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G.R. No. L-13667 April 29, 1960

PRIMITIVO ANSAY, ETC., ET AL.,plaintiffs-appellants,

vs.

THE BOARD OF DIRECTORS OF THE NATIONAL DEVELOPMENT COMPANY, ET AL., defendants-appellees.

PARAS, C. J.:

On July 25, 1956, appellants filed against appellees in the Court of First Instance of Manila a complaint

praying for a 20% Christmas bonus for the years 1954 and 1955. The court a quo on appellees' motion to

dismiss, issued the following order:

Considering the motion to dismiss filed on 15 August, 1956, set for this morning; considering

that at the hearing thereof, only respondents appeared thru counsel and there was no

appearance for the plaintiffs although the court waited for sometime for them; considering,

however, that petitioners have submitted an opposition which the court will consider

together with the arguments presented by respondents and the Exhibits marked and

presented, namely, Exhibits 1 to 5, at the hearing of the motion to dismiss; considering that

the action in brief is one to compel respondents to declare a Christmas bonus for petitioners

workers in the National Development Company; considering that the Court does not see how

petitioners may have a cause of action to secure such bonus because:

(a) A bonus is an act of liberality and the court takes it that it is not within its judicial powers

to command respondents to be liberal;

(b) Petitioners admit that respondents are not under legal duty to give such bonus but that

they had only ask that such bonus be given to them because it is a moral obligation of

respondents to give that but as this Court understands, it has no power to compel a party to

comply with a moral obligation (Art. 142, New Civil Code.).

IN VIEW WHEREOF, dismissed. No pronouncement as to costs.

A motion for reconsideration of the afore-quoted order was denied. Hence this appeal.

Appellants contend that there exists a cause of action in their complaint because their claim rests on

moral grounds or what in brief is defined by law as a natural obligation.

Since appellants admit that appellees are not under legal obligation to give such claimed bonus; that the

grant arises only from a moral obligation or the natural obligation that they discussed in their brief, this

Court feels it urgent to reproduce at this point, the definition and meaning of natural obligation.

Article 1423 of the New Civil Code classifies obligations into civil or natural. "Civil obligations are a right

of action to compel their performance. Natural obligations, not being based on positive law but on

equity and natural law, do not grant a right of action to enforce their performance, but after voluntary

fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason

thereof".

It is thus readily seen that an element of natural obligation before it can be cognizable by the court is

voluntary fulfillment by the obligor. Certainly retention can be ordered but only after there has been

voluntary performance. But here there has been no voluntary performance. In fact, the court cannot

order the performance.

At this point, we would like to reiterate what we said in the case of Philippine Education Co. vs.CIR and

the Union of Philippine Education Co., Employees (NUL) (92 Phil., 381; 48 Off. Gaz., 5278)

x x x x x x x x x

From the legal point of view a bonus is not a demandable and enforceable obligation. It is so

when it is made a part of the wage or salary compensation.

And while it is true that the subsequent case of H. E. Heacock vs.National Labor Union, et al., 95 Phil.,

553; 50 Off. Gaz., 4253, we stated that:

Even if a bonus is not demandable for not forming part of the wage, salary or compensation

of an employee, the same may nevertheless, be granted on equitable consideration as when

it was given in the past, though withheld in succeeding two years from low salaried

employees due to salary increases.

still the facts in said Heacock case are not the same as in the instant one, and hence the ruling applied in

said case cannot be considered in the present action.

Premises considered, the order appealed from is hereby affirmed, without pronouncement as to costs.


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G.R. No. L-48889 May 11, 1989

DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner,

vs.

THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch of the Court of First Instance of

Iloilo and SPOUSES PATRICIO CONFESOR and JOVITA VILLAFUERTE, respondents.

GANCAYCO,J.:

The issue posed in this petition for review on certiorari is the validity of a promissory note which was

executed in consideration of a previous promissory note the enforcement of which had been barred by

prescription.

On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an agricultural loan from

the Agricultural and Industrial Bank (AIB), now the Development of the Philippines (DBP), in the sum of

P2,000.00, Philippine Currency, as evidenced by a promissory note of said date whereby they bound

themselves jointly and severally to pay the account in ten (10) equal yearly amortizations. As the

obligation remained outstanding and unpaid even after the lapse of the aforesaid ten-year period,

Confesor, who was by then a member of the Congress of the Philippines, executed a second promissory

note on April 11, 1961 expressly acknowledging said loan and promising to pay the same on or before

June 15, 1961. The new promissory note r eads as follows

I hereby promise to pay the amount covered by my promissory note on or before

June 15, 1961. Upon my failure to do so, I hereby agree to the foreclosure of my

mortgage. It is understood that if I can secure a certificate of indebtedness from

the government of my back pay I will be allowed to pay the amount out of it.

Said spouses not having paid the obligation on the specified date, the DBP filed a complaint dated

September 11, 1970 in the City Court of Iloilo City against the spouses for the payment of the loan.

After trial on the merits a decision was rendered by the inferior court on December 27, 1976, the

dispositive part of which reads as follows:

WHEREFORE, premises considered, this Court renders judgment, ordering the

defendants Patricio Confesor and Jovita Villafuerte Confesor to pay the plaintiff

Development Bank of the Philippines, jointly and severally, (a) the sum of

P5,760.96 plus additional daily interest of P l.04 from September 17, 1970, the

date Complaint was filed, until said amount is paid; (b) the sum of P576.00

equivalent to ten (10%) of the total claim by way of attorney's fees and incidental

expenses plus interest at the legal rate as of September 17,1970, until fully paid;

and (c) the costs of the suit.

Defendants-spouses appealed therefrom to the Court of First Instance of Iloilo wherein in due course a

decision was rendered on April 28, 1978 reversing the appealed decision and dismissing the complaint

and counter-claim with costs against the plaintiff.

A motion for reconsideration of said decision filed by plaintiff was denied in an order of August 10, 1978.

Hence this petition wherein petitioner alleges that the decision of respondent judge is contrary to law

and runs counter to decisions of this Court when respondent judge (a) refused to recognize the law that

the right to prescription may be renounced or waived; and (b) that in signing the second promissory noterespondent Patricio Confesor can bind the conjugal partnership; or otherwise said respondent became

liable in his personal capacity. The petition is impressed with merit. The right to prescription may be

waived or renounced. Article 1112 of Civil Code provides:

Art. 1112. Persons with capacity to alienate property may renounce prescription

already obtained, but not the right to prescribe in the future.

Prescription is deemed to have been tacitly renounced when the renunciation

results from acts which imply the abandonment of the right acquired.

There is no doubt that prescription has set in as to the first promissory note of February 10, 1940.

However, when respondent Confesor executed the second promissory note on April 11, 1961 whereby

he promised to pay the amount covered by the previous promissory note on or before June 15, 1961,

and upon failure to do so, agreed to the foreclosure of the mortgage, said respondent thereby effectively

and expressly renounced and waived his right to the prescription of the action covering the first

promissory note.

This Court had ruled in a similar case that


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... when a debt is already barred by prescription, it cannot be enforced by the

creditor. But a new contract recognizing and assuming the prescribed debt would

be valid and enforceable ... .1

Thus, it has been held

Where, therefore, a party acknowledges the correctness of a debt and promises to

pay it after the same has prescribed and with full knowledge of the prescription he

thereby waives the benefit of prescription.2

This is not a mere case of acknowledgment of a debt that has prescribed but a new promise to pay the

debt. The consideration of the new promissory note is the pre-existing obligation under the first

promissory note. The statutory limitation bars the remedy but does not discharge the debt.

A new express promise to pay a debt barred ... will take the case from the

operation of the statute of limitations as this proceeds upon the ground that as a

statutory limitation merely bars the remedy and does not discharge the debt,

there is something more than a mere moral obligation to support a promise, to wit

a pre-existing debt which is a sufficient consideration for the new the new

promise; upon this sufficient consideration constitutes, in fact, a new cause of

action.3

... It is this new promise, either made in express terms or deduced from an

acknowledgement as a legal implication, which is to be regarded as reanimating

the old promise, or as imparting vitality to the remedy (which by lapse of time had

become extinct) and thus enabling the creditor to recover upon his original

contract. 4

However, the court a quo held that in signing the promissory note alone, respondent Confesor cannot

thereby bind his wife, respondent Jovita Villafuerte, citing Article 166 of the New Civil Code which

provides:

Art. 166. Unless the wife has been declared a non compos mentis or a spend thrift,

or is under civil interdiction or is confined in a leprosarium, the husband cannot

alienate or encumber any real property of the conjugal partnership without, the

wife's consent. If she ay compel her to refuses unreasonably to give her consent,

the court m grant the same.

We disagree. Under Article 165 of the Civil Code, the husband is the administrator of the conjugal

partnership. As such administrator, all debts and obligations contracted by the husband for the benefit

of the conjugal partnership, are chargeable to the conjugal partnership.5 No doubt, in this case,

respondent Confesor signed the second promissory note for the benefit of the conjugal partnership.

Hence the conjugal partnership is liable for this obligation.

WHEREFORE, the decision subject of the petition is reversed and set aside and another decision is hereby

rendered reinstating the decision of the City Court of Iloilo City of December 27, 1976, without

pronouncement as to costs in this instance. This decision is immediately executory and no motion for

extension of time to file motion for reconsideration shall be granted.

SO ORDERED.


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G.R. No. L-23749 April 29, 1977

FAUSTINO CRUZ, plaintiff-appellant,

vs.

J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA, INC., defendants-appellees.

BARREDO,J.:

FACTS: Actually, a perusal of plaintiff-appellant's complaint below shows that he alleged two separate

causes of action, namely: (1) that upon request of the Deudors (the family of Telesforo Deudor who laid

claim on the land in question on the strength of an "informacion posesoria" ) plaintiff made permanent

improvements valued at P30,400.00 on said land having an area of more or less 20 quinones and for

which he also incurred expenses in the amount of P7,781.74, and since defendants-appellees are being

benefited by said improvements, he is entitled to reimbursement from them of said amounts and (2)

that in 1952, defendants availed of plaintiff's services as an intermediary with the Deudors to work for

the amicable settlement of Civil Case No. Q-135, then pending also in the Court of First Instance of

Quezon City, and involving 50 quinones of land, of Which the 20 quinones aforementioned form part,

and notwithstanding his having performed his services, as in fact, a compromise agreement entered into

on March 16, 1963 between the Deudors and the defendants was approved by the court, the latter have

refused to convey to him the 3,000 square meters of land occupied by him, (a part of the 20 quinones

above) which said defendants had promised to do "within ten years from and after date of signing of the

compromise agreement", as consideration for his services.

Within the Period allowed by the rules, the defendants filed separate motions to dismiss alleging three

Identical grounds: (1) As regards that improvements made by plaintiff, that the complaint states no

cause of action, the agreement regarding the same having been made by plaintiff with the Deudors and

not with the defendants, hence the theory of plaintiff based on Article 2142 of the Code on unjust

enrichment is untenable; and (2) anent the alleged agreement about plaintiffs services as intermediary in

consideration of which, defendants promised to convey to him 3,000 square meters of land, that the

same is unenforceable under the Statute of Frauds, there being nothing in writing about it, and, in any

event, (3) that the action of plaintiff to compel such conveyance has already prescribed.

Plaintiff opposed the motion, insisting that Article 2142 of the applicable to his case; that the Statute of

Frauds cannot be invoked by defendants, not only because Article 1403 of the Civil Code refers only to

"sale of real property or of an interest therein" and not to promises to convey real property like the one

supposedly promised by defendants to him, but also because, he, the plaintiff has already performed his

part of the agreement, hence the agreement has already been partly executed and not merely executory

within the contemplation of the Statute; and that his action has not prescribed for the reason that

defendants had ten years to comply and only after the said ten years did his cause of action accrue, that

is, ten years after March 16, 1963, the date of the approval of the compromise agreement, and his

complaint was filed on January 24, 1964.

Ruling on the motion to dismiss, the trial court issued the herein impugned order of August 13, 1964:

III. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT FOR FAILURE

TO STATE A CAUSE OF ACTION IN SO FAR AS APPELLANT'S CLAIM FOR

REIMBURSEMENT OF EXPENSES AND FOR SERVICES RENDERED IN THE

IMPROVEMENT OF THE FIFTY (50) QUINONES IS CONCERNED.

As regards appellant's third assignment of error, We hold that the allegations in his complaint do not

sufficiently Appellants' reliance. on Article 2142 of Civil Code is misplaced. Said article provides:

Certain lawful, voluntary and unilateral acts give rise to the juridical relation of

quasi-contract to the end that no one shall be unjustly enriched or benefited at the

expense of another.

From the very language of this provision, it is obvious that a presumed qauasi-contract cannot emerge as

against one party when the subject mater thereof is already covered by an existing contract with another

party. Predicated on the principle that no one should be allowed to unjustly enrich himself at the

expense of another, Article 2124 creates the legal fiction of a quasi-contract precisely because of the

absence of any actual agreement between the parties concerned. Corollarily, if the one who claims

having enriched somebody has done so pursuant to a contract with a third party, his cause of action

should be against the latter, who in turn may, if there is any ground therefor, seek relief against the

party benefited. It is essential that the act by which the defendant is benefited must have been voluntary

and unilateral on the part of the plaintiff. As one distinguished civilian puts it, "The act is voluntary.

because the actor in quasi-contracts is not bound by any pre-existing obligation to act. It is unilateral,

because it arises from the sole will of the actor who is not previously bound by any reciprocal or bilateral

agreement. The reason why the law creates a juridical relations and imposes certain obligation is to

prevent a situation where a person is able to benefit or take advantage of such lawful, voluntary and

unilateral acts at the expense of said actor." (Ambrosio Padilla, Civil Law, Vol. VI, p. 748, 1969 ed.) In the

case at bar, since appellant has a clearer and more direct recourse against the Deudors with whom he

had entered into an agreement regarding the improvements and expenditures made by him on the land


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of appellees. it Cannot be said, in the sense contemplated in Article 2142, that appellees have been

enriched at the expense of appellant.

In the ultimate. therefore, Our holding above that appellant's first two assignments of error are well

taken cannot save the day for him. Aside from his having no cause of action against appellees, there is

one plain error of omission. We have found in the order of the trial court which is as good a ground as

any other for Us to terminate this case favorably to appellees. In said order Which We have quoted in full

earlier in this opinion, the trial court ruled that "the grounds relied upon in said motion are mere

repetitions of those already resolved and discussed by this Court in the order of August 13, 1964", an

observation which We fully share. Virtually, therefore. appellant's motion for reconsideration was ruled

to be pro-forma. Indeed, a cursory reading of the record on appeal reveals that appellant's motion for

reconsideration above-quoted contained exactly the same arguments and manner of discussion as his

February 6, 1964 "Opposition to Motion to Dismiss" of defendant Gregorio Araneta, Inc. ((pp. 17-25, Rec.

on Appeal) as well as his February 17, 1964 "Opposition to Motion to Dismiss of Defendant J. M. Tuason

& Co." (pp. 33-45, Rec. on Appeal and his February 29, 1964 "Rejoinder to Reply Oil Defendant J. M.

Tuason & Co." (pp. 52-64, Rec. on Appeal) We cannot see anything in said motion for reconsideration

that is substantially different from the above oppositions and rejoinder he had previously submitted andwhich the trial court had already considered when it rendered its main order of dismissal. Consequently,

appellant's motion for reconsideration did not suspend his period for appeal. (Estrada vs. Sto. Domingo,

28 SCRA 890, 905-6.) And as this point was covered by appellees' "Opposition to Motion for

Reconsideration" (pp. 8689), hence, within the frame of the issues below, it is within the ambit of Our

authority as the Supreme Court to consider the same here even if it is not discussed in the briefs of the

parties. (Insular Life Assurance Co., Ltd. Employees Association-NATU vs. Insular Life Assurance Co., Ltd.

[Resolution en banc of March 10, 1977 in G. R. No. L-25291).

Now, the impugned main order was issued on August 13, 1964, while the appeal was made on

September 24, 1964 or 42 days later. Clearly, this is beyond the 30-day reglementary period for appeal.

Hence, the subject order of dismissal was al ready final and executory when appellant fil ed his appeal.

WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No costs.


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G.R. No. L-9188 December 4, 1914

GUTIERREZ HERMANOS,plaintiff-appellee,

vs.

ENGRACIO ORENSE,defendant-appellant.

TORRES,J.:

Appeal through bill of exceptions filed by counsel for the appellant from the judgment on April 14, 1913,

by the Honorable P. M. Moir, judge, wherein he sentenced the defendant to make immediate delivery of

the property in question, through a public instrument, by transferring and conveying to the plaintiff all

his rights in the property described in the complaint and to pay it the sum of P780, as damages, and the

costs of the suit.

On March 5, 1913, counsel for Gutierrez Hermanos filed a complaint, afterwards amended, in the Court

of First Instance of Albay against Engacio Orense, in which he set forth that on and before February 14,

1907, the defendant Orense had been the owner of a parcel of land, with the buildings and

improvements thereon, situated in the pueblo of Guinobatan, Albay, the location, area and boundaries

of which were specified in the complaint; that the said property has up to date been recorded in the new

property registry in the name of the said Orense, according to certificate No. 5, with the boundaries

therein given; that, on February 14, 1907, Jose Duran, a nephew of the defendant, with the latter's

knowledge and consent, executed before a notary a public instrument whereby he sold and conveyed to

the plaintiff company, for P1,500, the aforementioned property, the vendor Duran reserving to himself

the right to repurchase it for the same price within a period of four years from the date of the said

instrument; that the plaintiff company had not entered into possession of the purchased property, owing

to its continued occupancy by the defendant and his nephew, Jose Duran, by virtue of a contract of lease

executed by the plaintiff to Duran, which contract was in force up to February 14, 1911; that the said

instrument of sale of the property, executed by Jose Duran, was publicly and freely confirmed and

ratified by the defendant Orense; that, in order to perfect the title to the said property, but that the

defendant Orense refused to do so, without any justifiable cause or reason, wherefore he should be

compelled to execute the said deed by an express order of the court, for Jose Duran is notoriously

insolvent and cannot reimburse the plaintiff company for the price of the sale which he received, nor pay

any sum whatever for the losses and damages occasioned by the said sale, aside from the fact that the

plaintiff had suffered damage by losing the present value of the property, which was worth P3,000; that,

unless such deed of final conveyance were executed in behalf of the plaintiff company, it would be

injured by the fraud perpetrated by the vendor, Duran, in connivance with the defendant; that the latter

had been occupying the said property since February 14, 1911, and refused to pay the rental thereof,

notwithstanding the demand made upon him for its payment at the rate of P30 per month, the just and

reasonable value for the occupancy of the said property, the possession of which the defendant likewise

refused to deliver to the plaintiff company, in spite of the continuous demands made upon him, the

defendant, with bad faith and to the prejudice of the firm of Gutierrez Hermanos, claiming to have rights

of ownership and possession in the said property. Therefore it was prayed that judgment be rendered by

holding that the land and improvements in question belong legitimately and exclusively to the plaintiff,

and ordering the defendant to execute in the plaintiff's behalf the said instrument of transfer and

conveyance of the property and of all the right, interest, title and share which the defendant has therein;

that the defendant be sentenced to pay P30 per month for damages and rental of the property from

February 14, 1911, and that, in case these remedies were not granted to the plaintiff, the defendant be

sentenced to pay to it the sum of P3,000 as damages, together with interest thereon since the date of

the institution of this suit, and to pay the costs and other legal expenses.

The demurrer filed to the amended complaint was overruled, with exception on the part of thedefendant, whose counsel made a general denial of the allegations contained in the complaint, excepting

those that were admitted, and specifically denied paragraph 4 thereof to the effect that on February 14,

1907, Jose Duran executed the deed of sale of the property in favor of the plaintiff with the defendant's

knowledge and consent.1awphil.net

As the first special defense, counsel for the defendant alleged that the facts set forth in the complaint

with respect to the execution of the deed did not constitute a cause of action, nor did those alleged in

the other form of action for the collection of P3,000, the value of the realty.

As the second special defense, he alleged that the defendant was the lawful owner of the property

claimed in the complaint, as his ownership was recorded in the property registry, and that, since his title

had been registered under the proceedings in rem prescribed by Act No. 496, it was conclusive against

the plaintiff and the pretended rights alleged to have been acquired by Jose Duran prior to such

registration could not now prevail; that the defendant had not executed any written power of attorney

nor given any verbal authority to Jose Duran in order that the latter might, in his name and

representation, sell the said property to the plaintiff company; that the defendant's knowledge of the

said sale was acquired long after the execution of the contract of sale between Duran and Gutierrez

Hermanos, and that prior thereto the defendant did not intentionally and deliberately perform any act

such as might have induced the plaintiff to believe that Duran was empowered and authorized by the


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defendant and which would warrant him in acting to his own detriment, under the influence of that

belief. Counsel therefore prayed that the defendant be absolved from the complaint and that the

plaintiff be sentenced to pay the costs and to hold his peace forever.

After the hearing of the case and an examination of the evidence introduced by both parties, the court

rendered the judgment aforementioned, to which counsel for the defendant excepted and moved for a

new trial. This motion was denied, an exception was taken by the defendant and, upon presentation of

the proper bill of exceptions, the same was approved, certified and forwarded to the clerk of his court.

This suit involves the validity and efficacy of the sale under right of redemption of a parcel of land and a

masonry house with the niparoof erected thereon, effected by Jose Duran, a nephew of the owner of

the property, Engracio Orense, for the sum of P1,500 by means of a notarial instrument executed and

ratified on February 14, 1907.

After the lapse of the four years stipulated for the redemption, the defendant refused to deliver the

property to the purchaser, the firm of Gutierrez Hermanos, and to pay the rental thereof at the rate of

P30 per month for its use and occupation since February 14, 1911, when the period for its repurchase

terminated. His refusal was based on the allegations that he had been and was then the owner of the

said property, which was registered in his name in the property registry; that he had not executed any

written power of attorney to Jose Duran, nor had he given the latter any verbal authorization to sell the

said property to the plaintiff firm in his name; and that, prior to the execution of the deed of sale, the

defendant performed no act such as might have induced the plaintiff to believe that Jose Duran was

empowered and authorized by the defendant to effect the said sale.

The plaintiff firm, therefore, charged Jose Duran, in the Court of First Instance of the said province, with

estafa, for having represented himself in the said deed of sale to be the absolute owner of the aforesaid

land and improvements, whereas in reality they did not belong to him, but to the defendant Orense.

However, at the trial of the case Engracio Orense, called as a witness, being interrogated by the fiscal as

to whether he and consented to Duran's selling the said property under right of redemption to the firm

of Gutierrez Hermanos, replied that he had. In view of this statement by the defendant, the court

acquitted Jose Duran of the charge of estafa.

As a result of the acquittal of Jose Duran, based on the explicit testimony of his uncle, Engacio Orense,

the owner of the property, to the effect that he had consented to his nephew Duran's selling the

property under right of repurchase to Gutierrez Hermanos, counsel for this firm filed a complainant

praying, among other remedies, that the defendant Orense be compelled to execute a deed for the

transfer and conveyance to the plaintiff company of all the right, title and interest with Orense had in the

property sold, and to pay to the same the rental of the property due from February 14, 1911.itc-alf

Notwithstanding the allegations of the defendant, the record in this case shows that he did give his

consent in order that his nephew, Jose Duran, might sell the property in question to Gutierrez Hermanos,

and that he did thereafter confirm and ratify the sale by means of a public instrument executed before a

notary.

It having been proven at the trial that he gave his consent to the said sale, it follows that the defendant

conferred verbal, or at least implied, power of agency upon his nephew Duran, who accepted it in the

same way by selling the said property. The principal must therefore fulfill all the obligations contracted

by the agent, who acted within the scope of his authority. (Civil Code, arts. 1709, 1710 and 1727.)

Even should it be held that the said consent was granted subsequently to the sale, it is unquestionable

that the defendant, the owner of the property, approved the action of his nephew, who in this case

acted as the manager of his uncle's business, and Orense'r ratification produced the effect of an express

authorization to make the said sale. (Civil Code, arts. 1888 and 1892.)

Article 1259 of the Civil Code prescribes: "No one can contract in the name of another without being

authorized by him or without his legal representation according to law.

A contract executed in the name of another by one who has neither his authorization nor

legal representation shall be void, unless it should be ratified by the person in whose name it

was executed before being revoked by the other c ontracting party.

The sworn statement made by the defendant, Orense, while testifying as a witness at the trial of Duran

for estafa, virtually confirms and ratifies the sale of his property effected by his nephew, Duran, and,

pursuant to article 1313 of the Civil Code, remedies all defects which the contract may have contained

from the moment of its execution.

The sale of the said property made by Duran to Gutierrez Hermanos was indeed null and void in the

beginning, but afterwards became perfectly valid and cured of the defect of nullity it bore at its

execution by the confirmation solemnly made by the said owner upon his stating under oath to the judge

that he himself consented to his nephew Jose Duran's making the said sale. Moreover, pursuant to

article 1309 of the Code, the right of action for nullification that could have been brought became legally


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extinguished from the moment the contract was validly confirmed and ratified, and, in the present case,

it is unquestionable that the defendant did confirm the said contract of sale and consent to its execution.

On the testimony given by Engacio Orense at the trial of Duran for estafa, the latter was acquitted, and it

would not be just that the said testimony, expressive of his consent to the sale of his property, which

determined the acquittal of his nephew, Jose Duran, who then acted as his business manager, and which

testimony wiped out the deception that in the beginning appeared to have been practiced by the said

Duran, should not now serve in passing upon the conduct of Engracio Orense in relation to the firm of

Gutierrez Hermanos in order to prove his consent to the sale of his property, for, had it not been for the

consent admitted by the defendant Orense, the plaintiff would have been the victim of estafa.

If the defendant Orense acknowledged and admitted under oath that he had consented to Jose Duran's

selling the property in litigation to Gutierrez Hermanos, it is not just nor is it permissible for him

afterward to deny that admission, to the prejudice of the purchaser, who gave P1,500 for the said

property.

The contract of sale of the said property contained in the notarial instrument of February 14, 1907, is

alleged to be invalid, null and void under the provisions of paragraph 5 of section 335 of the Code of Civil

Procedure, because the authority which Orense may have given to Duran to make the said contract of

sale is not shown to have been in writing and signed by Orense, but the record discloses satisfactory and

conclusive proof that the defendant Orense gave his consent to the contract of sale executed in a public

instrument by his nephew Jose Duran. Such consent was proven in a criminal action by the sworn

testimony of the principal and presented in this civil suit by other sworn testimony of the same principal

and by other evidence to which the defendant made no objection. Therefore the principal is bound to

abide by the consequences of his agency as though it had actually been given in writing (Conlu vs.

Araneta and Guanko, 15 Phil. Rep., 387; Gallemit vs. Tabiliran, 20 Phil. Rep., 241; Kuenzle & Streiff vs.

Jiongco, 22 Phil. Rep., 110.)

The repeated and successive statements made by the defendant Orense in two actions, wherein he

affirmed that he had given his consent to the sale of his property, meet the requirements of the law and

legally excuse the lack of written authority, and, as they are a full ratification of the acts executed by his

nephew Jose Duran, they produce the effects of an express power of ag ency.

The judgment appealed from in harmony with the law and the merits of the case, and the errors

assigned thereto have been duly refuted by the foregoing considerations, so it should be affirmed.

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


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9

G.R. No. L-44546 January 29, 1988

RUSTICO ADILLE, petitioner,

vs.

THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA

ASEJO and SANTIAGO ASEJO, respondents.

SARMIENTO,J.:

In issue herein are property and property rights, a familiar subject of controversy and a wellspring of

enormous conflict that has led not only to protracted legal entanglements but to even more bitter

consequences, like strained relationships and even the forfeiture of lives. It is a question that likewise

reflects a tragic commentary on prevailing social and cultural values and institutions, where, as one

observer notes, wealth and its accumulation are the basis of self-fulfillment and where property is held

as sacred as life itself. "It is in the defense of his property," says this modern thinker, that one "will

mobilize his deepest protective devices, and anybody that threatens his possessions will arouse his most

passionate enmity."1

The task of this Court, however, is not to judge the wisdom of values; the burden of reconstructing the

social order is shouldered by the political leadership-and the people themselves.

The parties have come to this Court for relief and accordingly, our responsibility is to give them that

relief pursuant to the decree of law.

The antecedent facts are quoted from the decision2appealed from:

xxx xxx xxx

... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi

City with an area of some 11,325 sq. m. originally belonged to one Felisa Alzul as

her own private property; she married twice in her lifetime; the first, with one

Bernabe Adille, with whom she had as an only child, herein defendant Rustico

Adille; in her second marriage with one Procopio Asejo, her children were herein

plaintiffs, now, sometime in 1939, said Felisa sold the property in pacto de retro

to certain 3rd persons, period of repurchase being 3 years, but she died in 1942

without being able to redeem and after her death, but during the period of

redemption, herein defendant repurchased, by himself alone, and after that, he

executed a deed of extra-judicial partition representing himself to be the only heir

and child of his mother Felisa with the consequence that he was able to secure

title in his name alone also, so that OCT. No. 21137 in the name of his mother was

transferred to his name, that was in 1955; that was why after some efforts of

compromise had failed, his half-brothers and sisters, herein plaintiffs, filed present

case for partition with accounting on the position that he was only a trustee on an

implied trust when he redeemed,-and this is the evidence, but as it also turned out

that one of plaintiffs, Emeteria Asejo was occupying a portion, defendant

counterclaimed for her to vacate that,

Well then, after hearing the evidence, trial Judge sustained defendant in his

position that he was and became absolute owner, he was not a trustee, and

therefore, dismissed case and also condemned plaintiff occupant, Emeteria to

vacate; it is because of this that plaintiffs have come here and contend that trial

court erred in:

I. ... declaring the defendant absolute owner of the property;

II. ... not ordering the partition of the property; and

III. ... ordering one of the plaintiffs who is in possession of the portion of the

property to vacate the land, p. 1 Appellant's brief.

which can be reduced to simple question of whether or not on the basis of evidence and law, judgment

appealed from should be maintained.3

xxx xxx xxx

The respondent Court of appeals reversed the trial Court,4and ruled for the plaintiffs-appellants, the

private respondents herein. The petitioner now appeals, by way of certiorari, from the Court's decision.

We required the private respondents to file a comment and thereafter, having given due course to the

petition, directed the parties to file their briefs. Only the petitioner, however, filed a brief, and the

private respondents having failed to file one, we declared the case submitted for decision.


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10

The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property

held in common?

Essentially, it is the petitioner's contention that the property subject of dispute devolved upon him upon

the failure of his co-heirs to join him in its redemption within the period required by law. He relies on the

provisions of Article 1515 of the old Civil Article 1613 of the present Code, giving the vendee a retro the

right to demand redemption of the entire property.

There is no merit in this petition.

The right of repurchase may be exercised by a co-owner with aspect to his share alone.5 While the

records show that the petitioner redeemed the property in its entirety, shouldering the expenses

therefor, that did not make him the owner of all of it. In other words, it did not put to end the existing

state of co-ownership.

Necessary expenses may be incurred by one co-owner, subject to his right to collect reimbursement

from the remaining co-owners.6 There is no doubt that redemption of property entails a necessary

expense. Under the Civil Code:

ART. 488. Each co-owner shall have a right to compel the other co-owners to

contribute to the expenses of preservation of the thing or right owned in common

and to the taxes. Any one of the latter may exempt himself from this obligation by

renouncing so much of his undivided interest as may be equivalent to his share of

the expenses and taxes. No such waiver shall be made if it is prejudicial to the co-

ownership.

The result is that the property remains to be in a condition of co-ownership. While a vendee a retro,

under Article 1613 of the Code, "may not be compelled to consent to a partial redemption," the

redemption by one co-heir or co-owner of the property in its totality does not vest in him ownership

over it. Failure on the part of all the co-owners to redeem it entitles the vendee a retro to retain the

property and consolidate title thereto in his name.7But the provision does not give to the redeeming co-

owner the right to the entire property. It does not provide for a mode of terminating a co-ownership.

Neither does the fact that the petitioner had succeeded in securing title over the parcel in his name

terminate the existing co-ownership. While his half-brothers and sisters are, as we said, liable to him for

reimbursement as and for their shares in redemption expenses, he cannot claim exclusive right to the

property owned in common. Registration of property is not a means of acquiring ownership. It operates

as a mere notice of existing title, that is, if there is one.

The petitioner must then be said to be a trustee of the property on behalf of the private respondents.

The Civil Code states:

ART. 1456. If property is acquired through mistake or fraud, the person obtaining it

is, by force of law, considered a trustee of an implied trust for the benefit of the

person from whom the property comes.

We agree with the respondent Court of Appeals that fraud attended the registration of the property. The

petitioner's pretension that he was the sole heir to the land in the affidavit of extrajudicial settlement he

executed preliminary to the registration thereof betrays a clear effort on his part to defraud his brothers

and sisters and to exercise sole dominion over the property. The aforequoted provision therefore

applies.

It is the view of the respondent Court that the petitioner, in taking over the property, did so either on

behalf of his co-heirs, in which event, he had constituted himself a negotiorum gestor under Article 2144

of the Civil Code, or for his exclusive benefit, in which case, he is guilty of fraud, and must act as trustee,

the private respondents being the beneficiaries, under the Article 1456. The evidence, of course, points

to the second alternative the petitioner having asserted claims of exclusive ownership over the property

and having acted in fraud of his co-heirs. He cannot therefore be said to have assume the mere

management of the property abandoned by his co-heirs, the situation Article 2144 of the Code

contemplates. In any case, as the respondent Court itself affirms, the result would be the same whether

it is one or the other. The petitioner would remain liable to the Private respondents, his co-heirs.

This Court is not unaware of the well-established principle that prescription bars any demand on

property (owned in common) held by another (co-owner) following the required number of years. In that

event, the party in possession acquires title to the property and the state of co-ownership is ended .8In

the case at bar, the property was registered in 1955 by the petitioner, solely in his name, while the claim

of the private respondents was presented in 1974. Has prescription then, set in?

We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership, must have

been preceded by repudiation (of the co-ownership). The act of repudiation, in turn is subject to certain

conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is clearly made

known to the other co-owners; (3) the evidence thereon is clear and conclusive, and (4) he has been in


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11

possession through open, continuous, exclusive, and notorious possession of the property for the period

required by law.9

The instant case shows that the petitioner had not complied with these requisites. We are not convinced

that he had repudiated the co-ownership; on the contrary, he had deliberately kept the private

respondents in the dark by feigning sole heirship over the estate under dispute. He cannot therefore be

said to have "made known" his efforts to deny the co-ownership. Moreover, one of the private

respondents, Emeteria Asejo, is occupying a portion of the land up to the present, yet, the petitioner has

not taken pains to eject her therefrom. As a matter of fact, he sought to recover possession of that

portion Emeteria is occupying only as a counterclaim, and only after the private respondents had first

sought judicial relief.

It is true that registration under the Torrens system is constructive notice of title,10

but it has likewise

been our holding that the Torrens title does not furnish a shield for fraud.11

It is therefore no argument

to say that the act of registration is equivalent to notice of repudiation, assuming there was one,

notwithstanding the long-standing rule that registration operates as a universal notice of title.

For the same reason, we cannot dismiss the private respondents' claims commenced in 1974 over the

estate registered in 1955. While actions to enforce a constructive trust prescribes in ten years,12

reckoned from the date of the registration of the property,13

we, as we said, are not prepared to count

the period from such a date in this case. We note the petitioner's sub rosa efforts to get hold of the

property exclusively for himself beginning with his fraudulent misrepresentation in his unilateral affidavit

of extrajudicial settlement that he is "the only heir and child of his mother Feliza with the consequence

that he was able to secure title in his name also."14

Accordingly, we hold that the right of the private

respondents commenced from the time they actually discovered the petitioner's act of defraudation.15

According to the respondent Court of Appeals, they "came to know [of it] apparently only during the

progress of the litigation." 16Hence, prescription is not a bar.

Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in a motion

to dismiss or in the answer otherwise it is deemed waived,17

and here, the petitioner never raised that

defense.18

There are recognized exceptions to this rule, but the petitioner has not shown why they

apply.

WHEREFORE, there being no reversible error committed by the respondent Court of Appeals, the

petition is DENIED. The Decision sought to be reviewed is hereby AFFIRMED in toto. No pronouncement

as to costs.

SO ORDERED,


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12

G.R. No. 82670 September 15, 1989

DOMETILA M. ANDRES, doing business under the name and style "IRENE'S WEARING APPAREL,"

petitioner,

vs.

MANUFACTURERS HANOVER & TRUST CORPORATION and COURT OF APPEALS, respondents.

CORTES,J.:

Assailed in this petition for review on certiorariis the judgment of the Court of Appeals, which, applying

the doctrine of solutio indebiti, reversed the decision of the Regional Trial Court, Branch CV, Quezon City

by deciding in favor of private respondent.

Petitioner, using the business name "Irene's Wearing Apparel," was engaged in the manufacture of ladies

garments, children's wear, men's apparel and linens for local and foreign buyers. Among its foreign

buyers was Facets Funwear, Inc. (hereinafter referred to as FACETS ) of the United States.

In the course of the business transaction between the two, FACETS from time to time remitted certain

amounts of money to petitioner in payment for the items it had purchased. Sometime in August 1980,

FACETS instructed the First National State Bank of New Jersey, Newark, New Jersey, U.S.A. (hereinafter

referred to as FNSB) to transfer $10,000.00 to petitioner via Philippine National Bank, Sta. Cruz Branch,

Manila (hereinafter referred to as PNB).

Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover and Trust

Corporation to effect the above- mentioned transfer through its facilities and to charge the amount to

the account of FNSB with private respondent. Although private respondent was able to send a telex to

PNB to pay petitioner $10,000.00 through the Pilipinas Bank, where petitioner had an account, the

payment was not effected immediately because the payee designated in the telex was only "Wearing

Apparel." Upon query by PNB, private respondent sent PNB another telex dated August 27, 1980 stating

that the payment was to be made to "Irene's Wearing Apparel." On August 28, 1980, petitioner received

the remittance of $10,000.00 through Demand Draft No. 225654 of the PNB.

Meanwhile, on August 25, 1980, after learning about the delay in the remittance of the money to

petitioner, FACETS informed FNSB about the situation. On September 8, 1980, unaware that petitioner

had already received the remittance, FACETS informed private respondent about the delay and at the

same time amended its instruction by asking it to effect the payment through the Philippine Commercial

and Industrial Bank (hereinafter referred to as PCIB) instead of PNB.

Accordingly, private respondent, which was also unaware that petitioner had already received the

remittance of $10,000.00 from PNB instructed the PCIB to pay $10,000.00 to petitioner. Hence, on

September 11, 1980, petitioner received a second $10,000.00 remittance.

Private respondent debited the account of FNSB for the second $10,000.00 remittance effected through

PCIB. However, when FNSB discovered that private respondent had made a duplication of the

remittance, it asked for a recredit of its account in the amount of $10,000.00. Private respondent

complied with the request.

Private respondent asked petitioner for the return of the second remittance of $10,000.00 but the latter

refused to pay. On May 12, 1982 a complaint was filed with the Regional Trial Court, Branch CV, Quezon

City which was decided in favor of petitioner as defendant. The trial court ruled that Art. 2154 of the

New Civil Code is not applicable to the case because the second remittance was made not by mistake but

by negligence and petitioner was not unjustly enriched by virtue thereof [Record, p. 234]. On appeal, the

Court of Appeals held that Art. 2154 is applicable and reversed the RTC decision. The dispositive portion

of the Court of Appeals' decision reads as follows:

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and

another one entered in favor of plaintiff-appellant and against defendant-appellee

Domelita (sic) M. Andres, doing business under the name and style "Irene's

Wearing Apparel" to reimburse and/or return to plaintiff-appellant the amount of

$10,000.00, its equivalent in Philippine currency, with interests at the legal rate

from the filing of the complaint on May 12, 1982 until the whole amount is fully

paid, plus twenty percent (20%) of the amount due as attomey's fees; and to pay

the costs.

With costs against defendant-appellee.

SO ORDERED. [Rollo, pp. 29-30.]

Thereafter, this petition was filed. The sole issue in this case is whether or not the private respondent

has the right to recover the second $10,000.00 remittance it had delivered to petitioner. The resolution

of this issue would hinge on the applicability of Art. 2154 of the New Civil Code which provides that:


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13

Art. 2154. If something received when there is no right to demand it, and it was

unduly delivered through mistake, the obligation to return it arises.

This provision is taken from Art. 1895 of the Spanish Civil Code which provided that:

Art. 1895. If a thing is received when there was no right to claim it and which,

through an error, has been unduly delivered, an obligation to restore it arises.

In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice Bocobo explained the

nature of this article thus:

Article 1895 [now Article 2154] of the Civil Code abovequoted, is therefore

applicable. This legal provision, which determines the quasi-contract of solution

indebiti, is one of the concrete manifestations of the ancient principle that no one

shall enrich himself unjustly at the expense of another. In the Roman Law Digest

the maxim was formulated thus: "Jure naturae acquum est, neminem cum alterius

detrimento et injuria fieri locupletiorem."And the Partidas declared: "Ninguno non

deue enriquecerse tortizeramente con dano de otro." Such axiom has grown

through the centuries in legislation, in the science of law and in court decisions.

The lawmaker has found it one of the helpful guides in framing statutes and codes.

Thus, it is unfolded in many articles scattered in the Spanish Civil Code. (See for

example, articles, 360, 361, 464, 647, 648, 797, 1158, 1163, 1295, 1303, 1304,

1893 and 1895, Civil Code.) This time-honored aphorism has also been adopted by

jurists in their study of th e conflict of rig hts. It has been accepted by th e courts,

which have not hesitated to apply it when the exigencies of right and equity

demanded its assertion. It is a part of that affluent reservoir of justice upon which

judicial discretion draws whenever the statutory laws are inadequate because they

do not speak or do so with a confused voice. [at p. 632.]

For this article to apply the following requisites must concur: "(1) that he who paid was not under

obligation to do so; and, (2) that payment was made by reason of an essential mistake of fact" [City of

Cebu v. Piccio, 110 Phil. 558, 563 (1960)].

It is undisputed that private respondent delivered the second $10,000.00 remittance. However,

petitioner contends that the doctrine of solutio indebiti, does not apply because its requisites are absent.

First, it is argued that petitioner had the right to demand and therefore to retain the second $10,000.00

remittance. It is alleged that even after the two $10,000.00 remittances are credited to petitioner's

receivables from FACETS, the latter allegedly still had a balance of $49,324.00. Hence, it is argued that

the last $10,000.00 remittance being in payment of a pre-existing debt, petitioner was not thereby

unjustly enriched.

The contention is without merit.

The contract of petitioner, as regards the sale of garments and other textile products, was with FACETS.

It was the latter and not private respondent which was indebted to petitioner. On the other hand, the

contract for the transmittal of dollars from the United States to petitioner was entered into by private

respondent with FNSB. Petitioner, although named as the payee was not privy to the contract of

remittance of dollars. Neither was private respondent a party to the contract of sale between petitioner

and FACETS. There being no contractual relation between them, petitioner has no right to apply the

second $10,000.00 remittance delivered by mistake by private respondent to the outstanding account of

FACETS.

Petitioner next contends that the payment by respondent bank of the second $10,000.00 remittance was

not made by mistake but was the result of negligence of its employees. In connection with this the Court

of Appeals made the following finding of facts:

The fact that Facets sent only one remittance of $10,000.00 is not disputed. In the

written interrogatories sent to the First National State Bank of New Jersey through

the Consulate General of the Philippines in New York, Adelaide C. Schachel, the

investigation and reconciliation clerk in the said bank testified that a request to

remit a payment for Facet Funwear Inc. was made in August, 1980. The total

amount which the First National State Bank of New Jersey actually requested the

plaintiff-appellant Manufacturers Hanover & Trust Corporation to remit to Irene's

Wearing Apparel was US $10,000.00. Only one remittance was requested by First

National State Bank of New Jersey as per instruction of Facets Funwear (Exhibit "J",

pp. 4-5).

That there was a mistake in the second remittance of US $10,000.00 is borne out

by the fact that both remittances have the same reference invoice number which

is 263 80. (Exhibits "A-1- Deposition of Mr. Stanley Panasow" and "A-2-Deposition

of Mr. Stanley Panasow").


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14

Plaintiff-appellant made the second remittance on the wrong assumption that

defendant-appellee did not receive the first remittance of US $10,000.00. [Rollo,

pp. 26-27.]

It is evident that the claim of petitioner is anchored on the appreciation of the attendant facts which

petitioner would have this Court review. The Court holds that the finding by the Court of Appeals that

the second $10,000.00 remittance was made by mistake, being based on substantial evidence, is final

and conclusive. The rule regarding questions of fact being raised with this Court in a petition for

certiorariunder Rule 45 of the Revised Rules of Court has been stated in Remalante v. Tibe, G.R. No.

59514, February 25, 1988, 158 SCRA 138, thus:

The rule in this jurisdiction is that only questions of law may be raised in a petition

for certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the

Supreme Court in cases brought to it from the Court of Appeals is limited to

reviewing and revising the errors of law imputed to it, its findings of fact being

conclusive" [Chan v. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA

737, reiterating a long line of decisions]. This Court has emphatically declared that

"it is not the function of the Supreme Court to analyze or weigh such evidence all

over again, its jurisdiction being limited to reviewing errors of law that might have

been committed by the lower court" [Tiongco v. De la Merced, G.R. No. L-24426,

July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No. L-62482, April 28,

1983, 121 SCRA 865; Baniqued v. Court of Appeals, G. R. No. L-47531, February 20,

1984, 127 SCRA 596]. "Barring, therefore, a showing that the findings complained

of are totally devoid of support in the record, or that they are so glaringly

erroneous as to constitute serious abuse of discretion, such findings must stand,

for this Court is not expected or required to examine or contrast the oral and

documentary evidence submitted by the parties" [Santa Ana, Jr. v. Hernandez, G.R.

No. L-16394, December 17, 1966, 18 SCRA 9731. [at pp. 144-145.]

Petitioner invokes the equitable principle that when one of two innocent persons must suffer by the

wrongful act of a third person, the loss must be borne by the one whose negligence was the proximate

cause of the loss.

The rule is that principles of equity cannot be applied if there is a provision of law specifically applicable

to a case [Phil. Rabbit Bus Lines, Inc. v. Arciaga, G.R. No. L-29701, March 16, 1987,148 SCRA 433; Zabat,

Jr. v. Court of Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA 587; Rural Bank of Paranaque, Inc. v.

Remolado, G.R. No. 62051, March 18, 1985, 135 SCRA 409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence,

the Court in the case of De Garcia v. Court of Appeals,G.R. No. L-20264, January 30, 1971, 37 SCRA 129,

citingAznar v. Yapdiangco , G.R. No. L-18536, March 31, 1965, 13 SCRA 486, held:

... The common law principle that where one of two innocent persons must suffer

by a fraud perpetrated by another, the law imposes the loss upon the party who,

by his misplaced confidence, has enabled the fraud to be committed, cannot be

applied in a case which is covered by an express provision of the new Civil Code,

specifically Article 559. Between a common law principle and a statutory provision,

the latter must prevail in this jurisdiction. [at p. 135.]

Having shown that Art. 2154 of the Civil Code, which embodies the doctrine of solutioindebiti, applies in

the case at bar, the Court must reject the common law principle invoked by petitioner.

Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the fact that from

the time the second $10,000.00 remittance was made, five hundred and ten days had elapsed before

private respondent demanded the return thereof. Needless to say, private respondent instituted the

complaint for recovery of the second $10,000.00 remittance well within the six years prescriptive period

for actions based upon a quasi-contract [Art. 1145 of the New Civil Code].

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.


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15

G.R. No. L-17447 April 30, 1963

GONZALO PUYAT & SONS, INC.,plaintiff-appelle,

vs.

CITY OF MANILA AND MARCELO SARMIENTO, as City Treasurer of Manila, defendants-appellants

PAREDES,J.:

This is an appeal from the judgment of the CFI of Manila, the dispostive portion of which reads:

"xxx Of the payments made by the plaintiff, only that made on October 25, 1950 in the

amount of P1,250.00 has prescribed Payments made in 1951 and thereafter are still

recoverable since the extra-judicial demand made on October 30, 1956 was well within the

six-year prescriptive period of the New CivilCode.

In view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiff,

ordering the defendants to refund the amount of P29,824.00, without interest. No costs.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted

and approved by this Honorable Court, without prejudice to the parties adducing other

evidence to prove their case not covered by t his stipulation of facts. 1wph1.t

Defendants' counterclaim is hereby dismissed for not having been substantiated."

On August 11, 1958, the plaintiff Gonzalo Puyat & Sons, Inc., filed an action for refund of Retail

DealerlsTaxes paid by it, corresponding to the first Quarter of 1950 up to the third Quarter of 1956,

amounting to P33,785.00, against the City of Manila and its City Treasurer.The case was submitted onthe following stipulation of facts, to wit--

"1. That the plaintiff is a corporation duly organized and existing according to the laws of the

Philippines, with offices at Manila; while defendant City Manila is a Municipal Corporation

duly organized in accordance with the laws of the Philippines, and defendant Marcelino

Sarmiento is the dulyqualified incumbent City Treasurer of Manila;

"2. That plaintiff is engaged in the business of manufacturing and selling all kinds of furniture

at its factory at 190 Rodriguez-Arias, San Miguel, Manila, and has a display room located at

604-606 Rizal Avenue, Manila, wherein it displays the various kind of furniture manufactured

by it and sells some goods imported by it, such as billiard balls, bowling balls and other

accessories;

"3. That acting pursuant to the provisions of Sec. 1. group II, of Ordinance No. 3364,

defendant City Treasurer of Manilaassessed from plaintiff retail dealer's tax corresponding to

the quarters hereunder stated on the sales of furniture manufactured and sold by it at its

factory site, all of which assessments plaintiff paid without protest in the erroneous belief

that it was liable therefor, on the dates and in the amount enumerated herein below:

Period Date Paid O.R. No.

Amount

Assessed

and Paid.

First Quarter 1950 Jan. 25, 1950 436271X P1,255.00

Second Quarter 1950Apr. 25,

1950215895X 1,250.00

Third Quarter 1950 Jul. 25, 1950 243321X 1,250.00

Fourth Quarter 1950Oct. 25,

1950271165X 1,250.00

(Follows the assessment for different quarters in 1951, 1952,

1953, 1954 and 1955, fixing the same amount quarterly.) x x x..

First Quarter 1956 Jan. 25, 1956 823047X 1,250.00

Second Quarter 1956Apr. 25,

1956855949X 1,250.00

Third Quarter 1956 Jul. 25, 1956 880789X 1,250.00

T O T A L . . . . . . . . . . . . .P33,785.00

===========


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16

"4. That plaintiff, being a manufacturer of various kinds of furniture, is exempt from the

payment of taxes imposed under the provisions of Sec. 1, Group II, of Ordinance No.

3364,which took effect on September 24, 1956, on the sale of the various kinds of furniture

manufactured by it pursuant to the provisions of Sec. 18(n) of Republic Act No. 409 (Revised

Charter of Manila), as restated in Section 1 of Ordinance No.3816.

"5. That, however, plaintiff, is liable for the payment of taxes prescribed in Section 1, Group II

or Ordinance No. 3364mas amended by Sec. 1, Group II of Ordinance No. 3816, which took

effect on September 24, 1956, on the sales of imported billiard balls, bowling balls and other

accessories at its displayroom. The taxes paid by the plaintiff on the sales of said article are as

follows:

x x x x x x x x x

"6. That on October 30, 1956, the plaintiff filed with defendant City Treasurer of Manila, a

formal request for refund of the retail dealer's taxes unduly paid by it as aforestated in

paragraph 3, hereof.

"7. That on July 24, 1958, the defendant City Treasurer of Maniladefinitely denied said

request for refund.

"8. Hence on August 21, 1958, plaintiff filed the present complaint.

"9. Based on the above stipulation of facts, the legal issues to be resolved by this Honorable

Court are: (1) the period of prescription applicable in matters of refund of municipal taxes

errenously paid by a taxpayer and (2) refund of taxes n ot paid under protest. x x x."

Said judgment was directly appealed to this Court on two dominant issues to wit: (1) Whether or not the

amounts paid by plaintiff-appelle, as retail dealer's taxes under Ordinance 1925, as amended by

Ordinance No. 3364of the City of Manila, without protest, are refundable;(2) Assuming arguendo, that

plaintiff-appellee is entitled to the refund of the retail taxes in question, whether or not the claim for

refund filed in October 1956, in so far as said claim refers to taxes paid from 1950 to 1952 has already

prescribed. .

Under the first issue, defendants-appellants contend tht the taxes in question were voluntarily paid by

appellee company and since, in this jurisdiction, in order that a legal basis arise for claim of refund of

taxes erroneously assessed, payment thereof must be made under protest, and this being a condition

sine qua non, and no protest having been made, -- verbally or in writing, therebyindicating that the

payment was voluntary, the action must fail. Cited in support of the above contention, are the cases of

Zaragoza vs. Alfonso, 46 Phil. 160-161, and Gavino v. Municipality of Calapan, 71 Phil. 438..

In refutation of the above stand of appellants, appellee avers tht the payments could not have been

voluntary.At most, they were paid "mistakenly and in good faith"and "without protest in the erroneous

belief that it was liable thereof." Voluntariness is incompatible with protest and mistake. It submits that

this is a simple case of "solutio indebiti"..

Appellants do not dispute the fact that appellee-companyis exempted from the payment of the tax in

question.This is manifest from the reply of appellant City Treasurer stating that sales of manufactured

products at the factory site are not taxable either under the Wholesalers Ordinance or under the

Retailers' Ordinance. With this admission, it would seem clear that the taxes collected from appellee

were paid, thru an error or mistake, which places said act of payment within the pale of the new Civil

Code provision on solutio indebiti. The appellant City of Manila, at the very start, notwithstanding the

Ordinance imposing the Retailer's Tax, had no right to demand payment thereof..

"If something is received when there is no right to demand it, and it was unduly delivered through

mistake, the obligationto retun it arises" (Art. 2154, NCC)..

Appelle categorically stated that the payment was not voluntarily made, (a fact found also by the lower

court),but on the erronoues belief, that they were due. Under this circumstance, the amount paid, even

without protest is recoverable. "If the payer was in doubt whether the debt was due, he may recover if

he proves that it was not due" (Art. 2156, NCC). Appellee had duly proved that taxes were not lawfully

due. There is, therefore, no doubt that the provisions of solutio indebtiti, the new Civil Code, apply to the

admitted facts of the case..

With all, appellant quoted Manresa as saying: "x x x De la misma opinion son el Sr. Sanchez Roman y el

Sr. Galcon, et cual afirma que si la paga se hizo por error de derecho, ni existe el cuasi-contrato ni esta

obligado a la restitucion el que cobro, aunque no se debiera lo que se pago" (Manresa, Tomo 12, paginas

611-612). This opinion, however, has already lost its persuasiveness, in view of the provisions of the Civil

Code, recognizing "error de derecho" as a basis for the quasi-contract, of solutio indebiti. .

"Payment by reason of a mistake in the contruction or application of a doubtful or difficult question of

law may come within the scope of the preceding article" (Art. 21555)..


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There is no gainsaying the fact that the payments made by appellee was due to a mistake in the

construction of a doubtful question of law. The reason underlying similar provisions, as applied to illegal

taxation, in the United States, is expressed in the case of Newport v. Ringo, 37 Ky. 635, 636; 10 S.W. 2, in

the following manner:.

"It is too well settled in this state to need the citation of authority that if money be paid through a clear

mistake of law or fact, essentially affecting the rights of the parties, and which in law or conscience was

not payable, and should not be retained by the party receiving it, it may be recovered. Both law and

sound morality so dictate. Especially should this be the rule as to illegal taxation. The taxpayer has no

voice in the impositionof the burden. He has the right to presume that the taxing power has been

lawfully exercised. He should not be required to know more than those in authority over him, nor should

he suffer loss by complying with what he bona fide believe to be his duty as a good citizen. Upon the

contrary, he should be promoted to its ready performance by refunding to him any legal exaction paid by

him in ignorance of its illegality; and, certainly, in such a case, if be subject to a penalty for nonpayment,

his compliance under belief of its legality, and without awaitinga resort to judicial proceedings should

not be regrded in law as so far voluntary as to affect his right of recovery.".

"Every person who through an act or performance by another, or any other means, acquires or comes

into possession of something at the expense of the latter without just or legal grounds, shall return the

same to him"(Art. 22, Civil Code). It would seems unedifying for the government, (here the City of

Manila), that knowing it has no right at all to collect or to receive money for alleged taxes paid by

mistake, it would be reluctant to return the same. No one should enrich itself unjustly at the expense of

another (Art. 2125, Civil Code)..

Admittedly, plaintiff-appellee paid the tax without protest.Equally admitted is the fact that section 76 of

the Charter of Manila provides that "No court shall entertain any suit assailing the validity of tax assessed

under this article until the taxpayer shall have paid, under protest the taxes assessed against him, xx". It

should be noted, however, that the article referred to in said section is Article XXI, entitled Department

of Assessment and the sections thereunder manifestly show that said article and its sections relate to

asseessment, collection and recovery of real estate taxes only. Said section 76, therefor, is not applicable

to the case at bar, which relates to the recover of retail dealer taxes..

In the opinion of the Secretary of Justice (Op. 90,Series of 1957, in a question similar to the case at bar, it

was held that the requiredment of protest refers only to the payment of taxes which are directly

imposed by the charter itself, that is, real estate taxes, which view was sustained by judicial and

administrative precedents, one of which is the case of Medina, et al., v. City of Baguio, G.R. No. L-4269,

Aug. 29, 1952. In other words, protest is not necessary for the recovery of retail dealer's taxes, like the

present, because they are not directly imposed by the charter. In the Medina case, the Charter of Baguio

(Chap. 61, Revised Adm. Code), provides that "no court shall entertain any suit assailing the validity of a

tax assessed unde this charter until the tax-payer shall have paid, under protest, the taxes assessed

against him (sec.25474[b], Rev. Adm. Code), a proviso similar to section 76 of the Manila Charter. The

refund of specific taxes paid under a void ordinance was ordered, although it did not appear that

payment thereof was made under protest..

In a recent case, We said: "The appellants argue that the sum the refund of which is sought by the

appellee, was not paid under protest and hence is not refundable. Again, the trial court correctly held

that being unauthorized, it is not a tax assessed under the Charter of the Appellant City of Davao and for

that reason, no protest is necessary for a claim or demand for its refund" (Citing the Medina case, supra;

East Asiatic Co., Ltd. v. City of Davao, G.R. No. L-16253, Aug. 21, 1962). Lastly, being a case of solutio

indebiti, protest is not required as a condition sine qua non for its application..

The next issue in discussion is that of prescription. Appellants maintain that article 1146 (NCC), which

provides for a period of four (4) years (upon injury to the rights of the plaintiff), apply to the case. On the

other hand, appellee contends that provisions of Act 190 (Code of Civ. Procedure) should apply, insofar

as payments made before the effectivity of the New Civil Code on August 30, 1950, the period of which is

ten (10) years, (Sec. 40,Act No. 190; Osorio v. Tan Jongko, 51 O.G. 6211) and article 1145 (NCC), for

payments made after said effectivity, providing for a period of six (6) years (upon quasi-contracts like

solutio indebiti). Even if the provisionsof Act No. 190 should apply to those payments made before the

effectivity of the new Civil Code, because "prescription already runnig before the effectivity of this Code

shall be governed by laws previously in force x x x" (art. 1116, NCC), for payments made after said

effectivity,providing for a period of six (6) years (upon quasi-contracts like solutio indebiti). Even if the

provisions of Act No. 190should apply to those payments made before the effectivity of the new Civil

Code, because "prescription already running before the effectivity of of this Code shall be govern by laws

previously in force xxx " (Art. 1116, NCC), Still payments made before August 30, 1950 are no longer

recoverable in view of the second paragraph of said article (1116), which provides:"but if since the time

this Code took effect the entire period herein required for prescription should elapse the present Code

shall be applicable even though by the former laws a longer period might be required". Anent the

payments made after August 30, 1950, it is abvious that the action has prescribed with respect to those

made before October 30, 1950 only, considering the fact that the prescription of action is interrupted xxx

when is a writteen extra-judicial demand x x x" (Art. 1155, NCC), and the written demand in the case at

bar was made on October 30, 1956 (Stipulation of Facts).MODIFIED in the sense that only payments


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made on or after October 30, 1950 should be refunded, the decision appealed from is affirmed, in all

other respects. No costs. .


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G.R. No. L-3756 June 30, 1952

SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE FILIPINAS, plaintiff-appellee,

vs.

NATIONAL COCONUT CORPORATION,defendant-appellant.

LABRADOR,J.:

This is an action to recover the possession of a piece of real property (land and warehouses) situated in

Pandacan Manila, and the rentals for its occupation and use. The land belongs to the plaintiff, in whose

name the title was registered before the war. On January 4, 1943, during the Japanese military

occupation, the land was acquired by a Japanese corporation by the name of Taiwan Tekkosho for the

sum of P140,00, and thereupon title thereto issued in its name (transfer certificate of title No. 64330,

Register of Deeds, Manila). After liberation, more specifically on April 4, 1946, the Alien Property

Custodian of the United States of America took possession, control, and custody thereof under section

12 of the Trading with the Enemy Act, 40 Stat., 411, for the reason that it belonged to an enemy

national. During the year 1946 the property was occupied by the Copra Export Management Company

under a custodianship agreement with United States Alien Property Custodian (Exhibit G), and when it

vacated the property it was occupied by the defendant herein. The Philippine Government made

representations with the Office Alien Property Custodian for the use of property by the Government (see

Exhibits 2, 2-A, 2-B, and 1). On March 31, 1947, the defendant was authorized to repair the warehouse

on the land, and actually spent thereon the repairs the sum of P26,898.27. In 1948, defendant leased

one-third of the warehouse to one Dioscoro Sarile at a monthly rental of P500, which was later raised to

P1,000 a month. Sarile did not pay the rents, so action was brought against him. It is not shown,

however, if the judgment was ever executed.

Plaintiff made claim to the property before the Alien Property Custodian of the United States, but as this

was denied, it brought an action in court (Court of First Instance of Manila, civil case No. 5007, entitled

"La Sagrada Orden Predicadores de la Provinicia del Santisimo Rosario de Filipinas," vs. Philippine Alien

Property Administrator, defendant, Republic of the Philippines, intervenor) to annul the sale of property

of Taiwan Tekkosho, and recover its possession. The Republic of the Philippines was allowed to intervene

in the action. The case did not come for trial because the parties presented a joint petition in which it is

claimed by plaintiff that the sale in favor of the Taiwan Tekkosho was null and void because it was

executed under threats, duress, and intimidation, and it was agreed that the title issued in the name of

the Taiwan Tekkosho be cancelled and the original title of plaintiff re-issued; that the claims, rights, title,

and interest of the Alien Property Custodian be cancelled and held for naught; that the occupant

National Coconut Corporation has until February 28, 1949, to recover its equipment from the property

and vacate the premises; that plaintiff, upon entry of judgment, pay to the Philippine Alien Property

Administration the sum of P140,000; and that the Philippine Alien Property Administration be free from

responsibility or liability for any act of the National Coconut Corporation, etc. Pursuant to the agreement

the court rendered judgment releasing the defendant and the intervenor from liability, but reversing to

the plaintiff the right to recover from the National Coconut Corporation reasonable rentals for the use

and occupation of the premises. (Exhibit A-1.)

The present action is to recover the reasonable rentals from August, 1946, the date when the defendant

began to occupy the premises, to the date it vacated it. The defendant does not contest its liability for

the rentals at the rate of P3,000 per month from February 28, 1949 (the date specified in the judgment

in civil case No. 5007), but resists the claim therefor prior to this date. It interposes the defense that it

occupied the property in good faith, under no obligation whatsoever to pay rentals for the use and

occupation of the warehouse. Judgment was rendered for the plaintiff to recover from the defendant

the sum of P3,000 a month, as reasonable rentals, from August, 1946, to the date the defendant vacates

the premises. The judgment declares that plaintiff has always been the owner, as the sale of Japanese

purchaser was void ab initio; that the Alien Property Administration never acquired any right to the

property, but that it held the same in trust until the determination as to whether or not the owner is an

enemy citizen. The trial court further declares that defendant can not claim any better rights than its

predecessor, the Alien Property Administration, and that as defendant has used the property and had

subleased portion thereof, it must pay reasonable rentals for its occupation.

Against this judgment this appeal has been interposed, the following assignment of error having been

made on defendant-appellant's behalf:

The trial court erred in holding the defendant liable for rentals or compensation for the use

and occupation of the property from the middle of August, 1946, to December 14, 1948.

1. Want to "ownership rights" of the Philippine Alien Property Administration did not render

illegal or invalidate its grant to the defendant of the free use of property.

2. the decision of the Court of First Instance of Manila declaring the sale by the plaintiff to the

Japanese purchaser null and void ab initio and that the plaintiff was and has remained as the

legal owner of the property, without legal interruption, is not conclusive.


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3. Reservation to the plaintiff of the right to recover from the defendant corporation not

binding on the later;

4. Use of the property for commercial purposes in itself alone does not justify payment of

rentals.

5. Defendant's possession was in good faith.

6. Defendant's possession in the nature of usufruct.

In reply, plaintiff-appellee's counsel contends that the Philippine Allien Property Administration (PAPA)

was a mere administrator of the owner (who ultimately was decided to be plaintiff), and that as

defendant has used it for commercial purposes and has leased portion of it, it should be responsible

therefore to the owner, who had been deprived of the possession for so many years. (Appellee's brief,

pp. 20, 23.)

We can not understand how the trial court, from the mere fact that plaintiff-appellee was the owner of

the property and the defendant-appellant the occupant, which used for its own benefit but by the

express permission of the Alien Property Custodian of the United States, so easily jumped to the

conclusion that the occupant is liable for the value of such use and occupation. If defendant-appellant is

liable at all, its obligations, must arise from any of the four sources of obligations, namley, law, contract

or quasi-contract, crime, or negligence. (Article 1089, Spanish Civil Code.) Defendant-appellant is not

guilty of any offense at all, because it entered the premises and occupied it with the permission of the

entity which had the legal control and administration thereof, the Allien Property Administration.

Neither was there any negligence on its part. There was also no privity (of contract or obligation)

between the Alien Property Custodian and the Taiwan Tekkosho, which had secured the possession of

the property from the plaintiff-appellee by the use of duress, such that the Alien Property Custodian or

its permittee (defendant-appellant) may be held responsible for the supposed illegality of the occupation

of the property by the said Taiwan Tekkosho. The Allien Property Administration had the control and

administration of the property not as successor to the interests of the enemy holder of the title, the

Taiwan Tekkosho, but by express provision of law (Trading with the Enemy Act of the United States, 40

Stat., 411; 50 U.S.C.A., 189). Neither is it a trustee of the former owner, the plaintiff-appellee herein, but

a trustee of then Government of the United States (32 Op. Atty. Gen. 249; 50 U.S.C.A. 283), in its own

right, to the exclusion of, and against the claim or title of, the enemy owner. (Youghioheny & Ohio Coal

Co. vs. Lasevich [1920], 179 N.W., 355; 171 Wis., 347; U.S.C.A., 282-283.) From August, 1946, when

defendant-appellant took possession, to

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