SECOND DIVISION
G.R. NO. 173622 : March 11, 2013 Dear Mr. Cuizon, Sr.,
ROBERN DEVELOPMENT CORPORATION and RODOLFO M. BERNARDO,
JR., Petitioners, v.PEOPLE'S LANDLESS ASSOCIATION represented by
FLORIDA RAMOS and NARDO LABORA,Respondent.
DECISION
DEL CASTILLO, J.:
"This Court cannot presume the existence of a sale of land, absent any direct proof
of it."1chanroblesvirtualawlibrary
Challenged in this Petition for Review on Certiorari are the August 16, 2005
Decision2 and May 30, 2006 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV
No. 66071, which ordered petitioner Robern Development Corporation (Robern) to
reconvey the 2,000-square meter lot it bought from Al-Amanah Islamic
Development Bank of the Philippines (Al-Amanah) to respondent People's Landless
Association (PELA).
Factual Antecedents
Al-Amanah owned a 2000-square meter lot located in Magtu-od, Davao City and
covered by Transfer Certificate of Title (TCT) No. 138914.4 On December 12, 1992,
Al-Amanah Davao Branch, thru its officer-in-charge Febe O. Dalig (OIC Dalig),
asked5 some of the members of PELA6 to desist from building their houses on the
lot and to vacate the same, unless they are interested to buy it. The informal
settlers thus expressed their interest to buy the lot at P100.00 per square meter,
which Al-Amanah turned down for being far below its asking price. 7 Consequently,
Al-Amanah reiterated its demand to the informal settlers to vacate the
lot.8chanroblesvirtualawlibrary
In a letter9 dated March 18, 1993, the informal settlers together with other
members comprising PELA offered to purchase the lot for P300,000.00, half of
which shall be paid as down payment and the remaining half to be paid within one
year. In the lower portion of the said letter, Al-Amanah made the following
annotation:chanroblesvirtualawlibrary
Note:chanroblesvirtualawlibrary
Subject offer has been acknowledged/received but processing to take effect upon
putting up of the partial amt. of P150,000.00 on or before April 15, 1993.
By May 3, 1993, PELA had deposited P150,000.00 as evidenced by four bank
receipts.10 For the first three receipts, the bank labelled the payments as "Partial
deposit on sale of TCT No. 138914", while it noted the 4th receipt as "Partial/Full
payment on deposit on sale of A/asset TCT No. 138914."
In the meantime, the PELA members remained in the property and introduced
further improvements.
On November 29, 1993, Al-Amanah, thru Davao Branch Manager Abraham D.
Ututalum-Al Haj, wrote then PELA President Bonifacio Cuizon, Sr. informing him of
the Head Office's disapproval of PELA's offer to buy the said 2,000-square meter
lot, viz:chanroblesvirtualawlibrary
Please be inform[ed] that your offer to purchase the lot covered by TCT No. T-
138914, containing an area of 2,000 square meters, located at Bakingan, Barangay
Magtuod, Davao City for P300,000.00 has been turned down by the top
management, due to the reason that your offered price is way below the selling
price of the Bank which is P500.00 per square meter, or negotiate but on Cash
basis only.
You had been told regarding this matter, but you failed to counter offer since you
have [conferred] with the Bank's local management. Despite x x x the time given
to you to counter offer or to vacate the lot presently and illegally occupied by you
and the members of the association, still you refrain to hear our previous notices.
You even deliberately construct more residential structures without our permission.
As such, you are finally instructed to vacate the lot and remove all the house
structures erected on the said lot within 15 days upon receipt of this letter. Failure
on your part including that of the members, the Bank will be constrained to take
legal action against you.
Furthermore, you can withdraw the amount deposited in the name of your
association anytime during banking hours.11chanroblesvirtualawlibrary
Subsequently, Al-Amanah sent similarly worded letters,12 all dated December 14,
1993, to 19 PELA members demanding that they vacate the lot.
In a letter13 dated December 20, 1993, PELA, through Atty. Pedro S. Castillo,
replied that it had already reached an agreement with Al-Amanah regarding the
sale of the subject lot based on their offered price:chanroblesvirtualawlibrary
Dear Mr. Ututalum-Al-Haj,
The People's Landless Association, Inc., through Mr. Bonifacio Cuizon, Sr. has
requested us to assist them in communicating with you anent your letter of 29
November 1993. According to Mr. Cuizon the present occupants of the lot covered
by T.C.T. No. T-138914 with an area of 2,000 square meters, had a definite
agreement with the Islamic Bank through its previous Manager or Officer-in-Charge
to buy this foreclosed property at P300,000.00. As a matter of fact their deposit
ofP150,000.00 was on that basis. For this reason, the occupants, who are members
of the association, have already made lot allocations among themselves and have
improved their respective houses.
It would be most unfair if the Bank would now renege on its commitment and eject
these occupants. In line with the national policy of granting landless members of
our society the opportunity of owning land and providing shelter to their families, it
would be equitable and socially justifiable to grant these occupants their occupied
areas pursuant to the earlier agreement with the Bank.
For the foregoing reasons we hope that the Islamic Bank, for legal, moral and social
grounds would reconsider.
Meanwhile, acting on Robern's undated written offer,14 Al-Amanah issued a
Recommendation Sheet15dated December 27, 1993 addressed to its Board
Operations Committee, indicating therein that Robern is interested to buy the lot
for P400,000.00; that it has already deposited 20% of the offered purchase price;
that it is buying the lot on "as is" basis; and, that it is willing to shoulder the
relocation of all informal settlers therein. On December 29, 1993, the Head Office
informed the Davao Branch Manager that the Board Operations Committee had
accepted Robern's offer.16chanroblesvirtualawlibrary
Eight days later, Robern was informed of the acceptance. Al-Amanah stressed that
it is Robern's responsibility to eject the occupants in the subject lot, if any, as well
as the payment of the remaining amount within 15 days; otherwise,
the P80,000.00 deposit shall be forfeited.17chanroblesvirtualawlibrary
In a letter18 dated January 13, 1994, Robern expressed to Al-Amanah its
uncertainty on the status of the subject lot, viz.:chanroblesvirtualawlibrary
This is in connection with TCT No. 138914 which your bank offered to sell to us and
which we committed to buy.
A group calling itself PEOPLE'S LANDLESS ASSOCIATION, INC. made representation
with our office bringing with them copies of official receipts totalling P150,000.00
issued by your bank which stated---"PARTIAL PAYMENT/DEPOSIT on sale of TCT
#138914".
While condition no. 6 in the sale of property to us states that the buyer shall be
responsible for ejecting the squatters of the property, the occupants of the said lot
could hardly be categorized as squatters considering the supposed transaction
previously entered by your bank with them. We were greatly appalled that we
should learn about this not from the bank but from outside sources.
My company is ready to finalize our transaction provided, however, that the
problem with this group is cleared. In this connection, we are requesting for a
definite statement from your bank on whether the official receipts being brandished
by this group are genuine or not, and if they were, were they ever invalidated by
virtue of the return of their deposit and whether there was a cancellation of your
agreement with them.
In the meantime, please consider the 15-day period for us to pay the amount
of P320,000.00 imposed by your bank suspended until such time that the legal
problem with the lot occupants is settled.
To convince Robern that it has no existing contract with PELA, Al-Amanah furnished
it with copies of the Head Office's rejection letter of PELA's bid, the demand letters
to vacate, and the proof of consignment of PELA's P150,000.00 deposit to the
Regional Trial Court (RTC) of Davao City that PELA refused to
withdraw.19 Thereafter, on February 2, 1994, it informed Robern that should the
latter fail to pay the balance by February 9, 1994, its P80,000.00 deposit will be
forfeited and the lot shall be up for sale to other prospective buyers. Meanwhile, Al-
Amanah requested for assistance for the removal of the houses not only from the
Office of the City Engineer of Davao City21 but also from Mayor Rodrigo Duterte.
Gaining a favorable legal opinion from the City Legal Officer, the matter was
indorsed to the Chief of Demolition Consensus of the Department of Public Services
for action.22chanroblesvirtualawlibrary
On March 4, 1994, Robern paid the balance of the purchase price.23 The Deed of
Sale24 over the realty was executed on April 6, 1994 and TCT No. T-21298325 was
issued in Robern's name the following day.
A week later, PELA consigned P150,000.00 in the RTC of Davao City.26 Then on April
14, 1994, it wrote27 Al-Amanah asking the latter to withdraw the amount
consigned. Part of the letter states:chanroblesvirtualawlibrary
xxx
On March 21, 1994 (almost one month before the April 15, 1994 deadline) we
came to your bank to remit the balance and full payment [for] the abovementioned
lot. [Inasmuch] as you refuse[d] to accept the payment, we have decided to
deposit the amount consigned to your bank.
In our dialogue at your office in 1993, we have agreed that documents will be
processed as soon as we pay the P150,000.00 initial deposit. [Inasmuch] as we
have not only paid the deposit but have also made full payment of the account,
kindly facilitate processing of the documents to finalize transaction.
We have not been remiss in doing our part of the transaction; please do your
share.
Thank you.
Very truly yours,
For the occupants/claimants
T.C.T. No. T-13891428chanroblesvirtualawlibrary
Three months later, as its members were already facing eviction and possible
demolition of their houses, and in order to protect their rights as vendees, PELA
filed a suit for Annulment and Cancellation of Void Deed of Sale 29 against Al-
Amanah, its Director Engr. Farouk Carpizo (Engr. Carpizo), OIC Dalig, Robern, and
Robern's President and General Manager, petitioner Rodolfo Bernardo (Bernardo)
before the RTC of Davao City. It insisted that as early as March 1993 it has a
perfected contract of sale with Al-Amanah. However, in an apparent act of bad faith
and in cahoots with Robern, Al-Amanah proceeded with the sale of the lot despite
the prior sale to PELA.
Incidentally, the trial court granted PELA's prayer for a temporary restraining order.
Subsequently, it issued on August 12, 1994 an Order31 finding merit in the issuance
of the writ of preliminary injunction, inter alia. The RTC's grant of injunctive relief
was affirmed by the CA in CA-G.R. SP No. 3523832 when the factual and legal bases
for its issuance were questioned before the appellate court.
The respondents in the annulment case filed their respective Answers. 33 Al-Amanah
and Engr. Carpizo claimed that the bank has every right to sell its lot to any
interested buyer with the best offer and thus they chose Robern. They clarified that
the P150,000.00 PELA handed to them is not part of the payment but merely a
deposit in connection with its offer. They asserted that PELA was properly apprised
that its offer to buy was subject to the approval of Al-Amanah's Head Office. They
stressed that Al-Amanah never entered into a sale with PELA for there was no
perfected agreement as to the price since the Head Office rejected PELA's offer.
For their part, Robern and Bernardo asserted the corporation's standing as a
purchaser in good faith and for value in the sale of the property, having relied on
the clean title of Al-Amanah. They also alleged that the purported sale to PELA is
violative of the Statute of Frauds34 as there is no written agreement covering the
same.
Ruling of the Regional Trial Court
In its August 10, 1999 Decision,35 the RTC dismissed PELA's Complaint. It opined
that the March 18, 1993 letter PELA has been relying upon as proof of a perfected
contract of sale was a mere offer which was already rejected.
Furthermore, the annotation appearing in the bottom part of the said letter could
not be construed as an acceptance because the same is a mere acknowledgment of
receipt of the letter (not the offer) which will still be subject to processing. The RTC
likewise ruled that being a corporation, only Al-Amanah's board of directors can
bind the bank with third persons involving the sale of its property. Thus, the
purported offer made by Al-Amanah's OIC, who was never conferred authority by
the board of directors to sell the lot, cannot bind the bank. In contrast, when the
Head Office accepted Robern's offered price, it was duly approved by the board of
directors, giving birth to a perfected contract of sale between Al-Amanah and
Robern.
Refusing to accept the Decision, PELA elevated its case to the
CA.36chanroblesvirtualawlibrary
Ruling of the Court of Appeals
Reversing the RTC in its assailed Decision37 of August 16, 2005, the CA ruled that
there was already a perfected contract of sale between PELA and Al-Amanah. It
held that the annotationon the lower portion of the March 18, 1993 letter could be
construed to mean that for Al-Amanah to accept PELA's offer, the sum
of P150,000.00 must be first put up. The CA also observed that the subsequent
receipt by Al-Amanah of the amounts totalling P150,000.00, and the annotation of
"deposit on sale of TCT No. 138914," on the receipts it issued explicitly indicated an
acceptance of the association's offer to buy. Consequently, the CA invalidated the
sale between Robern and Al-Amanah.
The CA also concluded that Al-Amanah is guilty of bad faith in dealing with PELA
because it took Al-Amanah almost seven months to reject PELA's offer while
holding on to the P150,000.00 deposit. The CA thus adjudged PELA entitled to
moral and exemplary damages as well as attorney's fees.
The dispositive portion of the CA Decision reads:chanroblesvirtualawlibrary
WHEREFORE, premises considered, the assailed Decision is SET ASIDE. Judgment
is hereby rendered:chanroblesvirtualawlibrary
1. DECLARING the contract of sale between PELA and defendant Bank valid and
subsisting.
2. ORDERING the defendant Bank to receive the balance of P150,000.00 of the
purchase price from PELA as consigned in court.
3. DECLARING the deed of sale executed by defendant Bank in favor or Robern
Development Corporation as invalid and, therefore, void.
4. ORDERING defendant Bank to return to Robern the full amount of P400,000.00
which Robern paid as the purchase price of the subject property within ten (10)
days from finality of this decision. It shall earn a legal interest of twelve percent
(12%) per annum from the tenth (10th) day aforementioned if there is delay in
payment.
5. ORDERING Robern Development Corporation to reconvey the land covered by
T.C.T. No. 212983 in favor of People's Landless Association within a similar period of
ten (10) days from finality of this decision.
6. ORDERING defendant Bank to pay plaintiffs-appellants the
following:chanroblesvirtualawlibrary
a. The sum of P100,000.00 as moral damages;cralawlibrary
b. The sum of P30,000.00 as exemplary damages;cralawlibrary
c. The sum of P30,000.00 as attorney's fees;cralawlibrary
d. A legal interest of SIX PERCENT (6%) per annum on the sums awarded in (a),
(b), and (c) from the date of this Decision up to the time of full payment thereof.
SO ORDERED.38chanroblesvirtualawlibrary
Robern and Bernardo filed a Motion for Reconsideration39 which Al-Amanah
adopted. The CA, however, was firm in its disposition and thus denied 40 the same.
Aggrieved, Robern and Al-Amanah separately filed Petitions for Review
on Certiorari before us. However, Al-Amanah's Petition docketed as G.R. NO.
173437, was denied on September 27, 2006 on procedural grounds.41 Al-Amanah's
Motion for Reconsideration of the said Resolution of dismissal was denied with
finality on December 4, 2006.42chanroblesvirtualawlibrary
Hence, only the Petition of Robern and Bernardo subsists.
Petitioners' Arguments
Petitioners stress that there was no sale between PELA and Al-Amanah, for neither
a deed nor any written agreement was executed. They aver that Dalig was a mere
OIC of Al-Amanah's Davao Branch, who was never vested with authority by the
board of directors of Al-Amanah to sell the lot. With regard to the notation on the
March 18, 1993 letter and the four bank receipts, Robern contends that these are
only in connection with PELA's offer.
Petitioners likewise contend that Robern is a purchaser in good faith. The PELA
members are mere informal settlers. The title to the lot was clean on its face, and
at the time Al-Amanah accepted Robern's offer, the latter was unaware of the
alleged transaction with PELA. And when PELA later represented to Robern that it
entered into a transaction with Al-Amanah regarding the subject lot, Robern even
wrote Al-Amanah to inquire about PELA's claim over the property. And when
informed by Al-Amanah that it rejected the offer of PELA and of its action of
requesting assistance from the local government to remove the occupants from the
subject property, only then did Robern push through with the sale.
Respondent's Arguments
PELA, on the other hand, claims that petitioners are not the proper parties who can
assail the contract of sale between it and the bank. It likewise argues that the
Petition should be dismissed because the petitioners failed to attach the material
portions of the records that would support its allegations, as required by Section 4,
Rule 45 of the Rules of Court.43chanroblesvirtualawlibrary
Aside from echoing the finding of the CA that Al-Amanah has a perfected contract
of sale with PELA, the latter further invokes the reasoning of the RTC and the CA
(CA-G.R. SP No. 35238) in finding merit in the issuance of the writ of preliminary
injunction, that is, that there was an apparent perfection of contract (of sale)
between the Bank and PELA. 44 Furthermore, PELA claims that Al-Amanah accepted
its offered price and the P150,000.00, thus barring the application of the Statute of
Frauds as the contract was already partially executed. As to the non-existence of a
written contract evidencing the same, PELA ascribes fault on the bank claiming that
nothing happened despite its repeated follow-ups for the OIC of Al-Amanah to
execute the deed after payment of the P150,000.00 in May 1993.
Issue
At issue before us is whether there was a perfected contract of sale between PELA
and Al-Amanah, the resolution of which will decide whether the sale of the lot to
Robern should be sustained or not.
Our Ruling
We shall first briefly address some matters raised by PELA.
PELA's contention that Robern cannot assail the alleged sale between PELA and Al-
Amanah is untenable. Robern is one of the parties who claim title to the disputed
lot. As such, it is a real party in interest since it stands to be benefited or injured by
the judgment.45chanroblesvirtualawlibrary
Petitioners' failure to attach the material portions of the record that would support
the allegations in the Petition is not fatal. We ruled in F.A.T. Kee Computer Systems,
Inc. v. Online Networks International, Inc.,46 thus:chanroblesvirtualawlibrary
x x x However, such a requirement failure to attach material portions of the record
was not meant to be an ironclad rule such that the failure to follow the same would
merit the outright dismissal of the petition. In accordance with Section 7 of Rule
45, the Supreme Court may require or allow the filing of such pleadings, briefs,
memoranda or documents as it may deem necessary within such periods and under
such conditions as it may consider appropriate. More importantly, Section 8 of Rule
45 declares that [i]f the petition is given due course, the Supreme Court may
require the elevation of the complete record of the case or specified parts thereof
within fifteen (15) days from notice. x x x47chanroblesvirtualawlibrary
Anent the statement of the courts below that there was an apparent perfection of
contract (of sale) between Al-Amanah and PELA , we hold that the same is strictly
confined to the resolution of whether a writ of preliminary injunction should issue
since the PELA members were then about to be evicted. PELA should not rely on
such statement as the same is not decisive of the rights of the parties and the
merits of this case.
We shall now delve into the crucial issue of whether there was a perfected contract
of sale between PELA and Al-Amanah.
Essential Elements of a Contract of Sale
A contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price.48 Thus, for a contract
of sale to be valid, all of the following essential elements must concur: "a) consent
or meeting of the minds; b) determinate subject matter; and c) price certain in
money or its equivalent."49chanroblesvirtualawlibrary
In the case at bench, there is no controversy anent the determinate subject matter,
i.e., the 2,000-square meter lot. This leaves us to resolve whether there was a
concurrence of the remaining elements.
As for the price, fixing it can never be left to the decision of only one of the
contracting parties.50 "But a price fixed by one of the contracting parties, if
accepted by the other, gives rise to a perfected sale." 51chanroblesvirtualawlibrary
As regards consent, "when there is merely an offer by one party without
acceptance of the other, there is no contract."52 The decision to accept a bidder's
proposal must be communicated to the bidder.53However, a binding contract may
exist between the parties whose minds have met, although they did not affix their
signatures to any written document,54 as acceptance may be expressed or
implied.55 It "can be inferred from the contemporaneous and subsequent acts of the
contracting parties."56 Thus, we held:chanroblesvirtualawlibrary
x x x The rule is that except where a formal acceptance is so required, although the
acceptance must be affirmatively and clearly made and must be evidenced by some
acts or conduct communicated to the offeror, it may be made either in a formal or
an informal manner, and may be shown by acts, conduct, or words of the accepting
party that clearly manifest a present intention or determination to accept the offer
to buy or sell. Thus, acceptance may be shown by the acts, conduct, or words of a
party recognizing the existence of the contract of sale.57chanroblesvirtualawlibrary
There is no perfected contract of sale between PELA and Al-Amanah for want of
consent and agreement on the price.
After scrutinizing the testimonial and documentary evidence in the records of the
case, we find no proof of a perfected contract of sale between Al-Amanah and
PELA. The parties did not agree on the price and no consent was given, whether
express or implied.
When PELA Secretary Florida Ramos (Ramos) testified, she referred to the March
18, 1993 letter which PELA sent to Al-Amanah as the document supposedly
embodying the perfected contract of sale.58However, we find that the March 18,
1993 letter referred to was merely an offer to buy, viz:chanroblesvirtualawlibrary
March 18, 1993
The Manager
Islamic Bank
Davao Branch
Davao City
Sir/Madam:chanroblesvirtualawlibrary
This has reference to the offer made by Messrs. Alejandro Padilla, Leonardo Labora,
Boy Bartiana, Francisco Paig, and Mr. Asterio Aki for the purchase of the acquired
asset of the bank with an area of 2,000 square meters and covered by T.C.T. No. T-
138914, portions of which are occupied by their houses. These occupants have
formed and registered a group of x x x landless families who have occupied
shoulders of National Highways, to be able to raise an amount that would meet the
approval of the Bank as the consideration for the purchase of the property. The
group which is known as PELA or People's Landless Association, is offering the bank
the amount of THREE HUNDRED THOUSAND PESOS (P300,000.00) for the whole
2,000 sq. meters. Of this amount the buyers will pay a down payment of ONE
HUNDRED FIFTY THOUSAND PESOS (P150,000.00) and the balance payable in one
(1) year.
According to the plan of PELA, about 24 landless families can be accommodated in
the property. We hope the Bank can help these families own even a small plot for
their shelter. This would be in line with the government's program of housing which
the present administration promised to put in high gear this year.59 (Emphasis
supplied)
Neither can the note written by the bank that "subject offer has been
acknowledged/received but processing to take effect upon putting up of the partial
amount of P150,000.00 on or before April 15, 1993" be construed as acceptance of
PELA's offer to buy. Taken at face value, the annotation simply means that the bank
merely acknowledged receipt of PELA's letter-offer. Furthermore, by processing, Al-
Amanah only meant that it will act on the offer , i.e., it still has to evaluate whether
PELA's offer is acceptable. Until and unless Al-Amanah accepts, there is as yet no
perfected contract of sale. Notably here, the bank never signified its approval or
acceptance of the offer.
We cannot agree with the CA's ratiocination that receipt of the amount, coupled
with the phrase written on the four receipts as "deposit on sale of TCT No.
138914," signified a tacit acceptance by Al-Amanah of PELA's offer. For sure, the
money PELA gave was not in the concept of an earnest money. Besides, as testified
to by then OIC Dalig, it is the usual practice of Al-Amanah to require submission of
a bid deposit which is acknowledged by way of bank receipts before it entertains
offers. Thus:chanroblesvirtualawlibrary
Atty. Bolcan:chanroblesvirtualawlibrary
Now, as far as you can remember, these receipts state that these are partial
deposits, what do you mean by that?
WITNESS:chanroblesvirtualawlibrary
A: x x x, we normally request an offeror to submit or make deposit, actually the
bank does not entertain any offer without any deposit and just like that, during my
time x x x in buying the property for those interested the bank does not entertain
any offer unless they make a deposit.
xxx
Q: Why do you issue receipts as officer-in-charge stating only partial deposits?
A: Because there was no sale, there was no consu[m]mated sale, so any amount
which you will give as a deposit will be accepted by the bank for the offer and that
if their offer will be disapproved we will return the deposit because their offer was
very low and this might be disapproved by the head office in
Manila.60chanroblesvirtualawlibrary
xxx
Atty. Taasan:chanroblesvirtualawlibrary
Do you confirm that based on the interest of the plaintiff to acquire the property
they made a deposit with said bank, as evidenced by the receipts that were shown
to you by your counsel, correct?
A: Yes, sir.
Q: And according to you, the bank does not entertain any offer to buy the property
without deposits?
A: Yes, sir.
Q: In this case since the plaintiffs made a deposit x x x they were properly
entertained, correct?
A: Yes because it is under negotiation, now while their offer price is below the
selling price of the bank.61chanroblesvirtualawlibrary
The absence of a perfected contract of sale was further buttressed by the testimony
of PELA Secretary Ramos on cross examination, viz:chanroblesvirtualawlibrary
Atty. Rabor:chanroblesvirtualawlibrary
Since it was x x x hard earned money you did not require the Amanah Bank when
you gave thatP150,000.00 to reduce your agreement into writing regarding the
sale of this property?
A: I insisted but she will not issue that.62chanroblesvirtualawlibrary
xxx
Atty. Bolcan:chanroblesvirtualawlibrary
Now, on April 15, 1993 when the deposit was made, you were present?
A: Yes, sir.
Q: Now, after making the deposit of One Hundred Fifty Thousand (P150,000.00)
Pesos on April 15, 1993 did you not request for the bank to execute a document to
prove that actually you are buying the property?
A: I even said to the OIC or the manager that ma am, now that you have received
our money, where is our paper that we were the ones to buy that property, sir.
Q: To whom are you referring to?
A: Febe Dalig, the OIC, sir.
Q: And this OIC Febe Dalig informed you that the Offer on your part to buy the
property is subject for approval by the head office in Manila, is that correct?
A: Yes she told me that it would be subject to approval in Manila x x x.
Q: And later on you were informed by the bank that your offer was not accepted by
the head office in Manila, is that correct?
A: She did not inform us but we kept on following it up with their office and she
told us that it did not arrive yet, sir.63 (Emphasis supplied)
PELA Secretary Ramos' testimony thus corroborated OIC Dalig's consistent stand
that it is the Head Office which will decide whether Al-Amanah would accept PELA's
offer:chanroblesvirtualawlibrary
Atty. Bolcan:chanroblesvirtualawlibrary
And now, if there are interested persons making offer x x x what would you do?
A: Well, we have to screen the offer before we forward the offer to Manila for
approval because
Court:chanroblesvirtualawlibrary
What would you do before you forward that to Manila?
A: We will be screening the offer x x x.
Atty. Bolcan:chanroblesvirtualawlibrary
And you said that it is referred to Manila?
A: Yes, sir.
Q: Who will eventually approve the offer made by the interested persons to buy the
property?
A: We have a committee in Manila to approve the sale of the property.
Q: Do you have any idea who will approve the offer of the property?
A: I have no idea but the president, rather it consists of the president I think and
then signed also by the vice-president and some officers in the office, sir.
xxx
Q: Now, in case of offers of the property of the bank, x x x the officer-in-charge of
the bank, Al-Amanah Bank branch, usually refers this matter to the head office in
Manila?
A: Yes, sir.
Q: And it is the head office that will decide whether the offer will be approved or
not?
A: Yes as head of the branch, we have to forward the offer whether it was
acceptable or not.64chanroblesvirtualawlibrary
It is thus undisputed, and PELA even acknowledges, that OIC Dalig made it clear
that the acceptance of the offer, notwithstanding the deposit, is subject to the
approval of the Head Office. Recognizing the corporate nature of the bank and that
the power to sell its real properties is lodged in the higher authorities, 65 she never
falsely represented to the bidders that she has authority to sell the bank's property.
And regardless of PELA's insistence that she execute a written agreement of the
sale, she refused and told PELA to wait for the decision of the Head Office, making
it clear that she has no authority to execute any deed of sale.
Contracts undergo three stages: "a) negotiation which begins from the time the
prospective contracting parties indicate interest in the contract and ends at the
moment of their agreement[; b) perfection or birth, x x x which takes place when
the parties agree upon all the essential elements of the contract x x x; and c)
consummation, which occurs when the parties fulfill or perform the terms agreed
upon, culminating in the extinguishment thereof." 66chanroblesvirtualawlibrary
In the case at bench, the transaction between Al-Amanah and PELA remained in
the negotiation stage. The offer never materialized into a perfected sale, for no oral
or documentary evidence categorically proves that Al-Amanah expressed
amenability to the offered P300,000.00 purchase price. Before the lapse of the 1-
year period PELA had set to pay the remaining balance, Al-Amanah expressly
rejected its offered purchase price, although it took the latter around seven months
to inform the former and this entitled PELA to award of damages.67 Al-Amanah's act
of selling the lot to another buyer is the final nail in the coffin of the negotiation
with PELA. Clearly, there is no double sale, thus, we find no reason to disturb the
consummated sale between Al-Amanah and Robern.
At this juncture, it is well to stress that Al-Amanah's Petition before this Court
docketed as G.R. NO. 173437 was already denied with finality on December 4,
2006. Hence, we see no reason to disturb paragraph 6 of the CA's Decision
ordering Al-Amanah to pay damages to PELA.
WHEREFORE, we PARTIALLY GRANT the Petition. Except for paragraph 6 of the
Court of Appeals Decision which had already been long settled, 68 the rest of the
judgment in the assailed August 16, 2005 Decision and May 30, 2006 Resolution of
the Court of Appeals in CA-G.R. NO. CV No. 66071 are hereby ANNULLED and SET
ASIDE. The August 10, 1999 Decision of the Regional Trial Court of Davao City,
Branch 12, dismissing the Complaint for Annulment and Cancellation of Void Deed
of Sale filed by respondent People's Landless Association is REINSTATED and
AFFIRMED. The amount of Pesos: Three Hundred Thousand (P300,000.00)
consigned with the Regional Trial Court of Davao City may now be withdrawn by
People's Landless Association.
SO ORDERED.
FIRST DIVISION
[G.R. No. L-36821. June 22, 1978.]
JOSE P. DIZON, Petitioner, v. ALFREDO G. GABORRO (Substituted by
PACITA DE GUZMAN GABORRO as Judicial Administratrix of the Estate of
Alfredo G. Gaborro) and the DEVELOPMENT BANK OF THE
PHILIPPINES, Respondents.
Leonardo Abola for Petitioner.
Carlos J . Antiporda for Respondents.
SYNOPSIS
After his properties were extrajudicially foreclosed but before the expiration of the
redemption period, petitioner executed a "Deed of Sale with Assumption of
Mortgage" in favor of private respondent, who in turn executed on the same day an
"Option to Purchase Real Estate" in favor of petitioner. Thereafter, private
respondent made several payments to the mortgagee, took possession of,
cultivated, and paid taxes, on the land.
Two years later, petitioner offered to reimburse what private respondent had paid
to the mortgagee, and demanded an accounting. When private respondent
dishonored the request, petitioner sued the former for accounting, alleging that the
two deeds did not express their true intent, the transaction being one of an
equitable mortgage and not an absolute sale.
The trial court ordered the instruments reformed in the sense that the true
agreement is one whereby private respondent, in consideration of the use of
petitioners properties, would assume the latters debts. The Court of Appeals
affirmed the decision, with the modification that petitioner "has the right to
reimburse" respondent at 8% per annum, which right shall be exercised within one
year from the finality of decision.
The Supreme Court affirmed the decision of the Court of Appeals, holding that after
foreclosure, the only right that the mortgagee may transfer is that of redemption;
that the disputed agreement is one of innominate contracts, under Article 1307 of
the Civil Code, partaking of antichresis; and that the agreement may be reformed
pursuant to Articles 1359 and 1361 of the Civil Code, because a mutual mistake of
the parties caused the failure of the instrument to disclose their true agreement.
SYLLABUS
1. CONTRACTS; FORECLOSURE SALE; REFORMATION OF INSTRUMENTS;
NECESSITY TO DETERMINE LEGALITY OF THE RIGHTS AND OBLIGATIONS
STIPULATED. Where the "Deed of Sale with Assumption of Mortgage" and
"Option to Purchase Real Estate" stipulate rights and obligations between the
parties thereto pertaining to and involving parcels of land that had already been
foreclosed and sold extrajudicially, and purchased by the mortgage creditor, it
 becomes necessary to determine the legality of said rights and obligations arising
from the foreclosure and sale proceedings not only between the two contracting
parties to the instruments executed between them but also insofar as the
agreement affects the rights of third parties.
2. ID.; ID.; REDEMPTION; DEBTOR MAY REDEEM PROPERTY WITHIN ONE YEAR.
Under Section 6 of Act 3135, as amended by Act 4118, the judgment debtor may
redeem the property extrajudicially sold within one year from and after the date of
the foreclosure sale.
3. ID.; ID.; ID.; RIGHTS OF JUDGMENT DEBTOR. Under Section 33, Rule 39,
Revised Rules of Court, the judgment debtor in possession of the property
foreclosed and sold is entitled to remain therein during the period of redemption,
shall receive its fruits and may transfer his right of redemption to any one whom he
may desire. This is so because the purchaser who has an inchoate right over the
property during the redemption period is not entitled to such possession.
4. ID.; ID.; RIGHT OF REDEMPTION, TRANSFERABLE. The right to redeem land
sold under execution within 12 months is a property right and may sold voluntarily
by its owner and may also be attached and sold under execution.
5. ID.; ID.; PURCHASER; RIGHTS OF PURCHASER AT AN AUCTION SALE. Upon
foreclosure and sale, the purchaser is entitled to a certificate of sale executed by
the sheriff. (Section 27, Revised Rules of Court) After the termination of the period
of redemption and no redemption having been made, the purchaser is entitled to a
deed of conveyance and to the possession of the properties. (Section 35, Revised
Rules of Court). The weight of authority is to the effect that the purchaser of land
sold at public auction under a writ of execution only has an inchoate right in the
property, subject to be defeated and terminated within the period of 12 months
from the date of sale, by a redemption on the part of the owner.
6. ID.; ID.; MORTGAGOR CANNOT SELL PROPERTY SOLD EXTRAJUDICIALLY.
After the extrajudicial foreclosure and a sale, the mortgagor retains the right to
redeem the lands, the possession, use and enjoyment of the same during the
period of redemption. And these are the only rights that the mortgagor could
legally transfer, cede and convey under an instrument captioned "Deed of Sale with
Assumption of Mortgage" and likewise the same rights that said transferee could
acquire in consideration of the latters promise to pay and assume the loans of the
mortgagor with the mortgagee.
7. ID.; ID.; ID.; TRANSFEREE OF PROPERTY ALREADY SOLD EXTRAJUDICIALLY
ACQUIRES MERELY THE LIMITED RIGHTS OF JUDGMENT DEBTOR. Where the
mortgagors properties had been extrajudicially sold and the mortgagor
subsequently conveys the property by way of "Deed of Sale with Assumption of
Mortgage", the transferee did not thereby purchase or acquire the full title and
ownership of the properties, but only certain limited rights or interests such as the
right of redemption. Consequently, the transferee of these certain limited rights or
interests, cannot grant more than said rights to the transferor, such as the option
to purchase the lands. The only legal effect of the option deed is to grant the
transferor the right to recover the properties upon reimbursing the transferee of
the total sums of money that the latter may have paid to the mortgagee on
account of the mortgage debts.
8. ID.; ANTICHRESIS; AN AGREEMENT "TO GIVE AND TO DO" IS CLASSIFIED AS
ONE OF THE INNOMINATE CONTRACTS UNDER ARTICLE 1307 OF THE NEW CIVIL
CODE. Where the true intention of the parties as found by the trial and appellate
courts was for the transferee to assume the mortgage debts of the mortgagor and
in consideration thereof the transferee was given possession, enjoyment and use of
the lands until the mortgagor can reimburse fully the transferee the amounts paid
by the latter to the mortgagee, to accomplish the following ends: (a) payment of
the bank obligations; (b) make the lands productive for the benefits of the
possessor; (c) assure the return of the land to the original owner, thus rendering
equity and fairness to all parties, the Supreme Court held that he agreement
between the mortgagor and transferee is one of those innominate contracts under
Article 1307 of the new Civil Code whereby the mortgagor and transferee agreed
"to give and to do" certain rights and obligations respecting the lands and the
mortgage debts of mortgagor which would be acceptable to the mortgagee, but
partaking of the nature of antichresis insofar as the principal parties, mortgagor
and transferee are concerned.
9. ID.; ID.; ID.;MISTAKE; MISTAKE GROUND FOR REFORMATION OF DOCUMENT.
Mistake is a ground for the reformation of an instrument when, there having been a
meeting of the minds of the parties to a contract, their true intention is not
expressed in the instrument purporting to embody the agreement, and one of the
parties may ask for such reformation to the end that such true intention may be
expressed. (Art. 1359, New Civil code). When a mutual mistake of the parties
causes the failure of the instrument to disclose their real agreement, said
instrument may be reformed. (Art. 1361, New Civil Code.) Since it was a mistake
for the parties to execute the Deed of Sale With Assumption of Mortgage and the
Option to Purchase Real Estate and stand on the literal meaning of the terms and
stipulations used therein the instruments must, therefore be reformed in
accordance with the intention and legal rights and obligations of the parties.
10. ID.; ID.; REFORMATION OF INSTRUMENTS; FRUITS RECEIVED BY PURCHASER
OFFSET BY TAXES AND INTERESTS PAID BY HIM. Where a contract of absolute
sale of real properties had been ordered reformed in the sense that it is one
whereby the supposed buyer, in consideration of the use and enjoyment of the
property of the owner, would assume and pay the latters debts, and judgment is
rendered whereby the owner is allowed to reacquire the property upon
reimbursement of the amounts paid by the buyer to the owners creditors, the
buyer need not account for the fruits, harvests, and other income received by him
while the properties had been in his (buyers) possession, the same being offset by
the taxes and interests on the owners indebtedness that have accrued and paid by
the buyer.
11. ID.; EXTENSION OF PERIOD TO EXERCISE OPTION EXTENDED ON EQUITABLE
GROUNDS. Where the period within which a contracting party must exercise the
option to purchase property had expired by reasons and circumstances beyond his
control, the court may fix a reasonable time within which to exercise the same. A
period of one year from the date of finality of judgment would be a reasonable
period to exercise such right.
DECISION
 GUERRERO, J.: P31,459.21, which amount covered the loan, interest and expenses, and the
corresponding "Certificate of Sale," (Exhibit A-2, Exhibit 1-b) was executed in favor
of the said bank. On November 12, 1959, Dizon himself executed the deed of sale
(Exhibit A-1-a) over the properties in favor of the DBP which deed was recorded in
the Office of the Register of Deeds on October 6, 1960.
Petition for review on certiorari of the decision of the Court of Appeals 1 in CA-G.R.
Sometime prior to October 6, 1959 Alfredo G. Gaborro and Jose P. Dizon met.
No. 46975-R entitled "Jose P. Dizon, Plaintiff-Appellant, versus Alfredo G. Gaborro
Gaborro became interested in the lands of Dizon. Dizon originally intended to lease
(substituted by Pacita de Guzman Gaborro as Judicial Administratrix of the Estate
to Gaborro the property which had been lying idle for some time. But as the
of Alfredo G. Gaborro) and the Development Bank of the Philippines, Defendants-
mortgage was already foreclosed by the DBP and the bank in fact purchased the
Appellees," affirming with modification the decision of the Court of First Instance of
lands at the foreclosure sale on May 26, 1959, they abandoned the projected lease.
Pampanga, Branch II in Civil Case No. 2184.
They then entered into the following contract on October 6, 1959 captioned and
quoted, to wit:chanrob1es virtual 1aw library
The dispositive portion of the decision sought to be reviewed
reads:jgc:chanrobles.com.ph
DEED OF SALE WITH ASSUMPTION
"IN VIEW OF THE FOREGOING, the judgment appealed therefrom is hereby
OF MORTGAGE
affirmed with modification that the plaintiff-appellant has the right to refund or
reimburse the defendant appellees the sum of P131,831.91 with interest at 8% per
KNOW ALL MEN BY THESE PRESENTS:chanrob1es virtual 1aw library
annum from October 6, 1959 until full payment, said right to be exercised within
one year from the date this judgment becomes final, with the understanding that, if
This DEED OF SALE WITH ASSUMPTION OF MORTGAGE, made and executed at the
he fails to do so within the said period, then he is deemed to have lost his right
City of Manila, Philippines, on this 6th day of October, 1959 by and between
over the lands forever. With costs against the appellant." 2
JOSE P. DIZON, of legal age, Filipino, married to Norberta Torres, with residence
MODIFIED.
and postal address at Mabalacat, Pampanga. hereinafter referred to as the
VENDOR,
The basic issue to be resolved in this case is whether the "Deed of Sale with
Assumption of Mortgage" and the "Option to Purchase Real Estate", two
ALFREDO G. GABORRO, likewise of legal age, Filipino, married to Pacita de
instruments executed by and between petitioner Jose P. Dizon and Alfredo G.
Guzman, with residence and postal address at 46, 7th St., Gilmore Avenue, Quezon
Gaborro (defendant below) on the same day, October 6, 1969 constitute in truth
City, hereinafter referred to as the VENDEE,
and in fact an absolute sale of the three parcels of land therein described or merely
an equitable mortgage or conveyance thereof by way of security for
W I T N E S S E T H: That
reimbursement, refund or repayment by petitioner Jose P. Dizon of any and all
sums which may have been paid to the Development Bank of the Philippines and
WHEREAS, the VENDOR is the registered owner of three (.!3) parcels of land
the Philippine National Bank by Alfredo G. Gaborro (later substituted herein by his
covered by Transfer Certificate of Title No. 15679 of the land records of Pampanga,
wife Pacita de Guzman Gaborro as administratrix of the estate of Alfredo G.
situated in the Municipality of Mabalacat, Province of Pampanga, and more
Gaborro) who had died during the pendency of the case.chanrobles law library
particularly described and bounded as follows:chanrob1es virtual 1aw library
A supplementary issue raised is whether or not Gaborro or the respondent
1. A parcel of land (Lot No. 188 of the Cadastral Survey of Mabalacat), with the
administratrix of the estate should account for all the fruits produced and income
improvements thereon, situated in the Municipality of Mabalacat. Bounded on the
received by them from the lands mentioned and described in the aforesaid "Deed of
NE., by Lot No. 187; on the SE., by Lots Nos. 183, 189, 191 and 192; on the SW.
Sale with Assumption of Mortgage."cralaw virtua1aw library
by Lot No. 192 and on the NW., by the unimproved provincial road to Magalang
Containing an area of TWO HUNDRED AND TWENTY ONE THOUSAND ONE
The antecedent facts established in the record are not disputed. Petitioner Jose P.
HUNDRED SEVENTY TWO SQUARE METERS (221,172),more or less.
Dizon was the owner of the three (3) parcels of land, subject matter of this
litigation, situated in Mabalacat, Pampanga with an aggregate area of 130.58
2. A parcel of land (Lot No. 193 of the Cadastral Survey of Mabalacat), with the
hectares, as evidenced by Transfer Certificate of Title No. 15679. He constituted a
improvements thereon, situated in the Municipality of Mabalacat. Bounded on the
first mortgage lien in favor of the Development Bank of the Philippines in order to
NE. by a road and Lots Nos. 569, 570 and 571; on the SE., by Lot No. 571 and the
secure a loan in the sum of P38,000.00 and a second mortgage lien in favor of the
unimproved road to Magalang; on the SW., by a road and on the NE., by a road and
Philippine National Bank to secure his indebtedness to said bank in the amount of
the Sapang Pritil. Containing an area of NINE HUNDRED SEVENTY EIGHT
P93,831.91.
THOUSAND SEVEN HUNDRED AND SEVENTEEN SQUARE METERS (978,717), more
or less.
Petitioner Dizon having defaulted in the payment of his debt, the Development
Bank of the Philippines foreclosed the mortgage extrajudicially pursuant to the
3. A parcel of land (Lot No. 568 of the Cadastral Survey of Mabalacat), with the
provisions of Act No. 3135. On May 26, 1959, the lands were sold to the DBP for
improvements thereon, situated in the Municipality of Mabalacat. Bounded on the
NE., by Lot No. 570, on the SE., SW and NW by roads. Containing an area of ONE
HUNDRED FIVE THOUSAND NINE HUNDRED AND TWENTY ONE SQUARE METERS
(105,921), more or less.
WHEREAS, the above-described properties are presently mortgaged (first
mortgage) to the Development Bank of the Philippines (formerly Rehabilitation
Finance Corporation) to secure the payment of a loan, plus interest, of THIRTY
EIGHT THOUSAND PESOS ONLY (38,000.00), Philippine currency, as evidenced by a
deed of mortgage for P. . . . .dated . . . . . . . . ., which deed was ratified and
acknowledged before Notary Public of Manila, Mr. . . . .as Doc. No....; Page
No. . . . .; Reg. No. . . . .Series of 196. . . . .;
WHEREAS, the aforesaid properties are likewise mortgage (second mortgage) to
the Philippine National Bank to secure the payment of a loan of NINETY THREE
THOUSAND EIGHT HUNDRED THIRTY ONE PESOS & 91/100 (93,331.91), Philippine
Currency, plus interest up to August 13, 1957, as evidenced by deed of Mortgage
for P. . . . . dated. . . . . . . .which deed was ratified and acknowledged before
Notary Public of Manila, Mr. . . . ., as Doc. No. . . . ., Page No. . . ., Reg. No. . . .
Series of 196. . . .;
WHEREAS, the VENDOR, has offered to sell and the VENDEE is willing to purchase
the above-described properties for ONE HUNDRED THIRTY ONE THOUSAND EIGHT
HUNDRED THIRTY ONE PESOS & 91/100 (131,831.91), Philippine Currency, under
the terms and conditions herein below set forth;
NOW, THEREFORE, for and in consideration of the above premises and the amount
of ONE HUNDRED THIRTY ONE THOUSAND EIGHT HUNDRED THIRTY ONE PESOS &
91/100 (P131,831.91), Philippine Currency, in hand paid in cash by the VENDEE
unto the VENDOR, receipt whereof is hereby acknowledged by the VENDOR to his
entire and full satisfaction, and the assumption by the VENDEE of the entire
mortgage indebtedness, both with the Development Bank of the Philippines and the
Philippine National Bank above mentioned, the VENDOR does by these presents,
sell, transfer and convey, as he had sold, transferred, and conveyed, by way of
absolute sale, perpetually and forever, unto the VENDEE, his heirs, successors and
assigns, above described properties, with all the improvements thereon, free from
all liens and encumbrances of whatever nature, except the pre-existing mortgage
obligations with the Development Bank of the Philippines and the Philippine
National Bank aforementioned. The VENDOR does hereby warrant title, ownership
and possession over the properties herein sold and conveyed, and binds himself to
defend the same from any and all claimants.
That the VENDEE, does by these presents, assume as he has assumed, under the
same terms and conditions of the mortgage contracts dated . . . . . . . . . . .and . . .
. . . . . . . . ., of the mortgage indebtedness of the VENDOR in favor of the
Development Bank of the Philippines and the Philippine National Bank, respectively,
as if the aforesaid documents were personally executed by the VENDEE and states
and reiterates all the terms and conditions stipulated in said both documents,
making them to all intents and purposes, parts hereof by reference.
IN WITNESS WHEREOF, the VENDOR and the VENDEE, together with their
instrumental witnesses, have signed this deed of the place, date, month and year
first above written.
(Sgd.) JOSE P. DIZON (Sgd.) ALFREDO G. GABORRO
Vendor Vendee
Signed in the Presence of:chanrob1es virtual 1aw library
(Sgd.) (Illegible) (Sgd.) (Illegible)
(Acknowledgment Omitted)
The second contract executed the same day, October 6, 1959 is called option to
Purchase Real Estate, and is in the following wise and manner:chanrob1es virtual
1aw library
OPTION TO PURCHASE REAL ESTATE
KNOW ALL MEN BY THESE PRESENTS:chanrob1es virtual 1aw library
That I, ALFREDO G. GABORRO, of legal age, Filipino, married to Pacita de Guzman,
with residence and postal address at 46, 7th St., Gilmore Ave., Quezon City, for
valuable consideration, do hereby give to JOSE P. DIZON, of legal age, Filipino,
married to Norberta Torres, resident of Mabalacat, Pampanga, his heirs, successors
and assigns, the option of repurchasing the following described properties:.
TRANSFER CERTIFICATE OF TITLE
NO. 15679 PROVINCE OF PAMPANGA
1. A parcel of land (Lot No. 188 of Cadastral Survey of Mabalacat, Pamp.),
containing an area of (211,172) more or less.
2. A parcel of land (Lot No. 193 of the Cadastral Survey of Mabalacat, Pampanga),
containing an area of (978,172) more or less.
3. A parcel of land (Lot No. 568 of the Cadastral Survey of Mabalacat, Pamp.),
containing an area of (105, 921), more or less.
which I acquired from the said Jose P. Dizon by purchase by virtue of that
document entitled Deed of Sale with Assumption of Mortgage dated October 6,
1959, acknowledged by both of us before Notary Public of Manila GREGORIO
SUMBILIO as Doc. No. 342, Page No. 70, Reg. No. VII Series of 1959.
Said option shall be valid and effective within the period comprised from January,
1965 to December 31, 1970, inclusive, upon payment of the amount of ONE
HUNDRED THIRTY ONE THOUSAND EIGHT HUNDRED THIRTY ONE PESOS & 91/100
P131,831.91), Philippine Currency, plus an interest of eight per centum (8%)
thereof, per annum. This is without prejudice at any time to the payment by Mr.
Dizon of any partial amount to be applied to the principal obligation, without any
way disturbing the possession and/or ownership of the above properties since only
full payment can effect the necessary change.
In the event that Mr. Jose P. Dizon may be able to find a purchaser for the
foregoing properties on or the fifth year from the date the execution of this
document, the GRANTEE, Mr. JOSE P. DIZON, may do so provided that the
aggregate amount which was paid to Development Bank of the Philippines and to
the Philippine National Bank together with the interests thereon at the rate of 8%
shall be refunded to the undersigned.

Furthermore, in case Mr. Jose P. Dizon shall be able to find a purchaser for the said
properties, it shall be his duty to first notify the undersigned of the contemplated
sale, naming the price and the purchaser therefor, and awarding the first
preference in the sale hereof to the undersigned.
IN WITNESS WHEREOF, I have hereunto signed these presents at the City of
Manila, on this 6th day of October, 1959.
(Sgd.) ALFREDO G. GABORRO
CONFORME:chanrob1es virtual 1aw library
(Sgd.) JOSE P. DIZON
SIGNED IN THE PRESENCE OF:chanrob1es virtual 1aw library
(Acknowledgment Omitted)
The sum of P131,813.91 which purports to be the consideration of the sale was not
actually paid by Alfredo G. Gaborro to the petitioner. The said amount represents
the aggregate debts of the petitioner with the Development Bank of the Philippines
and the Philippine National Bank.
After the execution of said contracts, Alfredo G. Gaborro took possession of the
three parcels of land in question.
On October 7, 1959, Gaborro wrote the Development Bank of the Philippines a
letter (Exh. J), as follows:jgc:chanrobles.com.ph
"Sir:chanrob1es virtual 1aw library
This is with reference to your mortgage lien of P38,000.00 more or less over the
properties more particularly described in TCT No. 15679 of the land records of
Pampanga in the name of Jose P. Dizon. In this connection, we have the honor to
inform you that pursuant to a Deed of Sale with Assumption of Mortgage executed
on October 6, 1959 by Jose P. Dizon in my favor, copy of which is hereto attached,
the ownership of the same has been transferred to me subject of course to your
conformity to the assumption of mortgage. As a consequence of the foregoing
document, the obligation therefore of paying your goodselves the total amount of
indebtedness has shifted to me.
Considering that these agricultural properties have not been under cultivation for
quite a long time, I would therefore request that, on the premise that the
assumption of mortgage would be agreeable to you, that I be allowed to pay the
outstanding obligation, under the same terms and conditions as embodied in the
original contract of mortgage within ten (10) years to be divided in 10 equal annual
amortizations. I am enclosing herewith a check in the amount of P3,609.95
representing 10% of the indebtedness of Jose P. Dizon to show my honest intention
in assuming the mortgage obligation to you. . . ."cralaw virtua1aw library
The Board of Governors of the DBP, in its Resolution No. 7066 dated October 21,
1959 approved the offer of Gaborro but said Board required him to pay 20% of the
purchase price as initial payment. (Exh. D) Accordingly, on July 11, 1960, the DBP
and Gaborro executed a conditional sale of the properties in consideration of the
sum of P36,090.95 (Exh. C) payable 20% down and the balance in 10 years in the
yearly amortization plan at 8 % per annum.
On January 7, 1960, Dizon assigned his right of redemption to Gaborro in an
instrument (Exh, 9) entitled:chanrob1es virtual 1aw library
ASSIGNMENT OF RIGHT OF REDEMPTION
AND ASSUMPTION OF OBLIGATION
KNOW ALL MEN BY THESE PRESENTS:chanrob1es virtual 1aw library
This instrument, made and executed by and between JOSE P. DIZON, married to
Norberta P. Torres, Filipino, of legal age, with residence and postal address at
Mabalacat, Pampanga, hereinafter referred to as the ASSIGNOR and ALFREDO G.
GABORRO, married to Pacita de Guzman, likewise of legal age, Filipino, with
residence and postal address at 46, 7th Street, Gilmore Ave., Quezon City,
hereinafter referred to as the ASSIGNEE,
W I T N E S S E T H:chanrob1es virtual 1aw library
WHEREAS, the Assignor is the owner and mortgagor of three (3) parcels
agricultural land together with all the improvements existing thereon and more
particularly described and bounded as follows:.
TRANSFER CERTIFICATE OF TITLE NO. 1567
PROVINCE OF PAMPANGA
1. A parcel of land (Lot No. 188 of the Cadastral Survey of Mabalacat), with the
improvements thereon. situated in the Municipality of Mabalacat. Bounded on the
NE, by Lot No. 187; on the SE. by Lots Nos. 183, 189, 191 and 192; on the SW. by
Lot No. 192; and on the NW, by the unimproved provincial road to Magalang.
Containing an area of two hundred twenty-one thousand one hundred and seventy
two square meters (221,172), more or less.
2. A parcel of land (Lot No. 193 of the Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the Municipality of Mabalacat. Bounded on the
NE. by a road and Lots Nos. 569, 670 and 571; on the SE. by Lot No. 571 and the
unimproved road to Magalan; on the SW. by a road; and on the NW. by a road and
the Sapang Pritil. Containing an area of nine hundred seventy eight thousand seven
hundred and seventeen square meters (978,717), more or less.
3. A parcel of land (Lot No. 568 of the Cadastral Survey of Mabalacat), with the
improvements thereon, situated in the Municipality of Mabalacat. Bounded on the
NE. by Lot No. 570; and on the SE., SW. and NW. by roads. Containing an area of
one hundred five thousand nine hundred and twenty-one square meters (105,921),
more or less.
WHEREAS, the above described properties were mortgaged with the Rehabilitation
Finance Corporation, now Development Bank of the Philippines, which mortgage
has been foreclosed on May 26, 1959;
AND WHEREAS, the herein Assignor has still the right to redeem the said properties
from the said Development Bank of the Philippines within a period of one (1) year
counted from the date of foreclosure of the said mortgage.
NOW, THEREFORE, for ___________________________, and other valuable
considerations, receipt whereof is hereby acknowledged by the Assignor from the
Assignee, the herein Assignor does hereby transfer and assign to the herein
Assignee, his heirs, successors and assigns the aforesaid right to redeem the
aforementioned properties above described.
That with this document the herein Assignor relinquishes any and all rights to the
said properties including the improvements existing thereon.
That the Assignee, by these presents, hereby assumes the obligation in favor of the
said Development Bank of the Philippines, as paying whatever legal indebtedness
the Assignor has with the said Bank in connection with the transaction regarding
the above mentioned properties subject to the terms and conditions that the said
Bank may require and further recognizes the second mortgage in favor of the
Philippine National Bank.chanrobles.com : virtual law library
IN WITNESS WHEREOF, the parties have hereunto set their hands in the City of
Manila, Philippines this day of 1959.
(Sgd.) JOSE P. DIZON (Sgd.) ALFREDO G. GABORRO
(Assignor) (Assignee)
(Acknowledgment Omitted)
After the execution of the conditional sale to him, Gaborro made several payments
to the DBP and PNB. He introduced improvements, cultivated the lands, raised
sugarcane and other crops and appropriated the produce to himself. He also paid
the land taxes thereon.
On July 5, 1961, Jose P. Dizon through his lawyer, Atty. Leonardo Abola, wrote a
letter to Gaborro informing him that he is formally offering to reimburse Gaborro of
what he paid to the banks but without, however, tendering any cash, and
demanding an accounting of the income and of the property, contending that the
transaction they entered into was one of antichresis. Gaborro did not accede to the
demands of the petitioner, whereupon, on July 30, 1962, Jose P. Dizon instituted a
complaint in the Court of First Instance of Pampanga, against Gaborro, alleging
that the documents Deed of Sale With Assumption of Mortgage and the Option to
Purchase Real Estate did not express the true intention and agreement between the
parties. Petitioner Dizon, as plaintiff below, contended that the two deeds constitute
in fact a single transaction; that their real agreement was not an absolute sale of
the said parcels of land but merely an equitable mortgage or conveyance by way of
security for the reimbursement or refund by Dizon to Gaborro of any and all sums
which the latter may have paid on account of the mortgage debts in favor of the
DBP and the PNB. Plaintiff prayed that defendant Gaborro be ordered to accept
plaintiffs offer to reimburse him of what he paid to the banks; to surrender the
possession of the lands to plaintiff; to make an accounting of all the fruits, produce,
harvest and other income which he had received from the three (3) parcels of land;
and to pay the plaintiff for the loss of two barns and for damages.
In its answer, the DBP specifically denied the material averments of the complaint
and stated that on October 6, 1959, the plaintiff Dizon was no longer the owner of
the land in question because the DBP acquired them at the extrajudicial foreclosure
sale held on May 26, 1959, and that the only right which plaintiff possessed was a
mere right to redeem the lands under Act 3135 as amended.
Defendant Alfredo G. Gaborro also answer, denying the material averments of the
complaint, stating that the "Deed of Sale with Assumption of Mortgage" expresses
the true agreement of the parties "fully, truthfully and religiously" but the "Option
to Purchase Real Estate" does not express the true intention of the parties because
it was made only to protect the reputation of the plaintiff among his townmates,
and even in the supposition that said option is valid, the action is premature. He
also filed a counterclaim for damages, which plaintiff denied. The issues having
been joined, a pre-trial was held and the following stipulation of facts admitted by
the parties was approved by the Court in the following order dated February 22,
1963:chanrob1es virtual 1aw library
ORDER
At todays initial trial, the following were present: Mr. Leonardo Abola, for the
plaintiff; Mr. Carlos Antiporda, for the defendant Alfredo Gaborro; and Mr. Virgilio
Fugoso, for the Development Bank of the Philippines:chanrobles law library : red
The parties have stipulated on the following facts:chanrob1es virtual 1aw library
1. That Annex A attached to the complaint is marked Exhibit A-Stipulation. The
parties have admitted the due execution, authenticity and genuineness of said
Exhibit A-Stipulation. This fact has been admitted by all the three parties.
2. That the defendant Gaborro executed Annex B, which is marked Exhibit B-
Stipulation. This fact has been admitted only between plaintiff and defendant
Gaborro.
3. That the three parcels of land referred to in paragraph 3 of the complaint, on or
before October 6, 1959, were subject to a first mortgage lien in favor of the
Development Bank of the Philippines, formerly Rehabilitation Finance Corporation,
to secure payment of a loan obtained by the plaintiff Jose P. Dizon in the original
sum of P38,000.00 plus interest, which has been assumed by defendant Gaborro
by virtue of a document, Exhibit A-Stipulation, and also subject to a second
mortgage lien in favor of the Philippine National Bank to secure the payment of a
loan in the sum of P93,831.91 plus interest up to August 30, 1951, which mortgage
liens were duly annotated on TCT 15679. This fact has been admitted by the
plaintiff and defendant Gaborro.
4. In respect to the foreclosure of the first mortgage referred to above, it was
admitted that the same was foreclosed on May 26, 1959, the second mortgage has
not been admitted nor foreclosed.
5. That the Development Bank of the Philippines admits that the first mortgage
referred to above was foreclosed on May 26, 1959 under the provisions of Public
Act No. 3135, as amended.
6. That subsequently the Development Bank and the defendant Gaborro executed a
document entitled Conditional Sale over the same parcels of land referred to in
paragraph 3 of the complaint, and copy thereof will be furnished by the
Development Bank of the Philippines and marked Exhibit C-Stipulation.
7. That on or before October 6, 1960, TCT No. 15679 of the Register of Deeds of
Pampanga in the name of Jose P. Dizon covering the three parcels of land referred
to in the complaint was cancelled and in lieu thereof TCT NO. 24292 of the Register
of Deeds of Pampanga was issued in the name of the Development Bank of the
Philippines. This fact has been admitted by all the parties.
8. That after the execution of the deed of conditional sale, certain payments were
made by the defendant Gaborro to the Development Bank, the exact amount to be
determined later and receipts of payments to be also exhibited later. This fact has
been admitted by all the three parties.
9. That since October 6, 1959, the defendant Gaborro has made several payments
to the PNB in the amounts appearing on the receipts which will be shown later,
such payments being made on account of the sum of P38,831.91. The payment
was assumed by said defendant Gaborro. This fact has been admitted by plaintiff
and defendant Gaborro only.
10. That since the execution of Exhibits A and B-Stipulation, the defendant Gaborro
has been and still is in the actual possession of the three parcels of land in question
and he is actually cultivating the same and that the land taxes thereon have been
paid by said defendant Gaborro, the amounts of said taxes appearing on the official
receipts to be shown later. This fact has been admitted by plaintiff and defendant
Gaborro only.
11. That since defendant Gaborro took possession of the lands in question, he has
been appropriating all the fruits produced and other income of said lands without
giving to the plaintiff any share thereof. This fact has been admitted by plaintiff and
defendant Gaborro only.
Let a copy of this order be served upon the plaintiff, defendant Gaborro and the
Development Bank of the Philippines with the understanding that, if, within fifteen
(15) days, none of the parties questions the correctness of the facts set forth
above, this stipulation of facts shall be conclusive upon the parties interested in this
case.
Set the trial on the controversial facts on April 18, 1963, at 9:00 oclock in the
morning.
Paragraphs 3 and 10 of the above quoted order were deleted in an order dated July
26, 1963.
The records disclose that during the pendency of the case in the trial court, motions
were filed by the plaintiff for the appointment of a receiver of the properties but all
were denied. Plaintiff also reiterated the same motion before the appellate court
which, however, dismissed the same, reserving to him the right to file in the trial
court. Plaintiff did file but with the same result, Certiorari proceedings were
resorted to in the Court of Appeals in CA-G.R. No. SP-01403 entitled "Jose P. Dizon
v. Hon. Felipe Buencamino, Et. Al." which the respondent court denied.
After trial the court held that the true agreement between Jose P. Dizon, the
plaintiff therein, and the defendant Alfredo G. Gaborro is that the defendant would
assume and pay the indebtedness of the plaintiff to the Development Bank of the
Philippines and the Philippine National Bank, and in consideration therefor, the
defendant was given the possession and enjoyment of the properties in question
until the plaintiff shall have reimbursed to defendant fully the amount of
P131,831.91 plus 6% interest per annum.
Accordingly, on March 14, 1970, the lower court rendered judgment, the dispositive
part of which reads:chanrobles law library
"IN VIEW OF THE FOREGOING, the documents entitled Deed of Sale with
Assumption of Mortgage (Exhibit A-Stipulation) and Option to Purchase Real
Estate (Exhibit B-Stipulation) are hereby reformed to the extent indicated above.
However, since this action was filed before the period allowed the plaintiff to
redeem his property, the prematurity of this action aside from not being principally
alleged in the complaint, deters this Court from ordering further reliefs and
remedies. The counterclaim of the defendant is dismissed.
The plaintiffs motion for new trial and for reconsideration, and motion for
admission of supplemental complaint having been denied for lack of merit, on June
6, 1970, plaintiff appealed to the Court of Appeals, which, however, affirmed the
decision with the modification that the plaintiff-appellant has the right to refund or
reimburse the defendant-appellee the sum of P131,831.91 with interest at 8% per
annum from October 6, 1959 until full payment, said right to be exercised within
one (1) year from the date the judgment becomes final, with the understanding
that, if he fails to do so within the said period, then he is deemed to have lost his
right over the lands forever.
Petitioners motion for reconsideration and/or rehearing having been denied by the
Court of Appeals, hence the present petition for review on certiorari. The petitioner
assigns the following errors, to wit:jgc:chanrobles.com.ph
"I. The Court of Appeals, like the lower court, erred in not holding that upon
established facts and undisputed documentary evidence, the deed of sale with
assumption of mortgage (Exhibit A-Stipulation) constitutes an equitable mortgage
or conveyance to secure petitioners obligation to reimburse or refund to defendant
Alfredo Gaborro any and all sums to the extent of P131,831.91, paid by said
defendant in total or partial satisfaction of petitioners mortgage debts to the DBP
and the PNB. In this connection, the Court of Appeals erred:chanrob1es virtual 1aw
library
(A) In not finding that the petitioner was the lawful owner of the lands in
question:chanrob1es virtual 1aw library
(B) In not finding that the deed of sale in question is not a real and unconditional
sale; and
(C) In not holding that the option to purchase real estate (Exhibit B-Stipulation) is
conclusive evidence that the transaction in question is in fact an equitable
mortgage.
"II. The Court of Appeals also erred in funding that the instrument entitled
Assignment of Right of Redemption and Assumption of Obligation is conclusive
evidence that the real transaction evidenced by the Deed of Sale with Assumption
of Mortgage is not an equitable mortgage. In this connection the said court also
erred or at least committed a grave abuse of discretion:chanrob1es virtual 1aw
library
(A) In not finding that the said deed of assignment is in fact a mere reiteration of
the terms and condition of the deed of sale;
(B) In finding that the price or consideration of the aforesaid assignment of right of
redemption consisted of 300 cavans of palay delivered by Mrs. Gaborro to the
petitioner;
(C) In finding that defendant Gaborro purchased the lands in question by virtue of
the aforementioned deed of assignment.
"III. The Court of Appeals, like the trial court, also erred in not finding that the
estate of Alfredo G. Gaborro is under obligation to render an accounting of all the
produce, fruits and other income of the lands in question from October 6, 1959,
and to reconvey the said lands to the herein petitioner. In this connection, the said
court also erred:chanrob1es virtual 1aw library
(A) In not holding that as a mortgagee in possession, the Gaborro estate has the
obligation to either render an accounting of the produce or fruits of the lands, or to
pay rentals for the occupation of said lands;
(B) In not finding that the Gaborro estate has the obligations to reconvey the lands
in controversy to the herein petitioner, upon payment of the balance due from him
after deducting either the net value of the produce or fruits of the said lands or the
rentals thereof;
(C) In not finding that further reliefs or remedies may be granted the herein
petitioner; and
(D) In not ordering the admission of herein petitioners Supplemental Complaint period of 12 months from the date of sale, by a redemption on the part of the
dated April 30, 1970.
"IV. The Court of Appeals finally erred in not reversing the decision of the trial
court, and in not rendering judgment declaring that the deed of sale with
assumption of mortgage (Exhibit A-Stipulation) is in fact an equitable mortgage;
and in not ordering the Gaborro estate either to render an accounting of all the
produce or fruits of the lands in question or to pay rentals for the occupation
thereof, from October 6, 1959: and in not ordering the estate of Alfredo G. Gaborro
to reconvey, transfer and assign unto the petitioner the aforementioned
lands."cralaw virtua1aw library
The two instruments sought to be reformed in this case appear to stipulate rights
and obligations between the parties thereto pertaining to and involving parcels of
land that had already been foreclosed and sold extrajudicially, and purchased by
the mortgage creditor, a third party. It becomes, therefore, necessary to determine
the legality of said rights and obligations arising from the foreclosure and sale
proceedings not only between the two contracting parties to the instruments
executed between them but also in so far as the agreement affects the rights of the
third party, the purchaser Bank.
Act 3135, Section 6 as amended by Act 4118, under which the properties were
extrajudicially foreclosed and sold, provides that:jgc:chanrobles.com.ph
"Sec. 6. In all cases in which an extrajudicial sale is made under the special power
herein before referred to, the debtor, his successors in interest or any judicial
creditor or judgment creditor of sale debtor, or any person having a lien on the
property subsequent to the mortgage or deed of trust under which the property is
sold, may redeem the same at any time within the term or one year from and after
the date of the sale; and such redemption shall be governed by the provisions of
sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the
Code of Civil Procedure, in so far as these are not consistent with the provisions of
this Act.
Under the Revised Rules of Court, Rule 39, Section 33, the judgment debtor
remains in possession of the property foreclosed and sold, during the period of
redemption. If the judgment debtor is in possession of the property sold, he is
entitled to retain it and receive the fruits, the purchaser not being entitled to such
possession. (Riosa v. Verzosa, 26 Phil. 86; Velasco v. Rosenbergs Inc., 32 Phil. 72;
Pabico v. Pauco, 43 Phil, 572; Power v. PNB, 54 Phil. 54; Gorospe v. Gochangco, L-
12735, Oct. 30, 1959).
A judgment debtor, whose property is levied on execution, may transfer his right of
redemption to any one whom he may desire. The right to redeem land sold under
execution within 12 months is a property right and may be sold voluntarily by its
owner and may also be attached and sold under execution. (Magno v. Viola and
Sotto, 61 Phil. 80).
Upon foreclosure and sale, the purchaser is entitled to a certificate of sale executed
by the sheriff. (Section 27, Revised Rules of Court) After the termination of the
period of redemption and no redemption having been made, the purchaser is
entitled to a deed of conveyance and to the possession of the properties. (Section
35, Revised Rules of Court). The weight of authority is to the effect that the
purchaser of land sold at public auction under a writ of execution only has an
inchoate right in the property, subject to be defeated and terminated within the
owner. Therefore, the judgment debtor in possession of the property is entitled to
remain therein during the period allowed for redemption. (Riosa v. Verzosa, 26 Phil.
86; 89; Gonzales v. Calimbas, 51 Phil, 355.)
In the case before Us, after the extrajudicial foreclosure and sale of his properties,
petitioner Dizon retained the right to redeem the lands, the possession, use and
enjoyment of the same during the period of redemption. And these are the only
rights that Dizon could legally transfer, cede and convey unto respondent Gaborro
under the instrument captioned Deed of Sale with Assumption of Mortgage (Exh A-
Stipulation), likewise the same rights that said respondent could acquire in
consideration of the latters promise to pay and assume the loan of petitioner Dizon
with DBP and PNB.chanrobles law library : red
Such an instrument cannot be legally considered a real and unconditional sale of
the parcels of land, firstly, because there was absolutely no money consideration
therefor, as admittedly stipulated, the sum of P131,831.91 mentioned in the
document as the consideration "receipt of which was acknowledged" was not
actually paid; and secondly, because the properties had already been previously
sold by the sheriff at the foreclosure sale, thereby divesting the petitioner of his full
right as owner thereof to dispose and sell the lands.
In legal consequence thereby, respondent Gaborro as transferee of these certain
limited rights or interests under Exh. A-Stipulation, cannot grant to petitioner Dizon
more than said rights, such as the option to purchase the lands as stipulated in the
document called Option to Purchase Real Estate (Exhibit B-Stipulation). This is
necessarily so for the reason that respondent Gaborro did not purchase or acquire
the full title and ownership of the properties by virtue of the Deed of Sale With
Assumption of Mortgage (Exh. A-Stipulation), earlier executed between them which
We have ruled out as an absolute sale. The only legal effect of this Option Deed is
the grant to petitioner the right to recover the properties upon reimbursing
respondent Gaborro of the total sums of money that the latter may have paid to
DBP and PNB on account of the mortgage debts, the said right to be exercised
within the stipulated 5 years period.
In the light of the foreclosure proceedings and sale of the properties, a legal point
of primary importance here, as well as other relevant facts and circumstances, We
agree with the findings of the trial and appellate courts that the true intention of
the parties is that respondent Gaborro would assume and pay the indebtedness of
petitioner Dizon to DBP and PNB, and in consideration therefor, respondent Gaborro
was given the possession, the enjoyment and use of the lands until petitioner can
reimburse fully the respondent the amounts paid by the latter to DBP and PNB, to
accomplish the following ends: (a) payment of the bank obligations; (b) make the
lands productive for the benefit of the possessor, respondent Gaborro; (c) assure
the return of the land to the original owner, petitioner Dizon, thus rendering equity
and fairness to all parties concerned.
In view of all these considerations, the law and jurisprudence, and the facts
established, We find that the agreement between petitioner Dizon and respondent
Gaborro is one of those innominate contracts under Art. 1307 of the New Civil Code
whereby petitioner and respondent agreed "to give and to do" certain rights and
obligations respecting the lands and the mortgage debts of petitioner which would
be acceptable to the bank, but partaking of the nature of the antichresis insofar as
the principal parties, petitioner Dizon and respondent Gaborro, are concerned.
Mistake is a ground for the reformation of an instrument when, there having been a
meeting of the minds of the parties to a contract, their true intention is not
expressed in the instrument purporting to embody the agreement, and one of the
parties may ask for such reformation to the end that such true intention may be
expressed. (Art. 1359, New Civil code). When a mutual mistake of the parties
causes the failure of the instrument to disclose their real agreement, said
instrument may be reformed. (Art. 1361, New Civil Code.) It was a mistake for the
parties to execute the Deed of Sale With Assumption of Mortgage and the Option to
Purchase Real Estate and stand on the literal meaning of the terms and stipulations
used therein.
The instruments must, therefore be reformed in accordance with the intention and
legal rights and obligations of the parties the petitioner, the respondent and the
Banks. We agree with the reformation decreed by the trial and appellate courts, but
in the sense that petitioner Jose P. Dizon has the right to reacquire the three
parcels of land within the one-year period indicated below by refunding or
reimbursing to respondent Alfredo G. Gaborro or the Judicial Administratrix of his
Estate whatever amount the latter has actually paid on account of the principal
only, of the loans of Dizon with the DBP and PNB, excluding the interests and land
taxes that may have been paid or may have accrued, on duly certified financial
statements issued by the said banks.
On the issue of the accounting of the fruits, harvests and other income received
from the three parcels of land from October 6, 1959 up to the present, prayed and
demanded by Dizon of Gaborro or the Judicial Administratrix of the latters estate,
We hold that in fairness and equity and in the interests of justice that since We
have ruled out the obligation of petitioner Dizon to reimburse respondent Gaborro
of any interests and land taxes that have accrued or been paid by the latter on the
loans of Dizon with DBP and PNB, petitioner Dizon in turn is not entitled to an
accounting of the fruits, harvests and other income received by respondent
Gaborro from the lands, for certainly, petitioner cannot have both benefits and the
two may be said to offset each other.chanrobles virtual lawlibrary
By virtue of the Option to Purchase Real Estate (Exh. B-Stipulation) which on its
face granted Dizon the option to purchase the properties which must be exercised
within the period from January, 1960 to December 31, 1965 but which We held to
be simply the grant of the right to petitioner Dizon to recover his properties within
the said period, although already expired by reasons and circumstances beyond his
control, petitioner is entitled to a reconveyance of the properties within a
reasonable period. The period of one year from the date of the finality of this
judgment as laid down by the Court of Appeals for the exercise of such right by
petitioner Dizon appears fair and reasonable and We approve the same.
Since We are not informed of the status of Dizons loan of P93,831.91 with the
Philippine National Bank which appears to be on a subsisting basis, it is proper to
indicate here how petitioner Dizon may exercise the right to a reconveyance of the
properties as herein affirmed, as follows:chanrob1es virtual 1aw library
(a) Dizon is granted the right to a reconveyance of the properties by reimbursing
Gaborro (or his estate) whatever amount(s) the latter has actually paid on account
of the principal only, of Dizons loans of P38,000.00 and P93,831.91 which the DBP
and PNB, respectively, exclusive of the interests that may have accrued thereon or
may have been paid by Gaborro, on the basis of duly certified statements issued by
said banks;
(b) Any outstanding balance due on Dizons original principal loan of P38,000.00
with the Development Bank of the Philippines assumed by Gaborro and on Dizons
original principal loan of 93,831.91 with the PNB shall be deducted from the above-
fixed reconveyance price payable to Gaborro, in order to enable Dizon to pay off
the said mortgage loans directly to the said banks, in accordance with terms
mutually agreed upon with them by Dizon;
(c) In other words, the maximum reconveyance price that Dizon is obligated to pay
is the total sum of P31,831.91 (the sum total of the principals of his two original
loans with the DBP and PNB), and should the amounts due to the said banks
exceed this total of P31,831.91 (because of delinquent interests and other
charges), nothing shall be due Gaborro by way of reimbursement and Dizon will
thereupon step into the shoes of Gaborro as owner-mortgagor of the properties and
directly arrange with the bars for the settlement of the amounts still due and
payable to them, subject to the right of Dizon to recover such amounts in excess of
P31,831.91 from Gaborro by writ of execution in this case; and
(d) As already stated, Dizon is not entitled to an accounting of the fruits, harvests
and other income received by Gaborro from the land while Gaborro in turn is not
entitled to the payment of any interests on any amounts paid by him on account of
the principal loans to the banks nor reimbursement of any interests paid by him to
the banks.
WHEREFORE, the judgment appealed from is hereby affirmed with the modification
that petitioner Dizon is granted the right within one year from finality of this
decision to a reconveyance of the properties in litigation upon payment and
reimbursement to respondent estate of Alfredo G. Gaborro of the amounts actually
paid by Gaborro or his estate on account of the principal only of Dizons original
loans with the Development Bank of the Philippines and Philippine National Bank in
and up to the total amount of P31,831.91, under the terms and conditions set forth
in the preceding paragraph with subparagraphs (a) to (d), which are hereby
incorporated by reference as an integral part of this judgment, and upon the
exercise of such right, respondent estate shall forthwith execute the corresponding
deed of reconveyance in favor of petitioner Dizon and deliver possession of the
properties to him. Without pronouncement as to costs.chanrobles.com:cralaw:red
Teehankee (Chairman), Makasiar, Muoz Palma and Fernandez, JJ., concur.
EN BANC
[G.R. No. 47806. April 14, 1941.]
LEONCIO GABRIEL, Petitioner, v. MONTE DE PIEDAD Y CAJA DE AHORROS
and THE COURT OF APPEALS, Respondents.
Vicente J. Francisco and Rody M. Jalandoni, for Petitioner.
Cavanna, Jazmines & Tianco, for Respondent.
SYLLABUS
1. CONTRACTS, FREEDOM OF CONTRACT. A contract is to be judged by its
character, and courts will look to the substance and not to the mere form of the
transaction. The freedom of contract is both a constitutional and statutory right and
to uphold this right, courts should move with all the necessary caution and
prudence in holding contracts void. (People v. Pomar, 46 Phil., 440; Ferrazzini v.
Gsell, 34 Phil., 697.)
2. ID.; PUBLIC POLICY. Courts should not rashly extend the rule which holds that
a contract is void as against public policy. The term "public policy" is vague and
uncertain in meaning, floating and changeable in connotation. It may be said,
however, that, in general, a contract which is neither prohibited by law nor
condemned by judicial decision, nor contrary to public morals, contravenes no
public policy. In the absence of express legislation or constitutional prohibition, a
court, in order to declare a contract void as against public policy, must and that the
contract as to the consideration or thing to be done, has a tendency to injure the
public, is against the public good, or contravenes some established interests of
society, or is inconsistent with sound policy and good morals, or tends clearly to
undermine the security of individual rights, whether of personal liability or of
private property. Examining the contract at bar, we are of the opinion that it does
not in anyway militate against the public good. Neither does it contravene the
policy of the law nor the established interests of society.
3. ID.; CONSIDERATION. A consideration, in the legal sense of the word, is some
right, interest, benefit, or advantage conferred upon the primrose, to which he is
otherwise not lawfully entitled, or any detriment, prejudice, loss, or disadvantage
suffered or undertaken by the promises other than to such as he is at the time of
consent bound to suffer. We think that there is sufficient consideration in this
contract, for, according to the Court of Appeals, "it has been satisfactorily
established that it was executed voluntarily by the latter to grantee the deficiencies
resulting from his erroneous appraisals of the jewelry." A preexisting admitted
liability is a good consideration for a promise. The fact that the bargain is a hard
one will not deprive it of validity. The exception to this rule in modern legislation is
where the inadequacy is so gross as to amount to fraud, oppression or undue
influence, or when statutes require the consideration to be adequate. We are not
convinced that the instant case falls within the exception.
4. ID.; CHATTEL MORTGAGE; AFFIDAVIT. Statutory requirements as to forms or
words of the affidavits in chattel mortgage contracts must be substantially, but
need not be literally, complied with.
DECISION
LAUREL, J.:
The herein petitioner was employed as appraiser of jewels in the pawnshop of the
Monte de Piedad from 1913 up to May, 1933. On December 13, 1932, he executed
a chattel mortgage to secure the payment of the deficiencies which resulted from
his erroneous appraisal of the jewels pawned to the appellee, amounting to
P14,679.07, with six per cent (6 %) interest from said date. In this chattel
mortgage, the appellant promised to pay to the appellee the sum of P300 a month
until the sum of P14,679.07, with interest is fully paid. The document was
registered on December 22, 1932 (statement, decision of Court of Appeals). To
recover the aforementioned sum less what had been paid, amounting to P3,333.25
or the balance of P11,346.75, and in case of default to effectuate the chattel
mortgage, an action was instituted against the petitioner by the respondent Monte
de Piedad in the Court of First Instance of Manila (civil case No. 50847). The
petitioner answered, denying generally and specifically all the specifications therein,
and also denied under oath the geniuses of the execution of the alleged chattel
mortgage attached thereto. By way of special defense, he alleged (1) that the
chattel mortgage was a part of a scheme on the part of the management of the
Monte de Piedad to cover up supposed losses incurred in its pawnshop department;
(2) that a criminal action had been instituted at the instance of the plaintiff against
him wherein said chattel mortgage was presented by the prosecution with regard to
his supposed responsibility as expert appraiser of jewels of the plaintiff entity but
he was therein acquitted; and (3) that said acquittal constituted a bar to the civil
case. By way of cross-complaint, the petitioner alleged (1) that the chattel
mortgage was entered into by E. Marco for and in behalf of the Monte de Piedad
without being duly authorized to do so by the latter; (2) that the defendant was
induced, through false representation, to sign said chattel mortgage against his
will; (3) that the chattel mortgage was based upon all nonexisting subject matter
and nonexisting consideration; and (4) that the chattel mortgage was null and void
ab initio. By way of counterclaim, the petitioner alleged (1) that the payments
made by him for the account of the chattel mortgage amounting to P3,333.25 were
made through deceit and without his consent and consisted of P300 monthly
deductions from his salary, printing job for plaintiff done by him in his printing
press, and reimbursement made from the pocket of E. Marco; (2) that he has
received P356.25 a month as expert appraiser of the plaintiff and that he was
separated arbitrarily at the end of the month of May 1933, from the plaintiff entity
without lawful cause and one month notice and plaintiff failed to pay him his salary
for the month of May, 1933 and the month of June, 1933, in accordance with law;
and (3) that due to the malicious and systematic prosecution brought in criminal
case No. 49078 and in the present case, he suffered damages and losses both
materially and in his reputation in the amount of at least P15,000.
Wherefore, Petitioner, among others, prayed that the Monte de Piedad be ordered
to return the unlawful deductions from his monthly remuneration, to pay his salary
for the months of May and June, 1933, and damages and losses he suffered
amounting to P15,000.
The lower court rendered judgment in favor of the Monte de Piedad against the
herein petitioner. Petitioner brought the case on appeal to the Court of Appeals,
which affirmed the judgment of the lower court in a decision rendered May 29,
1940. Hence, this petition for review by certiorari.
Petitioner contends that the provisions of the chattel mortgage contract by which
he guaranteed to pay the deficiencies amounting to P14,679.07 are contrary to law,
morals and public policy, and hence, the chattel mortgage contract is ineffective
and the principal obligation secured by it is void. A contract is to be judged by its
character, and courts will look to the substance and not to the mere form of the
transaction. The freedom of contract is both a constitutional and statutory right and
to uphold this right, courts should move with all the necessary caution and
prudence in holding contracts void. (People v. Pomar, 46 Phil., 440; Ferrazzini v.
Gsell, 34 Phil., 697.) At any rate, courts should not rashly extend the rule which
holds that a contract is void as against public policy. The term "public policy" is
vague and uncertain in meaning, floating and changeable in connotation. It may be
said, however, that, in general, a contract which is neither prohibited by law nor
condemned by judicial decision, nor contrary to public morals, contravenes no
public policy. In the absence of express legislation or constitutional prohibition, a
court, in order to declare a contract void as against public policy, must find that the
contract as to the consideration or thing to be done, has a tendency to injure the
public, is against the public good, or contravenes some established interests of
society. or is inconsistent with sound policy and good morals, or tends clearly to
undermine the security of individual rights, whether of personal liability or of
private property. Examining the contract at bar, we are of the opinion that it does
not in anyway militate against the public good. Neither does it contravene the
policy of the law nor the established interests of society.
Another objection raised is that the requirement of section 5 of Act No. 1508 has
not been complied with. We think that there is substantial compliance with the
requirements of the Chattel Mortgage Law on this point. The wording of the
affidavit under discussion, as it appears from the record, is almost in the same
language of the statute. Likewise, it appears that it was signed by E. Marco, who
was Director-General of the Monte de Piedad at the time of the execution of the
contract of chattel mortgage. The Court of Appeals found that "the contention that
director Marco had no authority to enter into the agreement is without merit. It
appears that there was confirmation of Exhibit A by the Consejo de administracion
of the Monte de Piedad." Statutory requirements as to forms or words of the
affidavits in chattel mortgage contracts must be substantially, but need not be
literally, complied with.
The second assignment of error made by the petitioner ix that the Court of Appeals
erred in not holding that the acquittal of the petitioner in criminal case No. 49078
of the Court of First Instance of Manila bars the action to enforce any civil liability
under said chattel mortgage. We do not need to dwell at length on this assignment
of error, for we find no reason for disturbing the conclusion reached by the Court of
Appeals on this point:jgc:chanrobles.com.ph
"The appellant claims that his acquittal in criminal case No. 49078 of the Court of
First Instance of Manila is a bar to the institution of the present case. The evidence
of record does not bear out this contention. There is no identity of subject matter
between the two cases; nor is the instant case dependent upon the said criminal
action. We agree with the trial court that the transactions involved in this case are
different from those involved in criminal case No. 49078. The courts finding that
the transactions involved in the case at bar commenced in August, 1932, can not
be considered erroneous simply because Exhibit F-32 of the plaintiff is allegedly
dated August 20, 1931. Exhibit F-22 can not be given any probative value, it was
undated during the hearing of the case."cralaw virtua1aw library
We do not find it necessary to discuss the last assignment of error.
The petition is hereby dismissed and the judgment sought to be reviewed is
affirmed, with costs against the petitioner. So ordered.
Imperial, Diaz, Moran and Horrilleno, JJ., concur.

Petitioner also contends that the chattel mortgage in question is void because it
lacks consideration. A consideration, in the legal sense of the word, is some right,
interest, benefit, or advantage conferred upon the promissory, to which he is
otherwise not lawfully entitled, or any detriment, prejudice, loss, or disadvantage
suffered or undertaken by the promise other than to such as he is at the time of
consent bound to suffer. We think that there is sufficient consideration in this
contract, for, according to the Court of Appeals, "it has been satisfactorily
established that it was executed voluntarily by the latter to guarantee the
deficiencies resulting from his erroneous appraisals of the jewels." A preexisting
admitted liability is a good consideration for a promise. The fact that the bargain is
a hard one will not deprive it of validity. The exception to this rule in modern
legislation is where the inadequacy is so gross as to amount to fraud, oppression or
undue influence, or when statutes require the consideration to be adequate. We are
not convinced that the instant case falls within the exception.

THIRD DIVISION
[G.R. No. 61594. September 28, 1990.]
PAKISTAN INTERNATIONAL AIRLINES CORPORATION, Petitioner, v. HON.
BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE
LEOGARDO, JR., in his capacity as Deputy Minister; ETHELYNNE B.
FARRALES and MARIA MOONYEEN MAMASIG, Respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for Petitioner.
Ledesma, Saludo & Associates for Private Respondents.
DECISION
FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"),
a foreign corporation licensed to do business in the Philippines, executed in Manila
two (2) separate contracts of employment, one with private respondent Ethelynne
B. Farrales and the other with private respondent Ma. M.C. Mamasig. 1 The
contracts, which became effective on 9 January 1979, provided in pertinent portion
as follows:jgc:chanrobles.com.ph
"5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of three (3) years, but can be extended by the
mutual consent of the parties.
x x x private respondent Mamasig of an amount equivalent to the value of a round trip
6. TERMINATION
x x x provisions of the Labor Code and its implementing rules and regulations on regular
Notwithstanding anything to contrary as herein provided, PIA reserves the right to
terminate this agreement at any time by giving the EMPLOYEE notice in writing in
advance one month before the intended termination or in lieu thereof, by paying
the EMPLOYEE wages equivalent to one months salary.
x x x respondents] their salaries corresponding to the unexpired portion of the
10. APPLICABLE LAW:chanrob1es virtual 1aw library
This agreement shall be construed and governed under and by the laws of
Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction to
consider any matter arising out of or under this agreement."cralaw virtua1aw
library
Respondents then commenced training in Pakistan. After their training period, they
began discharging their job functions as flight attendants, with base station in
Manila and flying assignments to different parts of the Middle East and Europe.
On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration
of the contracts of employment, PIA through Mr. Oscar Benares, counsel for and
official of the local branch of PIA, sent separate letters both dated 1 August 1980 to
private respondents Farrales and Mamasig advising both that their services as flight
stewardesses would be terminated "effective 1 September 1980, conformably to
clause 6 (b) of the employment agreement [they had] executed with [PIA]." 2
On 9 September 1980, private respondents Farrales and Mamasig jointly instituted
a complaint, docketed as NCR-STF-9-5151-80, for illegal dismissal and non-
payment of company benefits and bonuses, against PIA with the then Ministry of
Labor and Employment ("MOLE"). After several unfruitful attempts at conciliation,
the MOLE hearing officer Atty. Jose M. Pascual ordered the parties to submit their
position papers and evidence supporting their respective positions. The PIA
submitted its position paper, 3 out no evidence, and there claimed that both private
respondents were habitual absentees; that both were in the habit of bringing in
from abroad sizeable quantities of "personal effects" ; and that PIA personnel at
the Manila International Airport had been discreetly warned by customs officials to
advise private respondents to discontinue that practice. PIA further claimed that
the services of both private respondents were terminated pursuant to the
provisions of the employment contract.
In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered
the reinstatement of private respondents with full backwages or, in the alternative,
the payment to them of the amounts equivalent to their salaries for the remainder
of the fixed three-year period of their employment contracts; the payment to
ticket Manila-USA-Manila; and payment of a bonus to each of the private
respondents equivalent to their one-month salary. 4 The Order stated that private
respondents had attained the status of regular employees after they had rendered
more than a year of continued service; that the stipulation limiting the period of the
employment contract to three (3) years was null and void as violative of the
and casual employment; and that the dismissal, having been carried out without
the requisite clearance from the MOLE, was illegal and entitled private respondents
to reinstatement with full backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy
Minister, MOLE, adopted the findings of fact and conclusions of the Regional
Director and affirmed the latters award save for the portion thereof giving PIA the
option, in lieu of reinstatement, "to pay each of the complainants [private
contract[s] [of employment] . . ." 5

In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional
Director and the Order of the Deputy Minister as having been rendered without
jurisdiction; for having been rendered without support in the evidence of record
since, allegedly, no hearing was conducted by the hearing officer, Atty. Jose M.
Pascual; and for having been issued in disregard and in violation of petitioners
rights under the employment contracts with private respondents.
1. Petitioners first contention is that the Regional Director, MOLE, had no
jurisdiction over the subject matter of the complaint initiated by private
respondents for illegal dismissal, jurisdiction over the same being lodged in the
Arbitration Branch of the National Labor Relations Commission ("NLRC"). It appears
to us beyond dispute, however, that both at the time the complaint was initiated in
September 1980 and at the time the Orders assailed were rendered on January
1981 (by Regional Director Francisco L. Estrella) and August 1982 (by Deputy
Minister Vicente Leogardo, Jr.), the Regional Director had jurisdiction over
termination cases.
Article 278 of the Labor Code, as it then existed, forbade the termination of the
services of employees with at least one (1) year of service without prior clearance
from the Department of Labor and Employment:jgc:chanrobles.com.ph
"Art. 278. Miscellaneous Provisions . . .
(b) With or without a collective agreement, no employer may shut down his
establishment or dismiss or terminate the employment of employees with at least
one year of service during the last two (2) years, whether such service is
continuous or broken, without prior written authority issued in accordance with
such rules and regulations as the Secretary may promulgate . . ." (Emphasis
supplied)
Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code,
made clear that in case of a termination without the necessary clearance, the
Regional Director was authorized to order the reinstatement of the employee
concerned and the payment of backwages; necessarily, therefore, the Regional
Director must have been given jurisdiction over such termination
cases:jgc:chanrobles.com.ph
"Section 2. Shutdown or dismissal without clearance. Any shutdown or dismissal
without prior clearance shall be conclusively presumed to be termination of
employment without a just cause. The Regional Director shall, in such case order
the immediate reinstatement of the employee and the payment of his wages from
the time of the shutdown or dismissal until the time of reinstatement." (Emphasis
supplied)
Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was
similarly very explicit about the jurisdiction of the Regional Director over
termination of employment cases:jgc:chanrobles.com.ph
"Under PD 850, termination cases with or without CBA are now placed under
the original jurisdiction of the Regional Director. Preventive suspension cases, now
made cognizable for the first time, are also placed under the Regional Director.
Before PD 850, termination cases where there was a CBA were under the
jurisdiction of the grievance machinery and voluntary arbitration, while termination
cases where there was no CBA were under the jurisdiction of the Conciliation
Section.
In more details, the major innovations introduced by PD 850 and its implementing
rules and regulations with respect to termination and preventive suspension cases
are:chanrob1es virtual 1aw library
1. The Regional Director is now required to rule on every application for clearance,
whether there is opposition or not, within ten days from receipt thereof.
x x x"
(Emphasis supplied)
2. The second contention of petitioner PIA is that, even if the Regional Director had
jurisdiction, still his order was null and void because it had been issued in violation
of petitioners right to procedural due process. 6 This claim, however, cannot be
given serious consideration. Petitioner was ordered by the Regional Director to
submit not only its position paper but also such evidence in its favor as it might
have. Petitioner opted to rely solely upon its position paper; we must assume it had
no evidence to sustain its assertions. Thus, even if no formal or oral hearing was
conducted, petitioner had ample opportunity to explain its side. Moreover,
petitioner PIA was able to appeal his case to the Ministry of Labor and Employment.
7
There is another reason why petitioners claim of denial of due process must be
rejected. At the time the complaint was filed by private respondents on 21
September 1980 and at the time the Regional Director issued his questioned order
on 22 January 1981, applicable regulation, as noted above, specified that a
"dismissal without prior clearance shall be conclusively presumed to be termination
of employment without a just cause", and the Regional Director was required in
such case to "order the immediate reinstatement of the employee and the payment
of his wages from the time of the shutdown or dismissal until . . . reinstatement."
In other words, under the then applicable rule, the Regional Director did not even
have to require submission of position papers by the parties in view of the
conclusive (juris et de jure) character of the presumption created by such
applicable law and regulation. In Cebu Institute of Technology v. Minister of Labor
and Employment, 8 the Court pointed out that "under Rule 14, Section 2, of the
Implementing Rules and Regulations, the termination of [an employee] which was
without previous clearance from the Ministry of Labor is conclusively presumed to
be without [just] cause . . . [a presumption which] cannot be overturned by any
contrary proof however strong."cralaw virtua1aw library
3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract
of employment with private respondents Farrales and Mamasig, arguing that its
relationship with them was governed by the provisions of its contract rather than
by the general provisions of the Labor Code. 9
Paragraph 5 of that contract set a term of three (3) years for that relationship,
extendible by agreement between the parties; while paragraph 6 provided that,
notwithstanding any other provision in the contract, PIA had the right to terminate
the employment agreement at any time by giving one-months notice to the
employee or, in lieu of such notice, one-months salary.
A contract freely entered into should, of course, be respected, as PIA argues, since
a contract is the law between the parties. 10 The principle of party autonomy in
contracts is not, however, an absolute principle. The rule in Article 1306, of our Civil
Code is that the contracting parties may establish such stipulations as they may
deem convenient," provided they are not contrary to law, morals, good customs,
public order or public policy." Thus, counter-balancing the principle of autonomy of
contracting parties is the equally general rule that provisions of applicable law,
especially provisions relating to matters affected with public policy, are deemed
written into the contract. 11 Put a little differently, the governing principle is that
parties may not contract away applicable provisions of law especially peremptory
provisions dealing with matters heavily impressed with public interest. The law
relating to labor and employment is clearly such an area and parties are not at
liberty to insulate themselves and their relationships from the impact of labor laws
and regulations by simply contracting with each other. It is thus necessary to
appraise the contractual provisions invoked by petitioner PIA in terms of their
consistency with applicable Philippine law and regulations.
As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect
held that paragraph 5 of that employment contract was inconsistent with Articles
280 and 281 of the Labor Code as they existed at the time the contract of
employment was entered into, and hence refused to give effect to said paragraph
5. These Articles read as follows:jgc:chanrobles.com.ph
"Art. 280. Security of Tenure. In cases of regular employment, the employer
shall not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and to his backwages
computed from the time his compensation was withheld from him up to the time
his reinstatement.
Article 281. Regular and Casual Employment. The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreements
of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: provided, that, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered as
regular employee with respect to the activity in which he is employed and his
employment shall continue while such actually exists." (Emphasis supplied)
In Brent School, Inc., Et. Al. v. Ronaldo Zamora, etc., Et Al., 12 the Court had
occasion to examine in detail the question of whether employment for a fixed term
has been outlawed under the above quoted provisions of the Labor Code. After an
extensive examination of the history and development of Articles 280 and 281, the
Court reached the conclusion that a contract providing for employment with a fixed
period was not necessarily unlawful:jgc:chanrobles.com.ph
"There can of course be no quarrel with the proposition that where from the
circumstances it is apparent that periods have been imposed to preclude acquisition
of tenurial security by the employee, they should be struck down or disregarded as
contrary to public policy, morals, etc. But where no such intent to circumvent the
law is shown, or stated otherwise, where the reason for the law does not exist, e.g.
where it is indeed the employee himself who insists upon a period or where the
nature of the engagement is such that, without being seasonal or for a specific
project, a definite date of termination is a sine qua non, would an agreement fixing
a period be essentially evil or illicit, therefore anathema? Would such an agreement
come within the scope of Article 280 which admittedly was enacted `to prevent the
circumvention of the right of the employee to be secured in . . (his) employment?
As it is evident from even only the three examples already given that Article 280 of
the Labor Code, under a narrow and literal interpretation, not only fails to exhaust
the gamut of employment contracts to which the lack of a fixed period would be an
anomaly, but would also appear to restrict, without reasonable distinctions, the
right of an employee to freely stipulate with his employer the duration of his
engagement, it logically follows that such a literal interpretation should be
eschewed or avoided. The law must be given reasonable interpretation, to preclude
absurdity in its application. Outlawing the whole concept of term employment and
subverting to boot the principle of freedom of contract to remedy the evil of
employers using it as a means to prevent their employees from obtaining security
of tenure is like cutting off the nose to spite the face or, more relevantly, curing a
headache by lopping off the head.
x x x
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have
been, as already observed, to prevent circumvention of the employees right to be
secure in his tenure, the clause in said article indiscriminately and completely ruling
out all written or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer to the substantive evil
that the Code itself has singled out: agreements entered into precisely to
circumvent security of tenure. It should have no application to instances where a
fixed period of employment was agreed upon knowingly and voluntarily by the
parties, without any force, duress or improper pressure being brought to bear upon
the employee and absent any other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with each other on
more or less equal terms with no moral dominance whatever being exercised by
the former over the latter. Unless thus limited in its purview, the law would be
made to apply to purposes other than those explicitly stated by its framers; it thus
becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and
unintended consequences."cralaw virtua1aw library
(Emphasis supplied)
It is apparent from Brent School that the critical consideration is the presence or
absence of a substantial indication that the period specified in an employment
agreement was designed to circumvent the security of tenure of regular employees
which is provided for in Articles 280 and 281 of the Labor Code. This indication
must ordinarily rest upon some aspect of the agreement other than the mere
specification of a fixed term of the employment agreement, or upon evidence
aliunde of the intent to evade.
Examining the provisions of paragraphs 5 and 6 of the employment agreement
between petitioner PIA and private respondents, we consider that those provisions
must be read together and when so read, the fixed period of three (3) years
specified in paragraph 5 will be seen to have been effectively neutralized by the
provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back from
the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by
rendering such period in effect a facultative one at the option of the employer PIA.
For petitioner PIA claims to be authorized to shorten that term, at any time and for
any cause satisfactory to itself, to a one-month period, or even less by simply
paying the employee a months salary. Because the net effect of paragraphs 5 and
6 of the agreement here involved is to render the employment of private
respondents Farrales and Mamasig basically employment at the pleasure of
petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to
prevent any security of tenure from accruing in favor of private respondents even
during the limited period of three (3) years, 13 and thus to escape completely the
thrust of Articles 280 and 281 of the Labor Code.
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement
which specifies, firstly, the law of Pakistan as the applicable law of the agreement
and, secondly, lays the venue for settlement of any dispute arising out of or in
connection with the agreement "only [in] courts of Karachi, Pakistan." The first
clause of paragraph 10 cannot be invoked to prevent the application of Philippine
labor laws and regulations to the subject matter of this case, i.e., the employer-
employee relationship between petitioner PIA and private respondents. We have
already pointed out that relationship is much affected with public interest and that
the otherwise applicable Philippine laws and regulations cannot be rendered illusory
by the parties agreeing upon some other law to govern their relationship. Neither
may petitioner invoke the second clause of paragraph 10, specifying the Karachi
courts as the sole venue for the settlement of disputes between the contracting
parties. Even a cursory scrutiny of the relevant circumstances of this case will show
the multiple and substantive contacts between Philippine law and Philippine courts,
on the one hand, and the relationship between the parties, upon the other: the
contract was not only executed in the Philippines, it was also performed here, at
least partially; private respondents are Philippine citizens and residents, while
petitioner, although a foreign corporation, is licensed to do business (and actually
doing business) and hence resident in the Philippines; lastly, private respondents
were based in the Philippines in between their assigned flights to the Middle East
and Europe. All the above contacts point to the Philippine courts and administrative
agencies as a proper forum for the resolution of contractual disputes between the
parties. Under these circumstances, paragraph 10 of the employment agreement
cannot be given effect so as to oust Philippine agencies and courts of the
jurisdiction vested upon them by Philippine law. Finally, and in any event, the
petitioner PIA did not undertake to plead and prove the contents of Pakistan law on
the matter; it must therefore be presumed that the applicable provisions of the law
of Pakistan are the same as the applicable provisions of Philippine law. 14
We conclude that private respondents Farrales and Mamasig were illegally
dismissed and that public respondent Deputy Minister, MOLE, had not committed
any grave abuse of discretion nor any act without or in excess of jurisdiction in
ordering their reinstatement with backwages. Private respondents are entitled to
three (3) years backwages without qualification or deduction. Should their
reinstatement to their former or other substantially equivalent positions not be
feasible in view of the length of time which has gone by since their services were
unlawfully terminated, petitioner should be required to pay separation pay to
private respondents amounting to one (1) months salary for every year of service
rendered by them, including the three (3) years service putatively rendered.
ACCORDINGLY, the Petition for Certiorari is hereby DISMISSED for lack of merit,
and the Order dated 12 August 1982 of public respondent is hereby AFFIRMED,
except that (1) private respondents are entitled to three (3) years backwages,
without deduction or qualification; and (2) should reinstatement of private
respondents to their former positions or to substantially equivalent positions not be
feasible, then petitioner shall, in lieu thereof, pay to private respondents separation
pay amounting to one (1)-months salary for every year of service actually
rendered by them and for the three (3) years putative service by private
respondents. The Temporary Restraining Order issued on 13 September 1982 is
hereby LIFTED. Costs against petitioner.
SO ORDERED.
Fernan C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
EN BANC
[G.R. No. L-15127. May 30, 1961.]
EMETERIO CUI, Plaintiff-Appellant, v. ARELLANO UNIVERSITY, Defendant-
Appellee.
G.A.S. Sipin, Jr., for Plaintiff-Appellant.
E. Voltaire Garcia,, for Defendant-Appellee.
SYLLABUS
1. CONTRACTS; STUDENTS AND EDUCATIONAL INSTITUTIONS; SCHOLARSHIPS;
STIPULATION WHEREBY STUDENT CANNOT TRANSFER TO ANOTHER SCHOOL
WITHOUT REFUNDING SCHOLARSHIP CASH NULL AND VOID. The stipulation in a
contract, between a student and the school, that the students scholarship is good
only if he continues in the same school, and that he waives his right to transfer to
another school without refunding the equivalent of his scholarship in cash, is
contrary to public policy and, hence, null and void, because scholarships are
awarded in recognition of merit and to help gifted students in whom society has an
established interest or a first lien, and not to keep outstanding students in school to
bolster its prestige and increase its business potential.
DECISION
CONCEPCION, J.:
Appeal by plaintiff Emeterio Cui from a decision of the Court of First Instance of
Manila, absolving defendant Arellano University from plaintiffs complaint, with
costs against the plaintiff, and dismissing defendants counterclaim, for insufficiency
of proof thereon.
In the language of the decision appealed from:jgc:chanrobles.com.ph
"The essential facts of this case are short and undisputed. As established by the
agreement of facts Exhibit X and by the respective oral and documentary evidence
introduced by the parties, it appears conclusive that plaintiff, before the school year
1948-1949 took up preparatory law course in the defendant University. After
finishing his preparatory law course plaintiff enrolled in the College of Law of the
defendant from the school year 1948-1949. Plaintiff finished his law studies in the
defendant university up to and including the first semester of the fourth year.
During all the school years in which plaintiff was studying law in defendant law
college, Francisco R. Capistrano, brother of the mother of plaintiff, was the dean of
the College of Law and legal counsel of the defendant university. Plaintiff enrolled
for the last semester of his law studies in the defendant university but failed to pay
his tuition fees, because his uncle Dean Francisco R. Capistrano having severed his
connection with defendant and having accepted the deanship and chancellorship of
the College of Law of Abad Santos University, plaintiff left the defendants law
college and enrolled for the last semester of his fourth year law in the college of
law of the Abad Santos University graduating from the college of law of the latter
university. Plaintiff, during all the time he was studying law in defendant university
was awarded scholarship grants, for scholastic merit, so that his semestral tuition
fees were returned to him after the ends of semesters and when his scholarship
grants were awarded to him. The whole amount of tuition fees paid by plaintiff to
defendant and refunded to him by the latter from the first semester up to and
including the first semester of his last year in the college of law or the fourth year,
is in total P1,033.87. After graduating in law from Abad Santos University he
applied to take the bar examination. To secure permission to take the bar he
needed the transcripts of his records in defendant Arellano University. Plaintiff
petitioned the latter to issue to him the needed transcripts. The defendant refused
until after he had paid back the P1,033.87 which defendant refunded to him as
above stated. As he could not take the bar examination without those transcripts,
plaintiff paid to defendant the said sum under protest. This is the sum which
plaintiff seeks to recover from defendant in this case.
"Before defendant awarded to plaintiff the scholarship grants as above stated, he
was made to sign the following contract, covenant and agreement:chanrob1es
virtual 1aw library
In consideration of the scholarship granted to me by the University, I hereby waive
my right to transfer to another school without having refunded to the University
(defendant) the equivalent of my scholarship cash.
(Sgd.) Emeterio Cui."cralaw virtua1aw library
It is admitted that, on August 16, 1949, the Director of Private Schools issued
Memorandum No. 38, series of 1949, on the subject of "Scholarships", addressed
to "All heads of private schools, colleges and universities",
reading:jgc:chanrobles.com.ph
"1. School catalogs and prospectuses submitted to this Bureau show that some
schools offer full or partial scholarships to deserving students for excellence in
scholarship or for leadership in extracurricular activities. Such inducements to poor
but gifted students should be encouraged. But to stipulate the condition that such
scholarships are good only if the students concerned continue in the same school
nullifies the principle of merit in the award of these scholarships.
"2. When students are given full or partial scholarships, it is understood that such
scholarships are merited and earned. The amount in tuition and other fees
corresponding to these scholarships should not be subsequently charged to the
recipient students when they decide to quit school or to transfer to another
institution. Scholarships should not be offered merely to attract and keep students
in a school.
"3. Several complaints have actually been received from students who have
enjoyed scholarships, full or partial, to the effect that they could not transfer to
other schools since their credentials would not be released unless they would pay
the fees corresponding to the period of the scholarships. Where the Bureau
believes that the right of the student to transfer is being denied on this ground, it
reserves the right to authorize such transfer."cralaw virtua1aw library
that defendant herein received a copy of this memorandum; that plaintiff asked the
Bureau of Private Schools to pass upon the issue on his right to secure the
transcript of his record in defendant University, without being required to refund
the sum of P1,033.87; that the Bureau of Private Schools upheld the position taken
by the plaintiff and so advised the defendant; and that, this notwithstanding, the
latter refused to issue said transcript of record, unless said refund were made, and
even recommended to said Bureau that it issue a written order directing the
defendant to release said transcript of record, "so that the case may be presented
to the court for judicial action." As above stated, plaintiff was, accordingly,
constrained to pay, and did pay under protest, said sum of P1,033.87, in order that
he could take the bar examinations in 1953. Subsequently, he brought this action
for the recovery of said amount, aside from P2,000 as moral damages, P500 as
exemplary damages, P2,000 as attorneys fees, and P500 as expenses of litigation.
In its answer, defendant reiterated the stand it took vis-a-vis the Bureau of Private
Schools, namely, that the provisions of its contract with plaintiff are valid and
binding, and that the memorandum above-referred to is null and void. It, likewise,
set up a counterclaim for P10,000.00 as damages, and P3,000 as attorneys fees.
The issue in this case is whether the above quoted provision of the contract
between plaintiff and the defendant whereby the former waived his right to transfer
to another school without refunding to the latter the equivalent of his scholarships
in cash, is valid or not. The lower court resolved this question in the affirmative,
upon the ground that the aforementioned memorandum of the Director of Private
Schools is not a law; that the provisions thereof are advisory, not mandatory in
nature; and that, although the contractual provision "may be unethical, yet it was
more unethical for plaintiff to quit studying with the defendant without good
reasons and simply because he wanted to follow the example of his uncle."
Moreover, defendant maintains in its brief that the aforementioned memorandum of
the Director of Private Schools is null and void because said officer had no authority
to issue it, and because it had been neither approved by the corresponding
department head nor published in the official gazette.
We do not deem it necessary or advisable to consider, as the lower court did, the
question whether plaintiff had sufficient reasons or not to transfer from defendant
University to the Abad Santos University. The nature of the issue before us, and its
far reaching effects, transcend personal equations and demand a determination of
the case from a high impersonal plane. Neither do we deem it essential to pass
upon the validity of said Memorandum No. 38, for, regardless of the same, we are
of the opinion that the stipulation in question is contrary to public policy and hence,
null and void. The aforesaid memorandum merely incorporates a sound principle of
public policy. As the Director of Private Schools correctly pointed out in his letter,
Exhibit B, to the defendant,
"There is one more point that merits refutation and that is whether or not the
contract entered into between Cui and Arellano University on September 10, 1951
was void as against public policy. In the case of Zeigler v. Illinois Trust and Savings
Bank, 245 Ill. 180, 19 Ann. Case 127, the court said: In determining a public
policy of the state, courts are limited to a consideration of the Constitution, the
judicial decisions, the statutes, and the practice of government officers. It might
take more than a government bureau or office to lay down or establish a public
policy, as alleged in your communication, but courts consider the practices of
government officials as one of the four factors in determining a public policy of the
state. It has been consistently held in America that under the principles relating to
the doctrine of public policy, as applied to the law of contracts, courts of justice will
not recognize or uphold a transaction which in its object, operation, or tendency, is
calculated to be prejudicial to the public welfare, to sound morality, or to civic
honesty (Ritter v. Mutual Life Ins. Co., 169 U. S. 139; Heding v. Gallaghere, 64
L.R.A. 811; Veazy v. Allen, 173 N.Y. 359). If Arellano University understood clearly
the real essence of scholarships and the motives which prompted this office to
issue Memorandum No. 38, s. 1949, it should have not entered into a contract of
waiver with Cui on September 10, 1951, which is a direct violation of our
Memorandum and an open challenge to the authority of the Director of Private
Schools because the contract was repugnant to sound morality and civic honesty.
And finally, in Gabriel v. Monte de Piedad, Off. Gazette Supp. Dec. 6, 1941, p. 67
we read: In order to declare a contract void as against public policy, a court must
find that the contract as to consideration or the thing to be done, contravenes some
established interest of society, or is inconsistent with sound policy and good morals,
or tends clearly to undermine the security of individual rights. The policy
enunciated in Memorandum No. 33, s. 1949 is sound policy. Scholarships are
awarded in recognition of merit not to keep outstanding students in school to
bolster its prestige. In the understanding of that university scholarships award is a
business scheme designed to increase the business potential of an educational
institution. Thus conceived it is not only inconsistent with sound policy but also
good morals. But what is morals? Manresa has this definition. It is good customs;
those generally accepted principles of morality which have received some kind of
social and practical confirmation. The practice of awarding scholarships to attract
students and keep them in school is not good customs nor has it received some
kind of social and practical confirmation except in some private institutions as in
Arellano University. The University of the Philippines which implements Section 5 of
Article XIV of the Constitution with reference to the giving of free scholarships to
gifted children, does not require scholars to reimburse the corresponding value of
the scholarships if they transfer to other schools. So also with the leading colleges
and universities of the United States after which our educational practices or
policies are patterned. In these institutions scholarships are granted not to attract
and to keep brilliant students in school for their propaganda value but to reward
merit or help gifted students in whom society has an established interest or a first
lien." (Emphasis supplied.)
WHEREFORE, the decision appealed from is hereby reversed, and another one shall
be entered sentencing the defendant to pay to the plaintiff the sum of P1,033.87,
with interest thereon at the legal rate from September 1, 1954, date of the
institution of this case, as well as the costs, and dismissing defendants
counterclaim. It is so ordered.
EN BANC
[G.R. No. 10551. March 3, 1917. ]
IGNACIO ARROYO, Plaintiff-Appellant, v. ALFRED BERWIN, Defendant-
Appellee.
J. M. Arroyo for Appellant.
No appearance for Appellee.
SYLLABUS
1. THEFT; AGREEMENT TO STIFLE PROSECUTION. An agreement by the owner of
stolen goods to stifle the prosecution of the person charged with the theft, for a
pecuniary or other valuable consideration, is manifestly contrary to public policy
and the due administration of justice and will not be enforced in a court of law.
DECISION
CARSON, J. :
The complaint filed in this action is as follows:jgc:chanrobles.com.ph
"1. That both the plaintiff and the defendant are residents of the municipality of
Iloilo, Province of Iloilo, Philippine Islands.
"2. That the defendant is a procurador judicial in the law office of the Attorney John
Bordman, and is duly authorized by the court to practice in justice of the peace
courts of the Province of Iloilo.
"3. That the defendant, as such procurador judicial, represented Marcela Juaneza in
the justice of the peace court of Iloilo in proceeding for theft prosecuted by the
plaintiff Ignacio Arroyo; that said cause was decided by the said justice of the
peace against the accused, and the latter appealed to the Court of First Instance of
Iloilo.
"4. That on August 14, 1914, which was the day set for the hearing of the appeal of
the said cause against Marcela Juaneza for theft, Case No. 3120, the defendant
requested the plaintiff to agree to dismiss the said criminal proceeding, and, on
August 14, 1914, stipulated with the plaintiff in the presence of Roque Samson,
among other things, that his client Marcela Juaneza would recognize the plaintiffs
ownership in the land situated on Calle San Juan, suburb of Molo, municipality of
Iloilo, Province of Iloilo, where his said client ordered the cane cut, which land and
which cut cane are referred to in the cause for theft above-mentioned; and the
defendant furthermore agreed that the plaintiff should obtain a Torrens title to the
said land during the next term of the court for the trial of cadastral cases, and that
the defendants client, Marcela Juaneza, would not oppose the application for
registration to be filed by the said applicant; provided that the plaintiff would ask
the prosecuting attorney to dismiss the said proceedings filed against Marcela
Juaneza and Alejandro Castro for the crime of theft.
"5. That the plaintiff on his part complied with the agreement, and requested the
prosecuting attorney to dismiss the above-mentioned criminal cause; that the latter
petitioned the court and the court did dismiss the said cause; that in exchange the
defendant does not wish to comply with the above-mentioned agreement; that the
plaintiff delivered to the defendant for the signature of the said Marcela Juaneza a
written agreement attesting that the defendants said client recognized the
plaintiffs ownership in the described land and that she would not oppose the
plaintiffs application for registration; and that up to the present time, the
defendant has not returned to the plaintiff the said written agreement,
notwithstanding the plaintiffs many demands.
"Therefore, the plaintiff prays the court to render judgment ordering the defendant
to comply with the agreement by causing the latters said client Marcela Juaneza to
sign the document in which she recognizes the plaintiffs ownership of the land on
which she ordered the cane cut and states that she will not oppose the plaintiffs
application for the registration of the said land; and, further, by awarding to the
plaintiff the costs of the present suit, as well as any other relief that justice and
equity require."cralaw virtua1aw library
The trial judge dismissed this complaint on the ground of the illegality of the
consideration of the alleged contract, and without stopping to consider any other
objection to the complaint than that indicated by the court below, we are of opinion
that the order appealed from must be affirmed.
An agreement by the owner of stolen goods to stifle the prosecution of the person
charged with the theft, for a pecuniary or other valuable consideration, is
manifestly contrary to public policy and the due administration of justice. In the
interest of the public it is if the utmost importance that criminals should be
prosecuted, and that all criminal proceedings should be instituted and maintained
in the form and manner prescribed by law; and to permit an offender to escape the
penalties prescribed by law by the purchase of immunity from private individuals
would result in a manifest perversion of justice.
Article 1255 of the Civil Code provides that:jgc:chanrobles.com.ph
"The contracting parties may make the agreement and establish the clauses and
conditions which they may deem advisable, provided they are not in contravention
of law, morals, or public order."cralaw virtua1aw library
Article 1275 provides that:jgc:chanrobles.com.ph
"Contracts without consideration or with an illicit one have no effect whatsoever. A
consideration is illicit when it is contrary to law and good morals."cralaw virtua1aw
library
The order entered in the court below should, therefore, be affirmed, with the costs
of this instance against the appellant. So ordered.
Torres, Moreland, Trent and Araullo, JJ., concur.
EN BANC
[G.R. No. L-19638. June 20, 1966.]
FILIPINAS COMPAIA DE SEGUROS, ET AL., Petitioners-Appellees, v. HON.
FRANCISCO Y. MANDANAS, in his capacity as Insurance Commissioner,
respondent-appellant, AGRICULTURAL FIRE INSURANCE & SURETY CO.,
INC., ET AL., intervenors-appellees.
Jalandoni & Jamir for Petitioners-Appellees.
Solicitor General Arturo A. Alafriz, 1st Assistant. Solicitor General
Esmeraldo Umali and Solicitor Conrado T. Limcaoco, for intervenors-
appellees.
SYLLABUS
1. TRADE MONOPOLIES AND COMBINATIONS; TEST TO DETERMINE WHETHER AN
AGREEMENT CONSTITUTES UNLAWFUL MACHINATION OR COMBINATION IN
RESTRAINT OF TRADE; ARTICLE 22, CONSTITUTION OF PHILIPPINE RATING
BUREAU, NOT ILLEGAL; CASE AT BAR. The test on whether a given agreement
constitutes an unlawful machination or a combination in restraint of trade is
whether, under the particular circumstances of the case and the nature of the
particular contract involved in it, the contract is, or is not, unreasonable (Ferrazini
v. Gsell, 34 Phil., 697, 712-13). Restriction upon trade may be upheld when not
contrary to the public welfare and not greater than is necessary to afford a fair and
reasonable protection to the party in whose favor it is imposed (Ollendorf v.
Abrahamson, 38 Phil., 585). The question to be determined is whether the restraint
imposed is such as merely regulates and perhaps thereby promotes competition, or
whether it is such as may suppress or even destroy competition (Board of Trade of
Chicago v. U.S. 246, U.S. 231, 62 L. ed. 683 [1918]). Applying this test to the case
at bar, there is nothing unlawful, immoral, unreasonable or contrary to public policy
either in the objectives sought to be attained by the Bureau of Philippine Rating in
adopting Article 22 of its constitution, or in the means availed of to achieve said
objectives, or in the consequences of the accomplishment thereof. The said Article
22 provides that the members of the Bureau "agree not to represent nor to effect
reinsurance with nor accept reinsurance from any company, body, or underwriter
licensed to do business in the Philippines not a member of good standing in the
Bureau." Its purpose is not to eliminate competition, but to promote ethical
practices among non-life insurance companies, although incidentally, it may
discharge, and hence, eliminate unfair competition, through underrating, which in
itself, is eventually injurious to the public. The limitation upon reinsurance
contained in Article 22 does not affect the public at all, for whether there is
reinsurance or not, the liability of the insurer in favor of the insured is the same.
What is more, whatever the Bureau may do in the matter of rate-fixing is not
decisive insofar as the public is concerned, for no insurance company in the
Philippines may charge a rate of premium that has not been approved by the
Insurance Commissioner. The said Article 22 does not, therefore, constitute an
illegal or undue restraint of trade.
 company concerned to do business in the Philippines." Thereupon, or on May 16,
1961, the present action was commenced.

Briefly, appellant maintains that, since, in the aforementioned Article 22, members
DECISION
of the Bureau "agree not to represent nor to effect reinsurance with, nor to accept
reinsurance from any company, body, or underwriter, licensed to do business in the
Philippines not a member in good standing of the Bureau", said provision is illegal
as a combination in restraint of trade. As early as August 10, 1916, this Court had
occasion to declare that the test on whether a given agreement constitutes an
CONCEPCION, C.J.: unlawful machination or a combination in restraint of trade.

". . . is whether, under the particular circumstances of the case and the nature of
the particular contract involved in it, the contract is, or is not, unreasonable."
(Ferrazini v. Gzell, 34 Phil. 697, 712-13.)
This is a special civil action for a declaratory relief. Thirty- nine (39) non-life
This view was reiterated in Ollendorf v. Abrahamson (38 Phil., 585) and Red Line
insurance companies instituted it, in the Court of First Instance of Manila, to secure
Transportation Co. v. Bachrach Motor Co. (67 Phil., 77), in the following
a declaration of legality of Article 22 of the constitution of the Philippine Rating
language:jgc:chanrobles.com.ph
Bureau, of which they are members, inasmuch as respondent Insurance
Commissioner assails its validity upon the ground that it constitutes an illegal or
". . . The general tendency, we believe, of modern authority, is to make the test
undue restraint of trade. Subsequently to the filing of the petition, twenty (20)
whether the restrain is reasonably necessary for the protection of the contracting
other non-life insurance companies, likewise, members of said Bureau, were
parties. If the contract is reasonably necessary to protect the interest of the
allowed to intervene in support of the petition. After appropriate proceedings, said
parties, it will be upheld.
court rendered judgment declaring that the aforementioned Article 22 is neither
contrary to law nor against public policy, and that, accordingly, petitioners herein,
as well as the intervenors and other members of the aforementioned Bureau, may x x x
lawfully observe and enforce said Article, and are bound to comply with the
provisions thereof, without special pronouncement as to costs. Hence this appeal by
respondent Insurance Commissioners, who insists that the Article in question
constitutes an illegal or undue restraint of trade and, hence, null and void. ". . . we adopt the modern rule that the validity of restraints upon trade or
employment is to be determined by the intrinsic reasonableness of the restriction in
The record discloses that on March 11, 1960, respondent wrote to said Bureau, a each case, rather than by any fixed rule, and that such restrictions may be upheld
communication expressing his doubts or the validity of said Article 22, when not contrary to the public welfare and not greater than is necessary to afford
reading:chanrob1es virtual 1aw library a fair and reasonable protection to the party in whose favor it is imposed."
(Ollendorf v. Abrahamson, 38 Phil., 585.)
x x x
". . . The test of validity is whether under the particular circumstances of the case
and considering the nature of the particular contract involved, public interest and
welfare are not involved and the restraint is not only reasonably necessary for the
protection of the contracting parties but will not affect public interest or service."
"In respect to the classes of insurance specified in the Objects of the Bureau 1 and
(Red Line Transportation Co. v. Bachrach Motor Co., 67 Phil. 77.) (See, also, Del
for Philippine business only, the members of this Bureau agree not to represent nor
Castillo v. Richmond, 45 Phil. 483.)
to effect reinsurance from, any Company, Body, or Underwriter licensed to do
business in the Philippines not a Member in good standing of this Bureau"
The issue in the case at bar hinges, therefore, on the purpose or effect of the
disputed provision. The only evidence on this point is the uncontradicted testimony
and requesting that said provision, be accordingly, repealed. On April 11, 1960,
of Salvador Estrada, Chairman of the Bureau when it was first organized and when
respondent wrote another letter to the Bureau inquiring on the action taken on the
he took the witness stand. Briefly stated, he declared that the purpose of Article 22
subject-matter of his previous communication. In reply thereto, the Bureau advised
is to maintain a high degree or standard of ethical practice, so that insurance
respondent that the suggestion to delete said Article 22 was under consideration by
companies may earn and maintain the respect of the public, because the intense
a committee of said Bureau. Soon thereafter, or on May 9, 1961, the latter was
competition between the great number of non-life insurance companies operating
advised by respondent that, being an illegal agreement or combination in restraint
in the Philippines, is conducive to unethical practices, oftentimes taking the form
of trade, said Article should not be given force and effect; that failure to comply
underrating; that to achieve this purpose it is highly desirable to have cooperative
with this requirement would compel respondent to suspend the license issued to
action between said companies in the compilation of their total experience in the
the Bureau; and that the latter would circularize all of its members on this matter
business, so that the Bureau could determine more accurately the proper rate of
and advise them that "violation of this requirement by any member of the Bureau"
premium to be charged from the insured; that, several years ago, the very
would also compel respondent "to suspend the certificate of authority of the
Insurance Commissioner had indicated to the Bureau the necessity of doing
something to combat underrating, for, otherwise, he would urge the amendment of
the law so that appropriate measures could be taken therefor by this office; that
much of the work of the Bureau has to do with rate-making and policy wording;
that rate-making is actually dependent very much on statistics; that, unlike life
insurance companies, which have tables of mortality to guide them in the fixing of
rates, non-life insurance companies have, as yet, no such guides, that, accordingly,
non-life insurance companies need an adequate record of losses and premium
collections that will enable them to determine the amount of risk involved in each
type of risk and, hence, to determine the rates or premiums that should be charged
in insuring every type of risk; that this information cannot be compiled without full
cooperation on the part of the companies concerned, which cannot be expected
from non-members of the Bureau, over which the latter has no control; and that;
in addition to submitting information about their respective experience, said Bureau
members must, likewise, share in the rather appreciable expenses entailed in
compiling the aforementioned data and analyzing the same.
We find nothing unlawful, or immoral, or unreasonable, or contrary to public policy
either in the objectives thus sought to be attained by the Bureau, or in the means
availed of to achieve said objectives, or in the consequences of the accomplishment
thereof. The purpose of said Article 22 is not to eliminate competition, but to
promote ethical practices among non-life insurance companies, although,
incidentally, it may discourage, and, hence, eliminate unfair competition, through
underrating, which, in itself, is eventually injurious to the public. Indeed in the
words of Mr. Justice Brandeis:jgc:chanrobles.com.ph
". . . the legality of an agreement or regulation cannot be determined by so simple
a test, as whether it restrains competition. Every agreement concerning trade,
every regulation of trade, restrains. To bind, to restrain, is of their very essence.
The true test of legality is whether the restraint imposed is such as merely
regulates and perhaps thereby promotes competition, or whether it is such as may
suppress or even destroy competition. To determine that question the court must
ordinarily consider the facts peculiar to the business to which the restraint is
applied; its condition before and after the restraint was imposed; the nature of the
restraint, and its effect, actual or probable." (Board of Trade of Chicago v. U.S., 246
U.S. 231, 62 Led. 683 [1918].)
Thus, in Sugar Institute, Inc. v. U.S. (297 U.S. 553), the Federal Supreme Court
added:jgc:chanrobles.com.ph
"The restrictions imposed by the Sherman Act are not mechanical or artificial. We
have repeatedly said that they set up the essential standard of reasonableness.
Standard Oil Co. v. United States 221 U.S. 1, 55 L. ed. 619 31 S. Ct. 502, 34 L.R.A.
(N.S.) 834, Ann. Cas. 1912D, 734, United States v. American Tobacco Co., 221 U.S.
106, 55 L. ed. 663, 31 S. Ct. 632. They are aimed at contracts and combinations
which by reason of intent or the inherent nature of the contemplated acts,
prejudice the public interests by unduly restraining competition or unduly
obstructing the course of trade. Nash v. United States, 229 U.S. 373, 376, 57 L.
ed. 1232, 1235, 33 S. Ct. 780; United States v. American Linseed Oil Co., 262 U.S.
371, 388, 389, 67 L. ed. 1035, 1040, 1041, 43 S. Ct. 607. Designed to frustrate
unreasonable restraints, they do not prevent the adoption of reasonable means to
protect interstate commerce from destructive or injurious practices and to promote
competition upon a sound basis. Voluntary action to end abuses and to foster fair
competitive opportunities in the public interest may be more effective than legal
processes. And cooperative endeavor may appropriately have wider objectives than
merely the removal of evils which are infractions of positive law"
Hence, the City Fiscal of Manila refused to prosecute criminally the Manila Fire
Insurance Association for following a policy analogous to that incorporated in the
provision disputed in this case and the action of said official was sustained by the
Secretary of Justice, upon the ground that:jgc:chanrobles.com.ph
". . . combinations among insurance companies or their agents to fix and control
rates of insurance do not constitute indictable conspiracies, provided no unlawful
means are used in accomplishing their purpose (41 C.J. 161; Aetna Ins. Co. v.
Commonwealth, 106 Ky. 864, 51 SW 624; Queen Ins. Co. v. State, 86 Tex. 250, 24
SW 397; I Joyce on Insurance, par. 329-a)"
Indeed, Mr. Estradas testimony shows that the limitation upon insurance contained
in the aforementioned Article 22 does not affect the public at all, for, whether there
is reinsurance or not, the liability of the insurer is the same. Besides, there are
sufficient foreign reinsurance companies operating in the Philippines from which
non-members of the Bureau may secure reinsurance. What is more, whatever the
Bureau may do in the matter of rate-fixing is not decisive insofar as the public is
concerned, for insurance company in the Philippines may charge a rate of premium
that has not been approved by the Insurance Commissioner.
In fact, respondents Circular No. 54, dated February 26, 1954,
provides:jgc:chanrobles.com.ph
"II. Non-life Insurance company or Group Association of such Companies.
"Every non-life insurance company or group or association of such companies doing
business in the Philippines shall file with the Insurance Commissioner for approval
general basic schedules showing the premiums rates on all classes of risk except
marine, as distinguished from inland marine, insurable by such insurance company
or association of insurance companies in this country.
x x x
"An insurance company or group of such companies may satisfy its obligation to
make such filing by becoming a member of or subscriber to a rating organization
which make such filing and by authorizing the insurance commissioner to accept
such filings of the raring organization on such companys or groups behalf.
"III. Requiring Previous Application to and Approval by the Insurance Commissioner
before any Change in the Rates Schedules filed with Him Shall Take Effect.
"No change in the schedules filed in compliance with the requirements of the next
preceding paragraph shall be made except upon application duly filed with and
approved by the Insurance Commissioner. Said application shall state the changes
proposed and the date of their effectivity; all changes finally approved by the
Insurance Commissioner shall be incorporated in the old schedules or otherwise
indicated as new in the new schedules.
"IV. Empowering the Insurance Commissioner to Investigate All Non-Life Insurance
Rates.
"The Insurance Commissioner shall have power to examine any or all rates
established by non-life insurance companies or group or association of such
insurance companies in the country. Should any rate appear, in the opinion of the
Insurance Commissioner, unreasonably high or not adequate to the financial safety
or soundness to the company charging same, or prejudicial to policy-holders, the
Commissioner shall, in such case, hold a hearing and/or conduct an investigation.
Should the result of such hearing and/or investigation show that the rate is
unreasonably high or so low that it is not adequate to the financial safety and
soundness of the company charging same, or is prejudicial to policy-holders, the
Insurance Commissioner shall direct a revision of the said rate in accordance with
his findings. Any insurance company or group or association of insurance
companies may be required to publish the schedule of rates which may have been
revised in accordance herewith.
"The decision of the Insurance Commissioner shall be appealable within thirty days
after it has been rendered to the Secretary of Finance.
"V. prohibiting Non-Life Insurance Companies and their Agents from Insuring Any
Property in this Country at a Rate Different from that in the Schedules: Unethical
Practices.
"No insurance company shall engage or participate in the insurance of any property
located in the Philippines . . . unless the schedule if rates under which property is
insured has been filed and approved in accordance with the provisions of this
Circular . . ." (Emphasis ours.)
On the same date, the Constitution of the Bureau, containing a provision
substantially identical to the one now under consideration was approved. Article 2
of said Constitution reads:jgc:chanrobles.com.ph
"2. OBJECTS
The objects of the Bureau shall be:jgc:chanrobles.com.ph
"a. To establish rates in respect of Fire, Earthquake, Riot and Civil Commotion,
Automobile and Workmens Compensation, and whenever applicable, Marine
Insurance business.
x x x the following terms and conditions:jgc:chanrobles.com.ph
"c. To file the rates referred to above, tariff rules, and all other conditions or data
which may in any way affect premium rates with the Office of the Insurance
Commissioner on behalf of members for approval." (Emphasis ours.)
In compliance with the aforementioned Circular No. 54, in April, 1954, the Bureau
applied for the license required therein, and submitted with its application a copy of
said Constitution. On April 28, 1954, respondents office issued to the Bureau the
license applied for, certifying, not only that it had complied with the requirements
of Circular No. 54, but, also, the license empowered it "to engage in the making of
rates or policy conditions to be used by insurance companies in the Philippines."
Subsequently, thereafter, the Bureau applied for and was granted yearly the
requisite license to operate in accordance with the provisions of its Constitution.
During all this time, respondents office did not question, but impliedly
acknowledged, the legality of Article 22. It was not until March 11, 1960, that it
assailed its validity.
Respondents contention is anchored mainly on Paramount Famous Lasky Corp. v.
U.S., 282 U.S. 30, but the same is not in point, not only because it refers to the
conditions under which movie film producers and distributors determine the terms
under which theaters or exhibitors may be allowed to run movie films thereby
placing the contributors under the control of the producers or distributors and
giving the exhibitors, in effect, no choice as to what films and whose films they will
show but, also, because there is, in the film industry, no agency or officer with
powers or functions comparable to those in the Insurance Commissioner, as
regards the regulation of the business concerned and of the transactions involved
therein.
WHEREFORE, the decision appealed from should be, as it is hereby affirmed,
without costs. It is so ordered.
Dizon, Regala, Makalintal, J.P. Bengzon, Zaldivar and Sanchez, JJ., concur.
J.B.L. Reyes and Barrera, JJ., took no part
FIRST DIVISION
[G.R. No. 126800. November 29, 1999.]
NATALIA P. BUSTAMANTE, Petitioner, v. SPOUSES RODITO F. ROSEL and
NORMA A. ROSEL,Respondents.
RESOLUTION
PARDO, J.:
The case before the Court is a petition for review on certiorari 1 to annul the
decision of the Court of Appeals, 2 reversing and setting aside the decision of the
Regional Trial Court, 3 Quezon City, Branch 84, in an action for specific
performance with consignation.chanrobles virtual lawlibrary
On March 8, 1987, at Quezon city, Norma Rosel entered into a loan agreement with
petitioner Natalia Bustamante and her late husband Ismael C. Bustamante, under
"1. That the borrowers are the registered owners of a parcel of land, evidenced by
TRANSFER CERTIFICATE OF TITLE No. 80667, containing an area of FOUR
HUNDRED TWENTY THREE (423) SQUARE Meters, more or less, situated along
Congressional Avenue.
"2. That the borrowers were desirous to borrow the sum of ONE HUNDRED
THOUSAND (P100,000.00) PESOS from the LENDER, for a period of two (2) years,
counted from March 1, 1987, with an interest of EIGHTEEN (18%) PERCENT per
annum, and to guaranty the payment thereof, they are putting as a collateral
SEVENTY (70) SQUARE METERS portion, inclusive of the apartment therein, of the
aforestated parcel of land, however, in the event the borrowers fail to pay, the
lender has the option to buy or purchase the collateral for a total consideration of
TWO HUNDRED THOUSAND (P200,000.00) PESOS, inclusive of the borrowed
amount and interest therein;
"3. That the lender do hereby manifest her agreement and conformity to the
preceding paragraph, while the borrowers do hereby confess receipt of the
borrowed amount." 4
When the loan was about to mature on March 1, 1989, respondents proposed to
buy at the pre-set price of P200,000.00, the seventy (70) square meters parcel of
land covered by TCT No. 80667, given as collateral to guarantee payment of the
loan. Petitioner, however, refused to sell and requested for extension of time to pay
the loan and offered to sell to respondents another residential lot located at Road
20, Project 8, Quezon City, with the principal loan plus interest to be used as down
payment. Respondents refused to extend the payment of the loan and to accept
the lot in Road 20 as it was occupied by squatters and petitioner and her husband
were not the owners thereof but were mere land developers entitled to subdivision
shares or commission if and when they developed at least one half of the
subdivision area. 5
Hence, on March 1, 1989, petitioner tendered payment of the loan to respondents
which the latter refused to accept, insisting on petitioners signing a prepared deed
of absolute sale of the collateral.
On February 28, 1990, respondents filed with the Regional Trial Court, Quezon City,
Branch 84, a complaint for specific performance with consignation against
petitioner and her spouse. 6
Nevertheless, on March 4, 1990, respondents sent a demand letter asking
petitioner to sell the collateral pursuant to the option to buy embodied in the loan
agreement.
On the other hand, on March 5, 1990, petitioner filed in the Regional Trial Court,
Quezon City a petition for consignation, and deposited the amount of P153,000.00
with the City Treasurer of Quezon City on August 10, 1990. 7
When petitioner refused to sell the collateral and barangay conciliation failed,
respondents consigned the amount of P47,500.00 with the trial court. 8 In arriving
at the amount deposited, respondent considered the principal loan of P100,000.00
and 18% interest per annum thereon, which amounted to P52,500.00. 9 The
principal lot and the interest taken together amounted to P152,500.00, leaving
balance of P47,500.00. 10
After due trial, on November 10, 1992, the trial court rendered decision
holding:jgc:chanrobles.com.ph
"WHEREFORE, premises considered, judgment is hereby rendered as
follows:jgc:chanrobles.com.ph
"1. Denying the plaintiffs prayer for the defendants execution of the Deed of Sale
to Convey the collateral in plaintiffs favor;
"2. Ordering the defendants to pay the loan of P100,000.00 with interest thereon at
18% per annum commencing on March 2, 1989, up to and until August 10, 1990,
when defendants deposited the amount with the Office of the City Treasurer under
Official Receipt No. 0116548 (Exhibit "2"); and
"3. To pay Attorneys Fees in the amount of P5,000.00 plus costs of suit.
"SO ORDERED.chanroblesvirtuallawlibrary
"Quezon City, Philippines, November 10, 1992.
"TEODORO P. REGINO
"Judge" 11
On November 16, 1992, respondents appealed from the decision to the Court of
Appeals. 12 On July 8, 1996, the Court of Appeals rendered decision reversing the
ruling of the Regional Trial Court. The dispositive portion of the Court of Appeals
decision reads:jgc:chanrobles.com.ph
"IN VIEW OF THE FOREGOING, the judgment appeal (sic) from is REVERSED and
SET ASIDE and a new one entered in favor of the plaintiffs ordering the defendants
to accept the amount of P 47,000.00 deposited with the Clerk of Court of Regional
Trial Court of Quezon City under Official Receipt No. 0719847, and for defendants
to execute the necessary Deed of Sale in favor of the plaintiffs over the 70 SQUARE
METER portion and the apartment standing thereon being occupied by the plaintiffs
and covered by TCT No. 80667 within fifteen (15) days from finality hereof.
Defendants, in turn, are allowed to withdraw the amount of P153,000.00 deposited
by them under Official Receipt No. 0116548 of the City Treasurers Office of Quezon
City. All other claims and counterclaims are DISMISSED, for lack of sufficient basis.
No costs.
"SO ORDERED." 13
Hence, this petition. 14
On January 20, 1997, we required respondents to comment on the petition within
ten (10) days from notice. 15 On February 27, 1997 respondents filed their
comment. 16
On February 9, 1998, we resolved to deny the petition on the ground that there
was no reversible error on the part of respondent court in ordering the execution of
the necessary deed of sale in conformity with the parties stipulated agreement.
The contract is the law between the parties thereof (Syjuco v. Court of Appeals,
172 SCRA 111, 118, citing Phil. American General Insurance v. Mutuc, 64 SCRA 22;
Herrera v. Petrophil Corporation, 146 SCRA 360). 17
On March 17, 1998, petitioner filed with this Court a motion for reconsideration of
the denial alleging that the real intention of the parties to the loan was to put up
the collateral as guarantee similar to as equitable mortgage according to Article
1602 of the Civil Code. 18
On April 21, 1998, respondents filed an opposition to petitioners motion for
reconsideration. They contend that the agreement between the parties was not a
sale with right of re-purchase, but a loan with interest at 18% per annum for a
period of two years and if petitioner fails to pay, the respondent was given the right
to purchase the property or apartment for P200,000.00, which is not contrary to
law, moral good customs, public order or public policy. 19
Upon due consideration of petitioners motion, we now resolve to grant the motion
for reconsideration.
The questions presented are whether petitioner failed to pay the loan at its
maturity date and whether the stipulation in the loan contract was valid and
enforceable.
We rule that petitioner did not fail to pay the loan.
The loan was due for payment on March 1, 1989. On said date, petitioner tendered
payment to settle the loan which respondents refused to accept, insisting that
petitioner sell to them the collateral of the loan.
When respondents refused to accept payment, petitioner consigned the amount
with the trial court.
We note the eagerness of respondents to acquire the property given as collateral to
guarantee the loan. The sale of the collateral is an obligation with a suspensive
condition. 20 It is dependent upon the happening of an event, without which the
obligation to sell does not arise. Since the event did not occur, respondents do not
have the right to demand fulfillment of petitioners obligation, especially where the
same would not only be disadvantageous to petitioner but would also unjustly
enrich respondents considering the inadequate consideration (P200,000.00) for a
70 square meter property situated at Congressional Avenue, Quezon City.
Respondents argue that contracts have the force of law between the contracting
parties and must be complied with in good faith. 21 There are, however, certain
exceptions to the rule; specifically Article 1306 of the Civil Code, which
provides:jgc:chanrobles.com.ph
"ARTICLE 1306. The contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary
to law, morals, good customs, public order, or public policy." chanrobles.com :
virtual law library
A scrutiny of the stipulation of the parties reveals a subtle intention of the creditor
to acquire the property given as security for the loan. This is embraced in the
concept of pactum commissorium, which is proscribed by law. 22
"The elements of pactum commissorium are as follows: (1) there should be a
property mortgaged by way of security for the payment of the principal obligation,
and (2) there should be a stipulation automatic appropriation by the creditor of the
thing mortgaged in case of non-payment of the principal obligation within the
stipulated period." 23
In Nakpil v. Intermediate Appellate Court, 24 we said:jgc:chanrobles.com.ph
"The arrangement entered into between the parties, whereby Pulong Maulap was to
be "considered sold to him (respondent) . . . in case petitioner fails to reimburse
Valdes, must then be construed as tantamount to pactum commissorium which is
expressly prohibited by Art. 2088 of the Civil Code. For, there was to be automatic
appropriation of the property by Valdes in the event of failure of petitioner to pay
the value of the advances. Thus, contrary to respondents manifestation, all the
elements of a pactum commissorium were present: there was a creditor-debtor
relationship between the parties; the property was used as security for the loan;
and there was automatic appropriation by respondent of Pulong Maulap in case of
default of petitioner."cralaw virtua1aw library
A significant task in contract interpretation is the ascertainment of the intention of
the parties and looking into the words used by the parties to project that intention.
In this case, the intent to appropriate the property given as collateral in favor of
the creditor appears to be evident, for the debtor is obliged to dispose of the
collateral at the pre-agreed consideration amounting to practically the same
amount as the loan. In effect, the creditor acquires the collateral in the event of
non-payment of the loan. This is within the concept of pactum commissorium. Such
stipulation is void.25cralaw:red
All persons in need of money are liable to enter into contractual relationships
whatever the condition if only to alleviate their financial burden albeit temporarily.
Hence, courts are duty bound to exercise caution in the interpretation and
resolution of contracts lest the lenders devour the borrowers like vultures do with
their prey.
WHEREFORE, we GRANT petitioners motion for reconsideration and SET ASIDE the
Courts resolution of February 9. 1998. We REVERSE the decision of the Court of
Appeals in CA-G. R. CV No. 40193. In lieu thereof, we hereby DISMISS the
complaint in Civil Case No. Q-90-4813.
No costs.
SO ORDERED.chanrobles law library