Republic of the Philippines

SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 125283 February 10, 2006

PAN PACIFIC INDUSTRIAL SALES CO., INC., Petitioner,

vs.

COURT OF APPEALS and NICOLAS CAPISTRANO, Respondents.

D E C I S I O N

TINGA, J.:

Petitioner Pan Pacific Industrial Sales Co., Inc. (Pan Pacific) filed the instant Petition for Review on

Certiorari1 assailing the Decision

2 dated 4 June 1996 of the Court of Appeals Fourteenth Division in C.A.

G.R. No. CV-41112. The challenged Decision affirmed in toto the Decision3 dated 24 April 1992 of the

Regional Trial Court (RTC) of Manila, Branch 18 in Civil Case No. 88-46720.

The case arose when on 22 December 1988, private respondent Nicolas Capistrano (Capistrano) filed an

Amended Complaint4 before the RTC of Manila against Severo C. Cruz III (Cruz), his spouse Lourdes

Yap Miranda, and Atty. Alicia Guanzon,5 pleading two causes of action.

6

The first cause of action is for the nullification, or alternatively, for the "rescission," of a Deed of Absolute

Sale7 covering a parcel of land that Capistrano owned, located at 1821 (Int.), Otis Street (now Paz

Guanzon Street), Paco, Manila, and covered by Transfer Certificate of Title (TCT) No. 143599 to Cruz.8

This is the subject lot. Capistrano denied having executed the deed.

The second cause of action is for the rescission of another agreement with an alternative prayer for

specific performance. Capistrano alleged that he agreed to sell another parcel of land in the same vicinity

to Cruz. According to Capistrano, Cruz only paid P100,000.00 of the stipulated purchase price, thereby

leaving P250,000.00 still unpaid.9

The operative facts follow.

On 10 September 1982, Capistrano executed a Special Power of Attorney10

authorizing Cruz to mortgage

the subject lot in favor of Associated Bank (the Bank) as security for the latters loan accommodation.11

Shortly, by virtue of the Special Power of Attorney, Cruz obtained a loan in the amount of P500,000.00

from the Bank. Thus, he executed a Real Estate Mortgage12

over the subject lot in favor of the Bank.13

Capistrano and Cruz then executed a letter-agreement dated 23 September 1982 whereby Cruz agreed

to buy the subject lot for the price of P350,000.00, of which P200,000.00 would be paid out of the loan

secured by Cruz, and the balance of P150,000.00 in eight (8) quarterly payments of P18,750.00 within

two (2) years from 30 October 1982, without need of demand and with interest at 18% in case of

default.14

On 15 March 1983, Capistrano executed the Deed of Absolute Sale15

over the subject lot in favor of Cruz.

Two (2) days later, on 17 March 1983, Notary Public Vicente J. Benedicto (Benedicto) notarized the deed.

However, it was earlier or on 9 March 1983 that Capistranos wife, Josefa Borromeo Capistrano, signed

the Marital Consent16

evidencing her conformity in advance to the sale. The Marital Consent was also

sworn to before Benedicto.

Following the execution of the deed of sale, Cruz continued payments to Capistrano for the subject lot.

Sometime in October 1985, Capistrano delivered to Cruz a Statement of Account17

signed by Capistrano,

showing that as of 30 October 1985, Cruzs balance stood at P19,561.00 as principal, and P3,520.98 as

interest, or a total of P23,081.98.

Thus, in May 1987, with the mortgage on the subject lot then being in danger of foreclosure by the Bank,

Cruz filed a case with the RTC of Manila, Branch 11, docketed as Civil Case No. 87-40647, to enjoin the

foreclosure. Cruz impleaded Capistrano and his spouse Josefa Borromeo Capistrano as defendants, the

title to the subject lot not having been transferred yet to his name.18

Cruz also devised a way to save the subject lot from foreclosure by seeking a buyer for it and eventually

arranging for the buyer to pay the mortgage debt. Towards this end, Cruz succeeded in engaging Pan

Pacific. Thus, on 22 September 1988, Pan Pacific paid off Cruzs debt in the amount of P1,180,000.00.19

Consequently, on 23 September

1988, the Bank executed a Cancellation of Real Estate Mortgage.20

On even date, Cruz executed a Deed

of Absolute Sale21

over the subject lot in favor of Pan Pacific, attaching thereto the previous Deed of

Absolute Sale executed by Capistrano in favor of Cruz.

Surprisingly, on 20 October 1988, Capistrano filed a Revocation of Special Power of Attorney22

with the

Register of Deeds of Manila. Less than a week later, Capistrano sent the Register of Deeds another letter

informing said officer of his having come to know of the sale of the subject lot by Cruz to Pan Pacific and

requesting the officer to withhold any action on the transaction.23

Before long, in November 1988, Capistrano filed the precursory complaint before the Manila RTC in Civil

Case No. 88-46720.

Pan Pacific, which bought the subject lot from the Cruz spouses, was allowed to intervene in the

proceedings and joined Cruz, et al. in resisting the complaint insofar as the first cause of action on the

subject lot is concerned.24

Then on 24 April 1992, a Decision was rendered by the trial court in favor of Capistrano on both causes of

action, the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, Severo E.

(sic) Cruz III, his spouse, Lourdes Miranda Cruz, and the intervenor, Pan Pacific Industrial Sales Co., Inc.,

as follows:

1. Declaring the Letter-Agreement, dated September 23, 1982, Exhibit "C", as resolved and/or rescinded;

2. Declaring both the Deed of Absolute Sale, Exhibit "H", and the document entitled, "Marital Consent",

Exhibit "K", null and void;

3. Declaring the Deed of Absolute Sale executed by the spouses Severo C. Cruz, III and Lourdes

Miranda Cruz in favor of the intervenor, Pan Pacific Industrial Sales, Co., Inc., Exhibit "8", null and void;

4. Making the writ of preliminary injunction issued by this Court on November 23, 1988, permanent;

Grounds

5. Ordering the intervenor, thru its legal counsel and corporate secretary, Atty. Senen S. Burgos, who has

possession of the owners copy of TCT No. 143599 of the Register of Deeds of Manila, in the name of the

plaintiff, to surrender the same to this Court within ten days from finality of the decision for turn over to the

plaintiff;

6. Ordering Defendant Register of Deeds of Manila to reject and not give due course to the documents

submitted to it, which have for their purpose the transfer of the real estate property covered by TCT No.

143599 from the name of the plaintiff to Defendant Cruz and/or to the intervenor; and

7. Ordering the spouses Severo C. Cruz, III and Lourdes Miranda Cruz to pay the plaintiff the sum of

P69,561.00 as net amount due to the latter as per the computation in the end-part of this decision.

The counterclaims of both Severo C. Cruz, III and spouse, and of the intervenor, Pan Pacific Industrial

Sales Co., Inc., are both dismissed, for lack of merit.

Double costs against the defendants-Cruz spouses.

SO ORDERED.25

To arrive at the conclusion that the first Deed of Absolute Sale and the Marital Consent are spurious, the

trial court mainly relied on Capistranos disavowal of his signature and that of his wifes, together with

extrinsic factors which in its opinion evinced the spuriousness.

Pan Pacific and the Cruz spouses interposed separate appeals to the Court of Appeals, their common

concern being the trial courts finding that the Deed of Absolute Sale and the Marital Consent were

spurious.26

In assailing this finding, Pan Pacific and the Cruz spouses contended that Capistrano failed to present

clear and convincing evidence to overturn the presumption of regularity of public documents like the

documents in question.27

The Court of Appeals affirmed the RTC Decision. Concerning the subject lot, it held that while a notarial

document cannot be disproved by the mere denial of the signer, the denial in this case should be taken

together with the other circumstances of the case which in sum constitute clear and convincing evidence

sufficient to overcome the presumption of regularity of the documents.28

The Cruz spouses did not elevate the Court of Appeals Decision to this Court. Thus, the RTC Decision

became final as to them.

Pan Pacific, however, filed the instant Petition solely concerning the first cause of action in the Amended

Complaint. Pan Pacific contends that the genuineness and due execution of the Deed of Absolute Sale

and Marital Consent cannot be overridden by the self-serving testimony of Capistrano. It stresses that the

trial court cannot rely on irrelevant extrinsic factors to rule against the genuineness of the deed.29

Finally,

it points out that Capistrano cannot contest the sale of the subject lot to Cruz, as the sale had already

been consummated.30

For his part, Capistrano posits in his Memorandum31

that Pan Pacific is not an innocent purchaser for

value and in good faith as Cruz was never the registered owner of the subject lot. Pan Pacific was bound

at its peril to investigate the right of Cruz to transfer the property to it. Moreover, Capistrano asserts that

the legal presumption of regularity of public documents does not obtain in this case as the documents in

question were not properly notarized. He adds that the parties never appeared before the notary public as

in fact the deed had only been delivered by Capistrano to the house of Cruzs mother.

Contention of cruz and panpacific

Ruling

Contention of capistrano to panpacific appeal

Furthermore, Capistrano maintains that his spouses signature on the Marital Consent is a forgery as it

was virtually impossible for her to have signed the same. Lastly, Capistrano disputes Cruzs assertion that

the sale had been consummated, pointing out that the Amended Complaint consisted of two (2) causes of

action pertaining to two (2) separate lots, and Cruz had only paid P100,000.00 of the total price of the lot

subject of the second cause of action.1avvphil.net

The petition is imbued with merit.

Pan Pacific disputes the common conclusion reached by the courts below that the presumption of

regularity of the Deed of Absolute Sale and the Marital Consent, which in its estimation are both public

documents, has been rebutted by Capistranos countervailing evidence. The correctness of the

conclusions on the alleged spuriousness of the documents in question drawn by the courts below from

the facts on record is before this Court. The issue is a question of law cognizable by the Court.32

Deeply embedded in our jurisprudence is the rule that notarial documents celebrated with all the legal

requisites under the safeguard of a notarial certificate is evidence of a high character and to overcome its

recitals, it is incumbent upon the party challenging it to prove his claim with clear, convincing and more

than merely preponderant evidence.33

A notarized document carries the evidentiary weight conferred upon it with respect to its due execution,

and it has in its favor the presumption of regularity which may only be rebutted by evidence so clear,

strong and convincing as to exclude all controversy as to the falsity of the certificate. Absent such, the

presumption must be upheld. The burden of proof to overcome the presumption of due execution of a

notarial document lies on the one contesting the same. Furthermore, an allegation of forgery must be

proved by clear and convincing evidence, and whoever alleges it has the burden of proving the same.34

Evidently, as he impugns the genuineness of the documents, Capistrano has the burden of making out a

clear-cut case that the documents are bogus. The courts below both concluded that Capistrano had

discharged this burden. However, this Court does not share the conclusion. Indeed, Capistrano failed to

present evidence of the forgery that is enough to overcome the presumption of authenticity.

To support the allegation of the spuriousness of his signature on the Deed of Absolute Sale and that of

his wife on the Marital Consent, Capistrano relied heavily on his bare denial, at the same time taking

sanctuary behind other circumstances which supposedly cast doubt on the authenticity of the documents.

Capistrano did not bother to present corroborating witnesses much less an independent expert witness

who could declare with authority and objectivity that the challenged signatures are forged. It befuddles the

Court why both the courts below did not find this irregular considering that the Court has previously

declared in Sy Tiangco v. Pablo and Apao,,35

"that the execution of a document that has been ratified

before a notary public cannot be disproved by the mere denial of the alleged signer."

The case of Chilianchin v. Coquinco36

also finds application in this regard wherein we stated that:

As the lower court correctly said, the plaintiff did not even present a sample of his authentic signature to

support his contention that it is not his the (sic) signature appearing in said document. He did not call a

handwriting expert to prove his assertion. His attorney, at the beginning of the trial, made it of record that

if the defendant present an expert in hand-writing to show that the signature in question is genuine, the

plaintiff will also present an expert to the contrary, as if it were incumbent upon the defendant to show that

the signature of the plaintiff in Exhibit A is genuine . . . .37

Corollarily, he who disavows the authenticity of his signature on a public document bears the

responsibility to present evidence to that effect. Mere disclaimer is not sufficient. At the very least, he

should present corroborating witnesses to prove his assertion. At best, he should present an expert

witness.

On the other hand, the Court cannot understand why an unfavorable inference arose not from

Capistranos but from Cruzs failure to have the documents examined by an expert witness of the National

Bureau Investigation (NBI) and to present the notary public as witness. Specifically, the courts below took

Cruzs inability to obtain the NBI examination of the documents as he had somehow undertaken as an

indication that the documents are counterfeit.38

The courts below may have forgotten that on Capistrano lies the burden to prove with clear and

convincing evidence that the notarized documents are spurious. Nothing in law or jurisprudence reposes

on Cruz the obligation to prove that the documents are genuine and duly executed. Hence it is not

incumbent upon Cruz to call the notary public or an expert witness. In contrast, Capistrano should have

called the expert witness, the notary public himself or the witnesses to the document to prove his

contention that he never signed the deed of sale, that its subscribing witnesses never saw him sign the

same, and that he never appeared before the notary public before whom the acknowledgment was made.

In fact, there is no evidence that the notarization of the documents did not take place. All that Capistrano

could say on this matter was that he had not seen Benedicto, the notary public.39

The assertion that the

parties to the deed never appeared before the notary public is not supported by evidence either. The

courts below drew an inference to that effect from Cruzs testimony that the deed of sale was dropped or

delivered to his mothers house.40

That is not a reasonable deduction to make as it is plainly conjectural.

No conclusion can be derived therefrom which could destroy the genuineness of the deed. The testimony

means what it declares: that the copy of the deed was dropped at the house of Cruzs mother. That is all.

Nor can the Court lend credence to the thinking of the courts below that since Cruz had a balance of

P132,061.00 owing to Capistrano as of the date of the deed of sale, the latter could not have possibly

executed the deed. This is plain guesswork. From the existence of Cruzs outstanding balance, the non-

existence of the deed of sale does not necessarily follow.

Indeed, a vendor may agree to a deed of absolute sale even before full payment of the purchase price.

Article 1478 of the Civil Code states that "the parties may stipulate that ownership in the thing shall not

pass to the purchaser until he has fully paid the price." A sensu contrario, the parties may likewise

stipulate that the ownership of the property may pass even if the purchaser has not fully paid the price.

The courts below also assigned an adverse connotation to Cruzs impleading of the Capistrano spouses

as party-defendants in the action against the Bank to enjoin the foreclosure of the mortgage on the

subject lot. Cruzs move is congruent with both his strong desire to protect his interest in the subject lot

and the reality that there was an existing deed of sale in his favor. Precisely, his interest in the lot is borne

out and had arisen from the deed of sale. As purchaser of the lot, he had to avert the foreclosure of the

mortgage thereon. And to ensure against the dismissal of the action for failure to join a real party-in-

interest, he had to implead Capistrano in whose name the title to the subject lot was registered still.

Apart from Capistranos abject failure to overcome the presumption of regularity and genuineness with

which the Deed of Absolute Sale is impressed as a public document, Capistranos cause is eviscerated

by his own acts in writing before and after the execution of the deed. Said written acts constitute indelible

recognition of the existence and genuineness of the Deed of Absolute Sale.

First is the letter-agreement41

dated 23 September 1982 made and signed by Capistrano in favor of Cruz,

which the latter also signed subsequently, stating that Cruz will, as he did, purchase the subject lot for

P350,000.00 to be paid according to the terms provided therein.

Second is the Statement of Account42

signed by Capistrano, which he delivered to Cruz, showing that as

of 30 October 1985, Cruzs balance of the stipulated purchase price consisted of P19,561.00 as principal

and P3,520.98 as interest, or a total of P23,081.98.

Third is Capistranos Amended Complaint itself which illustrates his own manifest uncertainty as to the

relief he was seeking in court. He demanded that the Deed of Absolute Sale be nullified yet he prayed in

the same breath for the "rescission" of the same43

evidently, a self-defeating recognition of the contract.

In asking for "rescission," Capistrano obviously was invoking Article 1191 of the Civil Code which provides

that the "power to rescind," which really means to resolve or cancel, is implied in reciprocal obligations "in

case one of the obligors should not comply with what is incumbent upon him." When a party asks for the

resolution or cancellation of a contract it is implied that he recognizes its existence. A non-existent

contract need not be cancelled.

These are unmistakable written admissions of Capistrano that he really intended to sell the subject lot to

Cruz and that he received payments for it from the latter as late as the year 1985. It is thus a little baffling

why in 1988, he decided to disown the Deed of Absolute Sale. The most plausible explanation for his

sudden change of mind would be his belated realization that he parted with the subject lot for too small an

amount (P350,000.00), compared to the price pegged by Cruz (P1,800,000.00) in the sale to Pan Pacific.

Now, to the Marital Consent. The fact that the document contains a jurat, not an acknowledgment, should

not affect its genuineness or that of the related document of conveyance itself, the Deed of Absolute Sale.

In this instance, a jurat suffices as the document only embodies the manifestation of the spouses

consent,44

a mere appendage to the main document.

The use of a jurat, instead of an acknowledgement does not elevate the Marital Consent to the level of a

public document but instead consigns it to the status of a private writing.45

The lack of acknowledgment,

however, does not render a deed invalid. The necessity of a public document for contracts which transmit

or extinguish real rights over immovable property, as mandated by Article 1358 of the Civil Code, is only

for convenience; it is not essential for validity or enforceability.46

From the perspective of the law on evidence, however, the presumption of regularity does not hold true

with respect to the Marital Consent which is a private writing. It is subject to the requirement of proof

under Section 20, Rule 132 of the Rules of Court which states:

Section 20. Proof of private document.- Before any private document offered as authentic is received in

evidence, its due execution and authenticity must be proved either:

(a) By anyone who saw the document executed or written; or

(b) By evidence of the genuineness of the signature or handwriting of the maker.

Any other private document need only be identified as that which is claimed to be.

The requirement of proof of the authenticity of the Marital Consent was adequately met, in this case,

through the testimony of Cruz to the effect that, together with the other witnesses to the document, he

was present when Capistranos wife affixed her signature thereon before notary public Benedicto.47

Viewed against this positive declaration, Capistranos negative and self-serving assertions that his wifes

signature on the document was forged because "(i)t is too beautiful" and that his wife could not have

executed the Marital Consent because it was executed on her natal day and she was somewhere else,

crumble and become unworthy of belief.

That the Marital Consent was executed prior to the Deed of Absolute Sale also does not indicate that it is

phoney. A fair assumption is that it was executed in anticipation of the Deed of Absolute Sale which was

accomplished a scant six (6) days later.

With respect to whatever balance Cruz may still owe to Capistrano, the Court believes that this is not a

concern of Pan Pacific as the latter is not a party to the Deed of Absolute Sale between Capistrano and

Cruz. But of course, Pan Pacific should enjoy full entitlement to the subject lot as it was sold to him by

Cruz who earlier had acquired title thereto absolutely and unconditionally by virtue of the Deed of

Absolute Sale. Otherwise laid down, Cruz had the right to sell the subject lot to Pan Pacific in 1988, as he

in fact did. Thus, the question of whether or not Pan Pacific is a purchaser in good faith should be

deemed irrelevant.1avvphil.net

WHEREFORE, the Petition is GRANTED. The Decision dated 4 June 1996 of the Court of Appeals in CA-

G.R. CV No. 41112 is REVERSED and SET ASIDE. Respondent Nicolas Capistrano is ordered to

surrender the owners duplicate certificate of Transfer of Certificate of Title No. 143599 to the Register of

Deeds of Manila to enable the issuance of a new title over the subject lot in the name of petitioner Pan

Pacific Industrial Sales, Inc. Costs against respondent Nicolas Capistrano.

SO ORDERED.

Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 165881 April 19, 2006

OSCAR VILLAMARIA, JR. Petitioner,

vs.

COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents

D E C I S I O N

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of Court assailing the

Decision1 and Resolution

2 of the Court of Appeals (CA) in CA-G.R. SP No. 78720 which set aside the

Resolution3 of the National Labor Relations Commission (NLRC) in NCR-30-08-03247-00, which in turn

affirmed the Decision4 of the Labor Arbiter dismissing the complaint filed by respondent Jerry V.

Bustamante.

Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in

assembling passenger jeepneys with a public utility franchise to operate along the Baclaran-Sucat route.

By 1995, Villamaria stopped assembling jeepneys and retained only nine, four of which he operated by

employing drivers on a "boundary basis." One of those drivers was respondent Bustamante who drove

the jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day to Villamaria as boundary and

kept the residue of his daily earnings as compensation for driving the vehicle. In August 1997, Villamaria

verbally agreed to sell the jeepney to Bustamante under the "boundary-hulog scheme," where

Bustamante would remit to Villarama P550.00 a day for a period of four years; Bustamante would then

become the owner of the vehicle and continue to drive the same under Villamarias franchise. It was also

agreed that Bustamante would make a downpayment of P10,000.00.

On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa

Pamamagitan ng Boundary-Hulog"5 over the passenger jeepney with Plate No. PVU-660, Chassis No.

EVER95-38168-C and Motor No. SL-26647. The parties agreed that if Bustamante failed to pay the

boundary-hulog for three days, Villamaria Motors would hold on to the vehicle until Bustamante paid his

arrears, including a penalty of P50.00 a day; in case Bustamante failed to remit the daily boundary-hulog

for a period of one week, the Kasunduan would cease to have legal effect and Bustamante would have to

return the vehicle to Villamaria Motors.

Under the Kasunduan, Bustamante was prohibited from driving the vehicle without prior authority from

Villamaria Motors. Thus, Bustamante was authorized to operate the vehicle to transport passengers only

and not for other purposes. He was also required to display an identification card in front of the windshield

of the vehicle; in case of failure to do so, any fine that may be imposed by government authorities would

be charged against his account. Bustamante further obliged himself to pay for the cost of replacing any

parts of the vehicle that would be lost or damaged due to his negligence. In case the vehicle sustained

serious damage, Bustamante was obliged to notify Villamaria Motors before commencing repairs.

Bustamante was not allowed to wear slippers, short pants or undershirts while driving. He was required to

be polite and respectful towards the passengers. He was also obliged to notify Villamaria Motors in case

the vehicle was leased for two or more days and was required to attend any meetings which may be

called from time to time. Aside from the boundary-hulog, Bustamante was also obliged to pay for the

annual registration fees of the vehicle and the premium for the vehicles comprehensive insurance.

Bustamante promised to strictly comply with the rules and regulations imposed by Villamaria for the

upkeep and maintenance of the jeepney.

Bustamante continued driving the jeepney under the supervision and control of Villamaria. As agreed

upon, he made daily remittances of P550.00 in payment of the purchase price of the vehicle. Bustamante

failed to pay for the annual registration fees of the vehicle, but Villamaria allowed him to continue driving

the jeepney.

In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed

to pay their respective boundary-hulog. This prompted Villamaria to serve a "Paalala,"6 reminding them

that under the Kasunduan, failure to pay the daily boundary-hulog for one week, would mean their

respective jeepneys would be returned to him without any complaints. He warned the drivers that the

Kasunduan would henceforth be strictly enforced and urged them to comply with their obligation to avoid

litigation.

On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from

driving the vehicle.

On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal against Villamaria and his wife

Teresita. In his Position Paper,8 Bustamante alleged that he was employed by Villamaria in July 1996

under the boundary system, where he was required to remit P450.00 a day. After one year of

continuously working for them, the spouses Villamaria presented the Kasunduan for his signature, with

the assurance that he (Bustamante) would own the jeepney by March 2001 after paying P550.00 in daily

installments and that he would thereafter continue driving the vehicle along the same route under the

same franchise. He further narrated that in July 2000, he informed the Villamaria spouses that the surplus

engine of the jeepney needed to be replaced, and was assured that it would be done. However, he was

later arrested and his drivers license was confiscated because apparently, the replacement engine that

was installed was taken from a stolen vehicle. Due to negotiations with the apprehending authorities, the

jeepney was not impounded. The Villamaria spouses took the jeepney from him on July 24, 2000, and he

was no longer allowed to drive the vehicle since then unless he paid them P70,000.00.

Bustamante prayed that judgment be rendered in his favor, thus:

WHEREFORE, in the light of the foregoing, it is most respectfully prayed that judgment be rendered

ordering the respondents, jointly and severally, the following:

1. Reinstate complainant to his former position without loss of seniority rights and execute a Deed of Sale

in favor of the complainant relative to the PUJ with Plate No. PVU-660;

2. Ordering the respondents to pay backwages in the amount of P400.00 a day and other benefits

computed from July 24, 2000 up to the time of his actual reinstatement;

3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for the expenses incurred

by the complainant in the repair and maintenance of the subject jeep;

4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos per day counted

from August 7, 1997 up to June 2000 or a total of P91,200.00;

5. To pay moral and exemplary damages of not less than P200,000.00;

6. Attorneys fee[s] of not less than 10% of the monetary award.

Other just and equitable reliefs under the premises are also being prayed for.9

In their Position Paper,10

the spouses Villamaria admitted the existence of the Kasunduan, but alleged

that Bustamante failed to pay the P10,000.00 downpayment and the vehicles annual registration fees.

They further alleged that Bustamante eventually failed to remit the requisite boundary-hulog of P550.00 a

day, which prompted them to issue the Paalaala. Instead of complying with his obligations, Bustamante

stopped making his remittances despite his daily trips and even brought the jeepney to the province

without permission. Worse, the jeepney figured in an accident and its license plate was confiscated;

Bustamante even abandoned the vehicle in a gasoline station in Sucat, Paraaque City for two weeks.

When the security guard at the gasoline station requested that the vehicle be retrieved and Teresita

Villamaria asked Bustamante for the keys, Bustamante told her: "Di kunin ninyo." When the vehicle was

finally retrieved, the tires were worn, the alternator was gone, and the battery was no longer working.

Citing the cases of Cathedral School of Technology v. NLRC11

and Canlubang Security Agency

Corporation v. NLRC,12

the spouses Villamaria argued that Bustamante was not illegally dismissed since

the Kasunduan executed on August 7, 1997 transformed the employer-employee relationship into that of

vendor-vendee. Hence, the spouses concluded, there was no legal basis to hold them liable for illegal

dismissal. They prayed that the case be dismissed for lack of jurisdiction and patent lack of merit.

In his Reply,13

Bustamante claimed that Villamaria exercised control and supervision over the conduct of

his employment. He maintained that the rulings of the Court in National Labor Union v. Dinglasan,14

Magboo v. Bernardo,15

and Citizen's League of Free Workers v. Abbas16

are germane to the issue as

they define the nature of the owner/operator-driver relationship under the boundary system. He further

reiterated that it was the Villamaria spouses who presented the Kasunduan to him and that he conformed

thereto only upon their representation that he would own the vehicle after four years. Moreover, it

appeared that the Paalala was duly received by him, as he, together with other drivers, was made to affix

his signature on a blank piece of paper purporting to be an "attendance sheet."

On March 15, 2002, the Labor Arbiter rendered judgment17

in favor of the spouses Villamaria and ordered

the complaint dismissed on the following ratiocination:

Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their claim

that complainant violated the terms of their contract and afterwards abandoned the vehicle assigned to

him. As against the foregoing, [the] complaints (sic) mere allegations to the contrary cannot prevail.

Not having been illegally dismissed, complainant is not entitled to damages and attorney's fees.18

Bustamante appealed the decision to the NLRC,19

insisting that the Kasunduan did not extinguish the

employer-employee relationship between him and Villamaria. While he did not receive fixed wages, he

kept only the excess of the boundary-hulog which he was required to remit daily to Villamaria under the

agreement. Bustamante maintained that he remained an employee because he was engaged to perform

activities which were necessary or desirable to Villamarias trade or business.

The NLRC rendered judgment20

dismissing the appeal for lack of merit, thus:

WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for reasons not stated

in the Labor Arbiter's decision but mainly on a jurisdictional issue, there being none over the subject

matter of the controversy.21

The NLRC ruled that under the Kasunduan, the juridical relationship between Bustamante and Villamaria

was that of vendor and vendee, hence, the Labor Arbiter had no jurisdiction over the complaint.

Bustamante filed a Motion for Reconsideration, which the NLRC resolved to deny on May 30, 2003.22

Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that the NLRC erred

I

IN DISMISSING PETITIONERS APPEAL "FOR REASON NOT STATED IN THE LABOR ARBITERS

DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;"

II

IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED THAT THE

RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN PETITIONER AND THE PRIVATE

RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE MANTLE OF

OUR LABOR LAWS.23

Bustamante insisted that despite the Kasunduan, the relationship between him and Villamaria continued

to be that of employer-employee and as such, the Labor Arbiter had jurisdiction over his complaint. He

further alleged that it is common knowledge that operators of passenger jeepneys (including taxis) pay

their drivers not on a regular monthly basis but on commission or boundary basis, or even the boundary-

hulog system. Bustamante asserted that he was dismissed from employment without any lawful or just

cause and without due notice.

For his part, Villamaria averred that Bustamante failed to adduce proof of their employer-employee

relationship. He further pointed out that the Dinglasan case pertains to the boundary system and not the

boundary-hulog system, hence inapplicable in the instant case. He argued that upon the execution of the

Kasunduan, the juridical tie between him and Bustamante was transformed into a vendor-vendee

relationship. Noting that he was engaged in the manufacture and sale of jeepneys and not in the business

of transporting passengers for consideration, Villamaria contended that the daily fees which Bustmante

paid were actually periodic installments for the the vehicle and were not the same fees as understood in

the boundary system. He added that the boundary-hulog plan was basically a scheme to help the driver-

buyer earn money and eventually pay for the unit in full, and for the owner to profit not from the daily

earnings of the driver-buyer but from the purchase price of the unit sold. Villamaria further asserted that

the apparently restrictive conditions in the Kasunduan did not mean that the means and method of driver-

buyers conduct was controlled, but were mere ways to preserve the vehicle for the benefit of both

parties: Villamaria would be able to collect the agreed purchase price, while Bustamante would be

assured that the vehicle would still be in good running condition even after four years. Moreover, the right

of vendor to impose certain conditions on the buyer should be respected until full ownership of the

property is vested on the latter. Villamaria insisted that the parallel circumstances obtaining in Singer

Sewing Machine Company v. Drilon24

has analogous application to the instant issue.

In its Decision25

dated August 30, 2004, the CA reversed and set aside the NLRC decision. The fallo of

the decision reads:

UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC must be, as

they are hereby are, REVERSED AND SET ASIDE, and judgment entered in favor of petitioner:

1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante separation pay

computed from the time of his employment up to the time of termination based on the prevailing minimum

wage at the time of termination; and,

2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante back wages

computed from the time of his dismissal up to March 2001 based on the prevailing minimum wage at the

time of his dismissal.

Without Costs.

SO ORDERED.26

The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamantes complaint. Under the

Kasunduan, the relationship between him and Villamaria was dual: that of vendor-vendee and employer-

employee. The CA ratiocinated that Villamarias exercise of control over Bustamantes conduct in

operating the jeepney is inconsistent with the formers claim that he was not engaged in the transportation

business. There was no evidence that petitioner was allowed to let some other person drive the jeepney.

The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not mean

that Villamaria could not exercise it. It explained that the existence of an employment relationship did not

depend on how the worker was paid but on the presence or absence of control over the means and

method of the employees work. In this case, Villamarias directives (to drive carefully, wear an

identification card, don decent attire, park the vehicle in his garage, and to inform him about provincial

trips, etc.) was a means to control the way in which Bustamante was to go about his work. In view of

Villamarias supervision and control as employer, the fact that the "boundary" represented installment

payments of the purchase price on the jeepney did not remove the parties employer-employee

relationship.

While the appellate court recognized that a weeks default in paying the boundary-hulog constituted an

additional cause for terminating Bustamantes employment, it held that the latter was illegally dismissed.

According to the CA, assuming that Bustamante failed to make the required payments as claimed by

Villamaria, the latter nevertheless failed to take steps to recover the unit and waited for Bustamante to

abandon it. It also pointed out that Villamaria neither submitted any police report to support his claim that

the vehicle figured in a mishap nor presented the affidavit of the gas station guard to substantiate the

claim that Bustamante abandoned the unit.

Villamaria received a copy of the decision on September 8, 2004, and filed, on September 17, 2004, a

motion for reconsideration thereof. The CA denied the motion in a Resolution27

dated November 2, 2004,

and Villamaria received a copy thereof on November 8, 2004.

Villamaria, now petitioner, seeks relief from this Court via petition for review on certiorari under Rule 65 of

the Rules of Court, alleging that the CA committed grave abuse of its discretion amounting to excess or

lack of jurisdiction in reversing the decision of the Labor Arbiter and the NLRC. He claims that the CA

erred in ruling that the juridical relationship between him and respondent under the Kasunduan was a

combination of employer-employee and vendor-vendee relationships. The terms and conditions of the

Kasunduan clearly state that he and respondent Bustamante had entered into a conditional deed of sale

over the jeepney; as such, their employer-employee relationship had been transformed into that of

vendor-vendee. Petitioner insists that he had the right to reserve his title on the jeepney until after the

purchase price thereof had been paid in full.

In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an appeal

via a petition for review on certiorari under Rule 45 of the Rules of Court and not a special civil action of

certiorari under Rule 65. He argues that petitioner failed to establish that the CA committed grave abuse

of its discretion amounting to excess or lack of jurisdiction in its decision, as the said ruling is in accord

with law and the evidence on record.

Respondent further asserts that the Kasunduan presented to him by petitioner which provides for a

boundary-hulog scheme was a devious circumvention of the Labor Code of the Philippines. Respondent

insists that his juridical relationship with petitioner is that of employer-employee because he was engaged

to perform activities which were necessary or desirable in the usual business of petitioner, his employer.

In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in his favor; hence,

it behooves the Court to resolve the merits of his petition.

We agree with respondents contention that the remedy of petitioner from the CA decision was to file a

petition for review on certiorari under Rule 45 of the Rules of Court and not the independent action of

certiorari under Rule 65. Petitioner had 15 days from receipt of the CA resolution denying his motion for

the reconsideration within which to file the petition under Rule 45.28

But instead of doing so, he filed a

petition for certiorari under Rule 65 on November 22, 2004, which did not, however, suspend the running

of the 15-day reglementary period; consequently, the CA decision became final and executory upon the

lapse of the reglementary period for appeal. Thus, on this procedural lapse, the instant petition stands to

be dismissed.29

It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of Court is

proscribed by the remedy of appeal under Rule 45. As the Court elaborated in Tomas Claudio Memorial

College, Inc. v. Court of Appeals:30

We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a

petition for review on certiorari under Rule 45 of the Rules of Court, as amended, on questions of facts or

issues of law within fifteen days from notice of the said resolution. Otherwise, the decision of the CA shall

become final and executory. The remedy under Rule 45 of the Rules of Court is a mode of appeal to this

Court from the decision of the CA. It is a continuation of the appellate process over the original case. A

review is not a matter of right but is a matter of judicial discretion. The aggrieved party may, however,

assail the decision of the CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty

days from notice of the decision of the CA or its resolution denying the motion for reconsideration of the

same. This is based on the premise that in issuing the assailed decision and resolution, the CA acted with

grave abuse of discretion, amounting to excess or lack of jurisdiction and there is no plain, speedy and

adequate remedy in the ordinary course of law. A remedy is considered plain, speedy and adequate if it

will promptly relieve the petitioner from the injurious effect of the judgment and the acts of the lower court.

The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the remedies

of appeal and certiorari are mutually exclusive and not alternative or successive. The aggrieved party is,

likewise, barred from filing a petition for certiorari if the remedy of appeal is lost through his negligence. A

petition for certiorari is an original action and does not interrupt the course of the principal case unless a

temporary restraining order or a writ of preliminary injunction has been issued against the public

respondent from further proceeding. A petition for certiorari must be based on jurisdictional grounds

because, as long as the respondent court acted within its jurisdiction, any error committed by it will

amount to nothing more than an error of judgment which may be corrected or reviewed only by appeal.31

However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed under

Rule 45, conformably with the principle that rules of procedure are to be construed liberally, provided that

the petition is filed within the reglementary period under Section 2, Rule 45 of the Rules of Court, and

where valid and compelling circumstances warrant that the petition be resolved on its merits.32

In this

case, the petition was filed within the reglementary period and petitioner has raised an issue of

substance: whether the existence of a boundary-hulog agreement negates the employer-employee

relationship between the vendor and vendee, and, as a corollary, whether the Labor Arbiter has

jurisdiction over a complaint for illegal dismissal in such case.

We resolve these issues in the affirmative.

The rule is that, the nature of an action and the subject matter thereof, as well as, which court or agency

of the government has jurisdiction over the same, are determined by the material allegations of the

complaint in relation to the law involved and the character of the reliefs prayed for, whether or not the

complainant/plaintiff is entitled to any or all of such reliefs.33

A prayer or demand for relief is not part of the

petition of the cause of action; nor does it enlarge the cause of action stated or change the legal effect of

what is alleged.34

In determining which body has jurisdiction over a case, the better policy is to consider

not only the status or relationship of the parties but also the nature of the action that is the subject of their

controversy.35

Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive original jurisdiction only

over the following:

x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and

exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case

by the parties for decision without extension, even in the absence of stenographic notes, the following

cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wage, rates

of pay, hours of work, and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee

relations;

5. Cases arising from violation of Article 264 of this Code, including questions involving the legality of

strikes and lockouts; and

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other

claims, arising from employer-employee relationship, including those of persons in domestic or household

service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether

accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective bargaining agreements, and those

arising from the interpretation or enforcement of company personnel policies shall be disposed of by the

Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be

provided in said agreements.

In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional requisite.36

The jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes

arising from an employer-employee relationship which can only be resolved by reference to the Labor

Code, other labor statutes or their collective bargaining agreement.37

Not every dispute between an

employer and employee involves matters that only the Labor Arbiter and the NLRC can resolve in the

exercise of their adjudicatory or quasi-judicial powers. Actions between employers and employees where

the employer-employee relationship is merely incidental is within the exclusive original jurisdiction of the

regular courts.38

When the principal relief is to be granted under labor legislation or a collective bargaining

agreement, the case falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even though

a claim for damages might be asserted as an incident to such claim.39

We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the

Kasunduan, a dual juridical relationship was created between petitioner and respondent: that of

employer-employee and vendor-vendee. The Kasunduan did not extinguish the employer-employee

relationship of the parties extant before the execution of said deed.

As early as 1956, the Court ruled in National Labor Union v. Dinglasan40

that the jeepney owner/operator-

driver relationship under the boundary system is that of employer-employee and not lessor-lessee. This

doctrine was affirmed, under similar factual settings, in Magboo v. Bernardo41

and Lantaco, Sr. v.

Llamas,42

and was analogously applied to govern the relationships between auto-calesa owner/operator

and driver,43

bus owner/operator and conductor,44

and taxi owner/operator and driver.45

The boundary system is a scheme by an owner/operator engaged in transporting passengers as a

common carrier to primarily govern the compensation of the driver, that is, the latters daily earnings are

remitted to the owner/operator less the excess of the boundary which represents the drivers

compensation. Under this system, the owner/operator exercises control and supervision over the driver. It

is unlike in lease of chattels where the lessor loses complete control over the chattel leased but the

lessee is still ultimately responsible for the consequences of its use. The management of the business is

still in the hands of the owner/operator, who, being the holder of the certificate of public convenience,

must see to it that the driver follows the route prescribed by the franchising and regulatory authority, and

the rules promulgated with regard to the business operations. The fact that the driver does not receive

fixed wages but only the excess of the "boundary" given to the owner/operator is not sufficient to change

the relationship between them. Indubitably, the driver performs activities which are usually necessary or

desirable in the usual business or trade of the owner/operator.46

Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which

represented the boundary of petitioner as well as respondents partial payment (hulog) of the purchase

price of the jeepney.

Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus, the daily

remittances also had a dual purpose: that of petitioners boundary and respondents partial payment

(hulog) for the vehicle. This dual purpose was expressly stated in the Kasunduan. The well-settled rule is

that an obligation is not novated by an instrument that expressly recognizes the old one, changes only the

terms of payment, and adds other obligations not incompatible with the old provisions or where the new

contract merely supplements the previous one. 47

The two obligations of the respondent to remit to

petitioner the boundary-hulog can stand together.

In resolving an issue based on contract, this Court must first examine the contract itself, keeping in mind

that when the terms of the agreement are clear and leave no doubt as to the intention of the contracting

parties, the literal meaning of its stipulations shall prevail.48

The intention of the contracting parties should

be ascertained by looking at the words used to project their intention, that is, all the words, not just a

particular word or two or more words standing alone. The various stipulations of a contract shall be

interpreted together, attributing to the doubtful ones that sense which may result from all of them taken

jointly.49

The parts and clauses must be interpreted in relation to one another to give effect to the whole.

The legal effect of a contract is to be determined from the whole read together.50

Under the Kasunduan, petitioner retained supervision and control over the conduct of the respondent as

driver of the jeepney, thus:

Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog ay ang mga

sumusunod:

1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang sasakyan ipinagkatiwala

sa kanya ng TAUHAN NG UNANG PANIG.

2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG IKALAWANG PANIG sa

paghahanapbuhay bilang pampasada o pangangalakal sa malinis at maayos na pamamaraan.

3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG PANIG sa mga bagay

na makapagdudulot ng kahihiyan, kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.

4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG.

5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng ID Card sa harap ng

windshield upang sa pamamagitan nito ay madaliang malaman kung ang nagmamaneho ay awtorisado

ng VILLAMARIA MOTORS o hindi.

6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa kung sakaling mahuli ang

sasakyang ito na hindi nakakabit ang ID card sa wastong lugar o anuman kasalanan o kapabayaan.

7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o piyesa na papalitan ng

nasira o nawala ito dahil sa kanyang kapabayaan.

8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan pa rin ng TAUHAN NG

IKALAWANG PANIG ang nasabing sasakyan.

9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng TAUHAN NG UNANG

PANIG, ang TAUHAN NG IKALAWANG PANIG ay obligadong itawag ito muna sa VILLAMARIA

MOTORS bago ipagawa sa alin mang Motor Shop na awtorisado ng VILLAMARIA MOTORS.

10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon ng pamamasada na ang

nagmamaneho ay naka-tsinelas, naka short pants at nakasando lamang. Dapat ang nagmamaneho ay

laging nasa maayos ang kasuotan upang igalang ng mga pasahero.

11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver ay magpapakita ng

magandang asal sa mga pasaheros at hindi dapat magsasalita ng masama kung sakali man may

pasaherong pilosopo upang maiwasan ang anumang kaguluhan na maaaring kasangkutan.

12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang TAUHAN NG IKALAWANG

PANIG sa loob ng tatlong (3) araw ay ang opisina ng VILLAMARIA MOTORS ang may karapatang

mangasiwa ng nasabing sasakyan hanggang matugunan ang lahat ng responsibilidad. Ang halagang

dapat bayaran sa opisina ay may karagdagang multa ng P50.00 sa araw-araw na ito ay nasa

pangangasiwa ng VILLAMARIA MOTORS.

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa

loob ng isang linggo ay nangangahulugan na ang kasunduang ito ay wala ng bisa at kusang ibabalik ng

TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG.

14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro, comprehensive insurance

taon-taon at kahit anong uri ng aksidente habang ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG.

15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa pangkalahatang pagpupulong

ng VILLAMARIA MOTORS sa tuwing tatawag ang mga tagapangasiwa nito upang maipaabot ang

anumang mungkahi sa ikasusulong ng samahan.

16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga patakaran na magkakaroon

ng pagbabago o karagdagan sa mga darating na panahon at hindi magiging hadlang sa lahat ng mga

balakin ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng Samahan.

17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa pasahero upang hindi

kainisan ng kapwa driver at maiwasan ang pagkakasangkot sa anumang gulo.

18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na sa umaga bago

pumasada, at sa hapon o gabi naman ay sisikapin mapanatili ang kalinisan nito.

19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa o higit pang araw sa

lalawigan ay dapat lamang na ipagbigay alam muna ito sa VILLAMARIA MOTORS upang maiwasan ang

mga anumang suliranin.

20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-unahan sa kaninumang

sasakyan upang maiwasan ang aksidente.

21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa VILLAMARIA MOTORS

mabuti man or masama ay iparating agad ito sa kinauukulan at iwasan na iparating ito kung [kani-kanino]

lamang upang maiwasan ang anumang usapin. Magsadya agad sa opisina ng VILLAMARIA MOTORS.

22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong sinasang-ayunan at buong

sikap na pangangalagaan ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan at gagamitin

lamang ito sa paghahanapbuhay at wala nang iba pa.51

The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a

contract to sell the jeepney on a daily installment basis of P550.00 payable in four years and that

petitioner would thereafter become its owner. A contract is one of conditional sale, oftentimes referred to

as contract to sell, if the ownership or title over the

property sold is retained by the vendor, and is not passed to the vendee unless and until there is full

payment of the purchase price and/or upon faithful compliance with the other terms and conditions that

may lawfully be stipulated.52

Such payment or satisfaction of other preconditions, as the case may be, is a

positive suspensive condition, the failure of which is not a breach of contract, casual or serious, but

simply an event that would prevent the obligation of the vendor to convey title from acquiring binding

force.53

Stated differently, the efficacy or obligatory force of the vendor's obligation to transfer title is

subordinated to the happening of a future and uncertain event so that if the suspensive condition does not

take place, the parties would stand as if the conditional obligation had never existed.54

The vendor may

extrajudicially terminate the operation of the contract, refuse conveyance, and retain the sums or

installments already received, where such rights are expressly provided for.55

Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its material

possession was vested in respondent as its driver. In case respondent failed to make his P550.00 daily

installment payment for a week, the agreement would be of no force and effect and respondent would

have to return the jeepney to petitioner; the employer-employee relationship would likewise be terminated

unless petitioner would allow respondent to continue driving the jeepney on a boundary basis of P550.00

daily despite the termination of their vendor-vendee relationship.

The juridical relationship of employer-employee between petitioner and respondent was not negated by

the foregoing stipulation in the Kasunduan, considering that petitioner retained control of respondents

conduct as driver of the vehicle. As correctly ruled by the CA:

The exercise of control by private respondent over petitioners conduct in operating the jeepney he was

driving is inconsistent with private respondents claim that he is, or was, not engaged in the transportation

business; that, even if petitioner was allowed to let some other person drive the unit, it was not shown that

he did so; that the existence of an employment relation is not dependent on how the worker is paid but on

the presence or absence of control over the means and method of the work; that the amount earned in

excess of the "boundary hulog" is equivalent to wages; and that the fact that the power of dismissal was

not mentioned in the Kasunduan did not mean that private respondent never exercised such power, or

could not exercise such power.

Moreover, requiring petitioner to drive the unit for commercial use, or to wear an identification card, or to

don a decent attire, or to park the vehicle in Villamaria Motors garage, or to inform Villamaria Motors

about the fact that the unit would be going out to the province for two days of more, or to drive the unit

carefully, etc. necessarily related to control over the means by which the petitioner was to go about his

work; that the ruling applicable here is not Singer Sewing Machine but National Labor Union since the

latter case involved jeepney owners/operators and jeepney drivers, and that the fact that the "boundary"

here represented installment payment of the purchase price on the jeepney did not withdraw the

relationship from that of employer-employee, in view of the overt presence of supervision and control by

the employer.56

Neither is such juridical relationship negated by petitioners claim that the terms and conditions in the

Kasunduan relative to respondents behavior and deportment as driver was for his and respondents

benefit: to insure that respondent would be able to pay the requisite daily installment of P550.00, and that

the vehicle would still be in good condition despite the lapse of four years. What is primordial is that

petitioner retained control over the conduct of the respondent as driver of the jeepney.

Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise

supervision and control over the respondent, by seeing to it that the route provided in his franchise, and

the rules and regulations of the Land Transportation Regulatory Board are duly complied with. Moreover,

in a business establishment, an identification card is usually provided not just as a security measure but

to mainly identify the holder thereof as a bona fide employee of the firm who issues it.57

As respondents employer, it was the burden of petitioner to prove that respondents termination from

employment was for a lawful or just cause, or, at the very least, that respondent failed to make his daily

remittances of P550.00 as boundary. However, petitioner failed to do so. As correctly ruled by the

appellate court:

Ruling

It is basic of course that termination of employment must be effected in accordance with law. The just and

authorized causes for termination of employment are enumerated under Articles 282, 283 and 284 of the

Labor Code.

Parenthetically, given the peculiarity of the situation of the parties here, the default in the remittance of the

boundary hulog for one week or longer may be considered an additional cause for termination of

employment. The reason is because the Kasunduan would be of no force and effect in the event that the

purchaser failed to remit the boundary hulog for one week. The Kasunduan in this case pertinently

stipulates:

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng BOUNDARY HULOG sa

loob ng isang linggo ay NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at kusang

ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG

na wala ng paghahabol pa.

Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal of an

employee is for a just cause. The failure of the employer to discharge this burden means that the

dismissal is not justified and that the employee is entitled to reinstatement and back wages.

In the case at bench, private respondent in his position paper before the Labor Arbiter, alleged that

petitioner failed to pay the miscellaneous fee of P10,000.00 and the yearly registration of the unit; that

petitioner also stopped remitting the "boundary hulog," prompting him (private respondent) to issue a

"Paalala," which petitioner however ignored; that petitioner even brought the unit to his (petitioners)

province without informing him (private respondent) about it; and that petitioner eventually abandoned the

vehicle at a gasoline station after figuring in an accident. But private respondent failed to substantiate

these allegations with solid, sufficient proof. Notably, private respondents allegation viz, that he retrieved

the vehicle from the gas station, where petitioner abandoned it, contradicted his statement in the Paalala

that he would enforce the provision (in the Kasunduan) to the effect that default in the remittance of the

boundary hulog for one week would result in the forfeiture of the unit. The Paalala reads as follows:

"Sa lahat ng mga kumukuha ng sasakyan

"Sa pamamagitan ng BOUNDARY HULOG

"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang paragrapo 13 na

nagsasaad na kung hindi kayo makapagbigay ng Boundary Hulog sa loob ng isang linggo ay kusa

ninyong ibabalik and nasabing sasakyan na inyong hinuhulugan ng wala ng paghahabol pa.

"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad ang nasabing

Kasunduan kayat aking pinaaalala sa inyong lahat na tuparin natin ang nakalagay sa kasunduan upang

maiwasan natin ito.

"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo makaabot pa sa korte

kung sakaling hindi ninyo isasauli ang inyong sasakyan na hinuhulugan na ang mga magagastos ay kayo

pa ang magbabayad sapagkat ang hindi ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa

ng kaso.

"Sumasainyo

"Attendance: 8/27/99

"(The Signatures appearing herein

include (sic) that of petitioners) (Sgd.)

OSCAR VILLAMARIA, JR."

If it were true that petitioner did not remit the boundary hulog for one week or more, why did private

respondent not forthwith take steps to recover the unit, and why did he have to wait for petitioner to

abandon it?1avvphil.net

On another point, private respondent did not submit any police report to support his claim that petitioner

really figured in a vehicular mishap. Neither did he present the affidavit of the guard from the gas station

to substantiate his claim that petitioner abandoned the unit there.58

Petitioners claim that he opted not to terminate the employment of respondent because of magnanimity

is negated by his (petitioners) own evidence that he took the jeepney from the respondent only on July

24, 2000.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in

CA-G.R. SP No. 78720 is AFFIRMED. Costs against petitioner.

SO ORDERED.

PLATINUM PLANS PHILS INC V. CUCUECO 488 SCRA 156 (2006)

FACTS: Respondent Cucueco filed a case for specific performance with damages against petitioner

Platinum Plans pursuant to an alleged contract of sale executed by them for the purchase of a

condominium unit.

According to the respondent: sometime in July 1993, he offered to buy from petitioner Platinum

Plans Phils a condominium unit he was leasing from the latter for P 4 million payable in 2

installments of P2 million with the following terms and conditions:

a. Cucueco will issue a check for P100,00 as earnest money

b. He will issue a post-dated check for P1.9 million to be encashed on September 30, 1993 on the

condition that he will stop paying rentals for the said unit after September 30

c. In case Platinum Plans has an outstanding loan of less than P2 million with the bank as of

December 1993, Cucueco shall assume the same and pay the difference from the remaining P2 million

Cucueco likewise claimed that Platinum Plans accepted his offerby encashing the checks he

issued. However, he was surprised to learn that Platinum Plans had changed the due date of the

installment payment to September 30, 1993.

Respondent argued that there was a perfected sale between him and Platinum plans and as

such, he may validly demand from the petitioner to execute the necessary deed of sale

transferring ownership and title over the property in his favor

Platinum Plans denied Cucuecos allegations and asserted that Cucuecos initial down payment

was forfeited based on the following terms and conditions:

a. The terms of payment only includes two installments (August 1993 and September 1993)

b. In case of non-compliance on the part of the vendee, all installments made shall be forfeited in favor

of the vendor Platinum Plans

c. Ownership over the property shall not pass until payment of the full purchase price

Petitioners anchor their argument on the claim that there was no meeting of the minds between

the two parties, as evidenced by their letter of non-acceptance.

The trial court ruled in favor of Platinum, citing that since the element of consent was absent there

was no perfected contract. The trial court ordered Platinum Plans to return the P2 million they had

received from Cucueco, and for Cucueco to pay Platinum Plans rentals in arrears for the use of

the unit.

Upon appeal, CA held that there was a perfected contract despite the fact that both parties never

agreed on the date of payment of the remaining balance. CA ordered Cucueco to pay the

remaining balance of the purchase price and for Platinum Plans, to execute a deed of sale over

the property

ISSUE: WON the contract there is a perfected contract of sale

HELD: No, it is a contract to sell.

In a contract of sale, the vendor cannot recover ownership of the thing sold until and unless the contract

itself is resolved and set aside. Art 1592 provides:

In the sale of immovable property, even though it may have been stipulated that upon failure to pay the

price at the time agreed upon, the rescission of the contract shall of right take place, the vendee may pay,

even after the expiration of the period, as long as no demand for rescission of the contract has been

upon him either judicially or by a notarial act. After the demand, the court may not grant him a new

term.

Based on the above provision, a party who fails to invoke judicially or by notarial act would be

prevented from blocking the consummation of the same in light of the precept that mere failure to

fulfill the contract does not by itself have the effect of rescission.

On the other hand, a contract to sell is bilateral contract whereby the prospective seller, while expressly

reserving the ownership of the subject property despite its delivery to the prospective buyer, commits to

sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, i.e.,

full payment of the purchase price. Full payment here is considered as a positive suspensive condition.

As a result if the party contracting to sell, because of non-compliance with the suspensive condition,

seeks to eject the prospective buyer from, the land, the seller is enforcing the contract and is not

resolving it. The failure to pay is not a breach of contract but an event which prevent the

obligation to convey title from materializing.

In the present case, neither side was able to produce any written evidence documenting the actual terms

of their agreement. The trial court was correct in finding that there was no meeting of minds in this

case considering that the acceptance of the offer was not absolute and uncondition. In earlier

cases, the SC held that before a valid and binding contract of sale can exist, the manner of payment of

the purchase price must first be established.

Furthermore, the reservation of the title in the name of Platinum Plans clearly indicates an intention

of the parties to enter into a contract of sell. Where the seller promises to execute a deed of absolute

sale upon completion of the payment of purchase price, the agreement is a contract to sell.

The court cannot, in this case, step in to cure the deficiency by fixing the period pursuant to:

1. The relief sought by Cucueco was for specific performance to compel Platinum Plans to receive

the balance of the purchase price.

2. The relief provide in Art 1592 only applies to contracts of sale

3. Because of the differing dates set by both parties, the court would have no basis for granting

Cucueco an extension of time within which to pay the outstanding balance

SELLER CANNOT TREAT THE CONTRACT AS CANCELLED WITHOUT SERVING NOTICE

The act of a party in treating the contract as cancelled should be made known to the other party because

this act is subject to scrutiny and review by the courts in cased the alleged defaulter brings the matter for

judicial determination as explained in UP v. De los Angeles. In the case at bar, there were repeated

written notices sent by Platinum Plans to Cucueco that failure to pay the balance would result in the

cancellation of the contract and forfeiture of the down payment already made. Under these circumstance,

the cancellation made by Platinum Plans is valid and reasonable (except for the forfeiture of the down

payment because Cucueco never agreed to the same)

EFFECTS OF CONTRACT TO SELL

A contract to sell would be rendered ineffective and without force and effect by the non-fulfillment of the

buyers obligation to pay since this is a suspensive condition to the obligation of the seller to sell and

deliver the title of the property. As an effect, the parties stand as if the conditional obligation had

never existed. There can be no rescission of an obligation that is still non-existent as the suspensive

condition has not yet occurred.

CAS RELIANCE ON LEVY HERMANOS V. GERVACIO IS MISPLACED

It was unnecessary for CA to distinguish whether the transaction between the parties was an installment

sale or a straight sale. In the first place, there is no valid and enforceable contract to speak of.

Republic of the Philippines

Supreme Court

Manila

SECOND DIVISION

PILIPINAS SHELL PETROLEUM CORPORATION,

Petitioner,

- versus -

CARLOS ANG GOBONSENG, JR.,

Respondent.

G.R. No. 163562

Present:

PUNO, J., Chairperson,

SANDOVAL-GUTIERREZ,

CORONA,

AZCUNA, and

GARCIA, JJ.

Promulgated:

July 21, 2006

x------------------------------------------------------------------------------------x

D E C I S I O N

GARCIA, J.:

In this petition for review under Rule 45 of the Rules of Court, petitioner Pilipinas Shell Petroleum

Corporation (Pilipinas Shell, hereafter) seeks the reversal and setting aside of the Decision1[1] dated

October 10, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 63777, as reiterated in its

Resolution2[2] of April 13, 2004, reversing an earlier decision of the Regional Trial Court (RTC) of Negros

Oriental, Dumaguete City, Branch 40, in a suit for collection of rentals with damages thereat commenced

by the herein respondent Carlos Ang Gobonseng against, among others, the herein petitioner. The

rentals sought to be collected pertain to a gasoline station at Lot No. 853-A, located at corner Real

Urdaneta streets, Dumaguete City.

The factual backdrop:

Sometime on January 5, 1982, one Julio Tan Pastor, original owner of Lot No. 853-A, sold it to

the respondent for P1.3 million, albeit in the covering Deed of Absolute Sale executed by the parties, the

amount indicated was only P13,000.00, evidently to avoid payment of the correct legal fees in the

registration and transfer of title to the vendee. On the same date, however, the parties, in order to reflect

their real intentions, executed a Memorandum of Agreement thereunder spelling out the true terms and

conditions of their transaction, to wit:

1. Purchase price is P1,300,000.00 (P1.3 million);

2. P500,000.00 shall be paid upon the execution of the Deed of Sale. Out of this amount part

shall be paid to whatever mortgage obligation there is with the Philippines National Bank and/or any other

bank involving lot no. 853-A; and its improvements;

3. Balance of P800,000.00 will be paid in five (5) years at a yearly payment of P160,000.00 the

first payment to be paid one year from date hereof and succeeding four installments every year

thereafter;

4. All obligations or liabilities on or involving lot no. 853-A or its improvements such as electric

bills, water bills, telephone bills, etc., shall be for the account of the VENDOR which if not paid will be

automatically deductible from the first payment of the remaining balance;

5. Real property taxes full for 1981 over lot no. 853-A and its improvements, capital gains tax,

documentary stamp tax, sales tax shall be shouldered by the VENDOR; Registration expenses shall be

shouldered by the VENDEE;

6. Upon the execution of the Deed of Sale, ownership and possession shall automatically pass

to the VENDEE; The VENDOR agrees to pay a penalty of P500.00 for every day of delay in vacating the

property;

Respondent, armed with the inaccurate Deed of Absolute Sale earlier executed by Julio Tan

Pastor, and notwithstanding the Memorandum of Agreement aforementioned, succeeded in registering

the conveying instrument with the Registry of Deeds and was then issued Transfer Certificate of Title

(TCT) No. 13607 over Lot No. 853-A in his own name.

In the meantime, vendor Tan Pastor presented for encashment the postdated checks issued to

him by respondent as payment for the subject lot. Unfortunately, the drawee bank dishonored those

checks for a variety of reasons, namely, drawn against insufficient funds, stop payment order or closed

account. This prompted vendor Tan Pastor to file against respondent a criminal action for violation of

Batas Pambansa (BP) 22, otherwise known as the Bouncing Checks Law, docketed as Criminal Case

No. 7071, entitled People of the Philippines v. Carlos Ang Gobonseng, Jr., of the xxx.

It appears that prior to the sale of Lot No. 853-A to respondent, Tan Pastor had been operating

thereon a gasoline station, first with Flying A, subsequently with Getty Oil, and later with Basic Land Oil

and Energy Corporation (BLECOR).

In 1982, Pilipinas Shell acquired BLECOR, including all the latters assets, liabilities and

contracts. Thereafter, Tan Pastor remained as the distributor of Pilipinas Shell products and continued to

operate the gas station on Lot No. 853-A until 1991.

Sometime in 1991, respondent sent demand letters to Pilipinas Shell for payment by the latter of

rentals for its occupancy and use of his property. Responding to said letters, Pilipinas Shell disowned

liability for the rentals, explaining that the gas station on Lot No. 853-A was a dealer-owned filling station,

hence the demands for rental payment must be directed to Tan Pastor. In any event, Pilipinas Shell,

hoping for an amicable settlement of the controversy between respondent and Tan Pastor relative to Lot

No. 853-A, facilitated a meeting between the two.

True enough, on January 30, 1992, thru the efforts of Pilipinas Shell, Tan Pastor and respondent

executed an Agreement3[3] embodying the following terms and conditions:

The parties herein have agreed, as follows:

1. For humanitarian, peace, and other considerations, Carlos A. Gobonseng, Jr., the OWNER,

hereby allows Julio Tan Pastor the use of Lot No. 853-A at Corner Real-Urdaneta Streets, Dumaguete

City, covered by TCT No. 13607, as a gas/ fuel/ gasoline/ oil/ filling, selling and servicing, station, and for

such other use appropriate, or related, to the same, without any rental for a period of THREE (3) YEARS

from January 1st 1992, or up to December 31

st 1994, NON-EXTENDIBLE;

2. Consistent with the foregoing, Julio Tan Pastor is authorized to enter into any business

contract with a third person for the use of said property for a period of THREE (3) YEARS from JANUARY

1st 1992 or up to DECEMBER 31

st 1994, the DEADLINE;

3. No construction, renovation or repair, shall be done by Julio Tan Pastor, without the PRIOR

written consent of the owner, Carlos A. Gobonseng, Jr.;

4. All improvements, including old and new constructions, repairs, replacements, and other

removable items, shall automatically belong in ownership to the owner, Carlos A. Gobonseng, Jr., upon

and at the time of completion of construction of work, installation or repair or replacement, excluding

those owned or constructed by Shell Petroleum Corp., or Francisco Baludoy Salva, which shall

automatically belong to Carlos Ang Gobonseng, Jr. upon the expiration of the lease contract which the

latter executed in favor of Francisco C. Salva;

5. Subject to the terms and conditions stipulated in the contract of lease between Carlos Ang

Gobonseng, Jr. and Francisco C. Salva, Julio Tan Pastor and children or heirs, or Lessee, or third

person, obligate and undertake to VACATE Lot No. 853-A NOT later than December 31, 1994. On

December 31, 1994, PEACEFUL POSSESSION of the property and premises shall be TURNED OVER

to the owner, Carlos A. Gobonseng, Jr., otherwise, a penalty of P5,000.00 for every day of delay in

vacating the premises is imposed;

6. All the parties herein have no more further claimes against each other, and waived,

abandoned, relinquished, any such claim or claims;

Thereafter, Tan Pastor executed and filed in Criminal Case No. 7071 an Affidavit of Desistance

thereunder making known his lack of interest in further pursuing the case, which was eventually

dismissed.

The controversy could have ended there were it not for the fact that on November 13, 1992, in the

RTC of Negros Oriental, respondent filed a civil suit for collection of rentals and damages against Tan

Pastor and Pilipinas Shell. In his complaint, docketed as Civil Case No. 10389, respondent, as plaintiff,

alleged ownership of Lot No. 853-A on the basis of TCT No. 13607. He further averred that since 1982,

he had been paying the realty taxes due thereon and that Tan Pastor and Pilipinas Shell continued

occupying said lot and using the same as a gasoline and service station without paying rentals therefor.

He thus prayed that judgment be rendered ordering Tan Pastor and petitioner to pay him rentals and

damages for their use and occupation of his lot from 1982 to 1991.

In its Answer, Pilipinas Shell countered that plaintiffs claim for unpaid rentals had no basis

because the gasoline station on his property is a dealer-owned filling station, as evidenced by a

certification4[4] issued by the president of the Shell Dealers Association of the Philippines. Pilipinas

Shell likewise emphasized that Lot N