CASES Oblicon Article 1163-1165 Espejo Fulltext

8/10/2019 CASES Oblicon Article 1163-1165 Espejo Fulltext

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Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. L-69901 July 31, 1987

ANTONIO RAMON ONGSIAKO, petitioner,vs.

INTERMEDIATE APPELLATE COURT and THE PEOPLE OF THE PHILIPPINES, respondents.

CRUZ, J.:

Prosecuted for reckless imprudence resulting in multiple physical injuries and damage to property, the petitioner was convicted by thetrial court* of only simple negligence resulting in serious physical injuries and damage to property. He was sentenced to two months ofarresto mayor and to pay a total indemnity of P143,131.04 for medical expenses, unearned salaries and as moral damages.1 Onappeal, the conviction was affirmed but the respondent court** reduced the moral damages by P84,000.00, thus lowering the totalindemnity to P61,131,04.2 Still not satisfied, the petitioner has come to this Court for a complete reversal of the judgment below.

This case arose from a collision between the car being driven by the petitioner and the jeep of Robert Ha on December 30, 1981, atabout 4 o'clock in the afternoon. at MacArthur Highway, in Moncada, Tarlac. The petitioner had a companion, Leon Miguel Heras, whowas seated beside him. Robert Ha was at the wheel of his vehicle, which had seven other passengers. It appears that the petitionerwas south-bound, toward Manila, and the jeep was coming from the opposite direction; that a Philippine Rabbit bus ahead of the jeepswerved into the petitioner's lane to overtake and bypass a tricycle; and that as a result of this sudden move, the petitioner, to avoid ahead-on collision, immediately veered his car to the shoulder of the highway. The car went out of control when it hit the soft shoulder,moved back diagonally across the cemented highway, then collided with Ha's jeep, damaging it and causing multiple injuries to itspassengers. The Philippine Rabbit bus sped away.3

After considering the arguments of the parties in the petition itself, the comment thereon of the public respondent and the reply thereto,we gave due course to this petition and required the parties to file simultaneous memoranda. The petitioner complied in due time butthe Solicitor General, to avoid repetitiousness, as he put it, merely adopted his sketchy comment as the memorandum for therespondent.4

While this Court is ordinarily not a trier of facts, it has the authority to review and reverse the factual findings of the lower courts if it findsthat they do not conform to the evidence of record. We so find in this case, for reasons to be discussed presently.

The trial court held, and the respondent court affirmed, that "the jeep was still about 150 meters away from the Philippine Rabbit buswhen the accused drove his car toward the road shulder to avoid the collision with the oncoming bus. In other words, there was

sufficient time for Antonio Ramon Ongsiako to avail of a feasible time to avert hitting the jeep."5 The judge should have been morecareful in reaching this conclusion for it is not founded on the facts as established. The evidence of record is that the distance was not150 meters but 150 feet, which makes quite a difference, indeed. The correct distance, incidentally, was established by no less than thetrial court itself which, in its examination of Robert Ha, the principal prosecution witness, elicited from him the said information in thefollowing exchange:

COURT:

Q: How far was the Philippine Rabbit bus ahead of you before the car swerved to your lane?

WITNESS

A: Approximately about 150 feet ahead of me, Your Honor. 6

The Court considers this discrepancy important because the finding of negligence by the trial court is based on whether or not the

accused had enough opportunity to avoid the collision. And that opportunity depended on the distance between the two vehicles. If thetrial judge had carefully considered the evidence and discovered that the distance was 150 feet and not meters, it is doubtful that hewould have concluded as he did that the accused was negligent. The distance of 150 feet is less than one-third of 150 meters, whichmeans that the sufficient time imagined by the trial judge would have been correspondingly and significantly reduced by two-thirdsof the actual period. The time as shortened could not have, if we apply the trial judge's own calculations, prevented the petitioner fromavoiding the collision.

Another indication of carelessness, this time on the part of the respondent court, is its observation, in rejecting the petit ioner's version ofthe collision, that "the police sketch of the collision scene fails to reveal any skidmarks of the appellant's car"7 on the highway. What israther odd about this finding is that the trial court, and the respondent court later, never considered the fact that the sketch was madefive days after the collision, as clearly emphasized by the petitioner in his brief. Apparently, it did not occur to the courts below andthis is also somewhat puzzling that all skidmarks would have disappeared by that time on the busy highway.

There was also apparent disregard of the record when the respondent court observed that the petitioner had not presented hiscompanion to testify on his behalf, concluding that "such failure to present Heras raises the presumption that his testimony, had it been

presented, would have been adverse to the appellant's cause (Orfanel v. People, 30 SCRA 825)."8 This is another careless conclusion.The premise is incorrect, and so the conclusion must also be rejected. In fact, the petitioner did present Heras, and Heras did testify insupport of the petitioner, substantially corroborating the petitioner's account of the collision. A reading of the transcript of thestenographic notes in the hearing of the case on July 27, 1983, will readily disclose this.9

The Court is also perplexed by the following portion of the appealed decision:

If it was true that appellant lost control of his vehicle as early as when his car hit the shoulder of the road, it was extremely stupid of himto move his car back to the highway while his car was still out of control. This is especially true in the face of his own admission that hesaw the Rabbit bus for the first time when it was stin about 200 meters away overtaking a vehicle (jeep of Robert Ha) which wasimmediately behind a tricycle (p. 2, Ibid.). Assuming that appellant indeed lost control of his car as he hit the shoulder, he should haveapplied full not a little pressure upon his brakes. He should have stopped his vehicle instead of driving it back to the highway and riskingcollision with oncoming vehicles. 10


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As the car was "sti ll out of control," why is it assumed that the petitioner would nonetheless be able, although this would be "extremelystupid," to move it back to the highway? It is really mystifying that the respondent court would still expect the petitioner to control the carwhich, as it says so itself, was then "out of control." "Assuming the appellant indeed lost control of his car as he hit the shoulder," thedecision adds, "he should have stopped his vehicle instead of driving it back to the highway and risking collision with oncomingvehicles." This is hardly logical. The court cannot assume that the petitioner lost control of his vehicle and on that assumption fault himfor not correctly controlling it. That would be impossible, to say the least. When one loses control of his car, he cannot direct it the wayhe wants, or move it in the direction he chooses, or accelerate or stop it, for the simple reason that it is precisely out of control. A carout of control is simply out of control, period. As for the "little pressure" the petitioner says he applied on the brakes, the purpose,according to him, was to prevent his car from turning turtle as a result of a sudden stop that would have been caused by his jamming onthe brakes.

The real culprit in this unfortunate incident, as the Court sees it, could be the driver of the Philippine Rabbit bus whose recklessnesswas the cause of the collision between the petitioner's car and Robert Ha's jeep. We notice that the trial court made the meaningfulobservation that "the Philippine Rabbit bus may be faulted," but added rather helplessly, that "it is not here charged."11 We hope it didnot mean by this that someone else had to be made liable, to vindicate the victims' rights.

It seems to us that a simple investigation would have uncovered the Identity and whereabouts of the Rabbit bus driver, with a view tohis prosecution for his involvement in the collision. Why this was not done reflects on the sense of duty of the law-enforcement officerswho investigated this matter and on the resourcefulness of the petitioner and his counsel whose cause could have improved with theindictment of the said driver.

At any rate, it is the finding of the Court, in view of the misappreciation of the evidence of record by the respondent court and the trialcourt, that the guilt of the petitioner has not been proved beyond reasonable doubt. Consequently, he should not have been held guiltyof even simple negligence and instead is entitled to be completely absolved of criminal responsibility.

The civil liability is, however, a different question.

While the quantum of proof necessary for conviction has not been established, there is, in our view, a preponderance of evidence tohold the petitioner liable in damages for the injuries sustained by the victims of this accident. Although it is really doubtful that he wascriminally negligent, we find there is enough evidence to sustain the conclusion that a little more caution and discretion on his part inreacting to the threat of a head-on collision with the oncoming bus, could have avoided the unfortunate accident. For this shortcoming,we hold him liable for the hospitalization expenses and unearned salaries of the victims as itemized by the trial court and affirmed bythe respondent court. We absolve him, however, from the payment of moral damages and so reduce his total civil liability toP46,131.04.

We apply here the doctrine announced in the recent case of People v. Ligon,12 where the accused was acquitted of the crime ofhomicide for lack of clear and convincing proof that he had criminally caused a cigarette vendor to fall to his death from the jeep wherehe was hanging onto. Nevertheless, from the totality of the facts presented, we declared there was a preponderance of evidence to holdthe accused liable in damages for the tragic mishap that befell the victim. We make a similar finding in this case and hold the petitioner

civilly answerable for his quasi-delict.

WHEREFORE, the petitioner is ACQUITTED and his conviction is REVERSED, but he is held liable in the total sum of P46,131.04 fordamages as above specified. No costs.

SO ORDERED.


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EN BANC

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

THE ROMAN CATHOLIC BISHOP OF JARO, plaintiff-appellee,vs.GREGORIO DE LA PEA, administrator of the estate of Father Agustin de la Pea, defendant-appellant.

J. Lopez Vito, for appellant.Arroyo and Horrilleno, for appellee.

MORELAND, J.:

This is an appeal by the defendant from a judgment of the Court of First Instance of Iloilo, awarding to the plaintiff the sum of P6,641,with interest at the legal rate from the beginning of the action.

It is established in this case that the plaintiff is the trustee of a charitable bequest made for the construction of a leper hospital and thatfather Agustin de la Pea was the duly authorized representative of the plaintiff to receive the legacy. The defendant is theadministrator of the estate of Father De la Pea.

In the year 1898 the books Father De la Pea, as trustee, showed that he had on hand as such trustee the sum of P6,641, collected byhim for the charitable purposes aforesaid. In the same year he deposited in his personal account P19,000 in the Hongkong andShanghai Bank at Iloilo. Shortly thereafter and during the war of the revolution, Father De la Pea was arrested by the militaryauthorities as a political prisoner, and while thus detained made an order on said bank in favor of the United States Army officer underwhose charge he then was for the sum thus deposited in said bank. The arrest of Father De la Pea and the confiscation of the funds inthe bank were the result of the claim of the military authorities that he was an insurgent and that the funds thus deposited had beencollected by him for revolutionary purposes. The money was taken from the bank by the military authorities by virtue of such order, wasconfiscated and turned over to the Government.

While there is considerable dispute in the case over the question whether the P6,641 of trust funds was included in the P19,000deposited as aforesaid, nevertheless, a careful examination of the case leads us to the conclusion that said trust funds were a part ofthe funds deposited and which were removed and confiscated by the military authorities of the United States.

That branch of the law known in England and America as the law of trusts had no exact counterpart in the Roman law and has none

under the Spanish law. In this jurisdiction, therefore, Father De la Pea's liability is determined by those portions of the Civil Code whichrelate to obligations. (Book 4, Title 1.)

Although the Civil Code states that "a person obliged to give something is also bound to preserve it with the diligence pertaining to agood father of a family" (art. 1094), it also provides, following the principle of the Roman law, major casus est, cui humana infirmitasresistere non potest, that "no one shall be liable for events which could not be foreseen, or which having been foreseen were inevitable,with the exception of the cases expressly mentioned in the law or those in which the obligation so declares." (Art. 1105.)

By placing the money in the bank and mixing it with his personal funds De la Pea did not thereby assume an obligation different fromthat under which he would have lain if such deposit had not been made, nor did he thereby make himself liable to repay the money atall hazards. If the had been forcibly taken from his pocket or from his house by the military forces of one of the combatants during astate of war, it is clear that under the provisions of the Civil Code he would have been exempt from responsibility. The fact that heplaced the trust fund in the bank in his personal account does not add to his responsibility. Such deposit did not make him a debtor whomust respond at all hazards.

We do not enter into a discussion for the purpose of determining whether he acted more or less negligently by depositing the money inthe bank than he would if he had left it in his home; or whether he was more or less negligent by depositing the money in his personalaccount than he would have been if he had deposited it in a separate account as trustee. We regard such discussion as substantiallyfruitless, inasmuch as the precise question is not one of negligence. There was no law prohibiting him from depositing it as he did andthere was no law which changed his responsibility be reason of the deposit. While it may be true that one who is under obligation to door give a thing is in duty bound, when he sees events approaching the results of which will be dangerous to his trust, to take allreasonable means and measures to escape or, if unavoidable, to temper the effects of those events, we do not feel constrained to holdthat, in choosing between two means equally legal, he is culpably negligent in selecting one whereas he would not have been if he hadselected the other.

The court, therefore, finds and declares that the money which is the subject matter of this action was deposited by Father De la Pea inthe Hongkong and Shanghai Banking Corporation of Iloilo; that said money was forcibly taken from the bank by the armed forces of theUnited States during the war of the insurrection; and that said Father De la Pea was not responsible for its loss.

The judgment is therefore reversed, and it is decreed that the plaintiff shall take nothing by his complaint.

Arellano, C.J., Torres and Carson, JJ., concur.


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SECOND DIVISION

G.R. No. 91029 February 7, 1991

NORKIS DISTRIBUTORS, INC., petitioner,vs.THE COURT OF APPEALS & ALBERTO NEPALES, respondents.

Jose D. Palma for petitioner.

Public Attorney's Office for private respondent.

GRIO-AQUINO, J.:p

Subject of this petition for review is the decision of the Court of Appeals (Seventeenth Division) in CA-G.R. No. 09149, affirming withmodification the judgment of the Regional Trial Court, Sixth (6th) Judicial Region, Branch LVI. Himamaylan, Negros Occidental, in CivilCase No. 1272, which was private respondent Alberto Nepales' action for specific performance of a contract of sale with damagesagainst petitioner Norkis Distributors, Inc.

The facts borne out by the record are as follows:

Petitioner Norkis Distributors, Inc. (Norkis for brevity), is the distributor of Yamaha motorcycles in Negros Occidental with office inBacolod City with Avelino Labajo as its Branch Manager. On September 20, 1979, private respondent Alberto Nepales bought from theNorkis-Bacolod branch a brand new Yamaha Wonderbike motorcycle Model YL2DX with Engine No.L2-329401K Frame No. NL2-0329401, Color Maroon, then displayed in the Norkis showroom. The price of P7,500.00 was payable bymeans of a Letter of Guaranty from the Development Bank of the Philippines (DBP), Kabankalan Branch, which Norkis' BranchManager Labajo agreed to accept. Hence, credit was extended to Nepales for the price of the motorcycle payable by DBP upon releaseof his motorcycle loan. As security for the loan, Nepales would execute a chattel mortgage on the motorcycle in favor of DBP. BranchManager Labajo issued Norkis Sales Invoice No. 0120 (Exh.1) showing that the contract of sale of the motorcycle had been perfected.Nepales signed the sales invoice to signify his conformity with the terms of the sale. In the meantime, however, the motorcycleremained in Norkis' possession.

On November 6, 1979, the motorcycle was registered in the Land Transportation Commission in the name of Alberto Nepales. Aregistration certificate (Exh. 2) in his name was issued by the Land Transportation Commission on November 6, 1979 (Exh. 2-b). Theregistration fees were paid by him, evidenced by an official receipt, Exhibit 3.

On January 22, 1980, the motorcycle was delivered to a certain Julian Nepales who was allegedly the agent of Alberto Nepales but thelatter denies it (p. 15, t.s.n., August 2, 1984). The record shows that Alberto and Julian Nepales presented the unit to DBP's Appraiser-Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch (p. 12, Rollo). The motorcycle met anaccident on February 3, 1980 at Binalbagan, Negros Occidental. An investigation conducted by the DBP revealed that the unit wasbeing driven by a certain Zacarias Payba at the time of the accident (p. 33, Rollo). The unit was a total wreck (p. 36, t.s.n., August2,1984; p. 13, Rollo), was returned, and stored inside Norkis' warehouse.

On March 20, 1980, DBP released the proceeds of private respondent's motorcycle loan to Norkis in the total sum of P7,500. As theprice of the motorcycle later increased to P7,828 in March, 1980, Nepales paid the difference of P328 (p. 13, Rollo) and demanded thedelivery of the motorcycle. When Norkis could not deliver, he filed an action for specific performance with damages against Norkis inthe Regional Trial Court of Himamaylan, Negros Occidental, Sixth (6th) Judicial Region, Branch LVI, where it was docketed as CivilCase No. 1272. He alleged that Norkis failed to deliver the motorcycle which he purchased, thereby causing him damages.

Norkis answered that the motorcycle had already been delivered to private respondent before the accident, hence, the risk of loss or

damage had to be borne by him as owner of the unit.

After trial on the merits, the lower court rendered a decision dated August 27, 1985 ruling in favor of private respondent (p. 28, Rollo.)thus:

WHEREFORE, judgment is rendered in favor of the plaintiff and against the defendants. The defendants are ordered to pay solidarity tothe plaintiff the present value of the motorcycle which was totally destroyed, plus interest equivalent to what the Kabankalan Sub-Branch of the Development Bank of the Philippines will have to charge the plaintiff on fits account, plus P50.00 per day from February3, 1980 until full payment of the said present value of the motorcycle, plus P1,000.00 as exemplary damages, and costs of the litigation.In lieu of paying the present value of the motorcycle, the defendants can deliver to the plaintiff a brand-new motorcycle of the samebrand, kind, and quality as the one which was totally destroyed in their possession last February 3, 1980. (pp. 28-29, Rollo.)

On appeal, the Court of appeals affirmed the appealed judgment on August 21, 1989, but deleted the award of damages "in the amountof Fifty (P50.00) Pesos a day from February 3, 1980 until payment of the present value of the damaged vehicle" (p35, Rollo). The Courtof Appeals denied Norkis' motion for reconsideration. Hence, this Petition for Review.

The principal issue in this case is who should bear the loss of the motorcycle. The answer to this question would depend on whetherthere had already been a transfer of ownership of the motorcycle to private respondent at the time it was destroyed.

Norkis' theory is that:

. . . After the contract of sale has been perfected (Art. 1475) and even before delivery, that is, even before the ownership is transferredto the vendee, the risk of loss is shifted from the vendor to the vendee. Under Art. 1262, the obligation of the vendor to deliver adeterminate thing becomes extinguished if the thing is lost by fortuitous event (Art. 1174), that is, without the fault or fraud of the vendorand before he has incurred in delay (Art. 11 65, par. 3). If the thing sold is generic, the loss or destruction does not extinguish theobligation (Art. 1263). A thing is determinate when it is particularly designated or physically segregated from all others of the same class(Art. 1460). Thus, the vendor becomes released from his obligation to deliver the determinate thing sold while the vendee's obligation topay the price subsists. If the vendee had paid the price in advance the vendor may retain the same. The legal effect, therefore, is that


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the vendee assumes the risk of loss by fortuitous event (Art. 1262) after the perfection of the contract to the time of delivery. (Civil Codeof the Philippines, Ambrosio Padilla, Vol. 5,1987 Ed., p. 87.)

Norkis concedes that there was no "actual" delivery of the vehicle. However, it insists that there was constructive delivery of the unitupon: (1) the issuance of the Sales Invoice No. 0120 (Exh. 1) in the name of the private respondent and the affixing of his signaturethereon; (2) the registration of the vehicle on November 6, 1979 with the Land Transportation Commission in private respondent's name(Exh. 2); and (3) the issuance of official receipt (Exh. 3) for payment of registration fees (p. 33, Rollo).

That argument is not well taken. As pointed out by the private respondent, the issuance of a sales invoice does not prove transfer ofownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature, quantity and cost of thething sold and has been considered not a bill of sale (Am. Jur. 2nd Ed., Vol. 67, p. 378).

In all forms of delivery, it is necessary that the act of delivery whether constructive or actual, be coupled with the intention of deliveringthe thing. The act, without the intention, is insufficient (De Leon, Comments and Cases on Sales, 1978 Ed., citing Manresa, p. 94).

When the motorcycle was registered by Norkis in the name of private respondent, Norkis did not intend yet to transfer the title orownership to Nepales, but only to facilitate the execution of a chattel mortgage in favor of the DBP for the release of the buyer'smotorcycle loan. The Letter of Guarantee (Exh. 5) issued by the DBP, reveals that the execution in its favor of a chattel mortgage overthe purchased vehicle is a pre-requisite for the approval of the buyer's loan. If Norkis would not accede to that arrangement, DBP wouldnot approve private respondent's loan application and, consequently, there would be no sale.

In other words, the critical factor in the different modes of effecting delivery, which gives legal effect to the act, is the actual intention ofthe vendor to deliver, and its acceptance by the vendee. Without that intention, there is no tradition (Abuan vs. Garcia, 14 SCRA 759).

In the case of Addison vs. Felix and Tioco (38 Phil. 404, 408), this Court held:

The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is "placed inthe hands and possession of the vendee." (Civil Code, Art. 1462). It is true that the same article declares that the execution of a publicinstrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery mayproduce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of thesale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and the right ofpossession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing intothe tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient.But if notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing andmake use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition ofanother will, then fiction yields to reality-the delivery has riot been effects .(Emphasis supplied.)

The Court of Appeals correctly ruled that the purpose of the execution of the sales invoice dated September 20, 1979 (Exh. B) and theregistration of the vehicle in the name of plaintiff-appellee (private respondent) with the Land Registration Commission (Exhibit C) wasnot to transfer to Nepales the ownership and dominion over the motorcycle, but only to comply with the requirements of the

Development Bank of the Philippines for processing private respondent's motorcycle loan. On March 20, 1980, before privaterespondent's loan was released and before he even paid Norkis, the motorcycle had already figured in an accident while driven by oneZacarias Payba. Payba was not shown by Norkis to be a representative or relative of private respondent. The latter's supposed relative,who allegedly took possession of the vehicle from Norkis did not explain how Payba got hold of the vehicle on February 3, 1980. Norkis'claim that Julian Nepales was acting as Alberto's agent when he allegedly took delivery of the motorcycle (p. 20, Appellants' Brief), iscontroverted by the latter. Alberto denied having authorized Julian Nepales to get the motorcycle from Norkis Distributors or to enterinto any transaction with Norkis relative to said motorcycle. (p. 5, t.s.n., February 6, 1985). This circumstances more than amply rebutthe disputable presumption of delivery upon which Norkis anchors its defense to Nepales' action (pp. 33-34, Rollo).

Article 1496 of the Civil Code which provides that "in the absence of an express assumption of risk by the buyer, the things sold remainat seller's risk until the ownership thereof is transferred to the buyer," is applicable to this case, for there was neither an actual norconstructive delivery of the thing sold, hence, the risk of loss should be borne by the seller, Norkis, which was still the owner andpossessor of the motorcycle when it was wrecked. This is in accordance with the well-known doctrine of res perit domino.

WHEREFORE, finding no reversible error in the decision of the Court of Appeals in CA-G.R. No. 09149, we deny the petition for review

and hereby affirm the appealed decision, with costs against the petitioner.

SO ORDERED.

Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.


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EN BANC

G.R. No. L-10244 February 29, 1916

SANTIAGO CRUZADO, plaintiff-appellant,vs.ESTEFANIA BUSTOS and MANUEL ESCALER, defendants-appellees.

Felix Ferrer for appellant.Augusto Gonzalez for appellees.

TORRES, J.:

This appeal, by bill of exceptions, was taken from the judgment of June 17, 1914, in which the trial judge absolved defendants from thecomplaint and plaintiff from the cross-complaint, without express finding as to costs. Counsel for plaintiff appealed from this judgmentand moved for a new trial. This motion was denied, exception was taken by appellant, and, on the filing of the proper bill of exceptions,the same was approved, certified, and transmitted to the clerk of this court, together with a transcript of the evidence introduced at thetrial.

Counsel for the plaintiff Santiago Cruzado filed a written complaint on October 8, 1910, amended on September 25, 1913, in which healleged that plaintiff was the owner of certain rural property situated in the barrio of Dolores, formerly San Isidro, of the municipality ofBacolor, Pampanga, containing an area of 65 balitas and bounded as set forth in the complaint; that Estafania Bustos, during herlifetime, and now the administrator of her estate, together with the other defendant, Manuel Escaler, had, since the year 1906 up to thepresent, been detaining the said parcel of land, and had refused to deliver the possession thereof to plaintiff and to recognize hisownership of the same, notwithstanding the repeated demands made upon them; that by such detention, the plaintiff had sufferedlosses and damages to the amount of P3,500. He therefore asked for judgment declaring plaintiff to be the owner of the said parcel ofland and ordering defendants to return it to plaintiff and to pay the latter P3,500 for losses and damages, and the costs.

The demurrer filed by the defendant Bustos having been overruled, in her answer she made a general denial of each and all of theallegations of the complaint, and of each and all of the paragraphs thereof, and, as a special defense, alleged that the title to the saidland, produced by the plaintiff, was not a lawful one, for the reason that only a simulated sale of the land was made by the betweenherself and the deceased Agapito Geronimo Cruzado, plaintiff's father, and that for more than thirty years preceding the present timeshe had been the sole, exclusive, and lawful owner of the said parcel of land in question; that she had been holding it quietly,peaceably, publicly and in good faith; that it formed an integral part of another larger parcel of land, both parcels aggregating a totalarea of 100 balitas, 9 loanes, and 41 square brazas; that in September, 1891, with plaintiff's knowledge, the defendant Bustos sold andconveyed all the said property to the other defendant Manuel Escaler who then acquired the possession and ownership of the said

parcel of land, and had retained such ownership and possession up to the present time; that at no time and on no account whateverhad plaintiff or any other person except defendants acquired possession of the said parcel of land or any part thereof, nor any right ortitle therein. She therefore prayed to be absolved from the complaint, with the costs against plaintiff.

The other defendant, Manuel Escaler, in an amended answer to the aforementioned complaint, denied each and all of the allegationstherein contained and each and all of its clauses, and, as a special defense, alleged that plaintiff's title to the said land was illegal asonly a simulated sale was made by and between Agapito Geronimo Cruzado, plaintiff's predecessor in interest, and Bernardino Dizon;that defendants had been in possession of the said parcel of land for more than thirty years; that the defendant Escaler in good faithpurchased the land in question from Estefania Bustos, widow of Dizon, without ever having had any notice of any defect in the vendor'stitle; that plaintiff had knowledge of the contract of sale of the land in question yet did nothing to oppose its purchase by the defendantEscaler, wherefore the latter, in acquiring the property, did so under the belief that the plaintiff Santiago Cruzado had no right or interesttherein. He therefore prayed that the complaint be dismissed, with the costs against plaintiff, and that an injunction issue to restrain thelatter from interfering with the defendant Escaler in the enjoyment of his property and rights and from performing any act prejudicial tohis interests.

On the case coming to trial, both parties adduced evidence, among which was included the deposition of Inocencio Rosete.

Counsel for defendants, in a cross-complaint set forth: that as shown by the evidence, the defendant Escaler acquired in good faithfrom Estefania Bustos the land in question at a time when there was no record whatever in the property registry to show that this landbelonged to a third person or any other than the vendor; that, on entering into possession of the property, Escaler spent P4,000 in-improvements and in the repair of a long dike to prevent the erosion of the land by the frequent overflows of the adjoining estuary; thatof this sum P2,000 was paid by Escaler and the remaining P2,000 by Estafania Bustos, in her capacity as lessee of the land; and that incase the judgment of the court should be adverse to defendants, these latter, as owners in good faith, were entitled to be indemnifiedby plaintiff for the said expenses. He therefore asked that plaintiff be ordered to reimburse half of the said P4,000 to each of thedefendants in case judgment should be rendered favorable to plaintiff.

The latter's counsel, in answer to the said cross-complaint, specifically denied each and all of the allegations thereof and, in specialdefense, reproduced plaintiff's amended complaint in all its parts and alleged that the facts set forth in the cross-complaint did notconstitute a cause of action. He therefore prayed that plaintiff be absolved from the cross-complaint and that judgment be renderedagainst defendants, in conformity with the prayer of his complaint.

After the evidence was all in, counsel for the defendant Escaler moved that the deposition of the witness Inocencio Espanol R osete beadmitted into the record, and in support of his motion stated that with the authorization of the court the said deposition had been takenon November 21, 1913, in the municipality of Arayat in the presence of plaintiff's attorney; that the said declaration of the deponent wasduly forwarded to the clerk of the court, and there attached to the record, but through an unintentional oversight of defendant's attorney,it was not presented in evidence at the trial; that this deposition was very important for the defendants' defense; and that the deponentwas and continued to be unable to appear before the court on account of a threatened attack of brain fever which might develop duringthe journey from Arayat to San Fernando.

Plaintiff's counsel asked that the foregoing motion be overruled and that the deposition of the witness Rosete be stricken from therecord, because defendants' motion was made out of time and was contrary to the rules of procedure, and there was no reason foraltering the order of procedure, as requested by defendants, for, when the period for the reception of the evidence of both parties isclosed, an alteration in the order of procedure such as asked by defendants would be improper and illegal, counsel citing the decision


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of this court in the case of Garcia vs. Reyes.1 He alleged, moreover, that the said deposition necessarily affected the main issue incontroversy and that to allow the motion would be in contravention of the provisions of section 364 of the Code of Civil Procedure. Hetherefore asked that the said motion be overruled. The court, however, ordered that the deposition of the witness Inocencio Rosete beadmitted in evidence, and that plaintiff's exception be noted. In view of the foregoing, the judgment aforementioned was rendered.

The questions herein submitted for the decision of this court are:

1. Is it or is it not true that the deed of sale, Exhibit A, (p. 40 of the record) of 65 balitas of land situated in the municipality of Bacolor,Pampanga, executed by Estefania Bustos, with the assistance of her husband Bernardino Dizon, in favor of Agapito GeronimoCruzado, for the sum of P2,200, was simulated, not with intent to defraud any third person, but for the sole purpose of making it appearthat the vendee, Cruzado, then a candidate for the position of procurador on the date of the said deed, September 7,1875, possessed

real estate to the value of P2,200 with which to guarantee the faithful discharge of the duties of the office of procurador?

2. It is or is it not true that, notwithstanding such apparent alienation of the 65 balitas of land, the supposed vendee continued inpossession thereof, without the supposed purchaser having taken possession of the property until September 10, 1891, when its ownerBustos sold to Escaler, not only the said 65 balitas of land, but also all the remainder of a large tract of agricultural land of which theportion appearing as sold to Agapito G. Cruzado formed and forms a part, and that Escaler was then and, until the date of plaintiff'sclaim, continued to be in peaceable, uninterrupted possession of the said whole tract of land, including the aforementioned portion of 65balitas?

3. Has the right of ownership prescribed which Manuel Escaler is and has been enjoying in the land which Estefania Bustos had sold tohim and which includes the parcel of 65 balitas claimed by plaintiff, Santiago Cruzado, or has the right of any real or personal action hemight exercise by reason of the sale to Cruzado prescribed on account of the lapse of the respective periods fixed by law, between the7th of September, 1875, the date of said sale, and the 8th of October, 1910, that of the filing of the complaint?

To judge from the evidence adduced in this case, there is ample ground for holding that the said deed of sale of a parcel of 65 balitas ofland was simulated, not to defraud any creditor or other person interested in the land nor for the purpose of eluding any lawful obligationon the part of its owner, Estafania Bustos, but for the sole purpose of doing a favor, of rendering a special service to Agapito GeronimoCruzado, father of the plaintiff Santiago Cruzado.

During his lifetime Agapito G. Cruzado aspired to hold the office of procurador in the Court of First Instance of Pampanga, butnotwithstanding that he possessed the required ability for the discharge of the duties of that position, he was unable to give the requiredbond, an indispensable condition for his appointment, as he was possessed of no means or real property wherewith to guarantee theproper discharge of his duties in the manner prescribed by the laws then in force.

In the certified copy of the record of the case tried in the Secretaria de Gobierno of the abolished Real Audiencia de Manila, issued bythe Assistant Executive Secretary and chief of the division of archives, there appears on page 178 a decree by the presidencia of thislatter tribunal, issued by virtue of the resolution passed by the sala de gobierno on November 24, 1875, whereby it was ordered thatAgapito Geronimo Cruzado should be noticed that within the period of 30 days he must show proof of having furnished a bond of P700in cash or of P2,100 in real property as security for the position of procurador to which he had been appointed, with the understanding

that should be fail to furnish such bond he would not be issued the certificate entitling him to practice the profession of procurador.

After complying with the requirements of the said court and executing the mortgage deed of the land purchased by the procurador electCruzado from Estefania Bustos, on March 18, 1876, the mortgage was recorded in the old mortgage registry then kept in the office ofthe Ayuntamiento of Manila during the former sovereignty, and thereafter Agapito G. Cruzado received his appointment andcommenced to discharge the duties of his position.

The above-related facts conclusively prove that Estefania Bustos executed the deed of sale Exhibit A in favor of the deceased Cruzadoin order to enable the latter, by showing that he was a property owner, to hold the office of procurador. This position he held for manyyears, thanks to the liberality of the pretended vendor, who, notwithstanding the statements contained in the deed of sale, does notappear to have been paid anything as a result of the sham sale, a sale which was affected, not in prejudice or fraud of any person, northose who were entitled to hold Cruzado liable for the proper discharge of the duties of his office, because, had the need arisen, anyliability of his could have been covered by the value of the land, the sale of which was fictitiously set forth in that deed as lawfullybelonging to Cruzado, and then Estefania Bustos would have had no right either to object to or escape the consequences of thatalienation, although simulated.

The simulation of the said sale was effected by making a pretended contract which bore the appearance of truth, when really and trulythere was no contract, because the contracting parties did not in fact intend to execute one, but only to formulate a sale in such amanner that, for the particular purposes sought by Bustos and Cruzado, it would appear to have been celebrated solely that Cruzadomight hold his office of procurador on the strength of the security afforded by the value of the land feignedly sold.

The record does not show when the procurador Cruzado died, but it is unquestionable that he was still living during the last months of1882, judging from the certificate which he himself issued to Norberto Decena (Exhibit 3). He must have died sometime between theyears 1882 and 1890, to judge from the contents of the letters plaintiff addressed to Natalio Dizon, one of the children of EstefaniaBustos, on July 7, 1891, and July 4, 1896, and from the fact that in the said year 1890 Agapito G. Cruzado was no longer a practicingprocurador in the Court of First Instance of Pampanga..

It is true that even after the death of the aforesaid procurador, any liability he might have incurred in connection with the exercise of hisoffice could have been, upon presentation of the proper claim, collected out of the value of the land apparently sold by Estafania Bustosand pledged as security for the proper discharge of the duties of his office. On October 8, 1910, when his son Santiago Cruzado filed

his complaint, already more than twenty years had elapsed since 1889, if plaintiff's father died in 1889 and not between 1883 and 1889;therefore, any right of action to foreclose the mortgage, or any personal action with regard to the value of the encumbered land, as theresult of any liability incurred in the performance of his duties as procurador, has more than prescribed. (Art. 1964, Civil Code, andsecs. 38, 39 and 43, Act. No. 190.).

On the termination of the sovereignty of Spain over this Archipelago, the Spanish courts here established went out of existence onJanuary 31, 1899, the Pampanga court indeed being abolished about the middle of 1897 as a result of the revolution against the formersovereignty. The personnel of those courts also ceased to render service as such. It may therefore be affirmed that, if the said lien onthe land in question has not terminated by its no longer having any object, it is at least undeniable that prescription has already run withrespect to any action that might have been brought against the pledged land to recover for any liability which might have been incurredby the procurador Cruzado during his lifetime in connection with his office, so that this real estate may now be considered as free fromthat hypothecary encumbrance.


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It is, then, of the utmost importance to examine whether in the said sale the purchase price was paid and whether the vendee tookpossession of the land supposed to have been sold.

The record discloses that Cruzado during his lifetime was, before he became a procurador, an official escribiente or clerk charged withthe duty of coursing records and proceedings in the Court of Pampanga; that his salary was hardly sufficient to maintain him and hisfamily; that on account of the insufficiency of his monthly stipend, he was frequently obliged to borrow money from his friends,notwithstanding that he with his family lodged in the house of Bernardino Dizon, the husband of the vendor Bustos, situated in themunicipality of Bacolor, with whom Cruzado maintained intimate relations of friendship, and on this account the said couple werecontent to live in a country house they owned on one of their rice fields. Such was the testimony of several witnesses who lived in thatmunicipality, and who knew and had considerable dealings with the plaintiff's father for many years. It was the opinion of these

witnesses that the deceased Agapito G. Cruzado was a poor man, for the reason that his monthly salary scarcely provided for theneeds of himself and his family, and they therefore believed that he could not have furnished the sum of P2,200 to purchase the land inquestion, and, furthermore, if the plaintiff's father had possessed this sum, he would have made the deposit of the sum of P700, theamount of security required by the Presidencia of the former Real Audiencia de Manila for his appointment as procurador, since, havingthe means, he would have preferred to deposit this smaller sum rather than to have used P2,200 in acquiring a piece of land from whichhe would derive no benefit whatever, as in fact he never did, as he must have known that in spite of the simulated sale of the propertyits owner would continue in its possession and would cultivate it, as she did do until her death. It is, therefore, unquestionable that theprice of the sale was not paid, an omission which would indicate that it was in effect simulated.

Aside from the fact that the spouses Estafania Bustos and Bernardino Dizon had no need to sell the said 65 balitas of land, or offencing or separating this parcel from the large tract of land that belonged to them and of which it formed a part, for the reason that theywere rich and at that time were not in need of money to cultivate their extensive landholdings, it is also to be noted that the portion ofland sold was worth very much more than the P2,200 which, in the said instrument, purported to be its price.

In addition to the foregoing, the proceedings in the case at bar furnish ample proof that Agapito Geronimo Cruzado during his lifetimestated to various persons that he succeeded in giving bond for his appointment as procurador by means of the said instrument ofsimulated sale, executed in his favor by the spouses Dizon and Bustos, as he did not have the money to make the deposit required forhis appointment. So close were the relations that then existed between the Cruzado family and that of Dizon and Bustos, that later onthe plaintiff married a daughter of these latter; hence, plaintiff, in the beginning of his letters Exhibits 8 and 9 addressed to NatalioDizon, a son of the vendor Estefania Bustos, calls his correspondent his "dear and esteemed brother-in-law." It is therefore not strangerthat these spouses should have wished to help plaintiff's predecessor in interest by assisting him to obtain the office of procurador,even to the extent of making a feigned sale.

However, years afterwards, prompted by an intuition of possible future difficulties, Dizon and his wife Bustos went to the office ofAgapito G. Cruzado and required him to cancel the said deed of sale, in order to avoid any lawsuit after their death. Cruzado promisedto look for money wherewith to substitute the mortgage bond. This demand had to be repeated several times, because Cruzado did notcancel the deed as he promised.

Furthermore, it is shown that the instrument Exhibit A is merely a second copy obtained by the plaintiff from the chief of division of

archives, without prior summons or notification of the vendor Estefania Bustos, who was still living, in conformity with the provisionscontained in article 18 of the Notarial Law of February 15, 1889, and without the plaintiff's having explained what became of the firstcopy. Besides, the clerk and notary who certified that instrument did not attest therein that in his presence the vendee Cruzado paidover the sum of P2,200, the price of the land sold, and as the vendor denied having received this sum, the obligation devolved uponplaintiff to prove that his deceased father had paid the price stated in that instrument. By this not having done so, his omissionconstitutes additional proof that the sale of the land, the recovery of possession of which plaintiff now seeks, was really simulated.

The supreme court of Spain, in a decision dated February 20, 1899, rendered on an appeal in cassation, laid down the doctrine that, inaccordance with the provisions of article 40 of the Mortgage Law, in the alienation of real property it is understood that no price hasbeen paid if the notary does not attest its delivery or the contracting parties do not prove that it was previously paid.

The courts are allowed full latitude to accept the presumption that the purchase price has not been paid when the notary before whomthe instrument was executed does not attest the delivery of the money, and when, such delivery being denied by one of the contractingparties, the other does not adduce proof of its payment, especially when such presumption is corroborated by other circumstantialevidence which, all together, undoubtedly prove that the sale was feigned and simulated for certain purposes sought to be attained by

the parties, though, as in the case at bar, the simulation was not effected in fraud of creditors.

Besides the failure to pay the purchase price, the record discloses another very important fact, to wit, that neither the vendee nor hisheirs, among these latter, the plaintiff, had at any time taken possession of the land which in the said instrument Exhibit A appeared tohave been sold, for, by the testimony of seven competent witnesses examined at the trial it is decisively and conclusively proven thatthe alleged vendor, Estefania Bustos, and her husband while he was living, notwithstanding the said alienation, continued to possessthe said land supposedly sold to plaintiff's father, and cultivated it, as she had done long before the sale of September, 1875, andcontinued to do so up to the date of the complaint filed by Santiago Cruzado; in the first period, until September 10, 1891, as the ownerof the land, and from this date, when the whole of the large tract of land of which the said portion apparently sold forms a part was soldto the other defendant Manuel Escaler, the original owner Estefania Bustos continued in the material possession of the land, but now asthe lessee of the new owner, until 1908, when she was substituted by Marcelo Rodriguez as the new lessee of the property. Theplaintiff at no time after his father's death occupied the land in litigation, notwithstanding his allegation that he has been collectingrentals from Estefania Bustos, his mother-in-law, by reason of his having leased the land to her.

The plaintiff endeavored to prove that during the years 1882 and 1883 he personally took charge of and tilled the disputed land on

shares through his tenants named Florentino de los Reyes, Lino Cortes, Macario de los Reyes and Regino de los Reyes, all of whomcorroborated plaintiff's testimony in this regard. However, six of the defendants' witnesses positively stated that they never were awarethat the said tenants had worked on the land in question during either the said two years or in any other, for these latter were workingon the adjacent lands belonging to other owners. Pablo Angeles, one of the defendants' witnesses, testified that Regino and Florentinode los Reyes were his tenants on shares and were employed on his land adjoining that in question. He was positively certain that theynever worked on the disputed land during or about the years aforementioned, because the carabaos used by his said two tenantsbelonged to him and he never would have permitted them to use these animals in working land that did not belong to him. He addedthat Regino's children, Macario and Basilio, were at that time so young, being about eight years of age, that they were not yet able towork in the fields.

The plaintiff must have been well convinced that he had no right whatever in the land supposedly purchased by his father. The latternever demanded its possession from its owner Estefania Bustos and never thought of declaring the property as belonging to him, forthe purposes of the land tax, from the time this tax was established in this country, notwithstanding that the plaintiff, knowing his


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obligation, filed a sworn declaration relative to a lot he owned in the municipality of Bacolor. This procedure of plaintiff's proves that hedid not believe himself to be the owner of the land he claims and which its present owner Manuel Escaler has constantly declared forthe purpose of assessment.

Moreover, about the middle of the year 1891, the plaintiff Santiago Cruzado begged his brother-in-law Natalio Dizon to tell the latter'smother, plaintiff's mother-in-law, that Cruzado desired the lease four balitas of the land in question, and some days afterwards, possiblybecause he received no reply from his said brother-in-law, he addressed a letter to Dizon (Exhibit 9, page 152 of the record, translatedon page 154) in which he repeated his request and asked for a reply; but notwithstanding that his brother-in-law Dizon told him that hecould not dispose of any part of the said land for the reason that his mother Estefania Bustos was negotiating for the sale of all the landshe possessed in the sitio of Sicat to Manuel Escaler, plaintiff went to Dizon's house on an occasion when Paulino de la Cruz wasthere. Cruz was a representative of Escaler and had been charged to inform himself of the situation, condition and quality of the land

which Bustos was about to sell to his principal and was at the said house for the purpose of being shown the land offered for sale. Onthis occasion plaintiff learned that negotiations were being made for the sale of all the land owned by Estefania Bustos of which the 65balitas in litigation formed a part. Plaintiff did not then or afterwards make any statement or objection whatever in defense of his rightsand interest, if he really believed that he was entitled to the land shown in the instrument Exhibit A to have been purchased by hisfather.

Plaintiff made no protest whatsoever, because he well knew that the said sale was simulated and that his father had acquired no rightwhatever in the property; he was therefore anxious to lease four balitas of the same land, a purpose in which he was unsuccessfulbecause a deal was then already going forward for the sale of the said land to its present owner, Manuel Escaler, who in fact did but iton September 10, 1891. If plaintiff were convinced that he was the owner of the land, as he rashly asserted that he was in his complaintfor recovery of possession, it is not understood why about the middle of the year 1891 he wished to lease, not all the 65 balitas, but onlyfour of them, as stated in his said letter, Exhibit 9.

From that time the new owner Manuel Escaler took possession of all the land sold by Estefania Bustos, including the 65 balitas inlitigation, and continued in its possession as the owner thereof until October 8, 1910, when plaintiff filed his claim. Thus, more than theten years required by law for ordinary prescription had already elapsed, as Escaler purchased the land and was holding it in good faithunder a lawful title and was not disturbed in his continuous and peaceable possession, one that was adverse to the whole world. It istherefore unquestionable that he has absolutely acquired by prescription the ownership of the disputed land, and the action brought byplaintiff, founded solely on a simulated sale executed by the original owner of the land, not to the prejudice, but to the benefit, of thepretended vendee, cannot prevail against Escaler's rights.

The registration obtained by the plaintiff in the property registry of the second copy of the said instrument Exhibit A, about two monthsbefore filing his action for recovery, to wit, on August 23, 1910, has not improved the deed of sale nor made it more effective, nor couldit affect the rights held by the original owner and the present proprietor of the land in question, inasmuch as their predecessor ininterest, by default of payment of the price of the sale and on account of his never having taken possession of the land sold, was notthe owner thereof, nor did he acquire any property right whatever therein. Consequently at his death he could not have transmitted tothe plaintiff as his successor any greater right than a personal right to exact the fulfillment of a contract, and as plaintiff was not theowner of the land, he could not validly register it.

Article 1473 of the Civil Code prescribes:

If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first takenpossession thereof in good faith, if it should be personal property.

Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry.

Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absencethereof, to the person who presents the oldest title, provided there is good faith.

On the sale of the land to the defendant Escaler, neither he nor the plaintiff had had it entered in the property registry, but the said newowner, Escaler, took possession of the land on the date of its acquisition, September 10,1891, and has retained possession thereof upto the present time. So that when plaintiff registered the land he was not in possession thereof and no longer had any right whatevertherein, because it already belonged to the defendant Escaler, its lawful owner.

However, even though it were proper for plaintiff to bring the real action for recovery derived, though we do not admit that it could be,from the simulated sale before mentioned, both this action as well as the personal action the only one available in a proper case, asbefore demonstrated, pursuant to the provisions of article 1095 of the Civil Code have both certainly prescribed, for the reason thatthe periods fixed by law for filing such actions have much more than elapsed.

Article 1939 of the Civil Code says:

Prescription, which began to run before the publication of this code, shall be governed by the prior laws; but if, after this code becameoperative, all the time required in the same for prescription has elapsed, it shall be effectual, even if according to said prior laws alonger period of time may be required.

Personal actions prescribe after ten years; and the same with the writ of execution therein issued, after twenty years; while real actionsprescribe after thirty years: according to Law 5, Title 8, Book 1 of the Novisima Recopilacion, and Law 21, Title 29, Partida 3, whichwere those in force on the date of the execution of the deed of sale, Exhibit A.

From September 7, 1875, to October 8, 1910, when the complaint was filed, thirty-five years have elapsed. Therefore, not only inaccordance with the laws aforecited, but also pursuant to the provisions of articles 1963 and 1964 of the Civil Code, the periods fixedfor the prescription of the personal action which could, in a proper case, have been exercised, as well as for the real action for recoveryof possession brought by the plaintiff without right so to do, have more than prescribed.

For all the foregoing reasons, whereby the errors assigned to the judgment appealed from have been duly refuted, the said judgmentshould be, as it is hereby, affirmed, with the costs against the appellant. So ordered.

Arellano, C. J., Johnson, Carson, Moreland, Trent, and Araullo, JJ., concur.


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EN BANC

G.R. No. L-21601 December 17, 1966

NIELSON & COMPANY, INC., plaintiff-appellant,vs.LEPANTO CONSOLIDATED MINING COMPANY, defendant-appellee.

W. H. Quasha and Associates for plaintiff-appellant.Ponce Enrile, Siguion-Reyna, Montecillo and Belo for defendant-appellee.

ZALDIVAR, J.:

On February 6, 1958, plaintiff brought this action against defendant before the Court of First Instance of Manila to recover certain sumsof money representing damages allegedly suffered by the former in view of the refusal of the latter to comply with the terms of amanagement contract entered into between them on January 30, 1937, including attorney's fees and costs.

Defendant in its answer denied the material allegations of the complaint and set up certain special defenses, among them, prescriptionand laches, as bars against the institution of the present action.

After trial, during which the parties presented testimonial and numerous documentary evidence, the court a quo rendered a decisiondismissing the complaint with costs. The court stated that it did not find sufficient evidence to establish defendant's counterclaim and soit likewise dismissed the same.

The present appeal was taken to this Court directly by the plaintiff in view of the amount involved in the case.

The facts of this case, as stated in the decision appealed from, are hereunder quoted for purposes of this decision:

It appears that the suit involves an operating agreement executed before World War II between the plaintiff and the defendant wherebythe former operated and managed the mining properties owned by the latter for a management fee of P2,500.00 a month and a 10%participation in the net profits resulting from the operation of the mining properties. For brevity and convenience, hereafter the plaintiffshall be referred to as NIELSON and the defendant, LEPANTO.

The antecedents of the case are: The contract in question (Exhibit `C') was made by the parties on January 30, 1937 for a period of five(5) years. In the latter part of 1941, the parties agreed to renew the contract for another period of five (5) years, but in the meantime, thePacific War broke out in December, 1941.

In January, 1942 operation of the mining properties was disrupted on account of the war. In February of 1942, the mill, power plant,supplies on hand, equipment, concentrates on hand and mines, were destroyed upon orders of the United States Army, to prevent theirutilization by the invading Japanese Army. The Japanese forces thereafter occupied the mining properties, operated the mines duringthe continuance of the war, and who were ousted from the mining properties only in August of 1945.

After the mining properties were liberated from the Japanese forces, LEPANTO took possession thereof and embarked in rebuildingand reconstructing the mines and mill; setting up new organization; clearing the mill site; repairing the mines; erecting staff quarters andbodegas and repairing existing structures; installing new machinery and equipment; repairing roads and maintaining the same;salvaging equipment and storing the same within the bodegas; doing police work necessary to take care of the materials andequipment recovered; repairing and renewing the water system; and remembering (Exhibits "D" and "E"). The rehabilitation andreconstruction of the mine and mill was not completed until 1948 (Exhibit "F"). On June 26, 1948 the mines resumed operation underthe exclusive management of LEPANTO (Exhibit "F-l").

Shortly after the mines were liberated from the Japanese invaders in 1945, a disagreement arose between NIELSON and LEPANTO

over the status of the operating contract in question which as renewed expired in 1947. Under the terms thereof, the managementcontract shall remain in suspense in case fortuitous event or force majeure, such as war or civil commotion, adversely affects the workof mining and milling.

"In the event of inundations, floodings of mine, typhoon, earthquake or any other force majeure, war, insurrection, civil commotion,organized strike, riot, injury to the machinery or other event or cause reasonably beyond the control of NIELSON and which adverselyaffects the work of mining and milling; NIELSON shall report such fact to LEPANTO and without liability or breach of the terms of thisAgreement, the same shall remain in suspense, wholly or partially during the terms of such inability." (Clause II of Exhibit "C").

NIELSON held the view that, on account of the war, the contract was suspended during the war; hence the life of the contract should beconsidered extended for such time of the period of suspension. On the other hand, LEPANTO contended that the contract shouldexpire in 1947 as originally agreed upon because the period of suspension accorded by virtue of the war did not operate to extendfurther the life of the contract.

No understanding appeared from the record to have been bad by the parties to resolve the disagreement. In the meantime, LEPANTO

rebuilt and reconstructed the mines and was able to bring the property into operation only in June of 1948, . . . .

Appellant in its brief makes an alternative assignment of errors depending on whether or not the management contract basis of theaction has been extended for a period equivalent to the period of suspension. If the agreement is suspended our attention should befocused on the first set of errors claimed to have been committed by the court a quo; but if the contrary is true, the discussion will thenbe switched to the alternative set that is claimed to have been committed. We will first take up the question whether the managementagreement has been extended as a result of the supervening war, and after this question shall have been determined in the sensesustained by appellant, then the discussion of the defense of laches and prescription will follow as a consequence.

The pertinent portion of the management contract (Exh. C) which refers to suspension should any event constituting force majeurehappen appears in Clause II thereof which we quote hereunder:


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In the event of inundations, floodings of the mine, typhoon, earthquake or any other force majeure, war, insurrection, civil commotion,organized strike, riot, injury to the machinery or other event or cause reasonably beyond the control of NIELSON and which adverselyaffects the work of mining and milling; NIELSON shall report such fact to LEPANTO and without liability or breach of the terms of thisAgreement, the same shall remain in suspense, wholly or partially during the terms of such inability.

A careful scrutiny of the clause above-quoted will at once reveal that in order that the management contract may be deemedsuspended two events must take place which must be brought in a satisfactory manner to the attention of defendant within areasonable time, to wit: (1) the event constituting the force majeure must be reasonably beyond the control of Nielson, and (2) it mustadversely affect the work of mining and milling the company is called upon to undertake. As long as these two condition exist theagreement is deem suspended.

Does the evidence on record show that these two conditions had existed which may justify the conclusion that the managementagreement had been suspended in the sense entertained by appellant? Let us go to the evidence.

It is a matter that this Court can take judicial notice of that war supervened in our country and that the mines in the Philippines wereeither destroyed or taken over by the occupation forces with a view to their operation. The Lepanto mines were no exception for notwas the mine itself destroyed but the mill, power plant, supplies on hand, equipment and the like that were being used there weredestroyed as well. Thus, the following is what appears in the Lepanto Company Mining Report dated March 13, 1946 submitted by itsPresident C. A. DeWitt to the defendant:1 "In February of 1942, our mill, power plant, supplies on hand, equipment, concentrates onhand, and mine, were destroyed upon orders of the U.S. Army to prevent their utilization by the enemy." The report also mentions thereport submitted by Mr. Blessing, an official of Nielson, that "the original mill was destroyed in 1942" and "the original power plant andall the installed equipment were destroyed in 1942." It is then undeniable that beginning February, 1942 the operation of the Lepantomines stopped or became suspended as a result of the destruction of the mill, power plant and other important equipment necessary forsuch operation in view of a cause which was clearly beyond the control of Nielson and that as a consequence such destructionadversely affected the work of mining and milling which the latter was called upon to undertake under the management contract.Consequently, by virtue of the very terms of said contract the same may be deemed suspended from February, 1942 and as of thatmonth the contract still had 60 months to go.

On the other hand, the record shows that the defendant admitted that the occupation forces operated its mining properties subject ofthe management contract,2 and from the very report submitted by President DeWitt it appears that the date of the liberation of the minewas August 1, 1945 although at the time there were still many booby traps.3 Similarly, in a report submitted by the defendant to itsstockholders dated August 25, 1948, the following appears: "Your Directors take pleasure in reporting that June 26, 1948 marked theofficial return to operations of this Company of its properties in Mankayan, Mountain Province, Philippines."4

It is, therefore, clear from the foregoing that the Lepanto mines were liberated on August 1, 1945, but because of the period ofrehabilitation and reconstruction that had to be made as a result of the destruction of the mill, power plant and other necessaryequipment for its operation it cannot be said that the suspension of the contract ended on that date. Hence, the contract must still bedeemed suspended during the succeeding years of reconstruction and rehabilitation, and this period can only be said to have ended onJune 26, 1948 when, as reported by the defendant, the company officially resumed the mining operations of the Lepanto. It should herebe stated that this period of suspension from February, 1942 to June 26, 1948 is the one urged by plaintiff.5

It having been shown that the operation of the Lepanto mines on the part of Nielson had been suspended during the period set outabove within the purview of the management contract, the next question that needs to be determined is the effect of such suspension.Stated in another way, the question now to be determined is whether such suspension had the effect of extending the period of themanagement contract for the period of said suspension. To elucidate this matter, we again need to resort to the evidence.

For appellant Nielson two witnesses testified, declaring that the suspension had the effect of extending the period of the contract,namely, George T. Scholey and Mark Nestle. Scholey was a mining engineer since 1929, an incorporator, general manager anddirector of Nielson and Company; and for some time he was also the vice-president and director of the Lepanto Company during thepre-war days and, as such, he was an officer of both appellant and appellee companies. As vice-president of Lepanto and generalmanager of Nielson, Scholey participated in the negotiation of the management contract to the extent that he initialed the same both aswitness and as an officer of both corporations. This witness testified in this case to the effect that the standard force majeure clauseembodied in the management contract was taken from similar mining contracts regarding mining operations and the understandingregarding the nature and effect of said clause was that when there is suspension of the operation that suspension meant the extensionof the contract. Thus, to the question, "Before the war, what was the understanding of the people in the particular trend of business with

respect to the force majeure clause?", Scholey answered: "That was our understanding that the suspension meant the extension oftime lost."6

Mark Nestle, the other witness, testified along similar line. He had been connected with Nielson since 1937 until the time he took thewitness stand and had been a director, manager, and president of the same company. When he was propounded the question: "Do youknow what was the custom or usage at that time in connection with force majeure clause?", Nestle answered, "In the mining world theforce majeure clause is generally considered. When a calamity comes up and stops the work like in war, flood, inundation or fire, etc.,the work is suspended for the duration of the calamity, and the period of the contract is extended after the calamity is over to enable theperson to do the big work or recover his money which he has invested, or accomplish what his obligation is to a third person ."7

And the above testimonial evidence finds support in the very minutes of the special meeting of the Board of Directors of the LepantoCompany issued on March 10, 1945 which was then chairmaned by Atty. C. A. DeWitt. We read the following from said report:

The Chairman also stated that the contract with Nielson and Company would soon expire if the obligations were not suspended, inwhich case we should have to pay them the retaining fee of P2,500.00 a month. He believes however, that there is a provision in the

contract suspending the effects thereof in cases like the present, and that even if it were not there, the law itself would suspend theoperations of the contract on account of the war. Anyhow, he stated, we shall have no difficulty in solving satisfactorily any problem wemay have with Nielson and Company.8

Thus, we can see from the above that even in the opinion of Mr. DeWitt himself, who at the time was the chairman of the Board ofDirectors of the Lepanto Company, the management contract would then expire unless the period therein rated is suspended but that,however, he expressed the belief that the period was extended because of the provision contained therein suspending the effectsthereof should any of the case of force majeure happen like in the present case, and that even if such provision did not exist the lawwould have the effect of suspending it on account of the war. In substance, Atty. DeWitt expressed the opinion that as a result of thesuspension of the mining operation because of the effects of the war the period of the contract had been extended.

Contrary to what appellant's evidence reflects insofar as the interpretation of the force majeure clause is concerned, however, appelleegives Us an opposite interpretation invoking in support thereof not only a letter Atty. DeWitt sent to Nielson on October 20, 1945,9


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This is sufficient to have the agreement considered, for the purpose of applying the statute of limitations, as a written contract even ifthe minutes were not signed by the parties (3 A.L.R., 2d, p. 831). It has been held that a writing containing the terms of a contract ifadopted by two persons may constitute a contract in writing even if the same is not signed by either of the parties (3 A.L.R., 2d, pp.812-813). Another authority says that an unsigned agreement the terms of which are embodied in a document unconditionally acceptedby both parties is a written contract (Corbin on Contracts, Vol. 1, p. 85)

The modification, therefore, made in the management contract relative to the participation in the profits by appellant, as contained in theminutes of the special meeting of the Board of Directors of Lepanto held on August 21, 1940, should be considered as a writtencontract insofar as the application of the statutes of limitations is concerned. Hence, the action thereon prescribes within ten (10) yearspursuant to Section 43 of Act 190.

Coming now to the facts, We find that the right of Nielson to its 10% participation in the 1941 operations accrued on December 21,1941 and the right to commence an action thereon began on January 1, 1942 so that the action must be brought within ten (10) yearsfrom the latter date. It is true that the complaint was filed only on February 6, 1958, that is sixteen (16) years, one (1) month and five (5)days after the right of action accrued, but the action has not yet prescribed for various reasons which We will hereafter discuss.

The first reason is the operation of the Moratorium Law, for appellant's claim is undeniably a claim for money. Said claim accrued onDecember 31, 1941, and Lepanto is a war sufferer. Hence the claim was covered by Executive Order No. 32 of March 10, 1945. It iswell settled that the operation of the Moratorium Law suspends the running of the statue of limitations (Pacific Commercial Co. vs.Aquino, G.R. No. L-10274, February 27, 1957).

This Court has held that the Moratorium Law had been enforced for eight (8) years, two (2) months and eight (8) days (Tioseco vs. Day,et al., L-9944, April 30, 1957; Levy Hermanos, Inc. vs. Perez, L-14487, April 29, 1960), and deducting this period from the time that hadelapsed since the accrual of the right of action to the date of the filing of the complaint, the extent of which is sixteen (16) years, one (1)month and five (5) days, we would have less than eight (8) years to be counted for purposes of prescription. Hence appellant's actionon its claim of 10% on the 1941 profits had not yet prescribed.

Another reason that may be taken into account in support of the no-bar theory of appellant is the arbitration clause embodied in themanagement contract which requires that any disagreement as to any amount of profits before an action may be taken to court shall besubject to arbitration. 24 This agreement to arbitrate is valid and binding. 25 It cannot be ignored by Lepanto. Hence Nielson could notbring an action on its participation in the 1941 operations-profits until the condition relative to arbitration had been first complied with. 26The evidence shows that an arbitration committee was constituted but it failed to accomplish its purpose on June 25, 1957. 27 Fromthis date to the filing of the complaint the required period for prescription has not yet elapsed.

Nielson claims the following: (1) 10% share in the dividends declared in 1941, exclusive of interest, amounting to P17,500.00; (2) 10%in the depletion reserves for 1941; and (3) 10% in the profits for years prior to 1948 amounting to P19,764.70.

With regard to the first claim, the Lepanto's report for the calendar year of 1954 28 shows that it declared a 10% cash dividend inDecember, 1941, the amount of which is P175,000.00. The evidence in this connection (Exhibits L and O) was admitted withoutobjection by counsel for Lepanto. 29 Nielson claims 10% share in said amount with interest thereon at 6% per annum. The document

(Exhibit L) was even recognized by Lepanto's President V. L. Lednicky, 30 and this claim is predicated on the provision of paragraph Vof the management contract as modified pursuant to the proposal of Lepanto at the special meeting of the Board of Directors on August21, 1940 (Exh. B), whereby it was provided that Nielson would be entitled to 10% of any dividends to be declared and paid during theperiod of the contract.

With regard to the second claim, Nielson admits that there is no evidence regarding the amount set aside by Lepanto for depletionreserve for 1941 31 and so the 10% participation claimed thereon cannot be assessed.

Anent the third claim relative to the 10% participation of Nielson on the sum of P197,647.08, which appears in Lepanto's annual reportfor 1948 32 and entered as profit for prior years in the statement of income and surplus, which amount consisted "almost in its entiretyof proceeds of copper concentrates shipped to the United States during 1947," this claim should to denied because the amount is not"dividend declared and paid" within the purview of the management contract.

The fifth assignment of error of appellant refers to the failure of the lower court to order Lepanto to pay its management fees forJanuary, 1942, and for the full period of extension amounting to P150,000.00, or P2,500.00 a month for sixty (60) months, a total of

P152,500.00 with interest thereon from the date of judicial demand.

It is true that the claim of management fee for January, 1942 was not among the causes of action in the complaint, but inasmuch as thecontract was suspended in February, 1942 and the management fees asked for included that of January, 1942, the fact that such claimwas not included in a specific manner in the complaint is of no moment because an appellate court may treat the pleading as amendedto conform to the evidence where the facts show that the plaintiff is entitled to relief other than what is asked for in the complaint(Alonzo vs. Villamor, 16 Phil. 315). The evidence shows that the last payment made by Lepanto for management fee was for Novemberand December, 1941. 33 If, as We have declared, the management contract was suspended beginning February 1942, it follows thatNielson is entitled to the management fee for January, 1942.

Let us now come to the management fees claimed by Nielson for the period of extension. In this respect, it has been shown that themanagement contract was extended from June 27, 1948 to June 26, 1953, or for a period of sixty (60) months. During this periodNielson had a right to continue in the management of the mining properties of Lepanto and Lepanto was under obligation to let Nielsondo it and to pay the corresponding management fees. Appellant Nielson insisted in performing its part of the contract but Lepantoprevented it from doing so. Hence, by virtue of Article 1186 of the Civil Code, there was a constructive fulfillment an the part of Nielson

of its obligation to manage said mining properties in accordance with the contract and Lepanto had the reciprocal obligation to pay thecorresponding management fees and other benefits that would have accrued to Nielson if Lepanto allowed it (Nielson) to continue inthe management of the mines during the extended period of five (5) years.

We find that the preponderance of evidence is to the effect that Nielson had insisted in managing the mining properties soon afterliberation. In the report 34 of Lepanto, submitted to its stockholders for the period from 1941 to March 13, 1946, are stated the activitiesof Nielson's officials in relation to Nielson's insistence in continuing the management. This report was admitted in evidence withoutobjection. We find the following in the report:

Mr. Blessing, in May, 1945, accompanied Clark and Stanford to San Fernando (La Union) to await the liberation of the mines. (Mr.Blessing was the Treasurer and Metallurgist of Nielson). Blessing with Clark and Stanford went to the property on July 16 and foundthat while the mill site had been cleared of the enemy the latter was still holding the area around the staff houses and putting up astrong defense. As a result, they returned to San Fernando and later went back to the mines on July 26. Mr. Blessing made the report,


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dated August 6, recommending a program of operation. Mr. Nielson himself spent a day in the mine early in December, 1945 andreiterated the program which Mr. Blessing had outlined. Two or three weeks before the date of the report, Mr. Coldren of the Nielsonorganization also visited the mine and told President C. A. DeWitt of Lepanto that he thought that the mine could be put in condition forthe delivery of the ore within ten (10) days. And according to Mark Nestle, a witness of appellant, Nielson had several men includingengineers to do the job in the mines and to resume the work. These engineers were in fact sent to the mine site and submitted reportsof what they had done. 35

On the other hand, appellee claims that Nielson was not ready and able to resume the work in the mines, relying mainly on thetestimony of Dr. Juan Nabong, former secretary of both Nielson and Lepanto, given in the separate case of Nancy Irving Romero vs.Lepanto Consolidated Mining Company (Civil Case No. 652, CFI, Baguio), to the effect that as far as he knew "Nielson and Companyhad not attempted to operate the Lepanto Consolidated Mining Company because Mr. Nielson was not here in the Philippines after the

last war. He came back later," and that Nielson and Company had no money nor stocks with which to start the operation. He was askedby counsel for the appellee if he had testified that way in Civil Case No. 652 of the Court of First Instance of Baguio, and he answeredthat he did not confirm it fully. When this witness was asked by the same counsel whether he confirmed that testimony, he said thatwhen he testified in that case he was not fully aware of what happened and that after he learned more about the officials of thecorporation it was only then that he became aware that Nielson had really sent his men to the mines along with Mr. Blessing and thathe was aware of this fact personally. He further said that Mr. Nielson was here in 1945 and "he was going out and contacting hispeople." 36

Lepanto admits, in its own brief, that Nielson had really insisted in taking over the management and operation of the mines but that it(Lepanto) unequivocally refuse to allow it. The following is what appears in the brief of the appellee:

It was while defendant was in the midst of the rehabilitation work which was fully described earlier, still reeling under the terribledevastation and destruction wrought by war on its mine that Nielson insisted in taking over the management and operation of the mine.Nielson thus put Lepanto in a position where defendant, under the circumstances, had to refuse, as in fact it did, Nielson's insistence intaking over the management and operation because, as was obvious, it was impossible, as a result of the destruction of the mine, forthe plaintiff to manage and operate the same and because, as provided in the agreement, the contract was suspended by reason of thewar. The stand of Lepanto in disallowing Nielson to assume again the management of the mine in 1945 was unequivocal and cannot bemisinterpreted, infra.37

Based on the foregoing facts and circumstances, and Our conclusion that the management contract was extended, We believe thatNielson is entitled to the management fees for the period of extension. Nielson should be awarded on this claim sixty times its monthlypay of P2,500.00, or a total of P150,000.00.

In its sixth assignment of error Nielson contends that the lower court erred in not ordering Lepanto to pay it (Nielson) the 10% share inthe profits of operation realized during the period of five (5) years from the resumption of its post-war operations of the Mankayanmines,

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