FIRST DIVISION

DEVELOPMENT BANK G.R. No. 150097

OF THE PHILIPPINES,
Petitioner,
Present:

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,
-versus- CORONA,
AZCUNA* and
GARCIA, JJ.

ALEJANDRO and ADELAIDA

LICUANAN,
Respondents. Promulgated:

February 26, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CORONA, J.:

In this petition for review on certiorari,1 petitioner Development Bank of

the Philippines assails the February 9, 2001 decision2 and September 17, 2001

resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 37784.

Respondent spouses Alejandro and Adelaida Licuanan were granted a

piggery loan in the amount of P4,700 by petitioner, evidenced by a promissory

*
On official leave.
1
Under Rule 45 of the Rules of Court.
2
Penned by Associate Justice Ramon A. Barcelona (retired) and concurred in by Associate Justices
Rodrigo V. Cosico and Alicia L. Santos (retired) of the Eighth Division of the Court of Appeals; rollo,
pp. 34-46.
3
Associate Justice Bienvenido L. Reyes replaced Associate Justice Alicia L. Santos in the Special Former
Eighth Division of the Court of Appeals; id., pp. 32-33.
note dated September 20, 1974 and secured by a real estate mortgage 4 over a

980-square meter parcel of land with a two-storey building. The loans maturity

date was September 23, 1979.5

Petitioner granted respondents an additional loan of P12,000 evidenced by

a promissory note dated May 29, 1975 payable on or before the year 1980. This

was secured by a real estate mortgage over four parcels of land situated in

Pangasinan covered by TCT Nos. 109825, 109762, 109763 and 109764.6

On October 2, 1975, petitioner granted respondent spouses another loan

of P22,000 evidenced by a promissory note maturing on October 3, 1985. This

was secured by a real estate mortgage executed in favor of petitioner over three

parcels of land covered by TCT Nos. 112608, 112607 and 112609, all of the

Registry of Deeds of Pangasinan.7

On August 6, 1979, petitioner and respondents restructured the P12,000

loan, extending the maturity date from June 22, 1979 to June 22, 1982. On the

same date, respondents executed a promissory note for P12,320.73 and another

for P6,519.90.8

On July 6, 1981, petitioner sent a letter by registered mail to respondents

informing them that, since the conditions of the mortgage had been breached,

petitioner would have the mortgaged properties sold by the sheriff under Act

4
Also dated September 20, 1974.
5
Rollo, pp. 9-10, 19.
6
Id.
7
Id.
8
Id., p. 162.
3135. The total amount due from the three loans had by then ballooned to

P75,298.32.9

On July 20, 1981, petitioner filed an application for extrajudicial

foreclosure.10 The mortgaged properties were sold in a public auction on

December 16, 1981. Petitioner, as the highest bidder, acquired them for a total

of P16,340. The certificate of sale was registered on January 25, 1982.11

On February 4, 1983, petitioner consolidated its ownership over the

properties. After more than a year or on October 16, 1984, petitioner wrote

respondents by registered mail, informing them that the properties (now acquired

assets of the bank) would be disposed of by public auction. On November 11,

1984, petitioner published an advertisement stating that on November 14, 1984,

the properties would be sold by oral bidding. On this date, however, there were

no bidders.12

On November 16, 1984, petitioner sent respondents a letter informing

them that the properties could be reacquired by negotiated sale for cash or

installment.13 Three days later, however, on November 19, 1984, the properties

were sold through negotiated sale to one Emelita A. Peralta. Respondents were

informed of the sale by petitioner through a letter dated December 6, 1984.

9
Id., p. 19.
10
Id., p. 20.
11
Id., pp. 21 and 44.
12
Id.
13
Id., pp. 21-22.
 On the same day, petitioner executed a deed of conditional sale in favor of

Peralta.14 On December 11, 1984, respondents offered to repurchase the

properties from petitioner but they had already been sold to Peralta.15

Respondents then filed a complaint for recovery of real properties and

damages on July 18, 1985 in the Regional Trial Court (RTC) of Lingayen,
16
Pangasinan, Branch 39 against petitioner and Peralta. The RTC rendered

judgment dated September 17, 1991 in favor of respondents.

The trial court found that there was no demand for payment prior to the

extrajudicial foreclosure. Thus, the foreclosure proceedings were null and void.

It ordered Peralta to reconvey the properties to respondents subject to Peraltas

right to be paid by respondents the amount of P104,000 in consideration of such

reconveyance. It also held that petitioner did not deal fairly with respondents

making it liable for nominal and moral damages to the latter. The RTC further

ordered petitioner to pay respondents attorneys fees and litigation expenses.

On appeal, the CA affirmed the RTC but decreased the amount of nominal

damages from P75,000 to P50,000.17

Hence this petition.18

14
Id., pp. 22 and 45.
15
Id., p. 54.
16
Docketed as Civil Case No. 16245; rollo, p. 9.
17
Id., p. 30.
18
The petition is anchored on the following grounds:

THE [CA] HAD DECIDED THIS CASE IN A WAY NOT IN ACCORD WITH AND IN PATENT
DISREGARD OF THE PROVISIONS OF SECTION 4, RULE 29, OF THE REVISED RULES OF COURT,
WHEN IT DISREGARDED THE ADMISSIONS OF THE RESPONDENTS THAT [PETITIONER] MADE
VARIOUS DEMANDS FOR PAYMENT.

II

THE [CA] COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT FAILED TO NOTICE THE
RELEVANT FACT THAT THE RESPONDENTS OFFERED TO REPURCHASE THE FORECLOSED
PROPERTY WHICH WILL LEAD TO THE LOGICAL CONCLUSION THAT THEY IMPLIEDLY ADMIT
THE OWNERSHIP OF [PETITIONER] OF THE SAME PROPERTY ROOTED ON THE FORECLOSURE
PROCEEDINGS IN QUESTION, AND WITH THIS RESPONDENTS ARE IN ESTOPPEL TO ASSAIL THE
SAME PROCEEDINGS.

III

THE [CA] HAD DECIDED THIS CASE IN A WAY NOT IN ACCORD WITH AND IN PATENT
DISREGARD OF THE PROVISIONS OF ARTICLE 1169 OF THE NEW CIVIL CODE WHEN IT FAILED
TO NOTICE THE RELEVANT FACT THAT THE PROMISSORY NOTES AND THE MORTGAGE
CONTRACT AS WELL AS THE DEED OF RESTRUCTURING EXECUTED BY THE RESPONDENTS IN
FAVOR OF [PETITIONER] EXPRESSLY STIPULATED THE TIME WHEN THE AMORTIZATIONS
WOULD FALL DUE WHICH WILL LEAD TO THE LOGICAL CONCLUSION THAT THE MORTGAGORS
(RESPONDENTS HEREIN) INCURRED DELAY WITHOUT NEED OF FURTHER DEMAND WHEN THE
DUE DATES FELL AND NO PAYMENTS WERE MADE ON THE ACCOUNT.

IV

THE [CA] GRAVELY ERRED AND DECIDED THE CASE NOT IN ACCORD WITH LAW AND
JURISPRUDENCE WHEN IT ANNULLED THE FORECLOSURE PROCEEDINGS WITHOUT LEGAL
AND FACTUAL BASIS AND DENIED [PETITIONERS] CLAIM FOR DEFICIENCY OBLIGATION.

ASSUMING ARGUENDO THAT THE FORECLOSURE WAS LEGALLY FLAWED, THE [CA] GRAVELY
ERRED AND DECIDED THE CASE NOT IN ACCORD WITH LAW AND JURISPRUDENCE WHEN IT
FAILED TO CONSIDER THAT [PETITIONER] IS ENTITLED, UNDER THE LAW, TO THE PAYMENT
OF THE BALANCE OF THE LOANS OBTAINED, RECEIVED AND USED BY THE [RESPONDENTS],
OR TO DECLARE RESPONDENTS STILL INDEBTED TO CONFORMABLY WITH THE PROMISSORY
NOTES AND LOAN DOCUMENTS THEY EXECUTED IN FAVOR OF [PETITIONER].

VI

THE [RTC] GRAVELY ERRED AND DECIDED THE CASE NOT IN ACCORD WITH LAW AND
JURISPRUDENCE, WHEN IT FAILED TO CONSIDER THAT [PETITIONER] WAS IN GOOD FAITH IN
SELLING THE PROPERTY AFTER TITLE OF OWNERSHIP THEREON WAS CONSOLIDATED IN ITS
FAVOR, AND FURTHER WHEN IT FAILED TO CONSIDER THAT [PERALTA IS A BUYER] IN GOOD
FAITH OF THE PROPERTY INVOLVED IN THE CASE AND IS THEREFORE ENTITLED UNDER THE
LAW TO RETAIN OWNERSHIP OF THE SAME.

VII
 The main issues to be resolved are the following:

1) whether a demand for payment of the loans was made before the
mortgage was foreclosed;

2) whether demand is necessary to make respondents guilty of default;

3) whether or not respondents are liable for the deficiency claim of
petitioner and
4) whether or not petitioner is liable for damages.

The issue of whether demand was made before the foreclosure was

effected is essential. If demand was made and duly received by the respondents

and the latter still did not pay, then they were already in default and foreclosure

was proper. However, if demand was not made, then the loans had not yet

become due and demandable. This meant that respondents had not defaulted in

their payments and the foreclosure by petitioner was premature. Foreclosure is

valid only when the debtor is in default in the payment of his obligation.19

Whether or not demand was made is a question of fact. In petitions for

review on certiorari under Rule 45, only questions of law may be raised by the

parties and passed upon by this Court.20 Factual findings of the trial court, when

adopted and confirmed by the CA, are binding and conclusive on this Court and

will generally not be reviewed on appeal.21 Inquiry into the veracity of the CAs

factual findings and conclusions is not the function of the Supreme Court for the

THE [RTC] GRAVELY ERRED AND DECIDED THE CASE NOT IN ACCORD WITH
LAW AND JURISPRUDENCE WHEN IT AWARDED DAMAGES IN FAVOR OF
RESPONDENTS IN THE ABSENCE OF LEGAL OR FACTUAL BASIS. (Rollo, pp. 49-50.)
19
State Investment House, Inc. v. Court of Appeals, G.R. No. 99308, 13 November 1992, 215 SCRA 734,
744, citation omitted.
20
Pleyto v. Lomboy, G.R. No. 148737, 16 June 2004, 432 SCRA 329, 336; Metropolitan Bank and Trust Co.
v. Wong, 412 Phil. 207, 216 (2001).
21
Lazaro v. Court of Appeals, 423 Phil. 554, 558 (2001); Garrido v. Court of Appeals, 421 Phil. 872, 881
(2001); Santos v. Spouses Reyes, 420 Phil. 313, 317 (2001); Yu Bun Guan v. Ong, 419 Phil. 845, 854
(2001); Fernandez v. Fernandez, 416 Phil. 322, 337 (2001); Nagkakaisang Kapisanan Kapitbahayan
sa Commonwealth Avenue v. Court of Appeals, 414 Phil. 146, 153-154 (2001).
Court is not a trier of facts.22 Neither is it our function to re-examine and weigh

anew the respective evidence of the parties.23 While this Court has recognized

several exceptions to this rule,24 none of these exceptions finds application here.

Both the CA and RTC found that demand was never made. No compelling

reason whatsoever has been shown by petitioner for this Court to review and

reverse the trial courts findings and conclusions, as affirmed by the CA.

Petitioner asserts that demand was unnecessary because the maturity dates

of all loans were specified, i.e., the notes expressly stated the specific dates when

the amortizations were to fall due.25

We disagree.

Unless demand is proven, one cannot be held in default.26 Petitioners cause

of action did not accrue on the maturity dates stated in the promissory notes. It

is only when demand to pay is made and subsequently refused that respondents

can be considered in default and petitioner obtains the right to file an action to

22
First Metro Investment Corp. v. Este del Sol Mountain Reserve, Inc., 420 Phil. 902, 914 (2001).
23
Jose v. People, G.R. No. 148371, 12 August 2004, 436 SCRA 294, 302.
24
The exceptions are:
(1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts
are conflicting; (6) when in making its findings, the CA went beyond the issues of the case, or its findings
are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary
to the trial court; (8) when the findings are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply
briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed
absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly
overlooked certain relevant facts not disputed by the parties, which, if properly considered, will justify
a different conclusion; Langkaan Realty Development, Inc. v. United Coconut Planters Bank, G.R. No.
139437, 8 December 2000, 347 SCRA 542, 549; Nokom v. National Labor Relations Commission, 390
Phil. 1228, 1242 (2000); CIR v. Embroidery and Garments Industries (Phil.), Inc., 364 Phil. 541, 546-
547 (1999); Sta. Maria v. Court of Appeals, 349 Phil. 275, 282-283 (1998).
25
Rollo, pp. 55-57, 239-241.
26
Nuez v. GSIS Family Bank (Formerly ComSavings Bank), G.R. No. 163988, 17 November 2005.
collect the debt or foreclose the mortgage.27 As we held in China Banking

Corporation v. Court of Appeals:28

Well-settled is the rule that since a cause of action requires,

as essential elements, not only a legal right of the plaintiff and a
correlative duty of the defendant but also an act or omission of the
defendant in violation of said legal right, the cause of action does
not accrue until the party obligated refuses, expressly or impliedly,
to comply with its duty.

Otherwise stated, a cause of action has three elements, to wit,

(1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of
the named defendant to respect or not to violate such right; and (3)
an act or omission on the part of such defendant violative of the
right of the plaintiff or constituting a breach of the obligation of the
defendant to the plaintiff.

It bears stressing that it is only when the last element occurs

that a cause of action arises. Accordingly, a cause of action on a
written contract accrues only when an actual breach or violation
thereof occurs.

Applying the foregoing principle to the instant case, we rule

that private respondents cause of action accrued only on July
20, 1995, when its demand for payment of the Home Notes was
refused by petitioner. It was only at that time, and not before that,
when the written contract was breached and private respondent
could properly file an action in court.

The cause of action cannot be said to accrue on the uniform

maturity date of the Home Notes as petitioner posits because at
that point, the third essential element of a cause of action, namely,
an act or omission on the part of petitioner violative of the right of
private respondent or constituting a breach of the obligation of
petitioner to private respondent, had not yet occurred.29 (emphasis
supplied)

27
Caltex Philippines, Inc. v. Intermediate Appellate Court, G.R. No. 74730, 25 August 1989, 176 SCRA
741, 751.
28
G.R. No. 153267, 23 June 2005, 461 SCRA 162.
29
Id., pp. 167-168, citations omitted.
 The acceleration clause of the promissory notes stated that [i]n case of

non-payment of this note or any portion of it on demand, when due, on account

of this note, the entire obligation shall become due and demandable .30 Hence,

the maturity dates only indicate when payment can be demanded. It is the refusal

to pay after demand that gives the creditor a cause of action against the debtor.

Since demand, which is necessary to make respondents guilty of default,

was never made on respondents, the CA and RTC correctly ruled that the

foreclosure was premature and therefore null and void.

In arguing that the foreclosure was valid, petitioner also avers that

respondents are estopped from questioning the validity of the foreclosure sale

since they offered to repurchase the foreclosed properties.31 We are not

persuaded. The reason why respondents offered to repurchase the properties was

clearly stated in their letter to petitioner:

I am very much interested in repurchasing back these

properties because they are the only properties which my family
have and because our house is located inside this property and for
this matter I am willing to pay [for] these properties in cash which
I already told the bank when I went there.32

Besides, we have already ruled that an offer to repurchase should not be

construed as a waiver of the right to question the sale.33 Instead, it must be taken

as an intention to avoid further litigation and thus is in the nature of an offer to

30
Rollo, pp. 12 and 26, emphasis supplied.
31
Id., pp. 53-54.
32
Id., p. 14.
33
Rosales v. Court of Appeals, G.R. No. 137566, 28 February 2001, 353 SCRA 179, 191.
compromise.34 By offering to redeem the properties, respondents can attain their

ultimate objective: to pay off their debt and regain ownership of their lands.35

Moreover, it was petitioner, in its November 16, 1984 letter, which

informed respondents that the properties were available for sale. Respondents

merely took up petitioners offer for them to reacquire their properties.

Petitioner assigns as error the failure of the CA to rule on its deficiency

claim. It alleged that the price the mortgaged property was sold for (P104,000)

was less than the amount of respondents indebtedness (P131,642.33), thus it is

entitled to claim the difference (P27,642.33) with interest. Respondents cannot

be held liable for the deficiency claim. While it is true that in extrajudicial

foreclosure of mortgage, the mortgagee has the right to recover the deficiency

from the debtor,36 this presupposes that the foreclosure must first be valid.37

The last issue is whether the award of moral and nominal damages,

expenses of litigation and attorneys fees is proper. Crucial to the determination

of the propriety of the award of damages are the findings of the RTC, which were

affirmed by the CA, on the matter of bad faith:

Apart from the precipitate foreclosure proceedings, the Court

observes that certain acts of [petitioner] were most certainly less
than fair and less than honest, which negates the rehabilitation (prior
name of the bank) or development aspect or purpose of [petitioner].
These certainly caused serious anxiety and wounded feelings to
[respondents]. They are: -

34
Id.
35
Id., pp. 191-192.
36
Prudential Bank v. Martinez, G.R. No. 51768, 14 September 1990, 189 SCRA 612, 615.
37
See Delta Motor Sales Corporation v. Mangosing, G.R. No. L-41667, 30 April 1976, 70 SCRA 598,
602.
 FIRST. [Petitioner] granted a loan of P4,700.00; then a
second loan of P12,000.00 re-structured to P18,840.61; and a third
loan of P22,200.00, or a total of P45,740.61 during the period from
September 1974 to October 2, 1975. Obviously, these loans were
granted because the market value of the collaterals exceeds
P100,000.00 and [petitioners] appraisal value is more or less
P80,000.00. However, six (6) years later, when the value must have
appreciated in terms of pesos, the [petitioner] bidded for a [measly]
P16,000.00 and [claimed] a deficiency. That it was [measly] and
shocking to the conscience was conclusively proven by the fact that
[Peralta] offered and did in fact buy the properties for P104,000.00
barely three (3) years later. To the mind of the Court, the actuations
of the bank must have been revolting to [respondents] and to honest
men, especially considering that [petitioner] is a government
financial institution, capitalized with the money of the people, and
created principally to assist agricultural producers xxx in
developing their farms xxx to accelerate national progress, more
than to realize profit.

SECOND. [Respondents] are simple-minded persons in the

country side. It strikes the court as odd and certainly less than candid
WHY on AUGUST 6, 1979, [petitioner] restructured the second
loan which will mature on May 1980, but did not restructure the
first loan which was due to mature on September 23, 1979 or barely
one month hence. It appears that the result lulled [respondents] into
a false sense of security and a feeling of relief that the entire loan
accommodation will mature in 1985. And then like a bolt of
lightning from a clear sky, [respondents] were hit with [foreclosure]
proceedings, causing them to suffer sleepless nights.

THIRD. A letter dated November 16, 1984 was addressed to

[respondents] informing them practically that they are given the
priority to recover their properties by negotiated sale. And yet
before the letter was sent, or on November 14, 1984 the [petitioner]
had already negotiated with [Peralta] for the latter to buy the assets
for P104,000.00 in installment and as a matter of fact the Contract
for Conditional Sale was executed on November 19, 1984 even
before the letter was received by [respondents]. [Heart-rending] was
the plea of [respondents] which we quote: -

I am very much interested in repurchasing back

these properties because they are the only properties
which my family have and because our house is
located inside this property and for this matter I am
willing to pay [for] these properties in cash which I
already told the bank when I went there. (underscoring
supplied)
 Nevertheless, such supplications fell on deaf ears and did not
even merit sympathy from a heartless [petitioner]. At the very least,
the letter of 16 November 1984 was a very bad joke gleefully made
in bad taste and foisted on the hapless [respondents]. It added insult
to injury.

And to top it all, [petitioner] even has the temerity to allege

in paragraph 2 of its compulsory counterclaim that as of November
7, 1984 the total obligations of [respondents] on account of their
loans with [petitioner] amounted to P131,642.33 and making a
deficiency claim of P27,642.33 plus daily interest of P9.61
beginning November 8, 1984 which [respondents] are allegedly still
liable to pay the [petitioner]. This is unconscionable.

Certainly, there is abundant evidence that the rights of

[respondents] have been violated or invaded with unconcerned
ruthlessness by the [petitioner].38

Both the RTC and CA found that there was factual basis for the moral

damages adjudged against petitioner. They found that petitioner was guilty of

bad faith in its actuations against respondents. Again, this is a factual matter

binding and conclusive on this Court:

It is settled that bad faith must be duly proved and not merely
presumed. The existence of bad faith, being a factual question, and
the Supreme Court not being a trier of facts, the findings thereon of
the trial court as well as of the Court of Appeals shall not be
disturbed on appeal and are entitled to great weight and respect.
Said findings are final and conclusive upon the Supreme Court
except, inter alia, where the findings of the Court of Appeals and
the trial court are contrary to each other.39

The lower court also found that respondents property rights were invaded or

violated,40 hence the grant of nominal damages was also proper.

38
Rollo, pp. 13-14, citations omitted.
39
PAL, Inc. v. CA, 326 Phil. 824, 835 (1996), citations omitted.
40
Art. 2221, CIVIL CODE.
 Respondents are likewise entitled to the award of attorneys fees and

expenses of litigation since the premature foreclosure by petitioner compelled

them to incur expenses to protect their interest.41

WHEREFORE, we hereby AFFIRM the decision of the Court of

Appeals in CA-G.R. CV No. 37784.

Costs against petitioner.

SO ORDERED.

RENATO C. CORONA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA

Associate Justice Associate Justice

CANCIO C. GARCIA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above decision had been reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.

41
Art. 2208; rollo, p. 29.
REYNATO S. PUNO
Chief Justice

Today is Thursday, July 06, 2017

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-13438 November 20, 1918

FRANCISCO GUTIERREZ REPIDE, plaintiff-appellant,

vs.
IVAR O. AFZELIUS and his wife, PATROCINIO R. AFZELIUS, defendants-appellees.

Ramon Fernandez for appellant.

T. L. McGirr for appellees.

MALCOLM, J.:

The subject of Specific Performance, with reference to its common law and civil law status, it to
be considered on this appeal. The particular action is for the specific performance of a contract
for the sale and purchase of real estate.

The plaintiff is the owner of a certain parcel of realty consisting of 2,695.24 square meters,
situated in the city of Manila, and fully described in the complaint. About the month of December,
1916, the defendants made a proposition to the plaintiff for the purchase of this property. After
negotiating for some time, it was agreed that the defendants would pay plaintiff the sum of
P10,000 for the land, P2,000 of which was to be handed over upon the signing of the deed, and
the balance of P8,000, paid in monthly installments of P150. The property was to be mortgaged
to the plaintiff to secure the payment of this balance of P8,000. The plaintiff proceeded to have
survey made of the land and to prepare the deed and mortgage. Expenses to the amount of
P83.93 were incurred for these purposes. The deed was ready about December 28, 1916, when
the defendants were notified to appear and sign the same. They failed to do this, and instead,
the defendant, Patrocinio R. Afzelius, wrote a letter to plaintiff, as follows:

MANILA, January 3, 1917

MR. FRANCISCO GUTIERREZ,

Manila.

MY DEAR SIR: It is with regret that I inform you that it is now absolutely
impossible for us to effect the purchase of the property at Juan Luna
Street, as it was our desire to do. The reason for this is that the business
 has failed, in which we had invested all the money we had and from
which he hope to obtain sure gains and to get the P2,000 which we were
to give you in advance for the purchase of said property, and
consequently, we have lost our savings and our hope of being able to
purchase the property for the time being.

Before closing, I request you to pardon us for the troubles we have

caused you, for, in truth, we acted in good faith, but, as you will readily
realize, without having the P2,000 in our hands, it will be impossible for
us to effect the purchase.

Reiterating my request that you pardon us for all the trouble, I am

Very truly yours.

(Sgd.) PATROCINIO R. AFZELIUS

In addition to the letter above quoted, Afzelius testified on the trial that although he and his wife
had available the sum of P2,000 to pay the first installment on the purchase price of the land, yet
it belonged in part to his wife's sister, and that, as she subsequently needed the money for
something else, they had to return it to her, and in order to give excuses to the plaintiff, his wife
wrote this letter to the plaintiff.

Plaintiff was, and still is, willing to execute the deed in accordance with the terms agreed upon
with the defendants. Accordingly, plaintiff, in his action in the Court of First Instance of the city of
Manila, asked judgment against the defendants condemning them to sign the deed and
mortgage to the land in question, and to pay the purchase price stipulated, with costs. The
defendants filed a general denial, alleging that the plaintiff has not sustained damages of any
kind or character, and praying that the case be dismissed at the cost of the plaintiff. The trial
court, after finding the facts as herein stated, made application thereto of the law of Specific
Performance. After stating the general principles of this branch of the law, the court deduced
therefrom that the remedy by specific performance is one the granting or denying of which rests
in the exercise of sound judicial discretion. The court said:

Whether or not the defendants are able to perform the contract is a matter of
defense, and there is no special defense on that subject in the answer; but it appears
from the evidence that the defendants have not the funds available for the cash
payment on the contract, and apparently the performance of the contract in the terms
agreed between the plaintiff and defendants would be impracticable; the court would
not be able to enforce a decree for specific performance, and such a decree might
operate as a great hardship upon the defendants; therefore, the court is of the
opinion that it would be useless, unjust and inequitable to render judgment herein for
specific performance.lawphil.net

The judgment then was in favor of the defendants, dismissing the plaintiff's complaint, without
prejudice to any other remedy which the plaintiff might have, and without any finding as to the
costs.

The plaintiff and appellant bases his argument on articles 1254, 1258, 1278, 1450, and 1279 of
the Civil Code. The provisions of the five articles first cited and others that could be mentioned
merely tend to corroborate what is self-evident, namely, the existence of a valid contract
between the parties. Indisputably, there has been an offer and an acceptance, and all that
remained to effectuate the contract was the execution of the deed and the mortgage.

The article of the Civil code chiefly relied upon by appellant, No. 1279, would seem to settle
favorably the first branch of the prayer of the complaint, asking that the defendants be required
to sign the deed and mortgage to the land in question. This article of the Civil Code appears to
have been prepared to meet exactly such a situation, to the end that the contracting parties can
reciprocally compel the observance of the necessary formalities.

Other portions of the Civil Code not called to our attention by the appellant, notably articles 1096,
1098, 1124 and 1451, recognize what is denominated in the common law as Specific
Performance. Article 1451 provides that, "A promise to sell or buy, when there is an agreement
as to the thing and the price, entitles the contracting parties reciprocally to demand the fulfillment
of the contract." But the article in recognition of a negative result also provides, "whenever the
promise to purchase and sell cannot be fulfilled, the provisions relative to obligations and
contracts, contained in this book, shall be applicable in the respective cases to the vendor and
the vendee." Turning to these provisions relating to obligations and contracts, we find article
1096 making a distinction between a specific thing to be delivered and an indeterminate or
generic thing; article 1098 providing that a person is obligated to do a certain thing according to
the tenor of the obligation; and finally, article 1124 in absolute approval of contractual mutually
decreeing that "the person prejudiced may choose between exacting the fulfillment of the
obligation or its resolution with indemnity for damages and payment of interest in either cases."

As to whether the vendor can compel the vendee to perform, which is the point before the court,
the jurisprudence of the supreme court of Spain and the commentaries of Manresa do not in the
least attempt to distinguish between one or the other party, the vendor or the vendee, but
constantly and without exception use the word "reciprocamente." the following decisions of the
supreme court of Spain interpretative of these articles can be noted: April 17, 1897; October 10,
1904; February 4, 1905.

The vendee is entitled to specific performance essentially as a matter of course. Philippine cases
have so held. (Irureta Goyena vs. Tambunting [1902], 1 Phil., 490; Thunga Chui vs. Que Bentec
[1903], 2 Phil., 561; Couto Soriano vs. Cortes [1907, 8 Phil., 459; Dievas vs. Co Chongco [1910],
16 Phil., 447.) If the doctrine of mutuality of remedy is to apply, the vendor should likewise be
entitled to similar relief. Philippine jurisprudence, however, has never as yet been afforded an
opportunity to so hold. The nearest approach to the idea has been, with reference to
merchandise, in a decision to the effect that if the purchaser refuses without lawful reason to
accept delivery when tendered by the seller in conformity with the contract of sale, the seller may
elect to enforce compliance or to rescind. (Matute vs. Cheong Boo [1918], 37 Phil., 372.)

Thus far, in this opinion we have discussed the question of whether the vendor as well as the
vendee is entitled to the specific performance of the contract for the sale of land, from the
standpoint of the civil law. Now, of course, specific performance of contracts is, under this name,
an equitable remedy. As such, since there exist no courts of equity and no equity jurisprudence
in this jurisdiction, the authority arising from the common law is not of binding force in the
Philippines. Nevertheless, as the civil law and the common law seem to arrive at the same goal
on this subject, we should at least notice as persuasive authority the jurisprudence of the United
States and Great Britain.

The American and English cases that relate to specific performance by the vendor are with a few
exceptions all one way. In the language of Chief Justice Marshall, "The right of a vendor to come
into a court of equity to enforce a specific performance is unquestionable." (Cathcart vs.
Robinson [1831], 5 Pet., 264.) The rule in nearly all jurisdictions is that specific performance may
be had at the suit of the vendor of land, the vendee being decreed to accept the deed and pay
the purchase price. (Freeman vs. Paulson [1909], 107 Minn., 64; Migatz vs. Stieglitz [1905], 166
Ind., 362; Robinson vs. Appleton [1888], 124 Ill., 276; Hodges vs. Kowing [1889], 58 Conn., 12;
Curtis Land & Loan Co. vs. Interior Land Co. [1908], 137 Wis., 341; The Maryland Clay Co. vs.
Simpers [1903], 96 Md., 1; Old Colony R. Corp. vs. Evans [1856], 6 Gray, 25; Raymond vs. San
Gabriel rec. Co. [1893], 53 Fed., 883; 36 Cyc., 565.) The reasoning supporting the authorities is
that the performance of contracts must and should be mutual. The contract is ordinarily bilateral.
So should the respective rights of the parties be. Nor does an action to recover damages for
breach of contract ordinarily afford a complete and adequate remedy. The equitable doctrine is
not applied where it will be productive of great hardship.

Here we have presented a good and valid contract, bilateral in character, and free from all taint
of fraud. The stability of commercial transactions requires that the rights of the seller be
protected just as effectively as the rights of the buyer. If this plaintiff had refused to comply with
the contract, specific performance of the obligation could have been asked by the defendants.
Just as surely should the plaintiff who has lived up to his bargain and who has been put to
expense to do so, be permitted to coerce the defendant into going through with the contract.

The excuse of the defendants is that they do not now have the money to pay the first installment.
In other words, they plead impossibility of performance. The rule of equity jurisprudence in such
a case is that mere pecuniary inability to fulfill an engagement does not discharge the obligation
of the contract, not does it constitute any defense to a decree for specific performance. (Hopper
vs. Hopper [1863], 16 N. J. Eq., 147.) Now, the courts will not make an order obviously nugatory.
But the courts should lend their assistance to the plaintiff to compel the defendants to fulfill their
obligation. Besides requiring the defendants to sign the contract and the mortgage, the judgment
of the court can be aided by execution on the property of the defendants. If, then, it is found that
it is impossible for the defendants to live up to their agreement, naturally the plaintiff will rest
content if for no other reason than for the protection of his financial interests.

Judgment shall be reversed, and an order shall issue, condemning the defendants to sign the
deed and mortgage to the land in question and to pay the first installment of the purchase price
as stipulated.

The appellant shall recover costs of both instances. The Code of Civil Procedure in its Chapter
XXI entitled "Costs in the Several Courts" states in section 487 that "Costs shall ordinarily be
allowed to the prevailing party as a matter of course . . . . " Philippine law is, in this respect,
identical with the general rule, which is that "On reversal, . . . the costs will generally go to the
prevailing party, that is, to the appellant." (7 R. C. L., 801, citing cases.) No special reasons exist
in this case for modifying the general rule. So ordered.

Johnson, Street, Avanceña and Fisher, JJ., concur.

Separate Opinions

TORRES, J., concurring:

The undersigned concurs in the result, but nevertheless believes that all the costs of this action
and half of those of the first ought to be paid by the defendants.

The reasons upon which the reversal of the judgment is based are those prescribed by section
487 of Act No. 190 whereby the costs are allowed to the prevailing party who, for good cause,
appealed and obtained the reversal of the judgment, so in accordance with law the plaintiff
should not pay the costs of both instances, but a part or half only of the costs of the first
instance.

The Lawphil Project - Arellano Law Foundation

 FIRST DIVISION

SELEGNA MANAGEMENT G.R. No. 165662

AND DEVELOPMENT

CORPORATION; and Spouses Present:

EDGARDO and ZENAIDA

ANGELES, Panganiban, CJ,
Petitioners, Chairman,
Ynares-Santiago,

- versus - Austria-Martinez,

Callejo, Sr., and

Chico-Nazario, JJ

UNITED COCONUT PLANTERS Promulgated:

BANK,

Respondent. May 3, 2006

x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION

PANGANIBAN, CJ:

writ of preliminary injunction is issued to prevent an extrajudicial foreclosure,

only upon a clear showing of a violation of the mortgagors unmistakable right.

A
Unsubstantiated allegations of denial of due process and prematurity of a loan

are not sufficient to defeat the mortgagees unmistakable right to an extrajudicial

foreclosure.

The Case


The Court of Appeals is impleaded as respondent in the Petition for Review, but is presently excluded
pursuant to Sec. 4(a) of Rule 45 of the Rules of Court.
 Before us is a Petition for Review42 under Rule 45 of the Rules of Court,

assailing the May 4, 2004 Amended Decision43 and the October 12, 2004

Resolution44 of the Court of Appeals (CA) in CA-GR SP No. 70966. The challenged

Amended Decision disposed thus:

WHEREFORE, the Motion for Reconsideration is

GRANTED. The July 18, 2003 Decision is hereby
REVERSED and SET ASIDE and another one entered
GRANTING the petition and REVERSING and SETTING
ASIDE the March 15, 2002 Order of the Regional Trial
Court, Branch 58, Makati City in Civil Case No. 99-
1061.45

The assailed Resolution denied reconsideration.

42
Rollo, pp. 8-33.
43
Id. at 35-51. Former Special Fifteenth Division (Special Division of Five). Penned by Justice Jose
Catral Mendoza, with the concurrence of Justices Marina L. Buzon (Division chairperson) and Fernanda L.
Peralta (member). Justice Magdangal M. de Leon (member) concurred in a Separate Opinion, while Justice
Rebecca de Guia-Salvador (member) dissented.
44
Id. at 53-54.
45
Assailed Amended CA Decision, p. 7; rollo, p. 41.
 The Facts

On September 19, 1995, Petitioners Selegna Management and Development

Corporation and Spouses Edgardo and Zenaida Angeles were granted a credit
facility in the amount of P70 million by Respondent United Coconut Planters
Bank (UCPB). As security for this credit facility, petitioners executed real
estate mortgages over several parcels of land located in the cities of
Muntinlupa, Las Pias, Antipolo and Quezon; and over several condominium
units in Makati. Petitioners were likewise required to execute a promissory note
in favor of respondent every time they availed of the credit facility. As required
in these notes, they paid the interest in monthly amortizations.

The parties stipulated in their Credit Agreement dated September 19, 1995,46
that failure to pay any availment of the accommodation or interest, or any sum
due shall constitute an event of default,47 which shall consequently allow
respondent bank to declare [as immediately due and payable] all outstanding
availments

46
Rollo, pp. 263-268.
47
Id. at 266.
of the accommodation together with accrued interest and any other sum
payable. 48

In need of further business capital, petitioners obtained from UCPB an

increase in their credit facility.49 For this purpose, they executed a Promissory
Note for P103,909,710.82, which was to mature on March 26, 1999.50 In the
same note, they agreed to an interest rate of 21.75 percent per annum, payable
by monthly amortizations.

On December 21, 1998, respondent sent petitioners a demand letter,

worded as follows:

Gentlemen:

With reference to your loan with principal outstanding

balance of [P103,909,710.82], it appears from the records
of United Coconut Planters Bank that you failed to pay
interest amortizations amounting to [P14,959,525.10] on the
Promissory Note on its due date, 30 May 1998.

xxx xxx xxx

Accordingly, formal demand is hereby made upon you

to pay your outstanding obligations in the total amount of
P14,959,525.10, which includes unpaid interest and
penalties as of 21 December 1998 due on the promissory
note, eight (8) days from date hereof.51

Respondent decided to invoke the acceleration provision in their Credit

Agreement. Accordingly, through counsel, it relayed its move to petitioners on
January 25, 1999 in a letter, which we quote:

Gentlemen:

xxx xxx xxx

48
Id. at 267.
49
Amendment of Mortgage dated December 19, 1996; id. at 285.
50
Promissory Note executed on March 29, 1998; id. at 290.
51
Letter dated December 21, 1998; id. at 292.
 It appears from the record of [UCPB] that you failed to pay
the monthly interest due on said obligation since May 30,
1998 as well as the penalty charges due thereon. Despite
repeated demands, you refused and continue to refuse to
pay the same. Under the Credit Agreements/Letter
Agreements you executed, failure to pay when due any
installments of the loan or interest or any sum due
thereunder, is an event of default.

Consequently, we hereby inform you that our client has

declared your principal obligation in the amount of
[P103,909,710.82], interest and sums payable under the
Credit Agreement/Letter Agreement/Promissory Note to be
immediately due and payable.

Accordingly, formal demand is hereby made upon you to

please pay within five (5) days from date hereof or up to
January 29, 1999 the principal amount of [P103,909,710.82],
with the interest, penalty and other charges due thereon,
which as of January 25, 1999 amounts to [P17,351,478.55].52

Respondent sent another letter of demand on March 4, 1999. It contained a

final demand on petitioners to settle in full [petitioners] said past due obligation
to [UCPB] within five (5) days from [petitioners] receipt of [the] letter.53

52
Letter dated January 25, 1999; id. at 293-294.
53
Letter dated March 4, 1999; id. at 295.
In response, petitioners paid respondent the amount of P10,199,473.96 as
partial payment of the accrued interests.54 Apparently unsatisfied, UCPB
applied for extrajudicial foreclosure of petitioners mortgaged properties.

When petitioners received the Notice of Extra Judicial Foreclosure Sale on

May 18, 1999, they requested UCPB to give them a period of sixty (60) days to
update their accrued interest charges; and to restructure or, in the alternative, to
negotiate for a takeout of their account.55

On May 25, 1999, the Bank denied petitioners request in these words:

This is to reply to your letter dated May 20, 1999,

which confirms the request you made the previous day
when you paid us a visit.

As earlier advised, your account has been referred to

external counsel for appropriate legal action. Demand has
also been made for the full settlement of your account.

We regret that the Bank is unable to grant your

request unless a definite offer is made for settlement.56

54
See letter dated May 20, 1999; id. at 296.
55
Id.
56
Letter dated May 25, 1999; id. at 297.
In order to forestall the extrajudicial foreclosure scheduled for May 31, 1999,
petitioners filed a Complaint57 (docketed as Civil Case No. 99-1061) for
Damages, Annulment of Interest, Penalty Increase and Accounting with Prayer
for Temporary Restraining Order/Preliminary Injunction. All subsequent
proceedings in the trial court and in the CA involved only the propriety of
issuing a TRO and a writ of preliminary injunction.

Judge Josefina G. Salonga,58 then executive judge of the Regional Trial Court
(RTC) of Makati City, denied the Urgent Ex-parte Motion for Immediate
Issuance of a Temporary Restraining Order (TRO), filed by petitioners. Judge
Salonga denied their motion on the ground that no great or irreparable injury
would be inflicted on them if the parties would first be heard.59 Unsatisfied,
petitioners filed an Ex-Parte Motion for Reconsideration, by reason of which
the case was eventually raffled to Branch 148, presided by Judge Oscar B.
Pimentel.60

After due hearing, Judge Pimentel issued an Order dated May 31, 1999,
granting a 20-day TRO on the scheduled foreclosure of the Antipolo properties,
on the ground that the Notice of Foreclosure had indicated an inexistent auction
venue.61 To resolve that issue, respondent filed a Manifestation62 that it would
withdraw all its notices relative to the foreclosure of the mortgaged properties,
and that it would re-post or re-publish a new set of notices. Accordingly, in an
Order dated September 6, 1999,63 Judge Pimentel denied petitioners application
for a TRO for having been rendered moot by respondents Manifestation.64

Subsequently, respondent filed new applications for foreclosure in the cities

where the mortgaged properties were located. Undaunted, petitioners filed
another Motion for the Issuance of a TRO/Injunction and a Supplementary
Motion for the Issuance of TRO/Injunction with Motion to Clarify Order of
September 6, 1999.65

On October 27, 1999, Judge Pimentel issued an Order66 granting a 20-day TRO
in favor of petitioners. After several hearings, he issued his November 26, 1999

57
Rollo, pp. 82-90.
58
Now CA associate justice.
59
CA Decision dated July 18, 2003, pp. 2-3; rollo, pp. 57-58.
60
Id. at 3; id. at 58.
61
Id.
62
Rollo, pp. 246-248.
63
Id. at 91-95.
64
Id.
65
CA Decision dated July 18, 2003, p. 5; rollo, p. 60.
66
Rollo, pp. 96-100.
Order,67 granting their prayer for a writ of preliminary injunction on the
foreclosures, but only for a period of twenty (20) days. The Order states:

Admitted by defendant witness is the fact that in all the

notices of foreclosure sale of the properties of the
plaintiffs x x x it is stated in each notice that the property
will be sold at public auction to satisfy the mortgage
indebtedness of plaintiffs which as of August 31, 1999
amounts to P131,854,773.98.

xxx xxx xxx

As the court sees it, this is the problem that should be

addressed by the defendant in this case and in the
meantime, the notice of foreclosure sale should be held in
abeyance until such time as these matters are clarified and
cleared by the defendants x x x Should the defendant be
able to remedy the situation this court will have no more
alternative but to allow the defendant to proceed to its
intended action.

xxx xxx xxx

WHEREFORE, premises considered, and finding

compelling reason at this point in time to grant the
application for preliminary injunction, the same is hereby
granted upon posting of a preliminary injunction bond in the
amount of P3,500,000.00 duly approved by the court, let a
writ of preliminary injunction be issued.68

The corresponding Writ of Preliminary Injunction69 was issued on November

29, 1999.

Respondent moved for reconsideration. On the other hand, petitioners filed a

Motion to Clarify Order of November 26, 1999. Conceding that the November
26 Order had granted an injunction during the pendency of the case, respondent

67
Id. at 101-104.
68
Id. at 103-104.
69
Id. at 253.
contended that the injunctive writ merely restrained it for a period of 20
(twenty) days.

On December 29, 2000, Judge Pimentel issued an Order70 granting respondents

Motion for Reconsideration and clarifying his November 26, 1999 Order in this
manner:

There may have been an error in the Writ of Preliminary

Injunction issued dated November 29, 1999 as the same
[appeared to be actually] an extension of the TRO issued by
this Court dated 27 October 1999 for another 20 days period.
Plaintiffs seeks to enjoin defendants for an indefinite period
pending trial of the case.

Be that as it may, the Court actually did not have any intention
of restraining the defendants from foreclosing plaintiff[s]
property for an indefinite period and during the entire
proceeding of the case x x x.

xxx xxx xxx

What the [c]ourt wanted the defendants to do was to merely

modify the notice of [the] auction sale in order that the amount
of P131,854,773.98 x x x would not appear to be the value of
each property being sold on auction. x x x.71

WHEREFORE, premises considered and after finding merit

on the arguments raised by herein defendants to be impressed
with merit, and having stated in the Order dated 26 November
1999 that no other alternative recourse is available than to
allow the defendants to proceed with their intended action, the
Court hereby rules:

1.] To give due course to defendant[]s

motion for reconsideration, as the same is
hereby GRANTED, however, with reservation
that this Order shall take effect upon after its[]
finality[.]72

70
Id. at 105-117.
71
Order dated December 29, 2000, p. 8; rollo, p. 112.
72
Id. at 13; id. at 117.
 Consequently, respondent proceeded with the foreclosure sale of some of
the mortgaged properties. On the other hand, petitioners filed an [O]mnibus
[M]otion [for Reconsideration] and to [S]pecify the [A]pplication of the P92
[M]illion [R]ealized from the [F]oreclosure [S]ale x x x.73 Before this Omnibus
Motion could be resolved, Judge Pimentel inhibited himself from hearing the
case.74

The case was then re-raffled to Branch 58 of the RTC of Makati City,
presided by Judge Escolastico U. Cruz.75 The proceedings before him were,
however, all nullified by the Supreme Court in its En Banc Resolution dated
September 18, 2001.76 He was eventually dismissed from service.77

73
CA Decision dated July 18, 2003, p. 11; rollo, p. 66.
74
Id. at 12; id. at 67.
75
Id.
76
Dr. Alday v. Judge Cruz, Jr., 426 Phil. 385, February 4, 2002.
77
Id.
 The case was re-raffled to the pairing judge of Branch 58, Winlove M.
Dumayas. On March 15, 2002, Judge Dumayas granted petitioners Omnibus
Motion for Reconsideration and Specification of the Foreclosure Proceeds, as
follows:

WHEREFORE, premises considered, the Motion to

Reconsider the Order dated December 29, 2000 is hereby
granted and the Order of November 26, 1999 granting the
preliminary injunction is reinstated subject however to the
condition that all properties of plaintiffs which were
extrajudicially foreclosed though public bidding are subject
to an accounting. [A]nd for this purpose defendant bank is
hereby given fifteen (15) days from notice hereof to render
an accounting on the proceeds realized from the
foreclosure of plaintiffs mortgaged properties located in
Antipolo, Makati, Muntinlupa and Las Pias.78

The aggrieved respondent filed before the Court of Appeals a Petition for
Certiorari, seeking the nullification of the RTC Order dated March 15, 2002, on
the ground that it was issued with grave abuse of discretion.79

The Special Fifteenth Division, speaking through Justice Rebecca de

Guia-Salvador, affirmed the ruling of Judge Dumayas. It held that petitioners
had a clear right to an injunction, based on the fact that respondent had kept
them in the dark as to how and why their principal obligation had ballooned to
almost P132 million. The CA held that respondents refusal to give them a
detailed accounting had prevented the determination of the maturity of the
obligation and precluded the possibility of a foreclosure of the mortgaged
properties. Moreover, their payment of P10 million had the effect of updating,
and thereby averting the maturity of, the outstanding obligation.80

Respondent filed a Motion for Reconsideration, which was granted by a

Special Division of Five of the Former Special Fifteenth Division.

78
CA Decision dated July 18, 2003, p. 13; rollo, p. 68.
79
Id. at 14; id. at 69.
80
Id. at 17; id. at 72.
 Ruling of the Court of Appeals

Citing China Banking Corporation v. Court of Appeals,81 the appellate court held

in its Amended Decision82 that the foreclosure proceedings should not be enjoined

in the light of the clear failure of petitioners to meet their obligations upon

maturity.83

Also citing Zulueta v. Reyes,84 the CA, through Justice Jose Catral Mendoza,

went on to say that a pending question on accounting did not warrant an injunction

on the foreclosure.

Parenthetically, the CA added that petitioners were not without recourse or

protection. Further, it noted their pending action for annulment of interest, damages

and accounting. It likewise said that they could protect themselves by causing the

annotation of lis pendens on the titles of the mortgaged or foreclosed properties.

In his Separate Concurring Opinion,85 Justice Magdangal M. de Leon added

that a prior accounting was not essential to extrajudicial foreclosure. He cited Abaca

Corporation v. Garcia,86 which had ruled that Act No. 3135 did not require mortgaged

81
333 Phil. 158, December 5, 1996.
82
Justice de Guia-Salvador dissented and stood by her original ruling.
83
Assailed Amended CA Decision, p. 5; rollo, p. 39.
84
126 Phil. 625, May 29, 1967.
85
Rollo, pp. 43-47.
86
272 SCRA 475, May 14, 1997.
properties to be sold by lot or by only as much as would cover just the obligation.

Thus, he concluded that a request for accounting -- for the purpose of determining

whether the proceeds of the auction would suffice to cover the indebtedness --

would not justify an injunction on the foreclosure.

Petitioners filed a Motion for Reconsideration dated May 31, 2004, which the

appellate court denied.87

Hence, this Petition.88

Issues

Petitioners raise the following issues for our consideration:

Whether or not the Honorable Court of Appeals denied the

petitioners of due process.

II

87
Rollo, pp. 48-51.
88
This case was deemed submitted for decision on October 24, 2005, upon the Courts receipt of
respondents Memorandum, signed by Attys. Hector L. Hofilea and Miguelito V. Ocampo of Ocampo &
Ocampo. Petitioners Memorandum, signed by Atty. Alex M. Ganitano of Lopez & Rempillo, was received by
this Court on October 17, 2005.
 Whether or not the Honorable Court of Appeals supported its
Amended Decision by invoking jurisprudence not applicable
and completely identical with the instant case.

III

Whether or not the Honorable Court of Appeals failed to

establish its finding that RTC Judge Winlove Dumayas has
acted with grave abuse of discretion.89

The resolution of this case hinges on two issues: 1) whether petitioners are

in default; and 2) whether there is basis for preliminarily enjoining the extrajudicial

foreclosure. The other issues raised will be dealt with in the resolution of these two

main questions.

The Courts Ruling

The Petition has no merit.

First Issue:

Default

89
Petitioners Memorandum, p. 16; rollo, p. 204. Original in uppercase.
 The resolution of the present controversy necessarily begins with a

determination of respondents right to foreclose the mortgaged properties

extrajudicially.

It is a settled rule of law that foreclosure is proper when the debtors are in

default of the payment of their obligation. In fact, the parties stipulated in their

credit agreements, mortgage contracts and promissory notes that respondent was

authorized to foreclose on the mortgages, in case of a default by petitioners. That

this authority was granted is not disputed.

Mora solvendi, or debtors default, is defined as a delay90 in the fulfillment of an

obligation, by reason of a cause imputable to the debtor.91 There are three requisites

necessary for a finding of default. First, the obligation is demandable and liquidated;

second, the debtor delays performance; third, the creditor judicially or extrajudicially

requires the debtors performance.92

Mortgagors Default of

Monthly Interest Amortizations

90
CIVIL CODE, Art. 1169. Those obliged to deliver or to do something incur delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
91
A. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE
PHILIPPINES, Vol. IV, 101 (1987).
92
Id. at 102.
 In the present case, the Promissory Note executed on March 29, 1998,

expressly states that petitioners had an obligation to pay monthly interest on the

principal obligation. From respondents demand letter,93 it is clear and undisputed

by petitioners that they failed to meet those monthly payments since May 30, 1998.

Their nonpayment is defined as an event of default in the parties Credit Agreement,

which we quote:

Section 8.01. Events of Default. Each of the following

events and occurrences shall constitute an Event of Default
of this AGREEMENT:

1. The CLIENT shall fail to pay, when due, any

availment of the Accommodation or interest, or any other
sum due thereunder in accordance with the terms thereof;

xxx xxx xxx

Section 8.02. Consequences of Default. (a) If an Event of

Default shall occur and be continuing, the Bank may:

1. By written notice to the CLIENT, declare all

outstanding availments of the Accommodation together with
accrued interest and any other sum payable hereunder to
be immediately due and payable without presentment,
demand or notice of any kind, other than the notice
specifically required by this Section, all of which are
expressly waived by the CLIENT[.]94

93
Rollo, p. 292.
94
Credit Agreement dated September 19, 1995, Art. VIII; id. at 266-267.
 Considering that the contract is the law between the parties,95 respondent is

justified in invoking the acceleration clause declaring the entire obligation

immediately due and payable.96 That clause obliged petitioners to pay the entire loan

on January 29, 1999, the date fixed by respondent.97

Petitioners failure to pay on that date set into effect Article IX of the Real

Estate Mortgage,98 worded thus:

If, at any time, an event of default as defined in the credit

agreements, promissory notes and other related loan
documents referred to in paragraph 5 of ARTICLE I hereof
(sic), or the MORTGAGOR and/or DEBTOR shall fail or refuse
to pay the SECURED OBLIGATIONS, or any of the
amortization of such indebtedness when due, or to comply any
(sic) of the conditions and stipulations herein agreed, x x x then
all the obligations of the MORTGAGOR secured by this
MORTGAGE and all the amortizations thereof shall
immediately become due, payable and defaulted and the
MORTGAGEE may immediately foreclose this MORTGAGE
judicially in accordance with the Rules of Court, or
extrajudicially in accordance with Act No. 3135, as amended,
and Presidential Decree No. 385. For the purpose of
extrajudicial foreclosure, the MORTGAGOR hereby appoints
the MORTGAGEE his/her/its attorney-in-fact to sell the
property mortgaged under Act No. 3135, as amended, to sign
all documents and perform any act requisite and necessary
to accomplish said purpose and to appoint its substitutes
as such attorney-in-fact with the same powers as above
specified. x x x[.] 99

95
CIVIL CODE, Art. 1159.
96
Rollo, pp. 293-294.
97
Id. at 294.
98
Id. at 270.
99
Id. Italics supplied.
 The foregoing discussion satisfactorily shows that UCPB had every right to

apply for extrajudicial foreclosure on the basis of petitioners undisputed and

continuing default.

Petitioners Debt Considered

Liquidated Despite the Alleged

Lack of Accounting

Petitioners do not even attempt to deny the aforementioned matters. They

assert, though, that they have a right to a detailed accounting before they can be

declared in default. As regards the three requisites of default, they say that the first

requisite -- liquidated debt -- is absent. Continuing with foreclosure on the basis of

an unliquidated obligation allegedly violates their right to due process. They also

maintain that their partial payment of P10 million averted the maturity of their

obligation.100

100
Petitioners Memorandum, pp. 16-19; rollo, pp. 204-207.
 On the other hand, respondent asserts that questions regarding the running

balance of the obligation of petitioners are not valid reasons for restraining the

foreclosure. Nevertheless, it maintains that it has furnished them a detailed monthly

statement of account.

A debt is liquidated when the amount is known or is determinable by

inspection of the terms and conditions of the relevant promissory notes and related

documentation.101 Failure to furnish a debtor a detailed statement of account does

not ipso facto result in an unliquidated obligation.

Petitioners executed a Promissory Note, in which they stated that their

principal obligation was in the amount of P103,909,710.82, subject to an interest

rate of 21.75 percent per annum.102 Pursuant to the parties Credit Agreement,

petitioners likewise know that any delay in the payment of the principal obligation

will subject them to a penalty charge of one percent per month, computed from the

due date until the obligation is paid in full.103

It is in fact clear from the agreement of the parties that when the payment is

accelerated due to an event of default, the penalty charge shall be based on the total

principal amount outstanding, to be computed from the date of acceleration until

101
Pacific Mills, Inc., v. CA, 206 SCRA 317, February 17, 1992 (citing Bareng v. CA, 107 Phil. 641,
April 25, 1960; Insurance Company of North America v. Republic, 127 Phil. 635, August 30, 1967).
102
Rollo, p. 290.
103
Credit Agreement dated September 19, 1995, Art. II, Sec. 2.04; id. at 263.
the obligation is paid in full.104 Their Credit Agreement even provides for the

application of payments.105 It appears from the agreements that the amount of total

obligation is known or, at the very least, determinable.

Moreover, when they made their partial payment, petitioners did not question

the principal, interest or penalties demanded from them. They only sought

additional time to update their interest payments or to negotiate a possible

restructuring of their account.106 Hence, there is no basis for their allegation that a

statement of account was necessary for them to know their obligation. We cannot

impair respondents right to foreclose the properties on the basis of their

unsubstantiated allegation of a violation of due process.

In Spouses Estares v. CA,107 we did not find any justification to grant a

preliminary injunction, even when the mortgagors were disputing the amount being

sought from them. We held in that case that [u]pon the nonpayment of the loan,

which was secured by the mortgage, the mortgaged property is properly subject to

a foreclosure sale.108

Compared with Estares, the denial of injunctive relief in this case is even more

imperative, because the present petitioners do not even assail the amounts due from

104
Id.
105
Id. at 264.
106
Id. at 296.
107
459 SCRA 604, June 8, 2005.
108
Id. at 619, per Austria-Martinez, J.
them. Neither do they contend that a detailed accounting would show that they are

not in default. A pending question regarding the due amount was not a sufficient

reason to enjoin the foreclosure in Estares. Hence, with more reason should

injunction be denied in the instant case, in which there is no dispute as to the

outstanding obligation of petitioners.

At any rate, whether respondent furnished them a detailed statement of

account is a question of fact that this Court need not and will not resolve in this

instance. As held in Zulueta v. Reyes,109 in which there was no genuine controversy as

to the amounts due and demandable, the foreclosure should not be restrained by

the unnecessary question of accounting.

Maturity of the Loan Not Averted by

Partial Compliance with Respondents
Demand

109
Supra note 43.
 Petitioners allege that their partial payment of P10 million on March 25, 1999,

had the effect of forestalling the maturity of the loan;110 hence the foreclosure

proceedings are premature. 111 We disagree.

To be sure, their partial payment did not extinguish the obligation. The Civil

Code states that a debt is not paid unless the thing x x x in which the obligation

consists has been completely delivered x x x.112 Besides, a late partial payment could

not have possibly forestalled a long-expired maturity date.

The only possible legal relevance of the partial payment was to evidence the

mortgagees amenability to granting the mortgagor a grace period. Because the

partial payment would constitute a waiver of the mortgagees vested right to

foreclose, the grant of a grace period cannot be casually assumed;113 the banks

agreement must be clearly shown. Without a doubt, no express agreement was

entered into by the parties. Petitioners only assumed that their partial payment had

satisfied respondents demand and obtained for them more time to update their

account.114

110
Petitioners Memorandum, pp. 16-17; rollo, pp. 204-205.
111
Id. at 19; id. at 207.
112
CIVIL CODE, Art. 1233.
113
Pacific Mills, Inc., v. CA, supra note 60; Andres v. Crown Life Insurance Company, 102 Phil. 919,
January 28, 1958.
114
Petitioner Selegnas May 20, 1999 letter to UCPB expresses its assumption: Since we did not receive
any other advice from you, we have assumed thereafter, that you will give us time to update our accounts.
Rollo, p. 296.
 Petitioners are mistaken. When creditors receive partial payment, they are not

ipso facto deemed to have abandoned their prior demand for full payment. Article

1235 of the Civil Code provides:

When the obligee accepts the performance, knowing its

incompleteness or irregularity, and without expressing any
protest or objection, the obligation is deemed fully complied
with.

Thus, to imply that creditors accept partial payment as complete performance

of their obligation, their acceptance must be made under circumstances that indicate

their intention to consider the performance complete and to renounce their claim

arising from the defect.115

There are no circumstances that would indicate a renunciation of the right of

respondent to foreclose the mortgaged properties extrajudicially, on the basis of

petitioners continuing default. On the contrary, it asserted its right by filing an

application for extrajudicial foreclosure after receiving the partial payment. Clearly,

it did not intend to give petitioners more time to meet their obligation.

115
A. TOLENTINO, supra note 50 at 278.
 Parenthetically, respondent cannot be reproved for accepting their partial

payment. While Article 1248 of the Civil Code states that creditors cannot be

compelled to accept partial payments, it does not prohibit them from accepting such

payments.

Second Issue:
Enjoining the Extrajudicial Foreclosure

A writ of preliminary injunction is a

provisional remedy that may be resorted
to by litigants, only to protect or preserve
their rights or interests during the
pendency of the principal action. To
authorize a temporary injunction, the
plaintiff must show, at least prima facie,
a right to the final relief.116 Moreover, it
must show that the invasion of the right
sought to be protected is material and
substantial, and that there is an urgent
and paramount necessity for the writ to
prevent serious damage.117

In the absence of a clear legal right,

the issuance of the injunctive writ
constitutes grave abuse of discretion.
Injunction is not designed to protect
contingent or future rights. It is not
proper when the complainants right is
doubtful or disputed.118

As a general rule, courts should avoid

issuing this writ, which in effect disposes
of the main case without trial.119 In Manila
International Airport Authority v. CA,120

116
Ortigas & Company, Limited Partnership v. Ruiz, 148 SCRA 326, March 9, 1987.
117
Sps. Arcega v. CA, 341 Phil. 166, July 7, 1997.
118
Id.
119
F. REGALADO, REMEDIAL LAW COMPENDIUM, Vol. I, 639 (7th revised ed., 1999).
120
445 Phil. 369, February 14, 2003.
we urged courts to exercise caution in
issuing the writ, as follows:

x x x. We remind trial courts that while generally

the grant of a writ of preliminary injunction rests on the
sound discretion of the court taking cognizance of the
case, extreme caution must be observed in the exercise
of such discretion. The discretion of the court a quo to
grant an injunctive writ must be exercised based on the
grounds and in the manner provided by law. Thus, the
Court declared in Garcia v. Burgos:

It has been consistently held that there

is no power the exercise of which is more
delicate, which requires greater caution,
deliberation and sound discretion, or more
dangerous in a doubtful case, than the
issuance of an injunction. It is the strong arm
of equity that should never be extended
unless to cases of great injury, where courts
of law cannot afford an adequate or
commensurate remedy in damages.

Every court should remember that an

injunction is a limitation upon the freedom of
action of the defendant and should not be
granted lightly or precipitately. It should be
granted only when the court is fully satisfied
that the law permits it and the emergency
demands it.121 (Citations omitted)

Petitioners do not have any clear

right to be protected. As shown in our
earlier findings, they failed to
substantiate their allegations that their
right to due process had been violated and
the maturity of their obligation
forestalled. Since they indisputably failed
to meet their obligations in spite of
repeated demands, we hold that there is
no legal justification to enjoin respondent
from enforcing its undeniable right to
foreclose the mortgaged properties.

121
Id. at 383-384, per Carpio, J.
 In any case, petitioners will not be
deprived outrightly of their property.
Pursuant to Section 47 of the General
Banking Law of 2000,122 mortgagors who
have judicially or extrajudicially sold
their real property for the full or partial
payment of their obligation have the right
to redeem the property within one year
after the sale. They can redeem their real
estate by paying the amount due, with
interest rate specified, under the
mortgage deed; as well as all the costs and
expenses incurred by the bank.123

Moreover, in extrajudicial
foreclosures, petitioners have the right to
receive any surplus in the selling price.
This right was recognized in Sulit v. CA,124
in which the Court held that if the
mortgagee is retaining more of the
proceeds of the sale than he is entitled to,
this fact alone will not affect the validity
of the sale but simply gives the mortgagor
a cause of action to recover such
surplus.125

Petitioners failed to demonstrate the

prejudice they would probably suffer by
reason of the foreclosure. Also, it is clear
that they would be adequately protected
by law. Hence, we find no legal basis to
reverse the assailed Amended Decision of
the CA dated May 4, 2004.

122
Republic Act No. 8791, approved on May 23, 2000.
123
J. FERIA AND M.C. NOCHE, CIVIL PROCEDURE ANNOTATED, Vol. II, 577 (2001).
124
335 Phil. 914, February 17, 1997.
125
Id. at 931, per Regalado, J.
 WHEREFORE, the Petition is DENIED
and the assailed Amended Decision and
Resolution AFFIRMED. Costs against
petitioners.

SO ORDERED.

ARTEMIO V. PANGANIBAN

Chief Justice

Chairman, First Division

W E C O N C U R:

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

ROMEO J. CALLEJO, SR. MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

 CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

ARTEMIO V. PANGANIBAN

Chief Justice

Republic of the Philippines

SUPREME COURT

Manila
 THIRD DIVISION

GENERAL MILLING G.R. No. 193723

CORPORATION,

Petitioner,
Present:

- versus - CARPIO, J.,*

VELASCO, JR., Chairperson,

LEONARDO-DE CASTRO,**

ABAD, and

SPS. LIBRADO RAMOS and MENDOZA, JJ.

REMEDIOS RAMOS,

Respondents.
Promulgated:

July 20, 2011

x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The Case

*
Additional member per Special Order No. 1042 dated July 6, 2011.
**
Additional member per raffle dated July 13, 2011.
 This is a petition for review of the April 15, 2010 Decision of the Court of
Appeals (CA) in CA-G.R. CR-H.C. No. 85400 entitled Spouses Librado Ramos
& Remedios Ramos v. General Milling Corporation, et al., which affirmed the
May 31, 2005 Decision of the Regional Trial Court (RTC), Branch 12 in Lipa
City, in Civil Case No. 00-0129 for Annulment and/or Declaration of Nullity of
Extrajudicial Foreclosure Sale with Damages.

The Facts

On August 24, 1989, General Milling Corporation (GMC) entered into a

Growers Contract with spouses Librado and Remedios Ramos (Spouses Ramos).
Under the contract, GMC was to supply broiler chickens for the spouses to raise
on their land in Barangay Banaybanay, Lipa City, Batangas.126 To guarantee
full compliance, the Growers Contract was accompanied by a Deed of Real
Estate Mortgage over a piece of real property upon which their conjugal home
was built. The spouses further agreed to put up a surety bond at the rate of PhP
20,000 per 1,000 chicks delivered by GMC. The Deed of Real Estate Mortgage
extended to Spouses Ramos a maximum credit line of PhP 215,000 payable
within an indefinite period with an interest of twelve percent (12%) per
annum.127

The Deed of Real Estate Mortgage contained the following provision:

WHEREAS, the MORTGAGOR/S has/have agreed to

guarantee and secure the full and faithful compliance of
[MORTGAGORS] obligation/s with the MORTGAGEE by a First

126
Rollo, p. 37.
127
Id. at 13.
 Real Estate Mortgage in favor of the MORTGAGEE, over a 1
parcel of land and the improvements existing thereon, situated in
the Barrio/s of Banaybanay, Municipality of Lipa City, Province of
Batangas, Philippines, his/her/their title/s thereto being evidenced
by Transfer Certificate/s No./s T-9214 of the Registry of Deeds for
the Province of Batangas in the amount of TWO HUNDRED
FIFTEEN THOUSAND (P 215,000.00), Philippine Currency,
which the maximum credit line payable within a x x x day term and
to secure the payment of the same plus interest of twelve percent
(12%) per annum.

Spouses Ramos eventually were unable to settle their account with GMC.
They alleged that they suffered business losses because of the negligence of
GMC and its violation of the Growers Contract.128

On March 31, 1997, the counsel for GMC notified Spouses Ramos that
GMC would institute foreclosure proceedings on their mortgaged property.129

On May 7, 1997, GMC filed a Petition for Extrajudicial Foreclosure of

Mortgage. On June 10, 1997, the property subject of the foreclosure was
subsequently sold by public auction to GMC after the required posting and
publication.130 It was foreclosed for PhP 935,882,075, an amount representing
the losses on chicks and feeds exclusive of interest at 12% per annum and
attorneys fees.131 To complicate matters, on October 27, 1997, GMC informed
the spouses that its Agribusiness Division had closed its business and poultry
operations.132

128
Id. at 113.
129
Id. at 37.
130
Id.
131
Id. at 117.
132
Id. at 114.
 On March 3, 2000, Spouses Ramos filed a Complaint for Annulment
and/or Declaration of Nullity of the Extrajudicial Foreclosure Sale with
Damages. They contended that the extrajudicial foreclosure sale on June 10,
1997 was null and void, since there was no compliance with the requirements of
posting and publication of notices under Act No. 3135, as amended, or An Act to
Regulate the Sale of Property under Special Powers Inserted in or Annexed to
Real Estate Mortgages. They likewise claimed that there was no sheriffs affidavit
to prove compliance with the requirements on posting and publication of notices.
It was further alleged that the Deed of Real Estate Mortgage had no fixed term.
A prayer for moral and exemplary damages and attorneys fees was also included
in the complaint.133 Librado Ramos alleged that, when the property was
foreclosed, GMC did not notify him at all of the foreclosure.134

During the trial, the parties agreed to limit the issues to the following: (1)
the validity of the Deed of Real Estate Mortgage; (2) the validity of the
extrajudicial foreclosure; and (3) the party liable for damages.135

In its Answer, GMC argued that it repeatedly reminded Spouses Ramos of

their liabilities under the Growers Contract. It argued that it was compelled to
foreclose the mortgage because of Spouses Ramos failure to pay their obligation.
GMC insisted that it had observed all the requirements of posting and publication
of notices under Act No. 3135.136

The Ruling of the Trial Court

133
Id. at 37-38.
134
Id. at 117.
135
Id. at 115.
136
Id. at 38.
 Holding in favor of Spouses Ramos, the trial court ruled that the Deed of
Real Estate Mortgage was valid even if its term was not fixed. Since the duration
of the term was made to depend exclusively upon the will of the debtors-spouses,
the trial court cited jurisprudence and said that the obligation is not due and
payable until an action is commenced by the mortgagee against the mortgagor
for the purpose of having the court fix the date on and after which the instrument
is payable and the date of maturity is fixed in pursuance thereto.137

The trial court held that the action of GMC in moving for the foreclosure
of the spouses properties was premature, because the latters obligation under
their contract was not yet due.

The trial court awarded attorneys fees because of the premature action
taken by GMC in filing extrajudicial foreclosure proceedings before the
obligation of the spouses became due.

The RTC ruled, thus:

WHEREFORE, premises considered, judgment is rendered

as follows:

1. The Extra-Judicial Foreclosure Proceedings under

docket no. 0107-97 is hereby declared null and void;

2. The Deed of Real Estate Mortgage is hereby declared

valid and legal for all intents and puposes;

137
Id. at 123. (Citation omitted.)
 3. Defendant-corporation General Milling Corporation is
ordered to pay Spouses Librado and Remedios Ramos attorneys
fees in the total amount of P 57,000.00 representing acceptance fee
of P30,000.00 and P3,000.00 appearance fee for nine (9) trial dates
or a total appearance fee of P 27,000.00;

4. The claims for moral and exemplary damages are

denied for lack of merit.

IT IS SO ORDERED.138

The Ruling of the Appellate Court

On appeal, GMC argued that the trial court erred in: (1) declaring the
extrajudicial foreclosure proceedings null and void; (2) ordering GMC to pay
Spouses Ramos attorneys fees; and (3) not awarding damages in favor of GMC.

The CA sustained the decision of the trial court but anchored its ruling on
a different ground. Contrary to the findings of the trial court, the CA ruled that
the requirements of posting and publication of notices under Act No. 3135 were
complied with. The CA, however, still found that GMCs action against Spouses
Ramos was premature, as they were not in default when the action was filed on
May 7, 1997.139

The CA ruled:

138
Id. at 127. Penned by Judge Vicente F. Landicho.
139
Id. at 40-41.
 In this case, a careful scrutiny of the evidence on record
shows that defendant-appellant GMC made no demand to spouses
Ramos for the full payment of their obligation. While it was alleged
in the Answer as well as in the Affidavit constituting the direct
testimony of Joseph Dominise, the principal witness of defendant-
appellant GMC, that demands were sent to spouses Ramos, the
documentary evidence proves otherwise. A perusal of the letters
presented and offered as evidence by defendant-appellant GMC did
not demand but only request spouses Ramos to go to the office of
GMC to discuss the settlement of their account.140

According to the CA, however, the RTC erroneously awarded attorneys

fees to Spouses Ramos, since the presumption of good faith on the part of GMC
was not overturned.

The CA disposed of the case as follows:

WHEREFORE, and in view of the foregoing considerations,

the Decision of the Regional Trial Court of Lipa City, Branch 12,
dated May 21, 2005 is hereby AFFIRMED with MODIFICATION
by deleting the award of attorneys fees to plaintiffs-appellees
spouses Librado Ramos and Remedios Ramos.141

Hence, We have this appeal.

The Issues

A. WHETHER [THE CA] MAY CONSIDER ISSUES NOT

ALLEGED AND DISCUSSED IN THE LOWER COURT
AND LIKEWISE NOT RAISED BY THE PARTIES ON
140
Id. at 41.
141
Id. at 36-44. Penned by Associate Justice Priscilla J. Baltazar-Padilla and concurred in by Associate
Justices Fernanda Lampas Peralta and Manuel B. Barrios.
 APPEAL, THEREFORE HAD DECIDED THE CASE NOT IN
ACCORD WITH LAW AND APPLICABLE DECISIONS OF
THE SUPREME COURT.

B. WHETHER [THE CA] ERRED IN RULING THAT

PETITIONER GMC MADE NO DEMAND TO
RESPONDENT SPOUSES FOR THE FULL PAYMENT OF
THEIR OBLIGATION CONSIDERING THAT THE LETTER
DATED MARCH 31, 1997 OF PETITIONER GMC TO
RESPONDENT SPOUSES IS TANTAMOUNT TO A FINAL
DEMAND TO PAY, THEREFORE IT DEPARTED FROM
THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS.142

The Ruling of this Court

Can the CA consider matters not alleged?

GMC asserts that since the issue on the existence of the demand letter was
not raised in the trial court, the CA, by considering such issue, violated the basic
requirements of fair play, justice, and due process.143

In their Comment,144 respondents-spouses aver that the CA has ample

authority to rule on matters not assigned as errors on appeal if these are
indispensable or necessary to the just resolution of the pleaded issues.

142
Id. at 18.
143
Id. at 19.
144
Id. at 194-199.
 In Diamonon v. Department of Labor and Employment,145 We explained
that an appellate court has a broad discretionary power in waiving the lack of
assignment of errors in the following instances:

(a) Grounds not assigned as errors but affecting the

jurisdiction of the court over the subject matter;

(b) Matters not assigned as errors on appeal but are evidently

plain or clerical errors within contemplation of law;

(c) Matters not assigned as errors on appeal but consideration

of which is necessary in arriving at a just decision and complete
resolution of the case or to serve the interests of a justice or to avoid
dispensing piecemeal justice;

(d) Matters not specifically assigned as errors on appeal but

raised in the trial court and are matters of record having some
bearing on the issue submitted which the parties failed to raise or
which the lower court ignored;

(e) Matters not assigned as errors on appeal but closely

related to an error assigned;

(f) Matters not assigned as errors on appeal but upon which

the determination of a question properly assigned, is dependent.

Paragraph (c) above applies to the instant case, for there would be a just
and complete resolution of the appeal if there is a ruling on whether the Spouses
Ramos were actually in default of their obligation to GMC.

Was there sufficient demand?

We now go to the second issue raised by GMC. GMC asserts error on the
part of the CA in finding that no demand was made on Spouses Ramos to pay

145
G.R. No. 108951, March 7, 2000, 327 SCRA 283, 288-289. See also Kulas Ideas & Creations v.
Alcoseba, G.R. No. 180123, February 18, 2010, 613 SCRA 217, 231.
their obligation. On the contrary, it claims that its March 31, 1997 letter is akin
to a demand.

We disagree.

There are three requisites necessary for a finding of default. First, the
obligation is demandable and liquidated; second, the debtor delays performance;
and third, the creditor judicially or extrajudicially requires the debtors
performance.146

According to the CA, GMC did not make a demand on Spouses Ramos
but merely requested them to go to GMCs office to discuss the settlement of their
account. In spite of the lack of demand made on the spouses, however, GMC
proceeded with the foreclosure proceedings. Neither was there any provision in
the Deed of Real Estate Mortgage allowing GMC to extrajudicially foreclose the
mortgage without need of demand.

Indeed, Article 1169 of the Civil Code on delay requires the following:

Those obliged to deliver or to do something incur in delay

from the time the obligee judicially or extrajudicially demands from
them the fulfilment of their obligation.
However, the demand by the creditor shall not be necessary
in order that delay may exist:

146
Selegna Management and Development Corporation v. United Coconut Planters Bank, G.R. No.
165662, May 3, 2006, 489 SCRA 125, 138.
 (1) When the obligation or the law expressly so declares; x
xx

As the contract in the instant case carries no such provision on demand not
being necessary for delay to exist, We agree with the appellate court that GMC
should have first made a demand on the spouses before proceeding to foreclose
the real estate mortgage.

Development Bank of the Philippines v. Licuanan finds application to the

instant case:

The issue of whether demand was made before the

foreclosure was effected is essential. If demand was made and duly
received by the respondents and the latter still did not pay, then they
were already in default and foreclosure was proper. However, if
demand was not made, then the loans had not yet become due and
demandable. This meant that respondents had not defaulted in their
payments and the foreclosure by petitioner was premature.
Foreclosure is valid only when the debtor is in default in the
payment of his obligation.147

In turn, whether or not demand was made is a question of fact.148 This

petition filed under Rule 45 of the Rules of Court shall raise only questions of
law. For a question to be one of law, it must not involve an examination of the
probative value of the evidence presented by the litigants or any of them. The
resolution of the issue must rest solely on what the law provides on the given set
of circumstances. Once it is clear that the issue invites a review of the evidence
presented, the question posed is one of fact.149 It need not be reiterated that this
Court is not a trier of facts.150 We will defer to the factual findings of the trial

147
G.R. No. 150097, February 26, 2007, 516 SCRA 644, 650. (Emphasis supplied.)
148
Id.
149
Tirazona v. Court of Appeals, G.R. No. 169712, March 14, 2008, 548 SCRA 560, 581.
150
Heirs of Completo & Abiad v. Sgt. Albayda, G.R. No. 172200, July 6, 2010, 624 SCRA 97, 110.
court, because petitioner GMC has not shown any circumstances making this
case an exception to the rule.

WHEREFORE, the petition is DENIED. The CA Decision in CA-G.R.

CR-H.C. No. 85400 is AFFIRMED.

SO ORDERED.

PRESBITERO J. VELASCO, JR.

Associate Justice
WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

TERESITA J. LEONARDO-DE CASTRO ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.
 PRESBITERO J. VELASCO, JR.

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairpersons Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Courts Division.

RENATO C. CORONA

Chief Justice
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

.
.

DESAMPARADOS M. SOLIVA, SUBSTITUTED BY

SOLE HEIR PERLITA SOLIVA GALDO,
Petitioner,

G.R. No. 154017

December 8, 2003
-versus-

THE INTESTATE ESTATE OF MARCELO M. VILLALBA

AND VALENTA BALICUA VILLALBA,
Respondents.

DECISION

PANGANIBAN, J.:
chan robles virtual law library
chan robles virtual law library
chan robles virtual law library
There is a valid sale even though the purchase price is not paid in full. The unpaid seller's
remedy is an action to collect the balance or to rescind the contract within the time allowed
by law. In this case, laches barring the claim of petitioner to recover the property has
already set in. However, in the interest of substantial justice, and pursuant to the equitable
principle proscribing unjust enrichment, she is entitled to receive the unpaid balance of
the purchase price plus legal interest thereon. chan robles virtual law library

The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to nullify
the November 9, 2001 Decision[2] and the May 23, 2002[3] Resolution of the Court of
Appeals (CA) in CA-GR CV No. 42024. The assailed Decision disposed as follows: chan
robles virtual law library

"WHEREFORE, the Decision appealed from is AFFIRMED."[4]

The assailed Resolution denied petitioner's Motion for Reconsideration. chan robles
virtual law library

The Facts

The facts are narrated by the CA, as follows: chan robles virtual law library

chan robles virtual law library

"On May 5, 1982, Petitioner Desamparados M. Soliva filed a complaint for recovery of
ownership, possession and damages against Respondent Valenta Balicua Villalba x x x
alleging that she is the owner of a parcel of agricultural land situated at Hinaplanan,
Claveria, Misamis Oriental, containing an area of 16,542 square meters and covered by
Original Certificate of Title No. 8581; that on January 4, 1966, the late Capt. Marcelo
Villalba asked her permission to occupy her house on said land, promised to buy the
house and lot upon receipt of his money from Manila and gave her P600.00 for the
occupation of the house; that Capt. Villalba died in 1978 without having paid the
consideration for the house and lot; and that after [the] death of Capt. Villalba, his widow,
[Respondent Valenta], refused to vacate the house and lot despite demands, destroyed
the house thereon and constructed a new one. chan robles virtual law library

"For failure to file an answer, Respondent Valenta was declared in default and petitioner
was allowed to present her evidence ex-parte.
chan robles virtual law library
"On March 26, 1984, the court a quo rendered judgment restoring to petitioner her right
of ownership and possession of the property and ordering [Respondent Valenta] to pay
[her] P25,000.00 as actual damages and P5,000.00 as attorney's fees. Said decision
became final and petitioner was placed in possession of the subject property. chan
robles virtual law library

"A petition for relief from judgment was filed by [Respondent Valenta] on June 5, 1984
alleging that her failure to file an answer to the complaint was caused by her confusion
as to whether the property formed part of the estate of her late husband, Marcelo Villalba;
that she referred the matter to Atty. Eleno Kabanlit, the administrator of the estate, but
the latter informed her that the property was not included in the inventory of the estate;
and that she has a meritorious defense as her late husband had already paid the amount
of P2,250.00 out of the purchase price of P3,500.00 for the house and lot. chan robles
virtual law library

"The petition for relief was denied by the court a quo in an Order dated September 3,
1984 on the grounds that the failure of Respondent Valenta to file an answer was not due
to excusable negligence and that she does not seem to have a valid and meritorious
defense.
chan robles virtual law library
"Respondent Valenta appealed to the CA, which rendered a Decision on February 21,
1990 finding that the failure of Respondent Valenta to file an answer to the complaint was
due to excusable negligence; that she has a meritorious defense, and that the complaint
should have been filed not against her but against the administrator of the estate of
deceased Marcelo Villalba. The dispositive portion of said Decision reads:
chan robles virtual law library

'WHEREFORE, the order appealed from is hereby REVERSED; the judgment by default
in Civil Case No. 8515, subject matter of the petition for relief, is SET ASIDE; the trial
court is ORDERED to continue with the proceedings in said case; and Petitioner
Desamparados M. Soliva x x x is ORDERED to amend her complaint by substituting the
administrator of the intestate testate (sic) of the late Marcelo M. Villalba for Valenta
Baricua-Villalba respondent as defendant in said amended complaint. No pronouncement
as to costs. chan robles virtual law library

'SO ORDERED.'

"Consequently, an amended complaint was filed in Civil Case No. 8515 by substituting
the Intestate Estate of Marcelo M. Villalba, represented by its Administrator, Atty. Eleno
M. Kabanlit, for Respondent Valenta, as defendant therein. chan robles virtual law
library

"Answering the complaint, the Administrator alleged that the house and lot were sold to
the late Marcelo Villalba by Magdaleno Soliva, the late husband of petitioner, on
December 18, 1965 for P3,500.00 on installment basis and that Marcelo Villalba had paid
the total amount of P2,250.00; that no demands were made on Respondent Valenta to
vacate the property prior to the filing of the original complaint in 1982; and that
Respondent Valenta has been in continuous, public and uninterrupted possession of the
property for seventeen (17) years, i.e., from 1965 to 1982, so that petitioner's claim of
ownership has already prescribed. chan robles virtual law library

"An answer-in-intervention was filed by Respondent Valenta alleging that the original
transaction between her late husband and the late husband of petitioner covered seventy-
two (72) hectares of land, twenty-nine (29) heads of cattle and the subject house and lot;
that petitioner and her husband delivered to them only twenty-seven (27) hectares and
twelve (12) heads of cattle and they had to pay separately for the house and lot; and that
she renovated the house and lot at a cost of not less than P30,000.00 and planted
numerous fruit trees and permanent crops, all valued at not less than P50,000.00. chan
robles virtual law library

"On March 11, 1993, the court a quo rendered a Decision, the dispositive portion of which
reads: chan robles virtual law library
chan robles virtual law library

'WHEREFORE, judgment is hereby rendered dismissing the complaint and the

counterclaims without special pronouncement as to costs, and ordering the reconveyance
of subject lot to respondent and intervenor.'"[5] chan robles virtual law library
chan robles virtual law library
Ruling of the Court of Appeals
Affirming the RTC, the CA held that laches had already set in. The inaction of petitioner
for almost 16 years had barred her action to recover the disputed property from the
Villalbas. The appellate court found that 1) until the death of Marcelo Villalba in 1978, his
payment of the full purchase price of the disputed house and lot was never demanded; 2)
no evidence was presented to show when petitioner had made a verbal demand on
Valenta Villalba to vacate the premises; and 3) the complaint for recovery of ownership
and possession was filed only on May 5, 1982 — 16 years after the former's cause of
action had accrued. chan robles virtual law library

Hence, this Petition.[6]

Issues

Petitioner submits the following issues for our consideration: chan robles virtual law
library
chan robles virtual law library

"1. Whether or not Capt. Marcelo M. Villalba who died in 1978 after declaring that he
would not pay anymore the full consideration of the price of the house and lot and after
exhausting extrajudicial remedies would bar Desamparados M. Soliva or her successor-
in-interest from asserting her claim over her titled property. chan robles virtual law
library

"2. Whether or not the Decision of the Court of Appeals affirming the Decision of the
Regional Trial Court ordering the reconveyance of the subject lot to defendant and
intervenor although Capt. Marcelo Villalba nor his wife Valenta Balicua Villalba had not
yet paid the full consideration of the price of the house and lot would unjustly enrich
spouses Marcelo and Valenta Villalba at the expense of Desamparados M. Soliva."[7]
chan robles virtual law library

Simply put, the issues boil down to the following: (1) whether petitioner is barred from
recovering the disputed property; and (2) whether the conveyance ordered by the court a
quo would unjustly enrich respondents at her expense. chan robles virtual law
library

The Court's Ruling

The Petition is partly meritorious.

First Issue: Petitioner's Claim Already Barred

Petitioner contests the appellate court's finding that she slept on her rights for 16 years
and thereby allowed prescription and laches to set in and bar her claim. She avers that
she undertook extrajudicial measures to collect the unpaid balance of the purchase price
from the Villalbas. She also emphasizes that as a result of her original action, the trial
court restored her to the possession of the disputed house and lot on March 26, 1984.
chan robles virtual law library

It is readily apparent that petitioner is raising issues of fact that have amply been ruled
upon by the appellate court. The CA's findings of fact are generally binding upon this
Court and will not be disturbed on appeal - especially when, as in this case, they are the
same as those of the trial court.[8] Petitioner has failed to show sufficient reason for us to
depart from this rule. Accordingly, we shall review only questions of law that have been
distinctly set forth.[9]
chan robles virtual law library
No Invalidation of Sale Due to Nonpayment of Full Price
chan robles virtual law library
Petitioner argues that the transaction between the parties was a contract to sell rather
than a contract of sale. This argument was properly brushed aside by the appellate court,
which held that she was bound by her admission in her Complaint[10] and during the
hearings[11] that she had sold the property to the Villalbas.
chan robles virtual law library
Petitioner further contends that the oral contract of sale between the parties was invalid,
because the late Captain Marcelo Villalba and his wife had failed to comply with their
obligation to pay in full the purchase price of the house and lot. She is mistaken. chan
robles virtual law library
chan robles virtual law library
Under Article 1318 of the Civil Code, the following are the essential requisites of a valid
contract: 1) the consent of the contracting parties, 2) the object certain which is the subject
matter of the contract, and 3) the cause of the obligation which is established. When all
the essential requisites are present, a contract is obligatory in whatever form it may have
been entered into, save in cases where the law requires that it be in a specific form to be
valid and enforceable.[12]
chan robles virtual law library
With respect to real property, Article 1358(1) of the Civil Code specifically requires that a
contract of sale thereof be in a public document. However, an otherwise unenforceable
oral contract of sale of realty under Article 1403(2) of the Civil Code may be ratified by
the failure to object to the presentation of oral evidence to prove it or by the acceptance
of benefits granted by it.[13] chan robles virtual law library

All the essential elements of a valid contract are present in this case. No issue was raised
by petitioner on this point. Moreover, while the contract between the parties might have
been unenforceable under Article 1403(2) of the Civil Code, the admission[14] by
petitioner that she had accepted payments under the oral contract of sale took the case
out of the scope of the Statute of Frauds.[15] The ratification of the contract rendered it
valid and enforceable.
chan robles virtual law library
Furthermore, contrary to petitioner's submission, the nonpayment of the full consideration
did not invalidate the contract of sale. Under settled doctrine, nonpayment is a resolutory
condition that extinguishes the transaction existing for a time and discharges the
obligations created thereunder.[16] The remedy of the unpaid seller is to sue for
collection[17] or, in case of a substantial breach, to rescind the contract.[18] These
alternative remedies of specific performance and rescission are provided under Article
1191 of the Civil Code as follows: chan robles virtual law library
chan robles virtual law library

"Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him. chan robles virtual
law library
"The injured party may choose between fulfillment and the rescission of the obligation,
with the payment of damages in either case. He may also seek rescission even after he
has chosen fulfillment, if the latter should become impossible. chan robles virtual law
library

"The Court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period. chan robles virtual law library

" x x x x x x x x x."
chan robles virtual law library

The rescission of a sale of immovables, on the other hand, is governed by Article 1592 of
the Civil Code as follows: chan robles virtual law library
chan robles virtual law library
"Art. 1592. In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of the contract
shall of right take place, the vendee may pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made upon him either judicially
or extrajudicially or by a notarial act. After the demand, the court may not grant him a new
term." chan robles virtual law library
chan robles virtual law library
Upon the facts found by the trial and the appellate courts, petitioner did not exercise her
right either to seek specific performance or to rescind the verbal contract of sale until May
1982, when she filed her complaint for recovery of ownership and possession of the
property. This factual finding brings to the fore the question of whether by 1982, she was
already barred from recovering the property due to laches and prescription.

Action Barred by Laches

In general, laches is the failure or neglect, for an unreasonable and unexplained length
of time, to do that which - by the exercise of due diligence - could or should have been
done earlier.[19] It is the negligence or omission to assert a right within a reasonable
period, warranting the presumption that the party entitled to assert it has either abandoned
or declined to assert it.[20] chan robles virtual law library

Under this time-honored doctrine, relief has been denied to litigants who, by sleeping on
their rights for an unreasonable length of time - either by negligence, folly or inattention -
have allowed their claims to become stale.[21] Vigilantibus, sed non dormientibus, jura
subveniunt. The laws aid the vigilant, not those who slumber on their rights.[22] chan
robles virtual law library

The following are the essential elements of laches: chan robles virtual law library
chan robles virtual law library

(1) Conduct on the part of the defendant that gave rise to the situation complained of; or
the conduct of another which the defendant claims gave rise to the same; chan robles
virtual law library
(2) Delay by the complainant in asserting his right after he has had knowledge of the
defendant's conduct and after he has had an opportunity to sue; chan robles virtual
law library

(3) Lack of knowledge by or notice to the defendant that the complainant will assert the
right on which he bases his suit; and chan robles virtual law library

(4) Injury or prejudice to the defendant in the event relief is accorded to the
complainant.[23] chan robles virtual law library

chan robles virtual law library

Petitioner complied with her obligation to deliver the property in 1966.[24] However,
respondent's husband failed to comply with his reciprocal obligation to pay, when the
money he had been expecting from Manila never materialized.[25] He also failed to make
further installments after May 13, 1966.[26] As early as 1966, therefore, petitioner already
had the right to compel payment or to ask for rescission, pursuant to Article 1169 of the
Civil Code, which reads:
chan robles virtual law library
"Art. 1169. Those obliged to deliver or to do something incur in delay from the time the
obligee judicially or extrajudicially demands from them the fulfillment of their obligation.
chan robles virtual law library

"However, the demand by the creditor shall not be necessary in order that delay may
exist: chan robles virtual law library

x x x x x x x x x

chan robles virtual law library

"In reciprocal obligations, neither party incurs in delay if the other does not comply or is
not ready to comply in a proper manner with what is incumbent upon him. From the
moment one of the parties fulfills his obligation, delay by the other begins." (Emphasis
supplied)
chan robles virtual law library

Nonetheless, petitioner failed to sue for collection or rescission. Due to insufficiency of

evidence, the lower courts brushed aside her assertions that she had availed herself of
extrajudicial remedies to collect the balance or to serve an extrajudicial demand on
Villalba, prior to her legal action in 1982. Meanwhile, respondent had spent a considerable
sum in renovating the house and introducing improvements on the premises.[27]chan
robles virtual law library

In view thereof, the appellate court aptly ruled that petitioner's claim was already barred
by laches. It has been consistently held that laches does not concern itself with the
character of the defendant's title, but only with the issue of whether or not the plaintiff - by
reason of long inaction or inexcusable neglect - should be barred entirely from asserting
the claim, because to allow such action would be inequitable and unjust to the
defendant.[28]chan robles virtual law library

Likewise, it must be stressed that unlike prescription, laches is not concerned merely with
the fact of delay, but even more with the effect of unreasonable delay.[29] In Vda. de
Cabrera v. CA,[30] we explained: chan robles virtual law library
chan robles virtual law library

"In our jurisdiction, it is an enshrined rule that even a registered owner of property may
be barred from recovering possession of property by virtue of laches. Under the Land
Registration Act (now the Property Registration Decree), no title to registered land in
derogation to that of the registered owner shall be acquired by prescription or adverse
possession. The same is not true with regard to laches. As we have stated earlier in Mejia
de Lucas vs. Gamponia, while the defendant may not be considered as having acquired
title by virtue of his and his predecessor's long continued possession (37 years) the
original owner's right to recover x x x the possession of the property and the title thereto
from the defendant has, by the latter's long period of possession and by patentee's
inaction and neglect, been converted into a stale demand."[31]chan robles virtual law
library
chan robles virtual law library
The contention of petitioner that her right to recover is imprescriptible because the
property was registered under the Torrens system[32] also fails to convince us. It was the
finding of the trial court that the property was not yet covered by a free patent on January
4, 1966, when Captain Villalba acquired possession thereof. Indeed, the evidence shows
that as of that date, the documents relating to the property were still in the name of Pilar
Castrence, from whom petitioner purchased the property on April 27, 1966;[33] that she
applied for a free patent therefor between January 4 and April 27, 1966;[34] and that the
original certificate of title over the lot was issued to her under Free Patent No. (x-1) 3732
only on August 16, 1974.[35]chan robles virtual law library

It is apparent, then, that petitioner sold the house and lot to respondent on January 4,
1966, before she had even acquired the title to convey it. Moreover, she applied for a free
patent after she lost, by operation of law,[36] the title she had belatedly acquired from
Castrence. These circumstances raise serious questions over the former's good faith in
delaying the assertion of her rights to the property. They bar her from seeking relief under
the principle that "one who comes to court must come with clean hands."[37] chan
robles virtual law library

Action Barred by Prescription

Moreover, we find that the RTC and the CA correctly appreciated the operation of ordinary
acquisitive prescription in respondent's favor. To acquire ownership and other real rights
over immovables under Article 1134 of the Civil Code, possession must be for 10 years.
It must also be in good faith and with just title.[38]
chan robles virtual law library
Good faith consists of the reasonable belief that the person from whom the possessor
received the thing was its owner, but could not transmit the ownership thereof.[39] On the
other hand, there is just title when the adverse claimant came into possession of the
property through one of the modes recognized by law for the acquisition of ownership or
other real rights, but the grantor was not the owner or could not transmit any
right.[40]chan robles virtual law library

The RTC and the CA held that the Villalbas' had continuously possessed the property
from January 4, 1966 until May 5, 1982[41] or for a total of 16 years. Capt. Villalba came
into possession through a sale by petitioner, whom he believed was the owner, though
— at the time of the sale — she was not. Clearly, all the elements of ordinary acquisitive
prescription were present. chan robles virtual law library

Petitioner is thus precluded from invoking the 30-year prescriptive period for commencing
real action over immovables. Prescription of the action is without prejudice to acquisitive
prescription, according to Article 1141 of the Civil Code, which we quote: chan robles
virtual law library
chan robles virtual law library

"Art. 1141. Real actions over immovables prescribe after thirty years.

"This provision is without prejudice to what is established for the acquisition of ownership
and other real rights by prescription." (Emphasis supplied)

chan robles virtual law library

Second Issue: Unjust Enrichment
chan robles virtual law library
While petitioner is now barred from recovering the subject property, all is not lost for her.
By Respondent Villalba's own admission,[42] a balance of P1,250 of the total purchase
price remains unpaid. Reason and fairness suggest that petitioner be allowed to collect
this sum. It is a basic rule in law that no one shall unjustly enrich oneself at the expense
of another. Niguno non deue enriquecerse tortizamente condaño de otro. For indeed, to
allow respondent to keep the property without paying fully for it amounts to unjust
enrichment on her part. chan robles virtual law library

Since the obligation consists of the payment of a sum of money, and Respondent Villalba
has incurred delay in satisfying that obligation, legal interest at six percent (6%) per
annum[43] is hereby imposed on the balance of P1,250, to be computed starting May 5,
1982, when the claim was made judicially, until the finality of this Court's judgment.
Following our ruling in Eastern Shipping Lines, Inc. v. CA,[44] the sum so awarded shall
likewise bear interest at the rate of 12 percent per annum from the time this judgment
becomes final and executory until its satisfaction. chan robles virtual law library

WHEREFORE, the Petition is partly GRANTED. The Decision of the Court of Appeals is
AFFIRMED, with the MODIFICATION that respondent is ordered to pay the balance of
the purchase price of P1,250 plus 6 percent interest per annum, from May 5, 1982 until
the finality of this judgment. Thereafter, interest of 12 percent per year shall then be
imposed on that amount upon the finality of this Decision until the payment thereof. No
costs. chan robles virtual law library

SO ORDERED. chan robles virtual law library

Davide, Jr., C.J., Ynares-Santiago, Carpio and Azcuna, JJ., concur. chan robles
virtual law library

____________________________
Endnotes:

[1] Rollo, pp. 4–21.chan robles virtual law library

[2] Id., pp. 23–34. Third Division. Penned by Justice Marina L. Buzon, with the
concurrence of Justices Buenaventura J. Guerrero (Division chairman) and Alicia L.
Santos (member).
[3] Id., pp. 36–37. chan robles virtual law library
[4] CA Decision, p. 11; rollo, pp. 33. chan robles virtual law library
[5] Id., pp. 1–4 & 23–26. chan robles virtual law library
The case was deemed submitted for decision on April 2, 2003, upon receipt by this Court
of respondents' Memorandum signed by Atty. Francis Saturnino C. Juan. Petitioner's
Memorandum, signed by Atty. Samuel B. Arnado, was received by the Court on March
24, 2003. chan robles virtual law library
[6] Petitioner's Memorandum, p. 9; rollo, p. 152. chan robles virtual law library
[7] Lubos v. Galupo, 373 SCRA 618, January 16, 2002; Manufacturers Building Inc. v.
CA, 354 SCRA 521, March 16, 2001; Xentrex Automotive, Inc. v. CA, 353 Phil. 258, June
18, 1998.
[8] Section 1 of Rule 45 of the Rules of Court. chan robles virtual law library
[9] Complaint, p. 1, pars. 4–6; rollo, p. 38. chan robles virtual law library
[10] TSN, November 12, 1991, pp. 12–21, cited in CA Decision, pp. 8–9; id., pp. 30–31.
chan robles virtual law library
[11] Article 1356 of the Civil Code provides: chan robles virtual law library
"Art. 1356. Contracts shall be obligatory, in whatever form they may have been entered
into, provided all the essential requisites for their validity are present. However, when the
law requires that a contract be in some form in order that it may be valid or enforceable,
or that a contract be proved in a certain way, that requirement is absolute and
indispensable. In such cases, the right of the parties stated in the following article cannot
be exercised. chan robles virtual law library
[12] Article 1405 of the Civil Code. chan robles virtual law library
[13] TSN, November 12, 1991, pp. 17–21. chan robles virtual law library
[14] Mactan-Cebu International Airport Authority v. CA, 331 Phil. 1046, October 30, 1996.
chan robles virtual law library
[15] Central Bank of the Philippines v. Spouses Bichara, 385 Phil. 553, March 27, 2000;
Heirs of Escanlar v. CA, 346 Phil. 159, October 23, 1997; Jacinto v. Kaparaz; 209 SCRA
246, May 22, 1992.
[16] Villaflor v. CA, 345 Phil. 524, October 9, 1997. chan robles virtual law library
[17] Ibid.; citing Jacinto v. Kaparaz, supra. chan robles virtual law library
[18] Ramos v. Heirs of Ramos Sr., 381 SCRA 594, April 25, 2002; Westmont Bank v.
Ong, 375 SCRA 212, January 30, 2002; Heirs of Biona v. CA, 414 Phil. 297, July 31,
2001.
[19] Philgreen Trading Construction Corporation v. CA, 338 Phil. 433, April 18, 1997; Brillo
Handicrafts, Inc. v. CA, 329 Phil. 161, August 7, 1996; Chavez v. Bonto-Perez, 242 SCRA
73, March 1, 1995.
[20] Eduarte v. CA, 311 SCRA 18, July 22, 1999; Ochagabia v. CA, 364 Phil. 233, March
11, 1999; Catholic Bishop of Balanga v. CA, 332 Phil. 206, November 14, 1996. chan
robles virtual law library
[21] R.S. Vasan (ed.), Latin Words & Phrases for Lawyers (1980), p. 248; and Eduarte v.
CA, supra, p. 28. chan robles virtual law library
[22] Jison v. CA, 350 Phil. 138, 183, February 24, 1998. chan robles virtual law
library
[23] TSN, November 12, 1991, p. 14; TSN, February 10, 1992, p. 6. See also petitioner's
Memorandum, p. 10; rollo, p. 153. chan robles virtual law library
[24] TSN, November 12, 1991, p. 8. chan robles virtual law library
[25] Id., pp. 17–22. chan robles virtual law library
[26] TSN, February 10 & 12, 1992, pp. 35–39 & p. 44. chan robles virtual law library
[27] Catholic Bishop of Balanga v. CA, supra. chan robles virtual law library
[28] Associated Bank v. CA, 353 Phil. 702, June 29, 1998; Vda. de Cabreba v. CA, supra;
Catholic Bishop of Balanga v. CA, supra; chan robles virtual law library
[29] 335 Phil. 19, February 3, 1997. chan robles virtual law library
[30] Id., pp. 34–25, per Torres Jr., J. chan robles virtual law library
[31] Petitioner's Memorandum, p. 22; rollo, p. 165. chan robles virtual law library
[32] RTC Decision, p. 6; rollo, p. 72. chan robles virtual law library
[33] Ibid. chan robles virtual law library
[34] Petitioner's Memorandum, p. 22; rollo, p. 165. chan robles virtual law library
[35] Article 1434 of the Civil Code provides as follows: chan robles virtual law library
"Art. 1434. When a person who is not the owner of a thing sells or alienates and delivers
it, and later the seller or grantor acquires title thereto, such title passes by operation of
law to the buyer or grantee." chan robles virtual law library
[36] One Yong v. Tiu, 375 SCRA 614, February 1, 2002; Lim v. Queensland Tokyo
Commodities, Inc., 373 SCRA 31, January 4, 2002; Pilapil v. Garchitorena, 359 Phil. 676,
November 25, 1998.
[37] Article 1117 of the Civil Code. chan robles virtual law library
[38] Articles 1127 and 1128 of the Civil Code. chan robles virtual law library
[39] Article 1129 of the Civil Code. chan robles virtual law library
[40] Article 1123 of the Civil Code provides that possession is interrupted by judicial
summons to the possessor. chan robles virtual law library
[41] TSN, February 10 & 12, 1992, pp. 33–35 & 43; TSN, July 8, 1992, pp. 7 & 16. chan
robles virtual law library
[42] Article 2209 of the Civil Code provides: chan robles virtual law library
"Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor
incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall
be the payment of the interest agreed upon, and in the absence of stipulation, the legal
interest which is sex per cent per annum (Emphasis supplied) chan robles virtual law
library
[43] 234 SCRA 78, July 12, 1994. chan robles virtual law library
[44] 234 SCRA 78, July 12, 1994.

SECOND DIVISION
 PHILIPPINE LONG G.R. No. 182622

DISTANCE TELEPHONE
COMPANY [PLDT],
Present:
Petitioner,

CARPIO, J., Chairperson,

NACHURA,

PERALTA,

ABAD, and
- versus -
MENDOZA, JJ.

ROBERTO R. PINGOL,
Promulgated:
Respondent.
September 8, 2010

X -------------------------------------------------------------------------------------- X

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Revised

Rules of Court filed by petitioner Philippine Long Distance Telephone Company
(PLDT) which seeks to reverse and set aside: (1) the December 21, 2007
Decision151 of the Court of Appeals (CA), in CA-G.R. SP No. 98670, affirming
the November 15, 2006152 and January 31, 2007153 Resolutions of the National
Labor Relations Commission (NLRC); and (2) its April 18, 2008 Resolution154
denying the Motion for Reconsideration of petitioner.

THE FACTS

In 1979, respondent Roberto R. Pingol (Pingol) was hired by petitioner

PLDT as a maintenance technician.

On April 13, 1999, while still under the employ of PLDT, Pingol was
admitted at The Medical City, Mandaluyong City, for paranoid personality
disorder due to financial and marital problems. On May 14, 1999, he was
discharged from the hospital. Thereafter, he reported for work but frequently
absented himself due to his poor mental condition.

From September 16, 1999 to December 31, 1999, Pingol was absent from
work without official leave. According to PLDT, notices were sent to him with
a stern warning that he would be dismissed from employment if he continued to
be absent without official leave pursuant to PLDT Systems Practice A-007 which
provides that Absence without authorized leaves for seven (7) consecutive days
is subject to termination from the service.155 Despite the warning, he failed to
show up for work. On January 1, 2000, PLDT terminated his services on the
grounds of unauthorized absences and abandonment of office.

151
Rollo pp. 134-140. Penned by Associate Justice Japar D. Dimaampao with Associate Justice Mario L. Guaria
III and Associate Justice Sixto C. Marella, Jr., concurring.
152
Id. at 126-129.
153
Id. at 131-132.
154
Id. at 141-142.
155
Id. at 18.
 On March 29, 2004, four years later, Pingol filed a Complaint for
Constructive Dismissal and Monetary Claims156 against PLDT. In his
complaint, he alleged that he was hastily dismissed from his employment on
January 1, 2000. In response, PLDT filed a motion to dismiss claiming, among
others, that respondents cause of action had already prescribed as the complaint
was filed four (4) years and three (3) months after his dismissal.

Pingol, however, countered that in computing the prescriptive period, the

years 2001 to 2003 must not be taken into account. He explained that from 2001
to 2003, he was inquiring from PLDT about the financial benefits due him as an
employee who was no longer allowed to do his work, but he merely got empty
promises. It could not, therefore, result in abandonment of his claim.

On July 30, 2004, the Labor Arbiter (LA) issued an order granting
petitioners Motion to Dismiss on the ground of prescription, pertinent portions
of which read:

As correctly cited by (PLDT), as ruled by the Supreme

Court in the case of Callanta vs. Carnation Phils., 145 SCRA
268, the complaint for illegal dismissal must be filed within
four (4) years from and after the date of dismissal.

Needless to state, the money claims have likewise

prescribed.

Article 291 of the Labor Code provides:

All money claims arising from employer-

employee relations accruing from the effectivity
of this Code shall be filed within three (3) years
from the time the cause of action accrued,
otherwise they shall be forever barred.

WHEREFORE, let this case be, as it is hereby

DISMISSED on the ground of prescription.

156
Id. at 124-125.
 SO ORDERED.157

Pingol appealed to the NLRC arguing that the 4-year prescriptive period
has not yet lapsed because PLDT failed to categorically deny his claims. The
NLRC in its November 15, 2006 Resolution reversed the LAs resolution and
favored Pingol. The dispositive portion thereof reads:

WHEREFORE, the foregoing premises considered, the

instant appeal is GRANTED and the Order appealed from is
REVERSED and SET ASIDE.

Accordingly, let the entire records of the case be

REMANDED to the Labor Arbiter a quo for further
proceedings.

SO ORDERED.158

PLDT moved for reconsideration but the same was denied by the NLRC
in its Resolution dated January 31, 2007.

Unsatisfied, PLDT elevated the case to the CA by way of a petition for

certiorari under Rule 65 alleging grave abuse of discretion on the part of the
NLRC in issuing the assailed resolutions.

The CA denied the petition in its December 21, 2007 Decision, the fallo
of which reads:

WHEREFORE, the Petition for Certiorari is

hereby DISMISSED. The Resolutions dated 15

157
Id. at 136.
158
Id. at 129.
 November 2006 and 31 January 2007 of the
National Labor Relations Commission are
AFFIRMED.

SO ORDERED.159

PLDT moved for reconsideration but the same was denied by the CA in a
Resolution dated April 18, 2008.

THE ISSUES

Not in conformity with the ruling of the CA, PLDT seeks relief with this
Court raising the following issues:

THE HONORABLE COURT OF APPEALS HAS DECIDED

A QUESTION OF SUBSTANCE IN A WAY NOT
PROBABLY IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE HONORABLE
SUPREME COURT.

THE HONORABLE COURT OF APPEALS DEPARTED

FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION.160

The issues boil down to whether or not respondent Pingol filed his
complaint for constructive dismissal and money claims within the prescriptive
period of four (4) years as provided in Article 1146 of the Civil Code161 and
three (3) years as provided in Article 291 of the Labor Code,162 respectively.

Petitioner PLDT argues that the declaration under oath made by

respondent Pingol in his complaint before the LA stating January 1, 2000 as the
date of his dismissal, should have been treated by the NLRC and the CA as a

159
Id. at 139.
160
Id. at 31.
161
Art. 1146. The following actions must be instituted within four years:

(1) upon an injury to the rights of the plaintiff. xxx

162
Article 291. Money claims. All money claims arising from employer-employee relations accruing during the
effectivity of this Code shall be filed within three years from the time the cause of action accrued, otherwise they
shall be forever barred.
judicial admission pursuant to Section 4, Rule 129 of the Revised Rules of
Court.163 According to petitioner, respondent has never contradicted his
admission under oath. On the basis of said declaration, petitioner posits that the
LA was correct in finding that Pingols complaint for illegal dismissal was filed
beyond the prescriptive period of four (4) years from the date of dismissal
pursuant to Article 1146 of the New Civil Code.

In his Comment,164 respondent Pingol counters that petitioner PLDT

could not have sent those notices with warning as that claim has never been
supported by sufficient proof not only before the Labor Arbiter but likewise
before the Court of Appeals.165 He further alleges that his dismissal is likewise
unsupported by any evidence. He insists that both the NLRC and the CA
correctly stated that his cause of action has not yet prescribed as he was not
formally dismissed on January 1, 2000 or his monetary claims categorically
denied by petitioner.

THE COURTS RULING

The Court finds the petition meritorious.

Parties apparently do not dispute the applicable prescriptive period.

Article 1146 of the New Civil Code provides:

Art. 1146. The following actions must be instituted

within four years:

(1) Upon an injury to the rights of the plaintiff;

xxx xxx xxx

163
Sec. 4. Judicial admissions.An admission, verbal or written, made by a party in the course of the proceedings
in the same case, does not require proof. The admission may be contradicted only by showing that it was made
through palpable mistake or that no such admission was made.
164
Rollo pp. 62-76.
165
Id. at 70.
 As this Court stated in Callanta v. Carnation,166 when one is arbitrarily
and unjustly deprived of his job or means of livelihood, the action instituted to
contest the legality of one's dismissal from employment constitutes, in essence,
an action predicated "upon an injury to the rights of the plaintiff," as
contemplated under Art. 1146 of the New Civil Code, which must be brought
within four (4) years.

With regard to the prescriptive period for money claims, Article 291 of
the Labor Code states:

Article 291. Money Claims. All money claims arising

from employer-employee relations accruing during the
effectivity of this Code shall be filed within three (3) years
from the time the cause of action accrued; otherwise they
shall be barred forever.

The pivotal question in resolving the issues is the date when the cause of
action of respondent Pingol accrued.

It is a settled jurisprudence that a cause of action has three (3) elements,

to wit: (1) a right in favor of the plaintiff by whatever means and under whatever
law it arises or is created; (2) an obligation on the part of the named defendant
to respect or not to violate such right; and (3) an act or omission on the part of
such defendant violative of the right of the plaintiff or constituting a breach of
the obligation of the defendant to the plaintiff.167

Respondent asserts that his complaint was filed within the prescriptive
period of four (4) years. He claims that his cause of action did not accrue on
January 1, 2000 because he was not categorically and formally dismissed or his
monetary claims categorically denied by petitioner PLDT on said date. Further,
respondent Pingol posits that the continuous follow-up of his claim with
petitioner PLDT from 2001 to 2003 should be considered in the reckoning of the
prescriptive period.

166
229 Phil. 279, 289 (1986).
167
J Marketing Corporation v. Taran, G.R. No. 163924, June 18, 2009, 589 SCRA 428, 440, citing Auto Bus
Transport Systems, Inc. v. Baustista, 497 Phil. 863 (2005).
 Petitioner PLDT, on the other hand, contends that respondent Pingol was
dismissed from the service on January 1, 2000 and such fact was even alleged in
the complaint he filed before the LA. He never contradicted his previous
admission that he was dismissed on January 1, 2000. Such admitted fact does
not require proof.

The Court agrees with petitioner PLDT. Judicial admissions made by

parties in the pleadings, or in the course of the trial or other proceedings in the
same case are conclusive and so does not require further evidence to prove them.
These admissions cannot be contradicted unless previously shown to have been
made through palpable mistake or that no such admission was made.168 In Pepsi
Cola Bottling Company v. Guanzon,169 it was written:

xxx that the dismissal of the private respondent's

complaint was still proper since it is apparent from its face
that the action has prescribed. Private respondent himself
alleged in the complaint that he was unlawfully dismissed in
1979 while the complaint was filed only on November 14,
1984. xxx (Emphasis supplied. Citations omitted.)

In the case at bench, Pingol himself alleged the date January 1, 2000 as
the date of his dismissal in his complaint170 filed on March 29, 2004, exactly
four (4) years and three (3) months later. Respondent never denied making such
admission or raised palpable mistake as the reason therefor. Thus, the petitioner
correctly relied on such allegation in the complaint to move for the dismissal of
the case on the ground of prescription.
The Labor Code has no specific provision on when a claim for illegal
dismissal or a monetary claim accrues. Thus, the general law on prescription
applies. Article 1150 of the Civil Code states:

Article 1150. The time for prescription for all kinds of

actions, when there is no special provision which ordains

168
Damasco v. NLRC, 400 Phil. 568, 586 (2000), citing Philippine American General Insurance Inc. v. Sweet
Lines, Inc., G.R. No. 87434, August 5, 1992, 212 SCRA 194.
169
254 Phil. 578, 586 (1989).
170
Rollo, p. 124.
 otherwise, shall be counted from the day they may be brought.
(Emphasis supplied)

The day the action may be brought is the day a claim starts as a legal
possibility.171 In the present case, January 1, 2000 was the date that respondent
Pingol was not allowed to perform his usual and regular job as a maintenance
technician. Respondent Pingol cited the same date of dismissal in his complaint
before the LA. As, thus, correctly ruled by the LA, the complaint filed had
already prescribed.

Respondent claims that between 2001 and 2003, he made follow-ups with
PLDT management regarding his benefits. This, to his mind, tolled the running
of the prescriptive period.

The rule in this regard is covered by Article 1155 of the Civil Code. Its
applicability in labor cases was upheld in the case of International Broadcasting
Corporation v. Panganiban172 where it was written:

Like other causes of action, the prescriptive period for

money claims is subject to interruption, and in the absence of
an equivalent Labor Code provision for determining whether
the said period may be interrupted, Article 1155 of the Civil
Code may be applied, to wit:

ART. 1155. The prescription of actions is interrupted

when they are filed before the Court, when there is a written
extrajudicial demand by the creditors, and when there is any
written acknowledgment of the debt by the debtor.

Thus, the prescription of an action is interrupted by (a)

the filing of an action, (b) a written extrajudicial demand by
the creditor, and (c) a written acknowledgment of the debt by
the debtor.

In this case, respondent Pingol never made any written extrajudicial

demand. Neither did petitioner make any written acknowledgment of its alleged

171
Anabe v. Asian Construction, G.R. No. 183233, December 23, 2009, 609 SCRA 213, 221.
172
G.R. No. 151407, February 6, 2007, 514 SCRA 404, 411-412, citing Laureano v. Court of Appeals, 381
Phil. 403, 412, (2000).
obligation. Thus, the claimed follow-ups could not have validly tolled the
running of the prescriptive period. It is worthy to note that respondent never
presented any proof to substantiate his allegation of follow-ups.

Unfortunately, respondent Pingol has no one but himself to blame for his
own predicament. By his own allegations in his complaint, he has barred his
remedy and extinguished his right of action. Although the Constitution is
committed to the policy of social justice and the protection of the working class,
it does not necessary follow that every labor dispute will be automatically
decided in favor of labor. The management also has its own rights. Out of Its
concern for the less privileged in life, this Court, has more often than not
inclined, to uphold the cause of the worker in his conflict with the
employer. Such leaning, however, does not blind the Court to the rule that
justice is in every case for the deserving, to be dispensed in the light of the
established facts and applicable law and doctrine.173

WHEREFORE, the petition is GRANTED. The assailed December 21,

2007 Decision and April 18, 2008 Resolution of the Court of Appeals, in CA-
G.R. SP No. 98670, are REVERSED and SET ASIDE and a new judgment
entered DISMISSING the complaint of Roberto R. Pingol.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

173
Maribago Bluewater Beach Resort, Inc. v. Dual, G.R. No. 180660, July 20, 2010.
 WE CONCUR:

ANTONIO T. CARPIO

Associate Justice

Chairperson

ANTONIO EDUARDO B. NACHURA DIOSDADO M. PERALTA

Associate Justice Associate Justice

ROBERTO A. ABAD

Associate Justice
 ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.

ANTONIO T. CARPIO

Associate Justice

Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairpersons Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

RENATO C. CORONA

Chief Justice
 FIRST DIVISION

G.R. No. 169442, October 14, 2015

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE

PRIVATIZATION AND MANAGEMENT OFFICE (PMO),
Petitioner, v. ANTONIO V. BAÑEZ, LUISITA BAÑEZ
VALERA, NENA BAÑEZ HOJILLA, AND EDGARDO B.
HOJILLA, JR., Respondents.

DECISION

PEREZ, J.:

Assailed and sought to be annulled in this Petition for Review

on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure is the Decision1 of the Court of Appeals dated 23
August 2005 in CA-G.R. CV No. 70137, entitled "Cellophil
Resources Corporation v. Antonio V. Bañez, Luisita Bañez
Valera, Nena Bañez Hojilla and Edgar do B. Hojilla, Jr.," which
affirmed the Order2 of the Regional Trial Court (RTC), Branch
1, Bangued, Abra, dated 16 August 2000, that dismissed the
complaint of petitioner Republic of the Philippines, represented
by Privatization and Management Office (PMO), for specific
performance, recovery of possession, and damages against
respondents Antonio V. Bañez, Luisita Bañez Valera, Nena
Bañez Hojilla and Edgardo B. Hojilla, Jr., docketed as Civil
Case No. 1853.
The facts as culled from the records are as follows:

In 1976, Antonio V. Bañez, Luisita Bañez Valera, and Nena

Bañez Hojilla (collectively, respondents) offered for sale a
parcel of land (subject property), with an area of 20,000 sq m
in Barangay Calaba, Bangued, Abra to Cellophil Resources
Corporation (CRC). Pursuant to the offer to sell on 7 December
1981, respondents executed a Letter Agreement irrevocably
giving CRC the option to purchase the subject property, which
CRC accepted. The pertinent portion of the Letter Agreement
(hereinafter referred to as Contract), to wit:

1. The purchase price shall be Twenty Pesos xxx per square

meter or a total amount of Four Hundred Thousand Pesos
(P400,000.00).

2. The co-owners shall take all necessary steps to cause

the CRC Portion to be brought under the operation of
Republic Act No. 496, as amended, and to cause the
issuance in their name of the corresponding original
certificate of title, all of the foregoing to be
accomplished within a reasonable time from date
hereof. xxx

xxxx

7. The co-owners hereby confirm their agreement and

permission to CRC's entry into, construction of building[s] and
improvements, and occupancy of, any portion of the Property,
and xxx waive any right of action they may have against CRC
respecting such entry, construction, or occupancy by the latter
of any Portion of the Property.

8. An absolute deed of sale containing the above

provisions and standard warranties on conveyances of
real property shall be executed by the co-owners in
favor of CRC or its assignee/s and the same delivered to
the latter together with the original certificate of title upon
payment of the purchase price less the advances made by CRC
in accordance with Paragraphs 2 and 3 above; provided, that
payment shall be made by CRC only upon presentation
by the co-owners to CRC of certificate/s and/or
clearances, with corresponding receipts, issued by the
appropriate government office/s or agency/ies to the
effect that capital gains tax, real estate taxes on the
Property and local transfer tax and other taxes, fees or
charges due on the transaction and/or on the Property
have been paid.

9. This option shall be effective from [the] date of your

acceptance as indicated by your conformity below and for a
period of one (1) month from and after CRC shall have been
notified in writing by the co-owners that an original certificate
of title has been issued in their names and that they are ready
to execute the xxx deed of sale.3

Respondents asked for several cash advances which reached

the total amount of, more or less, Two Hundred Seventeen
Thousand Pesos (P217,000.00), to be deducted from the
purchase price of Four Hundred Thousand Pesos
(P400,000.00). After paying cash advances to respondents,
CRC constructed staff houses and introduced improvements on
the subject property. As respondents would be staying abroad
for a time, they executed a Special Power of Attorney (SPA) in
favor of Edgardo B. Hojilla (Hojilla). The SPA authorized Hojilla
to perform the following:

1. To take all steps necessary to cause a portion of the lot

covered by Tax Declaration No. 40185 in the name of Urbano
Bañez which is the subject of our "Offer to Sell" to Cellophil
Resources Corporation containing an area xxx to be brought
under the operation of Republic Act No. 496, as amended, and
to cause the issuance in our name of the corresponding
original certificate of title.

2. To do all acts and things and to execute all papers and

documents of whatever nature or kind required for the
accomplishments of the aforesaid purpose.

HEREBY GRANTING AND GIVING unto our said attorney full

power and authority whatsoever requisite or necessary or
proper to be done in or about the premises as fully to all
intents and purposes as we might or could lawfully do if
personally present (with power of substitution and revocation),
and hereby ratifying and confirming all that our said attorney
shall do or cause to be done under and by virtue of these
presents.4ChanRoblesVirtualawlibrary

However, CRC stopped its operation. The Development Bank of

the Philippines and National Development Company took over
CRC's operation and turned over CRC's equity to Asset
Privatization Trust (APT), which is a government agency
created by virtue of Proclamation No. 50, as amended. The
APT's function is to take title to and possession of,
provisionally manage and dispose of nonperforming assets of
government financial institutions. Upon the expiration of APT's
term on 31 December 2000, the government issued Executive
Order (E.O.) No. 323, which created the Privatization and
Management Office (PMO). By virtue of E.O. No. 323, the
powers, functions, and duties of APT were transferred to the
PMO. Thus, the original party, CRC, is now represented by the
Republic of the Philippines through the PMO (hereinafter
referred to as petitioner), the successor of the defunct APT.

As alleged by petitioner, respondents declared afterwards the

subject property as Urbano Bañez property, rented out to third
parties the staff houses petitioner constructed, and ordered its
guards to prohibit the petitioner from entering the compound,
which impelled petitioner to file a complaint for specific
performance, recovery of possession, and damages against
respondents, including Hojilla, on 10 April 2000. Among
others, the complaint prayed for respondents to surrender and
deliver the title of the subject property, and execute a deed of
absolute sale in favor of petitioner upon full payment. It
mentioned three letters sent to respondents on 29 May 1991,
24 October 1991, and 6 July 1999.

In the Complaint, it was alleged that:

"[t]here is no justification, legal or otherwise for the

[respondents] to dispossess (sic) the [petitioner] from the
subject property. [Petitioner] is more than willing and able to
pay the [respondents] the balance of the purchase price of the
subject parcel of land but its inability to do so was due to the
[respondents'] failure to produce the original certificate of title
of the subject parcel of land and to execute the pertinent deed
of sale, as well as the unjustified occupation by the
[respondents] of the property and [of] the staff houses built by
[petitioner and that] such actions of the [respondents] are
contrary to their undertaking under condition no. 7 of the
subject letter agreement, that is, for [respondents] to permit
[petitioner's] entry into and occupancy of any portion of the
subject property and their waiver of any right of action they
may have against [petitioner] respecting such entry and
occupancy of any portion of the property. And despite
repeated demands made by [petitioner] upon the
[respondents] for them to vacate and turnover the subject
parcel of land and the staff houses to [petitioner], the last of
which was in a letter dated July 6, 1999, the said
[respondents] have failed and neglected and still fail and
neglect to do so up to the present
time."5ChanRoblesVirtualawlibrary

Ruling of the RTC

On 23 June 2000, Hojilla filed a Motion to Dismiss on the

grounds that he was not a real party-in-interest and that the
action was barred by the Statute of Limitations, which Motion
the RTC granted in an Order dated 16 August 2000 based on
Article 1144(1) of the Civil Code, which bars actions filed
beyond ten (10) years upon the execution of the written
contract. According to the RTC, the letters petitioner sent to
respondents were not demands for respondents to comply with
their obligation to deliver the title as to interrupt the running
of the prescriptive period. The pertinent portion of the RTC
Order reads:

In the instant case, the defendants were given [enough] time

from December 7, 1981 to comply with their obligation, hence,
after a reasonable period of time, the plaintiff should have
demanded compliance of defendants' undertakings or initiated
any other action to protect its interest without waiting for the
statute of limitations to bar their claim.6

The RTC resolved that because the written contract was

executed on 7 December 1981, then the complaint that was
filed more than eighteen (18) years since the contract was
executed was beyond the 10-year prescriptive period. Within
that 18-year period, there was no act on the part of petitioner,
whether judicial or extrajudicial, to interrupt prescription.

While petitioner paid cash advances to respondents for the

processing of the registration of the title, "which totaled to
more or less P217,000.00 as of September 7, 1984 xxx to the
filing of this suit, [petitioner] has not demanded compliance by
[respondents] of their obligation, that is, the execution of the
absolute deed of sale and the delivery of the Original
Certificate of Title to the property to [petitioner] upon payment
of the purchase price stipulated. There were letters addressed
to [respondents] but these were not demands for compliance
of [respondents'] obligation and which is not sufficient under
the law to interrupt the prescriptive period."7
The RTC further stated that:

"[t]he parties could not have contemplated that the delivery of

the property and the payment thereof could be made
indefinitely and render uncertain the status of the land. The
failure of either [of the] parties to demand performance of the
obligation of the other for an unreasonable length of time
renders the contract ineffective."8

The motion for reconsideration was likewise denied in an Order

dated 5 January 2001.

On appeal, petitioner argued that the RTC erred when it

dismissed the complaint. Petitioner averred that: (1) its claim
was not yet barred by prescription; (2) the period of
prescription had been interrupted by extrajudicial demand; (3)
the Statute of Limitation did not run against the State; (4)
petitioner's claim not having prescribed, laches could not have
set in; (5) the laches of one nullified the laches of the other;
and (6) laches cannot be used to defeat justice or to
perpetuate fraud and injustice.chanrobleslaw

Ruling of the Court of Appeals

The Court of Appeals affirmed the ruling of the RTC in a

Decision dated 23 August 2005 on the ground that the
complaint was barred by the Statute of Limitations. Contrary
to petitioner's arguments, the Court of Appeals found that the
extrajudicial demand to respondents did not serve to toll the
running of the prescriptive period. The Court of Appeals ruled
that the record is bereft of evidence that would attest that
written extrajudicial demands were sent to respondents. While
petitioner sent demand letters dated 29 May 1991 and 24
October 1991, these demand letters were not considered as
demand letters because the letters simply called the attention
of Hojilla to return the properties and unlock the gates. As
regards the letter dated 6 July 1999, the Court of Appeals
ruled that because the letter was addressed to Hojilla, who
was only an attorney-in-fact authorized to register the
property, it was not binding upon the respondents. The Court
of Appeals also gave no probative value to the 6 July 1999
letter for having no proof of service.

With regard to the issue of running of prescriptive period

against the State, the Court of Appeals opined that because
the subject property is a patrimonial property of the State
when APT became the controlling stockholder of CRC,
prescription may run against the State. Thus, the reasonable
period within which to register the property is three (3) years.
According to the Court of Appeals, the cause of action of
petitioner accrued three (3) years from the time the Contract
was executed on 7 December 1981 or, to say the least, on 15
August 1984 when Hojilla sent the acknowledgment letter
dated 15 August 1984, at which time it became clear that
respondents could no longer fulfill their obligation.

Hence, petitioner is before us raising the following arguments:

A. The Court of Appeals erred in ruling that the running

of the prescriptive period was not interrupted when
respondents acknowledged their still unfulfilled
obligation to initiate proceedings for the registration
of title of the subject property and at the same time
committed that they will only claim the full payment
of the property upon presentation of a clean title and
execution of a Deed of Sale signed by the heirs as
stated in the letter dated August 15, 1984.

B. The Court of Appeals erred in affirming the outright

dismissal of petitioner's suit for specific
performance, recovery of possession and damages
on the basis of prescription even as it is evident that
there is a need to fix a period considering that the
performance of the condition or obligation is
dependent upon the will of respondents.

C. The Court of Appeals erred in ignoring certain

manifest equitable considerations which militate
against a resort to a purely mathematical
computation of the prescriptive period and in
disregarding the provision of the irrevocable offer
that the option remains effective for a period of one
month from and after notice that a certificate of title
has been issued.9

The main issue is whether or not the complaint for specific

performance was filed beyond the prescriptive
period.chanrobleslaw

Petitioner's Arguments
The petitioner argues that although there is a 10-year
limitation within which to file a case based on a written
contract, the period was interrupted due to a written
acknowledgment of respondents' obligation and demand by
petitioner. The argument is based on Article 1155 of the Civil
Code, which provides that the running of the prescriptive
period is interrupted when there is a written extrajudicial
demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor.

The petitioner referred to the letter sent by Hojilla to the

former dated 15 August 1984, and letters given by petitioner
to Hojilla dated 29 May 1991, 24 October 1991, and 6 July
1999. In the letter dated 15 August 1984, respondents
affirmed their undertaking that they will claim full payment of
the property upon presentation of a clean title and the
execution of the Absolute Deed of Sale, which reads, "[t]he
Bañez heirs will only claim for the full payment of the property
upon presentation of a clean title and execution of a Deed of
Sale signed by the heirs."10

Based on Hojilla's representation as stated in the letter dated

15 August 1984, petitioner argues that Hojilla is estopped by
his own acts and for misleading petitioner because
"respondents not only failed to comply with their commitment
to deliver a certificate of title but where [sic] they also
[misled] petitioner into believing that they were working on
the title of subject property even as they had[,] at the back of
their mind[s], the running of the statute of limitations as an
arsenal once petitioner demands the fulfillment of their
obligation."11

The petitioner further added that because there was no period

fixed for the fulfillment or performance of the obligation to
deliver the title, the least the court should have done was to
fix the period pursuant to Article 1197 of the Civil Code.

Finally, the petitioner posits that pursuant to paragraph 9 of

the Contract, its obligation is conditioned upon respondents'
obligation, which is to deliver the title. Thus, because the
respondents failed to deliver such, the obligation of petitioner
never ripened.chanrobleslaw

Respondents' Arguments
The arguments of respondents, which are aligned with the
reasons of the lower courts, rely on Article 1144 of the Civil
Code, which provides that actions upon a written contract
must be brought within ten (10) years from execution.
Because the complaint was filed beyond the 10-year
prescriptive period, the action was already barred by the
Statute of Limitations. Further, during such period, petitioner
failed to act either judicially or extrajudicially to effectively
interrupt the running of the prescriptive period. Thus, the
complaint must be dismissed for having been extinguished by
the Statute of Limitations.chanrobleslaw

Our Ruling

We rule in favor of the petitioner.

We deem material, for the resolution of the issues in this case,

the letters that were exchanged by the parties.

We shall discuss each letter in seriatim.

Hojilla 's letter dated 15 August 1984

In Hojilla's letter to petitioner dated 15 August 1984, Hojilla

updated petitioner of the status of the subject property's title,
in this wise:

The preparation of the advance survey plan, technical

description and Engineer's Certificate pursuant to Land
Administrative Order No. 10-4 has been submitted to the
Regional Land Office, and approved by the Regional Director.

Atty. Valera is now in the process of preparing the petition

papers of the Calaba property for submission to the local
court.12

There is no other logical conclusion but that the 15 August

1984 letter is an acknowledgment of respondents' commitment
under the Contract. The letter served to update petitioner of
the status of the subject property's title, an obligation agreed
upon by the parties in the Contract. It would be specious to
argue that respondents did not acknowledge the existence of
the Contract and yet, send correspondence to petitioner
updating it of the status of the application for title on the
subject property. Therefore, the letter dated 15 August 1984
served as a written acknowledgment of debt or obligation of
respondents.

In Philippine National Railways v. NLRC,13 it was stated that a

written acknowledgment of debt or obligation effectively
interrupts the running of the prescriptive period and sets the
same running anew.14 Hence, because Hojilla's letter dated 15
August 1984 served as a written acknowledgement of the
respondents' debt or obligation, it interrupted the running of
the prescriptive period and set the same running anew with a
new expiry period of 15 August 1994.

Petitioner's letters dated 29 May

1991 and 24 October 1991

With regard to the letters petitioner sent to Hojilla dated 29

May 1991 and 24 October 1991, the RTC ruled that these
letters were insufficient under the law to interrupt the
prescriptive period because these were not demand letters. We
lift the pertinent portion from the letter dated 29 May 1991,
which demanded respondents to return the properties and to
unlock the gates:

Under the agreement to purchase the lot, APT-CRC shall pay

the whole of the purchase price thereof when the certificate of
title and other documents enumerated therein are presented
to it. Clearly, the consummation of the sale is within your
control, x x x

In view of the foregoing, demand is hereby made upon

you and your principals, the heirs of Urbano Bañez, to
return the properties withdrawn and to unlock the gates
leading to the staffhouses (sic), within fifteen (15) days
from receipt thereof, otherwise we will be constrained
to institute the necessary action to protect the interest
of APT-CRC.15 (Emphasis and underscoring ours)

In the same vein, the letter dated 24 October 1991 demanded

respondents to discontinue the construction, repair,
demolition, and occupancy of several staff houses. A pertinent
portion of the 24 October 1991 letter reads:

Considering that these action (sic) are unauthorized, they

constitute violations of the irrevocable option to purchase
dated December 7, 1981, which remains valid, binding and
effective to this day. Demand is hereby made upon you to
discontinue such unauthorized acts and vacate the
premises within fifteen (15) days from receipt hereof.16
x x x (Emphasis and underscoring ours)

We do not agree with the lower courts. Clearly, the 29 May

1991 and 24 October 1991 letters demanded respondents to
return the properties, discontinue the construction, repair,
demolition and occupancy of several staff houses, and unlock
the gates, which is to enforce respondents' obligations
pursuant to paragraph 7 of the Contract which reads:

7. The co-owners hereby confirm their agreement and

permission to CRC's entry into, construction of building and
improvements, and occupancy of, any portion of the Property,
and hereby accordingly waive any right of action they may
have against CRC respecting such entry, construction, or
occupancy by the latter of any Portion of the Property.17

The letters dated 29 May 1991 and 24 October 1991 are

deemed demand letters as contemplated under Article 1155.
They are demand letters to enforce respondents' obligation
under the Contract, which is to cede possession to petitioner.
The letters interrupted the running of the prescriptive period
which commenced to run anew.

Petitioner's letter dated 6 July 1999

Compared to the letters dated 29 May and 24 October 1991,

which demanded Hojilla to surrender possession of the subject
property, this time, in petitioner's letter to Hojilla dated 6 July
1999, petitioner demanded Hojilla to produce the title of the
subject property. However, despite the fact that the letter was
a clear demand of the nature contemplated by law that would
interrupt the prescriptive period, the Court of Appeals found
that (1) the letter did not effectively interrupt the prescriptive
period because the complaint had long prescribed; (2) the
letter was addressed to the wrong party; and, finally, (3) the
letter did not bear any proof of service or receipt.

We do not agree.

Hojilla's SPA

We refer to the SPA, which granted the authority of Hojilla.

When respondents went abroad pending the performance of

their obligations in the Contract, they authorized Hojilla to
register the subject property— a single obligation in the whole
range of obligations in the Contract. The SPA appeared to have
left no representative to fulfill respondents' obligations in the
Contract on their behalf except for Hojilla's authority to
register the subject property. The pertinent portion of the SPA
reads:

1. To take all steps necessary to cause a portion of the

lot covered by Tax Declaration No. 40185 in the name of
Urbano Baflez which is the subject of our "Offer to Sell"
to Cellophil Resources Corporation containing an area
xxx to be brought under the operation of Republic Act
No. 496, as amended, and to cause the issuance in our
name of the corresponding original certificate of title.

2. To do all acts and things and to execute all papers and

documents of whatever nature or kind required for the
accomplishments of the aforesaid purpose.

HEREBY GRANTING AND GIVING unto our said attorney full

power and authority whatsoever requisite or necessary or
proper to be done in or about the premises as fully to all
intents and purposes as we might or could lawfully do if
personally present (with power of substitution and revocation),
and hereby ratifying and confirming all that our said attorney
shall do or cause to be done under and by virtue of these
presents.18 (Emphasis and underscoring ours)

This was read simply by the lower courts as limiting Hojilla's

authority to the registration of the subject property under the
name of his principal, and all the necessary acts for such
purpose. It observed that nowhere in the SPA was Hojilla
authorized as administrator or agent of respondents with
respect to the execution of the Contract.

In the case at bar, the reliefs prayed for by petitioner include

the execution of the Contract such as delivery of the subject
title, recovery of possession of the subject property, execution
of the deed of sale or transfer of absolute ownership upon full
payment of the balance, and damages for alleged violation of
respondents of the Contract for non-delivery of the title and
refusal to vacate the subject property. Indeed, following the
reading of the lower courts of the scope of Hojilla's authority,
Hojilla is neither the proper party to execute the Contract nor
the proper party to receive the demand letters on behalf of
respondents.

This strict construction of the tenor of the SPA will render the
obligatory force of the Contract ineffective. Construction is not
a tool to prejudice or commit fraud or to obstruct, but to attain
justice. Ea Est Accipienda Interpretatio Quae Vitio Caret. To
favor the lower court's interpretation of the scope of Hojilla's
power is to defeat the juridical tie of the Contract—the
vinculum juris of the parties. As no one was authorized to
represent respondents in the Contract, then petitioner cannot
enforce the Contract, as it were. This is an absurd
interpretation of the SPA. It renders the Contract ineffective
for lack of a party to execute the Contract.

Contrary to the findings of the lower court, the present case is

a case of an express agency, where, Hojilla, the agent, binds
himself to represent another, the principal, who are herein
respondents, with the latter's express consent or authority.19
In a contract of agency, the agent acts for and in behalf of the
principal on matters within the scope of the authority conferred
upon him, such that, the acts of the agent have the same legal
effect as if they were personally done by the principal.20
Because there is an express authority granted upon Hojilla to
represent the respondents as evidenced by the SPA, Hojilla's
actions bind the respondents.

As agent, the representations and guarantees of Hojilla are

considered representations and guarantees of the principal.
This is the principle of agency by promissory estoppel. We
refer to the evidence on record. It was Hojilla who
administered and/or managed the subject property.21 Based on
Hojilla's letter dated 15 August 1984 to petitioner, Hojilla
made the representation that besides being the attorney-in-
fact of the respondents with limited authority to register the
property, he was also their agent with regard to respondents'
other obligations related to the Contract. The pertinent portion
of the 15 August 1984 letter of Hojilla to petitioner reads:

Regarding our loan with the National Electrification

Administration (NEA), Hon. Mel Mathay who is helping the
Bafiez heirs has initiated negotiations with NEA for Abreco to
purchase our lot in front of the Provincial Jail to offset our loan
with NEA.22

Also, one glaring fact that cannot escape us is Hojilla's

representation and guarantee that petitioner's obligation will
only arise upon presentation of a clean title and execution of a
Deed of Sale signed by the respondents' heirs, which reads,
"[t]he Bañez heirs will only claim for the full payment of
the property upon presentation of a clean title and
execution of a Deed of Sale signed by the heirs."23

If Hojilla knew that he had no authority to execute the

Contract and receive the letters on behalf of respondents, he
should have opposed petitioner's demand letters. However,
having received the several demand letters from petitioner,
Hojilla continuously represented himself as the duly authorized
agent of respondents, authorized not only to administer and/or
manage the subject property, but also authorized to register
the subject property and represent the respondents with
regard to the latter's obligations in the Contract. Hojilla also
assured petitioner that petitioner's obligation to pay will arise
only upon presentation of the title.

Clearly, the respondents are estopped by the acts and

representations of their agent. Falling squarely in the case at
bar is our pronouncement in Philippine National Bank v. IAC
(First Civil Cases Div.),24 "[h]aving given that assurance,
[Hojilla] may not turn around and do the exact opposite of
what [he] said [he] would do. One may not take inconsistent
positions. A party may not go back on his own acts and
representations to the prejudice of the other party who relied
upon them."25cralawred

Assuming further that Hojilla exceeded his authority, the

respondents are still solidarity liable because they allowed
Hojilla to act as though he had full powers by impliedly
ratifying Hojilia's actions—through action by omission.26 This is
the import of the principle of agency by estoppel or the
doctrine of apparent authority.

In an agency by estoppel or apparent authority, "[t]he

principal is bound by the acts of his agent with the apparent
authority which he knowingly permits the agent to assume, or
which he holds the agent out to the public as possessing."27

The respondents' acquiescence of Hojilla's acts was made

when they failed to repudiate the latter's acts. They knowingly
permitted Hojilla to represent them and petitioners were
clearly misled into believing Hojilla's authority. Thus, the
respondents are now estopped from repudiating Hojilla's
authority, and Hojilla's actions are binding upon the
respondents.

Receipt of the Letters

Time and time again, this Court has reiterated it is not a trier
of facts and parties may raise only questions of law. The
jurisdiction of the Court is limited to reviewing errors of law
and findings of fact of the Court of Appeals are conclusive
because it is not the Court's function to review, examine, and
evaluate or weigh the evidence all over again.28 The rule,
however, is not without exceptions, viz.:

(1) [W]hen the [conclusion is a finding] grounded entirely on

speculations, surmises [and] conjectures;cralawlawlibrary

(2) [W]hen the inference made is manifestly mistaken, absurd

or impossible;cralawlawlibrary

(3) [W]hen there is grave abuse of discretion;cralawlawlibrary

(4) [W]hen the judgment is based on a misapprehension

of facts;cralawlawlibrary

(5) [W]hen the findings of fact are conflicting;

(6) [W]hen xxx the Court of Appeals[, in making its findings,]

went beyond the issues of the case [and the same is] contrary
to the admissions of both the appellant and the
appellee;cralawlawlibrary

(7) [W]hen the findings are contrary to [those] of the

trial court;

(8) [W]hen the findings [of fact] are conclusions without

citation of specific evidence on which they are
based;cralawlawlibrary

(9) [W]hen the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the
respondents;cralawlawlibrary

(10) [w]hen the findings of fact [of the Court of

Appeals] are premised on the supposed absence of
evidence and contradicted by the evidence on record
and
(11) [When] the Court of Appeals manifestly overlooked
certain irrelevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion.29

In the case at bar, the findings of the RTC and the Court of
Appeals are contradictory: the RTC did not make any finding
on the receipt of the demand letters by Hojilla, while the Court
of Appeals resolved that assuming arguendo that the letters
were demand letters contemplated under Article 1155 of the
Civil Code, the same are unavailing because the letters do not
bear any proof of service of receipt by respondents.

A perusal of the records reveals that only the 24 October 1991

letter has no proof of receipt.30 The demand letters dated 29
May 199131 and 6 July 199932 contain proofs of receipt.

Thus, the core issue of whether or not the action has

prescribed.

An action based on a written contract must be brought within

ten (10) years from the time the right of action accrued.
Accordingly, a cause of action on a written contract accrues
only when an actual breach or violation thereof occurs.33 A
cause of action has three elements, to wit: (1) a right in favor
of the plaintiff by whatever means and under whatever law it
arises or is created; (2) an obligation on the part of the named
defendant to respect or not to violate such right; and (3) an
act or omission on the part of such defendant violative of the
right of the plaintiff or constituting a breach of the obligation of
the defendant to the plaintiff.34

By the contract between the herein parties, the cause of action

accrued at the point when the reasonable time within which to
present the title lapsed. The parties did not determine the date
when the respondents must present the title and other
documents to the petitioner. The parties only agreed that the
respondents must present the same within a "reasonable
time." Reasonable time means "so much time as is necessary
under the circumstances for a reasonably prudent and diligent
man to do, conveniently, what the contract or duty requires
that should be done, having a regard for the rights and
possibility of loss, if any, to the other party."35 Such
reasonable time was determined by the respondents through
the letter dated 15 August 1984. The respondents
acknowledged their obligation to deliver the title and asked for
a new period to do so. It states:
The preparation of the advance survey plan, technical
description and Engineer's Certificate pursuant to Land
Administrative Order No. 10-4 has been submitted to the
Regional Land Office, and approved by the Regional Director.

Arty. Valera is now in the process of preparing the petition

papers of the Calaba property for submission to the local court.

xxxx

The Bañez heirs will only claim for the full payment of the
property upon presentation of a clean title and execution of a
Deed of Sale signed by the heirs.36

The accrual of the cause of action to demand the titling of the

land cannot be earlier than 15 August 1984. So that, the
petitioner can sue on the contract until 15 August 1994. Prior
to the expiration of the aforesaid period, the petitioner sent a
demand letter to Hojilla dated 29 May 1991. A few months
thereafter, petitioner sent another demand letter to Hojilla
dated 24 October 1991.37 The prescriptive period was
interrupted on 29 May 1991.

The consequence is stated in Article 1155 of the Civil Code. It

states, "[t]he prescription of actions is interrupted when they
are filed before the court, when there is a written extrajudicial
demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor."

Following the law, the new ten-year period for the filing of a
case by the petitioner should be counted from 29 May 1991,
ending on 29 May 2001. The complaint at bar was filed on 10
April 2000, well within the required period.

Notably, before the expiration of the new prescriptive period,

the petitioner again sent a new demand letter on 6 July 1999,
which again caused the same to run anew, which will expire on
6 July 2009. The complaint filed on 10 April 2000 was timely.

The Contract and True Intent of the Parties

Based on the stipulation in the Contract, the parties agreed

that payment shall be made only upon presentation of the title
and other documents of the subject property to petitioner.
Paragraph 8 of the Contract reads:
8. An absolute deed of sale containing the above provisions
and standard warranties on conveyances of real property shall
be executed by the co-owners in favor of CRC or its assignee/s
and the same delivered to the latter together with the original
certificate of title upon payment of the purchase price less the
advances made by CRC in accordance with Paragraphs 2 and 3
above; provided, that payment shall be made by CRC
only upon presentation by the co-owners to CRC of
certificate/s and/or clearances, with corresponding
receipts, issued by the appropriate government office/s
or agency/ies to the effect that capital gains tax, real
estate taxes on the Property and local transfer tax and
other taxes, fees or charges due on the transaction
and/or on the Property have been paid.38 (Emphasis and
underscoring ours)

The true intent of the parties is further enunciated in Hojilla's

letter to petitioner dated 15 August 1984, which stated, "[t]he
Bañez heirs will only claim for the full payment of the
property upon presentation of a clean title and
execution of a Deed of Sale signed by the heirs."39

To rule in favor of respondents despite their failure to perform

their obligations is the height of injustice. Respondents cannot
benefit from their own inaction and failure to comply with their
obligations in the Contract and let the petitioner suffer from
respondents' own default.

WHEREFORE, the petition is GRANTED. The Decision of the

Court of Appeals dated 23 August 2005 in CA-G.R. CV No.
70137, affirming the Order of the Regional Trial Court, which
ruled that the action has prescribed, is reversed and set aside.
Let the records of this case be REMANDED to the court of
origin, which is DIRECTED to admit the Answer with
Counterclaim of the petitioner for further trial on the merits.
The respondents are further ordered to return possession of
the subject property to petitioner. No pronouncement as to
costs.

SO ORDERED.chanroblesvirtuallawlibrary

Sereno, C.J., (Chairperson), Velasco, Jr.,* Leonardo-De Castro,

and Perlas-Bernabe, JJ., concur.

Endnotes:
 Designated as Additional Member in lieu of Associate
*

Justice Lucas P. Bcrsnmin per Raffle dated 10 August 2015.

1
Penned by Presiding Justice Romeo A. Brawner, with
Associate Justices Mario L. Guarina III and Jose C. Mendoza
(now a member of this Court) concurring; rollo, pp. 7-17.

2
Penned by Judge Charito B. Gonzales; records, pp. 370-373.

3
Id. at 11-13. (Emphases and underscoring ours.)

4
Id. at 14.

5
Rollo, pp. 77-78.

6
Id. at 101.

7
Id.

8
Id.

9
Petition for Review; id. at 39-40.

10
Id. at 43.

11
Id. at 46.

12
Records, p. 383.

13
258 Phil. 552(1989).

14
Id. at 553.

15
Records, p. 105.

16
Id. at 385.

17
Id. at 12.

18
Id. at 14.

19
Country Bankers Insurance Corporation v. Keppel Cebu
Shipyard, G.R. No. 166044, 18 June 2012, 673 SCRA 427,
444-445.

20
Id. at 445.

21
Rollo, p. 96.

22
Records, p. 383.

23
Petition for Review; rollo, p. 43.

24
267 Phil. 720 (1990).

25
Id. at 728. (Citations omitted.)

Filipinos Life Assurance Company v. Pedroso, 567 Phil. 514,

26

519 (2008).

27
Professional Services, Inc., v Agana, 542 Phil. 464, 490
(2007), citing Irving v. Doctors Hospital of Lake Worth, Inc.,
415 So. 2d 55 (1982).

Adriano v. Lasala, G.R. No. 197842, 9 October 2013, 707

28

SCRA 346, 355.

29
Id.

30
Records, p. 106.

31
Id. at 105.

32
Id. at 16.

China Banking Corporation v. Court of Appeals, 499 Phil.

33

770, 775 (2005).

34
Id.

35
Pascual v. Pascual, 622 Phil. 307, 320 (2009).

36
Records, p. 383.

37
The 24 October 1991 letter was not duly received by the
sellers. Such fact is irrelevant because the expiration of the
prescriptive period may be reckoned on 29 May 1991, giving a
new prescriptive period until 29 May 2001.

38
Records, p. 12.

39
Petition for Review; rollo, p. 43.