G.R. No. L-13602 April 6, 1918LEUNG BEN, plaintiff, vs.P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city of Manila, defendants.Thos. D. Aitken and W. A. Armstrong for plaintiff.Kincaid & Perkins for defendants.

STREET, J.:

This is an application for a writ of certiorari, the purpose of which is to quash an attachment issued from the Court of First Instance of the City of Manila under circumstances hereinbelow stated.

Upon December 12, 1917, an action was instituted in the Court of First Instance of the city of Manila by P. J. O'Brien to recover of Leung Ben the sum of P15,000 alleged to have been lost by the plaintiff to the defendant in a series of gambling, banking and percentage games conducted ruing the two or three months prior to the institution of the suit. In his verified complaint the plaintiff asked for an attachment, under section 424, and 412 (1) of the Code of Civil Procedure, against the property of the defendant, on the ground that the latter was about to depart from the Philippine islands with intent to defraud his creditors. This attachment was issued; and acting under the authority thereof, the sheriff attached the sum of P15,000 which had been deposited by the defendant with the International Banking Corporation.

The defendant thereupon appeared by his attorney and moved the court to quash the attachment. Said motion having dismissed in the Court of First Instance, the petitioner, Leung Ben, the defendant in that action, presented to this court, upon January 8, 1918 his petition for the writ of certiorari directed against P. J. O'Brien and the judges of the Court of First Instance of the city of Manila whose names are mentioned in the caption hereof. The prayer is that the Honorable James A. Ostrand, as the judge having cognizance of the action in said court be required to certify the record to this court for review and that the order of attachment which had been issued should be revoked and discharged. with costs. Upon the filing of said petition in this court the usual order was entered requiring the defendants to show cause why the writ should not issue. The response of the defendants, in the nature of a demurrer, was filed upon January 21, 1918; and the matter is now heard upon the pleadings thus presented.

The provision of law under which this attachment was issued requires that there should be accuse of action arising upon contract, express or implied. The contention of the petitioner is that the statutory action to recover money lost at gaming is that the statutory action to recover money lost at gaming is no such an action as is contemplated in this provision, and he therefore insists that the original complaint shows on its face that the remedy of attachment is not available in aid thereof; that the Court of First Instance acted in excess of its jurisdiction in granting the writ of attachment; that the petitioner has no plain, speedy, and adequate remedy by appeal or otherwise; and that consequently the writ of certiorari supplies the appropriate remedy for his relief.

The case presents the two following questions of law, either of which, if decided unfavorably to the petitioner, will be fatal to his application:

(1) Supposing that the Court of First Instance has granted an attachment for which there is no statutory authority, can this court entertain the present petition and grant the desired relief?

(2) Is the statutory obligation to restore money won at gaming an obligation arising from "contract, express or implied?"

We are of the opinion that the answer to the first question should be in the affirmative. Under section 514 of the Code of Civil Procedure the Supreme Court has original jurisdiction by the writ of certiorari over the proceedings of Courts of First Instance, wherever said courts have exceeded their jurisdiction and there is no plaint, speedy, and adequate remedy. In the same section, it is further declared that the proceedings in the Supreme Court in such cases hall be as prescribed for Courts of First Instance in section 217-221, inclusive, of said Code. This Supreme Court, so far as applicable, the provisions contained in those section to the same extent as if they had been reproduced verbatim immediately after section 514. Turning to section 217, we find that, in defining the conditions under which certiorari can be maintained in a Court of First Instance substantially the same language is used as is the same remedy can be maintained in the Supreme Court of First Instance, substantially the same language is used as is found in section 514 relative to the conditions under which the same remedy can be maintained in the Supreme Court, namely, when the inferior tribunal has exceeded its jurisdiction and there is no

appeal, nor any plain, speedy and adequate remedy. In using these expressions the author of the Code of Civil Procedure merely adopted the language which, in American jurisdictions at least, had long ago reached the stage of stereotyped formula.

In section 220 of the same Code, we have a provision relative to the final proceedings in certiorari, and herein it is stated that the court shall determine whether the inferior tribunal has regularly pursued its authority it shall give judgment either affirming annulling, or modifying the proceedings below, as the law requires. The expression, has not regularly pursued its authority as here used, is suggestive, and we think it should be construed in connection with the other expressions have exceeded their jurisdiction, as used in section 514, and has exceeded their jurisdiction as used in section 217. Taking the three together, it results in our opinion that any irregular exercise of juridical power by a Court of First Instance, in excess of its lawful jurisdiction, is remediable by the writ of certiorari, provided there is no other plain, speedy, and adequate remedy; and in order to make out a case for the granting of the writ it is not necessary that the court should have acted in the matter without any jurisdiction whatever. Indeed the repeated use of expression excess of jurisdiction shows that the lawmaker contemplated the situation where a court, having jurisdiction should irregularly transcend its authority as well as the situation where the court is totally devoid of lawful power.

It may be observed in this connection that the word jurisdiction as used in attachment cases, has reference not only to the authority of the court to entertain the principal action but also to its authority to issue the attachment, as dependent upon the existence of the statutory ground. (6 C. J., 89.) This distinction between jurisdiction to issue the attachment as an ancillary remedy incident to the principal litigation is of importance; as a court's jurisdiction over the main action may be complete, and yet it may lack authority to grant an attachment as ancillary to such action. This distinction between jurisdiction over the ancillary has been recognized by this court in connection with actions involving the appointment of a receiver. Thus in Rocha & Co. vs. Crossfield and Figueras (6 Phil. Rep., 355), a receiver had been appointed without legal justification. It was held that the order making the appointment was beyond the jurisdiction of the court; and though the court admittedly had jurisdiction of the main cause, the order was vacated by this court upon application a writ of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep., 358, Blanco vs. Ambler and McMicking 3 Phil. Rep., 735, Yangco vs. Rohde, 1 Phil. Rep., 404.)

By parity of reasoning it must follow that when a court issues a writ of attachment for which there is no statutory authority, it is acting irregularly and in excess of its jurisdiction, in the sense necessary to justify the Supreme Court in granting relief by the writ of certiorari. In applying this proposition it is of course necessary to take account of the difference between a ground of attachment based on the nature of the action and a ground of attachment based on the acts or the conditions of the defendant. Every complaint must show a cause of action some sort; and when the statue declares that the attachment may issue in an action arising upon contract, the express or implied, it announces a criterion which may be determined from an inspection of the language of the complaint. The determination of this question is purely a matter of law. On the other hand, when the stature declares that an attachment may be issued when the defendant is about to depart from the Islands, a criterion is announced which is wholly foreign to the cause of action; and the determination of it may involve a disputed question of fact which must be decided by the court. In making this determination, the court obviously acts within its powers; and it would be idle to suppose that the writ of certiorari would be available to reverse the action of a Court of First Instance in determining the sufficiency of the proof on such a disputed point, and in granting or refusing the attachment accordingly.

We should not be understood, in anything that has been said, as intending to infringe the doctrine enunciated by this court in Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245), when properly applied. It was there held that we would not, upon application for a writ of certiorari, dissolve an interlocutory mandatory injunction that had been issued in a Court of First Instance as an incident in an action of mandamus. The issuance of an interlocutory injunction depends upon conditions essentially different from those involved in the issuance of an attachment. The injunction is designed primarily for the prevention of irreparable injury and the use of the remedy is in a great measure dependent upon the exercise of discretion. Generally, it may be said that the exercise of the injunctive powers is inherent in judicial authority; and ordinarily it would be impossible to distinguish between the jurisdiction of the court in the main litigation and its jurisdiction to grant an interlocutory injunction, for the latter is involved in the former. That the writ of certiorari can not be used to reverse an order denying a motion for a preliminary injunction is of course not to cavil. (Somes vs. Crossfield and Molina, 8 Phil. Rep., 284.)

But it will be said that the writ of certiorari is not available in this cae, because the petitioner is protected by the attachment bond, and that he has a plain, speedy, and adequate remedy appeal. This suggestion seems to be sufficiently answered in the case of Rocha & Co vs. Crossfield and Figueras (6 Phil. Rep., 355), already referred

to, and the earlier case there cited. The remedy by appeal is not sufficiently speedy to meet the exigencies of the case. An attachment is extremely violent, and its abuse may often result in infliction of damage which could never be repaired by any pecuniary award at the final hearing. To postpone the granting of the writ in such a case until the final hearing and to compel the petitioner to bring the case here upon appeal merely in order to correct the action of the trial court in the matter of allowing the attachment would seem both unjust and unnecessary.

Passing to the problem propounded in the second question it may be observed that, upon general principles,. recognize both the civil and common law, money lost in gaming and voluntarily paid by the loser to the winner can not in the absence of statue, be recovered in a civil action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several forms of gambling, contains numerous provisions recognizing the right to recover money lost in gambling or in the playing of certain games (secs. 6, 7, 8, 9, 11). The original complaint in the action in the Court of First Instance is not clear as to the particular section of Act No. 1757 under which the action is brought, but it is alleged that the money was lost at gambling, banking, and percentage game in which the defendant was banker. It must therefore be assumed that the action is based upon the right of recovery given in Section 7 of said Act, which declares that an action may be brought against the banker by any person losing money at a banking or percentage game.

Is this a cause arising upon contract, express or implied, as this term is used in section 412 of the Code of Civil Procedure? To begin the discussion, the English version of the Code of Civil Procedure is controlling (sec. 15, Admin. Code, ed. of 1917). Furthermore it is universally admitted to be proper in the interpretation of any statute, to consider its historical antecedents and its juris prudential sources. The Code of Civil Procedure, as is well known, is an American contribution to Philippine legislation. It therefore speaks the language of the common-law and for the most part reflects its ideas. When the draftsman of this Code used the expression contract, express or implied, he used a phrase that has been long current among writers on American and English law; and it is therefore appropriate to resort to that system of law to discover the appropriate to resort to that system of law to discover the meaning which the legislator intended to convey by those meaning which the legislator intended to convey by those terms. We remark in passing that the expression contrato tracito, used in the official translation of the Code of Civil Procedure as the Spanish equivalent of implied contract, does not appear to render the full sense of the English expression.

The English contract law, so far as relates to simple contracts is planted upon two foundations, which are supplied by two very different conceptions of legal liability. These two conceptions are revealed in the ideas respectively underlying (1) the common- law debt and (2) the assumptual promise. In the early and formative stages of the common-law the only simple contract of which the courts took account was the real contract or contract re, in which the contractual duty imposed by law arises upon the delivery of a chattle, as in the mutuum, commodatum, depositum, and the like; and the purely consensual agreements of the Roman Law found no congenial place in the early common law system.

In course of time the idea underlying the contract re was extended so as to include from one person to another under such circumstances as to constitute a justa cuas debendi. The obligation thereby created was a debt. The constitutive element in this litigation is found in the fact that the debtor has received something from the creditor, which he is bound by the obligation of law to return or pay for. From an early day this element was denominated the quid pro quo, an ungainly phrase coined by Mediaeval Latinity. The quid pro quo was primarily a materials or physical object, and its constituted the recompense or equivalent acquired by the debtor. Upon the passage of the quid pro quo from one party to the other, the law imposed that real contractual duty peculiar to the debt. No one conversant with the early history of English law would ever conceive of the debt as an obligation created by promise. It is the legal duty to pay or deliver a sum certain of money or an ascertainable quantity of ponderable or measurable chattles.

The ordinary debt, as already stated, originates in a contract in which a quid pro quo passes to the debtor at the time of the creation of the debt, but the term is equally applicable to duties imposed by custom or statute, or by judgment of a court.

The existence of a debt supposes one person to have possession of thing (res) which he owes and hence ought to turn over the owner. This obligation is the oldest conception of contract with which the common law is familiar; and notwithstanding the centuries that have rolled over Westminster Hall that conception remains as one of the fundamental bases of the common-law contract.

Near the end of the fifteenth century there was evolved in England a new conception of contractual liability, which embodied the idea of obligation resulting from promise and which found expression in the common law

assumpsit, or parol promise supported by a consideration. The application of this novel conception had the effect of greatly extending the filed of contractual liability and by this means rights of action came to be recognized which had been unknown before. The action of assumpsit which was the instrument for giving effect to this obligation was found to be a useful remedy; and presently this action came to be used for the enforcement of common-law debts. The result was to give to our contract law the superficial appearance of being based more or less exclusively upon the notion of the obligation of promise.

An idea is widely entertained to the effect that all simple contracts recognized in the common-law system are referable to a singly category. They all have their roots, so many of us imagine, in one general notion of obligation; and of course the obligation of promise is supposed to supply this general notion, being considered a sort of menstruum in which all other forms of contractual obligation have been dissolved. This a mistake. The idea of contractual duty embodied in the debt which was the first conception of contract liability revealed in the common law, has remained, although it was detained to be in a measure obscured by the more modern conception of obligation resulting from promise.

What has been said is intended to exhibit the fact that the duty to pay or deliver a sum certain of money or an ascertainable quantity of ponderable or measurable chattles — which is indicated by them debt — has ever been recognized, in the common-law system, as a true contract, regardless, of the source of the duty or the manner in which it is create — whether derived from custom, statue or some consensual transaction depending upon the voluntary acts of the parties. the form of contract known as the debt is of the most ancient lineage; and when reference is had to historical antecedents, the right of the debt to be classed as a contract cannot be questioned. Indeed when the new form of engagement consisting of the parol promise supported by a consideration first appeared, it was looked upon as an upstart and its right to be considered a true contract was questioned. It was long customary to refer to it exclusively as an assumpsit, agreement, undertaking, or parol promise, in fact anything but a contract. Only in time did the new form of engagement attain the dignity of being classed among true contract.

The term implied takers us into shadowy domain of those obligations the theoretical classification of which has engaged the attention of scholars from the time of Gaius until our own day and has been a source of as much difficulty to the civilian as to the common-law jurist. There we are concerned with those acts which make one person debtor to another without there having intervened between them any true agreement tending to produce a legal bond (vinculum juris). Of late years some American and English writers have adopted the term quasi-contract as descriptive of these obligations or some of them; but the expression more commonly used is implied contract.

Upon examination of these obligations, from the view point of the common-law jurisprudence, it will be found that they fall readily into two divisions according as they bear an analogy to the common-law debt or to the common law assumpsit. To exhibit the scope of these different classes of obligations is here impracticable. It is only necessary in this connection to observe that the most conspicuous division is that which comprises duties in the nature of debt. The characteristic feature of these obligations is that upon certain states of fact the law imposes an obligation to pay a sum certain of money; and it is characteristic of this obligation that the money in respect to which the duty is raised is conceived as being equivalent of something taken or detained under circumstances giving rise to the duty to return or compensate therefore. The proposition that no one shall be allowed to enrich himself unduly at the expense of another embodies the general principle here lying at the basis of obligation. The right to recover money improperly paid (repeticion de lo indebido) is also recognized as belong to this class of duties.

It will observed that according to the Civil Code obligations are supposed to be derived either from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4) acts in which some sort ob lame or negligence is present. This enumeration of sources of obligations and the obligation imposed by law are different types. The learned Italian jurist, Jorge Giorgi, criticises this assumption and says that the classification embodied in the code is theoretically erroneous. His conclusion is that one or the other of these categories should have been suppressed and merged in the other. (Giorgi, Teoria de las Obligaciones, Spanish ed., vol. 5 arts. 5, 7, 9.) The validity of this criticism is, we thin, self-evident; and it is of interest to note that the common law makes no distinction between the two sources of liability. The obligations which in the Code are indicated as quasi-contracts, as well as those arising ex lege, are in the common la system, merged into the category of obligations imposed by law, and all are denominated implied contracts.

Many refinements, more or less illusory, have been attempted by various writers in distinguishing different sorts of implied contracts, as for example, the contract implied as of fact and the contract implied as of law. No

explanation of these distinctions will be here attempted. Suffice it to say that the term contract, express or implied, is used to by common-law jurists to include all purely personal obligations other than those which have their source in delict, or tort. As to these it may be said that, generally speaking, the law does not impose a contractual duty upon a wrongdoer to compensate for injury done. It is true that in certain situations where a wrongdoer unjustly acquired something at the expense of another, the law imposes on him a duty to surrender his unjust acquisitions, and the injured party may here elect to sue upon this contractual duty instead of suing upon the tort; but even here the distinction between the two liabilities, in contract and in tort, is never lost to sight; and it is always recognized that the liability arising out of the tort is delictual and not of a contractual or quasi-contractual nature.

In the case now under consideration the duty of the defendant to refund the money which he won from the plaintiff at gaming is a duty imposed by statute. It therefore arises ex lege. Furthermore, it is a duty to return a certain sum which had passed from the plaintiff to the defendant. By all the criteria which the common law supplies, this a duty in the nature of debt and is properly classified as an implied contract. It is well- settled by the English authorities that money lost in gambling or by lottery, if recoverable at all, can be recovered by the loser in an action of indebitatus assumpsit for money had and received. (Clarke vs. Johnson. Lofft, 759; Mason vs. Waite, 17 Mass., 560; Burnham vs. Fisher, 25 Vt., 514.) This means that in the common law the duty to return money won in this way is an implied contract, or quasi-contract.

It is no argument to say in reply to this that the obligation here recognized is called an implied contract merely because the remedy commonly used in suing upon ordinary contract can be here used, or that the law adopted the fiction of promise in order to bring the obligation within the scope of the action of assumpsit. Such statements fail to express the true import of the phenomenon. Before the remedy was the idea; and the use of the remedy could not have been approved if it had not been for historical antecedents which made the recognition of this remedy at one logical and proper. Furthermore, it should not be forgotten that the question is not how this duty but what sort of obligation did the author of the Code of Civil Procedure intend to describe when he sued the term implied contract in section 412.

In what has been said we have assumed that the obligation which is at the foundation of the original action in the court below is not a quasi-contract, when judge by the principles of the civil law. A few observations will show that this assumption is not by any means free from doubt. The obligation in question certainly does not fall under the definition of either of the two-quasi- contracts which are made the subject of special treatment in the Civil Code, for its does not arise from a licit act as contemplated in article 1895. The obligation is clearly a creation of the positive law — a circumstance which brings it within the purview of article 1090, in relation with article, 1089; and it is also derived from an illicit act, namely, the playing of a prohibited game. It is thus seen that the provisions of the Civil Code which might be consulted with a view to the correct theoretical classification of this obligation are unsatisfactory and confusing.

The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code are (1) the obligation incident to the officious management of the affairs of other person (gestion de negocios ajenos) and (2) the recovery of what has been improperly paid (cabro de lo indebido). That the authors of the Civil Code selected these two obligations for special treatment does not signify an intention to deny the possibility of the existence of other quasi-contractual obligations. As is well said by the commentator Manresa.

The number of the quasi-contracts may be indefinite as may be the number of lawful facts, the generations of the said obligations; but the Code, just as we shall see further on, in the impracticableness of enumerating or including them all in a methodical and orderly classification, has concerned itself with two only — namely, the management of the affairs of other person and the recovery of things improperly paid — without attempting by this to exclude the others. (Manresa, 2d ed., vol. 12, p. 549.)

It would indeed have been surprising if the authors of the Code, in the light of the jurisprudence of more than a thousand years, should have arbitrarily assumed to limit the quasi-contract to two obligations. The author from whom we have just quoted further observes that the two obligations in question were selected for special treatment in the Code not only because they were the most conspicuous of the quasi-contracts, but because they had not been the subject of consideration in other parts of the Code. (Opus citat., 550.)

It is well recognized among civilian jurists that the quasi- contractual obligations cover a wide range. The Italian jurist, Jorge Giorgi, to whom we have already referred, considers under this head, among other obligations, the following: payments made upon a future consideration which is not realized or upon an existing consideration which fails; payments wrongfully made upon a consideration which is contrary to law, or opposed to public policy;

and payments made upon a vicious consideration or obtained by illicit means (Giorgi, Teoria de las Obligaciones, vol. 5, art. 130.)

Im permitting the recovery of money lost at play, Act No. 1757 has introduced modifications in the application of articles 1798, 180`, and 1305 of the Civil Code. The first two of these articles relate to gambling contracts, while article 1305 treats of the nullity of contracts proceeding from a vicious or illicit consideration. Taking all these provisions together, it must be apparent that the obligation to return money lost at play has a decided affinity to contractual obligations; and we believe that it could, without violence to the doctrines of the civil law, be held that such obligations is an innominate quasi-contract. It is, however, unnecessary to place the decision on this ground.

From what has been said it follows that in our opinion the cause of action stated in the complaints in the court below is based on a contract, express or implied and is therefore of such nature that the court had authority to issue writ of attachment. The application for the writ of certiorari must therefore be denied and the proceedings dismissed. So ordered.

Arellano, C.J., Torres, Johnson and Carson, JJ., concur.Separate Opinions

MALCOLM, J., concurring:As I finished reading the learned and interesting decision of the majority, the impression which remained was that the court was enticed by the nice and unusual points presented to make a hard case out of an easy one and unfortunately t do violence to the principles of certiorari. The simple questions are : Di the Court of First Instance of city of Manila exceed its jurisdiction in granting an attachments against the property of the defendant, now plaintiff? Has this defendant, now become the plaintiff, any other plain, speedy and adequate remedy? The answer are found in the decision of thinks court, in Herrera vs. Barretto and Joaquin ([1913], 25 Phil., 245), from which I quote the following:

It has been repeatedly held by this court that a writ of certiorari will not be issued unless it clearly appears that the court to which it is to be directed acted without or in excess of jurisdiction. It will not be issued to cure errors in the proceedings or to correct erroneous conclusions of law or of fact. If the court has jurisdiction. It will not be issued to cure errors in the proceedings to correct jurisdiction of the subject matter and f the person, decisions upon all question pertaining to the cause are decisions within its jurisdiction and, however irregular or erroneous they may be, cannot be corrected by certiorari. The Code of Civil Procedure giving Courts of First Instance general jurisdiction in actions for mandamus, it goes without saying that the Court of First Instance had jurisdiction in the present case to resolve every question arising in such an action and t decide every question presented to it which pertained to the cause. It has already been held by this court, that while it is a power to be exercised only in extreme case, a Court of First Instance has power to issue a mandatory injunction t stand until the final determination of the action in which it is issued. While the issuance of the mandatory injunction in this particular case may have been irregular and erroneous, a question concerning which we express no opinion, nevertheless its issuance was within the jurisdiction of the court and its action is not reveiwable on certiorari. It is not sufficient to say that it was issued wrongfully and without sufficient grounds and in the absence of the other party. The question is, Did the court act with jurisdiction?

It has been urged that the court exceeded its jurisdiction in requiring the municipal president t issue the license, for the reason that he was not the proper person to issue it and that, if he was the proper person, he had the right to exercise a discretion as to whom the license should be issued. We do not believe that either of these questions goes to the jurisdiction of the court to act. One of the fundamental question in a mandamus against a public officer is whether or not that officer has the right to exercise discretion in the performance of the act which the plaintiff asks him to perform. It is one of the essential determinations of the cause. To claim that the resolution of that question may deprive the court of jurisdiction is to assert a novel proposition. It is equivalent to the contention that a court has jurisdiction if he decides right but no jurisdiction if he decides wrong. It may be stated generally that it is never necessary to decide the fundamental questions of a cause to determine whether the court has jurisdiction. The question of jurisdiction is preliminary and never touches the merits of the case. The determination of the fundamental questions of a cause are merely the exercise of a jurisdiction already conceded. In the case at bar no one denies the power, authority or jurisdiction of the Court of First Instance to take cognizance of an action for mandamus and to decide very question which arises in that cause and pertains thereto. The contention that the decision of one of those question, if wrong, destroys jurisdiction involves an evident contradiction.

Jurisdiction is the authority to hear and determine a cause — the right to act in a case. Since it is the power to hear and determine, it does not depend either upon the regularity of the exercise of that power or upon the rightfulness of the decision made. Jurisdiction should therefore be distinguished from the exercise of jurisdiction. The authority to decide a case at all, and not the decision rendered therein, is what makes up jurisdiction. Where there is jurisdiction of the person and subject matter, as we have said before, the decision of all other questions arising in the case an exercise of that jurisdiction.

Then follows an elaborate citation and discussion of American authorities, including a decision of the United States Supreme Court and of the applicable Philippine cases. The decision continues"

The reasons givens in these cases last cited for the allowance of the writ of prohibition are applicable only to the class of cases with which the decision deal and do not in any way militate against the general proposition herein asserted. Those which relate to election contest are based upon the principle that those proceedings, are special in their nature and must be strictly followed, a material departure from the statute resulting a loss, or in an excess of jurisdiction. The cases relating to receivers are based, in a measure, upon the principle the appointment of a receiver being governed by the statute; and in part upon the theory that the appointment of a receiver in an improper case is in substance a bankruptcy proceeding, the taking of which is expressly prohibited by law. The case relative to the allowance of alimony pendente lite when the answer denies the marriage is more difficult to distinguish. The reasons in support of the doctrine laid down in that case are given the opinion in full and they seem to place the particular case to which they refer in a class by itself.

It is not alight things that the lawmakers have abolished writs of error and with them certiorari and prohibition, in so far as they were methods by which the mere errors of an inferior curt could be corrected. As instruments to that end they no longer exist. Their place is no taken by the appeal. So long as the inferior court retains jurisdiction its errors can be corrected only by that method. The office of the writ of certiorari has been reduced to the correction of defects of jurisdiction solely and cannot legally be used for any other purpose. It is truly an extra ordinary remedy and in this jurisdiction, its use is restricted to truly extraordinary cases — cases in which the action of the inferior court is wholly void, where any further steps in the case would result in a waste of time and money and would produce no result whatever; where the parties, or their privies, would be utterly deceived; where a final judgment or decree would be nought but a snare and a delusion, deciding nothing, protecting nobody, a juridical pretension, a recorded falsehood, a standing menace. It is only to avoid such result as these that a writ of certiorari is issuable; and even here an appeal will lie if the aggrieved party prefers to prosecute it.

A full and thorough examination of all the decided cases in this court touching the question of certiorari and prohibition fully supports the proposition already stated that, where a Court of First Instance has jurisdiction of the subject matter and of the person, its decision of any question pertaining to the cause, however, erroneous, cannot be reviewed by certiorari, but must be corrected by appeal.

I see no reason to override the decision in Herrera vs. Barretto and Joaquin (supra). Accordingly, I can do no better than to make the language of Justice Moreland my own. applying these principles, it is self-evident that this court should no entertain the present petition and should not grant the desired relief.

FISHER, J., dissenting:I am in full accord with the view that the remedy of certiorari may be invoked in such cases as this, but I am constrained to dissent from the opinion of the majority as regards the meaning of the term implied contract.

Section 412 of the code of Civil Procedure in connection with section 424, authorizes the preliminary attachment of the property of the defendant: "(1) In an action for the recovery of money or damages on a cause of action arising upon contract, express or implied, when the defendant is about to depart from the Philippine Islands, with intent to defraud his creditors; (2) . . .; (3) . . .; (4) . . .; (5) When the defendant has removed or disposed of his property, or is about to do so, with intent to defraud his creditors."

It is evident that the terms of paragraph five of the article cited are much broader than those of the first paragraph. The fifth paragraph is not limited to action arising from contract, but is by its terms applicable to actions brought for the purpose of enforcing extra-contractual rights as well as contract rights. The limitation upon cases falling under paragraph five is to be found, not in the character of the obligation for the enforcement for which the action is brought, but in the terms of article 4265, which requires that the affidavit show that the amount due the plaintiff . . . is as much as the sum for which the order is granted.

That is to say, when application is made for a preliminary attachment upon the ground that the plaintiff is about to dispose of his property with intent to defraud his creditors — thus bringing the case within the terms of paragraph five of the section — it is not necessary to show that the obligation in suit is contractual in its origin, but is sufficient to show that the breach of the obligation, as shown by the facts stated in the complaint and affidavit, imposes upon the defendant the obligation to pay a specific and definite sum. For example, if it is alleged in the complaint that the defendant by negligence, has caused the destruction by fire of a building belonging to plaintiff, and that such building was worth a certain sum of money, these facts would show a definite basis upon which to authorize the granting of the writ. But if it were averred that the defendant has published a libel concerning the plaintiff, to the injury of his feeling and reputation, there is no definite basis upon which to grant an attachment, because the amount of the damage suffered, being necessarily uncertain and indeterminate, cannot be ascertained definitely until the trail has been completed.

But it appears that the legislature although it has seen fit to authorize a preliminary attachment in aid of action of all kinds when the defendant is concealing his property with intent to defraud his creditors, has provided is about to depart from the country with intent to defraud his creditos, the writ will issue only when the action in aid of which it is sought arises from a contract express or implied. If an attachment were permitted upon facts bringing the application with the first paragraph of the section in support of action of any kind, whether the obligation sued upon is contractual or not, then paragraph five would by construction be made absolutely identical with paragraph one, and this would be in effect equivalent to the complete eliminated of the last two lines of the first paragraph. It is a rule of statutory construction that effect should be given to all parts of the statue, if possible. I can see no reason why the legislature should have limited cases falling within the firs paragraph to action arising from contract and have refrained from imposing this limitation with respect to cases falling within the terms of the fifth paragraph, but this should have no effect upon us in applying the law. Whether there be a good reason for it or not the distinction exists.

Had the phrase express or implied not been used to qualify contract, there would be no doubt whatever with regard to the meaning of the word. In the Spanish Civil law contract are always consensual, and it would be impossible to define as a contract the judicial relation existing between a person who has lost money at gaming and the winner of such money, simple because the law imposes upon the winner the obligation of making restitution. An obligation of this kind, far from being consensual in its origin, arises against the will of the debtor. To call such a relation a contract is, from the standpoint of the civil law, a contradiction in terms.

But is said that as the phase express or implied has been used to qualify the word contract and these words are found in statue which speaks the language of the common law, this implies the introduction into our law of the concept of the implied contract of the English common-law, a concept which embraces a certain class of obligation originating ex lege, which have been arbitrarily classified as contracts, so that they might be enforced by one of the formal actions of the common law which legal tradition and practice has reserved for the enforcement of contract. I cannot concur in this reasoning. I believe that when a technical juridical term of substantive law is used in the adjective law of these islands, we should seek its meaning in our own substantive law rather than in the law of America or of England. The code of Civil Procedure was not enacted to establish rules of substantive law, but upon the assumption of the existence of these rules.

In the case of Cayce vs. Curtis (Dallam's Decisions Texas Reports, 403), it appears that the legislature, at a time when that State still retained to a large extent the Spanish substantive civil law, enacted a statue in which the word bonds is used. In litigation involving the construction of that statute, one of the parties contended that the work bond should be given the technical meaning which it had in the English Common Law. The court rejected this contention saying —

On the first point it is urged by counsel for the appellant that the word bond used in the statute being a common law term, we must refer to the common law for its legal signification; and that by that law no instrument is a bond which is not under seal. The truth of the proposition that sealing is an absolute requisite to the validity of a bond at common law is readily admitted; but the applicability of that rule of the case under consideration is not perceived. This bond was taken at a time when the common law afforded no rule of decision or practice in this country, and consequently that law cannot be legitimately resorted to, even for the purpose for which it is invoked by the counsel for the appellant, unless it be shown that the civil law had not term of similar import for we regard it as a correct rule of construction, that where technical terms are used in a statute they are to be referred for their signification to terms f similar import in the system of laws which prevails in the country where the statues is passed, and not to another system which is entirely foreign t the whole system of municipal regulations by which that country is governed. (Martin's Reports, vol. 3, 185; 7 Martin [N. S.], 162.)"

Consequently, I believe that in the interpretation of phase "contract, express or implied," we should apply the rules of our own substantive law. The phrase in itself offers no difficulty. The concept of the contract, under the Civil Code, as a legal relation of exclusively consensual origin, offers no difficulty. Nor is any difficulty encountered in the gramatical sense of the words express and "implied". Express according to the New International Dictionary is that which is directly and distinctly stated; expressed, not merely implied or left to interference. Therefore, a contract entered into by means of letters, in which the offer and the acceptance have been manifested by appropriate words, would be an "express contract." The word "imply" according to the same dictionary, is to involve in substance or essence, or by fair inference, or by construction of law, when not expressly stated in words or signs; to contain by implication to include virtually.

Therefore, if I enter a tailor shop and order a suit of clothes, although nothing is said regarding payment, it is an inference, both logical and legal, from my act that is my intention to pay the reasonable value of the garments. The contract is implied, therefore, is that in which the consent of the parties is implied.

Manresa, commenting upon article 1262 of the Civil Code, says:

The essence of consent is the agreement of the parties concerning that which is to constitute the contract . . . . The forms of this agreement may vary according to whether it is expressed verbally or in writing, by words or by acts. Leaving the other differences for consideration hereafter, we will only refer now to those which exist between express consent and implied consent . . . . It is unquestionable that implied consent manifested by act or conduct, produces a contract. . . .

If it were necessary to have recourse to the English common law for the purpose of ascertaining the meaning of the phrase under consideration, we could find many decisions which gave it the same meaning as that for which I contend.

An implied contract is where one party receives benefits from another party, under such circumstances that the law presume a promise on the part of the party benefited to pay a reasonable price for the same. (Jones vs. Tucker [Del.], 84 Atlantic, 1012.)

It is true that English courts have extended the concept of the term contract to include certain obligations arising ex lege without consent, express or implied. True contracts created by implied consent are designated in the English common law as contracts implied in the fact, while the so-called contracts in which the consent is a fiction of law are called contracts implied by law. But is evident that the latter are not real contracts. They have been called contract arbitrarily by the courts of England, and those of the Untied States in which the English common law is in force, in order that certain actions arising ex lege may be enforced by the action of assumpsit. In the rigid formulism of the English common law the substantive right had to be accommodated to the form of action. As is stated in the monograph on the action of assumpsit in Ruling Case Law. (volume 2, 743) —

In theory it wan action to recover for the nonperformance f simple contracts, and the formula and proceedings were constructed and carried on accordingly. . . . From the reign of Elizabeth this action has been extended to almost every case where an obligation arises from natural reason, . . . and it is now maintained in many cases which its principles do not comprehend and where fictions and intendments are resorted to, to fit the actual cause of action to the theory of the remedy. It is thus sanctioned where there has been no . . . real contract, but where some duty is deemed sufficient to justify the court in imputing the promise to perform its, and hence in bending the transaction to the form of action.

In the ancient English common law procedure the form of the action was regarded as being much more important than the substantive right to be enforced. If no form of action was found in which the facts would fit, so much the worse for the facts! to avoid the injustices to which this condition of affairs gave rise, the judges invented those fictions which permitted them to preserve the appearance of conservatism and change the law without expressly admitting that they were doing so. The indispensable averment, that they were doing so. The indispensable avernment without which the action of assumpsit would not lie, was that the defendant promised to pay plaintiff the amount demanded. (Sector vs. Holmes, 17 Vs., 566.) In true contracts, whether express or implied, this promise in fact exists. In obligations arising ex lege there is no such promise, and therefore the action of assumpsit could not be maintained, and therefore the action of assumpsit could not be maintained, although by reason of its relative simplicity it was one of the most favored forms of action. In order to permit the litigant to make use of this form of action for the enforcement of ascertain classes of obligations arising ex lege, the judges invented the fiction of the promise of the defendant to pay the amount of the obligation, and as this fictitious

promise give the appearance of consensuality to the legal relations of the parties, the name of implied contract is given to that class of extra-contractual obligations enforcible by the action of assumpsit.

Now, it is not be supposed that it was the intention of the Legislature in making use in the first paragraph of article 412 of the phrase contract, express or implied to corrupt the logical simplicity of our concept of obligations by importing into our law the antiquated fictions of the mediaeval English common law. If one of the concepts of the term "implied contract" in the English common law, namely, that in which consent is presume from the conduct of the debtor, harmonizes with the concept of the contract in our law, why should we reject that meaning and hold that the Legislature intended to use this phrase in the foreign and illogical sense of a contract arising without consent? This is a civil law country. why should we be compelled to study the fictions of the ancient English common law, in order to be informed as to the meaning of the word contract in the law of the Philippine Islands? Much more reasonable to my mind was the conclusion of the Texas court, under similar circumstances, to the effect to be referred for their signification to terms of similar import in the system of laws which prevails in the country where the statue is passed." (Cayce vs. Curtis, supra.)

My conclusion is that the phase contract, express or implied should be interpreted in the grammatical sense of the words and limited to true contracts, consensual obligations arising from consent, whether expressed in words, writing or signs, or presumed from conduct. As it is evident that the defendant in the present case never promised, him in the gambling game in question, his obligation to restor the amounts won, imposed by the law, is no contractual, but purely extra-contractual and therefore the action brought not being one arising upon contract express or implied, the plaintiff is not entitled to a preliminary attachment upon the averment that the defendant is about to depart from the Philippine Islands with with intent t defraud his creditors, no averment being made in the compliant or in the affidavit that the defendant has removed or disposed of his property, or is about to depart with intent to defraud his creditors, so as to bring the case within the terms of the fifth paragraph of section 412.

I am unable to agree with the contention of the application (Brief, p. 39) here that the phase in question should be interpreted in such a way as to include all obligations, whether arising from consent or ex lege, because that is equivalent to eliminating all distinction between the first and the fifth paragraphs by practically striking out the first two lines of paragraph one. The Legislature has deliberately established this distinction, and while we may be unable to see any reason why it should have been made, it is our duty to apply and interpret the law, and we are not authorized under the guise of interpretation to virtually repeal part of the statute.

Nor can it be said that the relations between the parties litigant constitute a quasi-contract. In the first place, quasi- contracts are "lawful and purely voluntary acts by which the authors thereof become obligated in favor of a third person. . . ." The act which gave rise to the obligation ex lege relied upon by the plaintiff in the court below is illicit — an unlawful gambling game. In the second place, the first paragraph of section 412 of the Code of Civil Procedure does not authorize an attachment in actions arising out of quasi contracts, but only in actions arising out of contract, express or implied.

I am therefore of the opinion that the court below was without jurisdiction to issue that writ of attachment and that the writ should be declared null and void.Avanceña, J., concurs.

G.R. No. L-4089 January 12, 1909

ARTURO PELAYO, plaintiff-appellant, vs.MARCELO LAURON, ET AL., defendants-appellees.

J.H. Junquera, for appellant.Filemon Sotto, for appellee.

TORRES, J.:

On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a complaint against Marcelo Lauron and Juana Abella setting forth that on or about the 13th of October of said year, at night, the plaintiff was called to the house of the defendants, situated in San Nicolas, and that upon arrival he was requested by them to render medical assistance to their daughter-in-law who was about to give birth to a child; that therefore, and after consultation with the attending physician, Dr. Escaño, it was found necessary, on account of the difficult birth, to remove the fetus by means of forceps which operation was performed by the plaintiff, who also had to remove

the afterbirth, in which services he was occupied until the following morning, and that afterwards, on the same day, he visited the patient several times; that the just and equitable value of the services rendered by him was P500, which the defendants refuse to pay without alleging any good reason therefor; that for said reason he prayed that the judgment be entered in his favor as against the defendants, or any of them, for the sum of P500 and costs, together with any other relief that might be deemed proper.

In answer to the complaint counsel for the defendants denied all of the allegation therein contained and alleged as a special defense, that their daughter-in-law had died in consequence of the said childbirth, and that when she was alive she lived with her husband independently and in a separate house without any relation whatever with them, and that, if on the day when she gave birth she was in the house of the defendants, her stay their was accidental and due to fortuitous circumstances; therefore, he prayed that the defendants be absolved of the complaint with costs against the plaintiff.

The plaintiff demurred to the above answer, and the court below sustained the demurrer, directing the defendants, on the 23rd of January, 1907, to amend their answer. In compliance with this order the defendants presented, on the same date, their amended answer, denying each and every one of the allegations contained in the complaint, and requesting that the same be dismissed with costs.

As a result of the evidence adduced by both parties, judgment was entered by the court below on the 5th of April, 1907, whereby the defendants were absolved from the former complaint, on account of the lack of sufficient evidence to establish a right of action against the defendants, with costs against the plaintiff, who excepted to the said judgment and in addition moved for a new trial on the ground that the judgment was contrary to law; the motion was overruled and the plaintiff excepted and in due course presented the corresponding bill of exceptions. The motion of the defendants requesting that the declaration contained in the judgment that the defendants had demanded therefrom, for the reason that, according to the evidence, no such request had been made, was also denied, and to the decision the defendants excepted.

Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of having been sent for by the former, attended a physician and rendered professional services to a daughter-in-law of the said defendants during a difficult and laborious childbirth, in order to decide the claim of the said physician regarding the recovery of his fees, it becomes necessary to decide who is bound to pay the bill, whether the father and mother-in-law of the patient, or the husband of the latter.

According to article 1089 of the Civil Code, obligations are created by law, by contracts, by quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault or negligence occurs.

Obligations arising from law are not presumed. Those expressly determined in the code or in special laws, etc., are the only demandable ones. Obligations arising from contracts have legal force between the contracting parties and must be fulfilled in accordance with their stipulations. (Arts. 1090 and 1091.)

The rendering of medical assistance in case of illness is comprised among the mutual obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.)

If every obligation consists in giving, doing or not doing something (art. 1088), and spouses are mutually bound to support each other, there can be no question but that, when either of them by reason of illness should be in need of medical assistance, the other is under the unavoidable obligation to furnish the necessary services of a physician in order that health may be restored, and he or she may be freed from the sickness by which life is jeopardized; the party bound to furnish such support is therefore liable for all expenses, including the fees of the medical expert for his professional services. This liability originates from the above-cited mutual obligation which the law has expressly established between the married couple.

In the face of the above legal precepts it is unquestionable that the person bound to pay the fees due to the plaintiff for the professional services that he rendered to the daughter-in-law of the defendants during her childbirth, is the husband of the patient and not her father and mother- in-law, the defendants herein. The fact that it was not the husband who called the plaintiff and requested his assistance for his wife is no bar to the fulfillment of the said obligation, as the defendants, in view of the imminent danger, to which the life of the patient was at that moment exposed, considered that medical assistance was urgently needed, and the obligation of the husband to furnish his wife in the indispensable services of a physician at such critical moments is specially established by the law, as has been seen, and compliance therewith is unavoidable; therefore, the plaintiff, who

believes that he is entitled to recover his fees, must direct his action against the husband who is under obligation to furnish medical assistance to his lawful wife in such an emergency.

From the foregoing it may readily be understood that it was improper to have brought an action against the defendants simply because they were the parties who called the plaintiff and requested him to assist the patient during her difficult confinement, and also, possibly, because they were her father and mother-in-law and the sickness occurred in their house. The defendants were not, nor are they now, under any obligation by virtue of any legal provision, to pay the fees claimed, nor in consequence of any contract entered into between them and the plaintiff from which such obligation might have arisen.

In applying the provisions of the Civil Code in an action for support, the supreme court of Spain, while recognizing the validity and efficiency of a contract to furnish support wherein a person bound himself to support another who was not his relative, established the rule that the law does impose the obligation to pay for the support of a stranger, but as the liability arose out of a contract, the stipulations of the agreement must be held. (Decision of May 11, 1897.)

Within the meaning of the law, the father and mother-in-law are strangers with respect to the obligation that devolves upon the husband to provide support, among which is the furnishing of medical assistance to his wife at the time of her confinement; and, on the other hand, it does not appear that a contract existed between the defendants and the plaintiff physician, for which reason it is obvious that the former can not be compelled to pay fees which they are under no liability to pay because it does not appear that they consented to bind themselves.

The foregoing suffices to demonstrate that the first and second errors assigned to the judgment below are unfounded, because, if the plaintiff has no right of action against the defendants, it is needless to declare whether or not the use of forceps is a surgical operation.

Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the judgment appealed from should be affirmed with the costs against the appellant. So ordered.

Mapa and Tracey, JJ., concur.Arellano, C.J., and Carson, J., concurs in the result.Willard, J., dissents.

G.R. No. 146322 December 6, 2006

ERNESTO RAMAS UYPITCHING and RAMAS UYPITCHING SONS, INC., petitioners, vs.ERNESTO QUIAMCO, respondent.D E C I S I O NCORONA, J.:

Honeste vivere, non alterum laedere et jus suum cuique tribuere. To live virtuously, not to injure others and to give everyone his due. These supreme norms of justice are the underlying principles of law and order in society. We reaffirm them in this petition for review on certiorari assailing the July 26, 2000 decision1 and October 18, 2000 resolution of the Court of Appeals (CA) in CA-G.R. CV No. 47571.

In 1982, respondent Ernesto C. Quiamco was approached by Juan Davalan,2 Josefino Gabutero and Raul Generoso to amicably settle the civil aspect of a criminal case for robbery3 filed by Quiamco against them. They surrendered to him a red Honda XL-100 motorcycle and a photocopy of its certificate of registration. Respondent asked for the original certificate of registration but the three accused never came to see him again. Meanwhile, the motorcycle was parked in an open space inside respondent’s business establishment, Avesco-AVNE Enterprises, where it was visible and accessible to the public.

It turned out that, in October 1981, the motorcycle had been sold on installment basis to Gabutero by petitioner Ramas Uypitching Sons, Inc., a family-owned corporation managed by petitioner Atty. Ernesto Ramas Uypitching. To secure its payment, the motorcycle was mortgaged to petitioner corporation.4

When Gabutero could no longer pay the installments, Davalan assumed the obligation and continued the payments. In September 1982, however, Davalan stopped paying the remaining installments and told petitioner corporation’s collector, Wilfredo Veraño, that the motorcycle had allegedly been "taken by respondent’s men."

Nine years later, on January 26, 1991, petitioner Uypitching, accompanied by policemen,5 went to Avesco-AVNE Enterprises to recover the motorcycle. The leader of the police team, P/Lt. Arturo Vendiola, talked to the clerk in charge and asked for respondent. While P/Lt. Vendiola and the clerk were talking, petitioner Uypitching paced back and forth inside the establishment uttering "Quiamco is a thief of a motorcycle."

On learning that respondent was not in Avesco-AVNE Enterprises, the policemen left to look for respondent in his residence while petitioner Uypitching stayed in the establishment to take photographs of the motorcycle. Unable to find respondent, the policemen went back to Avesco-AVNE Enterprises and, on petitioner Uypitching’s instruction and over the clerk’s objection, took the motorcycle.

On February 18, 1991, petitioner Uypitching filed a criminal complaint for qualified theft and/or violation of the Anti-Fencing Law6 against respondent in the Office of the City Prosecutor of Dumaguete City.7 Respondent moved for dismissal because the complaint did not charge an offense as he had neither stolen nor bought the motorcycle. The Office of the City Prosecutor dismissed the complaint8 and denied petitioner Uypitching’s subsequent motion for reconsideration.

Respondent filed an action for damages against petitioners in the RTC of Dumaguete City, Negros Oriental, Branch 37.9 He sought to hold the petitioners liable for the following: (1) unlawful taking of the motorcycle; (2) utterance of a defamatory remark (that respondent was a thief) and (3) precipitate filing of a baseless and malicious complaint. These acts humiliated and embarrassed the respondent and injured his reputation and integrity.

On July 30, 1994, the trial court rendered a decision10 finding that petitioner Uypitching was motivated with malice and ill will when he called respondent a thief, took the motorcycle in an abusive manner and filed a baseless complaint for qualified theft and/or violation of the Anti-Fencing Law. Petitioners’ acts were found to be contrary to Articles 1911 and 2012 of the Civil Code. Hence, the trial court held petitioners liable to respondent for P500,000 moral damages, P200,000 exemplary damages and P50,000 attorney’s fees plus costs.

Petitioners appealed the RTC decision but the CA affirmed the trial court’s decision with modification, reducing the award of moral and exemplary damages to P300,000 and P100,000, respectively.13 Petitioners sought reconsideration but it was denied. Thus, this petition.

In their petition and memorandum, petitioners submit that the sole (allegedly) issue to be resolved here is whether the filing of a complaint for qualified theft and/or violation of the Anti-Fencing Law in the Office of the City Prosecutor warranted the award of moral damages, exemplary damages, attorney’s fees and costs in favor of respondent.

Petitioners’ suggestion is misleading. They were held liable for damages not only for instituting a groundless complaint against respondent but also for making a slanderous remark and for taking the motorcycle from respondent’s establishment in an abusive manner.

Correctness of the Findings of the RTC and CA

As they never questioned the findings of the RTC and CA that malice and ill will attended not only the public imputation of a crime to respondent14 but also the taking of the motorcycle, petitioners were deemed to have accepted the correctness of such findings. This alone was sufficient to hold petitioners liable for damages to respondent.

Nevertheless, to address petitioners’ concern, we also find that the trial and appellate courts correctly ruled that the filing of the complaint was tainted with malice and bad faith. Petitioners themselves in fact described their action as a "precipitate act."15 Petitioners were bent on portraying respondent as a thief. In this connection, we quote with approval the following findings of the RTC, as adopted by the CA:

x x x There was malice or ill-will [in filing the complaint before the City Prosecutor’s Office] because Atty. Ernesto Ramas Uypitching knew or ought to have known as he is a lawyer, that there was no probable cause at all for filing a criminal complaint for qualified theft and fencing activity against [respondent]. Atty. Uypitching had no personal knowledge that [respondent] stole the motorcycle in question. He was merely told by his bill collector ([i.e.] the bill collector of Ramas Uypitching Sons, Inc.)[,] Wilfredo Veraño[,] that Juan Dabalan will [no longer] pay the remaining installment(s) for the motorcycle because the motorcycle was taken by the men of [respondent]. It

must be noted that the term used by Wilfredo Veraño in informing Atty. Ernesto Ramas Uypitching of the refusal of Juan Dabalan to pay for the remaining installment was [‘]taken[’], not [‘]unlawfully taken[’] or ‘stolen.’ Yet, despite the double hearsay, Atty. Ernesto Ramas Uypitching not only executed the [complaint-affidavit] wherein he named [respondent] as ‘the suspect’ of the stolen motorcycle but also charged [respondent] of ‘qualified theft and fencing activity’ before the City [Prosecutor’s] Office of Dumaguete. The absence of probable cause necessarily signifies the presence of malice. What is deplorable in all these is that Juan Dabalan, the owner of the motorcycle, did not accuse [respondent] or the latter’s men of stealing the motorcycle[,] much less bother[ed] to file a case for qualified theft before the authorities. That Atty. Uypitching’s act in charging [respondent] with qualified theft and fencing activity is tainted with malice is also shown by his answer to the question of Cupid Gonzaga16 [during one of their conversations] - "why should you still file a complaint? You have already recovered the motorcycle…"[:] "Aron motagam ang kawatan ug motor." ("To teach a lesson to the thief of motorcycle.")17

Moreover, the existence of malice, ill will or bad faith is a factual matter. As a rule, findings of fact of the trial court, when affirmed by the appellate court, are conclusive on this Court. We see no compelling reason to reverse the findings of the RTC and the CA.

Petitioners Abused Their Right of Recovery as Mortgagee(s)

Petitioners claim that they should not be held liable for petitioner corporation’s exercise of its right as seller-mortgagee to recover the mortgaged vehicle preliminary to the enforcement of its right to foreclose on the mortgage in case of default. They are clearly mistaken.

True, a mortgagee may take steps to recover the mortgaged property to enable it to enforce or protect its foreclosure right thereon. There is, however, a well-defined procedure for the recovery of possession of mortgaged property: if a mortgagee is unable to obtain possession of a mortgaged property for its sale on foreclosure, he must bring a civil action either to recover such possession as a preliminary step to the sale, or to obtain judicial foreclosure.18

Petitioner corporation failed to bring the proper civil action necessary to acquire legal possession of the motorcycle. Instead, petitioner Uypitching descended on respondent’s establishment with his policemen and ordered the seizure of the motorcycle without a search warrant or court order. Worse, in the course of the illegal seizure of the motorcycle, petitioner Uypitching even mouthed a slanderous statement.

No doubt, petitioner corporation, acting through its co-petitioner Uypitching, blatantly disregarded the lawful procedure for the enforcement of its right, to the prejudice of respondent. Petitioners’ acts violated the law as well as public morals, and transgressed the proper norms of human relations.

The basic principle of human relations, embodied in Article 19 of the Civil Code, provides:

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

Article 19, also known as the "principle of abuse of right," prescribes that a person should not use his right unjustly or contrary to honesty and good faith, otherwise he opens himself to liability.19 It seeks to preclude the use of, or the tendency to use, a legal right (or duty) as a means to unjust ends.

There is an abuse of right when it is exercised solely to prejudice or injure another.20 The exercise of a right must be in accordance with the purpose for which it was established and must not be excessive or unduly harsh; there must be no intention to harm another.21 Otherwise, liability for damages to the injured party will attach.

In this case, the manner by which the motorcycle was taken at petitioners’ instance was not only attended by bad faith but also contrary to the procedure laid down by law. Considered in conjunction with the defamatory statement, petitioners’ exercise of the right to recover the mortgaged vehicle was utterly prejudicial and injurious to respondent. On the other hand, the precipitate act of filing an unfounded complaint could not in any way be considered to be in accordance with the purpose for which the right to prosecute a crime was established. Thus, the totality of petitioners’ actions showed a calculated design to embarrass, humiliate and publicly ridicule respondent. Petitioners acted in an excessively harsh fashion to the prejudice of respondent. Contrary to law, petitioners willfully caused damage to respondent. Hence, they should indemnify him.22

WHEREFORE, the petition is hereby DENIED. The July 26, 2000 decision and October 18, 2000 resolution of the Court of Appeals in CA-G.R. CV No. 47571 are AFFIRMED.

Triple costs against petitioners, considering that petitioner Ernesto Ramas Uypitching is a lawyer and an officer of the court, for his improper behavior.

SO ORDERED.

Puno, J., Chairperson, Sandoval-Gutierrez, Azcuna and Garcia, JJ., concur.

[G.R. No. 154259. February 28, 2005]NIKKO HOTEL MANILA GARDEN and RUBY LIM, petitioners, vs. ROBERTO REYES, a.k.a. “AMAY BISAYA,” respondent.D E C I S I O NCHICO-NAZARIO, J.:

In this petition for review on certiorari, petitioners Nikko Hotel Manila Garden (Hotel Nikko)[1] and Ruby Lim assail the Decision[2] of the Court of Appeals dated 26 November 2001 reversing the Decision[3] of the Regional Trial Court (RTC) of Quezon City, Branch 104, as well as the Resolution[4] of the Court of Appeals dated 09 July 2002 which denied petitioners’ motion for reconsideration.

The cause of action before the trial court was one for damages brought under the human relations provisions of the New Civil Code. Plaintiff thereat (respondent herein) Roberto Reyes, more popularly known by the screen name “Amay Bisaya,” alleged that at around 6:00 o’clock in the evening of 13 October 1994, while he was having coffee at the lobby of Hotel Nikko,[5] he was spotted by his friend of several years, Dr. Violeta Filart, who then approached him.[6] Mrs. Filart invited him to join her in a party at the hotel’s penthouse in celebration of the natal day of the hotel’s manager, Mr. Masakazu Tsuruoka.[7] Mr. Reyes asked if she could vouch for him for which she replied: “of course.”[8] Mr. Reyes then went up with the party of Dr. Filart carrying the basket of fruits which was the latter’s present for the celebrant.[9] At the penthouse, they first had their picture taken with the celebrant after which Mr. Reyes sat with the party of Dr. Filart.[10] After a couple of hours, when the buffet dinner was ready, Mr. Reyes lined-up at the buffet table but, to his great shock, shame and embarrassment, he was stopped by petitioner herein, Ruby Lim, who claimed to speak for Hotel Nikko as Executive Secretary thereof.[11] In a loud voice and within the presence and hearing of the other guests who were making a queue at the buffet table, Ruby Lim told him to leave the party (“huwag ka nang kumain, hindi ka imbitado, bumaba ka na lang”).[12] Mr. Reyes tried to explain that he was invited by Dr. Filart.[13] Dr. Filart, who was within hearing distance, however, completely ignored him thus adding to his shame and humiliation.[14] Not long after, while he was still recovering from the traumatic experience, a Makati policeman approached and asked him to step out of the hotel.[15] Like a common criminal, he was escorted out of the party by the policeman.[16] Claiming damages, Mr. Reyes asked for One Million Pesos actual damages, One Million Pesos moral and/or exemplary damages and Two Hundred Thousand Pesos attorney’s fees.[17]

Ruby Lim, for her part, admitted having asked Mr. Reyes to leave the party but not under the ignominious circumstance painted by the latter. Ms. Lim narrated that she was the Hotel’s Executive Secretary for the past twenty (20) years.[18] One of her functions included organizing the birthday party of the hotel’s former General Manager, Mr. Tsuruoka.[19] The year 1994 was no different. For Mr. Tsuruoka’s party, Ms. Lim generated an exclusive guest list and extended invitations accordingly.[20] The guest list was limited to approximately sixty (60) of Mr. Tsuruoka’s closest friends and some hotel employees and that Mr. Reyes was not one of those invited.[21] At the party, Ms. Lim first noticed Mr. Reyes at the bar counter ordering a drink.[22] Mindful of Mr. Tsuruoka’s wishes to keep the party intimate, Ms. Lim approached Mr. Boy Miller, the “captain waiter,” to inquire as to the presence of Mr. Reyes who was not invited.[23] Mr. Miller replied that he saw Mr. Reyes with the group of Dr. Filart.[24] As Dr. Filart was engaged in conversation with another guest and as Ms. Lim did not want to interrupt, she inquired instead from the sister of Dr. Filart, Ms. Zenaida Fruto, who told her that Dr. Filart did not invite Mr. Reyes.[25] Ms. Lim then requested Ms. Fruto to tell Mr. Reyes to leave the party as he was not invited.[26] Mr. Reyes, however, lingered prompting Ms. Lim to inquire from Ms. Fruto who said that Mr. Reyes did not want to leave.[27] When Ms. Lim turned around, she saw Mr. Reyes conversing with a Captain Batung whom she later approached.[28] Believing that Captain Batung and Mr. Reyes knew each other, Ms. Lim requested from him the same favor from Ms. Fruto, i.e., for Captain Batung to tell Mr. Reyes to leave the party as he was not invited.[29] Still, Mr. Reyes lingered. When Ms. Lim spotted Mr. Reyes by the buffet table, she decided to speak to him herself as there were no other guests in the immediate vicinity.[30] However, as Mr. Reyes was already helping himself to the food, she decided to wait.[31] When Mr. Reyes went to a corner and started to eat, Ms. Lim

approached him and said: “alam ninyo, hindo ho kayo dapat nandito. Pero total nakakuha na ho kayo ng pagkain, ubusin na lang ninyo at pagkatapos kung pwede lang po umalis na kayo.”[32] She then turned around trusting that Mr. Reyes would show enough decency to leave, but to her surprise, he began screaming and making a big scene, and even threatened to dump food on her.[33]

Dr. Violeta Filart, the third defendant in the complaint before the lower court, also gave her version of the story to the effect that she never invited Mr. Reyes to the party.[34] According to her, it was Mr. Reyes who volunteered to carry the basket of fruits intended for the celebrant as he was likewise going to take the elevator, not to the penthouse but to Altitude 49.[35] When they reached the penthouse, she reminded Mr. Reyes to go down as he was not properly dressed and was not invited.[36] All the while, she thought that Mr. Reyes already left the place, but she later saw him at the bar talking to Col. Batung.[37] Then there was a commotion and she saw Mr. Reyes shouting.[38] She ignored Mr. Reyes.[39] She was embarrassed and did not want the celebrant to think that she invited him.[40]

After trial on the merits, the court a quo dismissed the complaint,[41] giving more credence to the testimony of Ms. Lim that she was discreet in asking Mr. Reyes to leave the party. The trial court likewise ratiocinated that Mr. Reyes assumed the risk of being thrown out of the party as he was uninvited:

Plaintiff had no business being at the party because he was not a guest of Mr. Tsuruoka, the birthday celebrant. He assumed the risk of being asked to leave for attending a party to which he was not invited by the host. Damages are pecuniary consequences which the law imposes for the breach of some duty or the violation of some right. Thus, no recovery can be had against defendants Nikko Hotel and Ruby Lim because he himself was at fault (Garciano v. Court of Appeals, 212 SCRA 436). He knew that it was not the party of defendant Violeta Filart even if she allowed him to join her and took responsibility for his attendance at the party. His action against defendants Nikko Hotel and Ruby Lim must therefore fail.[42]

On appeal, the Court of Appeals reversed the ruling of the trial court as it found more commanding of belief the testimony of Mr. Reyes that Ms. Lim ordered him to leave in a loud voice within hearing distance of several guests:

In putting appellant in a very embarrassing situation, telling him that he should not finish his food and to leave the place within the hearing distance of other guests is an act which is contrary to morals, good customs . . ., for which appellees should compensate the appellant for the damage suffered by the latter as a consequence therefore (Art. 21, New Civil Code). The liability arises from the acts which are in themselves legal or not prohibited, but contrary to morals or good customs. Conversely, even in the exercise of a formal right, [one] cannot with impunity intentionally cause damage to another in a manner contrary to morals or good customs.[43]

The Court of Appeals likewise ruled that the actuation of Ms. Lim in approaching several people to inquire into the presence of Mr. Reyes exposed the latter to ridicule and was uncalled for as she should have approached Dr. Filart first and both of them should have talked to Mr. Reyes in private:

Said acts of appellee Lim are uncalled for. What should have been done by appellee Lim was to approach appellee Mrs. Filart and together they should have told appellant Reyes in private that the latter should leave the party as the celebrant only wanted close friends around. It is necessary that Mrs. Filart be the one to approach appellant because it was she who invited appellant in that occasion. Were it not for Mrs. Filart’s invitation, appellant could not have suffered such humiliation. For that, appellee Filart is equally liable.. . .The acts of [appellee] Lim are causes of action which are predicated upon mere rudeness or lack of consideration of one person, which calls not only protection of human dignity but respect of such dignity. Under Article 20 of the Civil Code, every person who violates this duty becomes liable for damages, especially if said acts were attended by malice or bad faith. Bad faith does not simply connote bad judgment or simple negligence. It imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known duty to some motive or interest or ill-will that partakes of the nature of fraud (Cojuangco, Jr. v. CA, et al., 309 SCRA 603).[44]

Consequently, the Court of Appeals imposed upon Hotel Nikko, Ruby Lim and Dr. Violeta Filart the solidary obligation to pay Mr. Reyes (1) exemplary damages in the amount of Two Hundred Thousand Pesos (P200,000); (2) moral damages in the amount of Two Hundred Thousand Pesos (P200,000); and (3) attorney’s fees in the amount of Ten Thousand Pesos (P10,000).[45] On motion for reconsideration, the Court of Appeals affirmed its

earlier decision as the argument raised in the motion had “been amply discussed and passed upon in the decision sought to be reconsidered.”[46]

Thus, the instant petition for review. Hotel Nikko and Ruby Lim contend that the Court of Appeals seriously erred in –

I. NOT APPLYING THE DOCTRINE OF VOLENTI NON FIT INJURIA CONSIDERING THAT BY ITS OWN FINDINGS, AMAY BISAYA WAS A GATE-CRASHER

II. HOLDING HOTEL NIKKO AND RUBY LIM JOINTLY AND SEVERALLY LIABLE WITH DR. FILART FOR DAMAGES SINCE BY ITS OWN RULING, AMAY BISAYA “COULD NOT HAVE SUFFERED SUCH HUMILIATION,” “WERE IT NOT FOR DR. FILART’S INVITATION”

III. DEPARTING FROM THE FINDINGS OF FACT OF THE TRIAL COURT AS REGARDS THE CIRCUMSTANCES THAT ALLEGEDLY CAUSED THE HUMILIATION OF AMAY BISAYA

IV. IN CONCLUDING THAT AMAY BISAYA WAS TREATED UNJUSTLY BECAUSE OF HIS POVERTY, CONSIDERING THAT THIS WAS NEVER AN ISSUE AND NO EVIDENCE WAS PRESENTED IN THIS REGARD

V. IN FAILING TO PASS UPON THE ISSUE ON THE DEFECTS OF THE APPELLANT’S BRIEF, THEREBY DEPARTING FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS

Petitioners Lim and Hotel Nikko contend that pursuant to the doctrine of volenti non fit injuria, they cannot be made liable for damages as respondent Reyes assumed the risk of being asked to leave (and being embarrassed and humiliated in the process) as he was a “gate-crasher.”

The doctrine of volenti non fit injuria (“to which a person assents is not esteemed in law as injury”[47]) refers to self-inflicted injury[48] or to the consent to injury[49] which precludes the recovery of damages by one who has knowingly and voluntarily exposed himself to danger, even if he is not negligent in doing so.[50] As formulated by petitioners, however, this doctrine does not find application to the case at bar because even if respondent Reyes assumed the risk of being asked to leave the party, petitioners, under Articles 19 and 21 of the New Civil Code, were still under obligation to treat him fairly in order not to expose him to unnecessary ridicule and shame.

Thus, the threshold issue is whether or not Ruby Lim acted abusively in asking Roberto Reyes, a.k.a. “Amay Bisaya,” to leave the party where he was not invited by the celebrant thereof thereby becoming liable under Articles 19 and 21 of the Civil Code. Parenthetically, and if Ruby Lim were so liable, whether or not Hotel Nikko, as her employer, is solidarily liable with her.

As the trial court and the appellate court reached divergent and irreconcilable conclusions concerning the same facts and evidence of the case, this Court is left without choice but to use its latent power to review such findings of facts. Indeed, the general rule is that we are not a trier of facts as our jurisdiction is limited to reviewing and revising errors of law.[51] One of the exceptions to this general rule, however, obtains herein as the findings of the Court of Appeals are contrary to those of the trial court.[52] The lower court ruled that Ms. Lim did not abuse her right to ask Mr. Reyes to leave the party as she talked to him politely and discreetly. The appellate court, on the other hand, held that Ms. Lim is liable for damages as she needlessly embarrassed Mr. Reyes by telling him not to finish his food and to leave the place within hearing distance of the other guests. Both courts, however, were in agreement that it was Dr. Filart’s invitation that brought Mr. Reyes to the party.

The consequential question then is: Which version is credible?From an in depth review of the evidence, we find more credible the lower court’s findings of fact.First, let us put things in the proper perspective.

We are dealing with a formal party in a posh, five-star hotel,[53] for-invitation-only, thrown for the hotel’s former Manager, a Japanese national. Then came a person who was clearly uninvited (by the celebrant)[54] and who could not just disappear into the crowd as his face is known by many, being an actor. While he was already spotted by the organizer of the party, Ms. Lim, the very person who generated the guest list, it did not yet appear that the celebrant was aware of his presence. Ms. Lim, mindful of the celebrant’s instruction to keep the party intimate, would naturally want to get rid of the “gate-crasher” in the most hush-hush manner in order not to call attention to a glitch in an otherwise seamless affair and, in the process, risk the displeasure of the celebrant, her

former boss. To unnecessarily call attention to the presence of Mr. Reyes would certainly reflect badly on Ms. Lim’s ability to follow the instructions of the celebrant to invite only his close friends and some of the hotel’s personnel. Mr. Reyes, upon whom the burden rests to prove that indeed Ms. Lim loudly and rudely ordered him to leave, could not offer any satisfactory explanation why Ms. Lim would do that and risk ruining a formal and intimate affair. On the contrary, Mr. Reyes, on cross-examination, had unwittingly sealed his fate by admitting that when Ms. Lim talked to him, she was very close. Close enough for him to kiss:

Q: And, Mr. Reyes, you testified that Miss Lim approached you while you were at the buffet table? How close was she when she approached you?A: Very close because we nearly kissed each other.Q: And yet, she shouted for you to go down? She was that close and she shouted?A: Yes. She said, “wag kang kumain, hindi ka imbitado dito, bumaba ka na lang.”Q: So, you are testifying that she did this in a loud voice?. . .A: Yes. If it is not loud, it will not be heard by many.[55]In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and expose him to ridicule and shame, it is highly unlikely that she would shout at him from a very close distance. Ms. Lim having been in the hotel business for twenty years wherein being polite and discreet are virtues to be emulated, the testimony of Mr. Reyes that she acted to the contrary does not inspire belief and is indeed incredible. Thus, the lower court was correct in observing that –

Considering the closeness of defendant Lim to plaintiff when the request for the latter to leave the party was made such that they nearly kissed each other, the request was meant to be heard by him only and there could have been no intention on her part to cause embarrassment to him. It was plaintiff’s reaction to the request that must have made the other guests aware of what transpired between them. . .

Had plaintiff simply left the party as requested, there was no need for the police to take him out.[56]

Moreover, another problem with Mr. Reyes’s version of the story is that it is unsupported. It is a basic rule in civil cases that he who alleges proves. Mr. Reyes, however, had not presented any witness to back his story up. All his witnesses – Danny Rodinas, Pepito Guerrero and Alexander Silva - proved only that it was Dr. Filart who invited him to the party.[57]

Ms. Lim, not having abused her right to ask Mr. Reyes to leave the party to which he was not invited, cannot be made liable to pay for damages under Articles 19 and 21 of the Civil Code. Necessarily, neither can her employer, Hotel Nikko, be held liable as its liability springs from that of its employee.[58]

Article 19, known to contain what is commonly referred to as the principle of abuse of rights,[59] is not a panacea for all human hurts and social grievances. Article 19 states:

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.

Elsewhere, we explained that when “a right is exercised in a manner which does not conform with the norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for which the wrongdoer must be responsible.”[60] The object of this article, therefore, is to set certain standards which must be observed not only in the exercise of one’s rights but also in the performance of one’s duties.[61] These standards are the following: act with justice, give everyone his due and observe honesty and good faith.[62] Its antithesis, necessarily, is any act evincing bad faith or intent to injure. Its elements are the following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another.[63] When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of the Civil Code. Article 20 pertains to damages arising from a violation of law[64] which does not obtain herein as Ms. Lim was perfectly within her right to ask Mr. Reyes to leave. Article 21, on the other hand, states:

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

Article 21[65] refers to acts contra bonus mores and has the following elements: (1) There is an act which is legal; (2) but which is contrary to morals, good custom, public order, or public policy; and (3) it is done with intent to injure.[66]

A common theme runs through Articles 19 and 21,[67] and that is, the act complained of must be intentional.[68]

As applied to herein case and as earlier discussed, Mr. Reyes has not shown that Ms. Lim was driven by animosity against him. These two people did not know each other personally before the evening of 13 October 1994, thus, Mr. Reyes had nothing to offer for an explanation for Ms. Lim’s alleged abusive conduct except the statement that Ms. Lim, being “single at 44 years old,” had a “very strong bias and prejudice against (Mr. Reyes) possibly influenced by her associates in her work at the hotel with foreign businessmen.”[69] The lameness of this argument need not be belabored. Suffice it to say that a complaint based on Articles 19 and 21 of the Civil Code must necessarily fail if it has nothing to recommend it but innuendos and conjectures.

Parenthetically, the manner by which Ms. Lim asked Mr. Reyes to leave was likewise acceptable and humane under the circumstances. In this regard, we cannot put our imprimatur on the appellate court’s declaration that Ms. Lim’s act of personally approaching Mr. Reyes (without first verifying from Mrs. Filart if indeed she invited Mr. Reyes) gave rise to a cause of action “predicated upon mere rudeness or lack of consideration of one person, which calls not only protection of human dignity but respect of such dignity.”[70] Without proof of any ill-motive on her part, Ms. Lim’s act of by-passing Mrs. Filart cannot amount to abusive conduct especially because she did inquire from Mrs. Filart’s companion who told her that Mrs. Filart did not invite Mr. Reyes.[71] If at all, Ms. Lim is guilty only of bad judgment which, if done with good intentions, cannot amount to bad faith.

Not being liable for both actual and moral damages, neither can petitioners Lim and Hotel Nikko be made answerable for exemplary damages[72] especially for the reason stated by the Court of Appeals. The Court of Appeals held –

Not a few of the rich people treat the poor with contempt because of the latter’s lowly station in life. This has to be limited somewhere. In a democracy, such a limit must be established. Social equality is not sought by the legal provisions under consideration, but due regard for decency and propriety (Code Commission, pp. 33-34). And by way of example or correction for public good and to avert further commission of such acts, exemplary damages should be imposed upon appellees.[73]

The fundamental fallacy in the above-quoted findings is that it runs counter with the very facts of the case and the evidence on hand. It is not disputed that at the time of the incident in question, Mr. Reyes was “an actor of long standing; a co-host of a radio program over DZRH; a Board Member of the Music Singer Composer (MUSICO) chaired by popular singer Imelda Papin; a showbiz Coordinator of Citizen Crime Watch; and 1992 official candidate of the KBL Party for Governor of Bohol; and an awardee of a number of humanitarian organizations of the Philippines.”[74] During his direct examination on rebuttal, Mr. Reyes stressed that he had income[75] and nowhere did he say otherwise. On the other hand, the records are bereft of any information as to the social and economic standing of petitioner Ruby Lim. Consequently, the conclusion reached by the appellate court cannot withstand scrutiny as it is without basis.

All told, and as far as Ms. Lim and Hotel Nikko are concerned, any damage which Mr. Reyes might have suffered through Ms. Lim’s exercise of a legitimate right done within the bounds of propriety and good faith, must be his to bear alone.

WHEREFORE, premises considered, the petition filed by Ruby Lim and Nikko Hotel Manila Garden is GRANTED. The Decision of the Court of Appeals dated 26 November 2001 and its Resolution dated 09 July 2002 are hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Quezon City, Branch 104, dated 26 April 1999 is hereby AFFIRMED. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

[G.R. No. 143363. February 6, 2002]ST. MARY’S ACADEMY, petitioner, vs. WILLIAM CARPITANOS and LUCIA S. CARPITANOS, GUADA DANIEL, JAMES DANIEL II, JAMES DANIEL, SR., and VIVENCIO VILLANUEVA, respondents.D E C I S I O NPARDO, J.:The case is an appeal via certiorari from the decision[1] of the Court of Appeals as well as the resolution denying reconsideration, holding petitioner liable for damages arising from an accident that resulted in the death of a student who had joined a campaign to visit the public schools in Dipolog City to solicit enrollment.

The FactsThe facts, as found by the Court of Appeals, are as follows:“Claiming damages for the death of their only son, Sherwin Carpitanos, spouses William Carpitanos and Lucia Carpitanos filed on June 9, 1995 a case against James Daniel II and his parents, James Daniel Sr. and Guada Daniel, the vehicle owner, Vivencio Villanueva and St. Mary’s Academy before the Regional Trial Court of Dipolog City.

“On 20 February 1997, Branch 6 of the Regional Trial Court of Dipolog City rendered its decision the dispositive portion of which reads as follows:

“‘WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in the following manner:

1. Defendant St. Mary’s Academy of Dipolog City, is hereby ordered to pay plaintiffs William Carpitanos and Luisa Carpitanos, the following sums of money:

a. FIFTY THOUSAND PESOS (P50,000.00) indemnity for the loss of life of Sherwin S. Carpitanos;b. FORTY THOUSAND PESOS (P40,000.00) actual damages incurred by plaintiffs for burial and related expenses;c. TEN THOUSAND PESOS (P10,000.00) for attorney’s fees;d. FIVE HUNDRED THOUSAND PESOS (P500,000.00) for moral damages; and to pay costs.

2. Their liability being only subsidiary, defendants James Daniel, Sr. and Guada Daniel are hereby ordered to pay herein plaintiffs the amount of damages above-stated in the event of insolvency of principal obligor St. Mary’s Academy of Dipolog City;

3. Defendant James Daniel II, being a minor at the time of the commission of the tort and who was under special parental authority of defendant St. Mary’s Academy, is ABSOLVED from paying the above-stated damages, same being adjudged against defendants St. Mary’s Academy, and subsidiarily, against his parents;

4. Defendant Vivencio Villanueva is hereby ABSOLVED of any liability. His counterclaim not being in order as earlier discussed in this decision, is hereby DISMISSED.

IT IS SO ORDERED.”’ (Decision, pp. 32-33; Records, pp. 205-206).”

“From the records it appears that from 13 to 20 February 1995, defendant-appellant St. Mary’s Academy of Dipolog City conducted an enrollment drive for the school year 1995-1996. A facet of the enrollment campaign was the visitation of schools from where prospective enrollees were studying. As a student of St. Mary’s Academy, Sherwin Carpitanos was part of the campaigning group. Accordingly, on the fateful day, Sherwin, along with other high school students were riding in a Mitsubishi jeep owned by defendant Vivencio Villanueva on their way to Larayan Elementary School, Larayan, Dapitan City. The jeep was driven by James Daniel II then 15 years old and a student of the same school. Allegedly, the latter drove the jeep in a reckless manner and as a result the jeep turned turtle.

“Sherwin Carpitanos died as a result of the injuries he sustained from the accident.”[2]

In due time, petitioner St. Mary’s academy appealed the decision to the Court of Appeals.[3]

On February 29, 2000, the Court of Appeals promulgated a decision reducing the actual damages to P25,000.00 but otherwise affirming the decision a quo, in toto.[4]

On February 29, 2000, petitioner St. Mary’s Academy filed a motion for reconsideration of the decision. However, on May 22, 2000, the Court of Appeals denied the motion.[5]

Hence, this appeal.[6]

The Issues

1) Whether the Court of Appeals erred in holding the petitioner liable for damages for the death of Sherwin Carpitanos.

2) Whether the Court of Appeals erred in affirming the award of moral damages against the petitioner.

The Court’s Ruling

We reverse the decision of the Court of Appeals.

The Court of Appeals held petitioner St. Mary’s Academy liable for the death of Sherwin Carpitanos under Articles 218[7] and 219[8] of the Family Code, pointing out that petitioner was negligent in allowing a minor to drive and in not having a teacher accompany the minor students in the jeep.

Under Article 218 of the Family Code, the following shall have special parental authority over a minor child while under their supervision, instruction or custody: (1) the school, its administrators and teachers; or (2) the individual, entity or institution engaged in child care. This special parental authority and responsibility applies to all authorized activities, whether inside or outside the premises of the school, entity or institution. Thus, such authority and responsibility applies to field trips, excursions and other affairs of the pupils and students outside the school premises whenever authorized by the school or its teachers.[9]

Under Article 219 of the Family Code, if the person under custody is a minor, those exercising special parental authority are principally and solidarily liable for damages caused by the acts or omissions of the unemancipated minor while under their supervision, instruction, or custody.[10]

However, for petitioner to be liable, there must be a finding that the act or omission considered as negligent was the proximate cause of the injury caused because the negligence must have a causal connection to the accident.[11]

“In order that there may be a recovery for an injury, however, it must be shown that the ‘injury for which recovery is sought must be the legitimate consequence of the wrong done; the connection between the negligence and the injury must be a direct and natural sequence of events, unbroken by intervening efficient causes.’ In other words, the negligence must be the proximate cause of the injury. For, ‘negligence, no matter in what it consists, cannot create a right of action unless it is the proximate cause of the injury complained of.’ And ‘the proximate cause of an injury is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred.’”[12]

In this case, the respondents failed to show that the negligence of petitioner was the proximate cause of the death of the victim.

Respondents Daniel spouses and Villanueva admitted that the immediate cause of the accident was not the negligence of petitioner or the reckless driving of James Daniel II, but the detachment of the steering wheel guide of the jeep.

In their comment to the petition, respondents Daniel spouses and Villanueva admitted the documentary exhibits establishing that the cause of the accident was the detachment of the steering wheel guide of the jeep. Hence, the cause of the accident was not the recklessness of James Daniel II but the mechanical defect in the jeep of Vivencio Villanueva. Respondents, including the spouses Carpitanos, parents of the deceased Sherwin Carpitanos, did not dispute the report and testimony of the traffic investigator who stated that the cause of the accident was the detachment of the steering wheel guide that caused the jeep to turn turtle.

Significantly, respondents did not present any evidence to show that the proximate cause of the accident was the negligence of the school authorities, or the reckless driving of James Daniel II. Hence, the respondents’ reliance on Article 219 of the Family Code that “those given the authority and responsibility under the preceding Article shall be principally and solidarily liable for damages caused by acts or omissions of the unemancipated minor” was unfounded.

Further, there was no evidence that petitioner school allowed the minor James Daniel II to drive the jeep of respondent Vivencio Villanueva. It was Ched Villanueva, grandson of respondent Vivencio Villanueva, who had possession and control of the jeep. He was driving the vehicle and he allowed James Daniel II, a minor, to drive the jeep at the time of the accident.

Hence, liability for the accident, whether caused by the negligence of the minor driver or mechanical detachment of the steering wheel guide of the jeep, must be pinned on the minor’s parents primarily. The negligence of petitioner St. Mary’s Academy was only a remote cause of the accident. Between the remote cause and the injury, there intervened the negligence of the minor’s parents or the detachment of the steering wheel guide of the jeep.

“The proximate cause of an injury is that cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred.”[13]

Considering that the negligence of the minor driver or the detachment of the steering wheel guide of the jeep owned by respondent Villanueva was an event over which petitioner St. Mary’s Academy had no control, and which was the proximate cause of the accident, petitioner may not be held liable for the death resulting from such accident.

Consequently, we find that petitioner likewise cannot be held liable for moral damages in the amount of P500,000.00 awarded by the trial court and affirmed by the Court of Appeals.

Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant’s wrongful act or omission.[14] In this case, the proximate cause of the accident was not attributable to petitioner.

For the reason that petitioner was not directly liable for the accident, the decision of the Court of Appeals ordering petitioner to pay death indemnity to respondent Carpitanos must be deleted. Moreover, the grant of attorney’s fees as part of damages is the exception rather than the rule.[15] The power of the court to award attorney’s fees under Article 2208 of the Civil Code demands factual, legal and equitable justification.[16] Thus, the grant of attorney’s fees against the petitioner is likewise deleted.

Incidentally, there was no question that the registered owner of the vehicle was respondent Villanueva. He never denied and in fact admitted this fact. We have held that the registered owner of any vehicle, even if not used for public service, would primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle was being driven on the highways or streets.”[17] Hence, with the overwhelming evidence presented by petitioner and the respondent Daniel spouses that the accident occurred because of the detachment of the steering wheel guide of the jeep, it is not the school, but the registered owner of the vehicle who shall be held responsible for damages for the death of Sherwin Carpitanos.

The Fallo

WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of Appeals[18] and that of the trial court.[19] The Court remands the case to the trial court for determination of the liability of defendants, excluding petitioner St. Mary’s Academy, Dipolog City.

No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Kapunan, and Ynares-Santiago, JJ., concur.Puno, J., in the result.

[G.R. No. 190601, February 07, 2011]

SPOUSES LUIGI M. GUANIO AND ANNA HERNANDEZ-GUANIO, PETITIONERS, VS. MAKATI SHANGRI-LA HOTEL AND RESORT, INC., ALSO DOING BUSINESS UNDER THE NAME OF SHANGRI-LA HOTEL MANILA, RESPONDENT.

D E C I S I O N CARPIO MORALES, J.:

For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna Hernandez-Guanio (petitioners) booked at the Shangri-la Hotel Makati (the hotel).

Prior to the event, Makati Shangri-La Hotel & Resort, Inc. (respondent) scheduled an initial food tasting. Petitioners claim that they requested the hotel to prepare for seven persons ─ the two of them, their respective parents, and the wedding coordinator. At the scheduled food tasting, however, respondent prepared for only six.

Petitioners initially chose a set menu which included black cod, king prawns and angel hair pasta with wild mushroom sauce for the main course which cost P1,000.00 per person. They were, however, given an option in which salmon, instead of king prawns, would be in the menu at P950.00 per person. They in fact partook of the salmon.

Three days before the event, a final food tasting took place. Petitioners aver that the salmon served was half the size of what they were served during the initial food tasting; and when queried about it, the hotel quoted a much higher price (P1,200.00) for the size that was initially served to them. The parties eventually agreed on a final price ─ P1,150 per person.

A day before the event or on July 27, 2001, the parties finalized and forged their contract.[1]

Petitioners claim that during the reception, respondent's representatives, Catering Director Bea Marquez and Sales Manager Tessa Alvarez, did not show up despite their assurance that they would; their guests complained of the delay in the service of the dinner; certain items listed in the published menu were unavailable; the hotel's waiters were rude and unapologetic when confronted about the delay; and despite Alvarez's promise that there would be no charge for the extension of the reception beyond 12:00 midnight, they were billed and paid P8,000 per hour for the three-hour extension of the event up to 4:00 A.M. the next day.

Petitioners further claim that they brought wine and liquor in accordance with their open bar arrangement, but these were not served to the guests who were forced to pay for their drinks.

Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc. (respondent) and received an apologetic reply from Krister Svensson, the hotel's Executive Assistant Manager in charge of Food and Beverage. They nevertheless filed a complaint for breach of contract and damages before the Regional Trial Court (RTC) of Makati City.

In its Answer, respondent claimed that petitioners requested a combination of king prawns and salmon, hence, the price was increased to P1,200.00 per person, but discounted at P1,150.00; that contrary to petitioners' claim, Marquez and Alvarez were present during the event, albeit they were not permanently stationed thereat as there were three other hotel functions; that while there was a delay in the service of the meals, the same was occasioned by the sudden increase of guests to 470 from the guaranteed expected minimum number of guests of 350 to a maximum of 380, as stated in the Banquet Event Order (BEO);[2] and that Isaac Albacea, Banquet Service Director, in fact relayed the delay in the service of the meals to petitioner Luigi's father, Gil Guanio.

Respecting the belated service of meals to some guests, respondent attributed it to the insistence of petitioners' wedding coordinator that certain guests be served first.

On Svensson's letter, respondent, denying it as an admission of liability, claimed that it was meant to maintain goodwill to its customers.

By Decision of August 17, 2006, Branch 148 of the Makati RTC rendered judgment in favor of petitioners, disposing as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendant ordering the defendants to pay the plaintiff the following:

1) The amount of P350,000.00 by way of actual damages;2) The amount of P250,000.00 for and as moral damages;3) The amount of P100,000.00 as exemplary damages;4) The amount of P100,000.00 for and as attorney's fees.With costs against the defendant.

SO ORDERED.[3]In finding for petitioners, the trial court relied heavily on the letter of Svensson which is partly quoted below:

Upon receiving your comments on our service rendered during your reception here with us, we are in fact, very distressed. Right from minor issues pappadums served in the soup instead of the creutons, lack of valet parkers, hard rolls being too hard till a major one - slow service, rude and arrogant waiters, we have disappointed you in all means.

Indeed, we feel as strongly as you do that the services you received were unacceptable and definitely not up to our standards. We understand that it is our job to provide excellent service and in this instance, we have fallen short of your expectations. We ask you please to accept our profound apologies for causing such discomfort and annoyance. [4] (underscoring supplied)

The trial court observed that from "the tenor of the letter . . . the defendant[-herein respondent] admits that the services the plaintiff[-herein petitioners] received were unacceptable and definitely not up to their standards."[5]

On appeal, the Court of Appeals, by Decision of July 27, 2009,[6] reversed the trial court's decision, it holding that the proximate cause of petitioners' injury was an unexpected increase in their guests:

x x x Hence, the alleged damage or injury brought about by the confusion, inconvenience and disarray during the wedding reception may not be attributed to defendant-appellant Shangri-la.

We find that the said proximate cause, which is entirely attributable to plaintiffs-appellants, set the chain of events which resulted in the alleged inconveniences, to the plaintiffs-appellants. Given the circumstances that obtained, only the Sps. Guanio may bear whatever consequential damages that they may have allegedly suffered.[7] (underscoring supplied)

Petitioners' motion for reconsideration having been denied by Resolution of November 19, 2009, the present petition for review was filed.

The Court finds that since petitioners' complaint arose from a contract, the doctrine of proximate cause finds no application to it:

The doctrine of proximate cause is applicable only in actions for quasi-delicts, not in actions involving breach of contract. x x x The doctrine is a device for imputing liability to a person where there is no relation between him and another party. In such a case, the obligation is created by law itself. But, where there is a pre-existing contractual relation between the parties, it is the parties themselves who create the obligation, and the function of the law is merely to regulate the relation thus created.[8] (emphasis and underscoring supplied)

What applies in the present case is Article 1170 of the Civil Code which reads:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages.

RCPI v. Verchez, et al. [9] enlightens:

In culpa contractual x x x the mere proof of the existence of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promissee that may include his "expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or his "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party. Indeed, agreements can accomplish little, either for their makers or for society, unless they are made the basis for action. The effect of every infraction is to create a new duty, that is, to make RECOMPENSE to the one who has been injured by the failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence x x x or of the attendance of fortuitous event, to excuse him from his ensuing liability. (emphasis and underscoring in the original; capitalization supplied)

The pertinent provisions of the Banquet and Meeting Services Contract between the parties read:

4.3 The ENGAGER shall be billed in accordance with the prescribed rate for the minimum guaranteed number of persons contracted for, regardless of under attendance or non-appearance of the expected number of guests, except where the ENGAGER cancels the Function in accordance with its Letter of Confirmation with the HOTEL. Should the attendance exceed the minimum guaranteed attendance, the ENGAGER shall also be billed at the actual rate per cover in excess of the minimum guaranteed attendance.

x x x x

4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours before the scheduled date and time of the Function of any change in the minimum guaranteed covers. In the absence of such notice, paragraph 4.3 shall apply in the event of under attendance. In case the actual number of attendees exceed the minimum guaranteed numberby ten percent (10%), the HOTEL shall not in any way be held liable for any damage or inconvenience which may be caused thereby. The ENGAGER shall also undertake to advise the guests of the situation and take positive steps to remedy the same.[10] (emphasis, italics and underscoring supplied)

Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the [f]ailure, without legal excuse, to perform any promise which forms the whole or part of the contract.[11]

The appellate court, and even the trial court, observed that petitioners were remiss in their obligation to inform respondent of the change in the expected number of guests. The observation is reflected in the records of the case. Petitioners' failure to discharge such obligation thus excused, as the above-quoted paragraph 4.5 of the parties' contract provide, respondent from liability for "any damage or inconvenience" occasioned thereby.

As for petitioners' claim that respondent departed from its verbal agreement with petitioners, the same fails, given that the written contract which the parties entered into the day before the event, being the law between them.

Respecting the letter of Svensson on which the trial court heavily relied as admission of respondent's liability but which the appellate court brushed aside, the Court finds the appellate court's stance in order. It is not uncommon in the hotel industry to receive comments, criticisms or feedback on the service it delivers. It is also customary for hotel management to try to smooth ruffled feathers to preserve goodwill among its clientele.

Kalalo v. Luz holds:[12]

Statements which are not estoppels nor judicial admissions have no quality of conclusiveness, and an opponent whose admissions have been offered against him may offer any evidence which serves as an explanation for his former assertion of what he now denies as a fact.

Respondent's Catering Director, Bea Marquez, explained the hotel's procedure on receiving and processing complaints, viz:

ATTY. CALMA:QYou mentioned that the letter indicates an acknowledgement of the concern and that there was-the first letter there was an acknowledgment of the concern and an apology, not necessarily indicating that such or admitting fault?AYes.QIs this the letter that you are referring to?If I may, Your Honor, that was the letter dated August 4, 2001, previously marked as plaintiff's exhibits, Your Honor. What is the procedure of the hotel with respect to customer concern?AUpon receipt of the concern from the guest or client, we acknowledge receipt of such concern, and as part of procedure in service industry particularly Makati Shangri-la we apologize for whatever inconvenience but at the same time saying, that of course, we would go through certain investigation and get back to them for the feedback with whatever concern they may have.

QYour Honor, I just like at this point mark the exhibits, Your Honor, the letter dated August 4, 2001 identified by the witness, Your Honor, to be marked as Exhibit 14 and the signature of Mr. Krister Svensson be marked as Exhibit 14-A.[13]x x x xQIn your opinion, you just mentioned that there is a procedure that the hotel follows with respect to the complaint, in your opinion was this procedure followed in this particular concern?AYes, ma'am .QWhat makes you say that this procedure was followed?AAs I mentioned earlier, we proved that we did acknowledge the concern of the client in this case and we did emphatize from the client and apologized, and at the same time got back to them in whatever investigation we have.QYou said that you apologized, what did you apologize for?AWell, first of all it is a standard that we apologize, right? Being in the service industry, it is a practice that we apologize if there is any inconvenience, so the purpose for apologizing is mainly to show empathy and to ensure the client that we are hearing them out and that we will do a better investigation and it is not in any way that we are admitting any fault.[14] (underscoring supplied)

To the Court, the foregoing explanation of the hotel's Banquet Director overcomes any presumption of admission of breach which Svensson's letter might have conveyed.

The exculpatory clause notwithstanding, the Court notes that respondent could have managed the "situation" better, it being held in high esteem in the hotel and service industry. Given respondent's vast experience, it is safe to presume that this is not its first encounter with booked events exceeding the guaranteed cover. It is not audacious to expect that certain measures have been placed in case this predicament crops up. That regardless of these measures, respondent still received complaints as in the present case, does not amuse.

Respondent admitted that three hotel functions coincided with petitioners' reception. To the Court, the delay in service might have been avoided or minimized if respondent exercised prescience in scheduling events. No less than quality service should be delivered especially in events which possibility of repetition is close to nil. Petitioners are not expected to get married twice in their lifetimes.

In the present petition, under considerations of equity, the Court deems it just to award the amount of P50,000.00 by way of nominal damages to petitioners, for the discomfiture that they were subjected to during to the event.[15] The Court recognizes that every person is entitled to respect of his dignity, personality, privacy and peace of mind.[16] Respondent's lack of prudence is an affront to this right.

WHEREFORE, the Court of Appeals Decision dated July 28, 2009 is PARTIALLY REVERSED. Respondent is, in light of the foregoing discussion, ORDERED to pay the amount of P50,000.00 to petitioners by way of nominal damages.

SO ORDERED.

Brion, Bersamin, Villarama, Jr., and Sereno, JJ., concur.[G.R. No. 163419, February 13, 2008] 

TSPIC CORPORATION, Petitioner, vs. TSPIC EMPLOYEES UNION (FFW), representing MARIA FE FLORES, FE CAPISTRANO, AMY DURIAS,[1] CLAIRE EVELYN VELEZ, JANICE OLAGUIR, JERICO ALIPIT,

GLEN BATULA, SER JOHN HERNANDEZ, RACHEL NOVILLAS, NIMFA ANILAO, ROSE SUBARDIAGA, VALERIE CARBON, OLIVIA EDROSO, MARICRIS DONAIRE, ANALYN AZARCON, ROSALIE RAMIREZ, JULIETA ROSETE, JANICE NEBRE, NIA ANDRADE, CATHERINE YABA, DIOMEDISA ERNI,[2] MARIO

SALMORIN, LOIDA COMULLO,[3] MARIE ANN DELOS SANTOS,[4] JUANITA YANA, and SUZETTE DULAY, Respondents.

D E C I S I O N 

VELASCO JR., J.:

The path towards industrial peace is a two-way street. Fundamental fairness and protection to labor should always govern dealings between labor and management. Seemingly conflicting provisions should be harmonized to arrive at an interpretation that is within the parameters of the law, compassionate to labor, yet, fair to management.

In this Petition for Review on Certiorari under Rule 45, petitioner TSPIC Corporation (TSPIC) seeks to annul and set aside the October 22, 2003 Decision[5] and April 23, 2004 Resolution[6] of the Court of Appeals (CA) in CA-G.R. SP No. 68616, which affirmed the September 13, 2001 Decision[7] of Accredited Voluntary Arbitrator Josephus B. Jimenez in National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57.

TSPIC is engaged in the business of designing, manufacturing, and marketing integrated circuits to serve the communication, automotive, data processing, and aerospace industries. Respondent TSPIC Employees Union (FFW) (Union), on the other hand, is the registered bargaining agent of the rank-and-file employees of TSPIC. The respondents, Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, Rachel Novillas, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, are all members of the Union.

In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement (CBA)[8] for the years 2000 to 2004. The CBA included a provision on yearly salary increases starting January 2000 until January 2002. Section 1, Article X of the CBA provides, as follows:

Section 1. Salary/ Wage Increases.––Employees covered by this Agreement shall be granted salary/wage increases as follows:a) Effective January 1, 2000, all employees on regular status and within the bargaining unit on or before said

date shall be granted a salary increase equivalent to ten percent (10%) of their basic monthly salary as of December 31, 1999.

b) Effective January 1, 2001, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of December 31, 2000.

c) Effective January 1, 2002, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to eleven percent (11%) of their basic monthly salary as of December 31, 2001.

The wage salary increase of the first year of this Agreement shall be over and above the wage/salary increase, including the wage distortion adjustment, granted by the COMPANY on November 1, 1999 as per Wage Order No. NCR-07.

The wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases under future Wage Orders, that may be issued after Wage Order No. NCR-07, and shall be considered as correction of any wage distortion that may have been brought about by the said future Wage Orders. Thus the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after Wage Order No. NCR-07.Consequently, on January 1, 2000, all the regular rank-and-file employees of TSPIC received a 10% increase in their salary. Accordingly, the following nine (9) respondents (first group) who were already regular employees received the said increase in their salary: Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, and Rachel Novillas.[9]

The CBA also provided that employees who acquire regular employment status within the year but after the effectivity of a particular salary increase shall receive a proportionate part of the increase upon attainment of their regular status. Sec. 2 of the CBA provides:SECTION 2. Regularization Increase.––A covered daily paid employee who acquires regular status within the year subsequent to the effectivity of a particular salary/wage increase mentioned in Section 1 above shall be

granted a salary/wage increase in proportionate basis as follows:Regularization Period Equivalent Increase

- 1st Quarter 100%- 2nd Quarter 75%- 3rd Quarter 50%- 4th Quarter 25%

Thus, a daily paid employee who becomes a regular employee covered by this Agreement only on May 1, 2000, i.e., during the second quarter and subsequent to the January 1, 2000 wage increase under this Agreement, will be entitled to a wage increase equivalent to seventy-five percent (75%) of ten percent (10%) of his basic pay. In the same manner, an employee who acquires regular status on December 1, 2000 will be entitled to a salary increase equivalent to twenty-five percent (25%) of ten percent (10%) of his last basic pay.

On the other hand, any monthly-paid employee who acquires regular status within the term of the Agreement shall be granted regularization increase equivalent to 10% of his regular basic salary.Then on October 6, 2000, the Regional Tripartite Wage and Productivity Board, National Capital Region, issued Wage Order No. NCR-08[10] (WO No. 8) which raised the daily minimum wage from PhP 223.50 to PhP 250 effective November 1, 2000. Conformably, the wages of 17 probationary employees, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay (second group), were increased to PhP 250.00 effective November 1, 2000.

On various dates during the last quarter of 2000, the above named 17 employees attained regular employment[11] and received 25% of 10% of their salaries as granted under the provision on regularization increase under Article X, Sec. 2 of the CBA.

In January 2001, TSPIC implemented the new wage rates as mandated by the CBA. As a result, the nine employees (first group), who were senior to the above-listed recently regularized employees, received less wages.

On January 19, 2001, a few weeks after the salary increase for the year 2001 became effective, TSPIC’s Human Resources Department notified 24 employees,[12]namely: Maria Fe Flores, Janice Olaguir, Rachel Novillas, Fe Capistrano, Jerico Alipit, Amy Durias, Glen Batula, Claire Evelyn Velez, Ser John Hernandez, Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, and Marie Ann Delos Santos, that due to an error in the automated payroll system, they were overpaid and the overpayment would be deducted from their salaries in a staggered basis, starting February 2001. TSPIC explained that the correction of the erroneous computation was based on the crediting provision of Sec. 1, Art. X of the CBA.

The Union, on the other hand, asserted that there was no error and the deduction of the alleged overpayment from employees constituted diminution of pay. The issue was brought to the grievance machinery, but TSPIC and the Union failed to reach an agreement.

Consequently, TSPIC and the Union agreed to undergo voluntary arbitration on the solitary issue of whether or not the acts of the management in making deductions from the salaries of the affected employees constituted diminution of pay.

On September 13, 2001, Arbitrator Jimenez rendered a Decision, holding that the unilateral deduction made by TSPIC violated Art. 100[13] of the Labor Code. The falloreads:

WHEREFORE, in the light of the law on the matter and on the facts adduced in evidence, judgment is hereby rendered in favor of the Union and the named individual employees and against the company, thereby ordering the [TSPIC] to pay as follows: 1) to the sixteen (16) newly regularized employees named above,  the amount of P12,642.24 a month or a total

of P113,780.16 for nine (9) months or P7,111.26 for each of them as well as an additional P12,642.24 (for all), or P790.14 (for each), for every month after 30 September 2001, until full payment, with legal interests for every month of delay;

2) to the nine (9) who were hired earlier  than the sixteen (16); also named above, their respective amount of entitlements, according to the Union’s correct computation, ranging from P110.22 per month (or P991.98 for nine months) to P450.58 a month  (or P4,055.22 for nine months), as well as corresponding monthly  entitlements after 30 September 2001, plus legal interests until full  payment,

3) to Suzette Dulay, the amount of P608.14 a month (or P5,473.26), as well as corresponding monthly entitlements after 30  September 2001, plus legal interest until full payment,

4) Attorney’s fees equal to 10% of all the above monetary awards.

The claim for exemplary damages is denied for want of factual basis.

The parties are hereby directed to comply with their joint voluntary commitment to abide by this Award and thus, submit to this Office jointly, a written proof of voluntary compliance with this DECISION within ten (10) days after the finality hereof.

SO ORDERED.[14]

TSPIC filed a Motion for Reconsideration which was denied in a Resolution dated November 21, 2001.

Aggrieved, TSPIC filed before the CA a petition for review under Rule 43 docketed as CA-G.R. SP No. 68616. The appellate court, through its October 22, 2003 Decision, dismissed the petition and affirmed in toto the decision of the voluntary arbitrator. The CA declared TSPIC’s computation allowing PhP 287 as daily wages to the newly regularized employees to be correct, noting that the computation conformed to WO No. 8 and the provisions of the CBA. According to the CA, TSPIC failed to convince the appellate court that the deduction was a result of a system error in the automated payroll system. The CA explained that when WO No. 8 took effect on November 1, 2000, the concerned employees were still probationary employees who were receiving the minimum wage of PhP 223.50. The CA said that effective November 1, 2000, said employees should have received the minimum wage of PhP 250. The CA held that when respondents became regular employees on November 29, 2000, they should be allowed the salary increase granted them under the CBA at the rate of 25% of 10% of their basic salary for the year 2000; thereafter, the 12% increase for the year 2001 and the 10% increase for the year 2002 should also be made applicable to them.[15]

TSPIC filed a Motion for Reconsideration which was denied by the CA in its April 23, 2004 Resolution.

TSPIC filed the instant petition which raises this sole issue for our resolution: Does the TSPIC’s decision to deduct the alleged overpayment from the salaries of the affected members of the Union constitute diminution of benefits in violation of the Labor Code?

TSPIC maintains that the formula proposed by the Union, adopted by the arbitrator and affirmed by the CA, was flawed, inasmuch as it completely disregarded the “crediting provision†� contained in the last paragraph of Sec. 1, Art. X of the CBA.

We find TSPIC’s contention meritorious.A Collective Bargaining Agreement is the law between the parties

It is familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions.[16] We said so in Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:A collective bargaining agreement or CBA refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law.[17]

Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of their stipulations shall control.[18] However, sometimes, as in this case, though the provisions of the CBA seem clear and unambiguous, the parties sometimes arrive at conflicting interpretations. Here, TSPIC wants to credit the increase granted by WO No. 8 to the increase granted under the

CBA. According to TSPIC, it is specifically provided in the CBA that “the salary/wage increase for the year 2001 shall be deemed inclusive of the mandated minimum wage increases under future wage orders that may be issued after Wage Order No. 7.†The Union, on the other hand, insists that the “crediting†provision of the � �CBA finds no application in the present case, since at the time WO No. 8 was issued, the probationary employees (second group) were not yet covered by the CBA, particularly by its crediting provision.

As a general rule, in the interpretation of a contract, the intention of the parties is to be pursued. [19] Littera necat spiritus vivificat. An instrument must be interpreted according to the intention of the parties. It is the duty of the courts to place a practical and realistic construction upon it, giving due consideration to the context in which it is negotiated and the purpose which it is intended to serve.[20] Absurd and illogical interpretations should also be avoided. Considering that the parties have unequivocally agreed to substitute the benefits granted under the CBA with those granted under wage orders, the agreement must prevail and be given full effect.

Paragraph (b) of Sec. 1 of Art. X of the CBA provides for the general agreement that, effective January 1, 2001, all employees on regular status and within the bargaining unit on or before said date shall be granted a salary increase equivalent to twelve (12%) of their basic monthly salary as of December 31, 2000. The 12% salary increase is granted to all employees who (1) are regular employees and (2) are within the bargaining unit.

Second paragraph of (c) provides that the salary increase for the year 2000 shall not include the increase in salary granted under WO No. 7 and the correction of the wage distortion for November 1999.

The last paragraph, on the other hand, states the specific condition that the wage/salary increases for the years 2001 and 2002 shall be deemed inclusive of the mandated minimum wage increases under future wage orders, that may be issued after WO No. 7, and shall be considered as correction of the wage distortions that may be brought about by the said future wage orders. Thus, the wage/salary increases in 2001 and 2002 shall be deemed as compliance to future wage orders after WO No. 7.

Paragraph (b) is a general provision which allows a salary increase to all those who are qualified. It, however, clashes with the last paragraph which specifically states that the salary increases for the years 2001 and 2002 shall be deemed inclusive of wage increases subsequent to those granted under WO No. 7. It is a familiar rule in interpretation of contracts that conflicting provisions should be harmonized to give effect to all.[21] Likewise, when general and specific provisions are inconsistent, the specific provision shall be paramount to and govern the general provision.[22] Thus, it may be reasonably concluded that TSPIC granted the salary increases under the condition that any wage order that may be subsequently issued shall be credited against the previously granted increase. The intention of the parties is clear: As long as an employee is qualified to receive the 12% increase in salary, the employee shall be granted the increase; and as long as an employee is granted the 12% increase, the amount shall be credited against any wage order issued after WO No. 7.

Respondents should not be allowed to receive benefits from the CBA while avoiding the counterpart crediting provision. They have received their regularization increases under Art. X, Sec. 2 of the CBA and the yearly increase for the year 2001. They should not then be allowed to avoid the crediting provision which is an accompanying condition.

Respondents attained regular employment status before January 1, 2001. WO No. 8, increasing the minimum wage, was issued after WO No. 7. Thus, respondents rightfully received the 12% salary increase for the year 2001 granted in the CBA; and consequently, TSPIC rightfully credited that 12% increase against the increase granted by WO No. 8.

Proper formula for computing the salaries for the year 2001

Thus, the proper computation of the salaries of individual respondents is as follows:

(1) With regard to the first group of respondents who attained regular employment status before the effectivity of WO No. 8, the computation is as follows:

For respondents Jerico Alipit and Glen Batula:[23]

Wage rate before WO No. 8 .............................. PhP 234.67Increase due to WO No. 8setting the minimum wage at PhP 250 ..................                 15.33 Total Salary upon effectivity of WO No. 8 ........... PhP 250.00

 Increase for 2001 (12% of 2000 salary) .............. PhP 30.00Less the wage increase under WO No. 8 ............ ____15.33Total difference between the wage increasefor 2001 and the increase granted under WO No. 8 ............. 

PhP 14.67

Wage rate by December 2000 ............................ PhP 250.00Plus total difference between the wage increase for 2001and the increase granted under WO No. 8 ...........                 14.67 Total (Wage rate range beginning January 1, 2001) PhP 264.67

For respondents Ser John Hernandez and Rachel Novillas:[24]

Wage rate range before WO No. 8 ..................... PhP 234.68Increase due to WO No. 8setting the minimum wage at PhP 250 ..................                 15.32 Total Salary upon effectivity of WO No. 8 ........... PhP 250.00

Increase for 2001 (12% of 2000 salary) .............. PhP 30.00Less the wage increase under WO No. 8 ............             15.32 Total difference between the wage increasefor 2001 and the increase granted under WO No. 8 ........................

PhP 14.68

Wage rate by December 2000 ............................ PhP 250.00Plus total difference between the wage increase for 2001and the increase granted under WO No. 8 ........... _____14.68Total (Wage rate range beginning January 1, 2001) ......................

PhP 264.68

For respondents Amy Durias, Claire Evelyn Velez, and Janice Olaguir:[25]

Wage rate range before WO No. 8 ....................................

PhP 240.26

Increase due to WO No. 8setting the minimum wage at PhP 250 ...................                     9.74 Total Salary upon effectivity of WO No. 8 ...................... PhP 250.00

Increase for 2001 (12% of 2000 salary) .............................

PhP 30.00

Less the wage increase under WO No. 8 ................... _____9.74Total difference between the wage increase for 2001and the increase granted under WO No. 8 .........................

PhP 20.26

Wage rate by December 2000 ...........................................

PhP 250.00

Plus total difference between the wage increase for 2001

and the increase granted under WO No. 8 ............... _____20.26Total (Wage rate range beginning January 1, 2001) .......

PhP 270.26

For respondents Ma. Fe Flores and Fe Capistrano:[26]

   Wage rate range before WO No. 8 .............................. PhP 245.85Increase due to WO No. 8setting the minimum wage at PhP 250 ...............................

                    4.15

Total Salary upon effectivity of WO No. 8 .........................

PhP 250.00

Increase for 2001 (12% of 2000 salary) ................................

PhP 30.00

Less the wage increase under WO No. 8 ............                 4.15 Total difference between the wage increase for 2001and the increase granted under WO No. 8 ................................

PhP 25.85

Wage rate by December 2000 ....................................... PhP 250.00Plus total difference between the wage increase for 2001and the increase granted under WO No. 8 ........... _____25.85

Total (Wage rate range beginning January 1, 2001) ...................

PhP 275.85

(2) With regard to the second group of employees, who attained regular employment status after the implementation of WO No. 8, namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso, Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay, the proper computation of the salaries for the year 2001, in accordance with the CBA, is as follows:

Compute the increase in salary after the implementation of WO No. 8 by subtracting the minimum wage before WO No. 8 from the minimum wage per the wage order to arrive at the wage increase, thus:

Minimum Wage per Wage Order .................................. PhP 250.00Wage rate before Wage Order ......................................             223.50 Wage Increase ......................................  PhP 26.50

Upon attainment of regular employment status, the employees’ salaries were increased by 25% of 10% of their basic salaries, as provided for in Sec. 2, Art. X of the CBA, thus resulting in a further increase of PhP 6.25, for a total of PhP 256.25, computed as follows:

Wage rate after WO No. 8 .................................................. PhP 250.00Regularization increase (25 % of 10% of basic salary) ..........             6.25 Total (Salary for the end of year 2000) ................................ PhP 256.25

To compute for the increase in wage rates for the year 2001, get the increase of 12% of the employees’ salaries as of December 31, 2000; then subtract from that amount, the amount increased in salaries as granted under WO No. 8 in accordance with the crediting provision of the CBA, to arrive at the increase in salaries for the

year 2001 of the recently regularized employees. Add the result to their salaries as of December 31, 2000 to get the proper salary beginning January 1, 2001, thus: 

Increase for 2001 (12% of 2000 salary) .......................................

PhP 30.75

Less the wage increase under WO No. 8 .....................................

            26.50

Difference between the wage increasefor 2001 and the increase granted under WO No. 8 .....................

 PhP 4.25

Wage rate after regularization increase ..........................................

PhP 256.25

Plus total difference between the wage increase andthe increase granted under WO No. 8 ..........................................

                    4.25

Total (Wage rate beginning January 1, 2001) ...............................

PhP 260.50

With these computations, the crediting provision of the CBA is put in effect, and the wage distortion between the first and second group of employees is cured. The first group of employees who attained regular employment status before the implementation of WO No. 8 is entitled to receive, starting January 1, 2001, a daily wage rate within the range of PhP 264.67 to PhP 275.85, depending on their wage rate before the implementation of WO No. 8. The second group that attained regular employment status after the implementation of WO No. 8 is entitled to receive a daily wage rate of PhP 260.50 starting January 1, 2001.

Diminution of benefits

TSPIC also maintains that charging the overpayments made to the 16 respondents through staggered deductions from their salaries does not constitute diminution of benefits.

We agree with TSPIC.

Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded on a policy or has ripened into a practice over a long period; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer.[27]

As correctly pointed out by TSPIC, the overpayment of its employees was a result of an error. This error was immediately rectified by TSPIC upon its discovery. We have ruled before that an erroneously granted benefit may be withdrawn without violating the prohibition against non-diminution of benefits. We ruled in Globe-Mackay Cable and Radio Corp. v. NLRC:Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law. Payment may be said to have been made by reason of a mistake in the construction or application of a “doubtful or difficult question of law†�. (Article 2155, in relation to Article 2154 of the Civil Code). Since it is a past error that is being corrected, no vested right may be said to have arisen nor any diminution of benefit under Article 100 of the Labor Code may be said to have resulted by virtue of the correction.[28]

Here, no vested right accrued to individual respondents when TSPIC corrected its error by crediting the salary increase for the year 2001 against the salary increase granted under WO No. 8, all in accordance with the CBA.

Hence, any amount given to the employees in excess of what they were entitled to, as computed above, may be legally deducted by TSPIC from the employees’ salaries. It was also compassionate and fair that TSPIC deducted the overpayment in installments over a period of 12 months starting from the date of the initial deduction to lessen the burden on the overpaid employees. TSPIC, in turn, must refund to individual respondents any amount deducted from their salaries which was in excess of what TSPIC is legally allowed to deduct from the salaries based on the computations discussed in this Decision.

As a last word, it should be reiterated that though it is the state’s responsibility to afford protection to labor, this policy should not be used as an instrument to oppress management and capital.[29] In resolving disputes between labor and capital, fairness and justice should always prevail. We ruled in Norkis Union v. Norkis Trading that in the resolution of labor cases, we have always been guided by the State policy enshrined in the Constitution: social justice and protection of the working class. Social justice does not, however, mandate that every dispute should be automatically decided in favor of labor.  In any case, justice is to be granted to the deserving and dispensed in the light of the established facts and the applicable law and doctrine.[30]

WHEREFORE, premises considered, the September 13, 2001 Decision of the Labor Arbitrator in National Conciliation and Mediation Board Case No. JBJ-AVA-2001-07-57 and the October 22, 2003 CA Decision in CA-

G.R. SP No. 68616 are herebyAFFIRMED with MODIFICATION. TSPIC is hereby ORDERED to pay respondents their salary increases in accordance with this Decision, as follows:

Name of Employee Daily Wage RateNo. of

Working Days in a Month

No. of Months in

a Year

Total Salary for 2001

Nimfa Anilao 260.5 26 12 81,276.00Rose Subardiaga 260.5 26 12 81,276.00Valerie Carbon 260.5 26 12 81,276.00Olivia Edroso 260.5 26 12 81,276.00Maricris Donaire 260.5 26 12 81,276.00Analyn Azarcon 260.5 26 12 81,276.00Rosalie Ramirez 260.5 26 12 81,276.00Julieta Rosete 260.5 26 12 81,276.00Janice Nebre 260.5 26 12 81,276.00Nia Andrade 260.5 26 12 81,276.00Catherine Yaba 260.5 26 12 81,276.00Diomedisa Erni 260.5 26 12 81,276.00Mario Salmorin 260.5 26 12 81,276.00Loida Camullo 260.5 26 12 81,276.00Marie Ann Delos Santos 260.5 26 12 81,276.00Juanita Yana 260.5 26 12 81,276.00Suzette Dulay 260.5 26 12 81,276.00Jerico Alipit 264.67 26 12 82,577.04Glen Batula 264.67 26 12 82,577.04Ser John Hernandez 264.68 26 12 82,580.16Rachel Novillas 264.68 26 12 82,580.16Amy Durias 270.26 26 12 84,321.12Claire Evelyn Velez 270.26 26 12 84,321.12Janice Olaguir 270.26 26 12 84,321.12Maria Fe Flores 275.85 26 12 86,065.20Fe Capistrano 275.85 26 12 86,065.20

The award for attorney’s fees of ten percent (10%) of the total award isMAINTAINED.

SO ORDERED.

Quisumbing, (Chairperson), Carpio, Carpio-Morales, and Tinga, JJ., concur.G.R. No. 156109 November 18, 2004

KHRISTINE REA M. REGINO, Assisted and Represented by ARMANDO REGINO, petitioner, vs.PANGASINAN COLLEGES OF SCIENCE AND TECHNOLOGY, RACHELLE A. GAMUROT and ELISSA BALADAD, respondents.D E C I S I O NPANGANIBAN, J.:

Upon enrolment, students and their school enter upon a reciprocal contract. The students agree to abide by the standards of academic performance and codes of conduct, issued usually in the form of manuals that are distributed to the enrollees at the start of the school term. Further, the school informs them of the itemized fees they are expected to pay. Consequently, it cannot, after the enrolment of a student, vary the terms of the contract. It cannot require fees other than those it specified upon enrolment.

The Case

Before the Court is a Petition for Review under Rule 45,1 seeking to nullify the July 12, 20022 and the November 22, 20023 Orders of the Regional Trial Court (RTC) of Urdaneta City, Pangasinan (Branch 48) in Civil Case No. U-7541. The decretal portion of the first assailed Order reads:

"WHEREFORE, the Court GRANTS the instant motion to dismiss for lack of cause of action."4

The second challenged Order denied petitioner's Motion for Reconsideration.

The Facts

Petitioner Khristine Rea M. Regino was a first year computer science student at Respondent Pangasinan Colleges of Science and Technology (PCST). Reared in a poor family, Regino went to college mainly through the financial support of her relatives. During the second semester of school year 2001-2002, she enrolled in logic and statistics subjects under Respondents Rachelle A. Gamurot and Elissa Baladad, respectively, as teachers.

In February 2002, PCST held a fund raising campaign dubbed the "Rave Party and Dance Revolution," the proceeds of which were to go to the construction of the school's tennis and volleyball courts. Each student was required to pay for two tickets at the price of P100 each. The project was allegedly implemented by recompensing students who purchased tickets with additional points in their test scores; those who refused to pay were denied the opportunity to take the final examinations.

Financially strapped and prohibited by her religion from attending dance parties and celebrations, Regino refused to pay for the tickets. On March 14 and March 15, 2002, the scheduled dates of the final examinations in logic and statistics, her teachers -- Respondents Rachelle A. Gamurot and Elissa Baladad -- allegedly disallowed her from taking the tests. According to petitioner, Gamurot made her sit out her logic class while her classmates were taking their examinations. The next day, Baladad, after announcing to the entire class that she was not permitting petitioner and another student to take their statistics examinations for failing to pay for their tickets, allegedly ejected them from the classroom. Petitioner's pleas ostensibly went unheeded by Gamurot and Baladad, who unrelentingly defended their positions as compliance with PCST's policy.

On April 25, 2002, petitioner filed, as a pauper litigant, a Complaint5 for damages against PCST, Gamurot and Baladad. In her Complaint, she prayed for P500,000 as nominal damages; P500,000 as moral damages; at least P1,000,000 as exemplary damages; P250,000 as actual damages; plus the costs of litigation and attorney's fees.

On May 30, 2002, respondents filed a Motion to Dismiss6 on the ground of petitioner's failure to exhaust administrative remedies. According to respondents, the question raised involved the determination of the wisdom of an administrative policy of the PCST; hence, the case should have been initiated before the proper administrative body, the Commission of Higher Education (CHED).

In her Comment to respondents' Motion, petitioner argued that prior exhaustion of administrative remedies was unnecessary, because her action was not administrative in nature, but one purely for damages arising from respondents' breach of the laws on human relations. As such, jurisdiction lay with the courts.

On July 12, 2002, the RTC dismissed the Complaint for lack of cause of action.

Ruling of the Regional Trial Court

In granting respondents' Motion to Dismiss, the trial court noted that the instant controversy involved a higher institution of learning, two of its faculty members and one of its students. It added that Section 54 of the Education Act of 1982 vested in the Commission on Higher Education (CHED) the supervision and regulation of tertiary schools. Thus, it ruled that the CHED, not the courts, had jurisdiction over the controversy.7

In its dispositive portion, the assailed Order dismissed the Complaint for "lack of cause of action" without, however, explaining this ground.

Aggrieved, petitioner filed the present Petition on pure questions of law.8

Issues

In her Memorandum, petitioner raises the following issues for our consideration:

"Whether or not the principle of exhaustion of administrative remedies applies in a civil action exclusively for damages based on violation of the human relation provisions of the Civil Code, filed by a student against her former school.

"Whether or not there is a need for prior declaration of invalidity of a certain school administrative policy by the Commission on Higher Education (CHED) before a former student can successfully maintain an action exclusively for damages in regular courts.

"Whether or not the Commission on Higher Education (CHED) has exclusive original jurisdiction over actions for damages based upon violation of the Civil Code provisions on human relations filed by a student against the school."9

All of the foregoing point to one issue -- whether the doctrine of exhaustion of administrative remedies is applicable. The Court, however, sees a second issue which, though not expressly raised by petitioner, was impliedly contained in her Petition: whether the Complaint stated sufficient cause(s) of action.

The Court's Ruling

The Petition is meritorious.

First Issue:

Exhaustion of Administrative Remedies

Respondents anchored their Motion to Dismiss on petitioner's alleged failure to exhaust administrative remedies before resorting to the RTC. According to them, the determination of the controversy hinge on the validity, the wisdom and the propriety of PCST's academic policy. Thus, the Complaint should have been lodged in the CHED, the administrative body tasked under Republic Act No. 7722 to implement the state policy to "protect, foster and promote the right of all citizens to affordable quality education at all levels and to take appropriate steps to ensure that education is accessible to all."10

Petitioner counters that the doctrine finds no relevance to the present case since she is praying for damages, a remedy beyond the domain of the CHED and well within the jurisdiction of the courts.11

Petitioner is correct. First, the doctrine of exhaustion of administrative remedies has no bearing on the present case. In Factoran Jr. v. CA,12 the Court had occasion to elucidate on the rationale behind this doctrine:

"The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law, comity, and convenience, should not entertain suits unless the available administrative remedies have first been resorted to and the proper authorities have been given the appropriate opportunity to act and correct their alleged errors, if any, committed in the administrative forum. x x x.13"

Petitioner is not asking for the reversal of the policies of PCST. Neither is she demanding it to allow her to take her final examinations; she was already enrolled in another educational institution. A reversal of the acts

complained of would not adequately redress her grievances; under the circumstances, the consequences of respondents' acts could no longer be undone or rectified.

Second, exhaustion of administrative remedies is applicable when there is competence on the part of the administrative body to act upon the matter complained of.14 Administrative agencies are not courts; they are neither part of the judicial system, nor are they deemed judicial tribunals.15 Specifically, the CHED does not have the power to award damages.16 Hence, petitioner could not have commenced her case before the Commission.

Third, the exhaustion doctrine admits of exceptions, one of which arises when the issue is purely legal and well within the jurisdiction of the trial court.17 Petitioner's action for damages inevitably calls for the application and the interpretation of the Civil Code, a function that falls within the jurisdiction of the courts.18

Second Issue:

Cause of Action

Sufficient Causes of Action Stated in the Allegations in the Complaint

As a rule, every complaint must sufficiently allege a cause of action; failure to do so warrants its dismissal.19 A complaint is said to assert a sufficient cause of action if, admitting what appears solely on its face to be correct, the plaintiff would be entitled to the relief prayed for. Assuming the facts that are alleged to be true, the court should be able to render a valid judgment in accordance with the prayer in the complaint.20

A motion to dismiss based on lack of cause of action hypothetically admits the truth of the alleged facts. In their Motion to Dismiss, respondents did not dispute any of petitioner's allegations, and they admitted that "x x x the crux of plaintiff's cause of action is the determination of whether or not the assessment of P100 per ticket is excessive or oppressive."21 They thereby premised their prayer for dismissal on the Complaint's alleged failure to state a cause of action. Thus, a reexamination of the Complaint is in order.

The Complaint contains the following factual allegations:

"10. In the second week of February 2002, defendant Rachelle A. Gamurot, in connivance with PCST, forced plaintiff and her classmates to buy or take two tickets each, x x x;

"11. Plaintiff and many of her classmates objected to the forced distribution and selling of tickets to them but the said defendant warned them that if they refused [to] take or pay the price of the two tickets they would not be allowed at all to take the final examinations;

"12. As if to add insult to injury, defendant Rachelle A. Gamurot bribed students with additional fifty points or so in their test score in her subject just to unjustly influence and compel them into taking the tickets;

"13. Despite the students' refusal, they were forced to take the tickets because [of] defendant Rachelle A. Gamurot's coercion and act of intimidation, but still many of them including the plaintiff did not attend the dance party imposed upon them by defendants PCST and Rachelle A. Gamurot;

"14. Plaintiff was not able to pay the price of her own two tickets because aside form the fact that she could not afford to pay them it is also against her religious practice as a member of a certain religious congregation to be attending dance parties and celebrations;

"15. On March 14, 2002, before defendant Rachelle A. Gamurot gave her class its final examination in the subject 'Logic' she warned that students who had not paid the tickets would not be allowed to participate in the examination, for which threat and intimidation many students were eventually forced to make payments:

"16. Because plaintiff could not afford to pay, defendant Rachelle A. Gamurot inhumanly made plaintiff sit out the class but the defendant did not allow her to take her final examination in 'Logic;'

"17. On March 15, 2002 just before the giving of the final examination in the subject 'Statistics,' defendant Elissa Baladad, in connivance with defendants Rachelle A. Gamurot and PCST, announced in the classroom that she was not allowing plaintiff and another student to take the examination for their failure and refusal to pay the price of the tickets, and thenceforth she ejected plaintiff and the other student from the classroom;

"18. Plaintiff pleaded for a chance to take the examination but all defendants could say was that the prohibition to give the examinations to non-paying students was an administrative decision;

"19. Plaintiff has already paid her tuition fees and other obligations in the school;

"20. That the above-cited incident was not a first since PCST also did another forced distribution of tickets to its students in the first semester of school year 2001-2002; x x x " 22

The foregoing allegations show two causes of action; first, breach of contract; and second, liability for tort.

Reciprocity of theSchool-Student Contract

In Alcuaz v. PSBA,23 the Court characterized the relationship between the school and the student as a contract, in which "a student, once admitted by the school is considered enrolled for one semester."24 Two years later, in Non v. Dames II,25 the Court modified the "termination of contract theory" in Alcuaz by holding that the contractual relationship between the school and the student is not only semestral in duration, but for the entire period the latter are expected to complete it."26 Except for the variance in the period during which the contractual relationship is considered to subsist, both Alcuaz and Non were unanimous in characterizing the school-student relationship as contractual in nature.

The school-student relationship is also reciprocal. Thus, it has consequences appurtenant to and inherent in all contracts of such kind -- it gives rise to bilateral or reciprocal rights and obligations. The school undertakes to provide students with education sufficient to enable them to pursue higher education or a profession. On the other hand, the students agree to abide by the academic requirements of the school and to observe its rules and regulations.27

The terms of the school-student contract are defined at the moment of its inception -- upon enrolment of the student. Standards of academic performance and the code of behavior and discipline are usually set forth in manuals distributed to new students at the start of every school year. Further, schools inform prospective enrollees the amount of fees and the terms of payment.

In practice, students are normally required to make a down payment upon enrollment, with the balance to be paid before every preliminary, midterm and final examination. Their failure to pay their financial obligation is regarded as a valid ground for the school to deny them the opportunity to take these examinations.

The foregoing practice does not merely ensure compliance with financial obligations; it also underlines the importance of major examinations. Failure to take a major examination is usually fatal to the students' promotion to the next grade or to graduation. Examination results form a significant basis for their final grades. These tests are usually a primary and an indispensable requisite to their elevation to the next educational level and, ultimately, to their completion of a course.

Education is not a measurable commodity. It is not possible to determine who is "better educated" than another. Nevertheless, a student's grades are an accepted approximation of what would otherwise be an intangible product of countless hours of study. The importance of grades cannot be discounted in a setting where education is generally the gate pass to employment opportunities and better life; such grades are often the means by which a prospective employer measures whether a job applicant has acquired the necessary tools or skills for a particular profession or trade.

Thus, students expect that upon their payment of tuition fees, satisfaction of the set academic standards, completion of academic requirements and observance of school rules and regulations, the school would reward them by recognizing their "completion" of the course enrolled in.

The obligation on the part of the school has been established in Magtibay v. Garcia,28 Licup v. University of San Carlos29 and Ateneo de Manila University v. Garcia,30 in which the Court held that, barring any violation of the rules on the part of the students, an institution of higher learning has a contractual obligation to afford its students a fair opportunity to complete the course they seek to pursue.

We recognize the need of a school to fund its facilities and to meet astronomical operating costs; this is a reality in running it. Crystal v. Cebu International School31 upheld the imposition by respondent school of a "land purchase deposit" in the amount of P50,000 per student to be used for the "purchase of a piece of land and for the construction of new buildings and other facilities x x x which the school would transfer [to] and occupy after the expiration of its lease contract over its present site."

The amount was refundable after the student graduated or left the school. After noting that the imposition of the fee was made only after prior consultation and approval by the parents of the students, the Court held that the school committed no actionable wrong in refusing to admit the children of the petitioners therein for their failure to pay the "land purchase deposit" and the 2.5 percent monthly surcharge thereon.

In the present case, PCST imposed the assailed revenue-raising measure belatedly, in the middle of the semester. It exacted the dance party fee as a condition for the students' taking the final examinations, and ultimately for its recognition of their ability to finish a course. The fee, however, was not part of the school-student contract entered into at the start of the school year. Hence, it could not be unilaterally imposed to the prejudice of the enrollees.

Such contract is by no means an ordinary one. In Non, we stressed that the school-student contract "is imbued with public interest, considering the high priority given by the Constitution to education and the grant to the State of supervisory and regulatory powers over all educational institutions."32 Sections 5 (1) and (3) of Article XIV of the 1987 Constitution provide:

"The State shall protect and promote the right of all citizens to quality education at all levels and shall take appropriate steps to make such declaration accessible to all.

"Every student has a right to select a profession or course of study, subject to fair, reasonable and equitable admission and academic requirements."

The same state policy resonates in Section 9(2) of BP 232, otherwise known as the Education Act of 1982:

"Section 9. Rights of Students in School. – In addition to other rights, and subject to the limitations prescribed by law and regulations, students and pupils in all schools shall enjoy the following rights:

x x x x x x x x x

(2) The right to freely choose their field of study subject to existing curricula and to continue their course therein up to graduation, except in cases of academic deficiency, or violation of disciplinary regulations."

Liability for Tort

In her Complaint, petitioner also charged that private respondents "inhumanly punish students x x x by reason only of their poverty, religious practice or lowly station in life, which inculcated upon [petitioner] the feelings of guilt, disgrace and unworthiness;"33 as a result of such punishment, she was allegedly unable to finish any of her subjects for the second semester of that school year and had to lag behind in her studies by a full year. The acts of respondents supposedly caused her extreme humiliation, mental agony and "demoralization of unimaginable proportions" in violation of Articles 19, 21 and 26 of the Civil Code. These provisions of the law state thus:

"Article 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."

"Article 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 the damage."

"Article 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 beliefs, lowly station in life, place of birth, physical defect, or other personal condition."

Generally, liability for tort arises only between parties not otherwise bound by a contract. An academic institution, however, may be held liable for tort even if it has an existing contract with its students, since the act that violated the contract may also be a tort. We ruled thus in PSBA vs. CA,34 from which we quote:

"x x x A perusal of Article 2176 [of the Civil Code] shows that obligations arising from quasi-delicts or tort, also known as extra-contractual obligations, arise only between parties not otherwise bound by contract, whether express or implied. However, this impression has not prevented this Court from determining the existence of a tort even when there obtains a contract. In Air France v. Carrascoso (124 Phil. 722), the private respondent was awarded damages for his unwarranted expulsion from a first-class seat aboard the petitioner airline. It is noted, however, that the Court referred to the petitioner-airline's liability as one arising from tort, not one arising form a contract of carriage. In effect, Air France is authority for the view that liability from tort may exist even if there is a contract, for the act that breaks the contract may be also a tort. x x x This view was not all that revolutionary, for even as early as 1918, this Court was already of a similar mind. In Cangco v. Manila Railroad (38 Phil. 780), Mr. Justice Fisher elucidated thus: 'x x x. When such a contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes a breach of the contract would have constituted the source of an extra-contractual obligation had no contract existed between the parties.'

"Immediately what comes to mind is the chapter of the Civil Code on Human Relations, particularly Article 21 x x x."35

Academic Freedom

In their Memorandum, respondents harp on their right to "academic freedom." We are not impressed. According to present jurisprudence, academic freedom encompasses the independence of an academic institution to determine for itself (1) who may teach, (2) what may be taught, (3) how it shall teach, and (4) who may be admitted to study.36 In Garcia v. the Faculty Admission Committee, Loyola School of Theology,37 the Court upheld the respondent therein when it denied a female student's admission to theological studies in a seminary for prospective priests. The Court defined the freedom of an academic institution thus: "to decide for itself aims and objectives and how best to attain them x x x free from outside coercion or interference save possibly when overriding public welfare calls for some restraint."38

In Tangonan v. Paño,39 the Court upheld, in the name of academic freedom, the right of the school to refuse readmission of a nursing student who had been enrolled on probation, and who had failed her nursing subjects. These instances notwithstanding, the Court has emphasized that once a school has, in the name of academic freedom, set its standards, these should be meticulously observed and should not be used to discriminate against certain students.40 After accepting them upon enrollment, the school cannot renege on its contractual obligation on grounds other than those made known to, and accepted by, students at the start of the school year.

In sum, the Court holds that the Complaint alleges sufficient causes of action against respondents, and that it should not have been summarily dismissed. Needless to say, the Court is not holding respondents liable for the acts complained of. That will have to be ruled upon in due course by the court a quo.

WHEREFORE, the Petition is hereby GRANTED, and the assailed Orders REVERSED. The trial court is DIRECTED to reinstate the Complaint and, with all deliberate speed, to continue the proceedings in Civil Case No. U-7541. No costs.

SO ORDERED.

Sandoval-Gutierrez, Carpio-Morales, and Garcia, JJ., concur.Corona, J., on leave.

G.R. No. 84698 February 4, 1992

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM, BENJAMIN P. PAULINO, ANTONIO M. MAGTALAS, COL. PEDRO SACRO and LT. M. SORIANO, petitioners, vs.COURT OF APPEALS, HON. REGINA ORDOÑEZ-BENITEZ, in her capacity as Presiding Judge of Branch 47, Regional Trial Court, Manila, SEGUNDA R. BAUTISTA and ARSENIA D. BAUTISTA, respondents.

PADILLA, J.:

A stabbing incident on 30 August 1985 which caused the death of Carlitos Bautista while on the second-floor premises of the Philippine School of Business Administration (PSBA) prompted the parents of the deceased to file suit in the Regional Trial Court of Manila (Branch 47) presided over by Judge (now Court of Appeals justice) Regina Ordoñez-Benitez, for damages against the said PSBA and its corporate officers. At the time of his death, Carlitos was enrolled in the third year commerce course at the PSBA. It was established that his assailants were not members of the school's academic community but were elements from outside the school.

Specifically, the suit impleaded the PSBA and the following school authorities: Juan D. Lim (President), Benjamin P. Paulino (Vice-President), Antonio M. Magtalas (Treasurer/Cashier), Col. Pedro Sacro (Chief of Security) and a Lt. M. Soriano (Assistant Chief of Security). Substantially, the plaintiffs (now private respondents) sought to adjudge them liable for the victim's untimely demise due to their alleged negligence, recklessness and lack of security precautions, means and methods before, during and after the attack on the victim. During the proceedings a quo, Lt. M. Soriano terminated his relationship with the other petitioners by resigning from his position in the school.

Defendants a quo (now petitioners) sought to have the suit dismissed, alleging that since they are presumably sued under Article 2180 of the Civil Code, the complaint states no cause of action against them, as jurisprudence on the subject is to the effect that academic institutions, such as the PSBA, are beyond the ambit of the rule in the afore-stated article.

The respondent trial court, however, overruled petitioners' contention and thru an order dated 8 December 1987, denied their motion to dismiss. A subsequent motion for reconsideration was similarly dealt with by an order dated 25 January 1988. Petitioners then assailed the trial court's disposition before the respondent appellate court which, in a decision * promulgated on 10 June 1988, affirmed the trial court's orders. On 22 August 1988, the respondent appellate court resolved to deny the petitioners' motion for reconsideration. Hence, this petition.

At the outset, it is to be observed that the respondent appellate court primarily anchored its decision on the law of quasi-delicts, as enunciated in Articles 2176 and 2180 of the Civil Code. 1 Pertinent portions of the appellate court's now assailed ruling state:

Article 2180 (formerly Article 1903) of the Civil Code is an adoption from the old Spanish Civil Code. The comments of Manresa and learned authorities on its meaning should give way to present day changes. The law is not fixed and flexible (sic); it must be dynamic. In fact, the greatest value and significance of law as a rule of conduct in (sic) its flexibility to adopt to changing social conditions and its capacity to meet the new challenges of progress.

Construed in the light of modern day educational system, Article 2180 cannot be construed in its narrow concept as held in the old case of Exconde vs. Capuno 2 and Mercado vs. Court of Appeals; 3 hence, the ruling in the Palisoc 4 case that it should apply to all kinds of educational institutions, academic or vocational.

At any rate, the law holds the teachers and heads of the school staff liable unless they relieve themselves of such liability pursuant to the last paragraph of Article 2180 by "proving that they observed all the diligence to prevent damage." This can only be done at a trial on the merits of the case. 5

While we agree with the respondent appellate court that the motion to dismiss the complaint was correctly denied and the complaint should be tried on the merits, we do not however agree with the premises of the appellate court's ruling.

Article 2180, in conjunction with Article 2176 of the Civil Code, establishes the rule of in loco parentis. This Court discussed this doctrine in the afore-cited cases of Exconde, Mendoza, Palisoc and, more recently, in Amadora vs. Court of Appeals. 6 In all such cases, it had been stressed that the law (Article 2180) plainly provides that the damage should have been caused or inflicted by pupils or students of he educational institution sought to be held

liable for the acts of its pupils or students while in its custody. However, this material situation does not exist in the present case for, as earlier indicated, the assailants of Carlitos were not students of the PSBA, for whose acts the school could be made liable.

However, does the appellate court's failure to consider such material facts mean the exculpation of the petitioners from liability? It does not necessarily follow.

When an academic institution accepts students for enrollment, there is established a contract between them, resulting in bilateral obligations which both parties are bound to comply with. 7 For its part, the school undertakes to provide the student with an education that would presumably suffice to equip him with the necessary tools and skills to pursue higher education or a profession. On the other hand, the student covenants to abide by the school's academic requirements and observe its rules and regulations.

Institutions of learning must also meet the implicit or "built-in" obligation of providing their students with an atmosphere that promotes or assists in attaining its primary undertaking of imparting knowledge. Certainly, no student can absorb the intricacies of physics or higher mathematics or explore the realm of the arts and other sciences when bullets are flying or grenades exploding in the air or where there looms around the school premises a constant threat to life and limb. Necessarily, the school must ensure that adequate steps are taken to maintain peace and order within the campus premises and to prevent the breakdown thereof.

Because the circumstances of the present case evince a contractual relation between the PSBA and Carlitos Bautista, the rules on quasi-delict do not really govern. 8 A perusal of Article 2176 shows that obligations arising from quasi-delicts or tort, also known as extra-contractual obligations, arise only between parties not otherwise bound by contract, whether express or implied. However, this impression has not prevented this Court from determining the existence of a tort even when there obtains a contract. In Air France vs. Carrascoso (124 Phil. 722), the private respondent was awarded damages for his unwarranted expulsion from a first-class seat aboard the petitioner airline. It is noted, however, that the Court referred to the petitioner-airline's liability as one arising from tort, not one arising from a contract of carriage. In effect, Air France is authority for the view that liability from tort may exist even if there is a contract, for the act that breaks the contract may be also a tort. (Austro-America S.S. Co. vs. Thomas, 248 Fed. 231).

This view was not all that revolutionary, for even as early as 1918, this Court was already of a similar mind. In Cangco vs. Manila Railroad (38 Phil. 780), Mr. Justice Fisher elucidated thus:

The field of non-contractual obligation is much broader than that of contractual obligation, comprising, as it does, the whole extent of juridical human relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact that a person is bound to another by contract does not relieve him from extra-contractual liability to such person. When such a contractual relation exists the obligor may break the contract under such conditions that the same act which constitutes a breach of the contract would have constituted the source of an extra-contractual obligation had no contract existed between the parties.

Immediately what comes to mind is the chapter of the Civil Code on Human Relations, particularly Article 21, which provides:

Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good custom or public policy shall compensate the latter for the damage. (emphasis supplied).

Air France penalized the racist policy of the airline which emboldened the petitioner's employee to forcibly oust the private respondent to cater to the comfort of a white man who allegedly "had a better right to the seat." In Austro-American, supra, the public embarrassment caused to the passenger was the justification for the Circuit Court of Appeals, (Second Circuit), to award damages to the latter. From the foregoing, it can be concluded that should the act which breaches a contract be done in bad faith and be violative of Article 21, then there is a cause to view the act as constituting a quasi-delict.

In the circumstances obtaining in the case at bar, however, there is, as yet, no finding that the contract between the school and Bautista had been breached thru the former's negligence in providing proper security measures. This would be for the trial court to determine. And, even if there be a finding of negligence, the same could give rise generally to a breach of contractual obligation only. Using the test of Cangco, supra, the negligence of the school would not be relevant absent a contract. In fact, that negligence becomes material only because of the contractual relation between PSBA and Bautista. In other words, a contractual relation is a condition sine qua

non to the school's liability. The negligence of the school cannot exist independently of the contract, unless the negligence occurs under the circumstances set out in Article 21 of the Civil Code.

This Court is not unmindful of the attendant difficulties posed by the obligation of schools, above-mentioned, for conceptually a school, like a common carrier, cannot be an insurer of its students against all risks. This is specially true in the populous student communities of the so-called "university belt" in Manila where there have been reported several incidents ranging from gang wars to other forms of hooliganism. It would not be equitable to expect of schools to anticipate all types of violent trespass upon their premises, for notwithstanding the security measures installed, the same may still fail against an individual or group determined to carry out a nefarious deed inside school premises and environs. Should this be the case, the school may still avoid liability by proving that the breach of its contractual obligation to the students was not due to its negligence, here statutorily defined to be the omission of that degree of diligence which is required by the nature of the obligation and corresponding to the circumstances of persons, time and place. 9

As the proceedings a quo have yet to commence on the substance of the private respondents' complaint, the record is bereft of all the material facts. Obviously, at this stage, only the trial court can make such a determination from the evidence still to unfold.

WHEREFORE, the foregoing premises considered, the petition is DENIED. The court of origin (RTC, Manila, Br. 47) is hereby ordered to continue proceedings consistent with this ruling of the Court. Costs against the petitioners.

SO ORDERED.

Melencio-Herrera, Paras, Regalado and Nocon, JJ., concur.

G.R. No. 152801 August 20, 2004

COSMO ENTERTAINMENT MANAGEMENT, INC., petitioner, vs.LA VILLE COMMERCIAL CORPORATION, respondent.

D E C I S I O NCALLEJO, SR., J.:

Before the Court is the petition for review on certiorari under Rule 45 of the Rules of Court filed by Cosmo Entertainment Management, Inc. for the reversal of the Resolution1 dated September 26, 2000 of the Court of Appeals in CA-G.R. SP No. 59819, which dismissed its petition for review for being filed out of time. Likewise, sought to be reversed and set aside is the appellate court's Resolution dated March 22, 2002 denying the petitioner's motion for reconsideration.

The case stemmed from the following factual backdrop:

The respondent, La Ville Commercial Corporation, is the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. 174250 of the Registry of Deeds of Makati City together with the commercial building thereon situated at the corner of Kalayaan and Neptune Streets in Makati City. On March 17, 1993, it entered into a Contract of Lease with petitioner Cosmo Entertainment Management, Inc. over the subject property for a period of seven years with a monthly rental of P250 per square meter of the floor area of the building and a security deposit equivalent to three monthly rentals in the amount of P447,000 to guarantee the faithful compliance of the terms and conditions of the lease agreement. Upon execution of the contract, the petitioner took possession of the subject property.

The petitioner, however, suffered business reverses and was constrained to stop operations in September 1996. Thereafter, the petitioner defaulted in its rental payments. Consequently, on February 1, 1997, the respondent made a demand on the petitioner to vacate the premises as well as to pay the accrued rentals plus interests which, as of January 31, 1997, amounted to P740,478.91. In reply to the demand, the petitioner averred that its unpaid rentals amounted to P698,500 only and since it made a security deposit of P419,100 with the respondent, the said amount should be applied to the unpaid rentals; hence, the outstanding accounts payable would only be P279,400. The respondent requested that the interest charges be waived and it be given time to find a solution to its financial problems.

After negotiations between the parties failed, the respondent, on May 27, 1997, reiterated its demand on the petitioner to pay the unpaid rentals as well as to vacate and surrender the premises to the respondent. When the petitioner refused to comply with its demand, the respondent filed with the Metropolitan Trial Court (MeTC) of Makati City, Branch 62, a complaint for illegal detainer, docketed as Civil Case No. 58875.

The petitioner, in its answer to the complaint, raised the defense that, under the contract, it had the right to sublease the premises upon prior written consent by the respondent and payment of transfer fees. However, the respondent, without any justifiable reason, refused to allow the petitioner to sublease the premises.

After due proceedings, the MeTC rendered judgment in favor of the respondent holding that the petitioner was bound by the terms of the contract that it could only sublease the premises upon the respondent's consent. The latter, as owner of the premises and not having waived its right under the contract, had the exclusive right to determine to whom it would sublease the same. Since the petitioner had indisputably failed to pay the monthly rentals beginning September 1996, in clear breach of the contract of lease, the respondent rightfully rescinded the same and sought judicial eviction of the petitioner. The dispositive portion of the MeTC Decision dated July 20, 1999 reads:

WHEREFORE, judgment is rendered ordering the defendant Cosmo Entertainment Management, Inc. and all persons/entities claiming rights under it to vacate the Property in question and turn its possession as well as all the improvements found thereon to the plaintiff [the respondent]; to pay the accrued rentals including interest and taxes due in the amount of P2,918,568.58 as of November 30, 1997 minus the deposit equivalent to three (3) monthly rentals and the subsequent amount of P159,000.00 commencing December, 1997 and the same amount every month thereafter as reasonable compensation for the continued and illegal use and occupancy of the Property until finally restituted to the plaintiff [the respondent]; to pay the sum of P10,000.00 for [sic] as attorney's fees plus cost of suit.

The compulsory counter-claim of the defendant [the petitioner] is DISMISSED for lack of merit. The payment of subsequent rental starting December, 1997, until the full restitution of the Property to the plaintiff [the respondent] is with interest at the legal rate reckoned from even date.

SO ORDERED.2

The petitioner appealed the decision to the Regional Trial Court, Branch 150 of Makati City, which rendered a decision affirming in toto the decision of the court a quo.3 In its Decision dated June 26, 2000, the RTC concurred with the court a quo's findings that, under the terms of the contract, the respondent, as the owner-lessor of the premises, had reserved its right to approve the sublease of the same. The petitioner, having voluntarily given its consent thereto, was bound by this stipulation under the principle of mutuality of contracts.4 Further, the petitioner is deemed to have violated the terms of the contract upon its failure to pay the monthly rentals. Consequently, its ejectment from the leased premises was justified.

The petitioner received a copy of the RTC decision on July 6, 2000. On July 21, 2000, the last day to file its petition for review on certiorari of the RTC decision, the petitioner filed with the Court of Appeals (CA) a Motion for Extension to File Petition for Review. Acting thereon, the CA, in its Resolution dated August 2, 2000, granted the same in this wise:

Subject to the timeliness of the petition, the petitioner is hereby GRANTED a non-extendible period of fifteen (15) days from 21 July 2000 or until 5 August 2000 within which to file a petition for review.

SO ORDERED.5

Notwithstanding the clear tenor of the said resolution, the petitioner filed, on August 4, 2000, a second Motion for Extension to File Petition for Review asking that it be given another fifteen (15) days from August 5, 2000, or until August 20, 2000, within which to file the said pleading.

On August 18, 2000, the petitioner filed its Petition for Review on Certiorari with the CA. On September 26, 2000, the CA issued the assailed Resolution denying due course to the petition for review on certiorari for having been filed out of time. The assailed resolution reads in full:

As observed by this Court the Petition for Review was filed beyond the extended period granted to the petitioner.

On 5 [should read 2] August 2000, as prayed for by the petitioner, a resolution was issued granting an inextendible period of fifteen (15) days from 21 July 2000 or until 5 August 2000 within which to file a petition for review. However, on 4 August 2000, petitioner filed a second motion for extension of time for fifteen (15) days instead of its announced petition for review. The petitioner filed the petition for review on 18 August 2000 which is thirteen (13) days beyond the extended period granted.

WHEREFORE, in view of the foregoing premises, pursuant to Section 1, Rule 42 of the 1997 Rules of Civil Procedure, the petition is hereby DENIED DUE COURSE and is accordingly DISMISSED.

SO ORDERED.6

A motion for reconsideration of the said resolution was filed by the petitioner, but the CA, in the assailed Resolution of March 22, 2002, denied the same as it found "no cogent reason to reverse the aforesaid Resolution."7

Hence, the recourse to this Court by the petitioner. It maintains that the filing of a second motion for extension of time is allowed under Section 1, Rule 42 of the 1997 Rules of Court; the CA thus erred in denying its petition for review for being filed out of time. The petitioner asserts that technical rules on procedure ought to be relaxed to obtain substantial justice.

The petition is devoid of merit.

Rule 42 of the 1997 Rules of Court governs the filing of the petition for review with the CA from a decision of the RTC in the exercise of its appellate jurisdiction. Section 1 thereof reads:

Sec. 1. How appeal taken; time for filing. – A party desiring to appeal from a decision of the Regional Trial Court rendered in the exercise of its appellate jurisdiction may file a verified petition for review with the Court of Appeals, paying at the same time to the clerk of said court the corresponding docket and other lawful fees, depositing the amount of P500.00 for costs, and furnishing the Regional Trial Court and the adverse party with a copy of the petition. The petition shall be filed and served within fifteen (15) days from notice of the decision sought to be reviewed or of the denial of petitioner's motion for new trial or reconsideration filed in due time after judgment. Upon proper motion and the payment of the full amount of the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension shall be granted except for the most compelling reason and in no case to extend fifteen (15) days.

A plain reading of the above provision shows that a party is given fifteen (15) days from notice of the adverse RTC decision or denial of the motion for reconsideration within which to file a petition for review with the CA and pay at the same time the required appellate docket and other lawful fees. Further, the said provision provides that the CA, upon filing of a motion for extension and payment of the appellate docket and other lawful fees within the reglementary period, may grant an additional period of fifteen (15) days only within which to file the petition for review. As a general rule, no further extension shall be granted except for the most compelling reason and in no case to extend fifteen (15) days.

In this case, the CA did grant the petitioner an extension of fifteen (15) days within which to file its petition for review. However, the appellate court expressly qualified that the additional period shall be a "non-extendible period of fifteen (15) days from 21 July 2000 or until 5 August 2000." It thus behooved the petitioner, through its counsel, to comply with such directive and file its petition for review within the said period.

Motions for extensions are not granted as a matter of right but in the sound discretion of the court, and lawyers should never presume that their motions for extensions or postponement will be granted or that they will be granted the length of time they pray for.8 With more reason in this case where the petitioner, or its counsel, asked for a second motion for extension of time, which, as a general rule, is not granted except for the most compelling reason.

Reasons such as "pressure of work on equally important cases" are addressed to the sound discretion of the CA.9 Obviously, in this case, the reason advanced by the petitioner's counsel in asking for a second motion for extension of time, i.e. "heavy volume of work and equally urgent filings in courts and administrative agencies,"10 was not considered a compelling reason by the CA as it subsequently denied the petition for review for being filed out of time. The CA could not be faulted for this. In fact, this Court had held that pressure and large volume

of work do not excuse a party for filing the petition for certiorari out of time.11 When the petitioner thus filed its petition for review on certiorari beyond the extended period, the CA had the reason to deny the same outright.

While, exceptionally, the Court had adopted a liberal stance in the application of the rules of procedure, the circumstances obtaining in the present case, as earlier discussed, do not convince this Court to take exception. The following pronouncement, on the other hand, is quite apropos:

While petitioner pleads that a liberal, not literal, interpretation of the rules should be our policy guidance, nevertheless procedural rules are not to be disdained as mere technicalities. They may not be ignored to suit the convenience of a party. Adjective law ensures the effective enforcement of substantive rights through the orderly and speedy administration of justice. Rules are not intended to hamper litigants or complicate litigation. But they help provide for a vital system of justice where suitors may be heard in the correct form and manner, at the prescribed time in a peaceful though adversarial confrontation before a judge whose authority litigants acknowledge. Public order and our system of justice are well served by a conscientious observance of the rules of procedure...12

In any case, the Court is convinced that the findings and conclusions of the court a quo and the RTC are in order. These courts uniformly found that, under the terms of the contract of lease, the respondent, as the owner-lessor of the premises, had reserved its right to approve the sublease of the same. The petitioner, having voluntarily given its consent thereto, was bound by this stipulation. And, having failed to pay the monthly rentals, the petitioner is deemed to have violated the terms of the contract, warranting its ejectment from the leased premises. The Court finds no cogent reason to depart from this factual disquisition of the courts below in view of the rule that findings of facts of the trial courts are, as a general rule, binding on this Court.13

WHEREFORE, the petition is DENIED. The Resolutions dated September 26, 2000 and March 22, 2002 of the Court of Appeals in CA-G.R. SP No. 59819 are AFFIRMED in toto.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur

[G.R. No. 134284. December 1, 2000]AYALA CORPORATION, petitioner, vs. ROSA-DIANA REALTY AND DEVELOPMENT CORPORATION, respondent.D E C I S I O NDE LEON, JR., J.:

Before us is a petition for review on certiorari seeking the reversal of a decision rendered by the Court of Appeals in C.A. G.R. C.V. No. 4598 entitled, “Ayala Corporation vs. Rosa-Diana Realty and Development Corporation,” dismissing Ayala Corporation’s petition for lack of merit.

The facts of the case are not in dispute:

Petitioner Ayala Corporation (hereinafter referred to as Ayala) was the registered owner of a parcel of land located in Alfaro Street, Salcedo Village, Makati City with an area of 840 square meters, more or less and covered by Transfer Certificate of Title (TCT) No. 233435 of the Register of Deeds of Rizal.

On April 20, 1976, Ayala sold the lot to Manuel Sy married to Vilma Po and Sy Ka Kieng married to Rosa Chan. The Deed of Sale executed between Ayala and the buyers contained Special Conditions of Sale and Deed Restrictions. Among the Special Conditions of Sale were:

a) the vendees shall build on the lot and submit the building plans to the vendor before September 30, 1976 for the latter’s approval

b) the construction of the building shall start on or before March 30, 1977 and completed before 1979. Before such completion, neither the deed of sale shall be registered nor the title released even if the purchase price shall have been fully paid

c) there shall be no resale of the property

The Deed Restrictions, on the other hand, contained the stipulation that the gross floor area of the building to be constructed shall not be more than five (5) times the lot area and the total height shall not exceed forty two (42) meters. The restrictions were to expire in the year 2025.

Manuel Sy and Sy Ka Kieng failed to construct the building in violation of the Special Conditions of Sale. Notwithstanding the violation, Manuel Sy and Sy Ka Kieng, in April 1989, were able to sell the lot to respondent Rosa-Diana Realty and Development Corporation (hereinafter referred to as Rosa-Diana) with Ayala’s approval. As a consideration for Ayala to release the Certificate of Title of the subject property, Rosa-Diana, on July 27, 1989 executed an Undertaking promising to abide by said special conditions of sale executed between Ayala and the original vendees. Upon the submission of the Undertaking, together with the building plans for a condominium project, known as “The Peak”, Ayala released title to the lot, thereby enabling Rosa-Diana to register the deed of sale in its favor and obtain Certificate of Title No. 165720 in its name. The title carried as encumbrances the special conditions of sale and the deed restrictions. Rosa-Diana’s building plans as approved by Ayala were “subject to strict compliance of cautionary notices appearing on the building plans and to the restrictions encumbering the Lot regarding the use and occupancy of the same.”

Thereafter, Rosa-Diana submitted to the building official of Makati another set of building plans for “The Peak” which were substantially different from those that it earlier submitted to Ayala for approval. While the building plans which Rosa-Diana submitted to Ayala for approval envisioned a 24-meter high, seven (7) storey condominium project with a gross floor area of 3,968.56 square meters, the building plans which Rosa-Diana submitted to the building official of Makati, contemplated a 91.65 meter high, 38 storey condominium building with a gross floor area of 23,305.09 square meters.[1] Needless to say, while the first set of building plans complied with the deed restrictions, the latter set exceeded the same.

During the construction of Rosa-Diana’s condominium project, Ayala filed an action with the Regional Trial Court (RTC) of Makati, Branch 139 for specific performance, with application for a writ of preliminary injunction/temporary restraining order against Rosa-Diana Realty seeking to compel the latter to comply with the contractual obligations under the deed of restrictions annotated on its title as well as with the building plans it submitted to the latter. In the alternative, Ayala prayed for rescission of the sale of the subject lot to Rosa- Diana Realty.

The lower court denied Ayala’s prayer for injunctive relief, thus enabling Rosa-Diana to complete the construction of the building. Undeterred, Ayala tried to cause the annotation of a notice of lis pendens on Rosa-Diana’s title. The Register of Deeds of Makati, however, refused registration of the notice of lis pendens on the ground that the case pending before the trial court, being an action for specific performance and/or rescission, is an action in personam which does not involve the title, use or possession of the property.[2] The Land Registration Authority (LRA) reversed the ruling of the Register of Deeds saying that an action for specific performance or rescission may be classified as a proceeding of any kind in court directly affecting title to the land or the use or occupation thereof for which a notice of lis pendens may be held proper.[3] The decision of the LRA, however, was overturned by the Court of Appeals in C.A. G.R. S.P. No. 29157. In G.R. No. 112774, We affirmed the ruling of the CA on February 16, 1994 saying

We agree with respondent court that the notice of lis pendens is not proper in this instance. The case before the trial court is a personal action since the cause of action thereof arises primarily from the alleged violation of the Deed of Restrictions.

In the meantime, Ayala completed its presentation of evidence before the trial court. Rosa-Diana filed a Demurrer to Evidence averring that Ayala failed to establish its right to the relief sought inasmuch as (a) Ayala admittedly does not enforce the deed restrictions uniformly and strictly (b) Ayala has lost its right/power to enforce the restrictions due to its own acts and omissions; and (c) the deed restrictions are no longer valid and effective against lot buyers in Ayala’s controlled subdivision.

The trial court sustained Rosa-Diana’s Demurrer to Evidence saying that Ayala was guilty of abandonment and/or estoppel due to its failure to enforce the terms of deed of restrictions and special conditions of sale against Manuel Sy and Sy Ka Kieng. The trial court noted that notwithstanding the violation of the special conditions of sale, Manuel Sy and Sy Ka Kieng were able to transfer the title to Rosa-Diana with the approval of Ayala. The trial court added that Ayala’s failure to enforce the restrictions with respect to Trafalgar, Shellhouse, Eurovilla, LPL Plaza, Parc Regent, LPL Mansion and Leronville which are located within Salcedo Village, shows that Ayala discriminated against those which it wants to have the obligation enforced. The trial court then concluded that for

Ayala to discriminately choose which obligor would be made to follow certain conditions and which should not, did not seem fair and legal.

The Court of Appeals affirmed the ruling of the trial court saying that the “appeal is sealed by the doctrine of the law of the case in C.A. G.R. S.P. No. 29157” where it was stated that

]x x x Ayala is barred from enforcing the Deed of Restrictions in question pursuant to the doctrine of waiver and estoppel. Under the terms of the deed of sale, the vendee Sy Ka Kieng assumed faithful compliance with the special conditions of sale and with the Salcedo Village Deed of Restrictions. One of the conditions was that a building would be constructed within one year. However, Sy Ka Kieng failed to construct the building as required under the Deed of Sale. Ayala did nothing to enforce the terms of the contract. In fact, it even agreed to the sale of the lot by Sy Ka Kieng in favor of petitioner Realty in 1989 or thirteen (13) years later. We, therefore, see no justifiable reason for Ayala to attempt to enforce the terms of the conditions of sale against the petitioner.

x x x

The Court of Appeals also cited C.A. G.R. C.V. No. 46488 entitled, “Ayala Corporation vs. Ray Burton Development Corporation” which relied on C.A. G.R. S.P. No. 29157 in ruling that Ayala is barred from enforcing the deed restrictions in dispute. Upon a motion for reconsideration filed by herein petitioner, the Court of Appeals clarified that “the citation of the decision in Ayala Corporation vs. Ray Burton Development Corporation, C.A. G.R. C.V. No. 46488, February 27, 1996, was made not because said decision is res judicata to the case at bar but rather because it is precedential under the doctrine of stare decisis.”

Upon denial of said motion for reconsideration, Ayala filed the present appeal.

Ayala contends that the pronouncement of the Court of Appeals in C.A. G.R. S.P. No. 29157 that it is estopped from enforcing the deed restrictions is merely obiter dicta inasmuch as the only issue raised in the aforesaid case was the propriety of a lis pendens annotation on Rosa-Diana’s certificate of title.

Ayala avers that Rosa-Diana presented no evidence whatsoever on Ayala’s supposed waiver or estoppel in C.A. G.R. S.P. No. 29157. Ayala likewise pointed out that at the time C.A. G.R. S.P. No. 29157 was on appeal, the issues of the validity and continued viability of the deed of restrictions and their enforceability by Ayala were joined and then being tried before the trial court.

Petitioner’s assignment of errors in the present appeal may essentially be summarized as follows:

I. The Court of Appeals acted in a manner not in accord with law and the applicable decisions of the Supreme Court in holding that the doctrine of the law of the case, or stare decisis, operated to dismiss Ayala’s appeal.

II. The Court of Appeals erred as a matter of law and departed from the accepted and usual course of judicial proceedings when it failed to expressly pass upon the specific errors assigned in Ayala’s appeal.

A discussion on the distinctions between law of the case, stare decisis and obiter dicta is in order.

The doctrine of the law of the case has certain affinities with, but is clearly distinguishable from, the doctrines of res judicata and stare decisis, principally on the ground that the rule of the law of the case operates only in the particular case and only as a rule of policy and not as one of law.[4] At variance with the doctrine of stare decisis, the ruling adhered to in the particular case under the doctrine of the law of the case need not be followed as a precedent in subsequent litigation between other parties, neither by the appellate court which made the decision followed on a subsequent appeal in the same case, nor by any other court. The ruling covered by the doctrine of the law of the case is adhered to in the single case where it arises, but is not carried into other cases as a precedent.[5] On the other hand, under the doctrine of stare decisis, once a point of law has been established by the court, that point of law will, generally, be followed by the same court and by all courts of lower rank in subsequent cases where the same legal issue is raised.[6] Stare decisis proceeds from the first principle of justice that, absent powerful countervailing considerations, like cases ought to be decided alike.[7]

The Court of Appeals, in ruling against petitioner Ayala Corporation stated that the appeal is “sealed” by the doctrine of the law of the case, referring to G.R. No. 112774 entitled “Ayala Corporation, petitioner vs. Court of Appeals, et al., respondents”. The Court of Appeals likewise made reference to C.A. G.R. C.V. No. 46488

entitled, “Ayala Corporation vs. Ray Burton Development Corporation, Inc.” in ruling against petitioner saying that it is jurisprudential under the doctrine of stare decisis.

It must be pointed out that the only issue that was raised before the Court of Appeals in C.A. G.R. S.P. No. 29157 was whether or not the annotation of lis pendens is proper. The Court of Appeals, in its decision, in fact stated “the principal issue to be resolved is: whether or not an action for specific performance, or in the alternative, rescission of deed of sale to enforce the deed of restrictions governing the use of property, is a real or personal action, or one that affects title thereto and its use or occupation thereof."[8]

In the aforesaid decision, the Court of Appeals even justified the cancellation of the notice of lis pendens on the ground that Ayala had ample protection should it succeed in proving its allegations regarding the violation of the deed of restrictions, without unduly curtailing the right of the petitioner to fully enjoy its property in the meantime that there is as yet no decision by the trial court.[9]

From the foregoing, it is clear that the Court of Appeals was aware that the issue as to whether petitioner is estopped from enforcing the deed of restrictions has yet to be resolved by the trial court. Though it did make a pronouncement that the petitioner is estopped from enforcing the deed of restrictions, it also mentioned at the same time that this particular issue has yet to be resolved by the trial court. Notably, upon appeal to this Court, We have affirmed the ruling of the Court of Appeals only as regards the particular issue of the propriety of the cancellation of the notice of lis pendens.

We see no reason then, how the law of the case or stare decisis can be held to be applicable in the case at bench. If at all, the pronouncement made by the Court of Appeals that petitioner Ayala is barred from enforcing the deed of restrictions can only be considered as obiter dicta. As earlier mentioned, the only issue before the Court of Appeals at the time was the propriety of the annotation of the lis pendens. The additional pronouncement of the Court of Appeals that Ayala is estopped from enforcing the deed of restrictions even as it recognized that this said issue is being tried before the trial court was not necessary to dispose of the issue as to the propriety of the annotation of the lis pendens. A dictum is an opinion of a judge which does not embody the resolution or determination of the court, and made without argument, or full consideration of the point, not the proffered deliberate opinion of the judge himself.[10] It is not necessarily limited to issues essential to the decision but may also include expressions of opinion which are not necessary to support the decision reached by the court. Mere dicta are not binding under the doctrine of stare decisis.[11]

While the Court of Appeals did not err in ruling that the present petition is not barred by C.A. G.R. C.V. No. 46488 entitled “Ayala Corporation vs. Ray Burton Development Inc.” under the doctrine of res judicata, neither, however, can the latter case be cited as precedential under the doctrine of stare decisis. It must be pointed out that at the time the assailed decision was rendered, C.A. G.R. C.V. No. 46488 was on appeal with this Court. Significantly, in the decision We have rendered in Ayala Corporation vs. Ray Burton Development Corporation[12] which became final and executory on July 5, 1999 we have clearly stated that “An examination of the decision in the said Rosa-Diana case reveals that the sole issue raised before the appellate court was the propriety of the lis pendens annotation. However, the appellate court went beyond the sole issue and made factual findings bereft of any basis in the record to inappropriately rule that AYALA is in estoppel and has waived its right to enforce the subject restrictions. Such ruling was immaterial to the resolution of the issue of the propriety of the annotation of the lis pendens. The finding of estoppel was thus improper and made in excess of jurisdiction.”

Coming now to the merits of the case, petitioner avers that the Court of Appeals departed from the usual course of judicial proceedings when it failed to expressly pass upon the specific errors assigned in its appeal. Petitioner reiterates its contention that the trial court’s findings that Ayala has waived its right to enforce the deed of restrictions is not supported by law and evidence.

We find merit in the petition.

It is basic that findings of fact of the trial court and the Court of Appeals are conclusive upon the Supreme Court when supported by substantial evidence.[13] We are constrained, however, to review the trial court’s findings of fact, which the Court of Appeals chose not to pass upon, inasmuch as there is ample evidence on record to show that certain facts were overlooked which would affect the disposition of the case.

In its assailed decision of February 4, 1994, the trial court, ruled in favor of respondent Rosa-Diana Realty on the ground that Ayala had not acted fairly when it did not institute an action against the original vendees despite the

latter’s violation of the Special Conditions of Sale but chose instead to file an action against herein respondent Rosa-Diana. The trial court added that although the 38 storey building of Rosa-Diana is beyond the total height restriction, it was not violative of the National Building Code. According to the trial court the construction of the 38 storey building known as “The Peak” has not been shown to have been prohibited by law and neither is it against public policy.

It bears emphasis that as complainant, Ayala had the prerogative to initiate an action against violators of the deed restrictions. That Rosa-Diana had acted in bad faith is manifested by the fact that it submitted two sets of building plans, one which was in conformity with the deed restrictions submitted to Ayala and MACEA, and the other, which exceeded the height requirement in the deed restrictions to the Makati building official for the purpose of procuring a building permit from the latter. Moreover, the violation of the deed restrictions committed by respondent can hardly be denominated as a minor violation. It should be pointed out that the original building plan which was submitted to and approved by petitioner Ayala Corporation, envisioned a twenty four (24) meter high, seven (7) storey condominium whereas the respondent’s building plan which was submitted to and approved by the building official of Makati is that of a thirty eight (38) storey, 91.65 meters high, building. At present, the Peak building of respondent which actually stands at 133.65 meters with a total gross floor area of 23,305.09 square meters, seriously violates the dimensions indicated in the building plans submitted by Rosa-Diana to petitioner Ayala for approval inasmuch as the Peak building exceeds the approved height limit by about 109 meters and the allowable gross floor area under the applicable deed restrictions by about 19,105 square meters. Clearly, there was a gross violation of the deed restrictions and evident bad faith by the respondent.

It may not be amiss to mention that the deed restrictions were revised in a general membership meeting of the association of lot owners in Makati Central Business District – the Makati Commercial Estate Association, Inc. (MACEA) – whereby direct height restrictions were abolished in lieu of floor area limits. Respondent, however, did not vote for the approval of this revision during the General Membership meeting which was held on July 11, 1990 at the Manila Polo Club Pavilion, Makati, Metro Manila and again on July 12, 1990 at the Hotel Mandarin Oriental, Makati, Metro Manila. Hence, respondent continues to be bound by the original deed restrictions applicable to Lot 7, Block 1 and annotated on its title to said lot. In any event, assuming arguendo that respondent voted for the approval of direct height restrictions in lieu of floor area limits, the total floor area of its Peak building would still be violative of the floor area limits to the extent of about 9,865 square meters of allowable floor area under the MACEA revised restrictions.

Respondent Rosa-Diana avers that there is nothing illegal or unlawful in the building plans which it used in the construction of the Peak condominium “inasmuch as it bears the imprimatur of the building official of Makati, who is tasked to determine whether building and construction plans are in accordance with the law, notably, the National Building Code.”

Respondent Rosa-Diana, however, misses the point inasmuch as it has freely consented to be bound by the deed restrictions when it entered into a contract of sale with spouses Manuel Sy and Sy Ka Kieng. While respondent claims that it was under the impression that the deed restrictions were no longer being enforced by Ayala, the Undertaking[14] it executed belies this same claim. In said Undertaking, respondent agreed to “construct and complete the construction of the house on said lot as required under the special condition of sale.” Respondent likewise bound itself to abide and comply with x x x the condition of the rescission of the sale by Ayala Land, Inc. on the grounds therein stated x x x.

Contractual obligations between parties have the force of law between them and absent any allegation that the same are contrary to law, morals, good customs, public order or public policy, they must be complied with in good faith. Hence, Article 1159 of the New Civil Code provides

“Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.”

Respondent Rosa-Diana insists that the trial court had already ruled that the Undertaking executed by its Chairman and President cannot validly bind Rosa-Diana and hence, it should not be held bound by the deed restrictions.

We agree with petitioner Ayala’s observation that respondent Rosa-Diana’s special and affirmative defenses before the trial court never mentioned any allegation that its president and chairman were not authorized to execute the Undertaking. It was inappropriate therefore for the trial court to rule that in the absence of any authority or confirmation from the Board of Directors of respondent Rosa-Diana, its Chairman and the President

cannot validly enter into an undertaking relative to the construction of the building on the lot within one year from July 27, 1989 and in accordance with the deed restrictions. Curiously, while the trial court stated that it cannot be presumed that the Chairman and the President can validly bind respondent Rosa-Diana to enter into the aforesaid Undertaking in the absence of any authority or confirmation from the Board of Directors, the trial court held that the ordinary presumption of regularity of business transactions is applicable as regards the Deed of Sale which was executed by Manuel Sy and Sy Ka Kieng and respondent Rosa-Diana. In the light of the fact that respondent Rosa-Diana never alleged in its Answer that its president and chairman were not authorized to execute the Undertaking, the aforesaid ruling of the trial court is without factual and legal basis and surprising to say the least.

The fact alone that respondent Rosa-Diana conveniently prepared two sets of building plans - with one set which fully conformed to the Deed Restrictions and another in gross violation of the same - should have cautioned the trial court to conclude that respondent Rosa-Diana was under the erroneous impression that the Deed Restrictions were no longer enforceable and that it never intended to be bound by the Undertaking signed by its President and Chairman. We reiterate that contractual obligations have the force of law between parties and unless the same are contrary to public policy morals and good customs, they must be complied by the parties in good faith.

Petitioner, in its Petition, prays that judgment be rendered:

a) ordering Rosa-Diana Realty and Development Corporation to comply with its contractual obligations in the construction of the Peak by removing, or closing down and prohibiting Rosa-Diana from using, selling, leasing or otherwise disposing of, the portions of areas thereof constructed beyond or in excess of the approved height, as shown by the building plans submitted to, and approved by, Ayala, including any other portion of the building constructed not in accordance with the said building plans, during the effectivity of the Deed Restrictions;

b) Alternatively, in the event specific performance has become impossible:

(1)Ordering the cancellation and rescission of the April 20, 1976 Deed of Sale by Ayala in favor of the original vendees thereof as well as the subsequent Deed of Sale executed by such original vendees in favor of Rosa-Diana, and ordering Rosa-Diana to return to Ayala Lot 7, Block 1 of Salcedo Village;

(2)ordering the cancellation of Transfer Certificate of Title No. 165720 (in the name of Rosa-Diana) and directing the office of the Register of Deeds of Makati to issue a new title over the lot in the name of Ayala; and

(3)ordering Rosa-Diana to pay Ayala attorney’s fees in the amount of P500,000.00, exemplary damages in the amount of P5,000,000.00 and the costs of suit.

It must be noted that during the trial respondent Rosa-Diana was able to complete the construction of The Peak as a building with a height of thirty eight (38) floors or 133.65 meters and with a total gross floor area of 23,305.09 square meters. Having been completed for a number of years already, it would be reasonable to assume that it is now fully tenanted. Consequently, the remedy of specific performance by respondent is no longer feasible. However, neither can we grant petitioner’s prayer for the cancellation and rescission of the April 20, 1976 Deed of Sale by petitioner Ayala in favor of the original vendees thereof as well as the subsequent Deed of Sale executed by the original vendees in favor of respondent Rosa-Diana inasmuch as the original vendees were not even made parties in the case at bar. Moreover, petitioner Ayala, having agreed to the resale of the property by the original vendees, spouses Manuel Sy and Sy Ka Kieng, to respondent Rosa-Diana despite the failure of Manuel Sy and Sy Ka Kieng to comply with their obligation to construct a building within one year from April 20, 1976, has effectively waived its right to rescind the sale of the subject lot to the original vendees.

Faced with the same question as to the proper remedy available to petitioner in the case of “Ayala Corporation vs. Ray Burton Development Inc.,” a case which is on all fours with the case at bench, we ruled therein that the party guilty of violating the deed restrictions may only be held alternatively liable for substitute performance of its obligation, that is, for the payment of damages. In the aforesaid case it was observed that the Consolidated and Revised Deed Restrictions (CRDR) imposed development charges on constructions which exceed the estimated Gross Limits permitted under the original Deed Restrictions but which are within the limits of the CRDR’s.

The pertinent portion of the Deed of Restrictions reads:

3. DEVELOPMENT CHARGE

For any building construction within the Gross Floor Area limits defined under Paragraphs C-2.1 to C-2.4 above, but which will result in a Gross Floor Area exceeding certain standards defined in Paragraphs C-3.1-C below, the OWNER shall pay MACEA, prior to the construction of any new building, a DEVELOPMENT CHARGE as a contribution to a trust fund to be administered by MACEA. This trust fund shall be used to improve facilities and utilities in Makati Central District.

3.1. The amount of the development charge that shall be due from the OWNER shall be computed as follows:

DEVELOPMENT CHARGE = A x (B-C-D)

where:

A – is equal to the Area Assessment which shall be set at Five Hundred Pesos (P500.00) until December 31,1990. Each January 1st thereafter, such amount shall increase by ten percent (10%) over the Area Assessment charged in the immediately preceding year; provided that beginning 1995 and at the end of every successive five-year period thereafter, the increase in the Area Assessment shall be reviewed and adjusted by the VENDOR to correspond to the accumulated increase in the construction cost index during the immediately preceding five years as based on the weighted average of wholesale price and wage indices of the National Census and Statistics Office and the Bureau of Labor Statistics.

B - is equal to the Gross Floor Area of the completed or expanded building in square meters.

C - is equal to the estimated Gross Floor Area permitted under the original deed restrictions, derived by multiplying the lot area by the effective original FAR shown below for each location.

We then ruled in the aforesaid case that the development charges are a fair measure of compensatory damages which therein respondent Ray Burton Development Inc. is liable to Ayala Corporation. The dispositive portion of the decision in the said case which is squarely applicable to the case at bar, reads as follows:

WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated February 27, 1996, in CA-G.R. C.V. No. 46488, and its Resolution dated October 7, 1996 are hereby REVERSED and SET ASIDE, and in lieu thereof, judgment is hereby rendered finding that:

(1) The Deed Restrictions are valid and petitioner AYALA is not estopped from enforcing them against lot owners who have not yet adopted the Consolidated and Revised Deed Restrictions.

(2) Having admitted that the Consolidated and Revised Deed Restrictions are the applicable Deed Restrictions to Ray Burton Development Corporation, RBDC should be, and is bound by the same.

(3) Considering that Ray Burton Development Corporation’s Trafalgar plaza exceeds the floor area limits of the Deed Restrictions, RBDC is hereby ordered to pay development charges as computed under the provisions of the consolidated and Revised Deed Restrictions currently in force.

(4) Ray Burton Development corporation is further ordered to pay AYALA exemplary damages in the amount of P2,500,000.00 attorney’s fees in the amount of P250,000.00.

SO ORDERED.

There is no reason why the same rule should not be followed in the case at bar, the remedies of specific performance and/or rescission prayed for by petitioner no longer being feasible. In accordance with the peculiar circumstances of the case at bar, the development charges would certainly be a fair measure of compensatory damages to petitioner Ayala.

Exemplary damages in the sum of P2,500,000.00 as prayed for by petitioner are also in order inasmuch as respondent Rosa-Diana was in evident bad faith when it submitted a set of building plans in conformity with the deed restrictions to petitioner Ayala for the sole purpose of obtaining title to the property, but only to prepare and later on submit another set of building plans which are in gross violation of the Deed Restrictions. Petitioner Ayala is likewise entitled to an award of attorney’s fees in the sum of P250,000.00.

WHEREFORE, the assailed Decision of the Court of Appeals dated December 4, 1997 and its Resolution dated June 19, 1998 , C.A. G.R. C.V. No. 4598, are REVERSED and SET ASIDE. In lieu thereof, judgment is rendered

a) ordering respondent Rosa-Diana Realty and Development Corporation to pay development charges as computed under the provisions of the consolidated and Revised Deed Restrictions currently in force; and

b) ordering respondent Rosa-Diana Realty and Development Corporation to pay petitioner Ayala Corporation exemplary damages in the sum of P2,500,000.00, attorney’s fees in the sum of P250,000.00 and the costs of the suit.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

G.R. No. 112182 December 12, 1994

BRICKTOWN DEVELOPMENT CORP. (its new corporate name MULTINATIONAL REALTY DEVELOPMENT CORPORATION) and MARIANO Z. VERALDE, petitioners, vs.AMOR TIERRA DEVELOPMENT CORPORATION and the HON. COURT OF APPEALS, respondents.

VITUG, J.:

A contract, once perfected, has the force of law between the parties with which they are bound to comply in good faith and from which neither one may renege without the consent of the other. The autonomy of contracts allows the parties to establish such stipulations, clauses, terms and conditions as they may deem appropriate provided only that they are not contrary to law, morals, good customs, public order or public policy. The standard norm in the performance of their respective covenants in the contract, as well as in the exercise of their rights thereunder, is expressed in the cardinal principle that the parties in that juridical relation must act with justice, honesty and good faith.

These basic tenets, once again, take the lead in the instant controversy.

Private respondent reminds us that the factual findings of the trial court, sustained by the Court of Appeals, should be considered binding on this Court in this petition. We concede to this reminder since, indeed, there appears to be no valid justification in the case at bench for us to take an exception from the rule. We shall, therefore, momentarily paraphrase these findings.

On 31 March 1981, Bricktown Development Corporation (herein petitioner corporation), represented by its President and co-petitioner Mariano Z. Velarde, executed two Contracts to Sell (Exhs. "A" and "B") in favor of Amor Tierra Development Corporation (herein private respondent), represented in these acts by its Vice-President, Moises G. Petilla, covering a total of 96 residential lots, situated at the Multinational Village Subdivision, La Huerta, Parañaque, Metro Manila, with an aggregate area of 82,888 square meters. The total price of P21,639,875.00 was stipulated to be paid by private respondent in such amounts and maturity dates, as follows: P2,200,000.00 on 31 March 1981; P3,209,968.75 on 30 June 1981; P4,729,906.25 on 31 December 1981; and the balance of P11,500,000.00 to be paid by means of an assumption by private respondent of petitioner corporation's mortgage liability to the Philippine Savings Bank or, alternatively, to be made payable in cash. On even date, 31 March 1981, the parties executed a Supplemental Agreement (Exh. "C"), providing that private respondent would additionally pay to petitioner corporation the amounts of P55,364.68, or 21% interest on the balance of downpayment for the period from 31 March to 30 June 1981, and of P390,369.37 representing interest paid by petitioner corporation to the Philippine Savings Bank in updating the bank loan for the period from 01 February to 31 March 1981.

Private respondent was only able to pay petitioner corporation the sum of P1,334,443.21 (Exhs. "A" to "K"). In the meanwhile, however, the parties continued to negotiate for a possible modification of their agreement, although nothing conclusive would appear to have ultimately been arrived at.

Finally, on 12 October 1981, petitioner corporation, through its legal counsel, sent private respondent a "Notice of Cancellation of Contract" (Exh. "D") on account of the latter's continued failure to pay the installment due 30 June 1981 and the interest on the unpaid balance of the stipulated initial payment. Petitioner corporation advised

private respondent, however, that it (private respondent) still had the right to pay its arrearages within 30 days from receipt of the notice "otherwise the actual cancellation of the contract (would) take place."

Several months later, or on 26 September 1983, private respondent, through counsel, demanded (Exh. "E") the refund of private respondent's various payments to petitioner corporation, allegedly "amounting to P2,455,497.71," with interest within fifteen days from receipt of said letter, or, in lieu of a cash payment, to assign to private respondent an equivalent number of unencumbered lots at the same price fixed in the contracts. The demand, not having been heeded, private respondent commenced, on 18 November 1983, its action with the court a quo. 1

Following the reception of evidence, the trial court rendered its decision, the dispositive portion of which read:

In view of all the foregoing, judgment is hereby rendered as follows:

1. Declaring the Contracts to Sell and the Supplemental Agreement (Exhibits "A", "B" and "C") rescinded;2. Ordering the [petitioner] corporation, Bricktown Development Corporation, also known as Multinational Realty Development Corporation, to return to the [private respondent] the amount of One Million Three Hundred Thirty Four Thousand Four Hundred Forty-Three Pesos and Twenty-One Centavos (P1,334,443.21) with interest at the rate of Twelve (12%) percent per annum, starting November 18, 1983, the date when the complaint was filed, until the amount is fully paid;3. Ordering the [petitioner] corporation to pay the [private respondent] the amount of Twenty-five Thousand (P25,000.00) Pesos, representing attorney's fees;4. Dismissing [petitioner's] counterclaim for lack of merit; and5. With costs against the [petitioner] corporation.

SO ORDERED. 2

On appeal, the appellate court affirmed in toto the trial court's findings and judgment.

In their instant petition, petitioners contend that the Court of Appeals has erred in ruling that —

(1) By petitioners' acts, conduct and representation, they themselves delayed or prevented the performance of the contracts to sell and the supplemental agreement and were thus estopped from cancelling the same.(2) Petitioners were no justified in resolving the contracts to sell and the supplemental agreement.(3) The cancellation of the contract required a positive act on the part of petitioners giving private respondent the sixty (60) day grace period provided in the contracts to sell; and(4) In not holding that the forfeiture of the P1,378,197.48 was warranted under the liquidated damages provisions of the contracts to sell and the supplemental agreement and was not iniquitous nor unconscionable.

The core issues would really come down to (a) whether or not the contracts to sell were validly rescinded or cancelled by petitioner corporation and, in the affirmative, (b) whether or not the amounts already remitted by private respondent under said contracts were rightly forfeited by petitioner corporation.

Admittedly, the terms of payment agreed upon by the parties were not met by private respondent. Of a total selling price of P21,639,875.00, private respondent was only able to remit the sum of P1,334,443.21 which was even short of the stipulated initial payment of P2,200,000.00. No additional payments, it would seem, were made. A notice of cancellation was ultimately made months after the lapse of the contracted grace period. Paragraph 15 of the Contracts to Sell provided thusly:

15. Should the PURCHASER fail to pay when due any of the installments mentioned in stipulation No. 1 above, the OWNER shall grant the purchaser a sixty (60)-day grace period within which to pay the amount/s due, and should the PURCHASER still fail to pay the due amount/s within the 60-day grace period, the PURCHASER shall have the right to ex-parte cancel or rescind this contract, provided, however, that the actual cancellation or rescission shall take effect only after the lapse of thirty (30) days from the date of receipt by the PURCHASER of the notice of cancellation of this contract or the demand for its rescission by a notarial act, and thereafter, the OWNER shall have the right to resell the lot/s subject hereof to another buyer and all payments made, together with all improvements introduced on the aforementioned lot/s shall be forfeited in favor of the OWNER as liquidated damages, and in this connection, the PURCHASER obligates itself to peacefully vacate the aforesaid lot/s without necessity of notice or demand by the OWNER. 3

A grace period is a right, not an obligation, of the debtor. When unconditionally conferred, such as in this case, the grace period is effective without further need of demand either calling for the payment of the obligation or for honoring the right. The grace period must not be likened to an obligation, the non-payment of which, under Article 1169 of the Civil Code, would generally still require judicial or extrajudicial demand before "default" can be said to arise. 4

Verily, in the case at bench, the sixty-day grace period under the terms of the contracts to sell became ipso facto operative from the moment the due payments were not met at their stated maturities. On this score, the provisions of Article 1169 of the Civil Code would find no relevance whatsoever.

The cancellation of the contracts to sell by petitioner corporation accords with the contractual covenants of the parties, and such cancellation must be respected. It may be noteworthy to add that in a contract to sell, thenon-payment of the purchase price (which is normally the condition for the final sale) can prevent the obligation to convey title from acquiring any obligatory force (Roque vs. Lapuz, 96 SCRA 741; Agustin vs. Court of Appeals, 186 SCRA 375).

The forfeiture of the payments thus far remitted under the cancelled contracts in question, given the factual findings of both the trial court and the appellate court, must be viewed differently. While clearly insufficient to justify a foreclosure of the right of petitioner corporation to rescind or cancel its contracts with private respondent, the series of events and circumstances described by said courts to have prevailed in the interim between the parties, however, warrant some favorable consideration by this Court.

Petitioners do not deny the fact that there has indeed been a constant dialogue between the parties during the period of their juridical relation. Concededly, the negotiations that they have pursued strictly did not result in the novation, either extinctive or modificatory, of the contracts to sell; nevertheless, this Court is unable to completely disregard the following findings of both the trial court and the appellate court. Said the trial court:

It has been duly established through the testimony of plaintiff's witnesses Marcosa Sanchez and Vicente Casas that there were negotiations to enter into another agreement between the parties, after March 31, 1981. The first negotiation took place before June 30, 1981, when Moises Petilla and Renato Dragon, Vice-President and president, respectively, of the plaintiff corporation, together with Marcosa Sanchez, went to the office of the defendant corporation and made some proposals to the latter, thru its president, the defendant Mariano Velarde. They told the defendant Velarde of the plaintiff's request for the division of the lots to be purchased into smaller lots and the building of town houses or smaller houses therein as these kinds of houses can be sold easily than big ones. Velarde replied that subdivision owners would not consent to the building of small houses. He, however, made two counter-proposals, to wit: that the defendant corporation would assign to the plaintiff a number of lots corresponding to the amounts the latter had already paid, or that the defendant corporation may sell the corporation itself, together with the Multinational Village Subdivision, and its other properties, to the plaintiff and the latter's sister companies engaged in the real estate business. The negotiations between the parties went on for sometime but nothing definite was accomplished. 5

For its part, the Court of Appeals observed:

We agree with the court a quo that there is, therefore, reasonable ground to believe that because of the negotiations between the parties, coupled with the fact that the plaintiff never took actual possession of the properties and the defendants did not also dispose of the same during the pendency of said negotiations, the plaintiff was led to believe that the parties may ultimately enter into another agreement in place of the "contracts to sell." There was, evidently, no malice or bad faith on the part of the plaintiff in suspending payments. On the contrary, the defendants not only contributed, but had consented to the delay or suspension of payments. They did not give the plaintiff a categorical answer that their counter-proposals will not materialize. 6

In fine, while we must conclude that petitioner corporation still acted within its legal right to declare the contracts to sell rescinded or cancelled, considering, nevertheless, the peculiar circumstances found to be extant by the trial court, confirmed by the Court of Appeals, it would be unconscionable, in our view, to likewise sanction the forfeiture by petitioner corporation of payments made to it by private respondent. Indeed, in the opening statement of this ponencia, we have intimated that the relationship between parties in any contract must always be characterized and punctuated by good faith and fair dealing. Judging from what the courts below have said, petitioners did fall well behind that standard. We do not find it equitable, however, to adjudge any interest

payment by petitioners on the amount to be thus refunded, computed from judicial demand, for, indeed, private respondent should not be allowed to totally free itself from its own breach.

WHEREFORE, the appealed decision is AFFIRMED insofar as it declares valid the cancellation of the contracts in question but MODIFIED by ordering the refund by petitioner corporation of P1,334,443.21 with 12% interest per annum to commence only, however, from the date of finality of this decision until such refund is effected. No costs.

SO ORDERED.Bidin, Romero and Melo, JJ., concur.Feliciano, J., is on leave.

[G.R. No. 126570. August 18, 2000]PILIPINAS HINO, INC., petitioner, vs. COURT OF APPEALS, FERNANDO V. REYES, PONCIANO REYES, and TERESITA R. TAN, respondents.D E C I S I O NKAPUNAN, J.:

This petition for review on certiorari seeks to reverse and set aside the decision, dated September 26, 1996, of the Court of Appeals[1] in CA-G.R. CV NO. 48612 which affirmed in toto the decision of the Regional Trial Court of Pasig, Branch 152 in Civil Case No. 61266.

The antecedents of the case as found by the trial court and adopted by the appellate court in its decision, are as follows:

This is an action for Sum of Money and Damages filed by Pilipinas Hino, Inc., thereinafter referred to as the plaintiff against Fernando V. Reyes, Ponciano V. Reyes, and Teresita R. Tan, hereinafter referred to as the defendants.

The plaintiff is a corporation duly organized and existing under the laws of the Philippines, with office address at PMI Building, EDSA, Mandaluyong, Metro Manila: whereas, the defendants Fernando V. D. Reyes and Ponciano V. D. Reyes are both of legal age, with residential or business address at 57 Xavierville Avenue, Loyola Heights, Quezon City, Metro Manila, while defendant Teresita R. Tan is likewise of legal age, with postal address at 39 Zalameda St., Corinthian Garden, Quezon City.

The material allegations in plaintiff's Complaint are as follows:

ON THE FIRST CAUSE OF ACTION

That on or about 15 August 1989, a contract of lease was entered into between herein parties, under which the defendants, as lessors, leased real property located at Bigaa, Balagtas, Bulacan, to herein plaintiff for a term of two (2) years, from 16 August 1989 to 15 August 1991.

Pursuant to the contract of lease, plaintiff-lessee deposited with the defendants-lessors the amount of Four Hundred Thousand (P400,000.00) Pesos to answer for repairs and damages that may be caused by the lessee on the leased premises during the period of the lease.

After the expiration of the lease contract, the plaintiff and defendants made a joint inspection of the premises to determine the extent of the damages thereon, both agreed that the cost of repairs would amount to P60,000.00 and that the amount of P340,000.00 shall then be returned by the defendants to plaintiff. However, defendants returned to plaintiff only the amount of P200,000.00, still having a balance of P140,000.00.

Notwithstanding repeated demands, defendants unjustifiably refused to return the balance of P140,000.00 holding that the true and actual damage on the lease premises amounted to P298,738.90.

ON THE SECOND CAUSE OF ACTION

On August 10, 1990, plaintiff and defendants entered into a contract to sell denominated as a Memorandum of Agreement to sell whereby the latter agreed to sell to the former the leased property subject of this suit in the amount of P45,611,000.00.

The aforesaid Memorandum of Agreement to sell granted the owner (defendants) the option to rescind the same upon failure of the buyer (plaintiff) to pay any of the first six (6) installments with the corresponding obligation to return to the buyer any amount paid by the buyer in excess of the downpayment as stated in paragraphs 7 and 9 of the Memorandum of Agreement.

Pursuant to said Memorandum of Agreement, plaintiff remitted on August 10, 1990 to the defendants the amount of P1,811,000.00 as downpayment. Subsequently, plaintiff paid the first and second installments in the amount of P1,800,000.00 and P5,250,000.00, respectively, thereby making the total amount paid by the plaintiff to the defendants, on top of the downpayment, P7,050,000.00.

Unfortunately, plaintiff failed to pay the 3rd installment and subsequent installments: and thereupon, defendants decided to, and in fact did, in a letter dated 20 November 1990, rescinded and terminated the contract and promised to return to the plaintiff all the amounts paid in excess of the downpayment after deducting the interest due from 3rd to 6th installments, inclusive.

Thus, from the amount of P7,050,000.00 due to be returned to the plaintiff, defendants deducted P924,000.00 as interest and P220,000.00 as rent for the period from 15 February to 15 March 1991, thereby returning to the plaintiff the amount of P5,906,000.00 only, as acknowledged by plaintiff in the letter dated 4 April 1991.

x x x

In their Answer, defendants interposed the following defenses, to wit:

ON THE FIRST CAUSE OF ACTION

There is absolutely no evidence of any agreement allegedly arrived at between plaintiff and defendants upon which plaintiff can anchor its first cause of action.

Plaintiff avers that an estimate of P60,000.00 cost of repairs was agreed upon by the parties after a joint inspection of the premises, to which defendant categorically asserted that there was no such agreement arrived at, nor even an estimated amount was agreed upon by the parties. No less than plaintiff's witness Atty. Yumang testified that there was no such agreement.

It was Atty. Yumang who, by himself and without the approval of the Board came up with an amount of P60,000.00, which was turned down by the defendants as they were incompetent to determine the actual cost of the repairs.

Granting that there was an agreement entered into by Atty. Yumang with the defendants during the first inspection and thereafter as to the amount of damages, this agreement, at that time, would not have been binding on the plaintiff-corporation as Atty. Yumang was never authorized by the plaintiff-corporation at that time to enter into any settlement with the defendants.

Aside from Atty. Yumang, Mr. Rene C. Sangalang was also presented by the plaintiff. He testified that sometime in March 1991, Plaintiff (Pilhino) was moving out and he was requested to inspect the premises. In the same vein, there is nothing in the testimony to show that, at the time of the inspection or anytime thereafter, he was empowered or authorized by the plaintiff-corporation to settle any transaction with defendants. He merely prepared the cost of estimate on the repairs to be done and he forwarded it to Mr. Arsenio Paez, the General Manager of the plaintiff, who in turn allegedly sent it to the defendants. Unfortunately, however, said estimate never reached the hands of the defendants.

Plaintiff's other witness, Mr. Arsenio Paez, testified that there were two (2) inspections made on the premises and he categorically testified that he was present only in the second inspection. He also affirmed that the 'estimated' amount of P60,000.00 was allegedly arrived at by the parties and that plaintiff agreed that such amount should be allegedly retained by the defendants. However, nobody among the defendants agreed to the amount of P60,000.00. Indeed, this non-acceptance was corroborated by Mrs. Teresita Tan when she testified that she rejected the offer because it was not enough. Thus, there was no such agreement to speak of.

x x x

ON THE SECOND CAUSE OF ACTION

The defendants are entitled to the retention of the amount of P924,000.00 as payment of interest stipulated in the contract.

The second cause of action pertains to the Memorandum of Agreement to sell entered into by the parties. It is stated in paragraph 6 that an interest equivalent to three (3%) percent per thirty days period shall be imposed on any installment due but not paid for the duration of the delay. Paragraph 7 of the same documents also deserves a second look.

Since plaintiff failed to pay the third and subsequent installments, defendants' right to the 3% interest, therefore, readily accrued and became demandable at the time of the non-payment. The grace period granted to the plaintiff likewise lapsed. Consequently, the defendants decided to, and in fact did in a letter dated 20 November 1990, terminate the contract to sell. The defendants as agreed upon returned to the plaintiff the amount of P5,906,000.00 representing the amount due to the plaintiff as reimbursement of the installments for the 1st and 2nd installments. Considering that the plaintiff has failed to pay the installments due on time, the interest in the amount of P924,000.00 was charged against the plaintiff (which interest, in turn, represents the unproductive use of the money which should have been made by the defendants had the payment been made on time). The amount of P220,000.00 was likewise deducted by the defendants representing rentals for the period. Thus, only the amount of P5,906,000.00 was rightfully returned by the defendants.

Plaintiff's request to return the amount of P924,000.00 to which defendants however refused for reasons that the said amount represents interest due and demandable from the plaintiff when it incurred the delay which by virtue of legal compensation, was set-off by operation of law and the said amount was rightfully deducted from the amount of P7,050,000.00.[2]

On 24 August 1994, the trial court rendered a decision ruling in favor of respondents Reyes, et al. As to the first cause of action, the trial court found that petitioner was unable to prove its claim that based on the joint ocular inspection of the leased premises, the parties jointly agreed that petitioner would only be held liable in the amount of P60,000.00 representing damages to the leased property. As to the second cause of action, the trial court ruled that based on the contract to sell, petitioner is liable for interest arising from its failure to pay the third and subsequent installments, hence respondents were correct in withholding the amount representing these interest. The dispositive portion of the trial court’s decision reads:

WHEREFORE, judgment is hereby rendered:

1. Under the first cause of action, the plaintiff has no cause of action to demand the return of the balance of the deposits in the amount of P140,000.00 pesos:

2. Under the second cause of action, the defendants have the legal right to demand accrued interest on the unpaid installments in the amount of P924,000.00 pesos.

Defendants counterclaim has not been substantiated.

SO ORDERED. [3]

Not satisfied with the trial court’s decision, petitioner Pilipinas Hino elevated the case to the Court of Appeals. The appellate court, however, sustained the findings of the trial court:

WHEREFORE, the appealed decision of the lower court in Civil Case No. 61266 is hereby AFFIRMED by this Court, with costs against plaintiff-appellant.[4]

Petitioner thus seeks recourse to this Court and raises the following assignment of errors:

ITHE LOWER COURT ERRED IN NO[T] FINDING THAT THERE IS NO EVIDENCE ON RECORD SUFFICIENT TO SHOW ANY RIGHT FROM DEFENDANT-APPELLANT TO REFUSE THE RETURN OF THE BALANCE OF THE DEPOSITS AMOUNTING TO P140,000.00.

IITHE LOWER COURT ERRED IN NOT FINDING THAT THE ALLEGED DAMAGES ON THE PREMISES WERE CAUSED BY WEAR AND TEAR AND NOT DUE TO THE FAULT OF THE PLAINTIFF-APPELLANT.

IIITHE LOWER COURT IN NOT FINDING THAT THE ESTIMATE OF REPAIRS MADE ON THE PREMISES WERE SPECULATIVE.

IVTHE LOWER COURT ERRED IN NOT FINDING THAT THE MEMORANDUM OF AGREEMENT (EXH. “C”) CLEARLY [U]NEQUIVOCABLY PROVIDES THAT PLAINTIFF-APPELLANT IS ENTITLED TO THE RETURN OF THE AMOUNT PAID IN EXCESS OF THE DOWNPAYMENT AFTER THE DEFENDANT-APPELLEE EXERCISE[D] THE RIGHT TO FORFEIT THE SAID DOWNPAYMENT.

VTHE LOWER COURT ERRED IN NOT FINDING THAT THE PROVISION FOUND IN PARAGRAPH 6 OF THE MEMORANDUM OF AGREEMENT GRANTING THE DEFENDANT-APPELLEE THE RIGHT TO IMPOSE INTEREST IN CASE OF DELAY APPLIES ONLY IN CASE PAYMENTS AS STIPULATED IN THE AGREEMENT ARE CONTINUED BUT NOT WHEN THE AGREEMENT ITSELF IS RESCINDED.

VITHE LOWER COURT ERRED IN NOT FINDING THAT INTEREST CANNOT BE RECOVERABLE WHEN THE PRINCIPAL AMOUNT IS IN ITSELF NOT RECOVERABLE.

VIITHE LOWER COURT ERRED IN NOT AWARDING THE SUM CLAIMED UNDER THE COMPLAINT INCLUDING EXEMPLARY DAMAGES AND ATTORNEY’S FEES.

The petition is partly meritorious.

The issues raised in this petition may be summed as follows:

(1) Should the petitioner be held liable for alleged damages to the leased property in an amount of more than P60,000.00?

(2) Does private respondent have the right to retain the P924,000.00 representing the interest due for the unpaid installments, despite the fact that the respondent has exercised his option to rescind the memorandum of agreement?

The first issue is undoubtedly a question of fact. Time and again, this Court has pronounced that we do not review findings of fact by the Court of Appeals unless findings of the appellate court are mistaken, absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings culled by the trial court of origin.[5] In the case bar, no such reason exist to warrant a review of the appellate court’s factual findings.

In support of his allegation, petitioner quotes the following portion of the decision of the trial court:

A cursory perusal of the expediente as well as the documentary evidence presented by the parties, it appears therefrom that there was no exact figures agreed upon by the parties. Plaintiffs claimed that the amount of P60,000.00 was agreed by them which defendants vehemently denied as there was no such agreement.

The estimate and appraisals made by the contractors hired by the defendants entailed major repairs and renovation which was not fair, just and equitable on the part of the plaintiff. Some of the damages pointed to by the defendants were caused by wear and tear and thus not chargeable against the plaintiff (par. 7 of the lease contract).

Defendants should have secured first the consent/approval of the plaintiff whether they are amenable or not to the amount charged, before engaging the services of Eduardo Pascual (contractor). Otherwise, such actuations will cast doubt on the part of the payor.

The reception of defendants evidence together with the testimonies of their witnesses has indubitably proved that the amounts offered by the plaintiff was not enough to cover the expenses of the repairs. In fact, after deducting the amount claimed by the plaintiff from the total expenses incurred, the plaintiff is still obliged to pay the defendants the amount of P184,732.50. However, since the defendants were also in bad faith in dealing with the plaintiff, the difference of P184,732.50 may be dispensed with, and considering the short span of the leased period, it is impossible that all the damages found on the premises are attributable solely on the part of the plaintiff.”[6]

Based on the underlined portions above quoted, petitioner asserts that the trial court found the following facts: (1) that the appraisals made entailed major repairs and renovations which are not fair to be charged to petitioner; (2) there was bad faith on the part of private respondents in presenting appraisal for repairs; and (3) the alleged damage to the premises are not attributable to the petitioner.

Petitioner merely highlights certain portions of the trial court’s decision, which should not however be read in isolation with the rest of the decision. As mentioned earlier, the crux of petitioner’s first cause of action is whether or not the damage to the leased property amounted to more than P60,000.00. We find that the trial court correctly ruled that petitioner failed to prove his first cause of action:

Upon consideration of all the allegations, issues and documentary [evidence] adduced by the parties, the court, finds and so holds, that plaintiff has failed to establish by preponderance of evidence that there is an agreement reached between the parties as to the exact amount of the repairs to be done, so that it is barred to demand the return of the balance of the deposits.[7]

We agree with the findings of the appellate court that such matter is factual in nature, and that the findings of the trial court as to petitioner’s first cause of action are ably supported by the records on hand:

The issue on plaintiff-appellant’s first cause of action is evidentiary as to whether or not defendants-appellees’ refusal to return the amount of P140,000.00 is valid and in accordance with the lease agreement. It is the contention of the plaintiff-appellant that after the joint inspection was conducted on the subject premises it had been agreed upon by the parties that the amount of damages for the repairs of the premises shall be P60,000.00. Thus, plaintiff-appellant claims that the amount of P340,000.00 in excess of the cost of the repairs should have been returned by the defendants-appellees to plaintiff-appellant. Upon the other hand, defendants-appellees vehemently denied that there was such an agreement of P60,000.00 as having been agreed upon by them.

We find defendants-appellees’ contention to be in accordance with the evidence in this case. Plaintiff-appellant’s witness, Atty. Mauro Yumang when asked by the lower court on the matter, testified that plaintiff and defendants did not come to an agreement as to the exact cost of the repairs of the subject premises (pp. 8-9 tsn, April 22, 1993). Neither was it shown in the testimony of plaintiff-appellant’s other witness, Arsenio Paez that there was an agreement between the parties on the said P60,000.00. Thus, plaintiff-appellant, failed to prove its claim of P60,000.00 as costs of repair with solid and convincing proof. It is, of course, a basic rule in evidence that a party must prove his own affirmative allegations. In civil cases, the burden of proof is on the plaintiff to establish his case by a preponderance of evidence. In affirmative averment the onus probandi falls on pleader’s shoulder.[8]

In contrast, respondents were able to prove by clear and convincing evidence their counterclaim that the damage to the leased property amounted to P384,732.50. This petitioner failed to dispute:

Upon the other hand, defendants-appellees were able to prove that the amount of P60,000.00 offered by the plaintiff-appellant was not sufficient to answer the damages of the subject premises. It is highly improbable to believe that the alleged amount of P60,000.00 can cover the entire expenses of the repairs considering the actual area of the premises to be repaired was quite big with the building having broken door knobs, windows, jalousies, toilet bowls, walls, flooring, among the other things, not to mention the labor. As matter of fact, defendants-appellees’ witness Mr. Eduardo Pascual, an experienced contractor, categorically testified that defendants-appellees’ expenses for the repairs of the subject premises amounted to not only in P60,000.00 bit P384,732.50. Thus, plaintiff-appellees even owed defendants-appellees the amount of P184,732.50.[9]

We take note of petitioner’s assertion that the trial court found the respondent to be in bad faith in having the damage estimated without securing the consent of the petitioner and that not all the damages are attributable to the petitioner. However, these findings do not negate the correctness of the award by the trial court. Recognizing these facts, the trial court did not hold the petitioner liable for the whole amount of P384,732.50, but only for the amount of P200,000.00:

The defendants are likewise barred from demanding for the excess of the repairs as it was due (sic) without the knowledge of the plaintiff.[10]

Anent the petitioner’s second cause of action, we find the same to be meritorious. In order to verify the soundness of petitioner’s claim, an examination of the pertinent paragraphs of the memorandum of agreement between the parties is in order:

6. Where the buyer fails to deliver the check(s) due under paragraph 2 thereof, an interest equivalent to three percent (3%) per thirty (30) days period shall be imposed on the amount due for the duration of the delay.

7. The owners shall have the right to terminate or rescind this agreement, and to forfeit the downpayment where the buyer fails to pay any of the first six (6) installments. The buyer shall have a grace period of sixty (60) days within which to pay the installments and the interest due for the reason of the delay.

The owners may thereafter forfeit the downpayment and sell the property to other parties without need of notice to the buyer, the owner shall not have other obligations to the buyer relating to the property subject of the right of first refusal by the buyer, as contained in the lease contract between the owner and the buyers.

x x x

9. When the owners exercise their option to forfeit the downpayment, they shall return to the buyer any amount paid by the buyer in excess of the downpayment with no obligation to pay interest thereon. This shall be done within a period not later than one hundred twenty days (120) days from notice by the owner to the buyer of the forfeiture of the downpayment.[11]

In holding the petitioner liable for the amount of P924,000.00 representing interest earned for the unpaid installments, the trial court rationalized:

For failure of the plaintiff to pay the installments on September 14, 1990, September 28, 1990, October 15, 1990 and October 30, 1990, the defendants were consequently deprived of the productive use of the supposed money they should have received as per contract. The ‘Agreement’ of both parties leaves no room for further explanation. It categorically states that in case of default, the defendant will charge interest for the delay.

It is worthy of note to believe that when the defendants terminated their contract to sell on November 20, 1990, the plaintiff was already in default from the September 14, 1990 to October 30, 1990. Thus, defendants have a valid reason to retain the amount of P924,000.00 representing interest due of the unpaid installments.

As expressly provided for in Article 1159 of the Civil Code:

Obligation arising from contracts have the force of law between the contracting parties and should be complied with in good faith.[12]

The appellate court in upholding the above findings of the trial court pronounced, thus:

Clearly plaintiff-appellant should be held liable to pay for the corresponding three (3%) percent interest on the unpaid installments in accordance with the above provisions of paragraph 6 of the Memorandum of Agreement. Noteworthy to stress in this case that plaintiff-appellant admits its failure to pay the installments. x x x[13]

We disagree.

In justifying the withholding of the amount of P924,000.00 representing interest due of the unpaid installments, both the trial and the appellate court relied on paragraph 6 of the memorandum of agreement entered into by the parties. Surprisingly, both courts failed to consider paragraph 9 contained in the same memorandum of agreement. Said paragraph provides in very clear terms that “when the owners exercise their option to forfeit the downpayment, they shall return to the buyer any amount paid by the buyer in excess of the downpayment with no obligation to pay interest thereon.” This should include all amounts paid, including interest. Had it been the intention of the parties to exclude interest from the amount to be returned to the buyer in the event that the owner exercises its option to terminate or rescind the agreement, then such should have been stated in categorical terms. We find no basis in the conclusion reached by the lower courts that “interest paid” should not be returned to the buyer. It may be conceded, as the trial court endeavored to rationalize, that for failure of the buyer to pay the installments, private respondents “were consequently deprived of the productive use of the supposed money they should have received as per contract.” However, the private respondents’ withholding of the amount corresponding to the interest violated the specific and clear stipulation in paragraph 9 of the memorandum of agreement that except for the downpayment, all amounts paid shall be returned to the buyer “with no obligation to pay interest thereon.” The parties are bound by their agreement. Thus, Article 1159 of the Civil Code expressly provides:

Obligation arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

Paragraph 9 of the memorandum of agreement between the parties, not being contrary to law, morals, good customs, public policy, or public order has therefore the force of law between the parties. Aside from equity considerations, the lower courts failed to provide a basis for the retention by the respondent of the interest. Equity is applied only in the absence of, and never against, statutory law or judicial rules of procedure.[14] The memorandum of agreement, being the law between the parties, must therefore, govern.

Both the private respondents and trial court quote our ruling in Luzon Brokerage Company v. Maritime Building Inc.[15] in order to justify retention of said interest:

The distinction between contracts of sale and contracts to sell with reserved title has been recognized by this Court in repeated decisions upholding the power of promisors under contracts to sell in case of failure of the other party to complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain the sums or installments already received, where such rights are expressly provided for, as in the case at bar.

Sadly for private respondents, our ruling in the above case defeats rather than sustains their claim. While this Court recognizes that in contracts to sell even if the contract is terminated the seller can retain the sums already received or paid, such can be done only if it is expressly provided for in the contract. Such proviso is not contained in the memorandum of agreement, as what is merely provided for in paragraphs 7 and 9 is the retention of the downpayment.

As regards the claim of exemplary damages and attorney’s fees, petitioner fails to present an iota of evidence why they are entitled to these awards. The petition before this Court merely raises such assignment of error but does not even discuss the basis of such claim.

WHEREFORE, the petition is hereby GIVEN DUE COURSE and the decision of the Court of Appeals is MODIFIED in that private respondent is ordered to return to petitioner the amount of P924,000.00 representing the accrued interest for the unpaid installments. The decision appealed from is AFFIRMED in all other respects. However, the pronouncement as to cost is hereby deleted.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.