Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-30511 February 14, 1980

MANUEL M. SERRANO, petitioner,
vs.
CENTRAL BANK OF THE PHILIPPINES; OVERSEAS BANK OF MANILA; EMERITO M. RAMOS,
SUSANA B. RAMOS, EMERITO B. RAMOS, JR., JOSEFA RAMOS DELA RAMA, HORACIO DELA
RAMA, ANTONIO B. RAMOS, FILOMENA RAMOS LEDESMA, RODOLFO LEDESMA, VICTORIA RAMOS
TANJUATCO, and TEOFILO TANJUATCO, respondents.
Rene Diokno for petitioner.
F.E. Evangelista & Glecerio T. Orsolino for respondent Central Bank of the
Philippines.
Feliciano C. Tumale, Pacifico T. Torres and Antonio B. Periquet for respondent
Overseas Bank of Manila.
Josefina G. Salonga for all other respondents.

CONCEPCION, JR., J.:

Petition for mandamus and prohibition, with preliminary injunction, that seeks the
establishment of joint and solidary liability to the amount of Three Hundred Fifty
Thousand Pesos, with interest, against respondent Central Bank of the Philippines
and Overseas Bank of Manila and its stockholders, on the alleged failure of the
Overseas Bank of Manila to return the time deposits made by petitioner and assigned
to him, on the ground that respondent Central Bank failed in its duty to exercise
strict supervision over respondent Overseas Bank of Manila to protect depositors
and the general public.1 Petitioner also prays that both respondent banks be ordered
to execute the proper and necessary documents to constitute all properties fisted
in Annex "7" of the Answer of respondent Central Bank of the Philippines in G.R.
No. L-29352, entitled "Emerita M. Ramos, et al vs. Central Bank of the
Philippines," into a trust fund in favor of petitioner and all other depositors of
respondent Overseas Bank of Manila. It is also prayed that the respondents be
prohibited permanently from honoring, implementing, or doing any act predicated
upon the validity or efficacy of the deeds of mortgage, assignment. and/or
conveyance or transfer of whatever nature of the properties listed in Annex "7" of
the Answer of respondent Central Bank in G.R. No. 29352.2
A sought for ex-parte preliminary injunction against both respondent banks was not
given by this Court.
Undisputed pertinent facts are:
On October 13, 1966 and December 12, 1966, petitioner made a time deposit, for one
year with 6% interest, of One Hundred Fifty Thousand Pesos (P150,000.00) with the
respondent Overseas Bank of Manila. 3 Concepcion Maneja also made a time deposit,
for one year with 6-½% interest, on March 6, 1967, of Two Hundred Thousand Pesos
(P200,000.00) with the same respondent Overseas Bank of Manila.4
On August 31, 1968, Concepcion Maneja, married to Felixberto M. Serrano, assigned
and conveyed to petitioner Manuel M. Serrano, her time deposit of P200,000.00 with
respondent Overseas Bank of Manila. 5
Notwithstanding series of demands for encashment of the aforementioned time deposits
from the respondent Overseas Bank of Manila, dating from December 6, 1967 up to
March 4, 1968, not a single one of the time deposit certificates was honored by
respondent Overseas Bank of Manila. 6
Respondent Central Bank admits that it is charged with the duty of administering
the banking system of the Republic and it exercises supervision over all doing
business in the Philippines, but denies the petitioner's allegation that the Central
Bank has the duty to exercise a most rigid and stringent supervision of banks,
implying that respondent Central Bank has to watch every move or activity of all
banks, including respondent Overseas Bank of Manila. Respondent Central Bank claims
that as of March 12, 1965, the Overseas Bank of Manila, while operating, was only
on a limited degree of banking operations since the Monetary Board decided in its
Resolution No. 322, dated March 12, 1965, to prohibit the Overseas Bank of Manila
from making new loans and investments in view of its chronic reserve deficiencies
against its deposit liabilities. This limited operation of respondent Overseas Bank
of Manila continued up to 1968.7
Respondent Central Bank also denied that it is guarantor of the permanent solvency
of any banking institution as claimed by petitioner. It claims that neither the law
nor sound banking supervision requires respondent Central Bank to advertise or
represent to the public any remedial measures it may impose upon chronic delinquent
banks as such action may inevitably result to panic or bank "runs". In the years
1966-1967, there were no findings to declare the respondent Overseas Bank of Manila
as insolvent. 8
Respondent Central Bank likewise denied that a constructive trust was created in
favor of petitioner and his predecessor in interest Concepcion Maneja when their
time deposits were made in 1966 and 1967 with the respondent Overseas Bank of Manila
as during that time the latter was not an insolvent bank and its operation as a
banking institution was being salvaged by the respondent Central Bank. 9
Respondent Central Bank avers no knowledge of petitioner's claim that the properties
given by respondent Overseas Bank of Manila as additional collaterals to respondent
Central Bank of the Philippines for the former's overdrafts and emergency loans
were acquired through the use of depositors' money, including that of the petitioner
and Concepcion Maneja. 10
In G.R. No. L-29362, entitled "Emerita M. Ramos, et al. vs. Central Bank of the
Philippines," a case was filed by the petitioner Ramos, wherein respondent Overseas
Bank of Manila sought to prevent respondent Central Bank from closing, declaring
the former insolvent, and liquidating its assets. Petitioner Manuel Serrano in this
case, filed on September 6, 1968, a motion to intervene in G.R. No. L-29352, on the
ground that Serrano had a real and legal interest as depositor of the Overseas Bank
of Manila in the matter in litigation in that case. Respondent Central Bank in G.R.
No. L-29352 opposed petitioner Manuel Serrano's motion to intervene in that case,
on the ground that his claim as depositor of the Overseas Bank of Manila should
properly be ventilated in the Court of First Instance, and if this Court were to
allow Serrano to intervene as depositor in G.R. No. L-29352, thousands of other
depositors would follow and thus cause an avalanche of cases in this Court. In the
resolution dated October 4, 1968, this Court denied Serrano's, motion to intervene.
The contents of said motion to intervene are substantially the same as those of the
present petition. 11
This Court rendered decision in G.R. No. L-29352 on October 4, 1971, which became
final and executory on March 3, 1972, favorable to the respondent Overseas Bank of
Manila, with the dispositive portion to wit:
WHEREFORE, the writs prayed for in the petition are hereby granted and respondent
Central Bank's resolution Nos. 1263, 1290 and 1333 (that prohibit the Overseas Bank
of Manila to participate in clearing, direct the suspension of its operation, and
ordering the liquidation of said bank) are hereby annulled and set aside; and said
respondent Central Bank of the Philippines is directed to comply with its
obligations under the Voting Trust Agreement, and to desist from taking action in
violation therefor. Costs against respondent Central Bank of the Philippines. 12
Because of the above decision, petitioner in this case filed a motion for judgment
in this case, praying for a decision on the merits, adjudging respondent Central
Bank jointly and severally liable with respondent Overseas Bank of Manila to the
petitioner for the P350,000 time deposit made with the latter bank, with all
interests due therein; and declaring all assets assigned or mortgaged by the
respondents Overseas Bank of Manila and the Ramos groups in favor of the Central
Bank as trust funds for the benefit of petitioner and other depositors. 13
By the very nature of the claims and causes of action against respondents, they in
reality are recovery of time deposits plus interest from respondent Overseas Bank
of Manila, and recovery of damages against respondent Central Bank for its alleged
failure to strictly supervise the acts of the other respondent Bank and protect the
interests of its depositors by virtue of the constructive trust created when
respondent Central Bank required the other respondent to increase its collaterals
for its overdrafts said emergency loans, said collaterals allegedly acquired through
the use of depositors money. These claims shoud be ventilated in the Court of First
Instance of proper jurisdiction as We already pointed out when this Court denied
petitioner's motion to intervene in G.R. No. L-29352. Claims of these nature are
not proper in actions for mandamus and prohibition as there is no shown clear abuse
of discretion by the Central Bank in its exercise of supervision over the other
respondent Overseas Bank of Manila, and if there was, petitioner here is not the
proper party to raise that question, but rather the Overseas Bank of Manila, as it
did in G.R. No. L-29352. Neither is there anything to prohibit in this case, since
the questioned acts of the respondent Central Bank (the acts of dissolving and
liquidating the Overseas Bank of Manila), which petitioner here intends to use as
his basis for claims of damages against respondent Central Bank, had been
accomplished a long time ago.
Furthermore, both parties overlooked one fundamental principle in the nature of
bank deposits when the petitioner claimed that there should be created a
constructive trust in his favor when the respondent Overseas Bank of Manila
increased its collaterals in favor of respondent Central Bank for the former's
overdrafts and emergency loans, since these collaterals were acquired by the use
of depositors' money.
Bank deposits are in the nature of irregular deposits. They are really loans because
they earn interest. All kinds of bank deposits, whether fixed, savings, or current
are to be treated as loans and are to be covered by the law on loans. 14 Current
and savings deposit are loans to a bank because it can use the same. The petitioner
here in making time deposits that earn interests with respondent Overseas Bank of
Manila was in reality a creditor of the respondent Bank and not a depositor. The
respondent Bank was in turn a debtor of petitioner. Failure of he respondent Bank
to honor the time deposit is failure to pay s obligation as a debtor and not a
breach of trust arising from depositary's failure to return the subject matter of
the deposit
WHEREFORE, the petition is dismissed for lack of merit, with costs against
petitioner.
SO ORDERED.
Antonio, Abad Santos, JJ., concur.
Barredo (Chairman) J., concur in the judgment on the of the concurring opinion of
Justice Aquino.

Separate Opinions

AQUINO, J., concurring:

The petitioner prayed that the Central Bank be ordered to pay his time deposits of
P350,000, plus interests, which he could not recover from the distressed Overseas
Bank of Manila, and to declare all the assets assigned or mortgaged by that bank
and the Ramos group to the Central Bank as trust properties for the benefit of the
petitioner and other depositors.
The petitioner has no causes of action agianst the Central Bank to obtain those
reliefs. They cannot be granted in petitioner's instant original actions in this
Court for mandamus and prohibition. It is not the Central Bank's ministerial duty
to pay petitioner's time deposits or to hold the mortgaged properties in trust for
the depositors of the Overseas Bank of Manila. The petitioner has no cause of action
for prohibition, a remedy usually available against any tribunal, board, corporation
or person exercising judicial or ministerial functions.
Since the Overseas Bank of Manila was found to be insolvent and the Superintendent
of Banks was ordered to take over its assets preparatory to its liquidation under
section 29 of Republic Act No. 265 (p. 197, Rollo, Manifestation of September 19,
1973), petitioner's remedy is to file his claim in the liquidating proceeding
(Central Bank vs. Morfe, L-38427, March 12, 1975, 63 SCRA 114; Hernandez vs. Rural
Bank of Lucena, Inc., L-29791, January 10, 1978, 81 SCRA 75).

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-6913 November 21, 1913

THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,
vs.
GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin de la
Peña, defendant-appellant.
J. Lopez Vito, for appellant.
Arroyo and Horrilleno, for appellee.

MORELAND, J.:
This is an appeal by the defendant from a judgment of the Court of First Instance
of Iloilo, awarding to the plaintiff the sum of P6,641, with interest at the legal
rate from the beginning of the action.
It is established in this case that the plaintiff is the trustee of a charitable
bequest made for the construction of a leper hospital and that father Agustin de
la Peña was the duly authorized representative of the plaintiff to receive the
legacy. The defendant is the administrator of the estate of Father De la Peña.
In the year 1898 the books Father De la Peña, as trustee, showed that he had on
hand as such trustee the sum of P6,641, collected by him for the charitable purposes
aforesaid. In the same year he deposited in his personal account P19,000 in the
Hongkong and Shanghai Bank at Iloilo. Shortly thereafter and during the war of the
revolution, Father De la Peña was arrested by the military authorities as a political
prisoner, and while thus detained made an order on said bank in favor of the United
States Army officer under whose charge he then was for the sum thus deposited in
said bank. The arrest of Father De la Peña and the confiscation of the funds in the
bank were the result of the claim of the military authorities that he was an
insurgent and that the funds thus deposited had been collected by him for
revolutionary purposes. The money was taken from the bank by the military
authorities by virtue of such order, was confiscated and turned over to the
Government.
While there is considerable dispute in the case over the question whether the P6,641
of trust funds was included in the P19,000 deposited as aforesaid, nevertheless, a
careful examination of the case leads us to the conclusion that said trust funds
were a part of the funds deposited and which were removed and confiscated by the
military authorities of the United States.
That branch of the law known in England and America as the law of trusts had no
exact counterpart in the Roman law and has none under the Spanish law. In this
jurisdiction, therefore, Father De la Peña's liability is determined by those
portions of the Civil Code which relate to obligations. (Book 4, Title 1.)
Although the Civil Code states that "a person obliged to give something is also
bound to preserve it with the diligence pertaining to a good father of a family"
(art. 1094), it also provides, following the principle of the Roman law, major
casus est, cui humana infirmitas resistere non potest, that "no one shall be liable
for events which could not be foreseen, or which having been foreseen were
inevitable, with the exception of the cases expressly mentioned in the law or those
in which the obligation so declares." (Art. 1105.)
By placing the money in the bank and mixing it with his personal funds De la Peña
did not thereby assume an obligation different from that under which he would have
lain if such deposit had not been made, nor did he thereby make himself liable to
repay the money at all hazards. If the had been forcibly taken from his pocket or
from his house by the military forces of one of the combatants during a state of
war, it is clear that under the provisions of the Civil Code he would have been
exempt from responsibility. The fact that he placed the trust fund in the bank in
his personal account does not add to his responsibility. Such deposit did not make
him a debtor who must respond at all hazards.
We do not enter into a discussion for the purpose of determining whether he acted
more or less negligently by depositing the money in the bank than he would if he
had left it in his home; or whether he was more or less negligent by depositing the
money in his personal account than he would have been if he had deposited it in a
separate account as trustee. We regard such discussion as substantially fruitless,
inasmuch as the precise question is not one of negligence. There was no law
prohibiting him from depositing it as he did and there was no law which changed his
responsibility be reason of the deposit. While it may be true that one who is under
obligation to do or give a thing is in duty bound, when he sees events approaching
the results of which will be dangerous to his trust, to take all reasonable means
and measures to escape or, if unavoidable, to temper the effects of those events,
we do not feel constrained to hold that, in choosing between two means equally
legal, he is culpably negligent in selecting one whereas he would not have been if
he had selected the other.
The court, therefore, finds and declares that the money which is the subject matter
of this action was deposited by Father De la Peña in the Hongkong and Shanghai
Banking Corporation of Iloilo; that said money was forcibly taken from the bank by
the armed forces of the United States during the war of the insurrection; and that
said Father De la Peña was not responsible for its loss.
The judgment is therefore reversed, and it is decreed that the plaintiff shall take
nothing by his complaint.
Arellano, C.J., Torres and Carson, JJ., concur.

Separate Opinions
TRENT, J., dissenting:
I dissent. Technically speaking, whether Father De la Peña was a trustee or an
agent of the plaintiff his books showed that in 1898 he had in his possession as
trustee or agent the sum of P6,641 belonging to the plaintiff as the head of the
church. This money was then clothed with all the immunities and protection with
which the law seeks to invest trust funds. But when De la Peña mixed this trust
fund with his own and deposited the whole in the bank to hispersonal account or
credit, he by this act stamped on the said fund his own private marks and unclothed
it of all the protection it had. If this money had been deposited in the name of
De la Peña as trustee or agent of the plaintiff, I think that it may be presumed
that the military authorities would not have confiscated it for the reason that
they were looking for insurgent funds only. Again, the plaintiff had no reason to
suppose that De la Peña would attempt to strip the fund of its identity, nor had
he said or done anything which tended to relieve De la Peña from the legal
reponsibility which pertains to the care and custody of trust funds.
The Supreme Court of the United States in the United State vs. Thomas (82 U. S.,
337), at page 343, said: "Trustees are only bound to exercise the same care and
solicitude with regard to the trust property which they would exercise with regard
to their own. Equity will not exact more of them. They are not liable for a loss
by theft without their fault. But this exemption ceases when they mix the trust-
money with their own, whereby it loses its identity, and they become mere debtors."
If this proposition is sound and is applicable to cases arising in this jurisdiction,
and I entertain no doubt on this point, the liability of the estate of De la Peña
cannot be doubted. But this court in the majority opinion says: "The fact that he
(Agustin de la Peña) placed the trust fund in the bank in his personal account does
not add to his responsibility. Such deposit did not make him a debtor who must
respond at all hazards. . . . There was no law prohibiting him from depositing it
as he did, and there was no law which changed his responsibility, by reason of the
deposit."
I assume that the court in using the language which appears in the latter part of
the above quotation meant to say that there was no statutory law regulating the
question. Questions of this character are not usually governed by statutory law.
The law is to be found in the very nature of the trust itself, and, as a general
rule, the courts say what facts are necessary to hold the trustee as a debtor.
If De la Peña, after depositing the trust fund in his personal account, had used
this money for speculative purposes, such as the buying and selling of sugar or
other products of the country, thereby becoming a debtor, there would have been no
doubt as to the liability of his estate. Whether he used this money for that purpose
the record is silent, but it will be noted that a considerable length of time
intervened from the time of the deposit until the funds were confiscated by the
military authorities. In fact the record shows that De la Peña deposited on June
27, 1898, P5,259, on June 28 of that year P3,280, and on August 5 of the same year
P6,000. The record also shows that these funds were withdrawn and again deposited
all together on the 29th of May, 1900, this last deposit amounting to P18,970.
These facts strongly indicate that De la Peña had as a matter of fact been using
the money in violation of the trust imposed in him. lawph!1.net
If the doctrine announced in the majority opinion be followed in cases hereafter
arising in this jurisdiction trust funds will be placed in precarious condition.
The position of the trustee will cease to be one of trust.

---------------------------------------------------------------------------------

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 4015 August 24, 1908

ANGEL JAVELLANA, plaintiff-appellee,
vs.
JOSE LIM, ET AL., defendants-appellants.
R. Zaldarriaga for appellants.
B. Montinola for appellee.

TORRES, J.:
The attorney for the plaintiff, Angel Javellana, file a complaint on the 30th of
October, 1906, with the Court of First Instance of Iloilo, praying that the
defendants, Jose Lim and Ceferino Domingo Lim, he sentenced to jointly and severally
pay the sum of P2,686.58, with interest thereon at the rate of 15 per cent per
annum from the 20th of January, 1898, until full payment should be made, deducting
from the amount of interest due the sum of P1,102.16, and to pay the costs of the
proceedings.
Authority from the court having been previously obtained, the complaint was amended
on the 10th of January, 1907; it was then alleged, on the 26th of May, 1897, the
defendants executed and subscribed a document in favor of the plaintiff reading as
follows:
We have received from Angel Javellana, as a deposit without interest, the sum of
two thousand six hundred and eighty-six cents of pesos fuertes, which we will return
to the said gentleman, jointly and severally, on the 20th of January, 1898. — Jaro,
26th of May, 1897. — Signed Jose Lim. — Signed: Ceferino Domingo Lim.
That, when the obligation became due, the defendants begged the plaintiff for an
extension of time for the payment thereof, building themselves to pay interest at
the rate of 15 per cent on the amount of their indebtedness, to which the plaintiff
acceded; that on the 15th of May, 1902, the debtors paid on account of interest due
the sum of P1,000 pesos, with the exception of either capital or interest, had
thereby been subjected to loss and damages.
A demurrer to the original complaint was overruled, and on the 4th of January,
1907, the defendants answered the original complaint before its amendment, setting
forth that they acknowledged the facts stated in Nos. 1 and 2 of the complaint;
that they admitted the statements of the plaintiff relative to the payment of
1,102.16 pesos made on the 15th of November, 1902, not, however, as payment of
interest on the amount stated in the foregoing document, but on account of the
principal, and denied that there had been any agreement as to an extension of the
time for payment and the payment of interest at the rate of 15 per cent per annum
as alleged in paragraph 3 of the complaint, and also denied all the other statements
contained therein.
As a counterclaim, the defendants alleged that they had paid to the plaintiff sums
which, together with the P1,102.16 acknowledged in the complaint, aggregated the
total sum of P5,602.16, and that, deducting therefrom the total sum of P2,686.58
stated in the document transcribed in the complaint, the plaintiff still owed the
defendants P2,915.58; therefore, they asked that judgment be entered absolving
them, and sentencing the plaintiff to pay them the sum of P2,915.58 with the costs.
Evidence was adduced by both parties and, upon their exhibits, together with an
account book having been made of record, the court below rendered judgment on the
15th of January, 1907, in favor of the plaintiff for the recovery of the sum of
P5,714.44 and costs.
The defendants excepted to the above decision and moved for a new trial. This motion
was overruled and was also excepted to by them; the bill of exceptions presented
by the appellants having been approved, the same was in due course submitted to
this court.
The document of indebtedness inserted in the complaint states that the plaintiff
left on deposit with the defendants a given sum of money which they were jointly
and severally obliged to return on a certain date fixed in the document; but that,
nevertheless, when the document appearing as Exhibits 2, written in the Visayan
dialect and followed by a translation into Spanish was executed, it was
acknowledged, at the date thereof, the 15th of November, 1902, that the amount
deposited had not yet been returned to the creditor, whereby he was subjected to
losses and damages amounting to 830 pesos since the 20th of January, 1898, when the
return was again stipulated with the further agreement that the amount deposited
should bear interest at the rate of 15 per cent per annum, from the aforesaid date
of January 20, and that the 1,000 pesos paid to the depositor on the 15th of May,
1900, according to the receipt issued by him to the debtors, would be included, and
that the said rate of interest would obtain until the debtors on the 20th of May,
1897, it is called a deposit consisted, and they could have accomplished the return
agreed upon by the delivery of a sum equal to the one received by them. For this
reason it must be understood that the debtors were lawfully authorized to make use
of the amount deposited, which they have done, as subsequent shown when asking for
an extension of the time for the return thereof, inasmuch as, acknowledging that
they have subjected the letter, their creditor, to losses and damages for not
complying with what had been stipulated, and being conscious that they had used,
for their own profit and gain, the money that they received apparently as a deposit,
they engaged to pay interest to the creditor from the date named until the time
when the refund should be made. Such conduct on the part of the debtors is
unquestionable evidence that the transaction entered into between the interested
parties was not a deposit, but a real contract of loan.
Article 1767 of the Civil Code provides that —
The depository can not make use of the thing deposited without the express permission
of the depositor.
Otherwise he shall be liable for losses and damages.
Article 1768 also provides that —
When the depository has permission to make use of the thing deposited, the contract
loses the character of a deposit and becomes a loan or bailment.
The permission shall not be presumed, and its existence must be proven.
When on one of the latter days of January, 1898, Jose Lim went to the office of the
creditor asking for an extension of one year, in view of the fact the money was
scare, and because neither himself nor the other defendant were able to return the
amount deposited, for which reason he agreed to pay interest at the rate of 15 per
cent per annum, it was because, as a matter of fact, he did not have in his
possession the amount deposited, he having made use of the same in his business and
for his own profit; and the creditor, by granting them the extension, evidently
confirmed the express permission previously given to use and dispose of the amount
stated as having bee deposited, which, in accordance with the loan, to all intents
and purposes gratuitously, until the 20th of January, 1898, and from that dated
with interest at 15 per cent per annum until its full payment, deducting from the
total amount of interest the sum of 1,000 pesos, in accordance with the provisions
of article 1173 of the Civil Code.
Notwithstanding that it does not appear that Jose Lim signed the document (Exhibit
2) executed in the presence of three witnesses on the 15th of November, 1902, by
Ceferino Domingo Lim on behalf of himself and the former, nevertheless, the said
document has not been contested as false, either by a criminal or by a civil
proceeding, nor has any doubt been cast upon the authenticity of the signatures of
the witnesses who attested the execution of the same; and from the evidence in the
case one is sufficiently convinced that the said Jose Lim was perfectly aware of
and authorized his joint codebtor to liquidate the interest, to pay the sum of
1,000 pesos, on account thereof, and to execute the aforesaid document No. 2. A
true ratification of the original document of deposit was thus made, and not the
least proof is shown in the record that Jose Lim had ever paid the whole or any
part of the capital stated in the original document, Exhibit 1.
If the amount, together with interest claimed in the complaint, less 1,000 pesos
appears as fully established, such is not the case with the defendant's counterclaim
for P5,602.16, because the existence and certainty of said indebtedness imputed to
the plaintiff has not been proven, and the defendants, who call themselves creditors
for the said amount have not proven in a satisfactory manner that the plaintiff had
received partial payments on account of the same; the latter alleges with good
reason, that they should produce the receipts which he may have issued, and which
he did issue whenever they paid him any money on account. The plaintiffs allegation
that the two amounts of 400 and 1,200 pesos, referred to in documents marked "C"
and "D" offered in evidence by the defendants, had been received from Ceferino
Domingo Lim on account of other debts of his, has not been contradicted, and the
fact that in the original complaint the sum of 1,102.16 pesos, was expressed in
lieu of 1,000 pesos, the only payment made on account of interest on the amount
deposited according to documents No. 2 and letter "B" above referred to, was due
to a mistake.
Moreover, for the reason above set forth it may, as a matter of course, be inferred
that there was no renewal of the contract deposited converted into a loan, because,
as has already been stated, the defendants received said amount by virtue of real
loan contract under the name of a deposit, since the so-called bailees were forthwith
authorized to dispose of the amount deposited. This they have done, as has been
clearly shown.
The original joint obligation contracted by the defendant debtor still exists, and
it has not been shown or proven in the proceedings that the creditor had released
Joe Lim from complying with his obligation in order that he should not be sued for
or sentenced to pay the amount of capital and interest together with his codebtor,
Ceferino Domingo Lim, because the record offers satisfactory evidence against the
pretension of Jose Lim, and it further appears that document No. 2 was executed by
the other debtor, Ceferino Domingo Lim, for himself and on behalf of Jose Lim; and
it has also been proven that Jose Lim, being fully aware that his debt had not yet
been settled, took steps to secure an extension of the time for payment, and
consented to pay interest in return for the concession requested from the creditor.
In view of the foregoing, and adopting the findings in the judgment appealed from,
it is our opinion that the same should be and is hereby affirmed with the costs of
this instance against the appellant, provided that the interest agreed upon shall
be paid until the complete liquidation of the debt. So ordered.
Arellano, C.J., Carson, Willard and Tracey, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. Nos. L-26948 and L-26949 October 8, 1927
SILVESTRA BARON, plaintiff-appellant,
vs.
PABLO DAVID, defendant-appellant.
And
GUILLERMO BARON, plaintiff-appellant,
vs.
PABLO DAVID, defendant-appellant.
Jose Gutierrez David for plaintiff-appellant in case of No. 26948.
Gregorio Perfecto for defendant-appellant in both cases.
Francisco, Lualhati & Lopez and Jose Gutierrez David for plaintiff-appellant in
case No. 26949.

STREET, J.:
These two actions were instituted in the Court of First Instance of the Province
of Pampanga by the respective plaintiffs, Silvestra Baron and Guillermo Baron, for
the purpose of recovering from the defendant, Pablo David, the value of palay
alleged to have been sold by the plaintiffs to the defendant in the year 1920.
Owing to the fact that the defendant is the same in both cases and that the two
cases depend in part upon the same facts, the cases were heard together in the
trial court and determined in a single opinion. The same course will accordingly
be followed here.
In the first case, i. e., that which Silvestra Baron is plaintiff, the court gave
judgment for her to recover of the defendant the sum of P5,238.51, with costs. From
this judgment both the plaintiff and the defendant appealed.
In the second case, i. e., that in which Guillermo Baron, is plaintiff, the court
gave judgment for him to recover of the defendant the sum of P5,734.60, with costs,
from which judgment both the plaintiff and the defendant also appealed. In the same
case the defendant interposed a counterclaim in which he asked credit for the sum
of P2,800 which he had advanced to the plaintiff Guillermo Baron on various
occasions. This credit was admitted by the plaintiff and allowed by the trial court.
But the defendant also interposed a cross-action against Guillermo Baron in which
the defendant claimed compensation for damages alleged to have Ben suffered by him
by reason of the alleged malicious and false statements made by the plaintiff
against the defendant in suing out an attachment against the defendant's property
soon after the institution of the action. In the same cross-action the defendant
also sought compensation for damages incident to the shutting down of the
defendant's rice mill for the period of one hundred seventy days during which the
above-mentioned attachment was in force. The trial judge disallowed these claims
for damages, and from this feature of the decision the defendant appealed. We are
therefore confronted with five distinct appeals in this record.
Prior to January 17, 1921, the defendant Pablo David has been engaged in running a
rice mill in the municipality of Magalang, in the Province of Pampanga, a mill
which was well patronized by the rice growers of the vicinity and almost constantly
running. On the date stated a fire occurred that destroyed the mill and its contents,
and it was some time before the mill could be rebuilt and put in operation again.
Silvestra Baron, the plaintiff in the first of the actions before us, is an aunt
of the defendant; while Guillermo Baron, the plaintiff in the other action; is his
uncle. In the months of March, April, and May, 1920, Silvestra Baron placed a
quantity of palay in the defendant's mill; and this, in connection with some that
she took over from Guillermo Baron, amounted to 1,012 cavans and 24 kilos. During
approximately the same period Guillermo Baron placed other 1,865 cavans and 43
kilos of palay in the mill. No compensation has ever been received by Silvestra
Baron upon account of the palay delivered by Guillermo Baron, he has received from
the defendant advancements amounting to P2,800; but apart from this he has not been
compensated. Both the plaintiffs claim that the palay which was delivered by them
to the defendant was sold to the defendant; while the defendant, on the other hand,
claims that the palay was deposited subject to future withdrawal by the depositors
or subject to some future sale which was never effected. He therefore supposes
himself to be relieved from all responsibility by virtue of the fire of January 17,
1921, already mentioned.
The plaintiff further say that their palay was delivered to the defendant at his
special request, coupled with a promise on his part to pay for the same at the
highest price per cavan at which palay would sell during the year 1920; and they
say that in August of that year the defendant promised to pay them severally the
price of P8.40 per cavan, which was about the top of the market for the season,
provided they would wait for payment until December. The trial judge found that no
such promise had been given; and the incredulity of the court upon this point seems
to us to be justified. A careful examination of the proof, however, leads us to the
conclusion that the plaintiffs did, some time in the early part of August, 1920,
make demand upon the defendant for a settlement, which he evaded or postponed
leaving the exact amount due to the plaintiffs undetermined.
It should be stated that the palay in question was place by the plaintiffs in the
defendant's mill with the understanding that the defendant was at liberty to convert
it into rice and dispose of it at his pleasure. The mill was actively running during
the entire season, and as palay was daily coming in from many customers and as rice
was being constantly shipped by the defendant to Manila, or other rice markets, it
was impossible to keep the plaintiffs' palay segregated. In fact the defendant
admits that the plaintiffs' palay was mixed with that of others. In view of the
nature of the defendant's activities and the way in which the palay was handled in
the defendant's mill, it is quite certain that all of the plaintiffs' palay, which
was put in before June 1, 1920, been milled and disposed of long prior to the fire
of January 17, 1921. Furthermore, the proof shows that when the fire occurred there
could not have been more than about 360 cavans of palay in the mill, none of which
by any reasonable probability could have been any part of the palay delivered by
the plaintiffs. Considering the fact that the defendant had thus milled and
doubtless sold the plaintiffs' palay prior to the date of the fire, it result that
he is bound to account for its value, and his liability was not extinguished by the
occurence of the fire. In the briefs before us it seems to have been assumed by the
opposing attorneys that in order for the plaintiffs to recover, it is necessary
that they should be able to establish that the plaintiffs' palay was delivered in
the character of a sale, and that if, on the contrary, the defendant should prove
that the delivery was made in the character of deposit, the defendant should be
absolved. But the case does not depend precisely upon this explicit alternative;
for even supposing that the palay may have been delivered in the character of
deposit, subject to future sale or withdrawal at plaintiffs' election, nevertheless
if it was understood that the defendant might mill the palay and he has in fact
appropriated it to his own use, he is of course bound to account for its value.
Under article 1768 of the Civil Code, when the depository has permission to make
use of the thing deposited, the contract loses the character of mere deposit and
becomes a loan or a commodatum; and of course by appropriating the thing, the bailee
becomes responsible for its value. In this connection we wholly reject the
defendant's pretense that the palay delivered by the plaintiffs or any part of it
was actually consumed in the fire of January, 1921. Nor is the liability of the
defendant in any wise affected by the circumstance that, by a custom prevailing
among rice millers in this country, persons placing palay with them without special
agreement as to price are at liberty to withdraw it later, proper allowance being
made for storage and shrinkage, a thing that is sometimes done, though rarely.
In view of what has been said it becomes necessary to discover the price which the
defendant should be required to pay for the plaintiffs' palay. Upon this point the
trial judge fixed upon P6.15 per cavan; and although we are not exactly in agreement
with him as to the propriety of the method by which he arrived at this figure, we
are nevertheless of the opinion that, all things considered, the result is
approximately correct. It appears that the price of palay during the months of
April, May, and June, 1920, had been excessively high in the Philippine Islands and
even prior to that period the Government of the Philippine Islands had been
attempting to hold the price in check by executive regulation. The highest point
was touched in this season was apparently about P8.50 per cavan, but the market
began to sag in May or June and presently entered upon a precipitate decline. As
we have already stated, the plaintiffs made demand upon the defendant for settlement
in the early part of August; and, so far as we are able to judge from the proof,
the price of P6.15 per cavan, fixed by the trial court, is about the price at which
the defendant should be required to settle as of that date. It was the date of the
demand of the plaintiffs for settlement that determined the price to be paid by the
defendant, and this is true whether the palay was delivered in the character of
sale with price undetermined or in the character of deposit subject to use by the
defendant. It results that the plaintiffs are respectively entitle to recover the
value of the palay which they had placed with the defendant during the period
referred to, with interest from the date of the filing of their several complaints.
As already stated, the trial court found that at the time of the fire there were
about 360 cavans of palay in the mill and that this palay was destroyed. His Honor
assumed that this was part of the palay delivered by the plaintiffs, and he held
that the defendant should be credited with said amount. His Honor therefore deducted
from the claims of the plaintiffs their respective proportionate shares of this
amount of palay. We are unable to see the propriety of this feature of the decision.
There were many customers of the defendant's rice mill who had placed their palay
with the defendant under the same conditions as the plaintiffs, and nothing can be
more certain than that the palay which was burned did not belong to the plaintiffs.
That palay without a doubt had long been sold and marketed. The assignments of
error of each of the plaintiffs-appellants in which this feature of the decision
is attacked are therefore well taken; and the appealed judgments must be modified
by eliminating the deductions which the trial court allowed from the plaintiffs'
claims.
The trial judge also allowed a deduction from the claim of the plaintiff Guillermo
Baron of 167 cavans of palay, as indicated in Exhibit 12, 13, 14, and 16. This was
also erroneous. These exhibits relate to transactions that occurred nearly two
years after the transactions with which we are here concerned, and they were offered
in evidence merely to show the character of subsequent transactions between the
parties, it appearing that at the time said exhibits came into existence the
defendant had reconstructed his mill and that business relations with Guillermo
Baron had been resumed. The transactions shown by these exhibits (which relate to
palay withdrawn by the plaintiff from the defendant's mill) were not made the
subject of controversy in either the complaint or the cross-complaint of the
defendant in the second case. They therefore should not have been taken into account
as a credit in favor of the defendant. Said credit must therefore be likewise of
course be without prejudice to any proper adjustment of the rights of the parties
with respect to these subsequent transactions that they have heretofore or may
hereafter effect.
The preceding discussion disposes of all vital contentions relative to the liability
of the defendant upon the causes of action stated in the complaints. We proceed
therefore now to consider the question of the liability of the plaintiff Guillermo
Baron upon the cross-complaint of Pablo David in case R. G. No. 26949. In this
cross-action the defendant seek, as the stated in the third paragraph of this
opinion, to recover damages for the wrongful suing out of an attachment by the
plaintiff and the levy of the same upon the defendant's rice mill. It appears that
about two and one-half months after said action was begun, the plaintiff, Guillermo
Baron, asked for an attachment to be issued against the property of the defendant;
and to procure the issuance of said writ the plaintiff made affidavit to the effect
that the defendant was disposing, or attempting the plaintiff. Upon this affidavit
an attachment was issued as prayed, and on March 27, 1924, it was levied upon the
defendant's rice mill, and other property, real and personal. 1awph!l.net
Upon attaching the property the sheriff closed the mill and placed it in the care
of a deputy. Operations were not resumed until September 13, 1924, when the
attachment was dissolved by an order of the court and the defendant was permitted
to resume control. At the time the attachment was levied there were, in the bodega,
more than 20,000 cavans of palay belonging to persons who held receipts therefor;
and in order to get this grain away from the sheriff, twenty-four of the depositors
found it necessary to submit third-party claims to the sheriff. When these claims
were put in the sheriff notified the plaintiff that a bond in the amount of P50,000
must be given, otherwise the grain would be released. The plaintiff, being unable
or unwilling to give this bond, the sheriff surrendered the palay to the claimants;
but the attachment on the rice mill was maintained until September 13, as above
stated, covering a period of one hundred seventy days during which the mill was
idle. The ground upon which the attachment was based, as set forth in the plaintiff's
affidavit was that the defendant was disposing or attempting to dispose of his
property for the purpose of defrauding the plaintiff. That this allegation was
false is clearly apparent, and not a word of proof has been submitted in support
of the assertion. On the contrary, the defendant testified that at the time this
attachment was secured he was solvent and could have paid his indebtedness to the
plaintiff if judgment had been rendered against him in ordinary course. His
financial conditions was of course well known to the plaintiff, who is his uncle.
The defendant also states that he had not conveyed away any of his property, nor
had intended to do so, for the purpose of defrauding the plaintiff. We have before
us therefore a case of a baseless attachment, recklessly sued out upon a false
affidavit and levied upon the defendant's property to his great and needless damage.
That the act of the plaintiff in suing out the writ was wholly unjustifiable is
perhaps also indicated in the circumstance that the attachment was finally dissolved
upon the motion of the plaintiff himself.
The defendant testified that his mill was accustomed to clean from 400 to 450 cavans
of palay per day, producing 225 cavans of rice of 57 kilos each. The price charged
for cleaning each cavan rice was 30 centavos. The defendant also stated that the
expense of running the mill per day was from P18 to P25, and that the net profit
per day on the mill was more than P40. As the mill was not accustomed to run on
Sundays and holiday, we estimate that the defendant lost the profit that would have
been earned on not less than one hundred forty work days. Figuring his profits at
P40 per day, which would appear to be a conservative estimate, the actual net loss
resulting from his failure to operate the mill during the time stated could not
have been less than P5,600. The reasonableness of these figures is also indicated
in the fact that the twenty-four customers who intervened with third-party claims
took out of the camarin 20,000 cavans of palay, practically all of which, in the
ordinary course of events, would have been milled in this plant by the defendant.
And of course other grain would have found its way to this mill if it had remained
open during the one hundred forty days when it was closed.
But this is not all. When the attachment was dissolved and the mill again opened,
the defendant found that his customers had become scattered and could not be easily
gotten back. So slow, indeed, was his patronage in returning that during the
remainder of the year 1924 the defendant was able to mill scarcely more than the
grain belonging to himself and his brothers; and even after the next season opened
many of his old customers did not return. Several of these individuals, testifying
as witnesses in this case, stated that, owing to the unpleasant experience which
they had in getting back their grain from the sheriff to the mill of the defendant,
though they had previously had much confidence in him.
As against the defendant's proof showing the facts above stated the plaintiff
submitted no evidence whatever. We are therefore constrained to hold that the
defendant was damaged by the attachment to the extent of P5,600, in profits lost
by the closure of the mill, and to the extent of P1,400 for injury to the good-will
of his business, making a total of P7,000. For this amount the defendant must
recover judgment on his cross-complaint.
The trial court, in dismissing the defendant's cross-complaint for damages resulting
from the wrongful suing out of the attachment, suggested that the closure of the
rice mill was a mere act of the sheriff for which the plaintiff was not responsible
and that the defendant might have been permitted by the sheriff to continue running
the mill if he had applied to the sheriff for permission to operate it. This
singular suggestion will not bear a moment's criticism. It was of course the duty
of the sheriff, in levying the attachment, to take the attached property into his
possession, and the closure of the mill was a natural, and even necessary,
consequence of the attachment. For the damage thus inflicted upon the defendant the
plaintiff is undoubtedly responsible.
One feature of the cross-complaint consist in the claim of the defendant (cross-
complaint) for the sum of P20,000 as damages caused to the defendant by the false
and alleged malicious statements contained in the affidavit upon which the
attachment was procured. The additional sum of P5,000 is also claimed as exemplary
damages. It is clear that with respect to these damages the cross-action cannot be
maintained, for the reason that the affidavit in question was used in course of a
legal proceeding for the purpose of obtaining a legal remedy, and it is therefore
privileged. But though the affidavit is not actionable as a libelous publication,
this fact in no obstacle to the maintenance of an action to recover the damage
resulting from the levy of the attachment.
Before closing this opinion a word should be said upon the point raised in the
first assignment of error of Pablo David as defendant in case R. G. No. 26949. In
this connection it appears that the deposition of Guillermo Baron was presented in
court as evidence and was admitted as an exhibit, without being actually read to
the court. It is supposed in the assignment of error now under consideration that
the deposition is not available as evidence to the plaintiff because it was not
actually read out in court. This connection is not well founded. It is true that
in section 364 of the Code of Civil Procedure it is said that a deposition, once
taken, may be read by either party and will then be deemed the evidence of the
party reading it. The use of the word "read" in this section finds its explanation
of course in the American practice of trying cases for the most part before juries.
When a case is thus tried the actual reading of the deposition is necessary in
order that the jurymen may become acquainted with its contents. But in courts of
equity, and in all courts where judges have the evidence before them for perusal
at their pleasure, it is not necessary that the deposition should be actually read
when presented as evidence.
From what has been said it result that judgment of the court below must be modified
with respect to the amounts recoverable by the respective plaintiffs in the two
actions R. G. Nos. 26948 and 26949 and must be reversed in respect to the disposition
of the cross-complaint interposed by the defendant in case R. G. No. 26949, with
the following result: In case R. G. No. 26948 the plaintiff Silvestra Baron will
recover of the Pablo David the sum of P6,227.24, with interest from November 21,
1923, the date of the filing of her complaint, and with costs. In case R. G. No.
26949 the plaintiff Guillermo Baron will recover of the defendant Pablo David the
sum of P8,669.75, with interest from January 9, 1924. In the same case the defendant
Pablo David, as plaintiff in the cross-complaint, will recover of Guillermo Baron
the sum of P7,000, without costs. So ordered.
Avanceña, C.J., Johnson, Malcolm, Villamor, Romualdez and Villa-Real, JJ., concur.

Separate Opinions

JOHNS, J., dissenting and concurring:

The plaintiff Silvestra Baron is the aunt of the defendant, and Guillermo Baron,
the plaintiff in the other action, is his uncle. There is no dispute as to the
amount of palay which each delivered to the mill of the defendant. Owing to the
fact that they were relatives and that the plaintiffs reposed special reposed
special trust and confidence in the defendant, who was their nephew, they were not
as careful and prudent in their business dealings with him as they should have
been. Plaintiffs allege that their respective palay was delivered to the defendant
at his mill with the understanding and agreement between them that they should
receive the highest market price for the palay for that season, which was P8.50 per
cavan. They further allege that about August first they made another contract in
and by which he promised and agreed to pay them P8.40 per cavan for their palay,
in consideration of which they agreed to extend the time for payment to the first
of December of that year. The amount of palay is not in dispute, and the defendant
admits that it was delivered to his mill, but he claims that he kept it on deposit
and as bailee without hire for the plaintiffs and at their own risk, and that the
mill was burned down, and that at the time of the fire, plaintiffs' palay was in
the mill. The lower court found as a fact that there was no merit in that defense,
and that there was but little, if any, palay in the mill at the time of the fire
and that in truth and in fact that defense was based upon perjured testimony.
The two cases were tried separately in the court below, but all of the evidence in
the case was substituted and used in the other. Both plaintiffs testified to the
making of the respective contracts as alleged in their complaint; to wit, that they
delivered the palay to the defendant with the express understanding and agreement
that he would pay them for the palay the highest market price for the season, and
to the making of the second contract about the first of August, in which they had
a settlement, and that the defendant then agreed to pay them P8.40 per cavan, such
payment to be made on December first. It appears that the highest market price for
palay for that season was P8.50 per cavan. The defendant denied the making of either
one of those contracts, and offered no other evidence on that question. That is to
say, we have the evidence of both Silvestra Baron and Guillermo Baron to the making
of those contracts, which is denied by the defendant only. Plaintiffs' evidence is
also corroborated by the usual and customary manner in which the growers sell their
palay. That is to say, it is their custom to sell the palay at or about the time
it is delivered at the mill and as soon as it is made ready for market in the form
of rice. As stated the lower court found as a fact that the evidence of the
defendants as to plaintiffs' palay being in the mill at the time of the fire was
not worthy of belief, and that in legal effect it was a manufactured defense. Yet,
strange as it may seem, both the lower court and this court have found as a fact
that upon the question of the alleged contracts, the evidence for the defendant is
true and entitled to more weight than the evidence of both plaintiffs which is
false.
It appears that the plaintiff Silvestra Baron is an old lady about 80 years of age
and the aunt of the defendant, and Guillermo Baron is the uncle. Under the theory
of the lower court and of this court, both of them at all the time during the high
prices held their palay in defendant's mill at their own risk, and that upon that
point the evidence of the defendant, standing alone is entitled to more weight and
is more convincing than the combined evidence of the two plaintiffs. In the very
nature of things, if defendant's evidence upon that point is true, it stands to
reason that, following the custom of growers, the plaintiffs would have sold their
palay during the period of high prices, and would not have waited until it dropped
from P8.50 per cavan to P6.15 per cavan about the first of August. Upon that
question, both the weight and the credibility of the evidence is with the plaintiffs,
and they should have judgment for the full amount of their palay on the basis of
P8.40 per cavan. For such reason, I vigorously dissent from the majority opinion.
I frankly concede that the attachment was wrongful, and that it should never have
been levied. It remained in force for a period of one hundred and seventy days at
which time it was released on motion of the plaintiffs. The defendant now claims,
and the majority opinion has allowed him, damages for that full period, exclusive
of Sundays, at the rate, of P40 per day, found to be the net profit for the operation
of the rice mill. It further appears, and this court finds, that the defendant was
a responsible man, and that he had ample property out which to satisfy plaintiffs'
claim. Assuming that to be true, there was no valid reason why he could not had
given a counter bond and released the attachment. Upon the theory of the majority
opinion, if the plaintiffs had not released the attachment, they would still be
liable to the defendant at the rate of P40 per day up to the present time. When the
mill was attached, if he was in a position to do so, it was the duty of the defendant
to give a counter bond and release the attachment and resume its operation. The
majority opinion also allowed the defendant P1,400 "for injury to the goodwill of
his business." The very fact that after a delay of about four years, both of the
plaintiffs were compelled to bring to their respective actions against the defendant
to recover from him on a just and meritorious claim, as found by this court and the
lower court, and the further fact that after such long delay, the defendant has
sought to defeat the actions by a sham and manufactured defense, as found by this
and the lower court, would arouse the suspicion of any customers the defendant ever
had, and shake their confidence in his business honor and integrity, and destroy
any goodwill which he ever did have. Under such conditions, it would be strange
that the defendant would have any customers left. He is not entitled to any
compensation for the loss of goodwill, and P5,000 should be the very limit of the
amount of his damages for the wrongful attachment, and upon that point I vigorously
dissent. In all other respects, I agree with the majority opinion.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 189871 August 13, 2013
DARIO NACAR, PETITIONER,
vs.
GALLERY FRAMES AND/OR FELIPE BORDEY, JR., RESPONDENTS.

D E C I S I O N

PERALTA, J.:
This is a petition for review on certiorari assailing the Decision1 dated September
23, 2008 of the Court of Appeals (CA) in CA-G.R. SP No. 98591, and the
Resolution2 dated October 9, 2009 denying petitioner’s motion for reconsideration.
The factual antecedents are undisputed.
Petitioner Dario Nacar filed a complaint for constructive dismissal before the
Arbitration Branch of the National Labor Relations Commission (NLRC) against
respondents Gallery Frames (GF) and/or Felipe Bordey, Jr., docketed as NLRC NCR
Case No. 01-00519-97.
On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner
and found that he was dismissed from employment without a valid or just cause.
Thus, petitioner was awarded backwages and separation pay in lieu of reinstatement
in the amount of ₱158,919.92. The dispositive portion of the decision, reads:
With the foregoing, we find and so rule that respondents failed to discharge the
burden of showing that complainant was dismissed from employment for a just or
valid cause. All the more, it is clear from the records that complainant was never
afforded due process before he was terminated. As such, we are perforce constrained
to grant complainant’s prayer for the payments of separation pay in lieu of
reinstatement to his former position, considering the strained relationship between
the parties, and his apparent reluctance to be reinstated, computed only up to
promulgation of this decision as follows:
SEPARATION PAY

Date Hired = August 1990

Rate = ₱198/day

Date of Decision = Aug. 18, 1998

Length of Service = 8 yrs. & 1 month

₱198.00 x 26 days x 8 months = ₱41,184.00

BACKWAGES

Date Dismissed = January 24, 1997

Rate per day = ₱196.00

Date of Decisions = Aug. 18, 1998

a) 1/24/97 to 2/5/98 = 12.36 mos.

₱196.00/day x 12.36 mos. = ₱62,986.56

b) 2/6/98 to 8/18/98 = 6.4 months

 Prevailing Rate per day = ₱62,986.00

₱198.00 x 26 days x 6.4 mos. = ₱32,947.20

T O T A L = ₱95.933.76
x x x x
WHEREFORE, premises considered, judgment is hereby rendered finding respondents
guilty of constructive dismissal and are therefore, ordered:
To pay jointly and severally the complainant the amount of sixty-two thousand nine
hundred eighty-six pesos and 56/100 (₱62,986.56) Pesos representing his separation
pay;
To pay jointly and severally the complainant the amount of nine (sic) five thousand
nine hundred thirty-three and 36/100 (₱95,933.36) representing his backwages; and
All other claims are hereby dismissed for lack of merit.
SO ORDERED.4
Respondents appealed to the NLRC, but it was dismissed for lack of merit in the
Resolution5 dated February 29, 2000. Accordingly, the NLRC sustained the decision
of the Labor Arbiter. Respondents filed a motion for reconsideration, but it was
denied.6
Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA.
On August 24, 2000, the CA issued a Resolution dismissing the petition. Respondents
filed a Motion for Reconsideration, but it was likewise denied in a Resolution
dated May 8, 2001.7
Respondents then sought relief before the Supreme Court, docketed as G.R. No.
151332. Finding no reversible error on the part of the CA, this Court denied the
petition in the Resolution dated April 17, 2002.8
An Entry of Judgment was later issued certifying that the resolution became final
and executory on May 27, 2002.9The case was, thereafter, referred back to the Labor
Arbiter. A pre-execution conference was consequently scheduled, but respondents
failed to appear.10
On November 5, 2002, petitioner filed a Motion for Correct Computation, praying
that his backwages be computed from the date of his dismissal on January 24, 1997
up to the finality of the Resolution of the Supreme Court on May 27, 2002.11 Upon
recomputation, the Computation and Examination Unit of the NLRC arrived at an
updated amount in the sum of ₱471,320.31.12
On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter ordering
the Sheriff to collect from respondents the total amount of ₱471,320.31. Respondents
filed a Motion to Quash Writ of Execution, arguing, among other things, that since
the Labor Arbiter awarded separation pay of ₱62,986.56 and limited backwages of
₱95,933.36, no more recomputation is required to be made of the said awards. They
claimed that after the decision becomes final and executory, the same cannot be
altered or amended anymore.14 On January 13, 2003, the Labor Arbiter issued an
Order15 denying the motion. Thus, an Alias Writ of Execution16 was issued on January
14, 2003.
Respondents again appealed before the NLRC, which on June 30, 2003 issued a
Resolution17 granting the appeal in favor of the respondents and ordered the
recomputation of the judgment award.
On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the
NLRC to be final and executory. Consequently, another pre-execution conference was
held, but respondents failed to appear on time. Meanwhile, petitioner moved that
an Alias Writ of Execution be issued to enforce the earlier recomputed judgment
award in the sum of ₱471,320.31.18
The records of the case were again forwarded to the Computation and Examination
Unit for recomputation, where the judgment award of petitioner was reassessed to
be in the total amount of only ₱147,560.19.
Petitioner then moved that a writ of execution be issued ordering respondents to
pay him the original amount as determined by the Labor Arbiter in his Decision
dated October 15, 1998, pending the final computation of his backwages and
separation pay.
On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy
the judgment award that was due to petitioner in the amount of ₱147,560.19, which
petitioner eventually received.
Petitioner then filed a Manifestation and Motion praying for the re-computation of
the monetary award to include the appropriate interests.19
On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only
up to the amount of ₱11,459.73. The Labor Arbiter reasoned that it is the October
15, 1998 Decision that should be enforced considering that it was the one that
became final and executory. However, the Labor Arbiter reasoned that since the
decision states that the separation pay and backwages are computed only up to the
promulgation of the said decision, it is the amount of ₱158,919.92 that should be
executed. Thus, since petitioner already received ₱147,560.19, he is only entitled
to the balance of ₱11,459.73.
Petitioner then appealed before the NLRC,21 which appeal was denied by the NLRC in
its Resolution22 dated September 27, 2006. Petitioner filed a Motion for
Reconsideration, but it was likewise denied in the Resolution23dated January 31,
2007.
Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP
No. 98591.
On September 23, 2008, the CA rendered a Decision24 denying the petition. The CA
opined that since petitioner no longer appealed the October 15, 1998 Decision of
the Labor Arbiter, which already became final and executory, a belated correction
thereof is no longer allowed. The CA stated that there is nothing left to be done
except to enforce the said judgment. Consequently, it can no longer be modified in
any respect, except to correct clerical errors or mistakes.
Petitioner filed a Motion for Reconsideration, but it was denied in the
Resolution25 dated October 9, 2009.
Hence, the petition assigning the lone error:
I
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED, COMMITTED GRAVE
ABUSE OF DISCRETION AND DECIDED CONTRARY TO LAW IN UPHOLDING THE QUESTIONED
RESOLUTIONS OF THE NLRC WHICH, IN TURN, SUSTAINED THE MAY 10, 2005 ORDER OF LABOR
ARBITER MAGAT MAKING THE DISPOSITIVE PORTION OF THE OCTOBER 15, 1998 DECISION OF
LABOR ARBITER LUSTRIA SUBSERVIENT TO AN OPINION EXPRESSED IN THE BODY OF THE SAME
DECISION.26
Petitioner argues that notwithstanding the fact that there was a computation of
backwages in the Labor Arbiter’s decision, the same is not final until reinstatement
is made or until finality of the decision, in case of an award of separation pay.
Petitioner maintains that considering that the October 15, 1998 decision of the
Labor Arbiter did not become final and executory until the April 17, 2002 Resolution
of the Supreme Court in G.R. No. 151332 was entered in the Book of Entries on May
27, 2002, the reckoning point for the computation of the backwages and separation
pay should be on May 27, 2002 and not when the decision of the Labor Arbiter was
rendered on October 15, 1998. Further, petitioner posits that he is also entitled
to the payment of interest from the finality of the decision until full payment by
the respondents.
On their part, respondents assert that since only separation pay and limited
backwages were awarded to petitioner by the October 15, 1998 decision of the Labor
Arbiter, no more recomputation is required to be made of said awards. Respondents
insist that since the decision clearly stated that the separation pay and backwages
are "computed only up to [the] promulgation of this decision," and considering that
petitioner no longer appealed the decision, petitioner is only entitled to the
award as computed by the Labor Arbiter in the total amount of ₱158,919.92.
Respondents added that it was only during the execution proceedings that the
petitioner questioned the award, long after the decision had become final and
executory. Respondents contend that to allow the further recomputation of the
backwages to be awarded to petitioner at this point of the proceedings would
substantially vary the decision of the Labor Arbiter as it violates the rule on
immutability of judgments.
The petition is meritorious.
The instant case is similar to the case of Session Delights Ice Cream and Fast
Foods v. Court of Appeals (Sixth Division),27 wherein the issue submitted to the
Court for resolution was the propriety of the computation of the awards made, and
whether this violated the principle of immutability of judgment. Like in the present
case, it was a distinct feature of the judgment of the Labor Arbiter in the above-
cited case that the decision already provided for the computation of the payable
separation pay and backwages due and did not further order the computation of the
monetary awards up to the time of the finality of the judgment. Also in Session
Delights, the dismissed employee failed to appeal the decision of the labor arbiter.
The Court clarified, thus:
In concrete terms, the question is whether a re-computation in the course of
execution of the labor arbiter's original computation of the awards made, pegged
as of the time the decision was rendered and confirmed with modification by a final
CA decision, is legally proper. The question is posed, given that the petitioner
did not immediately pay the awards stated in the original labor arbiter's decision;
it delayed payment because it continued with the litigation until final judgment
at the CA level.
A source of misunderstanding in implementing the final decision in this case
proceeds from the way the original labor arbiter framed his decision. The decision
consists essentially of two parts.
The first is that part of the decision that cannot now be disputed because it has
been confirmed with finality. This is the finding of the illegality of the dismissal
and the awards of separation pay in lieu of reinstatement, backwages, attorney's
fees, and legal interests.
The second part is the computation of the awards made. On its face, the computation
the labor arbiter made shows that it was time-bound as can be seen from the figures
used in the computation. This part, being merely a computation of what the first
part of the decision established and declared, can, by its nature, be re-computed.
This is the part, too, that the petitioner now posits should no longer be re-
computed because the computation is already in the labor arbiter's decision that
the CA had affirmed. The public and private respondents, on the other hand, posit
that a re-computation is necessary because the relief in an illegal dismissal
decision goes all the way up to reinstatement if reinstatement is to be made, or
up to the finality of the decision, if separation pay is to be given in lieu
reinstatement.
That the labor arbiter's decision, at the same time that it found that an illegal
dismissal had taken place, also made a computation of the award, is understandable
in light of Section 3, Rule VIII of the then NLRC Rules of Procedure which requires
that a computation be made. This Section in part states:
[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events,
as far as practicable, shall embody in any such decision or order the detailed and
full amount awarded.
Clearly implied from this original computation is its currency up to the finality
of the labor arbiter's decision. As we noted above, this implication is apparent
from the terms of the computation itself, and no question would have arisen had the
parties terminated the case and implemented the decision at that point.
However, the petitioner disagreed with the labor arbiter's findings on all counts
- i.e., on the finding of illegality as well as on all the consequent awards made.
Hence, the petitioner appealed the case to the NLRC which, in turn, affirmed the
labor arbiter's decision. By law, the NLRC decision is final, reviewable only by
the CA on jurisdictional grounds.
The petitioner appropriately sought to nullify the NLRC decision on jurisdictional
grounds through a timely filed Rule 65 petition for certiorari. The CA decision,
finding that NLRC exceeded its authority in affirming the payment of 13th month pay
and indemnity, lapsed to finality and was subsequently returned to the labor arbiter
of origin for execution.
It was at this point that the present case arose. Focusing on the core illegal
dismissal portion of the original labor arbiter's decision, the implementing labor
arbiter ordered the award re-computed; he apparently read the figures originally
ordered to be paid to be the computation due had the case been terminated and
implemented at the labor arbiter's level. Thus, the labor arbiter re-computed the
award to include the separation pay and the backwages due up to the finality of the
CA decision that fully terminated the case on the merits. Unfortunately, the labor
arbiter's approved computation went beyond the finality of the CA decision (July
29, 2003) and included as well the payment for awards the final CA decision had
deleted - specifically, the proportionate 13th month pay and the indemnity awards.
Hence, the CA issued the decision now questioned in the present petition.
We see no error in the CA decision confirming that a re-computation is necessary
as it essentially considered the labor arbiter's original decision in accordance
with its basic component parts as we discussed above. To reiterate, the first part
contains the finding of illegality and its monetary consequences; the second part
is the computation of the awards or monetary consequences of the illegal dismissal,
computed as of the time of the labor arbiter's original decision.28
Consequently, from the above disquisitions, under the terms of the decision which
is sought to be executed by the petitioner, no essential change is made by a
recomputation as this step is a necessary consequence that flows from the nature
of the illegality of dismissal declared by the Labor Arbiter in that decision. 29 A
recomputation (or an original computation, if no previous computation has been
made) is a part of the law – specifically, Article 279 of the Labor Code and the
established jurisprudence on this provision – that is read into the decision. By
the nature of an illegal dismissal case, the reliefs continue to add up until full
satisfaction, as expressed under Article 279 of the Labor Code. The recomputation
of the consequences of illegal dismissal upon execution of the decision does not
constitute an alteration or amendment of the final decision being implemented. The
illegal dismissal ruling stands; only the computation of monetary consequences of
this dismissal is affected, and this is not a violation of the principle of
immutability of final judgments.30
That the amount respondents shall now pay has greatly increased is a consequence
that it cannot avoid as it is the risk that it ran when it continued to seek
recourses against the Labor Arbiter's decision. Article 279 provides for the
consequences of illegal dismissal in no uncertain terms, qualified only by
jurisprudence in its interpretation of when separation pay in lieu of reinstatement
is allowed. When that happens, the finality of the illegal dismissal decision
becomes the reckoning point instead of the reinstatement that the law decrees. In
allowing separation pay, the final decision effectively declares that the employment
relationship ended so that separation pay and backwages are to be computed up to
that point.31
Finally, anent the payment of legal interest. In the landmark case of Eastern
Shipping Lines, Inc. v. Court of Appeals,32 the Court laid down the guidelines
regarding the manner of computing legal interest, to wit:
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached,
an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is
made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit.33
Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its
Resolution No. 796 dated May 16, 2013, approved the amendment of Section 234 of
Circular No. 905, Series of 1982 and, accordingly, issued Circular No. 799,35 Series
of 2013, effective July 1, 2013, the pertinent portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the
following revisions governing the rate of interest in the absence of stipulation
in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any money, goods or
credits and the rate allowed in judgments, in the absence of an express contract
as to such rate of interest, shall be six percent (6%) per annum.
Section 2. In view of the above, Subsection X305.136 of the Manual of Regulations
for Banks and Sections 4305Q.1,37 4305S.338 and 4303P.139 of the Manual of Regulations
for Non-Bank Financial Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, in the absence of an express stipulation as to the rate
of interest that would govern the parties, the rate of legal interest for loans or
forbearance of any money, goods or credits and the rate allowed in judgments shall
no longer be twelve percent (12%) per annum - as reflected in the case of Eastern
Shipping Lines40and Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank
Financial Institutions, before its amendment by BSP-MB Circular No. 799 - but will
now be six percent (6%) per annum effective July 1, 2013. It should be noted,
nonetheless, that the new rate could only be applied prospectively and not
retroactively. Consequently, the twelve percent (12%) per annum legal interest
shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent
(6%) per annum shall be the prevailing rate of interest when applicable.
Corollarily, in the recent case of Advocates for Truth in Lending, Inc. and Eduardo
B. Olaguer v. Bangko Sentral Monetary Board,41 this Court affirmed the authority of
the BSP-MB to set interest rates and to issue and enforce Circulars when it ruled
that "the BSP-MB may prescribe the maximum rate or rates of interest for all loans
or renewals thereof or the forbearance of any money, goods or credits, including
those for loans of low priority such as consumer loans, as well as such loans made
by pawnshops, finance companies and similar credit institutions. It even authorizes
the BSP-MB to prescribe different maximum rate or rates for different types of
borrowings, including deposits and deposit substitutes, or loans of financial
intermediaries."
Nonetheless, with regard to those judgments that have become final and executory
prior to July 1, 2013, said judgments shall not be disturbed and shall continue to
be implemented applying the rate of interest fixed therein.1awp++i1
To recapitulate and for future guidance, the guidelines laid down in the case of
Eastern Shipping Lines42 are accordingly modified to embody BSP-MB Circular No. 799,
as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held liable
for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern
in determining the measure of recoverable damages.1âwphi1
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may
have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 6% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.
When an obligation, not constituting a loan or forbearance of money, is breached,
an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages, except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is
made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty
cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date the judgment of the court is made (at which
time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph
2, above, shall be 6% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior
to July 1, 2013, shall not be disturbed and shall continue to be implemented
applying the rate of interest fixed therein.
WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court
of Appeals in CA-G.R. SP No. 98591, and the Resolution dated October 9, 2009 are
REVERSED and SET ASIDE. Respondents are Ordered to Pay petitioner:
(1) backwages computed from the time petitioner was illegally dismissed on January
24, 1997 up to May 27, 2002, when the Resolution of this Court in G.R. No. 151332
became final and executory;
(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one
month pay per year of service; and
(3) interest of twelve percent (12%) per annum of the total monetary awards,
computed from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from
July 1, 2013 until their full satisfaction.
The Labor Arbiter is hereby ORDERED to make another recomputation of the total
monetary benefits awarded and due to petitioner in accordance with this Decision.
SO ORDERED.

Footnotes:
1 Penned by Associate Justice Vicente 10 Id. at 100.
S. E. Veloso, with Associate Justices 11 Id.
Rebecca De Guia-Salvador and Ricardo R. 12 Id. at 101.
Rosario, concurring; rollo, pp. 33-48. 13 Id. at 97-102.
2 Id. at 32. 14 Id. at 37.
3 Id. at 79-84. 15 Id. at 103-108.
4 Id. at 82-84. (Emphasis supplied.) 16 Id. at 109-113.
5 Id. at 85-93. 17 Id. at 114-117.
6 Resolution dated July 24, 2000, id. 18 Id. at 101.
at 94-96. 19 Id. at 40.
7 Rollo, p. 35. 20 Id. at 65-69.
8 Id. at 35-36. 21 Id. at 70-74.
9 Id. at 36. 22 Id. at 60-64.
23 Id. at 58-59.
24 Id. at 33-48.
25 Id. at 32.
26 Id. at 27.
27 G.R. No. 172149, February 8, 2010,
612 SCRA 10.
28 Session Delights Ice Cream and Fast
Foods v. Court of Appeals (Sixth
Division), supra, at 21-23.
29 Id. at 25.
30 Id. at 25-26.
31 Id. at 26.
32 G.R. No. 97412, July 12, 1994, 234
SCRA 78.
33 Eastern Shipping Lines, Inc. v. Court
of Appeals, supra, at 95-97. (Citations
omitted; italics in the original).
34 SECTION 2. The rate of interest for
the loan or forbearance of any money,
goods or credits and the rate allowed
in judgments, in the absence of express
contract as to such rate of interest,
shall continue to be twelve percent
(12%) per annum.
35 Rate of interest in the absence of
stipulation; Dated June 21, 2013.
36 § X305.1 Rate of interest in the
absence of stipulation. The rate of
interest for the loan or forbearance of
any money, goods or credits and the
rate allowed in judgments, in the
absence of expressed contract as to
such rate of interest, shall be twelve
percent (12%) per annum.
37 The Section is under Q Regulations or
Regulations Governing Non-Bank
Financial Institutions
Performing Quasi-Banking Functions. It
reads:
§ 4305Q.1 (2008 - 4307Q.6) Rate of
interest in the absence of stipulation.
The rate of interest for the loan or
forbearance of any money, goods or
credit and the rate allowed in
judgments, in the absence of express
contract as to such rate of interest,
shall be twelve percent (12%) per
annum.
38 The Section is under S Regulations or
Regulations Governing Non-Stock
Savings and Loan Associations. It
reads:
§ 4305S.3 Interest in the absence of
contract. In the absence of express
contract, the rate of interest for the
loan or forbearance of any money, goods
or credit and the rate allowed in
judgment shall be twelve percent (12%)
per annum.
39 The Section is under P Regulations or
Regulations Governing Pawnshops. It
reads:
§ 4303P.1 Rate of interest in the
absence of stipulation. The rate of
interest for a loan or forbearance of
money in the absence of an expressed
contract as to such rate of interest,
shall be twelve percent (12%) per
annum. (Circular No. 656 dated 02 June
2009)
40 Supra note 32, at 95-97.
41 G.R. No. 192986, January 15, 2013,
688 SCRA 530, 547.
42 Supra note 32.