural lessor which, in this case, private respondent failed to establish in his favor by clear and convincing evidence. 16

Consequently, the sanction of forfeiture of his preferred right to be issued a Certificate of Land Transfer under P.D. 27 and to the possession of his farmholdings should not be applied against petitioners, since private respondent has not established a cause of action for recovery of possession against petitioner.

WHEREFORE, premises considered, the Court hereby GRANTS the petition and the decision of the Court of Appeals dated 1 May 1994 which affirmed the decision of the RTC of Himamaylan, Negros Occidental dated 20 August 1991 is hereby SET ASIDE. The private respondent's complaint for recovery of possession and damages against petitioner Acap is hereby DISMISSED for failure to properly state a cause of action, without prejudice to private respondent taking the proper legal steps to establish the legal mode by which he claims to have acquired ownership of the land in question.

SO ORDERED.

ARTURO R. ABALOS, petitioner, vs. DR. GALICANO S. MACATANGAY, JR., respondent.

D E C I S I O NTINGA, J.:

The instant petition seeks a reversal of the Decision of the Court of Appeals in CA-G.R. CV No. 48355 entitled Dr. Galicano S. Macatangay, Jr. v. Arturo R. Abalos and Esther Palisoc-Abalos, promulgated on March 14, 2002. The appellate court reversed the trial courts decision which dismissed the action for specific performance filed by respondent, and ordered petitioner and his wife to execute in favor of herein respondent a deed of sale over the subject property.

Spouses Arturo and Esther Abalos are the registered owners of a parcel of land with improvements located at Azucena St., Makati City consisting of about three hundred twenty-seven (327) square meters, covered by Transfer Certificate of Title (TCT) No. 145316 of the Registry of Deeds of Makati.

Armed with a Special Power of Attorney dated June 2, 1988, purportedly issued by his wife, Arturo executed a Receipt and Memorandum of Agreement (RMOA) dated October 17, 1989, in favor of respondent, binding himself to sell to respondent the subject property and not to offer the same to any other party within thirty (30) days from date.Arturo acknowledged receipt of a check from respondent in the amount of Five Thousand Pesos (P5,000.00), representing earnest money for the subject property, the amount of which would be deducted from the purchase price of One Million Three Hundred Three Hundred Thousand Pesos (P1,300,000.00). Further, the RMOA stated that full payment would be effected as soon as possession of the property shall have been turned over to respondent.

Subsequently, Arturos wife, Esther, executed a Special Power of Attorney dated October 25, 1989, appointing her sister, Bernadette Ramos, to act for and in her behalf relative to the transfer of the property to respondent. Ostensibly, a marital squabble was brewing between Arturo and Esther at the time and to protect his interest, respondent caused the annotation of his adverse claim on the title of the spouses to the property on November 14, 1989.

On November 16, 1989, respondent sent a letter to Arturo and Esther informing them of his readiness and willingness to pay the full amount of the purchase price. The letter contained a demand upon the spouses to comply with their obligation to turn over possession of the property to him. On the same date, Esther, through her attorney-in-fact, executed in favor of respondent, a Contract to Sell the property to the extent of her conjugal interest therein for the sum of six hundred fifty thousand pesos (P650,000.00) less the sum already received by her and Arturo. Esther agreed to surrender possession of the property to respondent within twenty (20) days from November 16, 1989, while the latter promised to pay the balance of the purchase price in the amount of one million two hundred ninety thousand pesos (P1,290,000.00) after being placed in possession of the property. Esther also obligated herself to execute and deliver to respondent a deed of absolute sale upon full payment.

In a letter dated December 7, 1989, respondent informed the spouses that he had set aside the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) as evidenced by Citibank Check No. 278107 as full payment of the purchase price. He reiterated his demand upon them to comply with their obligation to turn over possession of the property. Arturo and Esther failed to deliver the property which prompted respondent to cause the annotation of another adverse claim on TCT No. 145316. On January 12, 1990, respondent filed a complaint for specific performance with damages against petitioners. Arturo filed his answer to the complaint while his wife was declared in default.

The Regional Trial Court (RTC) dismissed the complaint for specific performance. It ruled that the Special Power of Attorney (SPA) ostensibly issued by Esther in favor of Arturo was void as it was falsified. Hence, the court concluded that the SPA could not have authorized Arturo to sell the property to respondent. The trial court also noted that the check issued by respondent to cover the earnest money was dishonored due to insufficiency of funds and while it was replaced with another check by respondent, there is no showing that the second check was issued as payment for the earnest money on the property.

On appeal taken by respondent, the Court of Appeals reversed the decision of the trial court. It ruled that the SPA in favor of Arturo, assuming that it was void, cannot affect the transaction between Esther and respondent. The appellate court ratiocinated that it was by virtue of the SPA executed by Esther, in favor of her sister, that the sale of the property to respondent was effected. On the other hand, the appellate court considered the RMOA executed by Arturo in favor of respondent valid to effect the sale of Arturos conjugal share in the property.

Dissatisfied with the appellate courts disposition of the case, petitioner seeks a reversal of its decision alleging that:

I.

The Court of Appeals committed serious and manifest error when it decided on the appeal without affording petitioner his right to due process.

II.

The Court of Appeals committed serious and manifest error in reversing and setting aside the findings of fact by the trial court.

III.

The Court of Appeals erred in ruling that a contract to sell is a contract of sale, and in ordering petitioner to execute a registrable form of deed of sale over the property in favor of respondent. [1]

Petitioner contends that he was not personally served with copies of summons, pleadings, and processes in the appeal proceedings nor was he given an opportunity to submit an appellees brief. He alleges that his counsel was in the United States from 1994 to June 2000, and he never received any news or communication from him after the proceedings in the trial court were terminated. Petitioner submits that he was denied due process because he was not informed of the appeal proceedings, nor given the chance to have legal representation before the appellate court.

We are not convinced. The essence of due process is an opportunity to be heard. Petitioners failure to participate in the appeal proceedings is not due to a cause imputable to the appellate court but because of petitioners own neglect in ascertaining the status of his case. Petitioners counsel is equally negligent in failing to inform his client about the recent developments in the appeal proceedings. Settled is the rule that a party is bound by the conduct, negligence and mistakes of his counsel.[2] Thus, petitioners plea of denial of due process is downright baseless.

Petitioner also blames the appellate court for setting aside the factual findings of the trial court and argues that factual findings of the trial court are given much weight and respect when supported by substantial evidence. He asserts that the sale between him and respondent is void for lack of consent because the SPA purportedly executed by his wife Esther is a forgery and therefore, he could not have validly sold the subject property to respondent.

Next, petitioner theorizes that the RMOA he executed in favor of respondent was not perfected because the check representing the earnest money was dishonored. He adds that there is no evidence on

record that the second check issued by respondent was intended to replace the first check representing payment of earnest money.

Respondent admits that the subject property is co-owned by petitioner and his wife, but he objects to the allegations in the petition bearing a relation to the supposed date of the marriage of the vendors. He contends that the alleged date of marriage between petitioner and his wife is a new factual issue which was not raised nor established in the court a quo. Respondent claims that there is no basis to annul the sale freely and voluntarily entered into by the husband and the wife.

The focal issue in the instant petition is whether petitioner may be compelled to convey the property to respondent under the terms of the RMOA and the Contract to Sell. At bottom, the resolution of the issue entails the ascertainment of the contractual nature of the two documents and the status of the contracts contained therein.

Contracts, in general, require the presence of three essential elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established.[3]

Until the contract is perfected, it cannot, as an independent source of obligation, serve as a binding juridical relation. [4] In a contract of sale, the seller must consent to transfer ownership in exchange for the price, the subject matter must be determinate, and the price must be certain in money or its equivalent.[5] Being essentially consensual, a contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price.[6] However, ownership of the thing sold shall not be transferred to the vendee until actual or constructive delivery of the property.[7]

On the other hand, an accepted unilateral promise which specifies the thing to be sold and the price to be paid, when coupled with a valuable consideration distinct

andseparate from the price, is what may properly be termed a perfected contract of option.[8] An option merely grants a privilege to buy or sell within an agreed time and at a determined price. It is separate and distinct from that which the parties may enter into upon the consummation of the option.[9] A perfected contract of option does not result in the perfection or consummation of the sale; only when the option is exercised may a sale be perfected.[10] The option must, however, be supported by a consideration distinct from the price.[11]

Perusing the RMOA, it signifies a unilateral offer of Arturo to sell the property to respondent for a price certain within a period of thirty days. The RMOA does not impose upon respondent an obligation to buy petitioners property, as in fact it does not even bear his signature thereon. It is quite clear that after the lapse of the thirty-day period, without respondent having exercised his option, Arturo is free to sell the property to another. This shows that the intent of Arturo is merely to grant respondent the privilege to buy the property within the period therein stated. There is nothing in the RMOA which indicates that Arturo agreed therein to transfer ownership of the land which is an essential element in a contract of sale. Unfortunately, the option is not binding upon the promissory since it is not supported by a consideration distinct from the price.[12]

As a rule, the holder of the option, after accepting the promise and before he exercises his option, is not bound to buy. He is free either to buy or not to buy later. In Sanchez v. Rigos[13] we ruled that in an accepted unilateral promise to sell, the promissor is not bound by his promise and may, accordingly, withdraw it, since there may be no valid contract without a cause or consideration. Pending notice of its withdrawal, his accepted promise partakes of the nature of an offer to sell which, if acceded or consented to, results in a perfected contract of sale.

Even conceding for the nonce that respondent had accepted the offer within the period stated and, as a consequence, a bilateral

contract of purchase and sale was perfected, the outcome would be the same. To benefit from such situation, respondent would have to pay or at least make a valid tender of payment of the price for only then could he exact compliance with the undertaking of the other party.[14] This respondent failed to do. By his own admission, he merely informed respondent spouses of his readiness and willingness to pay. The fact that he had set aside a check in the amount of One Million Two Hundred Ninety Thousand Pesos (P1,290,000.00) representing the balance of the purchase price could not help his cause. Settled is the rule that tender of payment must be made in legal tender. A check is not legal tender, and therefore cannot constitute a valid tender of payment.[15] Not having made a valid tender of payment, respondents action for specific performance must fail.

With regard to the payment of Five Thousand Pesos (P5,000.00), the Court is of the view that the amount is not earnest money as the term is understood in Article 1482 which signifies proof of the perfection of the contract of sale, but merely a guarantee that respondent is really interested to buy the property. It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale.[16] No reservation of ownership on the part of Arturo is necessary since, as previously stated, he has never agreed to transfer ownership of the property to respondent.

Granting for the sake of argument that the RMOA is a contract of sale, the same would still be void not only for want of consideration and absence of respondents signature thereon, but also for lack of Esthers conformity thereto. Quite glaring is the absence of the signature of Esther in the RMOA, which proves that she did not give her consent to the transaction initiated by Arturo. The husband cannot alienate any real property of the conjugal partnership without the wifes consent.[17]

However, it was the Contract to Sell executed by Esther through her attorney-in-fact which the Court of Appeals made full use of. Holding that the contract is valid, the appellate court explained that while Esther did not authorize Arturo to sell the property, her execution of the SPA authorizing her sister to sell the land to respondent clearly shows her intention to convey her interest in favor of respondent. In effect, the court declared that the lack of Esthers consent to the sale made by Arturo was cured by her subsequent conveyance of her interest in the property through her attorney-in-fact.

We do not share the ruling.

The nullity of the RMOA as a contract of sale emanates not only from lack of Esthers consent thereto but also from want of consideration and absence of respondents signature thereon. Such nullity cannot be obliterated by Esthers subsequent confirmation of the putative transaction as expressed in the Contract to Sell. Under the law, a void contract cannot be ratified [18] and the action or defense for the declaration of the inexistence of a contract does not prescribe. [19] A void contract produces no effect either against or in favor of anyoneit cannot create, modify or extinguish the juridical relation to which it refers.[20]

True, in the Contract to Sell, Esther made reference to the earlier RMOA executed by Arturo in favor of respondent. However, the RMOA which Arturo signed is different from the deed which Esther executed through her attorney-in-fact. For one, the first is sought to be enforced as a contract of sale while the second is purportedly a contract to sell only. For another, the terms and conditions as to the issuance of title and delivery of possession are divergent.

The congruence of the wills of the spouses is essential for the valid disposition of conjugal property. Where the conveyance is contained in the same document which bears the conformity of both husband and wife, there could be no question on the validity of the transaction. But when there are two documents on which the signatures of the spouses

separately appear, textual concordance of the documents is indispensable. Hence, in this case where the wifes putative consent to the sale of conjugal property appears in a separate document which does not, however, contain the same terms and conditions as in the first document signed by the husband, a valid transaction could not have arisen.

Quite a bit of elucidation on the conjugal partnership of gains is in order.

Arturo and Esther appear to have been married before the effectivity of the Family Code. There being no indication that they have adopted a different property regime, their property relations would automatically be governed by the regime of conjugal partnership of gains.[21]

The subject land which had been admittedly acquired during the marriage of the spouses forms part of their conjugal partnership.[22]

Under the Civil Code, the husband is the administrator of the conjugal partnership. This right is clearly granted to him by law.[23] More, the husband is the sole administrator.The wife is not entitled as of right to joint administration.[24]

The husband, even if he is statutorily designated as administrator of the conjugal partnership, cannot validly alienate or encumber any real property of the conjugal partnership without the wifes consent.[25] Similarly, the wife cannot dispose of any property belonging to the conjugal partnership without the conformity of the husband. The law is explicit that the wife cannot bind the conjugal partnership without the husbands consent, except in cases provided by law.[26]

More significantly, it has been held that prior to the liquidation of the conjugal partnership, the interest of each spouse in the conjugal assets is inchoate, a mere expectancy, which constitutes neither a legal nor an equitable estate, and does not ripen into title until it appears that there are assets in the community as a result of the

liquidation and settlement. The interest of each spouse is limited to the net remainder or remanente liquido (haber ganancial) resulting from the liquidation of the affairs of the partnership after its dissolution.[27] Thus, the right of the husband or wife to one-half of the conjugal assets does not vest until the dissolution and liquidation of the conjugal partnership, or after dissolution of the marriage, when it is finally determined that, after settlement of conjugal obligations, there are net assets left which can be divided between the spouses or their respective heirs.[28]

In not a few cases, we ruled that the sale by the husband of property belonging to the conjugal partnership without the consent of the wife when there is no showing that the latter is incapacitated is void ab initio because it is in contravention of the mandatory requirements of Article 166 of the Civil Code.[29] Since Article 166 of the Civil Code requires the consent of the wife before the husband may alienate or encumber any real property of the conjugal partnership, it follows that acts or transactions executed against this mandatory provision are void except when the law itself authorizes their validity.[30]

Quite recently, in San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,[31] we ruled that neither spouse could alienate in favor of another, his or her interest in the partnership or in any property belonging to it, or ask for partition of the properties before the partnership itself had been legally dissolved. Nonetheless, alienation of the share of each spouse in the conjugal partnership could be had after separation of property of the spouses during the marriage had been judicially decreed, upon their petition for any of the causes specified in Article 191[32] of the Civil Code in relation to Article 214[33] thereof.

As an exception, the husband may dispose of conjugal property without the wifes consent if such sale is necessary to answer for conjugal liabilities mentioned in Articles 161 and 162 of the Civil Code.[34] In Tinitigan v. Tinitigan, Sr.,[35] the Court ruled that the husband may

sell property belonging to the conjugal partnership even without the consent of the wife if the sale is necessary to answer for a big conjugal liability which might endanger the familys economic standing. This is one instance where the wifes consent is not required and, impliedly, no judicial intervention is necessary.

Significantly, the Family Code has introduced some changes particularly on the aspect of the administration of the conjugal partnership. The new law provides that the administration of the conjugal partnership is now a joint undertaking of the husband and the wife. In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal partnership, the other spouse may assume sole powers of administration. However, the power of administration does not include the power to dispose or encumber property belonging to the conjugal partnership.[36] In all instances, the present law specifically requires the written consent of the other spouse, or authority of the court for the disposition or encumbrance of conjugal partnership property without which, the disposition or encumbrance shall be void.[37]

Inescapably, herein petitioners action for specific performance must fail. Even on the supposition that the parties only disposed of their respective shares in the property, the sale, assuming that it exists, is still void for as previously stated, the right of the husband or the wife to one-half of the conjugal assets does not vest until the liquidation of the conjugal partnership. Nemo dat qui non habet. No one can give what he has not.

WHEREFORE, the appealed Decision is hereby REVERSED and SET ASIDE. The complaint in Civil Case No. 90-106 of the Regional Trial Court of Makati is ordered DISMISSED. No pronouncement as to costs.

SO ORDERED.