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EN BANC

G.R. No. L-12611 August 7, 1918

FELIPE AGONCILLO, and his wife, MARCELA MARIÑO, plaintiff-appellees, vs.CRISANTO JAVIER, administrator of the estate of the late Anastasio Alano. FLORENCIO ALANO and JOSE ALANO, defendants-appellants.

Basilio Aromin for appellants.Felipe Agoncillo for appellees.

FISHER, J.:

On the twenty-seventh day of February, 1904, Anastasio Alano, Jose Alano, and Florencio Alano executed in favor of the plaintiff, Da. Marcela Mariño, a document of the following tenor:

We, the undersigned, Jose Alano and Florencio Alano (on our own behalf), and Anastasio Alano (on behalf of his children Leonila, Anastasio and Leocadio), the former and the latter testamentary heirs of the Rev. Anastasio C. Cruz, deceased, hereby solemnly promise under oath:

1. We will pay to Da. Marcela Mariño within one year from this date together with interest thereon at the rate of 12 per cent per annum, the sum of P2,730.50, Philippine currency, this being the present amount of indebtedness incurred in favor of that lady on the 20th of April 1897, by our testator, the Rev. Anastasio C. Cruz;

2. To secure the payment of this debt we mortgage to the said Da. Marcela Mariño the house and lot bequeathed to us by the deceased, situated in this town, on calle Evangelista, formerly Asturias, recorded in the register of deeds on the twenty-second of April, 1895, under number 730;

3. In case of insolvency on our part, we cede by virtue of these presents the said house and lot to Da. Marcela Mariño, transferring to her all our rights to the ownership and possession of the lot; and if the said property upon appraisal at the time of the maturity of this obligation should not be of sufficient value to cover the total amount of this indebtedness, I, Anastasio Alano, also mortgage to the said lady my four parcels of land situated in the barrio of San Isidro, to secure the balance, if any; the title deeds of said property, as well as the title deeds of the said house and lot are this day delivered to Sr. Vicente Ilustre, general attorney-in-fact of Da. Marcela Mariño.

In witness whereof we have signed these presents in Batangas, this twenty-seventh day of February, 1904.

(Sgd.) JOSE ALANO.

(Sgd.) ANASTASIO ALANO.

(Sgd.) FLORENCIO ALANO.

No part of the interest or of the principal due upon this undertaking has been paid, except the sum of P200 paid in the year 1908 by the late Anastasio Alano.

In 1912, Anastasio Alano died intestate. At the instance of one of his creditors, proceedings upon the administration of his estate were had in the Court of First Instance of Batangas. By order dated August 8, 1914, the court appointed an administrator and a committee to hear claims. Notices were published, as required, in a newspaper of general circulation, to inform the creditors of the time and place at which they might appear to present their claims against the estate of the deceased (Exhibit No. 1). The time designated in the notice for the presentation of claims expired on March 24, 1915. It appears that no claims whatever were presented to the committee, and it having been shown to the court, by the statement of the administrator, that the claim of the creditor at whose instance the administration proceeding was commenced, had been settled by the heirs, the administrator was discharged and the proceeding terminated by order dated November 8, 1915.

On April 27, 1916, at the instance of the plaintiff, Da. Marcela Mariño, and upon the statement, made on her behalf, that she was a creditor of the deceased and that her claim was secured by mortgage upon real estate belonging to the said deceased, the court reopened the intestate proceeding, and appointed one Javier to be administrator of the estate. No request was made for a renewal of the commission of the committee on claims. The appellants Jose and Florencio Alano objected to the appointment of Javier, but their objection was overruled by the court.

On March 17, 1916, the plaintiffs filed the complaint in this action against Javier, as administrator of the estate of Anastasio Alano and against Florencio Alano and Jose Alano personally. The action is based upon the execution of the document of February 27, 1904, above set forth, which is transcribed literally in the complaint. It is averred that defendants have paid no part of the indebtedness therein acknowledged, with the exception of the P200 paid on account in 1908. It is further averred that on April 22, 1910, the debtors promised in writing that they would pay the debt in 1911, but that they had failed to do so. The prayer of the complaint is that, unless defendants pay the debt for the recovery of which the action was brought, they be required to convey to plaintiffs the house and lot described in paragraph two of the said document; that this property be appraised; and that if its value is found to be less than the amount of the debt, with the accrued interest at the stipulated rate, judgment be rendered in favor of the plaintiffs for the balance. No relief is requested with respect to the undertaking of Anastasio Alano expressed in the third paragraph of the document in suit, as guarantor for the payment of the difference, if any, between the value of the said house and lot and the total amount of the indebtedness.

The defendants answered denying generally the facts alleged in the complaint, and setting up, as special defenses that (1) any cause of action which plaintiff might have had against the estate of Anastasio Alano has been barred by failure of the plaintiff to present her claim to the committee on claims for allowance; (2) that the document upon which plaintiff relies does not constitute a valid mortgage; and (3) that as to all of the defendants, the action is barred by the general statute of limitations.

The findings of the trial court upon the evidence were substantially as follows:

1. That the document set forth in paragraph two of plaintiffs' complaint was executed by the deceased, Anastasio Alano, and by the defendants Javier and Jose Alano, as alleged;

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2. That one year after the execution of the document, plaintiffs made a demand upon Anastasio Alano, deceased, and the other two defendants herein, to comply with the terms of the agreement by the execution of the conveyance of the house and lot, but that they requested an extension of time for the payment of the debt, which was granted them;

3. That on March 27, 1908, the defendants paid P200 on account of the debt.

Upon these findings the court below gave judgment for plaintiffs, and from that judgment the defendants have appealed to his court upon the law and the facts.

The question raised by the appellants require us to analyze the document upon which this action is based, and to determine its legal effect. Appellants contend that the contract evidenced by that instrument is merely a loan coupled with an ineffectual attempt to create a mortgage to effect the payment of debt. The court below regarded it as a conveyance of the house and lot described in the contract, which took effect upon the failure of the debtors to pay the debt.

The principal undertaking evidenced by the document is, obviously, the payment of money. The attempt to create a mortgage upon the house and lot described in the second clause of the contract is, of course, invalid, as it is admitted that the so-called mortgage was never recorded. Equally inefficacious, and for the same reasons, is the purported mortgage by Anastasio Alano of his land in the barrio of San Isidro described in the third paragraph of the document. (Compañia General de Tabacos vs. Jeanjaquet, 12 Phil. Rep., 195.)

The agreement to convey the house and lot at an appraised valuation in the event of failure to pay the debt in money a t its maturity is, however, in our opinion, perfectly valid. It is simply an undertaking that if the debt is not paid in money, it will be paid in another way. As we read the contract, the agreement is not open to the objection that the stipulation is a pacto comisorio. It is not an attempt to permit the creditor to declare a forfeiture of the security upon the failure of the debtor to pay the debt at maturity. It is simply provided that if the debt is not paid in money it shall be paid in another specific was by the transfer of property at a valuation. Of course, such an agreement, unrecorded, creates no right in rem; but as between the parties it is perfectly valid, and specific performance of its terms may be enforced, unless prevented by the creation of superior rights in favor of third persons.

The contract now under consideration is not susceptible of the interpretation that the title to the house and lot in question was to be transferred to the creditor ipso facto upon the mere failure of the debtors to pay the debt at its maturity. The obligations assumed by the debtors were alternative, and they had the right to elect which they would perform (Civil Code, art. 1132). The conduct of the parties (Civil Code, art. 1782) shows that it was not their understanding that the right to discharge the obligation by the payment of money was lost to the debtors by their failure to pay the debt at its maturity. The plaintiff accepted a partial payment from Anastasio Alano in 1908, several years after the debt matured. The prayer of the complaint is that the defendants be required to execute a conveyance of the house and lot, after its appraisal, "unless the defendants pay the plaintiff the debt which is the subject of this action."

It is quite clear, therefore, that under the terms of the contract, as we read it, and as the parties themselves have interpreted it, the liability of the defendants as to the conveyance of the house and lot is subsidiary and conditional, being dependent upon their failure to pay the debt in money. It must follow, therefore, that if the action to recover the debt has prescribed, the action to compel a conveyance of the house and lot is likewise barred, as the agreement to make such conveyance was not an independent principal undertaking, but merely a subsidiary alternative pact relating to the method by which the debt might be paid.

The undertaking to pay the debt, acknowledged by the contract in suit, is indisputably conjoint (mancomunada). The concurrence of two or more debtors does not in itself create a solidary liability. Obligations in solido arise only when it is expressly stipulated that they shall have this character (Civil Code, art. 1137). That being so, the debt must be regarded as divided into as many equal parts as there are debtors, each part constituting a debt distinct from the others. (Civil Code, art. 1138.) The result of this principle is that the extinction of the debt of one of the various debtors does not necessarily affect the debts of the others.

It is contended on behalf of the administrator of the estate of Anastasio Alano that the failure of the plaintiff to present her claim for allowance to the committee on claims is a bar to her action so far as this defendant is concerned. We are of the opinion that this objection is well-taken. Section 695 of the Code of Civil Procedure expressly requires that a claim of this kind be presented for allowance to the committee, and declares that the failure to do so operates to extinguish the claim. The operation of this statute and the absolute nature of the bar which it interposes against the subsequent assertion of claims not presented in accordance with its requirements have frequently been considered by this court, and the doctrines announced need not be here repeated. (Estate of De Dios, 24 Phil. Rep., 573; Santos vs. Manarang, 27 Phil. Rep., 209). While it is true that under certain circumstances and within the statutory limits (sec. 690 of the Code of Civil Procedure) the probate court may renew the commission of the committee on claims, and permit the presentation of belated demands, in no case may a claim proper to be allowed by the committee, such as is the one now under consideration, be enforced by an original action against the executor or administrator of the state. Our opinion is, therefore, that the objection to the action interposed on behalf of the administrator of the estate of Anastasio Alano was well-taken and that the court erred in rejecting it.

This conclusion makes it unnecessary to consider the effect of the payment made by Anastasio Alano in 1908 as regards the interruption of the period of prescription with respect to him. In this connection, however, we feel constrained to remark that a careful reading of the document makes it extremely doubtful whether Anastasio Alano was ever personally bound by its terms. It will be noted that he purports to have signed it only as the representative of his children, Leonina, Anastasio, and Leocadio, who are not parties to this suit.

With respect to the defendants Florencio and Jose Alano, their original liability admits of no dispute and the only question open for consideration is that presented by their plea of prescription. The debt matured February 27, 1905, and as the complaint was not filed within ten years from that date (Code of Civil Procedure, sec. 43), it is obvious that the plea of prescription is well-taken, unless the running of the statute was interrupted.

While it appears that some verbal and written demands for payment were made upon these defendants, it has been recently decided, upon mature consideration, that an extrajudicial demand is not sufficient, under the law as it now stands, to stop the running of the statute. (Pelaez vs. Abreu, 26 Phil. Rep., 415). There must be either (1) a partial payment, (2) a written acknowledgment or (3) a written promise to pay the debt. It is not contended that there has been any written acknowledgment or promise on the part of the defendants Jose and Florencio Alano, or either of them — plaintiff relies solely upon the payment made in 1908 by Anastasio Alano. But there is not the slightest foundation in the evidence for the belief that the payment made by Anastasio was for the benefit of Jose or Florencio or that it was authorized by either of them. Bearing in mind the express declaration of article 1138 of the Civil Code that joint (mancomunada) obligations are, as regard each of the debtors, to be reputed as separate debts with respect to each of the debtors, it follows of necessity that a payment or acknowledgment by one of such joint debtors will not stop the running of the period of prescription as to the others. That such is the law may be demonstrated by ample authority.

In his commentaries on article 1138 and 1139 of the Civil Code, Manresa says that one of the effects of the rule established by the code that the debt is to be regarded as "divided into as many parts . . . as there are

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debtors" is that "the interruption of prescription by the claim of a creditor addressed to a single debtor or by an acknowledgment made by one of the debtors in favor of one or more of the creditors is not to be understood as prejudicial to or in favor of the other debtors or creditors." (Manresa, Commentaries on the Civil Code, vol. 8, p. 182.)

The same doctrine is recognized in the Italian Civil Law, as stated by Giorgi in his work on Obligations as follows:

The obligation appears to be one, when as a matter of fact it is an aggregate of as many separate and independent obligations as there are creditors and debtors. Each creditor cannot demand more than his part; each debtor cannot be required to pay more than his share. Prescription, novation, merger, and any other cause of modification or extinction does not extinguish or modify the obligation except with respect to the creditor or debtor affected, without extending its operation to any other part of the debt or of the credit. The obligation is, in a word, pro rata, or in partes viriles. (Giorgi on Obligations, vol. 1, p. 83, Spanish translation.)

The same view is taken by the French law writers. In the article on obligations in Dalloz' Encyclopedia (Jurisprudence Generale) vol. 33, p. 297, the author says:

The conjoint (pro rata) obligation is divided by operation of law among the non-solidary co-debtors. It is as though there were many debts as there are persons bound. Hence it follows that if one of the debtors is insolvent the loss falls upon the creditor and not upon the other debtors, and that if prescription is interrupted with respect to one of the debtors, it is not interrupted with respect to the others.

In the State of Louisiana, whose Civil Code, like ours, is largely taken from the Code of Napoleon, the Supreme Court has established the same doctrine on the subject of the interruption of prescription.

In the case of Buard vs. Lemee, Syndic (12 Robinson's Reports, 243), the Supreme Court of Louisiana said:

It results . . . that when the acknowledgment of a debt is made by a joint debtor, such acknowledgment does not interrupt the prescription with regard to the others. Each is bound for his virile share of the debt; and, therefore, each is at liberty to act for himself, and the effect of his acts cannot be extended to the benefit or prejudice of his co-debtors; so true is this that the law has never intended that a suit brought against one of the several debtors should interrupt prescription with regard to all, unless they be debtors in solido.

This doctrine was recognized and applied by the Supreme Court of Louisiana in the subsequent cases of Succession of Cornelius Voorhies (21 La. Ann., 659) and Smith vs. Coon (22 La. Ann., 445).

There is no presumption that one conjoint ( pro-rata) debtor is authorized to perform any act having the effect of stopping the running of the statute of limitations as to the others. When the act relied upon is performed by some person other than the debtor, the burden rests upon the plaintiff to show that it was expressly authorized. (17 R.C.L., 911 and the cases there cited.) In this case there is no such evidence. The statement in the letter of Da. Maria Lontok, to whom the P200 payment was made, is that it was a payment made on account of "the debt of Anastasio Alano." (Plaintiffs' Exhibit D.) Da. Maria Lontok in her testimony does not attempt to say that the payment was made for the account of any one but Anastasio Alano, from whom she received it. The statement that Florencio Alano was with Anastasio at the time is not in itself sufficient to constitute proof that the payment was made for his benefit. (Lichauco vs. Limjuco and Gonzalo, 19 Phil. Rep., 12.)

Plaintiff argues that the undertaking to convey the house and lot constitutes an indivisible obligation, and that even where the promise is not in solidum, the concurrence of two or more debtors in an obligation whose performance is indivisible creates such a relation between them that the interruption of prescription as to one of necessity interrupts it as to all. The distinction is one which is well-established, although the authorities cited do not fully support plaintiffs' contentions, but in this particular case the question is academic, for the undertaking is in the alternative to pay a sum of money — an essentially divisible obligation — or to convey the house. As the alternative indivisible obligation is imposed only in the event that the debtors fail to pay the money, it is subject to a suspensive condition, and the prescription of the obligation whose non-performance constitutes the condition effectively prevents the condition from taking place.

We are, therefore, constrained to hold with defendants and to reverse the decision of the lower court. We do this most regretfully, as the evidence in this case shows that plaintiff has been extremely lenient with defendants and has refrained from pressing her claim against them when it fell due, and for a long period of years thereafter, purely out of consideration for them. The defense of prescription interposed, particularly as regards Jose and Florencio Alano, is an indefensible from the standpoint of fair dealing and honesty as it is unassailable from the standpoint of legal technicality. However, the law, as we see it, is clear and it is our duty to enforce it.

The judgment of the lower court is reversed and the action is dismissed as to all the defendants. No costs will be allowed. So ordered.

Torres, Johnson, Street and Avanceña, JJ., concur. Malcolm, J., dissents.

R E S O L U T I O N

September 20, 1918.

FISHER, J.:

Plaintiff seeks a consideration of the decision of this court rendered herein. With respect to plaintiff's contention concerning the action against the estate of Anastasio Alano, we have nothing to add to what was said in the former decision. As regards the defendants, Florencio Alano and Jose Alano, the principal argument advanced by plaintiff is that those defendants, as testamentary heirs of the late Anastasio C. Cruz, are liable, in solidum, for the debt in suit, which is evidenced by the document signed by these defendants on February 27, 1904, set forth at length in our decision. Plaintiff argues that he obligation being solidary, by reason of its hereditary origin (Fabievs. Yulo, 24 Phil. Rep., 240) the running of the statute of limitations was interrupted with respect to all the debtors, by the payment of P200 made by the late Anastasio Alano in 1908. The whole argument rests upon article 1084 of the Civil Code and the statement contained in the document of February 27, 1904, that the Alano brothers are the "testamentary heirs" of the original debtor, and the assumption that the latter died, and that his inheritance was accepted, before the present Code of Civil Procedure was enacted. There is nothing in the record to indicate, even remotely, when the Reverend Cruz died. If he died after the new Code took effect, the acceptance of his inheritance did not impose upon his testamentary heirs any personal obligation to respond to the payment of the debts of the deceased. (Pavia vs. De la Rosa, 8 Phil. Rep., 70.) There having been neither allegation nor proof with respect to the date of the death of the original debtor, we cannot

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presume, to the prejudice of the defendants, that he died and that his succession was opened under the old regime.

But even had it been proved that the late Reverend Cruz died before Act No. 190 took effect, and that the debt, by reason of its hereditary origin, imposed upon the five Alano brothers the solidary obligation of paying it, as the evidence does not show that the payment made by Anastasio Alano in 1908 was authorized by any one of the solidary debtors, it cannot have the effect of interrupting the prescription. It must be kept in mind that Anastasio Alano was in no sense a solidary debtor of the plaintiff, either with respect to the origin of the obligation or by his participation in the execution of the document by which the indebtedness was acknowledged. it is unquestionable that payment made by any one of the several solidary debtors interrupts the running of the statute of limitations with respect to the others, and that a third person may make a payment without the knowledge and even against the will of the debtor, but payments so made by a stranger to the debt do not interrupt the operation of the statute of limitations.

The general rule is that an acknowledgment or new promise to pay must, in order to take a case out of the statute, be made by the person to be charged or by some person legally authorized by him so to act. (17 Ruling Case Law, p. 911.)

In the case of a part payment by a stranger, or by a person not authorized to represent the debtor, it is obvious that there is no ground for assuming any admission of an existing liability on his part or for inferring a new promise by him to pay the balance of the debt. (17 Ruling Case Law, p. 935.)

Furthermore, it is to be observed that in accordance with the express terms of article 50 of the Code of Civil Procedure, payment in order to have the effect of interrupting the running of the statute, must be made by the person to be charged.

Independently of these considerations, it is obvious that this action was not brought as though based upon an obligation which had accrued under the provisions of the Civil Code, formerly in force, relating to the acceptance of an estate without benefit of inventory. The action has been brought solely and exclusively for the enforcement of the obligation created by the execution of the document of credit of 1904. This is the reason, no doubt, why plaintiff made no effort to prove the date of the death of Reverend Cruz; whether his heirs accepted the inheritance with or without the benefit of inventory; if they were all adults at the time of the death of the testator; whether they inherited in equal parts or in some proportion. It is natural that she should have made no effort to produce evidence upon these points, as there is nothing in the allegations of the complaint to support its admission. If the defendants had replied admitting the facts alleged, it is evident that it would have been necessary to decide the case in accordance with the law in force in 1904, considering the execution of the document in question as the act from which the obligation in suit originated, although it appears from the document that the consideration for its execution was the debt of a third person.

When the plaintiff deliberately adopts a certain theory with respect to the basis of his right of action, and the case is tried and decided in the court below and in this court upon that theory, plaintiff will not be permitted to change the theory of his action upon a motion for rehearing. (Molina vs. Somes, 24 Phil. Rep., 49.) To do so would be to deprive the defendant of an opportunity to defend. The defendant naturally produces evidence relating to the evidence offered on behalf of plaintiff. If the issue of the liability of Florencio and Jose Alano upon the theory now advanced by plaintiff had been presented in the court below, it is possible that these defendants might have been able to prove that their testator died after the enactment of the new code or, if he died before, that they were minors at that time; that the inheritance was accepted by their guardian without the intervention of the family council (Civil Code, art. 992), or that it was expressly accepted with benefit of inventory, and that the value of the property inherited is less than the amount of the debt (Civil Code, art. 1023), or that the effect of the execution of

the document of 1904 was a novation of the obligation by which the latter was converted into a simple joint indebtedness. The defendants Florencio and Jose Alano having had no opportunity to invoke any of these defenses, which might have been available to them, it would be unjust to give judgment against them upon the theory of their obligation now invoked by plaintiff. The motion for a rehearing is denied.

EN BANC

G.R. No. L-22738 December 2, 1924

ONG GUAN CAN and THE BANK OF THE PHILIPPINE ISLANDS, plaintiffs-appellees, vs.THE CENTURY INSURANCE CO., LTD., defendant-appellant.

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SYLLABUS

1. ALTERNATIVE OBLIGATIONS; CLAUSE OF INSURANCE POLICY. — The policy in question contains the following clause: "The Company may at its option reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss or damage, or may join with any other Company or insurers in so doing, but the Company shall not be bound to reinstate exactly or completely, but only as circumstances permit and in reasonable sufficient manner, and in no case shall the Company be bound to expend more in reinstatement that it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage, nor more than the sum insured by the Company thereon." Held: That if this clause of the policy is valid, it operates to make the obligation of the insurance company an alternative one that is to say, that it may either pay the amount in which the house was insured, or rebuilt it.

2. NOTICE OF ELECTION OF ALTERNATIVE PRESTATIONS. — The debtor must notify the creditor of his election, stating which prestation he is disposed to fulfill, in accordance with article 1133 of the Civil Code.

3. EFFECT OF NOTICE. — The effect of the notice is to give the creditor, that is, the plaintiff in the instant case, opportunity to express his consent, or to impugn the election take legal effect when consented by the creditor, or if impugned by the latter, when declared improper by a competent court.

VILLAMOR, J.:

On April 19, 1924, the Court of First Instance of Iloilo rendered a judgment in favor of the plaintiff, sentencing the defendant company to pay him the sum of P45,000, the value of certain policies of fire insurance, with legal interest thereon from February 28, 1923, until payment, with the costs. The defendant company appealed from this judgment, and now insists that the same must be modified and that it must be permitted to rebuild the house burnt, subject to the alignment of the street where the

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building was erected, and that the appellant be relieved from the payment of the sum in which said building was insured.

A building of the plaintiff was insured against fire by the defendant in the sum of P30,000, as well as the goods and merchandise therein contained in the sum of P15,000. The house and merchandise insured were burnt early in the morning of February 28, 1923, while the policies issued by the defendant in favor of the plaintiff were in force.

The appellant contends that under clause 14 of the conditions of the policies, it may rebuild the house burnt, and although the house may be smaller, yet it would be sufficient indemnity to the insured for the actual loss suffered by him.

The clause cites by the appellant is as follows:lawphi1.net

The Company may at its option reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss of damages, or may join with any other Company or insurers in so doing, but the Company shall not be bound to reinstate exactly or completely, but only as circumstances permit and in reasonable sufficient manner, and in no case shall the Company be bound to expend more in reinstatement that it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage, nor more than the sum insured by the Company thereon.

If this clause of the policies is valid, its effect is to make the obligation of the insurance company an alternative one, that is to say, that it may either pay the insured value of house, or rebuild it. It must be noted that in alternative obligations, the debtor, the insurance company in this case, must notify the creditor of his election, stating which of the two prestations he is disposed to fulfill, in accordance with article 1133 of the Civil Code. The object of this notice is to give the creditor, that is, the plaintiff in the instant case, opportunity to express his consent, or to impugn the election made by the debtor, and only after said notice shall the election take legal effect when consented by the creditor, or if impugned by the latter, when declared proper by a competent court. In the instance case, the record shows that the appellant company did not give a formal notice of its election to rebuild, and while the witnesses, Cedrun and Cacho, speak of the proposed reconstruction of the house destroyed, yet the plaintiff did not give his assent to the proposition, for the reason that the new house would be smaller and of materials of lower kind than those employed in the construction of the house destroyed. Upon this point the trial judge very aptly says in his decision: "It would be an imposition unequitable, as well as unjust, to compel the plaintiff to accept the rebuilding of a smaller house than the one burnt, with a lower kind of materials than those of said house, without offering him an additional indemnity for the difference in size between the two house, which circumstances were taken into account when the insurance applied for by the plaintiff was accepted by the defendant." And we may add: Without tendering either the insured value of the merchandise contained in the house destroyed, which amounts to the sum of P15,000.itc@alf

We find in the record nothing to justify the reversal of the finding of the trial judge, holding that the election alleged by the appellant to rebuild the house burnt instead of paying the value of the insurance is improper. To our mind, the judgment appealed from is in accordance with the merits of the case and the law, and must be, as is hereby, affirmed with the cost against the appellant. So ordered.

SUPREME COURTManila

EN BANC

G.R. No. L-3435 April 28, 1951

CLARA TAMBUNTING DE LEGARDA, ET AL., plaintiffs-appellants, vs.VICTORIA DESBARATS MIAILHE, substituting WILLIAM J. B. BURKE, defendant-appellee.

Jose S. Sarte and M. H. de Joya for appellant Vicente L. Legarda.Salvador Barrios for appellant Pacifica Price de Barrios.Eduardo D. Gutierrez for appellant Augusto Tambunting.Feliciano Jover Ledesma and Ross, Selph, Carrascoso and Janda for appellee.

BAUTISTA ANGELO, J.:

This is an appeal from a judgment of the Court of First Instance of Manila rendered on August 5, 1949, dismissing the complaint and ordering plaintiff Clara Tambunting de Legarda to pay to the defendant the sum of P70,000, with interest thereon at the rate of 3 ½ per cent per annum, from January 1, 1942, up to the date of full payment thereof, plus the sum of P2,500 as costs of suit and attorney's fees, within 120 days from the date of notice, and ordering the sale of the property mortgaged in accordance with law in the event of failure of said plaintiff to pay the amount of the judgment within the period above mentioned.

The background of this case, which originated during the Japanese occupation, is correctly stated in the judgment of the lower court, as follows:

On June 3, 1944, plaintiffs filed a complaint against the original defendant William J. B. Burke, alleging defendant's unjustified refusal to accept payment in discharge of a mortgage indebtedness in his favor, and praying that the latter be ordered (1) to receive the sum of P75,920.83 deposited by plaintiff Clara Tambunting de Legarda, the mortgagor, on the same date with the clerk of this court in payment of the mortgage indebtedness of said plaintiff to defendant herein, (2) to execute the corresponding deed of release of mortgage, and (30 to pay damages in the sum of P1,000.

The gist of defendant's answer dated the 19th of July, 1944, is that plaintiffs have no cause of action for the reason that at the instance of plaintiff Clara Tambunting de Legarda an agreement was had on May 26, 1944, whereunder defendant condoned the interests due and to become due on the mortgage indebtedness till the termination of the war, in consideration of the undertaking of said plaintiff (with the consent of her husband Vicente L. Legarda, the other plaintiff) to pay her obligation to defendant upon such termination of the war; and that the war then had not yet terminated.

Upon the issues raised, after due hearing, decision was rendered by this Court through the then Judge, Honorable Jose Gutierrez David (now Appellate Court Justice), ordering defendant to accept the sum of P75,920.83 deposited by plaintiff Clara Tambunting de Legarda in the office of the clerk of court; to execute forthwith a deed of release of mortgage covering the property in question; to pay plaintiff the sum of P120.40 representing the cost of the certification of the check deposited in the court and consignation, together with the clerk's commission for the deposit of the money in court and the costs of the suit.

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Defendant, on or about January 14, 1945, presented a motion to set aside the foregoing decision and for a new trial. Before this court could act on this motion, liberation came.

On October 23, 1945, petition was filed on behalf of plaintiffs for the reconstitution of the record of this case.

On October 23, 1945, defendant filed a supplements al answer alleging that the payment (by way of consignation in Japanese military notes made by plaintiff Clara Tambunting de Legarda in satisfaction of the mortgage obligation in question, which was originally contracted on the 17th of February, 1926, was null and void, and did not discharge the said obligation; and that, as plaintiffs well knew, defendant did not plead the foregoing facts in his original answer because had he done so "he and his attorneys would have been taken by the Japanese military police to Fort Santiago where they would have been tortured and most probably killed. The supplemental answer contains a counter-claim whereunder defendant sought the foreclosure of the real estate mortgage on the property in question. Basis of the counter-claim are the averments that the original mortgage executed by plaintiff Clara Tambunting de Legarda with the consent of her husband, plaintiff Vicente de Legarda with the consent of her husband, plaintiff Vicente L. Legarda, was for the sum of P75,000; that said mortgage was renewed from time to time until on March 16, 1940, at plaintiff Clara Tambunting de Legarda's request, defendant entered into another agreement with whereunder the latter granted said plaintiff a fourth extension of three years for the payment of the remaining balance of P70,000, and further reduced the interest rate from 9 per cent to 7 per cent per annum; that in the said agreement of March 16, 1940, defendant was granted an option to demand the payment of the principal and interests either in Philippine currency or in English currency at the rate of two shillings ( £.O2/Od.) for one peso, Philippine currency; that in May, 1944, plaintiff Clara Tambunting de Legarda attempted to pay her obligation to defendant in Japanese military notes; that to defendant, as plaintiffs well knew, was not disposed and did wish to receive payment in worthless Japanese military notes; that to prevent his being reported to the Japanese military police in Fort Santiago, defendant agreed to condone the interests then due on the obligation from December 1, 1941, until the termination of the war, with the understanding that payment should not be effected until the end of the war; that plaintiff Clara Tambunting de Legarda violated her agreement with defendant, sought to force payment by depositing the amount — in Japanese military note — in court, and thereafter filed the complaint herein; that notwithstanding demand made on October 16, 1945, plaintiff failed to pay the principal of P70,000, together with interests thereon at the rate of 7 per cent per annum which defendant claims upon the allegation that plaintiff having violated her agreement defendant was relieved from his undertaking to condone the interest.

In the order of December 24, 1945, declaring that the record of this case was reconstituted for all legal purposes, the then Judge presiding this court, Honorable Jose Guttierez David, denied the admission of the foregoing supplemental answer.

Appeal was taken by defendant from the above order of the 24th of December 1945.

The Honorable Supreme court in its decision on appeal (Clara Tambuting de Legarda and Vicente L. Legarda, plaintiffs-appellees vs. Antonio Carrascoso, Jr., substituting William J. B. Burke, defendant-appellant, GRL-331) declared that the supplemental answer heretofore adverted to should have been allowed and consequently directed that a new trial be had. . . .

The record was returned to this court.

On March 31, 1949, a motion consisting of two parts was filed on behalf of defendant. The first prayed for the substitution of Victoria Desbarats Miailhe as party defendant for the reason that William J. B. Burke died in the City of Manila on July 23, 1946, and his claim against plaintiffs was adjudicated to the said Victoria Debarats Miailhe as heir of the said William J. B. Burke. The second sought the admission of a amended supplemental answer. In the main the amended supplemental answer is a reproduction of the original supplemental answer filed on October 23, 1945, with the significant change that instead of demanding payment from plaintiffs Clara Tambunting de Legarda, defendant now seeks payment in pounds sterling, English currency. By order of this court of April 2, 1949, the petition for substitution was granted and the amended supplemental answer was admitted into the record of this case.

The issue raised in the counterclaim in the amended supplemental answer were met in the plaintiffs' reply dated April 4 1949, which substantially denies the allegation that Burke was not disposed and did not wish to receive payments in Japanese military notes and refused payment to avoid being reported to the Japanese military police. The reply alleges that the demand made by the new defendant Victoria Desbarats Miailhe is unavailing because it was presented too late, that is, after the present case had long beensubjudice and the obligation to be collected was already extinguished.

On August 5, 1949, the Court, presided over by Judge Conrado Sanchez, rendered judgment for the defendant as stated in the early part of this decision. From this judgment, plaintiffs appealed.

The principal question of fact which is presented for our determination in this appeal is whether the agreement had by the plaintiffs and William J. B. Burke during the Japanese occupation was that the rate of the annual interest of the indebtedness was merely reduced to 3 ½ per cent, as claimed by plaintiffs, or whether said agreement was in the sense that the defendant condoned the interests then due and which might hereafter become due on said obligation with the understanding that plaintiff Clara Tambunting de Legarda would pay her obligation upon the termination of the war.

On this point, Judge Jose Guttierez David, who originally decided this case, gave weight and credence to the evidence presented in behalf of the plaintiffs, disregarding entirely the evidence submitted in behalf of the defendant, and concluded that the alleged agreement was never entered into, as evidenced by the letters plaintiff Clara Tambunting de Legarda sent to defendant William J. B. Burke, not only tendering the payment of her obligation, but also giving notice that she will deposit same in court as required by law to protect her interests. The court also gave credence to the claim of the plaintiffs that defendant Burke agreed to reduce the rate of interest from 7 per cent to 3 1/2 per cent per annum from January 1, 1942, in the conference they had sometime in February or March, 1942. Judge Conrado Sanchez, who took over the court after the case was returned following the revocation by this court of the order denying the supplemental answer of the defendant, adopted in full said findings of fact of Judge Guttierez David.

We have carefully examined the evidence, testimonial as well as documentary, submitted by both parties in this case with a view to an enlightened determination of this important question of fact which may be considered as the crux of this case, and we have not been able to see eye to eye on this matter with the two Judges who decided this case in the lower court. As a rule, the determination of a question of fact depends largely on the credibility of witnesses unless some documentary evidence is available, which clearly substantiates the issue and whose genuineness and probative value is not disputed. In this case, most of the evidence presented is testimonial, with only some corroborating letters, and on the basis of this evidence the preponderance in our opinion militates in favor of the defendant. And we say so because, on one hand, only Vicente Legarda testified for the plaintiffs, whereas Antonio Carrascoso and William J. B. Burke testified for the defendant. True, their testimony is contradictory, but in our opinion the testimony of witnesses Carrascoso and Burke deserve more weight and credence. Of course these three witnesses are well known in our community and their character for probity has never been assailed, But we are more inclined to accept the view of Carrascoso and Burke because it is more consonant with

7

fairness and the history of the transaction. It appears that the indebtedness in question was granted to Clara Tambunting de Legarda as far back as February 1926, with the obligation to pay it within five (5) years but which period has been extended from time to time with the gradual reduction of the rate of interest up to January 1942, when, as intimated by the plaintiff, a further reduction of the interest to 3 1/2 per cent per annum was granted by the defendant. During this long period of time the plaintiffs enjoyed the use of the money, with a continued reduction of the rate of interest, and defendant had lavished upon her his unusual liberality when he extended to her his help and relief whenever she so requested as the exigencies of her financial situation warranted. The life of this indebtedness would not have been so prolonged as to be overtaken by war were it not for the desire of the defendant to help the mortgagor in her hour of need, Yet Vicente Legarda went out of his way to propose that his wife Clara Tambunting be exempted from paying all the interests due from January 1, 1942, up to the termination of the war, which caused the defendant to utter some unkind words and to be resentful. Nevertheless, through the mediation of Attorney Carrascoso, plaintiffs at last became reasonable and agreed not to pay the obligation until the termination of the war provided that all interests due and which might become due be condoned. It is not strange nor unnatural that should happen, considering the background of the loan. And there is nothing incredible in it considering the letter written by Burke to Clara Tambunting wherein the same understanding was reiterated (Exhibit "B"). Doctor Burke would not have stated in his letter that there was such an understanding if it was not true, considering the fact that he was so sick then and had practically one leg in the grave. We find no reason to discredit this statement of Burke which find full corroboration in the testimony of Attorney Corrascoso.

Granting, however, for the sake of argument that such an agreement is not true and was set up by the defendant as a mere defense to justify his refusal to accept payment of the mortgage indebtedness in Japanese military notes, the next question to be determined is whether or not the consignation made by the plaintiffs during the Japanese time had the effect of relieving Clara Tambunting de Legarda from the payment of her mortgage obligation in contemplation of law.

There is no dispute that on June 3, 1944, Clara Tambunting de Legarda deposited in court the sum of P75,920.83 for the purpose of satisfying the full amount then due on her obligation. But it is likewise true that the money deposited was in certified check, representing Japanese Military notes, which notes defendant Burke refuse to receive as payment a few days before the consignation.

The offer of payment or consignation to be effective must comply with some legal requirements. On this point our Civil Code contains the following provisions:

A debt shall not be deemed paid unless there has been a complete delivery of the thing or a performance of the undertaking which constitute the subject-matter of the obligation. (Art. 1157, Civil Code.).

The debtor of one thing cannot oblige his creditor to receive another, even though it should be of equal or greater value than that due.

In obligations to do, one undertaking cannot be substituted by another against the will of the creditor. (Art. 1166, Civil Code.).

Payment of debts of money shall be made in the specie stipulated and, should it not be possible to deliver such specie, in silver or gold coin legally current in the Philippines. (Art. 1170, Civil Code.)

As formerly stated, in the mortgage renewal executed by plaintiffs and defendant on March 16, 1940, defendant was given the option to demand payment of the obligation either in Philippine currency, or in

English currency. And this option has to be exercised "al tiempo del vencimiento de esta obligacion," (Exhibit "5"), or on February 17, 1943.

But defendant claims that on that date he could not very well refuse to accept the worthless Japanese Military notes tendered to him, nor insist on the payment of English currency, for he then entertained the fear that, had he done so, he would have been reported to the Japanese authorities, taken to Fort Santiago, and killed. But could the defendant then insist on the payment of English currency even if he could do so without exposing himself to bodily peril under the stipulation just mentioned?

Our answer is in the negative. As we have stated before, the option to demand payment of the indebtedness has to be exercised upon maturity of the obligation, which is February 17, 1943. On this date, the only currency available is the Philippine currency, or the Japanese Military notes, because all other currencies, including the English, were outlawed by a proclamation issued by the Japanese Imperial Commander on January 3, 1942. This means that the right of election ceased to exist on that date because it had become legally impossible. And this is so because in alternative obligations there is no right to choose undertakings that are impossible or illegal (Civil Code, art. 1132, par. 2). In other words, the obligation on the part of the debtor to pay the mortgage indebtedness has since then ceased to be alternative. (Articles 1134 & 1136(1) of the Civil Code.)

It appears, therefore, that the tender of payment made by the plaintiff in Japanese Military notes was a valid tender because it was the only currency permissible at the time, and the same was made in accordance with the agreement because payment in Japanese Military notes during the occupation is tantamount to payment in the Philippine currency. (Haw Pia vs. China Banking Corporation, 45 Off. Gaz., Supp.[9] 229; Phil. Trust vs. Araneta, 46 Off. Gaz., 4254; Allison D. Gibbs vs. Eulogio Rodriguez, 47 Off. Gaz., 186.) But the consignation of the sum of P75,920.83 in Japanese currency made by the plaintiffs with clerk of court does not have any legal effect because it was made in certified check, "does not meet the requirements of a legal tender."

In her sole assigned error the plaintiff contends that the Court erred in holding that the consignation of the check with the clerk of court was in valid and that it did not have the effect of paying her obligation. The court correctly held that the consignation was unvailing and that it did not produced any legal effect because the defendant did not accept it and it was not in the form of money or legal tender. Article 1170 of the Civil Code provides that payment of debts of money shall be made in the specie stipulated and, should it not be possible to deliver such specie, in silver or gold coin legally current; and provides further, that the delivery of promissory notes payable to order, or drafts or other commercial paper, shall produced the effects of payment only when realized or when, by the fault of the creditor, the privileges inherent in their negotiable character have been lost. Under this legal provision the defendant was under a duty to accept the check because it is known that it does not constitute legal tender, and the consignation having been refused, it did not produce any legal effect and could not be considered as payment made by the plaintiff of the repurchase price. In Belisario vs. Natividad (1934, 60 Phil., 156) it was held that the creditor is not bound to accept the check in satisfaction of his demand because a check even if good when offered, does not meet the requirements of a legal tender. (Villanueva vs. Santos, 39 Off. Gaz., 681-682). (Emphasis supplied.)

It is not necessary, in our opinion, to examine all the questions raised by appellant in his brief, in view of our conclusion on the question of the validity of the consignation made in court.

Under article 1127 of the Civil Code, "Consignation should not be efficacious unless made strictly in accordance with the provision governing payment." And Article 1170 provides that, "payment of debts of money shall be made in the specie stipulated and, should it not be

8

possible to deliver such specie, in silver or gold coin which is legal-tender in the Philippines." Under this provisions, a consignation by check is not binding upon the creditor (Meliciano vs. Natividad, 60 Phil., 156), unless accepted by him (Gutierrez vs.Carpio, 53 Phil., 334, 336), and in the instant case, there has been no such acceptance. In one case it was held by this court that where a person entitled to make a repurchase of some property, deposits with the court, by way of consignation, a check for the re-purchase price, the vendee is not under a duty to accept the check and may refuse the consignation which cannot produce the effect of payment. (Villanueva vs.Santos, 39 Off. Gaz., March 8, 1941, p. 681).

True that the consignation in the instant case was made by means of a manager's check. But a manager's check is, like an ordinary check, not legal-tender in the Philippines. Even treasury certificates are not legal-tender except for the payment of taxes and public debts, under sec. 1626 of Act No. 2711 as amended by Act No. 3058. In the United States, "the general rule is that an offer of a bank check for the amount due is not a good tender and this is true even though the check is certified" (62 C. J., p. 668), except "where no objection is made on the ground" (62 C. J., p. 668). Again it is said that, "on the same principle a check is not good legal-tender as against an objection duly made, whether the check is certified or not . . ." 40 Am. Jur., p. 764; Cuaycong vs. Rius, (47 Off. Gaz., 6125).

To recapitulate, we may state that, even if the claim of the plaintiff that Clara Tambunting de Legarda did not enter into any agreement with the defendant William J. B. Burke regarding payment of her obligation, subject to condonation of interest, after the termination of the war, is correct, and even if the tender of payment by Clara Tambunting of her obligation was made in Philippine currency in pursuance of the mortgage contract, yet the consignation made in Court can not have any legal effect for the simple reason that it was made by means of a certified check, which is not a legal tender within the meaning of the law. It is obvious, therefore, that such consignation did not have the effect of relieving her from her obligation to the defendant.

As regards the other issues, we find correct the findings and conclusions reached by the lower court on the matter.

Wherefore, the decision appealed from is hereby affirmed in toto, with costs against the appellants.

G.R. No. L-6220 May 7, 1954

MARTINA QUIZANA, plaintiff-appellee, vs.GAUDENCIO REDUGERIO and JOSEFA POSTRADO, defendants-appellants.

Samson and Amante for appellants.Sabino Palomares for appellee.

LABRADOR, J.:

This is an appeal to this Court from a decision rendered by the Court of First Instance of Marinduque, wherein the defendants-appellants are ordered to pay the plaintiff-appellee the sum of P550, with interest from the time of the filing of the complaint, and from an order of the same court denying a motion of the defendants-appellants for the reconsideration of the judgment on the ground that they were deprived of their day in court.

The action was originally instituted in the justice of the peace court of Sta. Cruz, Marinduque, and the same is based on an actionable document attached to the complaint, signed by the defendants-appellants on October 4, 1948, and containing the following pertinent provisions:

Na alang-alang sa aming mahigpit na pangangailangan ay kaming magasawa ay lumapit kay Ginang Martina Quizana, balo, at naninirahan sa Hupi, Sta. Cruz, Marinduque, at kami ay umutang sa kanya ng halagang Limang Daan at Limang Pung Piso (P550.00), Salaping umiiral dito sa Filipinas na aming tinanggap na husto at walang kulang sa kanya sa condicion na ang halagang aming inutang ay ibabalik o babayaran namin sa kanya sa katapusan ng buwan ng Enero, taong 1949.

Pinagkasunduan din naming magasawa sa sakaling hindi kami makabayad sa taning na panahon ay aming ipifrenda o isasangla sa kanya ang isa naming palagay na niogan sa lugar nang Cororocho, barrio ng Balogo, municipio ng Santa Cruz, lalawigang Marinduque, Kapuluang Filipinas at ito ay nalilibot ng mga kahanganang sumusunod:

Sa Norte, Dalmacio Constantino; sa este, Catalina Reforma; sa sur, Dionisio Ariola; at sa Oeste, Reodoro Ricamora, no natatala sa gobierno sa ilalim ng Declaracion No. ______ na nasa pangalan ko, Josefa Postrado.

The defendants-appellants admit the execution of the document, but claim, as special defense, that since the 31st of January, 1949, they offered to pledge the land specified in the agreement and transfer possession thereof to the plaintiff-appellee, but that the latter refused said offer. Judgement having been rendered by the justice of the peace court of Sta. Cruz, the defendants-appellants appealed to the Court of First Instance. In that court they reiterated the defenses that they presented in the justice of the peace court. The case was set for hearing in the Court of First Instance on August 16, 1951. As early as July 30 counsel for the defendants-appellants presented an "Urgent Motion for Continuance," alleging that on the day set for the hearing (August 16, 1951), they would appear in the hearing of two criminal cases previously set for trial before they received notice of the hearing on the aforesaid date. The motion was submitted on August 2, and was set for hearing on August 4. This motion was not acted upon until the day of the trial. On the date of the trial the court denied the defendants-appellants' motion for continuance, and after hearing the evidence for the plaintiff, in the absence of the defendants-appellants and their counsel, rendered the decision appealed from. Defendants-appellants upon receiving copy of the decision, filed a motion for reconsideration, praying that the decision be set aside on the ground that sufficient time in advance was given to the court to pass upon their motion for continuance, but that the same was not passed upon. This motion for reconsideration was denied.

The main question raised in this appeal is the nature and effect of the actionable document mentioned above. The trial court evidently ignored the second part of defendants-appellants' written obligation, and enforced its last first part, which fixed payment on January 31, 1949. The plaintiff-appellee, for his part, claims that this part of the written obligation is not binding upon him for the reason that he did not sign the agreement, and that even if it were so, the defendants-appellants did not execute the document as agreed upon, but, according to their answer, demanded the plaintiff-appellee to do so. This last contention of the plaintiff-appellee is due to a loose language in the answer filed with the Court of First Instance. But upon careful scrutiny, it will be seen that what the defendants-appellants wanted to allege is that they themselves had offered to execute the document of mortgage and deliver the same to the plaintiff-appellee, but that the latter refused to have it executed unless, an additional security was furnished. Thus the answer reads:

5. That immediately after the due date of the loan Annex "A" of the complaint, the defendants made efforts to execute the necessary documents of mortgage and to

9

deliver the same to the plaintiff, in compliance with the terms and conditions thereof, but the plaintiff refused to execute the proper documents and insisted on another portion of defendants' as additional security for the said loan; (emphasis ours.)

In our opinion it is not true that defendants-appellants had not offered to execute the deed of mortgage.

The other reasons adduced by the plaintiff-appellee for claiming that the agreement was not binding upon him also deserves scant consideration. When plaintiff-appellee received the document, without any objection on his part to the paragraph thereof in which the obligors offered to deliver a mortgage on a property of theirs in case they failed to pay the debt on the day stipulated, he thereby accepted the said condition of the agreement. The acceptance by him of the written obligation without objection and protest, and the fact that he kept it and based his action thereon, are concrete and positive proof that he agreed and contested to all its terms, including the paragraph on the constitution of the mortgage.

The decisive question at issue, therefore, is whether the second part of the written obligation, in which the obligors agreed and promised to deliver a mortgage over the parcel of land described therein, upon their failure to pay the debt on a date specified in the proceeding paragraph, is valid and binding and effective upon the plaintiff-appellee, the creditor. This second part of the obligation in question is what is known in law as a facultative obligation, defined in article 1206 of Civil Code of the Philippines, which provides:

ART. 1206. When only one prestation has been agreed upon, but the obligor may render another in substitution, the obligation is called facultative.

x x x x x x x x x

This is a new provision and is not found in the old Spanish Civil Code, which was the one in force at the time of the execution of the agreement.

There is nothing in the agreement which would argue against its enforcement. it is not contrary to law or public morals or public policy, and notwithstanding the absence of any legal provision at the time it was entered into government it, as the parties had freely and voluntarily entered into it, there is no ground or reason why it should not be given effect. It is a new right which should be declared effective at once, in consonance with the provisions of article 2253 of the Civil Code of the Philippines, thus:

ART. 2253. . . . But if a right should be declared for the first time in this Code, it shall be effective at once, even though the act or event which gives rise thereto may have been done or may have occurred under the prior legislation, provided said new right does not prejudice or impair any vested or acquired right, of the same origin.

In view of our favorable resolution on the important question raised by the defendants-appellants on this appeal, it becomes unnecessary to consider the other question of procedure raised by them.

For the foregoing considerations, the judgment appealed from is hereby reversed, and in accordance with the provisions of the written obligation, the case is hereby remanded to the Court of First Instance, in which court the defendants-appellants shall present a duly executed deed of mortgage over the property described in the written obligation, with a period of payment to be agreed upon by the parties with the approval of the court. Without costs.

Paras, C.J., Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, and Concepcion, JJ., concur.

[G.R. No. 109648. November 22, 2001]

PH CREDIT CORPORATION, petitioner, vs. COURT OF APPEALS and CARLOS M. FARRALES, respondents.

D E C I S I O N

PANGANIBAN, J.:

When there is a conflict between the dispositive portion or fallo of a decision and the opinion of the court contained in the text or body of the judgment, the former prevails over the latter. An order of execution is based on the disposition, not on the body, of the decision.

The Case

Before us is a Petition for Review under Rule 45 [1] of the Rules of Court, assailing the October 28, 1992 Decision[2] and the April 6, 1993 Resolution[3] of the Court of Appeals (CA) in CA-GR SP Nos. 23324 and 25714. The dispositive portion of the said Decision reads as follows:

WHEREFORE, judgment is hereby rendered DISMISSING: a) CA-G.R. SP No. 23324, for being moot and academic, and b) CA-G.R. SP No. 25714, for lack of merit.[4]

The assailed Resolution denied petitioners Motion for Reconsideration.

The Facts

The facts of the case are summarized by the Court of Appeals in this wise:

These two cases have been consolidated because they involve the same parties and/or related questions of [f]act and/or law.

x x x x x x x x x

I. CA-G.R. SP NO. 23324

PH Credit Corp., filed a case against Pacific Lloyd Corp., Carlos Farrales, Thomas H. Van Sebille and Federico C. Lim, for [a] sum of money. The case was docketed as Civil Case No. 83-17751 before the Regional Trial Court, Branch 51, Manila. After service of summons upon the defendants, they failed to file

10

their answer within the reglementary period, hence they were declared in default. PH Credit Corp., was then allowed to present its evidence ex-parte.

On January 31, 1984, a decision was rendered, the dispositive portion of which reads as follows:

WHEREFORE, judgment is hereby rendered in favor of plaintiff PH Credit Corporation and against defendants Pacific Lloyd Corporation, Thomas H. Van Sebille, Carlos M. Farrales, and Federico C. Lim, ordering the latter to pay the former, the following:

A) The sum of P118, 814.49 with interest of 18% per annum, starting December 20, 1982 until fully paid;

B) Surcharge of 16% per annum from December 20, 1982;

C) Penalty Charge of 2% per month from December 20, 1982, computed on interest and principal compounded;

D) Attorneys fees in an amount equivalent to 25% of the total sum due; and

E) Costs of suit.

SO ORDERED.

After the aforesaid decision has become final and executory, a Writ of Execution was issued and consequently implemented by the assigned Deputy Sheriff. Personal and real properties of defendant Carlos M. Farrales were levied and sold at public auction wherein PH Credit Corp. was the highest bidder. The personal properties were sold on August 2, 1984 at P18,900.00 while the real properties were sold on June 21, 1989 for P1,294,726.00.

On July 27, 1990, a motion for the issuance of a writ of possession was filed and on October 12, 1990, the same was granted. The writ of possession itself was issued on October 26, 1990. Said order and writ of possession are now the subject of this petition.

Petitioner claims that she, as a third-party claimant with the court below, filed an Urgent Motion for Reconsideration and/or to Suspend the Order dated October 12, 1990, but without acting there[on], respondent Judge issued the writ of possession on October 26, 1990. She claims that the actuations of respondent Judge was tainted with grave abuse of discretion.

We deem it unnecessary to pass upon the issue raised in view of the supervening event which had rendered the same moot and academic.

It appears that on January 31, 1991, respondent Judge issued an order considering the assailed Order dated October 12, 1990 as well as the writ of possession issued on October 26, 1990 as of no force and effect.

The purpose of the petition is precisely to have the aforesaid order and writ of possession declared null and void, but the same had already been declared of no force and effect by the respondent Judge. It is a well-settled rule that courts will not determine a moot question or abstract proposition nor express an opinion in a case in which no practical relief can be granted.

II. CA-G.R. SP NO. 25714

Petitioner claims that the respondent Judges Order dated January 31, 1991 was tainted with grave abuse of discretion based on the following grounds:

1. Respondent Judge refused to consider as waived private respondents objection that his obligation in the January 31, 1984 decision was merely joint and not solidary with the defendants therein. According to petitioner, private respondent assailed the levy on execution twice in 1984 and once in 1985 but not once did the latter even mention therein that his obligation was joint for failure of the dispositive portion of the decision to indicate that it was solidary. Thus, private respondent must be deemed to have waived that objection, petitioner concludes.

2. The redemption period after the auction sale of the properties had long lapsed so much [so] that the purchaser therein became the absolute owner thereof. Thus, respondent Judge allegedly abused his discretion in setting aside the auction sale after the redemption period had expired.

3. Respondent Judge erred in applying the presumption of a joint obligation in the face of the conclusion of fact and law contained in the decision showing that the obligation is solidary.[5] (Citations omitted)

Ruling of the Court of Appeals

The Court of Appeals affirmed the trial courts ruling declaring null and void (a) the auction sale of Respondent Ferrales real property and (b) the Writ of Possession issued in consequence thereof. It held that, pursuant to the January 31, 1984 Decision of the trial court, the liability of Farrales was merely joint and not solidary. Consequently, there was no legal basis for levying and selling Farrales real and personal properties in order to satisfy the whole obligation.

Hence, this Petition.[6]

The Issues

In its Memorandum,[7] petitioner submits the following issues for our consideration:

I

Whether or not the Court of Appeals disregarded the basic policy of avoiding multiplicity of motions.

II

Whether or not the Court of Appeals erred when it disregarded the body of the decision and concluded that the obligation was merely a joint obligation due to the failure of the dispositive portion of the decision dated 31 January 1984 to state that the obligation was joint and solidary.

III

11

Whether or not the Court of Appeals disregarded the policy of upholding executions.[8]

The Courts Ruling

The Petition is devoid of merit.

First Issue: Omnibus Motion Rule

Petitioner contends that because private respondent did not question the joint and solidary nature of his liability in his (a) Motion to Quash Levy Execution [9] dated August 23, 1984, (b) Urgent Motion to Order Sheriff to Suspend Sale on Execution[10]dated December 3, 1984, and (c) Motion to Declare Certificate of Sale Null and Void[11]dated January 9, 1985, he cannot now raise it as an objection. Petitioner argues that the Omnibus Motion Rule bars private respondents belated objection. We do not agree.

The Omnibus Motion Rule is found in Section 8 of Rule 15 of the Rules of Court, which we quote:

Subject to the provisions of section 1 of Rule 9, a motion attacking a pleading, order, judgment, or proceeding shall include all objections then available, and all objections not so included shall be deemed waived. (8a)

As an aid to the proper understanding of this case, we should at the outset point out that the objections of private respondent contained in his Omnibus Motion [12]dated November 5, 1990 were directed at the proceedings and the orders issued after the auction sale of his real property covered by TCT No. 82531. In his Omnibus Motion, he asked for the recall and quashal of the Writ of Possession issued on October 26, 1990; the annulment of the June 21, 1989 auction sale of the said real property and the recomputation of his liability to petitioner.

However, the three (3) Motions that petitioner referred to above were clearly directed against the execution of private respondents personal properties. A perusal of these Motions will show that at the time, his objections were directed at the acts of execution against his personal properties.

In his Motion to Quash Levy Execution, [13] private respondent pointed to the properties of herein moving defendant x x x located at his residence at No. 17, Bunker Hill St., New Manila, Quezon City, per the Notice of Levy and Sale,[14] and asked for the quashal and setting aside of such Notice. He was thus referring to the levy on his personal properties. By the same token, in his Urgent Motion to Order Sheriff to Suspend Sale on Execution,[15] he referred to a copy of a sheriffs notice of sale dated November 22, 1984,[16] which in turn alluded to the sale of his levied personal properties. Similarly, in his Motion to Declare Certificate of Sale Null and Void,[17] he once again assailed the sale at public auction of his personal properties. It is thus clear that up to that point, he was questioning the levy and sale of his personal properties. He could not have known at the time that he would be made to answer for the entire liability, which he and his co-respondents were adjudged to pay petitioner by reason of the trial courts judgment of January 31, 1984.

After private respondent realized that he was being made to answer on the entire liability as a solidary debtor, he filed his Omnibus Motion questioning the Writ of Possession and all incident orders and proceedings relevant thereto. This realization dawned on him, because his real property was levied and sold despite the previous sale of his personal property. Only at this point was he in a position to assert his objections to the auction sale of his real property and to put up the defense of joint liability among all the respondents.

The Rules of Court requires that all available objections to a judgment or proceeding must be set up in an Omnibus Motion assailing it; otherwise, they are deemed waived. In the case at bar, the objection of private respondent to his solidary liability became available to him, only after his real property was sold at public auction. At the time his personal properties were levied and sold, it was not evident to him that he was being held solely liable for the monetary judgment rendered against him and his co-respondents. That was why his objections then did not include those he asserted when his solidary liability became evident.

Prior to his Omnibus Motion, he was not yet being made to pay for the entire obligation. Thus, his objection to his being made solidarily liable with the other respondents was not yet available to him at the time he filed the Motions referred to by petitioner. Not being available, these objections could not have been deemed waived when he filed his three earlier Motions, which pertained to matters different from those covered by his Omnibus Motion.

True, the Omnibus Motion Rule requires the movant to raise all available exceptions in a single opportunity to avoid multiple piecemeal objections.[18] But to apply that statutory norm, the objections must have been available to the party at the time the Motion was filed.

Second Issue: Basis of Private Respondents Liability

Petitioner argues that the CA erred in disregarding the text of the January 31, 1984 Decision of the trial court. In concluding that the obligation was merely joint, the CA was allegedly mistaken in relying on the failure of the dispositive portion of the Decision to state that the obligation was solidary.

We are not impressed. A solidary obligation is one in which each of the debtors is liable for the entire obligation, and each of the creditors is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. On the other hand, a joint obligation is one in which each debtors is liable only for a proportionate part of the debt, and the creditor is entitled to demand only a proportionate part of the credit from each debtor.[19] The well-entrenched rule is that solidary obligations cannot be inferred lightly. They must be positively and clearly expressed.[20] A liability is solidary only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires. [21] Article 1207 of the Civil Code explains the nature of solidary obligations in this wise:

Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestations. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.

In the dispositive portion of the January 31, 1984 Decision of the trial court, the word solidary neither appears nor can it be inferred therefrom. The fallo merely stated that the following respondents were liable: Pacific Lloyd Corporation, Thomas H. Van Sebille, Carlos M. Farrales and Federico C. Lim. Under the circumstances, the liability is joint, as provided by the Civil Code, which we quote:

Art. 1208. If from the law, or the nature or the wording of the obligations to which the preceding article refers[,] the contrary does not appear, the credit or debt shall be presumed to be divided into as many equal shares as there are creditors or debtors x x x.[22]

We should stress that respondents obligation is based on the judgment rendered by the trial court. The dispositive portion or the fallo is its decisive resolution and is thus the subject of execution. The other parts of the decision may be resorted to in order to determine the ratio decidendi for the disposition. Where there is a conflict between the dispositive part and the opinion of the court contained in the text or body of the decision, the former must prevail over the latter on the theory that the

12

dispositive portion is the final order, while the opinion is merely a statement ordering nothing. [23] Hence the execution must conform with that which is ordained or decreed in the dispositive portion of the decision.

Petitioner maintains that the Court of Appeals improperly and incorrectly disregarded the body of the trial courts Decision, which clearly stated as follows:

To support the Promissory Note, a Continuing Suretyship Agreement was executed by the defendants, Federico C. Lim, Carlos M. Farrales and Thomas H. Van Sebille, in favor of the plaintiff corporation, to the effect that if Pacific Lloyd Corporation cannot pay the amount loaned by plaintiff to said corporation, then Federico C. Lim, Carlos M. Farrales and Thomas H. Van Sebille will hold themselves jointly and severally together with defendant Pacific Lloyd Corporation to answer for the payment of said obligation.[24]

As early as 1934 in Oriental Commercial Co. v. Abeto and Mabanag,[25] this Court has already answered such argument in this wise:

It is of no consequence that, under the written contract of suretyship executed by the parties, the obligation contracted by the sureties was joint and several in character. The final judgment, which superseded the action brought for the enforcement of said contract, declared the obligation to be merely joint, and the same cannot be executed otherwise.[26]

The same reasoning was recently adopted by this Court in Industrial Management International Development Corp. v. NLRC,[27] promulgated on May 11, 2000.

Doctrinally, the basis of execution is the January 31, 1984 Decision rendered by the trial court, not the written contract of suretyship executed by the parties. As correctly observed by the trial judge:

x x x [W]hat was stated in the body of the decision of January 31, 1984 [was] only part of the narration of facts made by the Judge[,] and the dispositive portion is to prevail.[28]

The only exception when the body of a decision prevails over the fallo is when the inevitable conclusion from the former is that there was a glaring error in the latter, in which case the body of the decision will prevail.[29] In this instance, there was no clear declaration in the body of the January 31, 1984 Decision to warrant a conclusion that there was an error in the fallo. Nowhere in the former can we find a definite declaration of the trial court that, indeed, respondents liability was solidary. If petitioner had doubted this point, it should have filed a motion for reconsideration before the finality of the Decision of the trial court.

Third Issue: The Policy of Upholding Executions

Petitioner argues that the issue of whether or not the judgment debt should be construed as joint or solidary can only affect the determination of the existence or absence of an excess in the proceeds of the sale.[30] He further maintains that private respondents interests are protected anyway even if all his properties are sold, because any excess in the proceeds of the sale over the judgment and accruing costs must be delivered to the judgment debtor.[31]

We cannot accept these arguments. What can be sold on execution is limited by the Rules of Court, as follows:

When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he (sheriff) must sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees.[32]

A writ of execution is void when issued for a sum greater than that which is warranted by the judgment or for the original amount it states despite partial payment thereof. The exact amount due cannot be left to the determination of the sheriff.[33]

Petitioner finally insists that it is futile for private respondent to contest the sale in execution conducted in the case at bar because of the general policy of the law to sustain execution sales.[34]

Simple logic dictates that a general policy to sustain execution sales does not guarantee that they will be upheld at every instance. Petitioner itself quotes grounds for setting aside such sales: a resulting injury or prejudice, fraud, mistake or irregularity.[35]

Being made to pay for an obligation in its entirety when ones liability is merely for a portion is a sufficient ground to contest an execution sale. It would be the height of inequity if we allow judgment obligors to shoulder entire monetary judgments when their legal liabilities are limited only to their proportionate shares in the entire obligation.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. No pronouncement as to costs.

SO ORDERED.

SECOND DIVISION

[G.R. No. 101723. May 11, 2000]

INDUSTRIAL MANAGEMENT INTERNATIONAL DEVELOPMENT CORP. (INIMACO), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, (Fourth Division) Cebu City, and ENRIQUE SULIT, SOCORRO MAHINAY, ESMERALDO PEGARIDO, TITA BACUSMO, GINO NIERE, VIRGINIA BACUS, ROBERTO NEMENZO, DARIO GO, and ROBERTO ALEGARBES, respondents.

D E C I S I O N

BUENA, J.:

This is a petition for certiorari assailing the Resolution dated September 4, 1991 issued by the National Labor Relations Commission in RAB-VII-0711-84 on the alleged ground that it committed a grave abuse of discretion amounting to lack of jurisdiction in upholding the Alias Writ of Execution issued by the Labor Arbiter which deviated from the dispositive portion of the Decision dated March 10, 1987, thereby holding that the liability of the six respondents in the case below is solidary despite the absence of the word "solidary" in the dispositive portion of the Decision, when their liability should merely be joint. S-jcj

The factual antecedents are undisputed: Supr-eme

In September 1984, private respondent Enrique Sulit, Socorro Mahinay, Esmeraldo Pegarido, Tita Bacusmo, Gino Niere, Virginia Bacus, Roberto Nemenzo, Dariogo, and Roberto Alegarbes filed a complaint with the Department of Labor and Employment, Regional Arbitration Branch No. VII in Cebu City against Filipinas Carbon Mining Corporation, Gerardo Sicat, Antonio Gonzales, Chiu Chin Gin, Lo Kuan Chin, and

13

petitioner Industrial Management Development Corporation (INIMACO), for payment of separation pay and unpaid wages. Sc-jj

In a Decision dated March 10, 1987, Labor Arbiter Bonifacio B. Tumamak held that:

"RESPONSIVE, to all the foregoing, judgment is hereby entered, ordering respondents Filipinas Carbon and Mining Corp. Gerardo Sicat, Antonio Gonzales/Industrial Management Development Corp. (INIMACO), Chiu Chin Gin and Lo Kuan Chin, to pay complainants Enrique Sulit, the total award of P82,800.00; ESMERALDO PEGARIDO the full award of P19,565.00; Roberto Nemenzo the total sum of P29,623.60 and DARIO GO the total award of P6,599.71, or the total aggregate award of ONE HUNDRED THIRTY-EIGHT THOUSAND FIVE HUNDRED EIGHTY-EIGHT PESOS AND 31/100 (P138,588.31) to be deposited with this Commission within ten (10) days from receipt of this Decision for appropriate disposition. All other claims are hereby Dismiss (sic) for lack of merit. Jjs-c

"SO ORDERED.

"Cebu City, Philippines.

"10 March 1987."0[1]

No appeal was filed within the reglementary period thus, the above Decision became final and executory. On June 16, 1987, the Labor Arbiter issued a writ of execution but it was returned unsatisfied. On August 26, 1987, the Labor Arbiter issued an Alias Writ of Execution which ordered thus: Ed-pm-is

"NOW THEREFORE, by virtue of the powers vested in me by law, you are hereby commanded to proceed to the premises of respondents Antonio Gonzales/Industrial Management Development Corporation (INIMACO) situated at Barangay Lahug, Cebu City, in front of La Curacha Restaurant, and/or to Filipinas Carbon and Mining corporation and Gerardo Sicat at 4th Floor Universal RE-Bldg. 106 Paseo de Roxas, Legaspi Village, Makati Metro Manila and at Philippine National Bank, Escolta, Manila respectively, and collect the aggregate award of ONE HUNDRED THIRTY-EIGHT THOUSAND FIVE HUNDRED EIGHTY-EIGHT PESOS AND THIRTY ONE CENTAVOS (P138,588.31) and thereafter turn over said amount to complainants ENRIQUE SULIT, ESMERALDO PEGARIDO, ROBERTO NEMENZO AND DARIO GO or to this Office for appropriate disposition. Should you fail to collect the said sum in cash, you are hereby authorized to cause the satisfaction of the same on the movable or immovable property(s) of respondents not exempt from execution. You are to return this writ sixty (6) (sic) days from your receipt hereof, together with your corresponding report.

"You may collect your legal expenses from the respondents as provided for by law.

"SO ORDERED."[2]

On September 3, 1987, petitioner filed a "Motion to Quash Alias Writ of Execution and Set Aside Decision,"[3] alleging among others that the alias writ of execution altered and changed the tenor of the decision by changing the liability of therein respondents from joint to solidary, by the insertion of the words "AND/OR" between "Antonio Gonzales/Industrial Management Development Corporation and

Filipinas Carbon and Mining Corporation, et al." However, in an order dated September 14, 1987, the Labor Arbiter denied the motion. Mis-oedp

On October 2, 1987, petitioner appealed[4] the Labor Arbiters Order dated September 14, 1987 to the respondent NLRC. Mis-edp

The respondent NLRC dismissed the appeal in a Decision[5] dated August 31, 1988, the pertinent portions of which read:

"In matters affecting labor rights and labor justice, we have always adopted the liberal approach which favors the exercise of labor rights and which is beneficial to labor as a means to give full meaning and import to the constitutional mandate to afford protection to labor. Considering the factual circumstances in this case, there is no doubt in our mind that the respondents herein are called upon to pay, jointly and severally, the claims of the complainants as was the latters prayers. Inasmuch as respondents herein never controverted the claims of the complainants below, there is no reason why complainants prayer should not be granted. Further, in line with the powers granted to the Commission under Article 218 (c) of the Labor code, to waive any error, defect or irregularity whether in substance or in form in a proceeding before Us, We hold that the Writ of Execution be given due course in all respects." Ed-p

On July 31, 1989, petitioner filed a "Motion To Compel Sheriff To Accept Payment Of P23,198.05 Representing One Sixth Pro Rata Share of Respondent INIMACO As Full and Final Satisfaction of Judgment As to Said Respondent."[6] The private respondents opposed the motion. In an Order[7] dated August 15, 1989, the Labor Arbiter denied the motion ruling thus:

"WHEREFORE, responsive to the foregoing respondent INIMACOs Motions are hereby DENIED. The Sheriff of this Office is order (sic) to accept INIMACOs tender payment (sic) of the sum of P23,198.05, as partial satisfaction of the judgment and to proceed with the enforcement of the Alias Writ of Execution of the levied properties, now issued by this Office, for the full and final satisfaction of the monetary award granted in the instant case.

"SO ORDERED." Ed-psc

Petitioner appealed the above Order of the Labor Arbiter but this was again dismissed by the respondent NLRC in its Resolution[8] dated September 4, 1991 which held that:

"The arguments of respondent on the finality of the dispositive portion of the decision in this case is beside the point. What is important is that the Commission has ruled that the Writ of Execution issued by the Labor Arbiter in this case is proper. It is not really correct to say that said Writ of Execution varied the terms of the judgment. At most, considering the nature of labor proceedings there was, an ambiguity in said dispositive portion which was subsequently clarified by the Labor Arbiter and the Commission in the incidents which were initiated by INIMACO itself. By sheer technicality and unfounded assertions, INIMACO would now reopen the issue which was already resolved against it. It is not in keeping with the established rules of practice and procedure to allow this attempt of INIMACO to delay the final disposition of this case.

14

"WHEREFORE, in view of all the foregoing, this appeal is DISMISSED and the Order appealed from is hereby AFFIRMED. Sce-dp

"With double costs against appellant."

Dissatisfied with the foregoing, petitioner filed the instant case, alleging that the respondent NLRC committed grave abuse of discretion in affirming the Order of the Labor Arbiter dated August 15, 1989, which declared the liability of petitioner to be solidary.

The only issue in this petition is whether petitioners liability pursuant to the Decision of the Labor Arbiter dated March 10, 1987, is solidary or not. Calrs-pped

Upon careful examination of the pleadings filed by the parties, the Court finds that petitioner INIMACOs liability is not solidary but merely joint and that the respondent NLRC acted with grave abuse of discretion in upholding the Labor Arbiters Alias Writ of Execution and subsequent Orders to the effect that petitioners liability is solidary.

A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation.[9] In a joint obligation each obligor answers only for a part of the whole liability and to each obligee belongs only a part of the correlative rights.[10]

Well-entrenched is the rule that solidary obligation cannot lightly be inferred.[11] There is a solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires.[12]

In the dispositive portion of the Labor Arbiter, the word "solidary" does not appear. The said fallo expressly states the following respondents therein as liable, namely: Filipinas Carbon and Mining Corporation, Gerardo Sicat, Antonio Gonzales, Industrial Management Development Corporation (petitioner INIMACO), Chiu Chin Gin, and Lo Kuan Chin. Nor can it be inferred therefrom that the liability of the six (6) respondents in the case below is solidary, thus their liability should merely be joint.

Moreover, it is already a well-settled doctrine in this jurisdiction that, when it is not provided in a judgment that the defendants are liable to pay jointly and severally a certain sum of money, none of them may be compelled to satisfy in full said judgment. In Oriental Commercial Co. vs. Abeto and Mabanag[13] this Court held:

"It is of no consequence that, under the contract of suretyship executed by the parties, the obligation contracted by the sureties was joint and several in character. The final judgment, which superseded the action for the enforcement of said contract, declared the obligation to be merely joint, and the same cannot be executed otherwise."[14]

Granting that the Labor Arbiter has committed a mistake in failing to indicate in the dispositive portion that the liability of respondents therein is solidary, the correction -- which is substantial -- can no longer be allowed in this case because the judgment has already become final and executory. Scc-alr

It is an elementary principle of procedure that the resolution of the court in a given issue as embodied in the dispositive part of a decision or order is the controlling factor as to settlement of rights of the parties.[15] Once a decision or order becomes final and executory, it is removed from the power or jurisdiction of the court which rendered it to further alter or amend it.[16] It thereby becomes immutable and unalterable

and any amendment or alteration which substantially affects a final and executory judgment is null and void for lack of jurisdiction, including the entire proceedings held for that purpose.[17] An order of execution which varies the tenor of the judgment or exceeds the terms thereof is a nullity.[18]

None of the parties in the case before the Labor Arbiter appealed the Decision dated March 10, 1987, hence the same became final and executory. It was, therefore, removed from the jurisdiction of the Labor Arbiter or the NLRC to further alter or amend it. Thus, the proceedings held for the purpose of amending or altering the dispositive portion of the said decision are null and void for lack of jurisdiction. Also, the Alias Writ of Execution is null and void because it varied the tenor of the judgment in that it sought to enforce the final judgment against "Antonio Gonzales/Industrial Management Development Corp. (INIMACO) and/or Filipinas Carbon and Mining Corp. and Gerardo Sicat," which makes the liability solidary. Ca-lrsc

WHEREFORE, the petition is hereby GRANTED. The Resolution dated September 4, 1991 of the respondent National Labor Relations is hereby declared NULL and VOID. The liability of the respondents in RAB-VII-0711-84 pursuant to the Decision of the Labor Arbiter dated March 10, 1987 should be, as it is hereby, considered joint and petitioners payment which has been accepted considered as full satisfaction of its liability, without prejudice to the enforcement of the award, against the other five (5) respondents in the said case. Sppedsc

SO ORDERED.

15

[G.R. No. 96405. June 26, 1996]

BALDOMERO INCIONG, JR., petitioner, vs. COURT OF APPEALS and PHILIPPINE BANK OF COMMUNICATIONS, respondents.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; PAROL EVIDENCE RULE; DOES NOT SPECIFY THAT THE WRITTEN AGREEMENT BE A PUBLIC INSTRUMENT.- Clearly, the rule does not specify that the written agreement be a public document. What is required is that the agreement be in writing as the rule is in fact founded on "long experience that written evidence is so much more certain and accurate than that which rests in fleeting memory only, that it would be unsafe, when parties have expressed the terms of their contract in writing, to admit weaker evidence to control and vary the stronger and to show that the parties intended a different contract from that expressed in the writing signed by them" [FRANCISCO, THE RULES OF COURT OF THE PHILIPPINES, Vol. VII, Part I, 1990 ed., p. 179] Thus, for the parol evidence rule to apply, a written contract need not be in any particular form, or be signed by both parties. As a general rule, bills, notes and other instruments of a similar nature are not subject to be varied or contradicted by parol or extrinsic evidence.

2. CIVIL LAW; OBLIGATIONS; SOLIDARY OR JOINT AND SEVERAL OBLIGATION, DEFINED.- A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. [TOLENTINO, CIVIL CODE OF THE PHILIPPINES, Vol. IV, 1991 ed., p. 217] Section 4, Chapter 3, Title 1, Book IV of the Civil Code states the law on joint and several obligations. Under Art. 1207 thereof, when there are two or more debtors in one and the same obligation, the presumption is that the obligation is joint so that each of the debtors is liable only for the proportionate part of the debt. There is a solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires. [Sesbreo v. Court of Appeals, G.R. No. 89252, May 24, 1993, 222 SCRA 466, 481.]

3. ID.; GUARANTY; GUARANTOR AS DISTINGUISHED FROM SOLIDARY DEBTOR.- While a guarantor may bind himself solidarily with the principal debtor, the liability of a guarantor is different from that of a solidary debtor. Thus, Tolentino explains: "A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph does not become a solidary co-debtor to all intents and purposes. There is a difference between a solidary co-debtor, and a fiador in solidum (surety). The latter, outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted, retains all the other rights, actions and benefits which pertain to him by reason of the fiansa;while a solidary co-debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, Title 1, Book IV of the Civil Code." [Tolentino, Civil Code of the Philippines, Vol. V, 1992 ed., p. 502]

APPEARANCES OF COUNSEL

Emilio G. Abrogena for petitioner.Teogenes X. Velez for private respondent.

D E C I S I O N

ROMERO, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals affirming that of the Regional Trial Court of Misamis Oriental, Branch 18,[1] which disposed of Civil Case No. 10507 for collection of a sum of money and damages, as follows:

"WHEREFORE, defendant BALDOMERO L. INCIONG, JR. is adjudged solidarily liable and ordered to pay to the plaintiff Philippine Bank of Communications, Cagayan de Oro City, the amount of FIFTY THOUSAND PESOS (P50,000.00),with interest thereon from May 5, 1983 at 16% per annum until fully paid; and 6% per annum on the total amount due, as liquidated damages or penalty from May 5, 1983 until fully paid; plus 10% of the total amount due for expenses of litigation and attorney's fees; and to pay the costs.

The counterclaim, as well as the cross claim, are dismissed for lack of merit.

SO ORDERED."

Petitioner's liability resulted from the promissory note in the amount of P50,000.00 which he signed with Rene C. Naybe and Gregorio D. Pantanosas on February 3, 1983, holding themselves jointly and severally liable to private respondent Philippine Bank of Communications, Cagayan de Oro City branch. The promissory note was due on May 5, 1983.

Said due date expired without the promissors having paid their obligation. Consequently, on November 14, 1983 and on June 8, 1984, private respondent sent petitioner telegrams demanding payment thereof.[2] On December 11, 1984 private respondent also sent by registered mail a final letter of demand to Rene C. Naybe. Since both obligors did not respond to the demands made, private respondent filed on January 24, 1986 a complaint for collection of the sum of P50,000.00 against the three obligors.

On November 25, 1986, the complaint was dismissed for failure of the plaintiff to prosecute the case. However, on January 9, 1987, the lower court reconsidered the dismissal order and required the sheriff to serve the summonses. On January 27, 1987, the lower court dismissed the case against defendant Pantanosas as prayed for by the private respondent herein.Meanwhile, only the summons addressed to petitioner was served as the sheriff learned that defendant Naybe had gone to Saudi Arabia.

In his answer, petitioner alleged that sometime in January 1983, he was approached by his friend, Rudy Campos, who told him that he was a partner of Pio Tio, the branch manager of private respondent in Cagayan de Oro City, in the falcata logs operation business. Campos also intimated to him that Rene C. Naybe was interested in the business and would contribute a chainsaw to the venture. He added that, although Naybe had no money to buy the equipment Pio Tio had assured Naybe of the approval of a loan he would make with private respondent.Campos then persuaded petitioner to act as a "co-maker" in the said loan. Petitioner allegedly acceded but with the understanding that he would only be a co-maker for the loan of P5,000.00.

Petitioner alleged further that five (5) copies of a blank promissory note were brought to him by Campos at his office. He affixed his signature thereto but in one copy, he indicated that he bound himself only for the amount of P5,000.00. Thus, it was by trickery, fraud and misrepresentation that he was made liable for the amount of P50,000.00.

In the aforementioned decision of the lower court, it noted that the typewritten figure "P50,000-" clearly appears directly below the admitted signature of the petitioner in the promissory note. [3] Hence, the latter's uncorroborated testimony on his limited liability cannot prevail over the presumed regularity and fairness of the transaction, under Sec. 5 (q) of Rule 131. The lower court added that it was "rather odd" for petitioner to have indicated in a copy and not in the original, of the promissory note, his

16

supposed obligation in the amount of P5,000.00 only.Finally, the lower court held that even granting that said limited amount had actually been agreed upon, the same would have been merely collateral between him and Naybe and, therefore, not binding upon the private respondent as creditor-bank.

The lower court also noted that petitioner was a holder of a Bachelor of Laws degree and a labor consultant who was supposed to take due care of his concerns, and that, on the witness stand, Pio Tio denied having participated in the alleged business venture although he knew for a fact that the falcata logs operation was encouraged by the bank for its export potential.

Petitioner appealed the said decision to the Court of Appeals which, in its decision of August 31, 1990, affirmed that of the lower court. His motion for reconsideration of the said decision having been denied, he filed the instant petition for review on certiorari.

On February 6,1991, the Court denied the petition for failure of petitioner to comply with the Rules of Court and paragraph 2 of Circular No. 1-88, and to sufficiently show that respondent court had committed any reversible error in its questioned decision.[4] His motion for the reconsideration of the denial of his petition was likewise denied with finality in the Resolution of April 24, 1991. [5] Thereafter, petitioner filed a motion for leave to file a second motion for reconsideration which, in the Resolution of May 27, 1991, the Court denied. In the same Resolution, the Court ordered the entry of judgment in this case.[6]

Unfazed, petitioner filed a motion for leave to file a motion for clarification. In the latter motion, he asserted that he had attached Registry Receipt No. 3268 to page 14 of the petition in compliance with Circular No. 1-88. Thus, on August 7,1991, the Court granted his prayer that his petition be given due course and reinstated the same.[7]

Nonetheless, we find the petition unmeritorious.

Annexed to the petition is a copy of an affidavit executed on May 3, 1988, or after the rendition of the decision of the lower court, by Gregorio Pantanosas, Jr., an MTCC judge and petitioner's co-maker in the promissory note. It supports petitioner's allegation that they were induced to sign the promissory note on the belief that it was only for P5,000.00, adding that it was Campos who caused the amount of the loan to be increased to P50,000.00.

The affidavit is clearly intended to buttress petitioner's contention in the instant petition that the Court of Appeals should have declared the promissory note null and void on the following grounds: (a) the promissory note was signed in the office of Judge Pantanosas, outside the premises of the bank; (b) the loan was incurred for the purpose of buying a second-hand chainsaw which cost only P5,000.00; (c) even a new chainsaw would cost only P27,500.00; (d) the loan was not approved by the board or credit committee which was the practice, at it exceeded P5,000.00; (e) the loan had no collateral; (f) petitioner and Judge Pantanosas were not present at the time the loan was released in contravention of the bank practice, and (g) notices of default are sent simultaneously and separately but no notice was validly sent to him.[8] Finally, petitioner contends that in signing the promissory note, his consent was vitiated by fraud as, contrary to their agreement that the loan was only for the amount of P5,000. 00, the promissory note stated the amount of P50,000.00.

The above-stated points are clearly factual. Petitioner is to be reminded of the basic rule that this Court is not a trier of facts. Having lost the chance to fully ventilate his factual claims below, petitioner may no longer be accorded the same opportunity in the absence of grave abuse of discretion on the part of the court below. Had he presented Judge Pantanosas' affidavit before the lower court, it would have strengthened his claim that the promissory note did not reflect the correct amount of the loan.

Nor is there merit in petitioner's assertion that since the promissory note "is not a public deed with the formalities prescribed by law but x x x a mere commercial paper which does not bear the signature of x x x attesting witnesses," parol evidence may "overcome" the contents of the promissory note. [9] The first paragraph of the parol evidence rule[10] states:

"When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement."

Clearly, the rule does not specify that the written agreement be a public document.

What is required is that agreement be in writing as the rule is in fact founded on "long experience that written evidence is so much more certain and accurate than that which rests in fleeting memory only, that it would be unsafe, when parties have expressed the terms of their contract in writing, to admit weaker evidence to control and vary the stronger and to show that the parties intended a different contract from that expressed in the writing signed by them." [11] Thus, for the parol evidence rule to apply, a written contract need not be in any particular form, or be signed by both parties. [12] As a general rule, bills, notes and other instruments of a similar nature are not subject to be varied or contradicted by parol or extrinsic evidence.[13]

By alleging fraud in his answer,[14] petitioner was actually in the right direction towards proving that he and his co-makers agreed to a loan of P5,000.00 only considering that, where a parol contemporaneous agreement was the inducing and moving cause of the written contract, it may be shown by parol evidence.[15] However, fraud must be established by clear and convincing evidence, mere preponderance of evidence, not even being adequate.[16] Petitioner's attempt to prove fraud must, therefore, fail as it was evidenced only by his own uncorroborated and, expectedly, self-serving testimony.

Petitioner also argues that the dismissal of the complaint against Naybe, the principal debtor, and against Pantanosas, his co-maker, constituted a release of his obligation, especially because the dismissal of the case against Pantanosas was upon the motion of private respondent itself. He cites as basis for his argument, Article 2080 of the Civil Code which provides that:

"The guarantors, even though they be solidary, are released from their obligation whenever by some act of the creditor, they cannot be subrogated to the rights, mortgages, and preferences of the latter."

It is to be noted, however, that petitioner signed the promissory note as a solidary co-maker and not as a guarantor. This is patent even from the first sentence of the promissory note which states as follows:

"Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND ONLY (P50,000. 00) Pesos, Philippine Currency, together with interest x x x at the rate of SIXTEEN (16) per cent per annum until fully paid."

A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. [17] On the other hand, Article 2047 of the Civil Code states:

"By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so.

If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed, In such a case the contract is called a suretyship." (Italics supplied.)

While a guarantor may bind himself solidarily with the principal debtor, the liability of a guarantor is different from that of a solidary debtor. Thus, Tolentino explains:

17

"A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph does not become a solidary co-debtor to all intents and purposes. There is a difference between a solidary co-debtor, and a fiador in solidum (surety). The later, outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted, retains all the other rights, actions and benefits which pertain to him by reason of the fiansa; while a solidary co-debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, title I, Book IV of the Civil Code."[18]

Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint and several obligations. Under Art. 1207 thereof, when there are two or more debtors in one and the same obligation, the presumption is that the obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. There is a solidarity liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires.[19]

Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable, any one, some or all of them may be proceeded against for the entire obligation.[20] The choice is left to the solidary creditor to determine against whom he will enforce collection.[21] Consequently, the dismissal of the case against Judge Pontanosas may not be deemed as having discharged petitioner from liability as well. As regards Naybe, suffice it to say that the court never acquired jurisdiction over him. Petitioner, therefore, may only have recourse against his co-makers, as provided by law.

WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the questioned decision of the Court of Appeals is AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 150402 November 28, 2006

EPARWA SECURITY AND JANITORIAL SERVICES, INC., Petitioner, vs.LICEO DE CAGAYAN UNIVERSITY, Respondent.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for certiorari1 of the Decision2 dated 20 April 2001 and the Resolution dated 21 September 2001 of the Court of Appeals ("appellate court") in CA-G.R. SP No. 59120, Liceo de Cagayan University v. The Hon. National Labor Relations Commission, Fifth Division, Eparwa Security and Janitorial Services, Inc., et al. The appellate court reinstated the 18 August 1999 decision3 of the Labor Arbiter and remanded the case to the Regional Arbitration Board, Branch No. 10 of Cagayan de Oro City to compute what is due to Liceo de Cagayan University (LDCU) from Eparwa Security and Janitorial Services, Inc. ("Eparwa").

The Facts

On 1 December 1997, Eparwa and LDCU, through their representatives, entered into a Contract for Security Services. The pertinent portion of the contract provides that:

5. For and in consideration of this security, protective and safety services, [LDCU] agrees to pay [Eparwa] FIVE THOUSAND PESOS ONLY (P5,000.00), Philippine Currency per guard a month payable within fifteen (15) days after [Eparwa] presents its service invoice. [Eparwa] shall furnish [LDCU] a monthly copy of SSS contribution of guards and monthly payroll of each guard assigned at [LDCU’s] premises on a monthly basis[.]4

Eparwa allocated the contracted amount of P5,000 per security guard per month in the following manner:

Basic Pay (P 104.50 x 391.5/12) P3,409.31

Night Diff. Pay 113.6413th mo. Pay 284.105 day incentive leave 43.54Uniform allowance 50.00Employer’s SSS, Medicare, ECC contribution 224.80Agency share 420.53VAT 454.59

CONTRACT RATE P5,000.50

(rounded off to P 5,000.00 )5

On 21 December 1998, 11 security guards ("security guards") whom Eparwa assigned to LDCU from 1 December 1997 to 30 November 1998 filed a complaint before the National Labor Relations Commission’s (NLRC) Regional Arbitration Branch No. 10 in Cagayan de Oro City. Docketed as NLRC-RABX Case No. 10-01-00102-99, the complaint was filed against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day, service incentive leave, night shift differential, overtime pay, and payment for attorney’s fees.

LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any payment to the security guards.

The Ruling of the Labor Arbiter

In its decision dated 18 August 1999, the Labor Arbiter found that the security guards are entitled to wage differentials and premium for holiday and rest day work. The Labor Arbiter held Eparwa and LDCU solidarily liable pursuant to Article 109 of the Labor Code. The dispositive portion of the Labor Arbiter’s decision reads:

WHEREFORE, judgment is rendered[:]

1. Ordering respondents [LDCU] and [Eparwa] solidarily liable to pay [the security guards] for underpayment, holiday and rest day, as follows:

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N a m e Amount1. Casiñero, Jovencio P 46,819.952. Villarino, Leonardo 46,819.953. Lumbab, Adriano 46,819.954. Caballero, Gregorio,

Jr.46,819.95

5. Cajilla, Delfin, Jr. 37,918.956. Paduanga, Arnold 20,321.107. Dungog, Achimedes 46,819.958. Magallanes, Eduardo 46,819.959. Dungog, Luigi 46,819.9510.

Dungog, Telford 46,819.95

11.

Bahian, Wilfredo 30,741.30

P 463,540.95

2. Denying the claim of unpaid 13th month pay, service incentive leave and night shift premium pay for lack of merit;

3. Ordering respondent [Eparwa] to reimburse respondent [LDCU] for whatever amount the latter may be required to pay [the security guards];

4. Ordering respondent [Eparwa] to pay respondent [LDCU] P20,000.00 and P5,000.00 each of the [security guards], moral and exemplary damages;

5. Ordering [Eparwa] to pay 10% of attorney’s fee[s][;]

6. The rest of the claims are denied for lack of merit.

So Ordered.6

LDCU filed an appeal before the NLRC. LDCU agreed with the Labor Arbiter’s decision on the security guards’ entitlement to salary differential but challenged the propriety of the amount of the award. LDCU alleged that security guards not similarly situated were granted uniform monetary awards and that the decision did not include the basis of the computation of the amount of the award.

Eparwa also filed an appeal before the NLRC. For its part, Eparwa questioned its liability for the security guards’ claims and the awarded cross-claim amounts.

The Ruling of the NLRC

The Fifth Division of the NLRC resolved Eparwa and LDCU’s separate appeals in its Resolution7 dated 19 January 2000. The NLRC found that the security guards are entitled to wage differentials and premium for holiday and rest day work. Although the NLRC held Eparwa and LDCU solidarily liable for the wage differentials and premium for holiday and rest day work, the NLRC did not require Eparwa to reimburse

LDCU for its payments to the security guards. The NLRC also ordered the recomputation of the monetary awards according to the dates actually worked by each security guard. The dispositive portion of the NLRC Resolution reads thus:

WHEREFORE, the appealed decision is AFFIRMED, subject to the modification that the portions thereof directing respondent EPARWA Security Agency and Janitorial Services, Inc. to reimburse respondent Liceo de Cagayan University for whatever amount the latter may have paid complainants and to pay respondent Liceo de Cagayan University the sum [sic] [of] P20,000.00 and P5,000.00, representing moral and exemplary damages, respectively, of each complainants [sic], are deleted for lack of legal basis. Further the monetary awards for wage differential and premiums for holiday and rest day works shall be recomputed by the Regional Arbitration Branch of origin at the execution stage of the proceedings.

Co[n]formably, the award of Attorney’s fee[s] is equivalent to ten (10%) percent of the aggregate monetary award as finally adjusted.

SO ORDERED.8

Eparwa and LDCU again filed separate motions for partial reconsideration of the 19 January 2000 NLRC Resolution. LDCU questioned the NLRC’s deletion of LDCU’s entitlement to reimbursement by Eparwa. Eparwa, on the other hand, prayed that LDCU be made to reimburse Eparwa for whatever amount it may pay to the security guards.

In its Resolution dated 14 March 2000, the NLRC declared that although Eparwa and LDCU are solidarily liable to the security guards for the monetary award, LDCU alone is ultimately liable. The NLRC resolved the issue thus:

WHEREFORE, the assailed resolution, dated 19 January 2000, is MODIFIED in that respondent Liceo de Cagayan University (LICEO) is ordered to reimburse respondent Eparwa Security and Janitorial Services, Inc. (EPARWA) for whatever amount the latter may have paid to complainants arising from this case.

SO ORDERED.9

LDCU filed a petition for certiorari10 before the appellate court assailing the NLRC’s decision. LDCU took issue with the NLRC’s order that LDCU should reimburse Eparwa. LDCU stated that this would free Eparwa from any liability for payment of the security guards’ money claims.

The Ruling of the Appellate Court

In its Decision promulgated on 20 April 2001, the appellate court granted LDCU’s petition and reinstated the Labor Arbiter’s decision. The appellate court also allowed LDCU to claim reimbursement from Eparwa. The appellate court’s decision reads thus:

WHEREFORE, foregoing considered, the petition is hereby GRANTED. The decision dated August 18, 1999 of Labor Arbiter Celenito N. Daing is REINSTATED. The case is hereby REMANDED to the Regional Arbitration Board, Branch No. 10 of Cagayan de Oro City to compute what is due to LDCU from EPARWA.

SO ORDERED.11

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Eparwa filed a motion for reconsideration of the appellate court’s decision. Eparwa stressed that jurisprudence is consistent in ruling that the ultimate liability for the payment of the monetary award rests with LDCU alone.

The appellate court denied Eparwa’s motion for reconsideration for lack of merit.

Hence, this petition.

The Issue

The petition raises this sole legal issue: Is LDCU alone ultimately liable to the security guards for the wage differentials and premium for holiday and rest day pay?

The Ruling of the Court

The petition has merit.

Eparwa and LDCU’s Solidary Liability andLDCU’s Ultimate Liability

Articles 106, 107 and 109 of the Labor Code read:

Art. 106. Contractor or subcontractor. — Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of the employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

Article 107. Indirect employer. — The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.

Article 109. Solidary liability. — The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

This Court’s ruling in Eagle Security Agency, Inc. v. NLRC12 squarely applies to the present case. In Eagle, we ruled that:

This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance of the provisions therein including the statutory minimum wage [Article 99, Labor Code]. The contractor is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the contractor’s employees for purposes of paying the employees their wages should the contractor be unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the workers’ performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution [See Article II Sec. 18 and Article XIII Sec. 3].

In the case at bar, it is beyond dispute that the security guards are the employees of EAGLE [See Article VII Sec. 2 of the Contract for Security Services; G.R. No. 81447, Rollo, p. 34]. That they were assigned to guard the premises of PTSI pursuant to the latter’s contract with EAGLE and that neither of these two entities paid their wage and allowance increases under the subject wage orders are also admitted [See Labor Arbiter’s Decision, p. 2; G.R. No. 81447, Rollo, p. 75]. Thus, the application of the aforecited provisions of the Labor Code on joint and several liability of the principal and contractor is appropriate [See Del Rosario & Sons Logging Enterprises, Inc. v. NLRC, G.R. No. 64204, May 31, 1985, 136 SCRA 669].

The solidary liability of PTSI and EAGLE, however, does not preclude the right of reimbursement from his co-debtor by the one who paid [See Article 1217, Civil Code]. It is with respect to this right of reimbursement that petitioners can find support in the aforecited contractual stipulation and Wage Order provision.

The Wage Orders are explicit that payment of the increases are "to be borne" by the principal or client.1âwphi1 "To be borne", however, does not mean that the principal, PTSI in this case, would directly pay the security guards the wage and allowance increases because there is no privity of contract between them. The security guards’ contractual relationship is with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among others, with the payment of their wages [See Article VII Sec. 3 of the Contract for Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 665].

On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the former availed of the security services provided by the latter. In return, the security agency collects from its client payment for its security services. This payment covers the wages for the security guards and also expenses for their supervision and training, the guards’ bonds, firearms with ammunitions, uniforms and other equipments, accessories, tools, materials and supplies necessary for the maintenance of a security force.

Premises considered, the security guards’ immediate recourse for the payment of the increases is with their direct employer, EAGLE. However, in order for the security agency to comply with the new wage and allowance rates it has to pay the security guards, the Wage Orders made specific provision to amend existing contracts for security services by allowing the adjustment of the consideration paid by the principal to the security agency concerned. What the Wage Orders require, therefore, is the amendment of the contract as to the consideration to cover the service contractor’s payment of the increases mandated. In the end, therefore, ultimate liability for the payment of the increases rests with the principal.

20

In view of the foregoing, the security guards should claim the amount of the increases from EAGLE. Under the Labor Code, in case the agency fails to pay them the amounts claimed, PTSI should be held solidarily liable with EAGLE [Articles 106,107 and 109]. Should EAGLE pay, it can claim an adjustment from PTSI for an increase in consideration to cover the increases payable to the security guards.

However, in the instant case, the contract for security services had already expired without being amended consonant with the Wage Orders. It is also apparent from a reading of a record that EAGLE does not now demand from PTSI any adjustment in the contract price and its main concern is freeing itself from liability. Given these peculiar circumstances, if PTSI pays the security guards, it cannot claim reimbursement from EAGLE. But in case it is EAGLE that pays them, the latter can claim reimbursement from PTSI in lieu of an adjustment, considering that the contract, [sic] had expired and had not been renewed.13 (Emphasis added)

We repeatedly upheld our ruling in Eagle regarding reimbursement in the subsequent cases of Spartan Security & Detective Agency, Inc. v. NLRC,14 Development Bank of the Philippines v. NLRC,15 Alpha Investigation and Security Agency, Inc. v. NLRC,16 Helpmate, Inc. v. NLRC, et al.,17 and Lapanday Agricultural Development Corporation v. Court of Appeals.18

For the security guards, the actual source of the payment of their wage differentials and premium for holiday and rest day work does not matter as long as they are paid. This is the import of Eparwa and LDCU’s solidary liability. Creditors, such as the security guards, may collect from anyone of the solidary debtors. Solidary liability does not mean that, as between themselves, two solidary debtors are liable for only half of the payment.

LDCU’s ultimate liability comes into play because of the expiration of the Contract for Security Services. There is no privity of contract between the security guards and LDCU, but LDCU’s liability to the security guards remains because of Articles 106, 107 and 109 of the Labor Code. Eparwa is already precluded from asking LDCU for an adjustment in the contract price because of the expiration of the contract, but Eparwa’s liability to the security guards remains because of their employer-employee relationship. In lieu of an adjustment in the contract price, Eparwa may claim reimbursement from LDCU for any payment it may make to the security guards. However, LDCU cannot claim any reimbursement from Eparwa for any payment it may make to the security guards.

WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 20 April 2001 and the Resolution dated 21 September 2001 of the Court of Appeals. We REINSTATE the Resolutions dated 19 January 2000 and 14 March 2000 of the National Labor Relations Commission.

SO ORDERED

[G.R. No. 138842. October 18, 2000]

NATIVIDAD P. NAZARENO, MAXIMINO P. NAZARENO, JR., petitioners, vs. COURT OF APPEALS, ESTATE OF MAXIMINO A. NAZARENO, SR., ROMEO P. NAZARENO and ELIZA NAZARENO, respondents.

D E C I S I O N

MENDOZA, J.:

This is a petition for review on certiorari of the decision [1] of the Court of Appeals in CA-GR CV No. 39441 dated May 29, 1998 affirming with modifications the decision of the Regional Trial Court, Branch 107, Quezon City, in an action for annulment of sale and damages.

The facts are as follows:

Maximino Nazareno, Sr. and Aurea Poblete were husband and wife. Aurea died on April 15, 1970, while Maximino, Sr. died on December 18, 1980. They had five children, namely, Natividad, Romeo, Jose, Pacifico, and Maximino, Jr. Natividad and Maximino, Jr. are the petitioners in this case, while the estate of Maximino, Sr., Romeo, and his wife Eliza Nazareno are the respondents.

During their marriage, Maximino Nazareno, Sr. and Aurea Poblete acquired properties in Quezon City and in the Province of Cavite. It is the ownership of some of these properties that is in question in this case.

It appears that after the death of Maximino, Sr., Romeo filed an intestate case in the Court of First Instance of Cavite, Branch XV, where the case was docketed as Sp. Proc. No. NC-28.Upon the reorganization of the courts in 1983, the case was transferred to the Regional Trial Court of Naic, Cavite. Romeo was appointed administrator of his fathers estate.

In the course of the intestate proceedings, Romeo discovered that his parents had executed several deeds of sale conveying a number of real properties in favor of his sister, Natividad. One of the deeds involved six lots in Quezon City which were allegedly sold by Maximino, Sr., with the consent of Aurea, to Natividad on January 29, 1970 for the total amount ofP47,800.00. The Deed of Absolute Sale reads as follows:

DEED OF ABSOLUTE SALE

KNOW ALL MEN BY THESE PRESENTS:

I, MAXIMINO A. NAZARENO, Filipino, married to Aurea Poblete-Nazareno, of legal age and a resident of the Mun. of Naic, Prov. of Cavite, Philippines,

- W I T N E S S E T H -

That I am the absolute registered owner of six (6) parcels of land with the improvements thereon situated in Quezon City, Philippines, which parcels of land are herewith described and bounded as follows, to wit:

TRANS. CERT. OF TITLE NO. 140946

A parcel of land (Lot 3-B of the subdivision plan Psd-47404, being a portion of Lot 3, Block D-3 described on plan Bsd-10642, G.L.R.O. Record No.) situated in the Quirino District, Quezon City. Bounded on the N., along line 1-2 by Lot 15, Block D-3 of plan Bsd - 10642; along line 2-3 by Lot 4, Block D-3 of plan Bsd-10642; along line 3-4 by Aurora Boulevard (Road Lot-1, Bsd-10642); and along line 4-1 by Lot 3-D of the subdivision plan. Beginning at a point marked 1 on plan, being S.29 deg. 26E., 1156.22 m. from B.L.L.M. 9, Quezon City,

thence N. 79 deg. 53E., 12.50 m. to point 2;

thence S. 10 deg. 07E., 40.00 m. to point 3;

thence S. 79 deg. 53W., 12.50 m. to point 4;

21

thence N. 10 deg. 07W., 40.00 m. to the point

of beginning; containing an area of FIVE HUNDRED (500) SQUARE METERS. All points referred to are indicated on the plan and are marked on the ground as follows: points 1 and 4 by P.L.S. Cyl. Conc. Mons. bearings true; date of the original survey, April 8-July 15, 1920 and that of the subdivision survey, March 25, 1956.

TRANS. CERT. OF TITLE NO. 132019

A parcel of land (Lot 3, Block 93 of the subdivision plan Psd-57970 being a portion of Lot 6, Pcs-4786, G.L.R.O. Rec. No. 917) situated in Quirino District Quezon City. Bounded on the NW., along line 1-2, by Lot 1, Block 93; on the NE., along line 2-3, by Road Lot 101; on the SE., along line 3-4, by Road Lot 100; on the SW., along line 4-1, by Lot 4, Block 93; all of the subdivision plan. Beginning at point marked 1 on plan, being S. 65 deg. 40 3339.92 m. from B.L.L.M. No. 1, Marikina, Rizal;

thence N. 23 deg. 28 min. E., 11.70 m. to point 2;

thence S. 66 deg. 32 min. E., 18.00 m. to point 3;

thence S. 23 deg. 28 min. W., 11.70 m. to point 4;

thence N. 66 deg. 32. min. W., 18.00 m. to the point

of beginning; containing an area of TWO HUNDRED TEN SQUARE METERS AND SIXTY SQUARE DECIMETERS (210.60). All points referred to are indicated on the plan and are marked on the ground by B.L. Cyl. Conc. Mons. 15 x 60 cm.; bearings true; date of the original survey, Nov. 10, 1920 and Jan. 31-March 31, 1924 and that of the subdivision survey, February 1 to September 30, 1954. Date approved - March 9, 1962.

TRANS. CERT. OF TITLE NO. 118885

A parcel of land (Lot No. 10, of the consolidation and subdivision plan Pcs-988, being a portion of the consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O.Record No. 917), situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No. 4 of the consolidation and subdivision plan; on the SE., by Lot No. 11 of the consolidation and subdivision plan; on the SW., by Lot No. 3 of the consolidation and subdivision plan; and on the NW., by Lot No. 9 of the consolidation and subdivision plan. Beginning at a point marked 1 on the plan, being S. 7 deg. 26W., 4269.90 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;

thence S. 25 deg. 00E., 12.00 m. to point 2;

thence S. 64 deg. 59W., 29.99 m. to point 3;

thence N. 25 deg. 00W., 12.00 m to point 4;

thence N. 64 deg. 59E., 29.99 m. to the point of

beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or less. All points referred to are indicated on the plan and on the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50E., date of the original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision survey, April 24 to 26, 1941.

TRANS. CERT. OF TITLE NO. 118886

A parcel of land (Lot No. 11, of the consolidation and subdivision plan Pcs-988, being a portion of the consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record No. 917), situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No. 4 of the consolidation and subdivision plan; on the SE., by Lot No. 12 of the consolidation and subdivision plan; on the SW., by Lot No. 3 of the consolidation and subdivision plan; on the NW., by Lot No. 10 of the consolidation and subdivision plan. Beginning at a point marked 1 on plan, being S. 79 deg. 07W., 4264.00 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;

thence S. 64 deg. 59W., 29.99 m. to point 2;

thence N. 25 deg. 00W., 12.00 m. to point 3;

thence N. 64 deg. 59E., 29.99 m. to point 4;

thence S. 26 deg. 00E., 12.00 m. to the point of

beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or less. All points referred to are indicated on the plan and on the ground, are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50E.; date of the original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision survey, April 24 to 26, 1941.

A parcel of land (Lot No. 13 of the consolidation and subdivision plan Pcs-988, being a portion of the consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O.Record No. 917), situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No. 4 of the consolidation and subdivision plan; on the SE., by Lot No. 14, of the consolidation; and subdivision plan; on the SW., by Lot No. 3 of the consolidation and subdivision plan; and on the NW., by Lot No. 12, of the consolidation and subdivision plan. Beginning at the point marked 1 on plan, being S.78 deg. 48W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;

thence S. 64 deg. 58W., 30.00 m. to point 2;

thence N. 25 deg. 00W., 12.00 m. to point 3;

thence N. 64 deg. 59E., 29.99 m. to point 4;

thence S.25 deg. 00E., 12.00 m. to point of

beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360, more or less. All points referred to are indicated on the plan and on the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50E., date of the original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision survey, April 24 to 26, 1941.

22

A parcel of land (Lot No. 14, of the consolidation and subdivision plan Pcs-988, being a portion of the consolidated Lot No. 26, Block No. 6, Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record No. 917), situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on the NE., by Lot No. 4 of the consolidation and subdivision plan; on the SE., by Lot No. 15, of the consolidation and subdivision plan; on the SW., by Lot No. 3 of the consolidation and subdivision plan; and on the NW., by Lot No. 13 of the consolidation and subdivision plan. Beginning at the point marked 1 on plan, being S.78 deg. 48W., 4258.20 m. more or less from B.L.L.M. No. 1, Mp. of Mariquina;

thence S. 25 deg. 00E., 12.00 m. to point 2;

thence S. 65 deg. 00W., 30.00 m. to point 3;

thence S. 65 deg. 00W., 12.00 m. to point 4;

thence N.64 deg. 58E., 30.00 m. to the point of

beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS (360), more or less. All points referred to are indicated on the plan and on the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true; declination 0 deg. 50E., date of the original survey, April 8 to July 15, 1920, and that of the consolidation and subdivision survey, April 24 to 26, 1941.

That for and in consideration of the sum of FORTY THREE THOUSAND PESOS (P43,000.00) PHILIPPINE CURRENCY, to me in hand paid by NATIVIDAD P. NAZARENO, Filipino, single, of legal age and a resident of the Mun. of Naic, Prov. of Cavite, Philippines, the receipt whereof is acknowledged to my entire satisfaction, I do hereby CEDE, SELL, TRANSFER, CONVEY and ASSIGN unto the said Natividad P. Nazareno, her heirs, administrators and assigns, all my title, rights, interests and participations to the abovedescribed parcels of land with the improvements thereon, with the exception ofLOT NO. 11 COVERED BY T.C.T. NO. 118886, free of any and all liens and encumbrances; and

That for and in consideration of the sum of FOUR THOUSAND EIGHT HUNDRED PESOS (P4,800.00) PHILIPPINE CURRENCY, to me in hand paid by NATIVIDAD P. NAZARENO, Filipino, single, of legal age and a resident of the Mun. of Naic, Prov. of Cavite, Philippines, the receipt whereof is acknowledged to my entire satisfaction, I do hereby CEDE, SELL, TRANSFER, CONVEY and ASSIGN unto the said Natividad P. Nazareno, her heirs, administrators and assigns, all my title, rights, interests and participations in and to Lot No. 11 covered by T.C.T. No. 118886 above-described, free of any and all liens and encumbrances, with the understanding that the title to be issued in relation hereto shall be separate and distinct from the title to be issued in connection with Lots Nos. 13 and 14, although covered by the same title.

IN WITNESS WHEREOF, I have hereunto signed this deed of absolute sale in the City of Manila, Philippines, this 29th day of January, 1970.[2]

By virtue of this deed, transfer certificates of title were issued to Natividad, to wit: TCT No. 162738 (Lot 3-B),[3] TCT No. 162739 (Lot 3),[4] TCT No. 162735 (Lot 10),[5] TCT No. 162736 (Lot 11),[6] and TCT No. 162737 (Lots 13 and 14),[7] all of the Register of Deeds of Quezon City.

Among the lots covered by the above Deed of Sale is Lot 3-B which is registered under TCT No. 140946. This lot had been occupied by Romeo, his wife Eliza, and by Maximino, Jr. since 1969. Unknown to Romeo, Natividad sold Lot 3-B on July 31, 1982 to Maximino, Jr., [8] for which reason the latter was issued TCT No. 293701 by the Register of Deeds of Quezon City.[9]

When Romeo found out about the sale to Maximino, Jr., he and his wife Eliza locked Maximino, Jr. out of the house. On August 4, 1983, Maximino, Jr. brought an action for recovery ofpossession and

damages with prayer for writs of preliminary injunction and mandatory injunction with the Regional Trial Court of Quezon City. On December 12, 1986, the trial court ruled in favor of Maximino, Jr. In CA-G.R. CV No. 12932, the Court of Appeals affirmed the decision of the trial court.[10]

On June 15, 1988, Romeo in turn filed, on behalf of the estate of Maximino, Sr., the present case for annulment of sale with damages against Natividad and Maximino, Jr. The case was filed in the Regional Trial Court of Quezon City, where it was docketed as Civil Case No. 88-58.[11] Romeo sought the declaration of nullity of the sale made on January 29, 1970 to Natividad and that made on July 31, 1982 to Maximino, Jr. on the ground that both sales were void for lack of consideration.

On March 1, 1990, Natividad and Maximino, Jr. filed a third-party complaint against the spouses Romeo and Eliza.[12] They alleged that Lot 3, which was included in the Deed of Absolute Sale of January 29, 1970 to Natividad, had been surreptitiously appropriated by Romeo by securing for himself a new title (TCT No. 277968) in his name.[13] They alleged that Lot 3 is being leased by the spouses Romeo and Eliza to third persons. They therefore sought the annulment of the transfer to Romeo and the cancellation of his title, the eviction of Romeo and his wife Eliza and all persons claiming rights from Lot 3, and the payment of damages.

The issues having been joined, the case was set for trial. Romeo presented evidence to show that Maximino and Aurea Nazareno never intended to sell the six lots to Natividad and that Natividad was only to hold the said lots in trust for her siblings. He presented the Deed of Partition and Distribution dated June 28, 1962 executed by Maximino Sr. and Aurea and duly signed by all of their children, except Jose, who was then abroad and was represented by their mother, Aurea. By virtue of this deed, the nine lots subject of this Deed of Partition were assigned by raffle as follows:

1. Romeo - Lot 25-L (642 m2)2. Natividad - Lots 23 (312 m2) and 24 (379 m2)3. Maximino, Jr. - Lots 6 (338 m2) and 7 (338 m2)4. Pacifico - Lots 13 (360 m2) and 14 (360 m2)5. Jose - Lots 10 (360 m2) and 11 (360 m2)

Romeo received the title to Lot 25-L under his name,[14] while Maximino, Jr. received Lots 6 and 7 through a Deed of Sale dated August 16, 1966 for the amount of P9,500.00.[15]Pacifico and Joses shares were allegedly given to Natividad, who agreed to give Lots 10 and 11 to Jose, in the event the latter came back from abroad. Natividads share, on the other hand, was sold to third persons[16] because she allegedly did not like the location of the two lots. But, Romeo said, the money realized from the sale was given to Natividad.

Romeo also testified that Lot 3-B was bought for him by his father, while Lot 3 was sold to him for P7,000.00 by his parents on July 4, 1969.[17] However, he admitted that a document was executed by his parents transferring six properties in Quezon City, i.e., Lots 3, 3-B, 10, 11, 13, and 14, to Natividad.

Romeo further testified that, although the deeds of sale executed by his parents in their favor stated that the sale was for a consideration, they never really paid any amount for the supposed sale. The transfer was made in this manner in order to avoid the payment of inheritance taxes. [18] Romeo denied stealing Lot 3 from his sister but instead claimed that the title to said lot was given to him by Natividad in 1981 after their father died.

Natividad and Maximino, Jr. claimed that the Deed of Partition and Distribution executed in 1962 was not really carried out. Instead, in December of 1969, their parents offered to sell to them the six lots in Quezon City, i.e., Lots 3, 3-B, 10, 11, 13 and 14. However, it was only Natividad who bought the six properties because she was the only one financially able to do so. Natividad said she sold Lots 13 and 14 to Ros-Alva Marketing Corp.[19] and Lot 3-B to Maximino, Jr. for P175,000.00.[20] Natividad admitted that Romeo and the latters wife were occupying Lot 3-B at that time and that she did not tell the latter about the sale she had made to Maximino, Jr.

23

Natividad said that she had the title to Lot 3 but it somehow got lost. She could not get an original copy of the said title because the records of the Registrar of Deeds had been destroyed by fire. She claimed she was surprised to learn that Romeo was able to obtain a title to Lot 3 in his name.

Natividad insisted that she paid the amount stated in the Deed of Absolute Sale dated January 29, 1970. She alleged that their parents had sold these properties to their children instead of merely giving the same to them in order to impose on them the value of hardwork.

Natividad accused Romeo of filing this case to harass her after Romeo lost in the action for recovery of possession (Civil Case No. Q-39018) which had been brought against him by Maximino, Jr. It appears that before the case filed by Romeo could be decided, the Court of Appeals rendered a decision in CA-GR CV No. 12932 affirming the trial courts decision in favor of Maximino, Jr.

On August 10, 1992, the trial court rendered a decision, the dispositive portion of which states:

WHEREFORE, judgment is hereby rendered declaring the nullity of the Deed of Sale dated January 29, 1970. Except as to Lots 3, 3-B, 13 and 14 which had passed on to third persons, the defendant Natividad shall hold the rest in trust for Jose Nazareno to whom the same had been adjudicated. The Register of Deeds of Quezon City is directed to annotate this judgment on Transfer Certificate of Titles Nos. 162735 and 162736 as a lien in the titles of Natividad P. Nazareno.

The defendants counterclaim is dismissed. Likewise, the third-party complaint is dismissed.

The defendants are hereby directed to pay to the plaintiff jointly and severally the sum of P30,000 as and for attorneys fees. Likewise, the third-party plaintiff is directed to pay the third-party defendants attorneys fees of P20,000.

All other claims by one party against the other are dismissed.

SO ORDERED.[21]

Natividad and Maximino, Jr. filed a motion for reconsideration. As a result, on October 14, 1992 the trial court modified its decision as follows:

WHEREFORE, the plaintiffs Partial Motion for Reconsideration is hereby granted. The judgment dated August 10, 1992 is hereby amended, such that the first paragraph of its dispositive portion is correspondingly modified to read as follows:

WHEREFORE, judgment is hereby rendered declaring the nullity of the Deeds of Sale dated January 29, 1970 and July 31, 1982.

Except as to Lots 3, 13 and 14 which had passed on to third person, the defendant Natividad shall hold the rest OF THE PROPERTIES COVERED BY THE DEED OF SALE DATED JANUARY 29, 1970 (LOTS 10 and 11) in trust for Jose Nazareno to whom the same had been adjudicated.

The Register of Deeds of Quezon City is directed to annotate this judgment on Transfer Certificates of Title No. 162735 and 162736 as a lien on the titles of Natividad P. Nazareno.

LIKEWISE, THE SAID REGISTER OF DEEDS IS DIRECTED TO CANCEL TCT NO. 293701 (formerly 162705) OVER LOT 3-B AND RESTORE TCT NO. 140946 IN THE NAME OF MAXIMINO NAZARENO SR. AND AUREA POBLETE.[22]

On appeal to the Court of Appeals, the decision of the trial court was modified in the sense that titles to Lot 3 (in the name of Romeo Nazareno) and Lot 3-B (in the name of Maximino Nazareno, Jr.), as well as to Lots 10 and 11 were cancelled and ordered restored to the estate of Maximino Nazareno, Sr. The dispositive portion of the decision dated May 29, 1998 reads:

WHEREFORE, the appeal is GRANTED. The decision and the order in question are modified as follows:

1. The Deed of Absolute Sale dated 29 January 1970 and the Deed of Absolute Sale dated 31 July 1982 are hereby declared null and void;

2. Except as to Lots 13 and 14 ownership of which has passed on to third persons, it is hereby declared that Lots 3, 3-B, 10 and 11 shall form part of the estate of the deceased Maximino Nazareno, Sr.;

3. The Register of Deeds of Quezon City is hereby ordered to restore TCT No. 140946 (covering Lot 3-B), TCT No. 132019 (covering Lot 3), TCT No. 118885 (covering Lot 10), and TCT No. 118886 (covering Lot 11).[23]

Petitioners filed a motion for reconsideration but it was denied in a resolution dated May 27, 1999. Hence this petition.

Petitioners raise the following issues:

1. WHETHER OR NOT THE UNCORROBORATED TESTIMONY OF PRIVATE RESPONDENT ROMEO P. NAZARENO CAN DESTROY THE FULL FAITH AND CREDIT ACCORDED TO NOTARIZED DOCUMENTS LIKE THE DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 (EXH. 1) EXECUTED BY THE DECEASED SPOUSES MAXIMINO A. NAZARENO, SR. AND AUREA POBLETE IN FAVOR OF PETITIONER NATIVIDAD P. NAZARENO.

2. WHETHER OR NOT THE RESPONDENT COURT GROSSLY MISAPPRECIATED THE FACTS OF THE CASE WITH RESPECT TO THE VALIDITY OF THE SAID DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 (EXH. 1) IN THE LIGHT OF THE FOLLOWING:

A) THE DOCUMENTARY EVIDENCE, ALL OF WHICH ARE NOTARIZED, EXECUTED BY THE DECEASED SPOUSES DURING THEIR LIFETIME INVOLVING SOME OF THEIR CONJUGAL PROPERTIES.

B) THE EXECUTION OF AN EXTRA-JUDICIAL PARTITION WITH WAIVER OF RIGHTS AND CONFIRMATION OF SALE DATED MAY 24, 1975 (EXH. 14A) OF THE ESTATE OF AUREA POBLETE BY THE DECEASED MAXIMINO A. NAZARENO, SR. AND THEIR CHILDREN INVOLVING THE ONLY REMAINING ESTATE OF AUREA POBLETE THUS IMPLIEDLY ADMITTING THE VALIDITY OF PREVIOUS DISPOSITIONS MADE BY SAID DECEASED SPOUSES ON THEIR CONJUGAL PROPERTIES, HALF OF WHICH WOULD HAVE BECOME A PART OF AUREA POBLETES ESTATE UPON HER DEMISE.

C) THE ADMISSION MADE BY MAXIMINO A. NAZARENO, SR. IN HIS TESTIMONY IN OPEN COURT ON AUGUST 13, 1980 DURING HIS LIFETIME IN CIVIL CASE NO. NC-712 (EXH. 81, 81B) THAT HE HAD SOLD CERTAIN PROPERTIES IN FAVOR OF NATIVIDAD P. NAZARENO THUS BELYING THE CLAIM OF ROMEO P. NAZARENO THAT THE DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 IS ONE AMONG THE DOCUMENTS EXECUTED BY THE DECEASED SPOUSES TO BE WITHOUT CONSIDERATION.

D) THE ADMISSIONS MADE BY ROMEO P. NAZARENO HIMSELF CONTAINED IN A FINAL DECISION OF THE RESPONDENT COURT IN CA-GR CV NO. 12932 DATED AUGUST 31, 1992 AND AN ANNEX APPEARING IN HIS ANSWER TO THE COMPLAINT IN CIVIL CASE

24

NO. Q-39018 (EXH. 11-B) INVOLVING LOT 3B, ONE OF THE PROPERTIES IN QUESTION THAT THE SAID PROPERTY IS OWNED BY PETITIONER NATIVIDAD P. NAZARENO.

E) THE PARTIAL PROJECT OF PARTITION DATED MAY 24, 1995 WHICH WAS APPROVED BY THE INTESTATE COURT IN SP. PROC. NO. NC-28 AND EXECUTED IN ACCORDANCE WITH THE LATTER COURTS FINAL ORDER DATED JULY 9, 1991 DETERMINING WHICH WERE THE REMAINING PROPERTIES OF THE ESTATE.

3. WHETHER OR NOT THE DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 EXECUTED BY THE DECEASED SPOUSES MAXIMINO A. NAZARENO, SR. AND AUREA POBLETE DURING THEIR LIFETIME INVOLVING THEIR CONJUGAL PROPERTIES IS AN INDIVISIBLE CONTRACT? AND IF SO WHETHER OR NOT UPON THEIR DEATH, THE ESTATE OF MAXIMINO A. NAZARENO, SR. ALONE CAN SEEK THE ANNULMENT OF SAID SALE?

4. WHETHER OR NOT THE SALE OF LOT 3 UNDER THE DEED OF ABSOLUTE SALE DATED JANUARY 29, 1970 IN FAVOR OF PETITIONER NATIVIDAD P. NAZARENO, IS VALID CONSIDERING THAT AS PER THE ORDER OF THE LOWER COURT DATED NOVEMBER 21, 1990. ROMEO NAZARENO ADMITTED THAT HE DID NOT PAY THE CONSIDERATION STATED IN THE DEED OF ABSOLUTE SALE DATED JULY 4, 1969 EXECUTED BY THE DECEASED SPOUSES IN HIS FAVOR (EXH. M-2).

5. WHETHER OR NOT AS A CONSEQUENCE, THE TITLE ISSUED IN THE NAME OF ROMEO P. NAZARENO, TCT NO. 277968 (EXH. M) SHOULD BE CANCELLED AND DECLARED NULL AND VOID AND A NEW ONE ISSUED IN FAVOR OF NATIVIDAD P. NAZARENO PURSUANT TO THE DEED OF ABSOLUTE SALE EXECUTED IN THE LATTERS FAVOR ON JANUARY 29, 1970 BY THE DECEASED SPOUSES.[24]

We find the petition to be without merit.

First. Petitioners argue that the lone testimony of Romeo is insufficient to overcome the presumption of validity accorded to a notarized document.

To begin with, the findings of fact of the Court of Appeals are conclusive on the parties and carry even more weight when these coincide with the factual findings of the trial court. This Court will not weigh the evidence all over again unless there is a showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion. [25] The lone testimony of a witness, if credible, is sufficient. In this case, the testimony of Romeo that no consideration was ever paid for the sale of the six lots to Natividad was found to be credible both by the trial court and by the Court of Appeals and it has not been successfully rebutted by petitioners. We, therefore, have no reason to overturn the findings by the two courts giving credence to his testimony.

The fact that the deed of sale was notarized is not a guarantee of the validity of its contents. As held in Suntay v. Court of Appeals:[26]

Though the notarization of the deed of sale in question vests in its favor the presumption of regularity, it is not the intention nor the function of the notary public to validate and make binding an instrument never, in the first place, intended to have any binding legal effect upon the parties thereto. The intention of the parties still and always is the primary consideration in determining the true nature of a contract.

Second. Petitioners make capital of the fact that in C.A.-G.R. CV No. 12932, which was declared final by this Court in G.R. No. 107684, the Court of Appeals upheld the right of Maximino, Jr. to recover possession of Lot 3-B. In that case, the Court of Appeals held:

As shown in the preceding disquisition, Natividad P. Nazareno acquired the property in dispute by purchase in 1970. She was issued Transfer Certificate of Title No. 162738 of the Registry of Deeds of Quezon City. When her parents died, her mother Aurea Poblete-Nazareno in 1970 and her father

Maximino A. Nazareno, Sr. in 1980, Natividad P. Nazareno had long been the exclusive owner of the property in question. There was no way therefore that the aforesaid property could belong to the estate of the spouses Maximino Nazareno, Sr. and Aurea Poblete. The mere fact that Romeo P. Nazareno included the same property in an inventory of the properties of the deceased Maximino A. Nazareno, Sr. will not adversely affect the ownership of the said realty. Appellant Romeo P. Nazarenos suspicion that his parents had entrusted all their assets under the care and in the name of Natividad P. Nazareno, their eldest living sister who was still single, to be divided upon their demise to all the compulsory heirs, has not progressed beyond mere speculation. His barefaced allegation on the point not only is without any corroboration but is even belied by documentary evidence. The deed of absolute sale (Exhibit B), being a public document (Rule 132, Secs. 19 and 23, Revised Rules on Evidence), is entitled to great weight; to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant (Yturralde vs. Aganon, 28 SCRA 407; Favor vs. Court of Appeals, 194 SCRA 308). Defendants-appellants own conduct disproves their claim of co-ownership over the property in question.Being themselves the owner of a ten-unit apartment building along Stanford St., Cubao Quezon City, defendants-appellants, in a letter of demand to vacate addressed to their tenants (Exhibits P, P-1 and P-2) in said apartment, admitted that the house and lot located at No. 979 Aurora Blvd., Quezon City where they were residing did not belong to them. Also, when they applied for a permit to repair the subject property in 1977, they stated that the property belonged to and was registered in the name of Natividad P. Nazareno. Among the documents submitted to support their application for a building permit was a copy of TCT No. 162738 of the Registry of Deeds of Quezon City in the name of Natividad Nazareno (Exhibit O and submarkings; tsn March 15, 1985, pp. 4-5).[27]

To be sure, that case was for recovery of possession based on ownership of Lot 3-B. The parties in that case were Maximino, Jr., as plaintiff, and the spouses Romeo and Eliza, as defendants. On the other hand, the parties in the present case for annulment of sale are the estate of Maximino, Sr., as plaintiff, and Natividad and Maximino, Jr., as defendants. Romeo and Eliza were named third-party defendants after a third-party complaint was filed by Natividad and Maximino, Jr. As already stated, however, this third-party complaint concerned Lot 3, and not Lot 3-B.

The estate of a deceased person is a juridical entity that has a personality of its own. [28] Though Romeo represented at one time the estate of Maximino, Sr., the latter has a separate and distinct personality from the former. Hence, the judgment in CA-GR CV No. 12932 regarding the ownership of Maximino, Jr. over Lot 3-B binds Romeo and Eliza only, and not the estate of Maximino, Sr., which also has a right to recover properties which were wrongfully disposed.

Furthermore, Natividads title was clearly not an issue in the first case. In other words, the title to the other five lots subject of the present deed of sale was not in issue in that case. If the first case resolved anything, it was the ownership of Maximino, Jr. over Lot 3-B alone.

Third. Petitioners allege that, as shown by several deeds of sale executed by Maximino, Sr. and Aurea during their lifetime, the intention to dispose of their real properties is clear.Consequently, they argue that the Deed of Sale of January 29, 1970 should also be deemed valid.

This is a non-sequitur. The fact that other properties had allegedly been sold by the spouses Maximino, Sr. and Aurea does not necessarily show that the Deed of Sale made on January 29, 1970 is valid.

Romeo does not dispute that their parents had executed deeds of sale. The question, however, is whether these sales were made for a consideration. The trial court and the Court of Appeals found that the Nazareno spouses transferred their properties to their children by fictitious sales in order to avoid the payment of inheritance taxes.

Indeed, it was found both by the trial court and by the Court of Appeals that Natividad had no means to pay for the six lots subject of the Deed of Sale.

25

All these convince the Court that Natividad had no means to pay for all the lots she purportedly purchased from her parents. What is more, Romeos admission that he did not pay for the transfer to him of lots 3 and 25-L despite the considerations stated in the deed of sale is a declaration against interest and must ring with resounding truth. The question is, why should Natividad be treated any differently, i.e., with consideration for the sale to her, when she is admittedly the closest to her parents and the one staying with them and managing their affairs? It just seems without reason. Anyway, the Court is convinced that the questioned Deed of Sale dated January 29, 1970 (Exh. A or 1) is simulated for lack of consideration, and therefore ineffective and void.[29]

In affirming this ruling, the Court of Appeals said:

Facts and circumstances indicate badges of a simulated sale which make the Deed of Absolute Sale dated 29 January 1970 void and of no effect. In the case of Suntay vs. Court of Appeals (251 SCRA 430 [1995]), the Supreme Court held that badges of simulation make a deed of sale null and void since parties thereto enter into a transaction to which they did not intend to be legally bound.

It appears that it was the practice in the Nazareno family to make simulated transfers of ownership of real properties to their children in order to avoid the payment of inheritance taxes. Per the testimony of Romeo, he acquired Lot 25-L from his parents through a fictitious or simulated sale wherein no consideration was paid by him. He even truthfully admitted that the sale of Lot 3 to him on 04 July 1969 (Deed of Absolute Sale, Records, Vol. II, p. 453) likewise had no consideration. This document was signed by the spouses Max, Sr. and Aurea as vendors while defendant-appellant Natividad signed as witness.[30]

Fourth. Petitioners argue further:

The Deed of Absolute Sale dated January 29, 1970 is an indivisible contract founded on an indivisible obligation. As such, it being indivisible, it can not be annulled by only one of them. And since this suit was filed only by the estate of Maximino A. Nazareno, Sr. without including the estate of Aurea Poblete, the present suit must fail. The estate of Maximino A. Nazareno, Sr. can not cause its annulment while its validity is sustained by the estate of Aurea Poblete.[31]

An obligation is indivisible when it cannot be validly performed in parts, whatever may be the nature of the thing which is the object thereof. The indivisibility refers to the prestation and not to the object thereof.[32] In the present case, the Deed of Sale of January 29, 1970 supposedly conveyed the six lots to Natividad. The obligation is clearly indivisible because the performance of the contract cannot be done in parts, otherwise the value of what is transferred is diminished. Petitioners are therefore mistaken in basing the indivisibility of a contract on the number of obligors.

In any case, if petitioners only point is that the estate of Maximino, Sr. alone cannot contest the validity of the Deed of Sale because the estate of Aurea has not yet been settled, the argument would nonetheless be without merit. The validity of the contract can be questioned by anyone affected by it. [33] A void contract is inexistent from the beginning. Hence, even if the estate of Maximino, Sr. alone contests the validity of the sale, the outcome of the suit will bind the estate of Aurea as if no sale took place at all.

Fifth. As to the third-party complaint concerning Lot 3, we find that this has been passed upon by the trial court and the Court of Appeals. As Romeo admitted, no consideration was paid by him to his parents for the Deed of Sale. Therefore, the sale was void for having been simulated. Natividad never acquired ownership over the property because the Deed of Sale in her favor is also void for being without consideration and title to Lot 3 cannot be issued in her name.

Nonetheless, it cannot be denied that Maximino, Sr. intended to give the six Quezon City lots to Natividad. As Romeo testified, their parents executed the Deed of Sale in favor of Natividad because the latter was the only female and the only unmarried member of the family.[34] She was thus entrusted with

the real properties in behalf of her siblings. As she herself admitted, she intended to convey Lots 10 and 11 to Jose in the event the latter returned from abroad. There was thus an implied trust constituted in her favor. Art. 1449 of the Civil Code states:

There is also an implied trust when a donation is made to a person but it appears that although the legal estate is transmitted to the donee, he nevertheless is either to have no beneficial interest or only a part thereof.

There being an implied trust, the lots in question are therefore subject to collation in accordance with Art. 1061 which states:

Every compulsory heir, who succeeds with other compulsory heirs, must bring into the mass of the estate any property or right which he may have received from the decedent, during the lifetime of the latter, by way of donation, or any other gratuitous title, in order that it may be computed in the determination of the legitime of each heir, and in the account of the partition.

As held by the trial court, the sale of Lots 13 and 14 to Ros-Alva Marketing, Corp. on April 20, 1979[35] will have to be upheld for Ros-Alva Marketing is an innocent purchaser for value which relied on the title of Natividad. The rule is settled that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property.[36]

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.