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ARTICLE 1106

EN BANC

G.R. No. L-23072 November 29, 1968

SIMEON B. MIGUEL, ET AL.,plaintiffs-appellants,

vs.FLORENDO CATALINO,defendant-appellee.

Bienvenido L. Garcia for plaintiffs-appellants.

Moises P. Cating for defendant-appellee.

REYES, J.B.L.,J.:

Direct appeal from the judgment in Civil Case No. 1090 of the Courtof First Instance of Baguio, dismissing the plaintiffs' complaint forrecovery of possession of a parcel of land, registered under Act 496,in the name of one Bacaquio,

1 a long-deceased illiterate non-

Christian resident of Mountain Province, and declaring thedefendant to be the true owner thereof.

On January 22, 1962, appellants Simeon, Emilia and Marcelina

Miguel, and appellant Grace Ventura brought suit in the Court belowagainst Florendo Catalino for the recovery of the land above-described, plaintiffs claiming to be the children and heirs of theoriginal registered owner, and averred that defendant, without theirknowledge or consent, had unlawfully taken possession of the land,gathered its produce and unlawfully excluded plaintiffs therefrom.Defendant answered pleading ownership and adverse possession for30 years, and counterclaimed for attorney's fees. After trial theCourt dismissed the complaint, declared defendant to be the rightfulowner, and ordered the Register of Deeds to issue a transfercertificate in lieu of the original. Plaintiffs appealed directly to thisCourt, assailing the trial Court's findings of fact and law.

As found by the trial Court, the land in dispute is situated in the

Barrio of San Pascual, Municipality of Tuba, Benguet, MountainProvince and contains an area of 39,446 square meters, more orless. It is covered by Original Certificate of Title No. 31, which wasissued on 28 December 1927 in the name of Bacaquio (or Bakakew),a widower. No encumbrance or sale has ever been annotated in thecertificate of title.

The plaintiff-appellant Grace Ventura2 is the only child of Bacaquio

by his first wife, Debsay, and the other plaintiffs-appellants, Simeon,Emilia and Marcelina, all surnamed "Miguel", are his children by his

third wife, Cosamang. He begot no issue with his second wife,Dobaney. The three successive wives have all died.

Bacaquio, who died in 1943, acquired the land when his second wifedied and sold it to Catalino Agyapao, father of the defendantFlorendo Catalino, for P300.00 in 1928. Of the purchase priceP100.00 was paid and receipted for when the land was surveyed,

but the receipt was lost; the balance was paid after the certificate oftitle was issued. No formal deed of sale was executed, but since thesale in 1928, or for more than 30 years, vendee Catalino Agyapaoand his son, defendant-appellee Florendo Catalino, had been inpossession of the land, in the concept of owner, paying the taxes

thereon and introducing improvements.

On 1 February 1949, Grace Ventura, by herself alone, "sold" (as per

her Transferor's Affidavit, Exhibit "6") anew the same land forP300.00 to defendant Florendo Catalino.

In 1961, Catalino Agyapao in turn sold the land to his son, thedefendant Florendo Catalino.

This being a direct appeal from the trial court, where the value ofthe property involved does not exceed P200,000.00, only the issuesof law are reviewable by the Supreme Court, the findings of fact ofthe court a quobeing deemed conceded by the appellant (Jacinto v.Jacinto, 105 Phil. 1218; Del Castillo v. Guerro, L-11994, 25 July 1960;

Abuyo, et al. v. De Suazo, L-21202, 29 Oct. 1966; 18 SCRA 600, 601).

We are thus constrained to discard appellant's second and thirdassignments of error.

In their first assignment, appellants assail the admission in evidenceover the objection of the appellant of Exhibit "3". This exhibit is adecision in favor of the defendant-appellee against herein plaintiff-appellant Grace Ventura, by the council of Barrio of San Pascual,

Tuba, Benguet, in its Administrative Case No. 4, for the settlement ofownership and possession of the land. The decision is ultra viresbecause barrio councils, which are not courts, have no judicialpowers (Sec. 1, Art. VIII, Constitution; see Sec. 12, Rep. Act 2370,otherwise known as the Barrio Charter). Therefore, as contended by

appellants, the exhibit is not admissible in a judicial proceeding asevidence for ascertaining the truth respecting the fact of ownership

and possession (Sec. 1, Rule 128, Rules of Court).

Appellants are likewise correct in claiming that the sale of the land in1928 by Bacaquio to Catalino Agyapao, defendant's father, is null

and void ab initio, for lack of executive approval (Mangayao et al. vs.Lasud, et al., L-19252, 29 May 1964). However, it is not theprovisions of the Public Land Act (particularly Section 118 of Act

2874 and Section 120 of Commonwealth Act 141) that nullify thetransaction, for the reason that there is no finding, and thecontending parties have not shown, that the land titled in the nameof Bacaquio was acquired from the public domain (Palad vs. Saito, 55Phil. 831). The laws applicable to the said sale are: Section 145(b) of

the Administrative Code of Mindanao and Sulu, providing that noconveyance or encumbrance of real property shall be made in that

department by any non-christian inhabitant of the same, unless,among other requirements, the deed shall bear indorsed upon it theapproval of the provincial governor or his representative duly

authorized in writing for the purpose; Section 146 of the same Code,declaring that every contract or agreement made in violation of

Section 145 "shall be null and void"; and Act 2798, as amended byAct 2913, extending the application of the above provisions to

Mountain Province and Nueva Vizcaya.

Since the 1928 sale is technically invalid, Bacaquio remained, in law,the owner of the land until his death in 1943, when his title passedon, by the law on succession, to his heirs, the plaintiffs-appellants.

Notwithstanding the errors aforementioned in the appealed

decision, we are of the opinion that the judgment in favor ofdefendant-appellee Florendo Catalino must be sustained. Fordespite the invalidity of his sale to Catalino Agyapao, father ofdefendant-appellee, the vendor Bacaquio suffered the latter toenter, possess and enjoy the land in question without protest, from1928 to 1943, when the seller died; and the appellants, in turn,while succeeding the deceased, also remained inactive, without

taking any step to reivindicate the lot from 1944 to 1962, when thepresent suit was commenced in court. Even granting appellants'proposition that no prescription lies against their father's recordedtitle, their passivity and inaction for more than 34 years (1928-1962)

justifies the defendant-appellee in setting up the equitable defenseof laches in his own behalf. As a result, the action of plaintiffs-appellants must be considered barred and the Court below correctlyso held. Courts can not look with favor at parties who, by theirsilence, delay and inaction, knowingly induce another to spend time,effort and expense in cultivating the land, paying taxes and makingimprovements thereon for 30 long years, only to spring fromambush and claim title when the possessor's efforts and the rise ofland values offer an opportunity to make easy profit at his expense.In Mejia de Lucas vs. Gamponia, 100 Phil. 277, 281, this Court laid

down a rule that is here squarely applicable:

Upon a careful consideration of the facts andcircumstances, we are constrained to find, however, thatwhile no legal defense to the action lies, an equitable onelies in favor of the defendant and that is, the equitabledefense of laches. We hold that the defense ofprescription or adverse possession in derogation of thetitle of the registered owner Domingo Mejia does not lie,but that of the equitable defense of laches. Otherwisestated, we hold that while defendant may not beconsidered as having acquired title by virtue of his and his

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predecessors' long continued possession for 37 years, theoriginal owner's right to recover back the possession of the

property and title thereto from the defendant has, by thelong period of 37 years and by patentee's inaction and

neglect, been converted into a stale demand.

As in the Gamponiacase, the four elements of laches are present in

the case at bar, namely: (a) conduct on the part of the defendant, orof one under whom he claims, giving rise to the situation of whichcomplaint is made and for which the complaint seeks a remedy; (b)delay in asserting the complainant's rights, the complainant havinghad knowledge or notice, of the defendant's conduct and having

been afforded an opportunity to institute a suit; (c) lack ofknowledge or notice on the part of the defendant that the

complainant would assert the right on which he bases his suit; and(d) injury or prejudice to the defendant in the event relief is

accorded to the complainant, or the suit is not held to be barred. Inthe case at bar, Bacaquio sold the land in 1928 but the sale is voidfor lack of the governor's approval. The vendor, and also his heirsafter him, could have instituted an action to annul the sale from thattime, since they knew of the invalidity of the sale, which is a matter

of law; they did not have to wait for 34 years to institute suit. Thedefendant was made to feel secure in the belief that no action

would be filed against him by such passivity, and also because he"bought" again the land in 1949 from Grace Ventura who alone triedto question his ownership; so that the defendant will be plainlyprejudiced in the event the present action is not held to be barred.

The difference between prescription and laches was elaborated inNielsen & Co., Inc. vs. Lepanto Consolidated Mining Co., L-21601, 17December 1966, 18 SCRA p. 1040, as follows:

Appellee is correct in its contention that the defense oflaches applies independently of prescription. Laches isdifferent from the statute of limitations. Prescription is

concerned with the fact of delay, whereas laches isconcerned with the effect of delay. Prescription is a matterof time; laches is principally a question of inequity ofpermitting a claim to be enforced, this inequity beingfounded on some change in the condition of the propertyor the relation of the parties. Prescription is statutory;laches is not. Laches applies in equity, whereasprescription applies at law. Prescription is based on fixedtime laches is not, (30 C.J.S., p. 522. See also Pomeroy'sEquity Jurisprudence, Vol. 2, 5th ed., p. 177) (18 SCRA

1053).

With reference to appellant Grace Ventura, it is well to remark thather situation is even worse than that of her co-heirs and co-

plaintiffs, in view of her executing an affidavit of transfer (Exh. 6)attesting under oath to her having sold the land in controversy toherein defendant-appellee, and the lower Court's finding that in1949 she was paid P300.00 for it, because she, "being a smartwoman of enterprise, threatened to cause trouble if the defendantfailed to give her P300.00 more, because her stand (of being theowner of the land) was buttressed by the fact that OriginalCertificate of Title No. 31 is still in the name of her father, Bacaquio"(Decision, Record on Appeal, p. 24). This sale, that was in fact aquitclaim, may not be contested as needing executive approval; forit has not been shown that Grace Ventura is a non-christianinhabitant like her father, an essential fact that cannot be assumed(Sale de Porkan vs. Yatco, 70 Phil. 161, 175).

Since the plaintiffs-appellants are barred from recovery, theirdivestiture of all the elements of ownership in the land is complete;and the Court a quo was justified in ordering that Bacaquio's originalcertificate be cancelled, and a new transfer certificate in the nameof Florendo Catalino be issued in lieu thereof by the Register ofDeeds.

FOR THE FOREGOING REASONS, the appealed decision is hereby

affirmed, with costs against the plaintiffs-appellants.

Concepcion C.J., Dizon, Makalintal, Zaldivar, Sanchez, Fernando and

Capistrano, JJ., concur.

Castro, J.,took no part.

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THIRD DIVISION

[G.R. No. 133317. June 29, 1999]

ANTONIO R. AGRA, CAYETANO FERRERIA, NAPOLEON M. GAMO

and VICENTE O. NOVALES,petitioners, vs.PHILIPPINE NATIONAL

BANK, respondent.

D E C I S I O N

PANGANIBAN,J.:

Laches is a recourse in equity. Equity, however, is applied only inthe absence, never in contravention, of statutory law. Thus, lachescannot, as a rule, abate a collection suit filed within the prescriptiveperiod mandated by the Civil Code.

The CaseBefore us is a Petition for Review on Certiorari under Rule 45 of theRules of Court, assailing the November 26, 1997 Decision of theCourt of Appeals,[1]which disposed as follows:

IN VIEW OF THE FOREGOING, the decision of the lower court ishereby AFFIRMED, with the modification that the award ofattorneys fees is hereby DELETED and the twelve percent (12%)

interest on the P2,500,000.00 the defendant-appellants are to payPNB should start from August 30, 1976, the date when the

complaint was filed.[2]

The decretal portion of the aforementioned trial court ruling reads:

WHEREFORE, in view of the foregoing, in the interest o f justice,judgment is rendered in favor of the plaintiff ordering all the suretiesjointly and severally, to pay PNB as follows:

a) the amount of P2,500,000.00 plus twelve per centum (12%)accrued interest from August 1, 1976;

b) ten percent (10%) of the total amount due as attorneys fees

and cost of the suit.

SO ORDERED.

Also assailed by petitioners is the April 2, 1998 Resolution of theCourt of Appeals, which denied their Motion for Reconsideration.

[3]

The Facts

The facts are summarized by the Court of Appeals (CA) in this wise:[4]

On August 30, 1976, an action for collection of a sum ofmoneywas filed by the Philippine National Bank (PNB, for brevity)against Fil-Eastern Wood Industries, Inc. (Fil-Eastern, for short) in itscapacity as principal debtor and against Cayetano Ferreria, Pedro

Atienza, Vicente O. Novales, Antonio R. Agra, and Napoleon M.Gamo in their capacity as sureties.

In its complaint, plaintiff PNB alleged that on July 17, 1967 Fil -Eastern was granted a loan in the amount of [t]wo [m]illion [f]ive

[h]undred [t]housand [p]esos (P2,500,000.00) with interest attwelve percent (12%) per annum. Drawings from said demand loanwere made on different dates as evidenced by several promissorynotes and were credited to the account of Fil-Eastern. To secure thepayment of the said loan Fil-Eastern as principal and suretiesFerreria, Atienza, Novales, Agra, and Gamo executed a SuretyAgreement whereby the sureties, jointly and severally with theprincipal, guaranteed and warranted to PNB, its successors orassigns, prompt payment of subject obligation including notes,

drafts, bills of exchange, overdrafts and other obligations of everykind, on which Fil-Eastern was indebted or may thereafter becomeindebted to PNB. It was further alleged that as of May 31, 1976 thetotal indebtedness of Fil-Eastern and its sureties on subject loanamounted to [f]ive [m]illion [t]wo [h]undred [n]inety-[s]even[t]housand, [n]ine [h]undred [s]eventy-[s]ix [p]esos and [s]eventeen

*c+entavos (P5,297,976.17), excluding attorneys

fees. Notwithstanding repeated demands, the defendants refused

and failed to pay their loans.

The defendants (herein sureties) filed separate answers (pp. 49, 68,

205, 208 and 231). Collating these, We drew the following: All ofthem claimed that they only signed the Surety Agreement with the

understanding that the same was a mere formality required of theofficers of the corporation. They did not in any way or manner

receive a single cent from the proceeds of said loan and/or deriveany profit therefrom. Neither did they receive any consideration

valuable or otherwise, from defendant Fil-Eastern. They furtherclaim that the loan in question was negotiated and approved underhighly irregular, anomalous and suspicious circumstances to the

point that the Surety Agreement executed thereafter is invalid, nulland void and without force and effect. The extension of time of

payment of the loan in question released and discharged theanswering defendants from any liability under the SuretyAgreement. The Surety Agreement is null and void from thebeginning due to a defect in the consent of the defendants and thattheir liabilities under the Surety Agreement, if any, has beenextinguished by novation. The cause of action of the complainant isbarred by laches and estoppelin that the plaintiff with fullknowledge of the deteriorating financial condition of Fil-Eastern didnot take steps to collect from said defendant corporation while stillsolvent. They also maintained that if anyone is liable for thepayment of said loan, it is Felipe Ysmael, Jr. and not them or it isonly Fil-Eastern and the controlling officers who profited and madeuse of the proceeds of the loan. Defendant Agra likewise said thathe was made to sign the Surety Agreement and he did it because ofthe moral influence and pressure exerted upon him by FelipeYsmael, Jr. (their employer at the time of signing), thereby arousingstrong fears of losing a much needed employment to support his

family should he refuse to sign as Surety.

In the order of the trial court dated October 30, 1978, defendantFil-Eastern was declared in default for its failure to answer thecomplaint within the reglementary period and the case was

scheduled for pre-trial conference. The individual defendants withthe courts approval thereafter filed an amended third-party

complaint against Felipe Ysmael, Jr.

The amended third-party complaint alleged that at the time ofexecution of the alleged Surety Agreement subject matter of theprincipal complaint, third-party plaintiffs were but employees of

Ysmael Steel Manufacturing Co., owned by third-party-defendant. Third-party-plaintiffs were in no financial position to act

as sureties to a P2.5 million loan. They became incorporators oforiginal defendant Fil-Eastern because of fear of losing theiremployment brought about by the tremendous pressure and moralinfluence exerted upon them by their employer-third-party-defendant. They signed the Surety Agreement upon the order of the

third-party-defendant. In signing the said document, the third-party-plaintiffs were assured by the third-party-defendant that theyhad nothing to fear and worry about because the latter will assumeall liabilities as well as profits therefrom and that the loan subject of

the Surety Agreement was with the prior approval and blessing of ahigh government official. They were likewise assured that the suretyagreement was but a formality and that because of such pressure,influence as well as assurances, third-party-plaintiffs signed theSurety Agreement.

Third-party-defendant Felipe Ysmael, Jr. in his answer alleged thatthe Surety Agreement was freely and voluntarily signed andexecuted by third-party-plaintiffs without any intimidation, undue,improper or fraudulent representations. Further,granting arguendothat the consent of third-party plaintiffs in signingsaid Surety Agreement was vitiated with intimidation, undueinfluence or fraudulent representation on the part of third-party-defendant, said Surety Agreement is only voidable and therefore

binding unless annulled by a proper action in court. The third-party-plaintiffs did not file the proper court action for the annulment ofsaid agreement. They are now barred from filing an action forannulment of said agreement, the prescriptive period therefor beingonly four (4) years from the time the defect of the consent hadceased, and from the discovery of the all[e]ged fraud. In addition,

third-party plaintiffs had ratified said agreement which they signedin July 1967 by signing their names on and execution of several

promissory thereafter.

At the pre-trial conference held on March 21, 1980, the partiesfailed to agree on a possible amicable settlement hence the casewas set for trial on the merits. On July 5, 1984, during the pendency

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period. Article 1391 of the Civil Code provides that the action toannul a contract vitiated by intimidation, violence or undue

influence shall be filed within four years from the cessation of suchdefects. In this case, Petitioners Agra, Gamo and Novales resigned

from Fil-Eastern in 1967, 1968 and 1969, respectively. It was only in1976, when PNB sought to enforce the contract, that they alleged adefect in their consent. By their inaction, their alleged cause of

action based on vitiated consent had precribed. There was noquestion that petitioners, in their capacity as sureties, were

answerable for the obligations of Fil-Eastern to PNB.

We shall now go to the main issue of this case: Whether petitioners

may invoke the defense of laches, considering that PNBs c laim hadnot yet prescribed.

Main Issue: Laches

Petitioners admit that PNBs claim, though filed more than seven

years from the maturity of the obligation, fell within the ten-yearprescriptive period. They argue, however, that the cause wasalready barred by laches, which is defined as the failure or neglectfor an unreasonable or unexplained length of time to do that whichby exercising due diligence, could or should have been done earlierwarranting a presumption that he has abandoned his right ordeclined to assert it.

[7]In arguing that the appellate court erred in

rejecting the defense of laches, petitioners cite four reasons: (1) the

defense of laches applies independently of prescription; (2) thecause of action against petitioners accrued from the maturity of theobligation, not from the time of judicial demand; (3) the four well-settled elements of laches were duly proven; and (4) PNB v.CAapplies in the instant case. As will be shown below, all these

arguments are devoid of merit.

Application of Laches

Assailing the CA ruling that laches was inapplicable because theclaim was brought within the ten-year prescriptive period,petitioners stress that the defense of laches differs from and is

applied independently of prescription. In support, they cite, amongothers, Nielson & Co., Inc. v. Lepanto Consolidated Mining Co.,

[8]in

which the Supreme Court ruled:

*T+he defense of laches applies independently of

prescription. Laches is different from the statute oflimitations. Prescription is concerned with the fact of delay,

whereas laches is concerned with the effect of delay. Prescription isa matter of time; laches is principally a question of inequity ofpermitting a claim to be enforced, this inequity being founded onsome change in the condition of the property or the relation of the

parties. Prescription is statutory; laches is not. Laches applies inequity; whereas prescription applies at law. Prescription is based on

fixed time, laches is not.

True, prescription is different from laches, but petitioners reliance

on Nielsonis misplaced. As held in the aforecited case, laches isprincipally a question of equity. Necessarily, there is no absoluterule as to what constitutes laches or staleness of demand; each caseis to be determined according to its particular circumstances. Thequestion of laches is addressed to the sound discretion of the courtand since laches is an equitable doctrine, its application is controlled

by equitable considerations.[9]

Petitioners, however, failed to showthat the collection suit against herein sureties was

inequitable. Remedies in equity address only situations tainted with

inequity, not those expressly governed by statutes. Indeed, thepetitioners failed to prove the presence of all the four establishedrequisites of laches, viz:

(1) conduct on the part of the defendant or one under whom he

claims, giving rise to the situation of which complaint is made and

for which the complainant seeks a remedy;

(2) delay in asserting the complainants right, the complainanthaving had knowledge or notice of defendants conduct and having

been afforded an opportunity to institute a suit;

(3) lack of knowledge or notice on the part of the defendant that thecomplainant would assert the right on which he bases his claim; and

(4) injury or prejudice to the defendant in the event relief is

accorded to the complainant, or the suit is not held barred.[10]

That the first element exists is undisputed. Neither Fil-Eastern northe sureties, herein petitioners, paid the obligation under the Surety

Agreement.

The second element cannot be deemed to exist. Although thecollection suit was filed more than seven years after the obligationof the sureties became due, the lapse was within the prescriptiveperiod for filing an action. In this light, we find immaterial

petitioners insistence that the cause of action accrued on December

31, 1968, when the obligation became due, and not on August 30,1976, when the judicial demand was made. In either case, bothsubmissions fell within the ten-year prescriptive period. In any

event, the fact of delay, standing alone, is insufficient to constitute

laches.[11]

Petitioners insist that the delay of seven years was unreasonableand unexplained, because demand was not necessary. Again wepoint that, unless reasons of inequitable proportions are adduced, adelay within the prescriptive period is sanctioned by law and is notconsidered to be a delay that would bar relief. In Chavez v. Bonto-Perez,

[12]the Court reiterated an earlier holding, viz:

Laches is a doctrine in equity while prescription is based on

law. Our courts are basically courts of law and not courts ofequity. Thus, laches cannot be invoked to resist the enforcement ofan existing legal right. We have ruled in Arsenal v. Intermediate

Appellate Court x x x that it is a long standing principle that equityfollows the law. Courts exercising equity jurisdiction are bound by

rules of law and have no arbitrary discretion to disregard them. InZabat, Jr. v. Court of Appeals x x x, this Court was more emphatic in

upholding the rules of procedure. We said therein:

As for equity, which has been aptly described as justice outside

legality, this is applied only in the absence of, and never against,

statutory law or, as in this case, judicial rules of

procedure. Aequetas nunquam contravenit legis. This pertinentpositive rules being present here, they should preempt and prevail

over all abstract arguments based only on equity.

Thus, where the claim was filed within the three-year statutory

period, recovery therefore cannot be barred by laches.Petitioners also failed to prove the third element of laches. It isabsurd to maintain that petitioners did not know that PNB wouldassert its right under the Surety Agreement. It is unnatural, if not

unheard of, for banks to condone debts without adequaterecompense in some other form. Petitioners have not given usreason why they assumed that PNB would not enforce theAgreement against them.

Finally, petitioners maintain that the fourth element is presentbecause they would suffer damage or injury as a result of PNBs

claim. This is the crux of the controversy. In addition to thepayment of the amount stipulated in the Agreement, otherequitable grounds were enumerated by petitioners, viz:

1.Petitioners acted as sureties under pressure from Felipe BabyYsmael, Jr., the headman of the Ysmael Group of Companies wherethe petitioners were all employed in various executive positions.

2. Petitioners did not receive a single centavo in consideration oftheir acting as sureties.

3. The surety agreement was not really a requisite for the grant ofthe loan to FIL-EASTERN because the first release on the loan was

made on July 17, 1967, or even before the Surety Agreement wasexecuted by petitioners on July 21, 1967.

4. Petitioners were assured that the Surety Agreement was merely a

formality, and they had reason to believe that assurance becausethe loan was principally secured by an assignment of 15% of theproceeds of the sale of logs of FIL-EASTERN to Iwai & Co., Ltd., and

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such assignment was clearly stated in PNB Board Resolution No.407. In fact, while it was expressly stated in all of the eight (8)

promissory notes covering the releases of the loan that the said loanwas secured by 15% of the contract of sale with Iwai & Co., Ltd., only

three (3) promissory notes stated that the loan was also secured bythe joint and several signatures of the officers of the

corporation. It is to be noted that no mention was even made of

the joint and several signatures of petitioners as sureties . In otherwords, the principal security was the assignment of 15% of the

contract for the sale of logs to Iwai & Co., Ltd.

5. For reasons not explained by PNB, PNB did not collect the 15% ofthe proceeds of the sale of the logs to Iwai & Co., Ltd., and suchfailure resulted in the non-collection of the P2,500,000.00 demandloan, or at least a portion of it.

6. For reasons likewise unexplained by PNB, PNB did not make anydemand upon petitioners to pay the unpaid loan of FIL-EASTERNuntil after FIL-EASTERN had become bankrupt, and PNB was awareof this fact because it foreclosed the chattel mortgages on the otherloans of FIL-EASTERN which were secured by said chattelmortgages.

[13](Emphasis found in the original.)

These circumstances do not justify the application of laches. Rather,they disclose petitioners failure to understand the language and the

nature of the Surety Arrangement. They cannot now argue that theSurety Agreement was merely a formality, secondary to the

assignment of 15 percent of the proceeds of the sale of Fil-Easternslogs to Iwai and Co., Ltd. Neither can they rely on PNBs failure tocollect the assigned share in the sale of the logs or to make ademand on petitioners until after Fil-Eastern had becomebankrupt. The Court stresses that the obligation of a surety is direct,

primary and absolute. Thus, the Court has held:

*A+lthough the contract of a surety is in essence secondary only to a

valid principal obligation, his liability to the creditor or promisee of

the principal is said to be direct, primary, and absolute; in otherwords, he is directly and equallybound with the principal. Thesurety therefore becomes liable for the debt or duty of another

although he possesses no direct or personal interest over theobligations nor does he receive any benefit therefrom.

[14]

When petitioners signed as sureties, they expressly andunequivocally agreed to the stipulation that the liability on this

guaranty shall be solidary, direct and immediate and not contingent

upon the pursuit by the creditor,its successors, indorsees or assigns,of whatever remedies it or they have against the principal or the

securities or liens it or they may possess.

If they had mistaken the import of the Surety Agreement, they couldhave easily asked for its revocation. The Agreement stipulates that

it may be revoked by the Surety at any time, but only after forty-eight hours notice in writing to the Creditor, and such revocationshall not operate to relieve the Surety from responsibility forobligations incurred by the Principal prior to the termination of such

period. This they did not do.

Equally unavailing is petitioners allegation that the Surety

Agreement was not a requisite for the grant of the loan. Even iftheir assertion is true, the fact remains that they signed the contractand voluntarily bound themselves to be solidarily liable for the loanamounting toP2,500,000.

The other equitable circumstances above enumerated fail to

support petitioners cause. As earlier stated, petitioners are already

barred from questioning the voluntariness of theirconsent. Furthermore, this Court has categorically ruled that asurety is liable for the debt of another, although he or she receivedno benefit therefrom.

[15]

Clearly, aside from the fact that the collection suit was filed only

after the lapse of seven years from the date the obligation becamedue and demandable, petitioners failed to adduce any showing of

inequity. Hence, the rules on equity cannot protect them.

Applicability of PNB v. CA

Petitioners allege that the CA committed grave error in failing toapply PNB v. Court of Appeals,

[16]which they insist to be analogous

to the present case. The facts in said case are as follows:Private Respondent B.P. Mata & Co. Inc. (Mata), is a private

corporation engaged in providing goods and services to shipping

companies. Since 1966, it has acted as a manning or crewing agentfor several foreign firms, one of which is Star Kist foods, Inc., USA

(Star Kist). As part of their agreement, Mata makes advances forthe crews basic personal needs. Subsequently, Mata sendsmonthly billings to its foreign principal Star Kist, which in turnreimburses Mata by sending a telegraphic transfer through banks for

credit to the latters account.

Against this background, on February 21, 1975, Security Pacific

National Bank (SEPAC) of Los Angeles which had an agencyarrangement with Philippine National Bank (PNB), transmitted acable message to the International Department of PNB to pay the

amount of US$14,000 to Mata by crediting the latters account with

the Insular Bank of Asia and America (IBAA), per order of StarKist. Upon receipt of this cabled message on February 24, 1975,

PNBs International Department noticed an error and sent a service

message to SEPAC Bank. The latter replied with the instructions thatthe amount of US$14,000 should only be for US$1,400.

On the basis of the cable message dated February 24, 1975,

Cashiers Check No. 269522 in the amount of US$1,400 (P9,772.96)

representing reimbursement from Star Kist, was issued by the StarKist for the account of Mata on February 25, 1975 through theInsular Bank of Asia and America (IBAA).

However, fourteen days after or on March 11, 1975, PNB effected

another payment through Cashiers Check No. 270271 in the amount

of US$14,000 (P97,878.60) purporting to be another transmittal of

reimbursement from Star Kist, private respondents foreignprincipal.

Six years later, or more specifically, on May 13, 1981, PNB

requested Mata for refund of US$14,000 (P97,878.60) after it

discovered its error in effecting the second payment.On February 4, 1982, PNB filed a civil case for collection and refundof US$14,000 against Mata arguing that based on a constructivetrust under Article 1456 of the Civil Code, it has a right to recover

the said amount it erroneously credited to respondent Mata.[17]

On the ground of laches, the Court decided against the claim of PNB,stating that:

*i+t is amazing that it took petitioner almost seven years before it

discovered that it had erroneously paid privaterespondent. Petitioner would attribute its mistake to the heavyvolume of international transactions handled by the Cable andRemittance Division of the International Department of PNB. Suchspecious reasoning is not persuasive. It is unbelievable for a bank,

and a government bank at that, which regularly publishes itsbalanced financial statements annually or more frequently, by thequarter, to notice its error only seven years later. As a universalbank with worldwide operations, PNB cannot afford to commit suchcostly mistakes. Moreover, as between parties where negligence isimputable to one and not to the other, the former must perforcebear the consequences of its neglect. Hence, petitioner should bearthe cost of its own negligence.

Petitioners maintain that the delay in PNB v. CAwas even shorterthan that in the present case. If the bank in the aforesaid case wasnegligent in not discovering the overpayment, herein petitionersassert that the negligence was even more culpable in the presentcase. They add that, given the standard practice of banks to flagdelinquent accounts, the inaction for almost seven years of herein

respondent bank was gross and inexcusable.We are not persuaded. There are no absolute rules in the

application of equity, and each case must be examined in the light ofits peculiar facts. In PNB v. CA,there was a mistake, an inexcusable

one, on the part of petitioner bank in making an overpayment andrepeating the same error fourteen days later. If the bank could notimmediately discover the mistake despite all its agents and

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employees, the beneficiary of the amount could not be expected todo so. It is, thus, inequitable to allow PNB to collect the amount,

after such a long delay, from the beneficiary who had assumed, afterall those years, that the amount really belonged to it.

In the present case, there is no showing of any mistake or anyinequity. The fact alone that seven years had lapsed before PNB

filed the collection suit does not mean that it discovered theobligation of the sureties only then. There was a Surety

Arrangement, and the law says that the said contract can beenforced by action within ten years. The bank and the sureties allknew that the action to enforce the contract did not have to be filedimmediately. In other words, the bank committed no mistake orinequitable conduct that needed correction, and the sureties had nomisconception about their liabilities under the contract.

Clearly, petitioners have no recourse in equity, because they failedto show any inequity on the part of PNB.

Additional Issue: Liability of Conjugal Assets

In their Memorandum, petitioners belatedly ask the Court to rulethat, in case of a court ruling adverse to them, the conjugalproperties would not be liable for the husbands debts that did notredound to the benefit of the conjugal partnership.

[18]

This issue cannot be allowed, for it is being raised for the first timeonly in petitioners Memorandum. Issues, arguments, theories andcauses of action not raised below may no longer be posed onappeal.

[19]Furthermore, petitioners are asking the Court to issue a

ruling on a hypothetical situation. In effect, they are asking the

Court to render an advisory opinion, a task which is beyond itsconstitutional mandate.

WHEREFORE, the petition is hereby DENIEDand the assailed

Decision of the Court of Appeals isAFFIRMED. Costs againstpetitioners.SO ORDERED.

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ARTICLE 1144

MERCADO vs. ESPINOCILLA

DECISION

VILLARAMA, JR.,J.:

The casePetitioner Celerino E. Mercado appeals the Decisioni*1+

dated April 28, 2008 and Resolutionii*2+dated July 22, 2008 of theCourt of Appeals (CA) in CA-G.R. CV No. 87480. The CA dismissed

petitioners complaintiii*3+ for recovery of possession, quieting oftitle, partial declaration of nullity of deeds and documents, anddamages, on the ground of prescription.

The antecedent facts

Doroteo Espinocilla owned a parcel of land, Lot No. 552,with an area of 570 sq. m., located at Magsaysay Avenue, Zone 5,

Bulan, Sorsogon. After he died, his five children, Salvacion, Aspren,Isabel, Macario, and Dionisia divided Lot No. 552 equally amongthemselves. Later, Dionisia died without issue ahead of her foursiblings, and Macario took possession of Dionisias share. In anaffidavit of transfer of real property iv*4+dated November 1, 1948,

Macario claimed that Dionisia had donated her share to him in May1945.

Thereafter, on August 9, 1977, Macario and his daughtersBetty Gullaba and Saida Gabelo soldv*5+225 sq. m. to his son RogerEspinocilla, husband of respondent Belen Espinocilla and father ofrespondent Ferdinand Espinocilla. On March 8, 1985, RogerEspinocilla soldvi*6+114 sq. m. to Caridad Atienza. Per actual surveyof Lot No. 552, respondent Belen Espinocilla occupies 109 sq. m.,

Caridad Atienza occupies 120 sq. m., Caroline Yu occupies 209 sq.m., and petitioner, Salvacion's son, occupies 132 sq. m.vii*7+

The case for petitioner

Petitioner sued the respondents to recover two portions:an area of 28.5viii*8+ sq. m. which he bought from Aspren andanother 28.5 sq. m. which allegedly belonged to him but was

occupied by Macarios house.ix*9+ His claim has since beenmodified to an alleged encroachment of only 39 sq. m. that he

claims must be returned to him. He avers that he is entitled to ownand possess 171 sq. m. of Lot No. 552, having inherited 142.5 sq. m.

from his mother Salvacion and bought 28.5 sq. m. from his auntAspren. According to him, his mothers inheritance is 142.5 sq. m.,

that is, 114 sq. m. from Doroteo plus 28.5 sq. m. from Dionisia.Since the area he occupies is only 132 sq. m.,x*10+ he claims thatrespondents encroach on his share by 39 sq. m.xi*11+

The case for respondents

Respondents agree that Doroteos five children each

inherited 114 sq. m. of Lot No. 552. However, Macarios share

increased when he received Dionisias share. Macarios increased

share was then sold to his son Roger, respondents husband and

father. Respondents claim that they rightfully possess the land theyoccupy by virtue of acquisitive prescription and that there is no basis

for petitioners claim of encroachment.xii*12+

The trial courts decision

On May 15, 2006, the Regional Trial Court (RTC) ruled infavor of petitioner and held that he is entitled to 171 sq. m. The RTCfound that petitioner inherited 142.5 sq. m. from his motherSalvacion and bought 28.5 sq. m. from his aunt Aspren. The RTCcomputed that Salvacion, Aspren, Isabel and Macario each inherited142.5 sq. m. of Lot No. 552. Each inherited 114 sq. m. from Doroteoand 28.5 sq. m. from Dionisia. The RTC further ruled that Macariowas not entitled to 228 sq. m. Thus, respondents must return 39 sq.

m. to petitioner who occupies only 132 sq. m.xiii*13+

There being no public document to prove Dionisiasdonation, the RTC also held that Macarios 1948 affidavit is void and

is an invalid repudiation of the shares of his sisters Salvacion,Aspren, and Isabel in Dionisias share. Accordingly, Macario cannot

acquire said shares by prescription. The RTC further held that theoral partition of Lot No. 552 by Doroteos heirs did not include

Dionisias share and that partition should have been the main action.

Thus, the RTC ordered partition and deferred the transfer ofpossession of the 39 sq. m. pending partition.xiv*14+The dispositive

portion of the RTC decision reads:

WHEREFORE, in view of the foregoing premises, the

court issues the following ORDER, thus -

a) Partially declaring the nullity of the Deed of Absolute Sale ofProperty dated August 9, 1977 x x x executed by MacarioEspinocilla, Betty E. Gullaba and Saida E. Gabelo in favor ofRoger Espinocilla, insofar as it affects the portion or the

share belonging to Salvacion Espinocilla, mother of[petitioner,] relative to the property left by DionisiaEspinocilla, including [Tax Declaration] No. 13667 and other

documents of the same nature and character whichemanated from the said sale;

b) To leave as is the Deeds of Absolute Sale of May 11,1983 and March 8, 1985, it having been determined thatthey did not involve the portion belonging to [petitioner] xx x.

c) To effect an effective and real partition among

the heirs for purposes of determining theexact location of the share (114 sq. m.) of thelate Dionisia Espinocilla together with the 28.5

sq. m. belonging to *petitioners+ motherSalvacion, as well as, the exact location of the

39 sq. m. portion belonging to the [petitioner]being encroached by the [respondents], with

the assistance of the Commissioner (Engr.Fundano) appointed by this court.

d) To hold in abeyance the transfer of possessionof the 39 sq. m. portion to the [petitioner]pending the completion of the real partitionabove-mentioned.xv*15+

The CA decision

On appeal, the CA reversed the RTC decision anddismissed petitioners complaint on the ground that extraordinary

acquisitive prescription has already set in in favor of respondents.The CA found that Doroteos four remaining children made an oral

partition of Lot No. 552 after Dionisias death in 1945 and occupied

specific portions. The oral partition terminated the co-ownership ofLot No. 552 in 1945. Said partition also included Dionisias share

because the lot was divided into four parts only. And sincepetitioners complaint was filed only on July 13, 2000, the CA

concluded that prescription has set in.xvi*16+ The CA disposed theappeal as follows:

WHEREFORE, the appeal is GRANTED.The assailed May 15, 2006 Decision of the

Regional Trial Court (RTC) of Bulan, Sorsogon ishereby REVERSED and SET ASIDE. The Complaintof the [petitioner] is hereby DISMISSED. No

costs.xvii*17+

The instant petition

The core issue to be resolved is whether petitioners

action to recover the subject portion is barred by prescription.

Petitioner confirms oral partition of Lot No. 552 byDoroteo's heirs, but claims that his share increased from 114 sq. m.

to 171 sq. m. and that respondents encroached on his share by 39sq. m. Since an oral partition is valid, the corresponding survey

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ordered by the RTC to identify the 39 sq. m. that must be returnedto him could be made.xviii*18+ Petitioner also alleges that Macario

committed fraud in acquiring his share; hence, any evidenceadduced by him to justify such acquisition is inadmissible. Petitioner

concludes that if a person obtains legal title to property by fraud orconcealment, courts of equity will impress upon the title a so-calledconstructive trust in favor of the defrauded party.xix*19+

The Courts ruling

We affirm the CA ruling dismissing petitioners complaint

on the ground of prescription.

Prescription, as a mode of acquiring ownership and other

real rights over immovable property, is concerned with lapse of timein the manner and under conditions laid down by law, namely, that

the possession should be in the concept of an owner, public,peaceful, uninterrupted, and adverse. Acquisitive prescription of

real rights may be ordinary or extraordinary. Ordinary acquisitiveprescription requires possession in good faith and with just title for10 years. In extraordinary prescription, ownership and other real

rights over immovable property are acquired through uninterruptedadverse possession for 30 years without need of title or of good

faith.xx*20+

Here, petitioner himself admits the adverse nature of

respondents possession with his assertion thatMacarios fraudulentacquisition of Dionisias share created a constructive trust. In a

constructive trust, there is neither a promise nor any fiduciaryrelation to speak of and the so-called trustee (Macario) neither

accepts any trust nor intends holding the property for thebeneficiary (Salvacion, Aspren, Isabel). The relation of trustee andcestui que trust does not in fact exist, and the holding of a

constructive trust is for the trustee himself, and therefore, at alltimes adverse.xxi*21+ Prescription may supervene even if the

trustee does not repudiate the relationship.xxii*22+

Then, too, respondents uninterrupted adverse possessionfor 55 years of 109 sq. m. of Lot No. 552 was established. Macariooccupied Dionisias share in 1945 although his claim that Dionisia

donated it to him in 1945 was only made in a 1948 affidavit. We

also agree with the CA that Macarios possession of Dionisias share

was public and adverse since his other co-owners, his three othersisters, also occupied portions of Lot No. 552. Indeed, the 1977 salemade by Macario and his two daughters in favor of his son Roger

confirms the adverse nature of Macarios possession because said

sale of 225 sq. m.xxiii*23+ was an act of ownership over Macariosoriginal share and Dionisias share. In 1985, Roger also exercised anact of ownership when he sold 114 sq. m. to Caridad Atienza. It was

only in the year 2000, upon receipt of the summons to answerpetitioners complaint, that respondents peaceful possession of the

remaining portion (109 sq. m.) was interrupted. By then, however,

extraordinary acquisitive prescription has already set in in favor ofrespondents. That the RTC found Macarios 1948 affidavit void is of

no moment. Extraordinary prescription is unconcerned withMacarios title or good faith. Accordingly, the RTC erred in ruling

that Macario cannot acquire by prescription the shares of Salvacion,Aspren, and Isabel, in Dionisias 114-sq. m. share from Lot No. 552.

Moreover, the CA correctly dismissed petitioners

complaint as an action for reconveyance based on an implied orconstructive trust prescribes in 10 years from the time the right ofaction accrues.xxiv*24+ This is the other kind of prescription under

the Civil Code, called extinctive prescription, where rights andactions are lost by the lapse of time.xxv*25+ Petitioners action forrecovery of possession having been filed 55 years after Macario

occupied Dionisias share, it is also barred by extinctive prescription.

The CA while condemning Macarios fraudulent act o f depriving his

three sisters of their shares in Dionisias share, equally emphasized

the fact that Macarios sisters wasted their opportunity to question

his acts.

WHEREFORE, we DENY the petition for review oncertiorari for lack of merit and AFFIRM the assailed Decision dated

April 28, 2008 and Resolution dated July 22, 2008 of the Court ofAppeals in CA-G.R. CV No. 87480.

No pronouncement as to costs.

SO ORDERED.

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ARTICLE 1157

EN BANC

G.R. No. L-3489 September 7, 1907

VICENTE NAVALES, plaintiff-appellee,

vs.EULOGIA RIAS, ET AL.,defendants-appellants.

Pantaleon E. del Rosario for appellants.

F. Sevilla y Macam for appellee.

TORRES,J.:

On the 18th of November, 1904, Vicente Navales filed a complaintwith the Court of First Instance of Cebu against Eulogia Rias andMaximo Requiroso, claiming that the latter should be sentenced topay him the sum of 1,200 pesos, Philippine currency, as damages,together with costs and such other expenses as the court mightconsider just and equitable. To this end he alleged that the said

defendants, without due cause, ordered the pulling down anddestruction of his house erected in Daanbuangan, town of Naga,Island of Cebu, which was 6 meters in height with an area of 8.70square meters, built of wood with a nipa roof, and worth 1,000pesos, which amount he expended in its construction. He furtheralleged that the destruction took place in the month of April, 1904,and that, notwithstanding his efforts, he had not obtained any

reimbursement from the defendants, and that by reason of theirrefusal he had been prejudiced to the extent of 200 pesos,

Philippine currency.

The defendant, in answer to the foregoing complaint, denied all andeach one of the allegations therein contained, and asked that

judgment be entered dismissing the complaint with costs against the

plaintiff.

After considering the proofs submitted by both parties and theproceedings upon the trial, the judge, on the 17th of January, 1906,rendered judgment declaring that the decision entered by the

justice of the peace of Naga, and the order given by virtue thereofwere illegal, as well as the action of the deputy sheriff LucianoBacayo, that the defendant were thereby liable for the damagescaused to the plaintiff, which amounted to 500 pesos, and that thedefendants were sentenced to pay the said sum to the plaintiff, withcosts. The defendant upon being informed of this decision, askedthat it be set aside, and also moved for a new trial on the groundthat the decision was not in accordance with the weight of theevidence. The motion was denied, to which exception was taken,and at the request of the interested party, the corresponding bill ofexceptions was limited.

The aim of this litigation, therefore, is to obtain payment through ajudicial decision, of the damages said to have been caused by the

execution of a judgment rendered by the justice of the peace, in anaction for ejectment.

It is undeniable that, in order to remove from the land of EulogiaRias, situated within the jurisdiction of the town of Naga, the house

which Vicente Navales had constructed thereon, by virtue of thedecision of the justice in the action instituted by the said Eulogia

Rias against the owner of the house , Vicente Navales, the deputy

sheriff who carried the judgment into execution was obliged todestroy the said house and removed it from the land, according tothe usual procedure in the action for ejectment.

In the order of execution issued to the deputy sheriff, the directiveportion of the judgment of the justice of the peace was inserted, andit contained the essential statement that the said judgment, byreason of its not having been appealed from, had become final, andfrom the contents of the same may be inferred that there had beenan action for ejectment between the above-named parties, and thatthere was no reason why it should not be enforced when it had

already become final and acquired the nature of res adjudicata.

Section 72 of the Code of Civil Procedure reads:

Execution. If no appeal from a judgment of a justice ofthe peace shall be perfected as herein provided, the

justice of the peace shall, at the request of the successfulparty, issue execution for the enforcement of the

judgment, and the expiration of the time limited by law for

the perfection of an appeal.

Assuming that the order for execution of final judgment was issuedin accordance with the law, and in view of the fact that it has notbeen alleged nor proven that the sheriff when complying with thesame had committed trespass or exceeded his functions, it must bepresumed according to section 334 (14) of the said Code ofProcedure, that the official duty was regularly performed. Therefore,it is not possible to impute liability to the plaintiff who obtained the

judgment and the execution thereof, when the same was notdisputed nor alleged to be null or illegal, and much less to compel

the payment of damages to the person who was defeated in theaction and sentenced to be ejected from the land which heimproperly occupied with his house.

No proof has been submitted that a contract had been entered into

between the plaintiff and the defendants, or that the latter hadcommitted illegal acts or omissions or incurred in any kind of fault ornegligence, from any of which an obligation might have arisen onthe part of the defendants to indemnify the plaintiff. For this reason,the claim for indemnity, on account of acts performed by the sheriffwhile enforcing a judgment, can not under any consideration besustained. (Art. 1089, Civil Code.)

The illegality of the judgment of the justice of the peace, that of thewrit of execution thereunder, or of the acts performed by the sheriff

for the enforcement of the judgment, has not been shown.Therefore, for the reasons hereinbefore set forth, the judgment

appealed from is hereby reversed, and the complaint for damagesfiled by Vicente Navales against Eulogia Rias and Maximo Requiroso

is dismissed without special ruling as to costs. So ordered.

Arellano, C.J., Johnson, Willard, and Tracey, JJ.,concur.

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FIRST DIVISION

G.R. No. L-46179 January 31, 1978

CANDIDA VIRATA, TOMAS VIRATA, MANOLITO VIRATA, EDERLINDA

VIRATA, NAPOLEON VIRATA, ARACELY VIRATA, ZENAIDA VIRATA,

LUZMINDA VIRATA, PACITA VIRATA, and EVANGELINA VIRATA,

petitioners,vs.VICTORIO OCHOA, MAXIMO BORILLA and THE COURT OF FIRST

INSTANCE OF CAVITE, 7th JUDICIAL DISTRICT, BRANCH V, stationed

at BACOOR, CAVITE, respondents.

Remulla, Estrella & Associates for petitioners

Exequil C. Masangkay for respondents.

FERNANDEZ,J.:

This is an appeal by certiorari, from the order of the Court of FirstInstance of Cavite, Branch V, in Civil Case No. B-134 granting the

motion of the defendants to dismiss the complaint on the groundthat there is another action pending between the same parties forthe same cause.

1

The record shows that on September 24, 1975 one Arsenio Virata

died as a result of having been bumped while walking along TaftAvenue, Pasay City by a passenger jeepney driven by Maximo Borilla

and registered in the name Of Victoria Ochoa; that Borilla is theemployer of Ochoa; that for the death of Arsenio Virata, a action for

homicide through reckless imprudence was instituted on September25, 1975 against Maximo Borilla in the Court of First Instance of Rizalat Pasay City, docketed as C Case No. 3162-P of said court; that at

the hearing of the said criminal case on December 12, 1975, Atty.Julio Francisco, the private prosecutor, made a reservation to file a

separate civil action for damages against the driver on his criminalliability; that on February 19, 1976 Atty. Julio Francisco filed amotion in said c case to withdraw the reservation to file a separatecivil action; that thereafter, the private prosecutor activelyparticipated in the trial and presented evidence on the damages;that on June 29, 1976 the heirs of Arsenio Virata again reserved theirright to institute a separate civil action; that on July 19, 1977 theheirs of Arsenio Virata, petitioners herein, commenced Civil No. B-134 in the Court of First Instance of Cavite at Bacoor, Branch V, fordamages based on quasi-delict against the driver Maximo Borilla andthe registered owner of the jeepney, Victorio Ochoa; that on August13, 1976 the defendants, private respondents filed a motion todismiss on the ground that there is another action, Criminal Case No.3162-P, pending between the same parties for the same cause; thaton September 8, 1976 the Court of First Instance of Rizal at PasayCity a decision in Criminal Case No. 3612-P acquitting the accusedMaximo Borilla on the ground that he caused an injury by nameaccident; and that on January 31, 1977, the Court of First Instance ofCavite at Bacoor granted the motion to Civil Case No. B-134 fordamages.

2

The principal issue is weather or not the of the Arsenio Virata, canprosecute an action for the damages based on quasi-delict againstMaximo Borilla and Victoria Ochoa, driver and owner, respectivelyon the passenger jeepney that bumped Arsenio Virata.

It is settled that in negligence cases the aggrieved parties maychoose between an action under the Revised Penal Code or of quasi-delict under Article 2176 of the Civil Code of the Philippines. What is

prohibited by Article 2177 of the Civil Code of the Philippines is torecover twice for the same negligent act.

The Supreme Court has held that:

According to the Code Commission: 'The foregoingprovision (Article 2177) though at first sight startling, isnot so novel or extraordinary when we consider the exactnature of criminal and civil negligence. The former is a

violation of the criminal law, while the latter is a 'culpaaquiliana' or quasi-delict, of ancient origin, having always

had its own foundation and individuality, separate fromcriminal negligence. Such distinction between criminal

negligence and 'culpa extra-contractual' or quasi-delitohas been sustained by decision of the Supreme Court ofSpain and maintained as clear, sound and perfectly

tenable by Maura, an outstanding Spanish jurist.Therefore, under the proposed Article 2177, acquittal

from an accusation of criminal negligence, whether onreasonable doubt or not, shall not be a bar to asubsequent civil action, not for civil liability arising fromcriminal negligence, but for damages due to a quasi-delictor 'culpa aquiliana'. But said article forestalls a doublerecovery. (Report of the Code Commission, p. 162.)

Although, again, this Article 2177 does seem to literallyrefer to only acts of negligence, the same argument ofJustice Bocobo about construction that upholds 'the spiritthat given life' rather than that which is literal that killeththe intent of the lawmaker should be observed in

applying the same. And considering that the preliminarychapter on human relations of the new Civil Code

definitely establishes the separability and independenceof liability in a civil action for acts criminal in character(under Articles 29 to 32) from the civil responsibilityarising from crime fixed by Article 100 of the Penal Code,and, in a sense, the Rules of Court, under Sections 2 and

3(c), Rule 111, contemplate also the same separability, itis 'more congruent' with the spirit of law, equity and

justice, and more in harmony with modern progress', toborrow the felicitous language in Rakes vs. Atlantic Gulfand Pacific Co., 7 Phil. to 359, to hod as We do hold, thatArticle 2176, where it refers to 'fault covers not only acts'not punishable by law' but also criminal in character,

whether intentional and voluntary or consequently, aseparate civil action lies against the in a criminal act,whether or not he is criminally prosecuted and foundguilty and acquitted, provided that the offended party isnot allowed, if he is actually charged also criminally, torecover damages on both scores, and would be entitledin such eventuality only to the bigger award of the, twoassuming the awards made in the two cases vary. Inother words the extinction of civil liability refereed to inPar. (c) of Section 13, Rule 111, refers exclusively to civil

liability founded on Article 100 of the Revised PenalCode, whereas the civil liability for the same actconsidered as a quasi-delict only and not as a crime is notextinguished even by a declaration in the criminal case

that the criminal act charged has not happened or hasnot been committed by the accused. Brief stated, Wehold, in reitration of Garcia, that culpa aquilina includes

voluntary and negligent acts which may be punishable bylaw.

3

The petitioners are not seeking to recover twice for the samenegligent act. Before Criminal Case No. 3162-P was decided, theymanifested in said criminal case that they were filing a separate civilaction for damages against the owner and driver of the passenger

jeepney based on quasi-delict. The acquittal of the driver, MaximoBorilla, of the crime charged in Criminal Case No. 3162-P is not a barto the prosecution of Civil Case No. B-134 for damages based onquasi-delict The source of the obligation sought to be enforced in

Civil Case No. B-134 is quasi-delict, not an act or omission punishableby law. Under Article 1157 of the Civil Code of the Philippines, quasi-delict and an act or omission punishable by law are two different

sources of obligation.

Moreover, for the petitioners to prevail in the action for damages,Civil Case No. B-134, they have only to establish their cause of actionby preponderance of the evidence.

WHEREFORE, the order of dismissal appealed from is hereby set

aside and Civil Case No. B-134 is reinstated and remanded to the

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lower court for further proceedings, with costs against the privaterespondents.

SO ORDERED.

Teehankee (Chairman), Makasiar, Muoz Palma and Guerrero, JJ.,

concur.

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SECOND DIVISION

HOSPICIO DE SAN JOSE DE BARILI

Vs.

DAR

September 23, 2005

D E C I S I O N

TINGA,J.:

At the core of this case is an obscure old special law. The issue iswhether a provision in the law prohibiting the sale of the propertiesdonated to the charitable organization that was incorporated by thesame law bars the implementation of agrarian reform laws asregards said properties.

Petitioner Hospicio de San Jose de Barili (Hospicio) is a

charitable organization created as a body corporate in 1925 by ActNo. 3239. The law was enacted in order to formally accept the offermade by Pedro Cui and Benigna Cui to establish a home for the careand support, free of charge, of indigent invalids and incapacitatedand helpless persons.[1] The Hospicio was to be maintained withthe revenues of the personal and real properties to be endowed by

the Cuis and other donors.[2]

Section 4 of Act No. 3239 provides that *t+he personal and real

property donated to the [Hospicio] by its founders or by otherpersons shall not be sold under any consideration .[3]

On 10 October 1987, the Department of Agrarian Reform

Regional Office (DARRO) Region VII issued an order ordaining thattwo parcels of land owned by the Hospicio be placed under

Operation Land Transfer in favor of twenty-two (22) tillers thereof asbeneficiaries. Presidential Decree (P.D.) No. 27, a land reform law,was cited as legal basis for the order. The Hospicio filed a motion for

the reconsideration of the order with the Department of AgrarianReform (DAR) Secretary, citing the aforementioned Section 4 of Act

No. 3239. It argued that Act No. 3239 is a special law, which couldnot have been repealed by P.D. No. 27, a general law, or by the

latters general repealing clause.

The DAR Secretary rejected the motion for reconsideration in an

Order dated 30 March 1997. Therein, the DAR Secretary held thatP.D. No. 27 was a special law, as it applied only to particular

individuals in the State, specifically the tenants of rice and cornlands. Moreover, P.D. No. 27, which covered all rice and corn lands,

provides no exemptions based on the manner of acquisition of theland by the landowner.[4]

The Order of the DAR Secretary was assailed in a Petition forCertiorari filed with the Court of Appeals. In a Decision[5] dated 9July 1999, the Court of Appeals Special Eleventh Division affirmedthe DAR Secretarys issuance. It sustained the position of the Officeof the Solicitor General (OSG) position that Section 4 of Act No. 3239was expressly repealed not only by P.D. No. 27, but also by RepublicAct No. 6657, otherwise known as the Comprehensive AgrarianReform Law of 1988, both laws being explicit in mandating thedistribution of agricultural lands to qualified beneficiaries. The Courtof Appeals further noted that the subject lands did not fall amongthe exemptions provided under Section 10 of Rep. Act No. 6657.

Finally, the appellate court brought into play the aims of landreform, affirming as it did the need to distribute and create an

economic equilibrium among the inhabitants of this land, most

especially those with less privilege in life, our peasant farmer.[6]

Unsatisfied with the Court of Appeals Decision, theHospicio lodged the present Petition for Review. TheHospicio alleges that P.D. No. 27, the CARL, and Executive OrderNo. 407[7] all violate Section 10, Article III of the Constitution, which

provides that no law impairing the obligation of contracts shall bepassed. More sedately, the Hospicio also argues that Act No. 3239

was not repealed either by P.D. No. 27 or Rep. Act No. 6657 and that

the forced disposition of the Hospicios landholdings would

incapacitate the discharge of its charitable functions, which equally

promote social justice and the upliftment of the lives of the lessfortunate.

On the other hand, the OSG, representing respondent DAR,bluntly replies that Act No. 3239 was repealed by P.D. No. 27 and

Rep. Act No. 6657, which do not exempt lands owned byeleemosynary or charitable institutions from the coverage of thoseagrarian reform laws.

A brief recapitulation of the relevant laws is in order.

P.D. No. 27, "Decreeing the Emancipation of Tenants from the

Bondage of the Soil, Transferring to Them Ownership of the Landthey Till, and Providing the Instrument and Mechanism Therefor,

has once been touted as perhaps a radical solution in its pristine

sense, one that goes at the root [of the problem of land

tenancy+.[8] Its constitutionality was upheld in De Chavez v.Zobel.[9] The law generally ordains the emancipation of tenantsand confers on them ownership of the lands they till.[10] The

following provisions of P.D. No. 27 have concretized this policy:

NOW, THEREFORE, I, FERDINAND E.MARCOS, President of the Philippines, by virtue of thepowers vested in me by the Constitution asCommander-in-Chief of all the Armed Forces of thePhilippines, and pursuant to Proclamation No. 1081,

dated September 21, 1972, and General Order No. 1dated September 22, 1972, as amended do hereby

decree and order the emancipation of all tenantfarmers as of this day, October 21, 1972;

This shall apply to tenant farmers of privateagricultural lands[[11]] primarily devoted to rice and

corn under a system of sharecrop or lease-tenancy,whether classified as landed estate or not

The tenant farmer, whether in landclassified as landed estate or not, shall be deemedowner of a portion constituting a family-size farm offive (5) hectares if not irrigated and three (3) hectares

if irrigated;

In all cases, the landowner may retain an

area of not more than seven (7) hectares if suchlandowner is cultivating such area or will now

cultivate it;

The CARL was not yet in effect when the DARRO and the DARissued their respective orders. Said law vests P.D. No. 27 withsuppletory effect insofar as the earlier law does not run inconsistentwith the later law.[12] Under Section 4 of the CARL, placed undercoverage are all public and private agricultural lands regardless oftenurial arrangement and commodity produced, subject to theexempted lands listed in Section 10 thereof.

We agree with the Court of Appeals that neither P.D. No. 27 northe CARL exempts the lands of the Hospicio or other charitableinstitutions from the coverage of agrarian reform. Ultimately, theresult arrived at in the assailed issuances should be affirmed.Nonetheless, both the DAR Secretary and the appellate court failed

to appreciate what to this Court is indeed the decisive legaldimension of the case.

Section 4 of Act No. 3239 prohibits the sale under any

consideration of the lands donated to the Hospicio. But the land

transfers mandated under P.D. No. 27 cannot be considered a

conventional sale under our civil laws.

Generally, sale arises out of a contractual obligation. Thus, itmust meet the first essential requisite of every contract that is thepresence of consent.[13] Consent implies an act of volition in

entering into the agreement.[14] The absence or vitiation of consentrenders the sale either void or voidable.

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In this case, the deprivation of the Hospicios property did notarise as a consequence of the Hospicios consent to the transfer.

There was no meeting of minds between the Hospicio, on one hand,and the DAR or the tenants, on the other, on the properties and the

cause which are to constitute the contract[15] that is to serveultimately as the basis for the transfer of ownership of the subjectlands.[16] Instead, the obligation to transfer arises by compulsion of

law, particularly P.D. No. 27.[17]

Agrarian reform is justified under the States inherent power of

eminent domain that enables it to forcibly acquire private landsintended for public use upon payment of just compensation to the

owner.[18] It has even been characterized as beyond the traditionalexercise of eminent domain, but a revolutionary kind of

expropriation. As expounded in the landmark case of Association ofSmall Landowners in the Philippines, Inc. v. Secretary of Agrarian

Reform, thus:

. . . . However, we do not deal here with thetraditional exercise of the power of eminent domain.This is not an ordinary expropriation where only a

specific property of relatively limited area is soughtto be taken by the State from its owner for a specific

and perhaps local purpose. What we deal with here

is a revolutionary kind of expropriation

The expropriation before us affects all

private agricultural lands whenever found and of

whatever kind as long as they are in excess of the

maximum retention limits allowed their owners. Thiskind of expropriation is intended for the benefit notonly of a particular community or of a small segmentof the population but of the entire Filipino nation,from all levels of our society, from the impoverishedfarmer to the land-glutted owner. Its purpose does

not cover only the whole territory of this country butgoes beyond in time to the foreseeable future, whichit hopes to secure and edify with the vision and thesacrifice of the present generation of Filipinos.Generations yet to come are as involved in thisprogram as we are today, although hopefully only asbeneficiaries of a richer and more fulfilling life we willguarantee to them tomorrow through ourthoughtfulness today. And, finally, let it not beforgotten that it is no less than the Constitution itself

that has ordained this revolution in the farms, callingfor "a just distribution" among the farmers of lands

that have heretofore been the prison of their dreamsbut can now become the key at least to their

deliverance.[19]

This characterization is warranted whether the expropriation isoperative under the CARL or P.D. No. 27, as both laws are keyed intothe same governmental objective. Moreover, under both laws, thelandowner is entitled to just compensation for the properties taken.

The twin process of expropriation of lands under agrarian reformand the payment of just compensation is akin to a forced sale, which

has been aptly described in common law jurisdictions as sale made

under the process of the court, and in the mode prescribed by law,

and which is not the voluntary act of the owner, such as to satisfy a

debt, whether of a mortgage, judgment, tax lien, etc.[20] The termhas not been precisely defined in this jurisdiction, but reference to

the phrase itself is made in Articles 223, 232, 237 and 243 of the CivilCode, which uniformly exempt the family home from execution,

forced sale, or attachment.[21] Yet a forced sale is clearly differentfrom the sales described under Book V of the Civil Code which areconventional sales, as it does not arise from the consensualagreement of the vendor and vendee, but by compulsion of law.Still, since law is recognized as one of the sources of obligation,there can be no dispute on the efficacy of a forced sale, so long as itis authorized by law.

The crucial question now arises, whether the sale prohibitedunder Section 4 of Act No. 3239 includes even a forced sale. Of

course an overly literal reading of the provision would justify suchinclusion, but appropriately a more sophisticated approach to

statutory construction is warranted.

No sance is required to discern the intent of Section 4. Itensures that the properties received by the Hospicio are notalienated for profit by the officers or administrators, in

contravention of the charitable purpose for which the Hospicio wascreated. To an extent, it makes possible the perpetual operation ofthe Hospicio, which was empowered by law to operate for anindefinite period, by assuring the existence of the property on whichthe Hospicio could operate. We also do not doubt that whatever

fruits of the forcibly retained property would also serve a source offunding for the operations of the Hospicio.

The salutariness of these objectives is beyond doubt. Theinterests they seek to protect are present whether the prohibitionencompasses only conventional sales, or even forced sales. Yet to

insist that Section 4 likewise prohibits sales or dispositions byoperation of law would necessarily imply that the Hospicio is alsobeyond the reach of any form of judicial execution. The charitable

nature of the Hospicio does not shield it from susceptibility to civilliability, and an absolute prohibition on sales, whether forced orconventional, deprives whatever judgment creditors of the Hospiciofrom any effective means of enforcing relief.

Was it the intent of the framers of Act No. 3239 to exempt theHospicio from all judicial processes, even those arising from civiltransactions? We do not think so. The contemporaneousconstruction of Section 4 indicates that the prohibition intended bythe crafters of the law pertained only to conventional sales, and notforced sales. The law was promulgated in 1925, or when the SpanishCivil Code of 1889 was in effect. The provisions in the Civil Code

referring to forced sales were not derived from the Spanish CivilCode. On the other hand,

the consensual nature of the contract of sale, and of

contracts in general, is recognized under the Spanish Civil Code.Under Article 1261 of the Spanish Civil Code, there is no contractunless the consent of the contracting parties exists.[22]

Evidently, the word sale, as contemplated by the

framers of the law in 1925, pertains to its concept in civil law, withthe requisite of consent being present. It cannot refer to sales ordispositions that arise by operation of law, such as through judicial

execution, or, as in this case, expropriation.

Thus, we can hardly characterize the acquisition of the subjectproperties from the Hospicio for the benefit of the tenants as a sale,

within the contemplation of Section 4 of Act No. 3239. The transferarises from compulsion of law, and not the desire of any parties.Even if the Hospicio had voluntarily offered to surrender itsproperties to agrarian reform, the resulting transaction would notbe considered as a conventional sale, since the obligation is creatednot out of the mandate of the parties, but the will of the law.

The DARRO Orderdid note that Section 4 of Act No. 3239 is notapplicable in this case, since the transfer is compulsory on the partof the landowner, unlike inordinary sale.[23] Regrettably, the DAR Secretary and the Court ofAppeals failed to apply that sound principle, preferring to rely

instead on the conclusion that Section 4 was repealed by P.D. No. 27and the CARL.

Nonetheless, even assuming for the nonce that Section 4contemplates even forced sales such as those through

expropriation, we would agree with the DAR Secretary and the Courtof Appeals that Section 4 is deemed repealed by P.D. No. 27 and the

CARL.

The scope of lands subjected to agrarian reform under thesetwo laws is overwhelming. P.D. No. 27 applies to all privateagricultural lands primarily devoted to rice and corn with tenant

farmers under a system of sharecrop or lease-tenancy,[24] while theCARL is even broader in scope, generally covering all public and

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private agricultural lands regardless of tenurial arrangement andcommodity produced. Under Section 10 of the CARL, the only

exempted lands are:

Lands actually, directly and exclusively usedand found to be necessary for parks, wildlife, forestreserves, reforestation, fish sanctuaries and breeding

grounds, watersheds, and mangroves, nationaldefense, school sites and campuses includingexp