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1 A PORTION OF THE SECOND bound by all the terms and FLOOR of the two-storey conditions thereof. building, situated at C.M. Recto Avenue, Manila, with a floor Sometime in August 1974, Mr. Henry Pascal of area of 1,064 square meters. Carmelo informed Mr. Henry Yang, President of Mayfair, through a telephone conversation THE TWO (2) STORE SPACES AT that Carmelo was desirous of selling the entire THE GROUND FLOOR and Claro M. Recto property. Mr. Pascal told Mr. MEZZANINE of the two-storey Yang that a certain Jose Araneta was offering building situated at C.M. Recto to buy the whole property for US Dollars Avenue, Manila, with a floor 1,200,000, and Mr. Pascal asked Mr. Yang if area of 300 square meters and the latter was willing to buy the property for bearing street numbers 1871 Six to Seven Million Pesos. and 1875, Mr. Yang replied that he would let Mr. Pascalfor similar use as a movie theater and for a know of his decision. On August 23, 1974,similar term of twenty (20) years. Mayfair put Mayfair replied through a letter stating asup another movie house known as "Miramar follows:Theatre" on this leased property. It appears that on August 19,Both contracts of lease provides (sic) 1974 your Mr. Henry Pascalidentically worded paragraph 8, which reads: informed our client's Mr. Henry Yang through the telephone That if the LESSOR should that your company desires to desire to sell the leased sell your above-mentioned C.M. premises, the LESSEE shall be Recto Avenue property. given 30-days exclusive option to purchase the same. Under your company's two lease contracts with our client, In the event, however, that the it is uniformly provided: leased premises is sold to someone other than the 8. That if the LESSOR should LESSEE, the LESSOR is bound desire to sell the leased and obligated, as it hereby premises the LESSEE shall be binds and obligates itself, to given 30-days exclusive option stipulate in the Deed of Sale to purchase the same. In the hereof that the purchaser shall event, however, that the leased recognize this lease and be premises is sold to someone other than the LESSEE, the 2 LESSOR is bound and obligated, null and void for lack of consideration. as it is (sic) herebinds (sic) and Equatorial, in its Answer, pleaded as special obligates itself, to stipulate in and affirmative defense that the option is void the Deed of Sale thereof that for lack of consideration (sic) and is the purchaser shall recognize unenforceable by reason of its impossibility of this lease and be bound by all performance because the leased premises the terms and conditions hereof could not be sold separately from the other (sic). portions of the land and building. It counterclaimed for cancellation of theCarmelo did not reply to this letter. contracts of lease, and for increase of rentals in view of alleged supervening extraordinaryOn September 18, 1974, Mayfair sent another devaluation of the currency. Equatorialletter to Carmelo purporting to express likewise cross-claimed against co-defendantinterest in acquiring not only the leased Carmelo for indemnification in respect ofpremises but "the entire building and other Mayfair's claims.improvements if the price is reasonable.However, both Carmelo and Equatorial During the pre-trial conference held onquestioned the authenticity of the second January 23, 1979, the parties stipulated onletter. the following:
Four years later, on July 30, 1978, Carmelo 1. That there was a deed of salesold its entire C.M. Recto Avenue land and of the contested premises bybuilding, which included the leased premises the defendant Carmelo . . . inhousing the "Maxim" and "Miramar" theatres, favor of defendant Equatorial . .to Equatorial by virtue of a Deed of Absolute .;Sale, for the total sum of P11,300,000.00. 2. That in both contracts ofIn September 1978, Mayfair instituted the lease there appear (sic) theaction a quo for specific performance and stipulation granting the plaintiffannulment of the sale of the leased premises exclusive option to purchaseto Equatorial. In its Answer, Carmelo alleged the leased premises should theas special and affirmative defense (a) that it lessor desire to sell the samehad informed Mayfair of its desire to sell the (admitted subject to theentire C.M. Recto Avenue property and offered contention that the stipulationthe same to Mayfair, but the latter answered is null and void);that it was interested only in buying the areasunder lease, which was impossible since the 3. That the two buildingsproperty was not a condominium; and (b) that erected on this land are not ofthe option to purchase invoked by Mayfair is the condominium plan; 3 4. That the amounts stipulated WHEREFORE, judgment is and mentioned in paragraphs 3 hereby rendered: (a) and (b) of the contracts of lease constitute the (1) Dismissing the complaint consideration for the plaintiff's with costs against the plaintiff; occupancy of the leased premises, subject of the same (2) Ordering plaintiff to pay contracts of lease, Exhibits A defendant Carmelo & and B; Bauermann P40,000.00 by way of attorney's fees on its xxx xxx xxx counterclaim;
4 (4) Dismissing defendant morals, good custom, public Equatorial's crossclaim against order or public policy. defendant Carmelo & Bauermann. Contracts therefore without consideration produce no effect whatsoever. Article 1324 The contracts of lease dated provides: June 1, 1967 and March 31, 1969 are declared expired and When the offeror has allowed all persons claiming rights the offeree a certain period to under these contracts are accept, the offer may be directed to vacate the withdrawn at any time before premises. 6 acceptance by communicating such withdrawal, except whenThe trial court adjudged the identically worded the option is founded uponparagraph 8 found in both aforecited lease contracts consideration, as somethingto be an option clause which however cannot be paid or promised.deemed to be binding on Carmelo because of lack ofdistinct consideration therefor. in relation with Article 1479 of the same Code:
5consideration. The consideration cannot be Accordingly, the promiseepresumed as in Article 1354: cannot compel the promissor to comply with the promise, Although the cause is not unless the former establishes stated in the contract, it is the existence of said distinct presumed that it exists and is consideration. In other words, lawful unless the debtor proves the promisee has the burden of the contrary. proving such consideration. Plaintiff herein has not evenwhere consideration is legally presumed to alleged the existence thereof inexists. Article 1354 applies to contracts in his complaint. 7general, whereas when it comes to an optionit is governed particularly and more It follows that plaintiff cannot compelspecifically by Article 1479 whereby the defendant Carmelo & Bauermann to sell thepromisee has the burden of proving the C.M. Recto property to the former.existence of consideration distinct from theprice. Thus, in the case of Sanchez vs. Rigor, Mayfair taking exception to the decision of the trial45 SCRA 368, 372-373, the Court said: court, the battleground shifted to the respondent Court of Appeals. Respondent appellate court (1) Article 1354 applies to reversed the court a quo and rendered judgment: contracts in general, whereas the second paragraph of Article 1. Reversing and setting aside the appealed 1479 refers to sales in Decision; particular, and, more specifically, to an accepted 2. Directing the plaintiff-appellant Mayfair unilateral promise to buy or to Theater Inc. to pay and return to Equatorial sell. In other words, Article the amount of P11,300,000.00 within fifteen 1479 is controlling in the case (15) days from notice of this Decision, and at bar. ordering Equatorial Realty Development, Inc. to accept such payment; (2) In order that said unilateral promise may be binding upon 3. Upon payment of the sum of P11,300,000, the promissor, Article 1479 directing Equatorial Realty Development, Inc. requires the concurrence of a to execute the deeds and documents condition, namely, that the necessary for the issuance and transfer of promise be supported by a ownership to Mayfair of the lot registered consideration distinct from the under TCT Nos. 17350, 118612, 60936, and price. 52571; and
6 4. Should plaintiff-appellant Mayfair Theater, option as follows: "A contract by virtue of Inc. be unable to pay the amount as which A, in consideration of the payment of a adjudged, declaring the Deed of Absolute Sale certain sum to B, acquires the privilege of between the defendants-appellants Carmelo buying from or selling to B, certain securities & Bauermann, Inc. and Equatorial Realty or properties within a limited time at a Development, Inc. as valid and binding upon specified price," (pp. 686-7). all the parties. 8 Article 1479, second paragraph, on the otherRereading the law on the matter of sales and option hand, contemplates of an "accepted unilateralcontracts, respondent Court of Appeals differentiated promise to buy or to sell a determinate thingbetween Article 1324 and Article 1479 of the Civil for a price within (which) is binding upon theCode, analyzed their application to the facts of this promisee if the promise is supported by acase, and concluded that since paragraph 8 of the consideration distinct from the price." Thattwo lease contracts does not state a fixed price for "unilateral promise to buy or to sell athe purchase of the leased premises, which is an determinate thing for a price certain" is calledessential element for a contract of sale to be an offer. An "offer", in laws, is a proposal toperfected, what paragraph 8 is, must be a right of enter into a contract (Rosenstock vs. Burke,first refusal and not an option contract. It explicated: 46 Phil. 217). To constitute a legal offer, the proposal must be certain as to the object, the Firstly, the court a quo misapplied the price and other essential terms of the contract provisions of Articles 1324 and 1479, second (Art. 1319, Civil Code). paragraph, of the Civil Code. Based on the foregoing discussion, it is Article 1324 speaks of an "offer" made by an evident that the provision granting Mayfair offeror which the offeree may or may not "30-days exclusive option to purchase" the accept within a certain period. Under this leased premises is NOT AN OPTION in the article, the offer may be withdrawn by the context of Arts. 1324 and 1479, second offeror before the expiration of the period and paragraph, of the Civil Code. Although the while the offeree has not yet accepted the provision is certain as to the object (the sale offer. However, the offer cannot be withdrawn of the leased premises) the price for which by the offeror within the period if a the object is to be sold is not stated in the consideration has been promised or given by provision Otherwise stated, the questioned the offeree in exchange for the privilege of stipulation is not by itself, an "option" or the being given that period within which to accept "offer to sell" because the clause does not the offer. The consideration is distinct from specify the price for the subject property. the price which is part of the offer. The contract that arises is known as option. In the Although the provision giving Mayfair "30- case of Beaumont vs. Prieto, 41 Phil. 670, the days exclusive option to purchase" cannot be Supreme court, citing Bouvier, defined an legally categorized as an option, it is, 7nevertheless, a valid and binding stipulation. importantly, to make an offer to sell theWhat the trial court failed to appreciate was leased premises to Mayfair, giving the latter athe intention of the parties behind the fair and reasonable opportunity to accept orquestioned proviso. reject the offer, before offering to sell or selling the leased property to third parties. xxx xxx xxx The right vested in Mayfair is analogous to the right of first refusal, which means thatThe provision in question is not of the pro- Carmelo should have offered the sale of theforma type customarily found in a contract of leased premises to Mayfair before offering itlease. Even appellees have recognized that to other parties, or, if Carmelo should receivethe stipulation was incorporated in the two any offer from third parties to purchase theContracts of Lease at the initiative and behest leased premises, then Carmelo must first giveof Mayfair. Evidently, the stipulation was Mayfair the opportunity to match that offer.intended to benefit and protect Mayfair in itsrights as lessee in case Carmelo should In fact, Mr. Pascal understood the provision asdecide, during the term of the lease, to sell giving Mayfair a right of first refusal when hethe leased property. This intention of the made the telephone call to Mr. Yang in 1974.parties is achieved in two ways in accordance Mr. Pascal thus testified:with the stipulation. The first is by givingMayfair "30-days exclusive option to Q Can you tellpurchase" the leased property. The second is, this Honorablein case Mayfair would opt not to purchase the Court how youleased property, "that the purchaser (the new made the offer toowner of the leased property) shall recognize Mr. Henry Yangthe lease and be bound by all the terms and by telephone?conditions thereof." A I have an offerIn other words, paragraph 8 of the two from anotherContracts of lease, particularly the stipulation party to buy thegiving Mayfair "30-days exclusive option to property andpurchase the (leased premises)," was meant having the offerto provide Mayfair the opportunity to we decided topurchase and acquire the leased property in make an offer tothe event that Carmelo should decide to Henry Yang on adispose of the property. In order to realize this first-refusal basis.intention, the implicit obligation of Carmelo (TSN Novemberonce it had decided to sell the leased 8, 1983, p. 12.).property, was not only to notify Mayfair ofsuch decision to sell the property, but, more and on cross-examination: 8 Q When you We are not persuaded by the contentions of called Mr. Yang the defendants-appellees. It is to be noted on August 1974 that the Deed of Absolute Sale between can you Carmelo and Equatorial covering the whole remember Claro M. Recto property, made reference to exactly what you four titles: TCT Nos. 17350, 118612, 60936 have told him in and 52571. Based on the information connection with submitted by Mayfair in its appellant's Brief that matter, Mr. (pp. 5 and 46) which has not been Pascal? controverted by the appellees, and which We, therefore, take judicial notice of the two A More or less, I theaters stand on the parcels of land covered told him that I by TCT No. 17350 with an area of 622.10 sq. received an offer m and TCT No. 118612 with an area of from another 2,100.10 sq. m. The existence of four party to buy the separate parcels of land covering the whole property and I Recto property demonstrates the legal and was offering him physical possibility that each parcel of land, first choice of the together with the buildings and improvements enter property. thereof, could have been sold independently (TSN, November of the other parcels. 29, 1983, p. 18). At the time both parties executed the We rule, therefore, that the foregoing contracts, they were aware of the physical interpretation best renders effectual the and structural conditions of the buildings on intention of the parties.9 which the theaters were to be constructed in relation to the remainder of the whole RectoBesides the ruling that paragraph 8 vests in Mayfair property. The peculiar language of thethe right of first refusal as to which the requirement stipulation would tend to limit Mayfair's rightof distinct consideration indispensable in an option under paragraph 8 of the Contract of Lease tocontract, has no application, respondent appellate the acquisition of the leased areas only.court also addressed the claim of Carmelo and Indeed, what is being contemplated by theEquatorial that assuming arguendo that the option is questioned stipulation is a departure from thevalid and effective, it is impossible of performance customary situation wherein the buildings andbecause it covered only the leased premises and not improvements are included in and form partthe entire Claro M. Recto property, while Carmelo's of the sale of the subjacent land. Althoughoffer to sell pertained to the entire property in this situation is not common, especiallyquestion. The Court of Appeals ruled as to this issue considering the non-condominium nature ofin this wise: the buildings, the sale would be valid and 9 capable of being performed. A sale limited to III the leased premises only, if hypothetically assumed, would have brought into operation THE COURT OF APPEALS GRIEVOUSLY ERRED the provisions of co-ownership under which WHEN IT DIRECTED IMPLEMENTATION OF ITS Mayfair would have become the exclusive DECISION EVEN BEFORE ITS FINALITY, AND owner of the leased premises and at the same WHEN IT GRANTED MAYFAIR A RELIEF THAT time a co-owner with Carmelo of the WAS NOT EVEN PRAYED FOR IN THE subjacent land in proportion to Mayfair's COMPLAINT. interest over the premises sold to it. 10 IVCarmelo and Equatorial now comes before usquestioning the correctness and legal basis for the THE COURT OF APPEALS VIOLATED ITS OWNdecision of respondent Court of Appeals on the basis INTERNAL RULES IN THE ASSIGNMENT OFof the following assigned errors: APPEALED CASES WHEN IT ALLOWED THE SAME DIVISION XII, PARTICULARLY JUSTICE I MANUEL HERRERA, TO RESOLVE ALL THE MOTIONS IN THE "COMPLETION PROCESS" THE COURT OF APPEALS GRAVELY ERRED IN AND TO STILL RESOLVE THE MERITS OF THE CONCLUDING THAT THE OPTION CLAUSE IN CASE IN THE "DECISION STAGE". 11 THE CONTRACTS OF LEASE IS ACTUALLY A RIGHT OF FIRST REFUSAL PROVISO. IN DOING SO THE COURT OF APPEALS DISREGARDED THE CONTRACTS OF LEASE WHICH CLEARLY We shall first dispose of the fourth assigned error AND UNEQUIVOCALLY PROVIDE FOR AN respecting alleged irregularities in the raffle of this OPTION, AND THE ADMISSION OF THE PARTIES case in the Court of Appeals. Suffice it to say that in OF SUCH OPTION IN THEIR STIPULATION OF our Resolution, 12 dated December 9, 1992, we FACTS. already took note of this matter and set out the proper applicable procedure to be the following: II On September 20, 1992, counsel for petitioner WHETHER AN OPTION OR RIGHT OF FIRST Equatorial Realty Development, Inc. wrote a REFUSAL, THE COURT OF APPEALS ERRED IN letter-complaint to this Court alleging certain DIRECTING EQUATORIAL TO EXECUTE A DEED irregularities and infractions committed by OF SALE EIGHTEEN (18) YEARS AFTER certain lawyers, and Justices of the Court of MAYFAIR FAILED TO EXERCISE ITS OPTION (OR, Appeals and of this Court in connection with EVEN ITS RIGHT OF FIRST REFUSAL ASSUMING case CA-G.R. CV No. 32918 (now G.R. No. IT WAS ONE) WHEN THE CONTRACTS LIMITED 106063). This partakes of the nature of an THE EXERCISE OF SUCH OPTION TO 30 DAYS administrative complaint for misconduct FROM NOTICE. 10 against members of the judiciary. While the That if the LESSOR should desire to sell the letter-complaint arose as an incident in case leased premises, the LESSEE shall be given CA-G.R. CV No. 32918 (now G.R. No. 106063), 30-days exclusive option to purchase the the disposition thereof should be separate same. and independent from Case G.R. No. 106063. However, for purposes of receiving the In the event, however, that the leased requisite pleadings necessary in disposing of premises is sold to someone other than the the administrative complaint, this Division LESSEE, the LESSOR is bound and obligated, shall continue to have control of the case. as it hereby binds and obligates itself, to Upon completion thereof, the same shall be stipulate in the Deed of Sale thereof that the referred to the Court En Banc for proper purchaser shall recognize this lease and be disposition. 13 bound by all the terms and conditions thereof. 14This court having ruled the procedural irregularitiesraised in the fourth assigned error of Carmelo and We agree with the respondent Court of Appeals thatEquatorial, to be an independent and separate the aforecited contractual stipulation provides for asubject for an administrative complaint based on right of first refusal in favor of Mayfair. It is not anmisconduct by the lawyers and justices implicated option clause or an option contract. It is a contract oftherein, it is the correct, prudent and consistent a right of first refusal.course of action not to pre-empt the administrativeproceedings to be undertaken respecting the said As early as 1916, in the case of Beaumontirregularities. Certainly, a discussion thereupon by us vs. Prieto, 15 unequivocal was our characterization ofin this case would entail a finding on the merits as to an option contract as one necessarily involving thethe real nature of the questioned procedures and the choice granted to another for a distinct and separatetrue intentions and motives of the players therein. consideration as to whether or not to purchase a determinate thing at a predetermined fixed price.In essence, our task is two-fold: (1) to define the truenature, scope and efficacy of paragraph 8 stipulated It is unquestionable that, by means of thein the two contracts of lease between Carmelo and document Exhibit E, to wit, the letter ofMayfair in the face of conflicting findings by the trial December 4, 1911, quoted at the beginning ofcourt and the Court of Appeals; and (2) to determine this decision, the defendant Valdes granted tothe rights and obligations of Carmelo and Mayfair, as the plaintiff Borck the right to purchase thewell as Equatorial, in the aftermath of the sale by Nagtajan Hacienda belonging to BenitoCarmelo of the entire Claro M. Recto property to Legarda, during the period of three monthsEquatorial. and for its assessed valuation, a grant which necessarily implied the offer or obligation onBoth contracts of lease in question provide the the part of the defendant Valdes to sell toidentically worded paragraph 8, which reads: Borck the said hacienda during the period and for the price mentioned . . . There was, 11therefore, a meeting of minds on the part of have the right to buy histhe one and the other, with regard to the property at a fixed price withinstipulations made in the said document. But it a certain time. He does not sellis not shown that there was any cause or his land; he does not thenconsideration for that agreement, and this agree to sell it; but he does sellomission is a bar which precludes our holding something; that is, the right orthat the stipulations contained in Exhibit E is a privilege to buy at the electioncontract of option, for, . . . there can be no or option of the other party. Thecontract without the requisite, among others, second party gets in praesenti,of the cause for the obligation to be not lands, nor an agreementestablished. that he shall have lands, but he does get something of value;In his Law Dictionary, edition of 1897, Bouvier that is, the right to call for anddefines an option as a contract, in the receive lands if he elects. Thefollowing language: owner parts with his right to sell his lands, except to the second A contract by virtue of which A, party, for a limited period. The in consideration of the payment second party receives this right, of a certain sum to B, acquires or, rather, from his point of the privilege of buying from, or view, he receives the right to selling to B, certain securities or elect to buy. properties within a limited time at a specified price. (Story vs. But the two definitions above cited refer to Salamon, 71 N.Y., 420.) the contract of option, or, what amounts to the same thing, to the case where there wasFrom vol. 6, page 5001, of the work "Words cause or consideration for the obligation, theand Phrases," citing the case of Ide subject of the agreement made by thevs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. parties; while in the case at bar there was noSt. Rep., 17) the following quotation has been such cause or consideration. 16 (Emphasistaken: ours.)
To rule that a contractual stipulation such as that First and foremost is that the petitioners acted in badfound in paragraph 8 of the contracts is governed by faith to render Paragraph 8 "inutile".Article 1324 on withdrawal of the offer or Article1479 on promise to buy and sell would render in What Carmelo and Mayfair agreed to, by executingeffectual or "inutile" the provisions on right of first the two lease contracts, was that Mayfair will haverefusal so commonly inserted in leases of real estate the right of first refusal in the event Carmelo sells thenowadays. The Court of Appeals is correct in stating leased premises. It is undisputed that Carmelo didthat Paragraph 8 was incorporated into the contracts recognize this right of Mayfair, for it informed theof lease for the benefit of Mayfair which wanted to be latter of its intention to sell the said property in 1974.assured that it shall be given the first crack or the There was an exchange of letters evidencing thefirst option to buy the property at the price which offer and counter-offers made by both parties.Carmelo is willing to accept. It is not also correct to Carmelo, however, did not pursue the exercise to itssay that there is no consideration in an agreement of logical end. While it initially recognized Mayfair'sright of first refusal. The stipulation is part and parcel right of first refusal, Carmelo violated such right 15when without affording its negotiations with Mayfair protection of one of the contracting partiesthe full process to ripen to at least an interface of a and even third persons from all injury anddefinite offer and a possible corresponding damage the contract may cause, or to protectacceptance within the "30-day exclusive option" time some incompatible and preferent rightgranted Mayfair, Carmelo abandoned negotiations, created by the contract. Rescission implies akept a low profile for some time, and then sold, contract which, even if initially valid, produceswithout prior notice to Mayfair, the entire Claro M a lesion or pecuniary damage to someoneRecto property to Equatorial. that justifies its invalidation for reasons of equity.Since Equatorial is a buyer in bad faith, this findingrenders the sale to it of the property in question It is true that the acquisition by a third personrescissible. We agree with respondent Appellate of the property subject of the contract is anCourt that the records bear out the fact that obstacle to the action for its rescission whereEquatorial was aware of the lease contracts because it is shown that such third person is in lawfulits lawyers had, prior to the sale, studied the said possession of the subject of the contract andcontracts. As such, Equatorial cannot tenably claim that he did not act in bad faith. However, thisto be a purchaser in good faith, and, therefore, rule is not applicable in the case before usrescission lies. because the petitioner is not considered a third party in relation to the Contract of Sale . . . Contract of Sale was not voidable but nor may its possession of the subject property rescissible. Under Article 1380 to 1381(3) of be regarded as acquired lawfully and in good the Civil Code, a contract otherwise valid may faith. nonetheless be subsequently rescinded by reason of injury to third persons, like Indeed, Guzman, Bocaling and Co. was the creditors. The status of creditors could be vendee in the Contract of Sale. Moreover, the validly accorded the Bonnevies for they had petitioner cannot be deemed a purchaser in substantial interests that were prejudiced by good faith for the record shows that it the sale of the subject property to the categorically admitted it was aware of the petitioner without recognizing their right of lease in favor of the Bonnevies, who were first priority under the Contract of Lease. actually occupying the subject property at the time it was sold to it. Although the Contract of According to Tolentino, rescission is a remedy Lease was not annotated on the transfer granted by law to the contracting parties and certificate of title in the name of the late Jose even to third persons, to secure reparation for Reynoso and Africa Reynoso, the petitioner damages caused to them by a contract, even cannot deny actual knowledge of such lease if this should be valid, by means of the which was equivalent to and indeed more restoration of things to their condition at the binding than presumed notice by registration. moment prior to the celebration of said contract. It is a relief allowed for the 16A purchaser in good faith and for value is one Petitioners assert the alleged impossibility ofwho buys the property of another without performance because the entire property isnotice that some other person has a right to indivisible property. It was petitioner Carmelo whichor interest in such property and pays a full fixed the limits of the property it was leasing out.and fair price for the same at the time of such Common sense and fairness dictate that instead ofpurchase or before he has notice of the claim nullifying the agreement on that basis, the stipulationor interest of some other person in the should be given effect by including the indivisibleproperty. Good faith connotes an honest appurtenances in the sale of the dominant portionintention to abstain from taking under the right of first refusal. A valid and legalunconscientious advantage of another. Tested contract where the ascendant or the more importantby these principles, the petitioner cannot of the two parties is the landowner should be giventenably claim to be a buyer in good faith as it effect, if possible, instead of being nullified on ahad notice of the lease of the property by the selfish pretext posited by the owner. Following theBonnevies and such knowledge should have arguments of petitioners and the participation of thecautioned it to look deeper into the owner in the attempt to strip Mayfair of its rights, theagreement to determine if it involved right of first refusal should include not only thestipulations that would prejudice its own property specified in the contracts of lease but alsointerests. the appurtenant portions sold to Equatorial which are claimed by petitioners to be indivisible. CarmeloThe petitioner insists that it was not aware of acted in bad faith when it sold the entire property tothe right of first priority granted by the Equatorial without informing Mayfair, a clear violationContract of Lease. Assuming this to be true, of Mayfair's rights. While there was a series ofwe nevertheless agree with the observation of exchanges of letters evidencing the offer andthe respondent court that: counter-offers between the parties, Carmelo abandoned the negotiations without giving Mayfair If Guzman-Bocaling failed to full opportunity to negotiate within the 30-day inquire about the terms of the period. Lease Contract, which includes Par. 20 on priority right given to Accordingly, even as it recognizes the right of first the Bonnevies, it had only itself refusal, this Court should also order that Mayfair be to blame. Having known that authorized to exercise its right of first refusal under the property it was buying was the contract to include the entirety of the indivisible under lease, it behooved it as a property. The boundaries of the property sold should prudent person to have be the boundaries of the offer under the right of first required Reynoso or the broker refusal. As to the remedy to enforce Mayfair's right, to show to it the Contract of the Court disagrees to a certain extent with the Lease in which Par. 20 is concluding part of the dissenting opinion of Justice contained. 25 Vitug. The doctrine enunciated in Ang Yu Asuncion
17vs.Court of Appeals should be modified, if not at which Mayfair could have purchased the propertyamplified under the peculiar facts of this case. is, therefore, fixed. It can neither be more nor less. There is no dispute over it. The damages whichAs also earlier emphasized, the contract of sale Mayfair suffered are in terms of actual injury and lostbetween Equatorial and Carmelo is characterized by opportunities. The fairest solution would be to allowbad faith, since it was knowingly entered into in Mayfair to exercise its right of first refusal at theviolation of the rights of and to the prejudice of price which it was entitled to accept or reject which isMayfair. In fact, as correctly observed by the Court of P11,300,000.00. This is clear from the records.Appeals, Equatorial admitted that its lawyers hadstudied the contract of lease prior to the sale. To follow an alternative solution that Carmelo andEquatorial's knowledge of the stipulations therein Mayfair may resume negotiations for the sale to theshould have cautioned it to look further into the latter of the disputed property would be unjust andagreement to determine if it involved stipulations unkind to Mayfair because it is once more compelledthat would prejudice its own interests. to litigate to enforce its right. It is not proper to give it an empty or vacuous victory in this case. From theSince Mayfair has a right of first refusal, it can viewpoint of Carmelo, it is like asking a fish if it wouldexercise the right only if the fraudulent sale is first accept the choice of being thrown back into the river.set aside or rescinded. All of these matters are now Why should Carmelo be rewarded for and allowed tobefore us and so there should be no piecemeal profit from, its wrongdoing? Prices of real estate havedetermination of this case and leave festering sores skyrocketed. After having sold the property forto deteriorate into endless litigation. The facts of the P11,300,000.00, why should it be given anothercase and considerations of justice and equity require chance to sell it at an increased price?that we order rescission here and now. Rescission is arelief allowed for the protection of one of the Under the Ang Yu Asuncion vs. Court ofcontracting parties and even third persons from all Appeals decision, the Court stated that there wasinjury and damage the contract may cause or to nothing to execute because a contract over the rightprotect some incompatible and preferred right by the of first refusal belongs to a class of preparatorycontract. 26 The sale of the subject real property by juridical relations governed not by the law onCarmelo to Equatorial should now be rescinded contracts but by the codal provisions on humanconsidering that Mayfair, which had substantial relations. This may apply here if the contract isinterest over the subject property, was prejudiced by limited to the buying and selling of the real property.the sale of the subject property to Equatorial without However, the obligation of Carmelo to first offer theCarmelo conferring to Mayfair every opportunity to property to Mayfair is embodied in a contract. It isnegotiate within the 30-day stipulated period. 27 Paragraph 8 on the right of first refusal which created the obligation. It should be enforced according to theThis Court has always been against multiplicity of law on contracts instead of the panoramic andsuits where all remedies according to the facts and indefinite rule on human relations. The latter remedythe law can be included. Since Carmelo sold the encourages multiplicity of suits. There is somethingproperty for P11,300,000.00 to Equatorial, the price to execute and that is for Carmelo to comply with its 18obligation to the property under the right of the first property. Mayfair is under no obligation to pay anyrefusal according to the terms at which they should interests arising from this judgment to eitherhave been offered then to Mayfair, at the price when Carmelo or Equatorial.that offer should have been made. Also, Mayfair hasto accept the offer. This juridical relation is not WHEREFORE, the petition for review of the decisionamorphous nor is it merely preparatory. Paragraphs 8 of the Court of Appeals, dated June 23, 1992, in CA-of the two leases can be executed according to their G.R. CV No. 32918, is HEREBY DENIED. The Deed ofterms. Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc. isOn the question of interest payments on the principal hereby deemed rescinded; petitioner Carmelo &amount of P11,300,000.00, it must be borne in mind Bauermann is ordered to return to petitionerthat both Carmelo and Equatorial acted in bad faith. Equatorial Realty Development the purchase price.Carmelo knowingly and deliberately broke a contract The latter is directed to execute the deeds andentered into with Mayfair. It sold the property to documents necessary to return ownership to CarmeloEquatorial with purpose and intend to withhold any and Bauermann of the disputed lots. Carmelo ¬ice or knowledge of the sale coming to the Bauermann is ordered to allow Mayfair Theater, Inc.attention of Mayfair. All the circumstances point to a to buy the aforesaid lots for P11,300,000.00.calculated and contrived plan of non-compliance withthe agreement of first refusal. SO ORDERED.
On the part of Equatorial, it cannot be a buyer in Regalado, Davide, Jr., Bellosillo, Melo, Puno, Kapunan,good faith because it bought the property with notice Mendoza and Francisco, JJ., concur.and full knowledge that Mayfair had a right to orinterest in the property superior to its own. Carmelo Narvasa, C.J., took no part.and Equatorial took unconscientious advantage ofMayfair.
23 Republic of the Philippines Maroon, then displayed in the Norkis showroom. The price of SUPREME COURT P7,500.00 was payable by means of a Letter of Guaranty Manila from the Development Bank of the Philippines (DBP), Kabankalan Branch, which Norkis' Branch Manager Labajo SECOND DIVISION agreed to accept. Hence, credit was extended to Nepales for the price of the motorcycle payable by DBP upon release ofG.R. No. 91029 February 7, 1991 his motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on the motorcycle in favor of DBP. Branch Manager Labajo issued Norkis Sales Invoice No.NORKIS DISTRIBUTORS, INC., petitioner, 0120 (Exh.1) showing that the contract of sale of thevs. motorcycle had been perfected. Nepales signed the salesTHE COURT OF APPEALS & ALBERTO invoice to signify his conformity with the terms of the sale.NEPALES, respondents. In the meantime, however, the motorcycle remained in Norkis' possession.Jose D. Palma for petitioner.Public Attorney's Office for private respondent. On November 6, 1979, the motorcycle was registered in the Land Transportation Commission in the name of Alberto Nepales. A registration certificate (Exh. 2) in his name was issued by the Land Transportation Commission on November 6, 1979 (Exh. 2-b). The registration fees were paid by him,GRIO-AQUINO, J.: evidenced by an official receipt, Exhibit 3.
Subject of this petition for review is the decision of the Court On January 22, 1980, the motorcycle was delivered to aof Appeals (Seventeenth Division) in CA-G.R. No. 09149, certain Julian Nepales who was allegedly the agent ofaffirming with modification the judgment of the Regional Alberto Nepales but the latter denies it (p. 15, t.s.n., AugustTrial Court, Sixth (6th) Judicial Region, Branch LVI. 2, 1984). The record shows that Alberto and Julian NepalesHimamaylan, Negros Occidental, in Civil Case No. 1272, presented the unit to DBP's Appraiser-Investigator Ernestowhich was private respondent Alberto Nepales' action for Arriesta at the DBP offices in Kabankalan, Negros Occidentalspecific performance of a contract of sale with damages Branch (p. 12, Rollo). The motorcycle met an accident onagainst petitioner Norkis Distributors, Inc. February 3, 1980 at Binalbagan, Negros Occidental. An investigation conducted by the DBP revealed that the unitThe facts borne out by the record are as follows: was being driven by a certain Zacarias Payba at the time of the accident (p. 33, Rollo). The unit was a total wreck (p. 36, t.s.n., August 2,1984; p. 13, Rollo), was returned, and storedPetitioner Norkis Distributors, Inc. (Norkis for brevity), is the inside Norkis' warehouse.distributor of Yamaha motorcycles in Negros Occidental withoffice in Bacolod City with Avelino Labajo as its BranchManager. On September 20, 1979, private respondent On March 20, 1980, DBP released the proceeds of privateAlberto Nepales bought from the Norkis-Bacolod branch a respondent's motorcycle loan to Norkis in the total sum ofbrand new Yamaha Wonderbike motorcycle Model YL2DX P7,500. As the price of the motorcycle later increased towith Engine No. L2-329401K Frame No. NL2-0329401, Color P7,828 in March, 1980, Nepales paid the difference of P328
24(p. 13, Rollo) and demanded the delivery of the motorcycle. Norkis' motion for reconsideration. Hence, this Petition forWhen Norkis could not deliver, he filed an action for specific Review.performance with damages against Norkis in the RegionalTrial Court of Himamaylan, Negros Occidental, Sixth (6th) The principal issue in this case is who should bear the loss ofJudicial Region, Branch LVI, where it was docketed as Civil the motorcycle. The answer to this question would dependCase No. 1272. He alleged that Norkis failed to deliver the on whether there had already been a transfer of ownershipmotorcycle which he purchased, thereby causing him of the motorcycle to private respondent at the time it wasdamages. destroyed.
Norkis answered that the motorcycle had already been Norkis' theory is that:delivered to private respondent before the accident, hence,the risk of loss or damage had to be borne by him as owner . . . After the contract of sale has been perfected (Art.of the unit. 1475) and even before delivery, that is, even before the ownership is transferred to the vendee, the riskAfter trial on the merits, the lower court rendered a decision of loss is shifted from the vendor to the vendee.dated August 27, 1985 ruling in favor of private respondent Under Art. 1262, the obligation of the vendor to(p. 28, Rollo.) thus: deliver a determinate thing becomes extinguished if the thing is lost by fortuitous event (Art. 1174), that WHEREFORE, judgment is rendered in favor of the is, without the fault or fraud of the vendor and before plaintiff and against the defendants. The defendants he has incurred in delay (Art. 11 65, par. 3). If the are ordered to pay solidarity to the plaintiff the thing sold is generic, the loss or destruction does not present value of the motorcycle which was totally extinguish the obligation (Art. 1263). A thing is destroyed, plus interest equivalent to what the determinate when it is particularly designated or Kabankalan Sub-Branch of the Development Bank of physically segregated from all others of the same the Philippines will have to charge the plaintiff on fits class (Art. 1460). Thus, the vendor becomes released account, plus P50.00 per day from February 3, 1980 from his obligation to deliver the determinate thing until full payment of the said present value of the sold while the vendee's obligation to pay the price motorcycle, plus P1,000.00 as exemplary damages, subsists. If the vendee had paid the price in advance and costs of the litigation. In lieu of paying the the vendor may retain the same. The legal effect, present value of the motorcycle, the defendants can therefore, is that the vendee assumes the risk of loss deliver to the plaintiff a brand-new motorcycle of the by fortuitous event (Art. 1262) after the perfection of same brand, kind, and quality as the one which was the contract to the time of delivery. (Civil Code of the totally destroyed in their possession last February 3, Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.) 1980. (pp. 28-29, Rollo.) Norkis concedes that there was no "actual" delivery of theOn appeal, the Court of appeals affirmed the appealed vehicle. However, it insists that there was constructivejudgment on August 21, 1989, but deleted the award of delivery of the unit upon: (1) the issuance of the Salesdamages "in the amount of Fifty (P50.00) Pesos a day from Invoice No. 0120 (Exh. 1) in the name of the privateFebruary 3, 1980 until payment of the present value of the respondent and the affixing of his signature thereon; (2) thedamaged vehicle" (p35, Rollo). The Court of Appeals denied registration of the vehicle on November 6, 1979 with the Land Transportation Commission in private respondent's
25name (Exh. 2); and (3) the issuance of official receipt (Exh. possession of the vendee." (Civil Code, Art. 1462). It3) for payment of registration fees (p. 33, Rollo). is true that the same article declares that the execution of a public instrument is equivalent to theThat argument is not well taken. As pointed out by the delivery of the thing which is the object of theprivate respondent, the issuance of a sales invoice does not contract, but, in order that this symbolic deliveryprove transfer of ownership of the thing sold to the buyer. may produce the effect of tradition, it is necessaryAn invoice is nothing more than a detailed statement of the that the vendor shall have had such control over thenature, quantity and cost of the thing sold and has been thing sold that, at the moment of the sale, itsconsidered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. material delivery could have been made. It is not378). enough to confer upon the purchaser theownership and the right of possession. The thingIn all forms of delivery, it is necessary that the act of sold must be placed in his control. When there is nodelivery whether constructive or actual, be coupled with the impediment whatever to prevent the thing soldintention of delivering the thing. The act, without the passing into the tenancy of the purchaser by the soleintention, is insufficient (De Leon, Comments and Cases on will of the vendor, symbolic delivery through theSales, 1978 Ed., citing Manresa, p. 94). execution of a public instrument is sufficient. But if notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and materialWhen the motorcycle was registered by Norkis in the name tenancy of the thing and make use of it himself orof private respondent, Norkis did not intend yet to transfer through another in his name, because such tenancythe title or ownership to Nepales, but only to facilitate the and enjoyment are opposed by the interposition ofexecution of a chattel mortgage in favor of the DBP for the another will, then fiction yields to reality-the deliveryrelease of the buyer's motorcycle loan. The Letter of has riot been effects .(Emphasis supplied.)Guarantee (Exh. 5) issued by the DBP, reveals that theexecution in its favor of a chattel mortgage over thepurchased vehicle is a pre-requisite for the approval of the The Court of Appeals correctly ruled that the purpose of thebuyer's loan. If Norkis would not accede to that execution of the sales invoice dated September 20, 1979arrangement, DBP would not approve private respondent's (Exh. B) and the registration of the vehicle in the name ofloan application and, consequently, there would be no sale. plaintiff-appellee (private respondent) with the Land Registration Commission (Exhibit C) was not to transfer to Nepales the ownership and dominion over the motorcycle,In other words, the critical factor in the different modes of but only to comply with the requirements of theeffecting delivery, which gives legal effect to the act, is the Development Bank of the Philippines for processing privateactual intention of the vendor to deliver, and its acceptance respondent's motorcycle loan. On March 20, 1980, beforeby the vendee. Without that intention, there is no tradition private respondent's loan was released and before he even(Abuan vs. Garcia, 14 SCRA 759). paid Norkis, the motorcycle had already figured in an accident while driven by one Zacarias Payba. Payba was notIn the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), shown by Norkis to be a representative or relative of privatethis Court held: respondent. The latter's supposed relative, who allegedly took possession of the vehicle from Norkis did not explain The Code imposes upon the vendor the obligation how Payba got hold of the vehicle on February 3, 1980. to deliver the thing sold. The thing is considered to Norkis' claim that Julian Nepales was acting as Alberto's be delivered when it is "placed in the hands and agent when he allegedly took delivery of the motorcycle (p. 2620, Appellants' Brief), is controverted by the latter. Albertodenied having authorized Julian Nepales to get themotorcycle from Norkis Distributors or to enter into anytransaction with Norkis relative to said motorcycle. (p. 5,t.s.n., February 6, 1985). This circumstances more thanamply rebut the disputable presumption of delivery uponwhich Norkis anchors its defense to Nepales' action (pp. 33-34,Rollo).
Article 1496 of the Civil Code which provides that "in theabsence of an express assumption of risk by the buyer, thethings sold remain at seller's risk until the ownership thereofis transferred to the buyer," is applicable to this case, forthere was neither an actual nor constructive delivery of thething sold, hence, the risk of loss should be borne by theseller, Norkis, which was still the owner and possessor of themotorcycle when it was wrecked. This is in accordance withthe well-known doctrine of res perit domino.
27[No. L-7756, July 30, 1955] employees who died or voluntarily left the service before the outbreak of the war should be excluded from the distributionPHILIPPINE LONG DISTANCE TELEPHONE COMPANY, of pension benefits.petitioner, vs. CRISPIN JETURIAN, ET AL., respondents. Decision affirmed with modification. Philippine LongReview of the decision of the Court of Industrial Relations. It Distance Telephone Company vs. Jeturian, et al., 97 Phil.is not disputed that on September 18, 1923, a "Plan for 981, No. L-7756 July 30, 1955Employees Pensions" was adopted by the petitionercompany, subject to the conditions set forth therein. On (Supplemental)November 6, 1945, the Board of Directors of the Companyadopted a resolution discontinuing the Pension Plan and all Republic of the Philippinespayments thereunder, effective retroactively as of January 1, SUPREME COURT1942. Hence this action for monetary benefits allegedly due Manilathe respondent employees under the pension plan. Thecourt below decreed that the prewar employees of the EN BANCcompany be paid according to the "proportion of the lengthof service rendered and the age of petitioners concerned as G.R. No. L-16370 October 31, 1961of October 31, 1941, to the service and age limitrequirements of the Pension Plan." Held: The pension plan JOSE S. GALVEZ, Deceased (Represented by his widowwas not a mere offer of gratuity by the company, inspired by and heir, GRACIA VDA. DE GALVEZ), petitioner,no other purpose than to benefit its employees, In reality, vs.the plan sought to induce the employees to continue PHILIPPINE LONG DISTANCE TELEPHONE COMPANYindefinitely in the service, and to spur them to greater AND THE COURT OF INDUSTRIALefforts in its service and increased zeal in its behalf. The RELATIONS,respondents.plan ripened into a binding contract upon its impliedacceptance of the employees. Not being a donation, there is Narciso E. Martin and Antonio N. Castro for petitioner.110 statutory requirement that acceptance of the plan Perkins, Ponce Enrile, Siguion Reyna, Montecillo and Belo forshould be express. The assent or acceptance of the respondent Company.employees is inferable from their entering the employ of the F.A. Sambajon for respondent Court of Industrial Relations.company, or their stay therein after the plan was madeknown. CONCEPCION, J.:Petitioner company argues, however, that it can not bemade liable except upon fulfillment of the conditions Appeal by certiorari from an order of the Court of Industrialexpressly set in the pension plan (age 50 and 20 years Relations.service). But the Company that violated the contract with itsemployees, by discontinuing the plan without their consent, Petitioner herein, Gracia Vda. de Galvez, hereafter referredis not in a position now to insist upon the terms of the very to as Mrs. Galvez, is the widow of the late Jose S. Galvez,contract it has breached (cf. Bosque vs. Yu Chipco, 14 Phil. who during his lifetime was an employee of respondent95). In justice to the Company, however, those prewar Philippine Long Distance Telephone Company, hereafter
28referred to as the Company. Mr. Galvez had worked therefor Later on, the Court of Industrial Relations ordered its chieffrom December 1, 1908 to December 31, 1941, when the examiner to liquidate said prewar pension plan. By an orderoperation of the Company was disrupted by the Japanese dated May 12, 1956, the report thereon of said chiefinvasion and occupation of the Philippines. As of the date examiner was approved by the Court of Industrial Relations.last mentioned he had served the Company for thirty-three The report specified the names of all prewar employees(33) years and one (1) month. Upon the liberation of the entitled to participate in the distribution of the Employees'Philippines, or on April 1, 1945, Mr. Galvez was reinstated Pension fund and the amount each was entitled to. Itand continued under the employment of the Company for included the name of several persons not petitioners in theanother five (5) years, ten (10) months and six (6) days, or case, whose aggregate share was said to be P23,381.96.up to February 7, 1951, when he died. Thus, his prewar and Among these persons was Jose S. Galvez whose share,post-war services to the Company aggregated thirty-eight forming part of the sum last mentioned, amounted to(38) years, eleven (11) months and six (6) days. Sometime P13,028.64. Thereafter, said non-petitioners, including Mrs.in 1951, Mrs. Galvez received from the Company P24,000, Galvez, on behalf of her deceased spouse, asked the Courtas pension and death benefits due to the deceased under an of Industrial Relations to order the payment of theirEmployees' Pension Plan adopted by the Company on aforementioned shares, according to the examiner's report.September 18, 1923. Despite the opposition of the Company, predicated upon the theory that these claimants were not parties to theSubsequently, or on December 22, 1951, Crispin Jeturian proceeding and could not invoke, therefore, the benefits ofand about sixty-three (63) other persons, who had served the aforementioned decisions (of the Court of Industrialthe Company as its prewar employees, instituted in the Relations, of February 23, 1954, and of the Supreme Court,Court of Industrial Relations a proceeding for the collection promulgated on June 20, 1955), the Court of Industrialof their proportionate shares in said Employees' Pension Relations issued an order, dated January 8, 1959, grantingPlan, which had been discontinued by a resolution dated said request and directing the Company to deposit with theNovember 6, 1945, unilaterally taken by the Board of cashier of said Court, within a specified time, theDirectors of the Company, to be effective retroactively as of aforementioned sum of P23,381.96, exclusive of service fee.January 1, 1942. In due course, a decision was, on February On motion for reconsideration filed by the company, said23, 1954, rendered in said proceeding, docketed as Case No. order was affirmed by the Court of Industrial Relations,639-V of the Court of Industrial Relations, directing payment sitting en banc, in a resolution dated February 14, 1959.to the petitioners therein of their respective proportionate Thereupon, or on or about February 28, 1959, the Companyshares in the aforementioned Employees' Pension Plan, as filed with this Court a petition, docketed as G.R. No. L-well as to those who had not received their 30-day notice 15120, for review by certiorari of said order and theof dismissal from the service of the Company before the aforementioned resolution of the Court of Industrialresumption of its business operations in 1946 a Relations, dated January 8, and February 14, 1959,severance pay equivalent to one month salary. With a slight respectively, but the petition was dismissed by resolution ofmodification, immaterial to the case at bar, said decision this Court of March 17, 1959, for lack of merit.was affirmed by the Supreme Court in Philippine LongDistance Telephone Co. vs. Jeturian, et al., G.R. No. L-7756, Presently, or on April 14, 1959, the Company filed with thedecided on June 20, 1955. Court of Industrial Relations a petition praying that it be no longer required to deposit the aforementioned share of Jose 29S. Galvez in the amount of P13,028.64, because Mrs. Galvez one of the petitioners in said Case No. 639-V, beinghad already been paid P24,000, as above stated, inasmuch one of the employees of said company. The order ofas, at the time of his death, Mr. Galvez was receiving a this Court of July 8, 1959 in the instant incidentalmonthly compensation of P2,000 and, under the rules case implements said Report of Examiner, thusgoverning the Employees' Pension Plan, he would have giving effectivity to the award in favor of Jose S.received only the salary for six (6) months, or P12,000, for Galvez, We believe that this Court may in its soundhis post liberation services, which were over five (5) years discretion, after discovering through hearings asbut less than ten (10) years, but was given the benefit of a was done in this case a certain error which mightprovision prescribing a 12-month pay for those who had do injustice to the aggrieved party if not corrected,served ten (10) years or over, in view of his prewar services. alter or modify its order to accord substantial justiceBy an order dated September 8, 1959, the Court of to the party concerned during the effectivity of anIndustrial Relations held that amounts collectible by Jose S. award, order or decision.Galvez under said pension plan for his prewar and post-liberation services were P13,028.64 and P12,000, The lower court was thus aware of the fact that it wasrespectively, or the aggregate sum of P25,028.64, and that thereby altering or modifying its order of January 8, 1959.since Mrs. Galvez had already received P24,000, the sum Regardless of the excellence of the motive for acting as itnow due her is only P1,028.64, which the Company was did, we are constrained to hold, however, that the lowerordered to deposit in court. court had no authority to make said alteration or modification. The order of January 8, 1959, awardingA reconsideration having been denied by the Court of P13,028.64 to Jose S. Galvez, was affirmed by the Court ofIndustrial Relations sitting en banc, Mrs. Galvez now seeks a Industrial Relations sitting en banc, and an appeal byreview by certiorari of said order of September 8, 1959, certiorari from said order and from the confirmatoryupon the ground that it had in effect amended unlawfully resolution of said Court en banc was dismissed by thisthe aforementioned order of January 8, 1959, which was Court, for lack of merit. As a consequence, said order ofalready final and executory. By way of justification for the January 8, 1959 and the award of P13,028.64 in favor of Joseaction complained of, lower court stated in its order of S. Galvez become executory and are no longer subject toSeptember 8, 1959. alteration or modification (Rattan Art & Decorations, Inc. vs. Rattan Art & Decorations [Daily Workers] Union, G.R. No. L- The order of this Court dated May 12, 1956, 6466, May 28, 1954; Pepsi-Cola Bottling Co. of the P.I. vs. approving the Report of Examiner in which the Philippine Labor Organization, G.R. No. L-3506, January 31, equities of all employees of the respondent company 1951). were determined in accordance with the decision of this Court in Case No. 639-V, Crispin Jeturian, et al. The equitable considerations that led the lower court to take vs. Philippine Long Distance Telephone Co., as the action complained of cannot offset the demands of modified by the Supreme Court in G.R. No. L-7756, public policy and public interest which are also responsive Philippine Long Distance Telephone Company vs. to the tenets of equity requiring that all issues passed Crispin Jeturian, et al., recognizes the equity in favor upon in decisions or final orders that have become of Jose S. Galvez in the pre-war pension plan, executory, be deemed conclusively disposed of and although his name was not specifically mentioned as definitely closed, for, otherwise, there would be no end to 30litigations, thus setting at naught the main role of courts ofjustice, which is to assist in the enforcement of the rule oflaw and the maintenance of peace and order, by settling EN BANCjusticiable controversies with finality. [G.R. No. L-27454. April 30, 1970.]WHEREFORE, the order appealed from is hereby set aside ROSENDO O. CHAVES, Plaintiff-Appellant, v.and another one shall be entered directing that, within thirty FRUCTUOSO GONZALES, Defendant-Appellee.(30) days from entry of judgment in this case, the sum ofP13,028.64 exclusive of service fee, be deposited by Chaves, Elio, Chaves & Associates, for Plaintiff-respondent Philippine Long Distance Telephone Co. with the Appellant.Court of Industrial Relations for the benefit of the heirs ofJose S. Galvez with costs against said respondent. It is so Sulpicio E. Platon, for Defendant-Appellee.ordered.
REYES, J.B.L., J.: "On August 23, 1965, the plaintiff commenced this action before the City Court of Manila, demanding from the defendant the payment of P90.00 as actual andThis is a direct appeal by the party who prevailed in a suit compensatory damages, P100.00 for temperate damages,for breach of oral contract and recovery of damages but was P500.00 for moral damages, and P500.00 as attorneys fees.unsatisfied with the decision rendered by the Court of FirstInstance of Manila, in its Civil Case No. 65138, because it "In his answer as well as in his testimony given before thisawarded him only P31.10 out of his total claim of P690 00 court, the defendant made no denials of the facts narratedfor actual, temperate and moral damages and attorneys above, except the claim of the plaintiff that the typewriterfees. was delivered to the defendant through a certain Julio Bocalin, which the defendant denied allegedly because theThe appealed judgment, which is brief, is hereunder quoted typewriter was delivered to him personally by the plaintiff.in full:jgc:chanrobles.com.ph "The repair done on the typewriter by Freixas Business"In the early part of July, 1963, the plaintiff delivered to the Machines with the total cost of P89.85 should not, however,defendant, who is a typewriter repairer, a portable be fully chargeable against the defendant. The repairtypewriter for routine cleaning and servicing. The defendant invoice, Exhibit C, shows that the missing parts had a totalwas not able to finish the job after some time despite value of only P31.10. 32 but failed to comply with the same" ; and that "after getting"WHEREFORE, judgment is hereby rendered ordering the exasperated with the delay of the repair of the typewriter",defendant to pay the plaintiff the sum of P31.10, and the the plaintiff went to the house of the defendant and askedcosts of suit. for its return, which was done. The inferences derivable from these findings of fact are that the appellant and the appellee"SO ORDERED."cralaw virtua1aw library had a perfected contract for cleaning and servicing a typewriter; that they intended that the defendant was toThe error of the court a quo, according to the plaintiff- finish it at some future time although such time was notappellant, Rosendo O. Chaves, is that it awarded only the specified; and that such time had passed without the workvalue of the missing parts of the typewriter, instead of the having been accomplished, far the defendant returned thewhole cost of labor and materials that went into the repair of typewriter cannibalized and unrepaired, which in itself is athe machine, as provided for in Article 1167 of the Civil breach of his obligation, without demanding that he shouldCode, reading as follows:jgc:chanrobles.com.ph be given more time to finish the job, or compensation for the work he had already done. The time for compliance"ART. 1167. If a person obliged to do something fails to do it, having evidently expired, and there being a breach ofthe same shall be executed at his cost. contract by non-performance, it was academic for the plaintiff to have first petitioned the court to fix a period forThis same rule shall be observed if he does it in the performance of the contract before filing his complaintcontravention of the tenor of the obligation. Furthermore it in this case. Defendant cannot invoke Article 1197 of themay be decreed that what has been poorly done he Civil Code for he virtually admitted non-performance byundone."cralaw virtua1aw library returning the typewriter that he was obliged to repair in a non-working condition, with essential parts missing. TheOn the other hand, the position of the defendant-appellee, fixing of a period would thus be a mere formality and wouldFructuoso Gonzales, is that he is not liable at all, not even serve no purpose than to delay (cf. Tiglao. Et. Al. V. Manilafor the sum of P31.10, because his contract with plaintiff- Railroad Co. 98 Phil. 18l).appellant did not contain a period, so that plaintiff-appellantshould have first filed a petition for the court to fix the It is clear that the defendant-appellee contravened the tenorperiod, under Article 1197 of the Civil Code, within which the of his obligation because he not only did not repair thedefendant appellee was to comply with the contract before typewriter but returned it "in shambles", according to thesaid defendant-appellee could be held liable for breach of appealed decision. For such contravention, as appellantcontract. contends, he is liable under Article 1167 of the Civil Code. jam quot, for the cost of executing the obligation in a properBecause the plaintiff appealed directly to the Supreme Court manner. The cost of the execution of the obligation in thisand the appellee did not interpose any appeal, the facts, as case should be the cost of the labor or service expended infound by the trial court, are now conclusive and non- the repair of the typewriter, which is in the amount ofreviewable. 1 P58.75. because the obligation or contract was to repair it.
The appealed judgment states that the "plaintiff delivered to In addition, the defendant-appellee is likewise liable, underthe defendant . . . a portable typewriter for routine cleaning Article 1170 of the Code, for the cost of the missing parts, inand servicing" ; that the defendant was not able to finish the the amount of P31.10, for in his obligation to repair thejob after some time despite repeated reminders made by typewriter he was bound, but failed or neglected, to return itthe plaintiff" ; that the "defendant merely gave assurances, in the same condition it was when he received it. 33Appellants claims for moral and temperate damages andattorneys fees were, however, correctly rejected by the trialcourt, for these were not alleged in his complaint (Record onAppeal, pages 1-5). Claims for damages and attorneys feesmust be pleaded, and the existence of the actual basisthereof must be proved. 2 The appealed judgment thusmade no findings on these claims, nor on the fraud ormalice charged to the appellee. As no findings of fact weremade on the claims for damages and attorneys fees, thereis no factual basis upon which to make an award therefor.Appellant is bound by such judgment of the court, a quo, byreason of his having resorted directly to the Supreme Courton questions of law.
34 Republic of the Philippines "That due to the increase in price of oil and its derivatives SUPREME COURT and the concomitant worldwide spiralling of prices, which Manila are not within the control of plaintiff, of all commodities including basis raw materials required for such development FIRST DIVISION work, the cost of development has risen to levels which are unanticipated, unimagined and not within the remotestG.R. No. L-44349 October 29, 1976 contemplation of the parties at the time said agreement was entered into and to such a degree that the conditions andJESUS V. OCCENA and EFIGENIA C. factors which formed the original basis of said contract,OCCENA, petitioners, Annex 'A', have been totally changed; 'That furthervs. performance by the plaintiff under the contract.HON. RAMON V. JABSON, Presiding Judge of the CourtOf First Instance of Rizal, Branch XXVI; COURT OF That further performance by the plaintiffAPPEALS and TROPICAL HOMES, INC., respondents. under the contract,Annex 'S', will result in situation where defendants would be unustlyOccena Law Office for petitioners. enriched at the expense of the plaintiff; will cause an inequitous distribution of proceeds from the sales of subdivided lots in manifestSerrano, Diokno & Serrano for respondents. actually result in the unjust and intolerable exposure of plaintiff to implacable losses, all such situations resulting in an unconscionable, unjust and immoral situationTEEHANKEE, J.: contrary to and in violation of the primordial concepts of good faith, fairness and equityThe Court reverses the Court of Appeals appealed which should pervade all human relations.resolution. The Civil Code authorizes the release of anobligor when the service has become so difficult as to be Under the subdivision contract, respondent "guaranteedmanifestly beyond the contemplation of the parties but does (petitioners as landowners) as the latter's fixed and solenot authorize the courts to modify or revise the subdivision share and participation an amount equivalent to forty (40%)contract between the parties or fix a different sharing ratio percent of all cash receifpts fromthe sale of the subdivisionfrom that contractually stipulated with the force of law lots"between the parties. Private respondent's complaint formodification of the contract manifestly has no basis in law Respondent pray of the Rizal court of first instance thatand must therefore be dismissed for failure to state a cause "after due trial, this Honorable Court render judgmentof action. On February 25, 1975 private respondent Tropical modifying the terms and conditions of the contract ... byHomes, Inc. filed a complaint for modification of the terms fixing the proer shares that shouls pertain to the hereinand conditions of its subdivision contract with petitioners parties out of the gross proceeds from the sales of(landowners of a 55,330 square meter parcel of land in subdivided lots of subjects subdivision".Davao City), making the following allegations:
35Petitioners moved to dismiss the complaint principally for The general rule is that impossibility oflack of cause of action, and upon denial thereof and of performance releases the obligor. However, itreconsideration by the lower court elevated the matter on is submitted that when the service hascertiorari to respondent Court of Appeals. become so difficult as to be manifestly beyond the contemplation of the parties, theRespondent court in its questioned resolution of June 28, court should be authorized to release the1976 set aside the preliminary injunction previously issued obligor in whole or in part. The intention ofby it and dimissed petition on the ground that under Article the parties should govern and if it appears1267 of the Civil Code which provides that that the service turns out to be so difficult as have been beyond their contemplation, it ART. 1267. When the service has become so would be doing violence to that intention to difficult as to be manifestly beyond the hold the obligor still responsible. ... 2 contemplation of the parties, the obligor may also be released therefrom, in whole or in It misapplied the same to respondent's complaint. part. 1 If respondent's complaint were to be released from having ... a positive right is created in favor of the to comply with the subdivision contract, assuming it could obligor to be released from the performance show at the trial that the service undertaken contractually of an obligation in full or in part when its by it had "become so difficult as to be manifestly beyond the performance 'has become so difficult as to be contemplation of the parties", then respondent court's manifestly beyond the contemplation of the upholding of respondet's complaint and dismissal of the parties. petition would be justifiable under the cited codal article. Without said article, respondent would remain bound by itsHence, the petition at abar wherein petitioners insist that contract under the theretofore prevailing doctrine thatthe worldwide increase inprices cited by respondent does performance therewith is ot excused "by the fact that thenot constitute a sufficient casue of action for modification of contract turns out to be hard and improvident, unprofitable,the subdivision contrct. After receipt of respondent's or unespectedly burdensome", 3since in case a party desirescomment, the Court in its Resolution of September 13, 1976 to be excuse from performance in the event of suchresolved to treat the petition as special civil actionand contingencies arising, it is his duty to provide threfor in thedeclared the case submitted for decision. contract.
The petition must be granted. But respondent's complaint seeks not release from the subdivision contract but that the court "render judgment IWhile respondent court correctly cited in its decision the modifying the terms and Conditions of the Contract by fixingCode Commission's report giving the rationale for Article the proper shares that should pertain to the herein parties1267 of the Civil Code, to wit; out of the gross proceed., from the sales of subdivided lots of subject subdivision". The cited article does not grant the courts this authority to remake, modify or revise the contract or to fix the division of shares between the parties 36as contractually stipulated with the force of law between the G.R. No. L-55372 May 31, 1989parties, so as to substitute its own terms for thosecovenanted by the partiesthemselves. Respondent's LETTY HAHN, petitioner,complaint for modification of contract manifestly has no vs.basis in law and therefore states no cause of action. Under COURT OF APPEALS, JOSIE M. SANTOS andthe particular allegations of respondent's complaint and the FRANCISCO SANTOS, respondents.circumstances therein averred, the courts cannot even inequity grant the relief sought. Raymundo A. Armovit for petitioner.
A final procedural note. Respondent cites the general rule Mary Concepcion Bautista for respondents.that an erroneous order denying a motion to dismiss isinterlocutory and should not be corrected by certiorari butby appeal in due course. This case however manifestly fallswithin the recognized exception that certiorari will lie when CRUZ, J.:appeal would not prove to be a speedy and adequateremedy.' Where the remedy of appeal would not, as in this It is said that diamonds are a girl's best friend, but privatecase, promptly relieve petitioners from the injurious effects respondent Josie M. Santos may have her doubts about this.of the patently erroneous order maintaining respondent's The fact is that they have caused her not a little difficulty,baseless action and compelling petitioners needlessly to go and her troubles are not yet over. This case was decidedthrough a protracted trial and clogging the court dockets by against her by the trial court and later by the respondentone more futile case, certiorari will issue as the plain, court which, however, mitigated the judgment of the former.speedy and adequate remedy of an aggrieved party. The petitioner does not like this and wants the earlier decision reinstated. That is why she is now before this Court.ACCORDINGLY, the resolution of respondent appellate courtis reversed and the petition for certiorari is granted and The basic facts as determined by the trial court 1 andprivate respondent's complaint in the lower court is ordered affirmed by the respondent court 2 are no longer in issue. Itdismissed for failure to state a sufficient cause of action. has been established that Santos received two diamondWith costs in all instances against private respondent. rings with a total value of P47,000.00 in 1966 from the petitioner. She issued separate receipts therefor in whichMakasiar, Muoz Palma, Concepcion, Jr., and Martin JJ., she acknowledged that they had been delivered by Lettyconcur. Hahn to her for sale on commission and that they would be returned upon demand if unsold. 3 The rings were not sold Republic of the Philippines nor were they returned when demanded by Hahn. SUPREME COURT Manila Hahn sued for recovery of the rings or their value. While the civil case was pending, she also filed a criminal action for FIRST DIVISION estafa against Santos. Santos was acquitted on reasonable doubt. 4 In the civil action, however, where she also pleaded
37that the contracts between her and Hahn were not of In challenging this decision, the petitioner contends that theagency but of sale, Santos did not fare as well. respondent erred in not allowing an upward adjustment of the original price of the two rings and in disallowing theThe trial court ordered her to return the two rings or pay the moral and exemplary damages granted by the trial court.plaintiff their value, which was increased to P65,000.00, with These are the issues in this petition.legal interest, plus P10,000 moral damages, P5,000exemplary damages, and P6,000.00 attorney's fees. 5 The On the first question, the petitioner cites Central Bankincrease on the original value of the rings was based on figures to show that the amount of P47,000.00 in 1966,Article 1250 of the Civil Code calling for an adjustment of when the obligation to return it or the rings fell due, wasthe payment due in case of extraordinary inflation or equivalent to about P235,000.00 in 1980 (and necessarily todeflation. The moral and exemplary damages were imposed an even higher amount now in view of the continuedbecause of the defendant's "seeming lack of scruples and reduction in the purchasing power of the peso). As theconscientiousness." increase ordered by the trial court (to P65,000.00 on August 7, 1971) was a finding of fact based on official figures, theOn appeal, this decision was modified. The Court of Appeals Court of Appeals was not justified in reversing the same.found that Article 1250 was not applicable and that theappellant had not acted in bad faith or with malice. The petitioner also argues that the award of moral andAccordingly, it rendered judgment: exemplary damages by the trial court was entirely justified and should not have been disallowed by the respondent A. Ordering the defendants to court. The reason is that there was sufficient showing that return to the plaintiff the two the private respondent had acted with malice and in bad rings in question; to pay faith toward the petitioner who had trusted her. plaintiff legal interest on the value of the ring, P47,000.00, Thus, Santos misrepresented her agreements with the from the time of the filing of the petitioner as contracts of sale when the very language of complaint until restitution in the receipts she herself had written and signed clearly made; and attorney's fees in shows that she was receiving the rings in trust from the the amount of P6,000.00. petitioner, as later found in both the criminal and civil cases. 7 Second, she claimed she had made installment B. Sentencing the defendants, payments directly and personally to the petitioner during in case return of the rings is no the period from August 14 to November 20, 1966, and when longer feasible, to pay to the this lie was exposed with evidence that the petitioner was plaintiff the value thereof, abroad during that period, changed her testimony to make it which is P47,000.00, with appear that the alleged payments had been made when interest at the legal rate from Hahn was in the country. 8 In fact, the finding of the trial the time of the filing of the court as sustained by the respondent court was that she had complaint until full payment made no payment at all at any time. 9 Third, when Santos and P6,000.00 attorney's fees. 6 offered to return the solitaire ring to the petitioner, the latter readily saw that it was not the same ring she had entrusted 38to the private respondent, who evidently wanted to foist to the purely peso transaction to beanother deception upon her. 10 meritorious.
For her part, the private respondent dismisses the claim for In this regard, Article 1250 of the Civil Codeupward adjustment of the amount due and says Article 1250 provides of the Civil Code is not applicable, there being no inflation ordeflation. The Central Bank statistics Hahn invokes are In case an extraordinaryhearsay and immaterial. Not in point either is the case inflation or deflation of theof Zulueta v. Pan-American World Airways," 11 as cited by currency stipulated shouldthe petitioner, where the issue of inflation was not even supervene, the value of theraised. Moreover, the delay in the payment of the amount currency at the time of thedue was imputable not to her but to the petitioner, who had establishment of the obligationunreasonably prevented her from discharging her obligation. should be the basis of payment, unless there is an agreement toAs early as December of 1966, she says she had offered to the contrary.return the marquisette ring to the petitioner but thepetitioner's lawyer, acting on her instructions, refused to By extraordinary inflation or deflation ofaccept it and demanded the return also of the P35,000.00 currency is understood to be any uncommonsolitaire ring. 12 She offered to pay for this other ring on decrease or increase in the purchasing powerinstallment but this offer was also rejected. 13 At the trial of of currency which the parties could not havethe criminal case against her, she brought the solitaire ring reasonably foreseen and which has been dueto prove that she had not disposed of it, but the petitioner to war and the effects thereof, or any unusualdenied it was the ring she had delivered to the force majeure or fortuitous event. (Civil Codeaccused. 14 Still later, she offered to pay for both rings on of the Philippines, Dean Capistrano, Vol. III, p.installment, but the offer was also rejected without reason 186.)by the petitioner. 15 In sum, it is the petitioner who hasdelayed payment of the amount due and not the private Under the circumstances, we do not find anyrespondent, who was ready to settle her obligation. legal justification in applying the so-called 'floating rate," since there has been noThe trial court cited no legal basis for the upward 'extraordinary inflation" of currency within theadjustment of the original amount due although the reason meaning of the aforequoted Art. 1250 of thewas presumably Article 1250 of the Civil Code. We agree Civil Code. 16with the respondent court that such adjustment waserroneous for, as explained by Justice Serafin M. Cuevas The Court holds that, in determining the accountability of(later a member of this Court): the private respondent, the trial judge should have applied the following provisions of the Civil Code, as the respondent We, however, find the contention of appellant court apparently did: under her fifth assignment of error that the lower court erred in applying the floating rate 39 Art. 2209. If the obligation consists in the Received from Mrs. Letty Hahn 1 ring solo diamond worth payment of a sum of money, and the debtor P12,000 to be sold on commission or to be return upon incurs in delay, the indemnity for damages, demand. there being no stipulation to the contrary, shall be the payment of the interest agreed June 7,1966 upon, and in the absence of stipulation, the legal interest, which is six per cent per Received from Mrs. Letty Hahn 1 ring solo diamond worth annum. P35,000 to be sold on commission basis or to be return upon demand. Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded From the moment demand was made upon Santos and she for breach of contract. did not or could not comply, she has already incurred in delay. The meaning of the receipts is unmistakable. Her Art. 2212. Interest due shall earn legal contention that it was the private respondent who had interest from the time it is judicially prevented her from fulfilling her obligation is simply demanded, although the obligation may be untenable and unacceptable. silent upon this point. There is no doubt that the petitioner could validly reject theThe Court notes, however, that the respondent court should private respondent's offer to pay for the rings on installmentalso have imposed interest on the interest due on the because Hahn was entitled to payment in full. If suchprincipal amount of P47,000.00, conformably to Article payment could not be made, Santos was obligated to return2212. The interest due started to earn interest from the date both of the rings and not one or the other only at herit was judicially demanded with the filing of the complaint on option "upon demand," under the separate receipts sheJanuary 6,1967. had signed. According to Article 1233 of the Civil Code, "a debt shall not be understood to have been paid unless theAs to the delay in the performance of the private thing or service in which the obligation consists has beenrespondent's obligation, our ruling is that it was caused by completely delivered or rendered as the case may be."the private respondent herself and not the petitioner whohad the right to demand performance in full of the former's As for the private respondent's offer to return the solitaireobligation she had assumed under their written agreement. ring, which was also refused, the pertinent rule is Article 1244, providing that "the debtor of a thing cannot compelThe receipts composed and signed by Santos, which were the creditor to receive a different one, although the latteroffered as Exhibits A and B, read as follows: may be of the same value as, or more valuable than that which is due." More so then in the case at bar if, as averredJune 2, 1966 by the petitioner, the ring offered was less valuable than the one that was due . 17
40We cannot sustain the respondent court, however, on the follows: a) the award of moral damages in the sum of Imoral and exemplary damages which it disallowed on the P10,000.00 and exemplary damages in the sum ofground that "there was no clear showing of malice and bad P5,000.00 is i added to the other amounts to be paid by thefaith on the part of the defendant." The Court thinks private respondent to the petitioner in accordance with theotherwise. We hold that the moral and exemplary damages said decision; and b) I interest on the principal amount ofshould be restored in light of her dubious conduct as P47,00.00 shall earn interest also at the legal rate, fromrecounted in the petitioner's brief and the following findings January 6, 1967, and until full payment is made. Costsof the trial court which we have no reason to disturb: against the private respondent.


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- Hotel and vacation rental insurance gap coverer InsuraGuest is expanding its reach to Europe and Asia this year, and expects to be registered and licensed in all 50 states before the end of the year
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"The InsuraGuest coverage is purchased by the property and provides coverage for covered claims from each registered guest and all room occupants upon check-in," a company news release states (source).
The InsurTech arena has blossomed during recent years, as tech startups have become a popular target for custom-tailored insurance coverage (source). Within the travel stay industry, insurers are increasingly shifting toward filling the needs of small business startups operating as vacation rentals. Real estate analysts at iPropertyManagement.com predict the small vacation rental segment will become more profitable than hotels this year as the number of Airbnb users grows worldwide (source).
InsuraGuest Chairman and CEO Douglas Anderson noted that during 2018 travelers purchased 2.8 billion nightly hotel stays in Europe, compared with 1.1 billion in the United States.
"Additionally, $100 billion was spent on vacation rentals," he stated (source).
Although 2020 is barely under way, industry watchers are already expressing optimism for the year after reports noted that U.S hotels' revenue per available room (RevPAR) rose 4 percent during the week of December 29 to January 4 while the average daily rate (ADR) and occupancy grew 4 percent and 0.3 percent, respectively (source).
U.S. hotel occupancy was up 5.9 percent during the week before Christmas, according to the report.

subset: commoncrawl


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