FIRST DIVISION

[ G.R. No. 128991, April 12, 2000 ]

YOLANDA ROSELLO-BENTIR, SAMUEL PORMIDA AND CHARITO
PORMIDA, PETITIONERS, VS. HONORABLE MATEO M. LEANDA, IN HIS
CAPACITY AS PRESIDING JUDGE OF RTC, TACLOBAN CITY, BRANCH
8, AND LEYTE GULF TRADERS, INC., RESPONDENTS.

DECISION

KAPUNAN, J.:

Reformation of an instrument is that remedy in equity by means of which a written

instrument is made or construed so as to express or conform to the real intention of the
parties when some error or mistake has been committed.[1] It is predicated on the
equitable maxim that equity treats as done that which ought to be done.[2] The rationale of
the doctrine is that it would be unjust and unequitable to allow the enforcement of a
written instrument which does not reflect or disclose the real meeting of the minds of the
parties.[3] However, an action for reformation must be brought within the period
prescribed by law, otherwise, it will be barred by the mere lapse of time. The issue in this
case is whether or not the complaint for reformation filed by respondent Leyte Gulf
Traders, Inc. has prescribed and in the negative, whether or not it is entitled to the remedy
of reformation sought.

On May 15, 1992, respondent Leyte Gulf Traders, Inc. (herein referred to as respondent
corporation) filed a complaint for reformation of instrument, specific performance,
annulment of conditional sale and damages with prayer for writ of injunction against
petitioners Yolanda Rosello-Bentir and the spouses Samuel and Charito Pormida. The
case was docketed as Civil Case No. 92-05-88 and raffled to Judge Pedro S. Espina,
RTC, Tacloban City, Branch 7. Respondent corporation alleged that it entered into a
contract of lease of a parcel of land with petitioner Bentir for a period of twenty (20)
years starting May 5, 1968. According to respondent corporation, the lease was extended
for another four (4) years or until May 31, 1992. On May 5, 1989, petitioner Bentir sold
the leased premises to petitioner spouses Samuel Pormada and Charito Pormada.
Respondent corporation questioned the sale alleging that it had a right of first refusal.
Rebuffed, it filed Civil Case No. 92-05-88 seeking the reformation of the expired contract
of lease on the ground that its lawyer inadvertently omitted to incorporate in the contract
of lease executed in 1968, the verbal agreement or understanding between the parties that
in the event petitioner Bentir leases or sells the lot after the expiration of the lease,
respondent corporation has the right to equal the highest offer.

In due time, petitioners filed their answer alleging that the inadvertence of the lawyer
who prepared the lease contract is not a ground for reformation. They further contended
that respondent corporation is guilty of laches for not bringing the case for reformation of
the lease contract within the prescriptive period of ten (10) years from its execution.

Respondent corporation then filed its reply and on November 18, 1992, filed a motion to
admit amended complaint. Said motion was granted by the lower court.[4]

Thereafter, petitioners filed a motion to dismiss reiterating that the complaint should be
dismissed on the ground of prescription.

On December 15, 1995, the trial court through Judge Pedro S. Espina issued an order
dismissing the complaint premised on its finding that the action for reformation had
already prescribed. The order reads:
ORDER

Resolved here is the defendants’ MOTION TO DISMISS PLAINTIFF’S complaint on

ground of prescription of action.

It is claimed by plaintiff that he and defendant Bentir entered into a contract of lease of a
parcel of land on May 5, 1968 for a period of 20 years (and renewed for an additional 4
years thereafter) with the verbal agreement that in case the lessor decides to sell the
property after the lease, she shall give the plaintiff the right to equal the offers of other
prospective buyers. It was claimed that the lessor violated this right of first refusal of the
plaintiff when she sureptitiously (sic) sold the land to co-defendant Pormida on May 5,
1989 under a Deed of Conditional Sale. Plaintiff’s right was further violated when after
discovery of the final sale, plaintiff ordered to equal the price of co-defendant Pormida
was refused and again defendant Bentir surreptitiously executed a final deed of sale in
favor of co-defendant Pormida in December 11, 1991.

The defendant Bentir denies that she bound herself to give the plaintiff the right of first
refusal in case she sells the property. But assuming for the sake of argument that such
right of first refusal was made, it is now contended that plaintiff’s cause of action to
reform the contract to reflect such right of first refusal, has already prescribed after 10
years, counted from May 5, 1988 when the contract of lease incepted. Counsel for
defendant cited Conde vs. Malaga, L-9405 July 31, 1956 and Ramos vs. Court of
Appeals, 180 SCRA 635, where the Supreme Court held that the prescriptive period for
reformation of a written contract is ten (10) years under Article 1144 of the Civil Code.

This Court sustains the position of the defendants that this action for reformation of
contract has prescribed and hereby orders the dismissal of the case.
SO ORDERED.[5]
On December 29, 1995, respondent corporation filed a motion for reconsideration of the
order dismissing the complaint.

On January 11, 1996, respondent corporation filed an urgent ex-parte motion for issuance

of an order directing the petitioners, or their representatives or agents to refrain from
taking possession of the land in question.

Considering that Judge Pedro S. Espina, to whom the case was raffled for resolution, was
assigned to the RTC, Malolos, Bulacan, Branch 19, Judge Roberto A. Navidad was
designated in his place.

On March 28, 1996, upon motion of herein petitioners, Judge Navidad inhibited himself
from hearing the case. Consequently, the case was re-raffled and assigned to RTC,
Tacloban City, Branch 8, presided by herein respondent judge Mateo M. Leanda.

On May 10, 1996, respondent judge issued an order reversing the order of dismissal on
the grounds that the action for reformation had not yet prescribed and the dismissal was
"premature and precipitate", denying respondent corporation of its right to procedural due
process. The order reads:
ORDER

Stated briefly, the principal objectives of the twin motions submitted by the plaintiffs, for
resolution are:
(1) for the reconsideration of the Order of 15 December 1995 of the Court (RTC, Br. 7),
dismissing this case, on the sole ground of prescription of one (1) of the five (5) causes
of action of plaintiff in its complaint for "reformation" of a contract of lease; and,
(2) for issuance by this Court of an Order prohibiting the defendants and their privies-in-
interest, from taking possession of the leased premises, until a final court order issues
for their exercise of dominical or possessory right thereto.

The records of this case reveal that co-defendant BENTER (Yolanda) and plaintiff Leyte
Gulf Traders Incorporation, represented by Chairman Benito Ang, entered into a contract
of lease of a parcel of land, denominated as Lot No. 878-D, located at Sagkahan District,
Tacloban City, on 05 May 1968, for a period of twenty (20) years, (later renewed for an
additional two (2) years). Included in said covenant of lease is the verbal understanding
and agreement between the contracting parties, that when the defendant (as lessor) will
sell the subject property, the plaintiff as (lessee) has the "right of first refusal", that is, the
right to equal the offer of any other prospective third-party buyer. This agreement (sic) is
made apparent by paragraph 4 of the lease agreement stating:
"4. IMPROVEMENT. The lessee shall have the right to erect on the leased premises any
building or structure that it may desire without the consent or approval of the Lessor x x x
provided that any improvements existing at the termination of the lease shall remain as
the property of the Lessor without right to reimbursement to the Lessee of the cost or
value thereof."
That the foregoing provision has been included in the lease agreement if only to convince
the defendant-lessor that plaintiff desired a priority right to acquire the property (ibid) by
purchase, upon expiration of the effectivity of the deed of lease.

In the course of the interplay of several procedural moves of the parties herein, the
defendants filed their motion to admit their amended answer to plaintiff’s amended
complaint. Correspondingly, the plaintiff filed its opposition to said motion. The former
court branch admitted the amended answer, to which order of admission, the plaintiff
seasonably filed its motion for reconsideration. But, before the said motion for
reconsideration was acted upon by the court, the latter issued an Order on 15 December
1995, DISMISSING this case on the lone ground of prescription of the cause of action of
plaintiff’s complaint on "reformation" of the lease contract, without anymore considering
the remaining cause of action, viz.: (a) on Specific Performance; (b) an Annulment of
Sale and Title; (c) on Issuance of a Writ of Injunction, and (d) on Damages.

With due respect to the judicial opinion of the Honorable Presiding Judge of Branch 7 of
this Court, the undersigned, to whom this case was raffled to after the inhibition of Judge
Roberto Navidad, as acting magistrate of Branch 7, feels not necessary any more to
discuss at length that even the cause of action for "reformation" has not, as yet,
prescribed.

To the mind of this Court, the dismissal order adverted to above, was obviously
premature and precipitate, thus resulting denial upon the right of plaintiff that procedural
due process. The other remaining four (4) causes of action of the complaint must have
been deliberated upon before that court acted hastily in dismissing this case.

WHEREFORE, in the interest of substantial justice, the Order of the court, (Branch 7,
RTC) dismissing this case, is hereby ordered RECONSIDERED and SET ASIDE.

Let, therefore, the motion of plaintiff to reconsider the Order admitting the amended
answer and the Motion to Dismiss this case (ibid), be set for hearing on May 24, 1996, at
8:30 o’clock in the morning. Service of notices must be effected upon parties and counsel
as early as possible before said scheduled date.

Concomitantly, the defendants and their privies-in-interest or agents, are hereby

STERNLY WARNED not to enter, in the meantime, the litigated premises, before a final
court order issues granting them dominical as well as possessory right thereto.

To the motion or petition for contempt, filed by plaintiff, thru Atty. Bartolome C. Lawsin,
the defendants may, if they so desire, file their answer or rejoinder thereto, before the said
petition will be set for hearing. The latter are given ten (10) days to do so, from the date
of their receipt of a copy of this Order.

SO ORDERED.[6]
On June 10, 1996, respondent judge issued an order for status quo ante, enjoining
petitioners to desist from occupying the property.[7]

Aggrieved, petitioners herein filed a petition for certiorari to the Court of Appeals

seeking the annulment of the order of respondent court with prayer for issuance of a writ
of preliminary injunction and temporary restraining order to restrain respondent judge
from further hearing the case and to direct respondent corporation to desist from further
possessing the litigated premises and to turn over possession to petitioners.

On January 17, 1997, the Court of Appeals, after finding no error in the questioned order
nor grave abuse of discretion on the part of the trial court that would amount to lack, or in
excess of jurisdiction, denied the petition and affirmed the questioned order.[8] A
reconsideration of said decision was, likewise, denied on April 16, 1997.[9]

Thus, the instant petition for review based on the following assigned errors, viz:
6.01 THE COURT OF APPEALS ERRED IN HOLDING THAT AN ACTION FOR
REFORMATION IS PROPER AND JUSTIFIED UNDER THE CIRCUMSTANCES OF
THE PRESENT CASE;

6.02 THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACTION FOR
REFORMATION HAS NOT YET PRESCRIBED;

6.03 THE COURT OF APPEALS ERRED IN HOLDING THAT AN OPTION TO BUY

IN A CONTRACT OF LEASE IS REVIVED FROM THE IMPLIED RENEWAL OF
SUCH LEASE; AND,

6.04 THE COURT OF APPEALS ERRED IN HOLDING THAT A STATUS QUO

ANTE ORDER IS NOT AN INJUNCTIVE RELIEF THAT SHOULD COMPLY WITH
THE PROVISIONS OF RULE 58 OF THE RULES OF COURT.[10]
The petition has merit.

The core issue that merits our consideration is whether the complaint for reformation of
instrument has prescribed. Sdaad

The remedy of reformation of an instrument is grounded on the principle of equity where,

in order to express the true intention of the contracting parties, an instrument already
executed is allowed by law to be reformed. The right of reformation is necessarily an
invasion or limitation of the parol evidence rule since, when a writing is reformed, the
result is that an oral agreement is by court decree made legally effective. [11] Consequently,
the courts, as the agencies authorized by law to exercise the power to reform an
instrument, must necessarily exercise that power sparingly and with great caution and
zealous care. Moreover, the remedy, being an extraordinary one, must be subject to
limitations as may be provided by law. Our law and jurisprudence set such limitations,
among which is laches. A suit for reformation of an instrument may be barred by lapse of
time. The prescriptive period for actions based upon a written contract and for
reformation of an instrument is ten (10) years under Article 1144 of the Civil Code.
[12]
 Prescription is intended to suppress stale and fraudulent claims arising from
transactions like the one at bar which facts had become so obscure from the lapse of time
or defective memory.[13] In the case at bar, respondent corporation had ten (10) years from
1968, the time when the contract of lease was executed, to file an action for reformation.
Sadly, it did so only on May 15, 1992 or twenty-four (24) years after the cause of action
accrued, hence, its cause of action has become stale, hence, time-barred.

In holding that the action for reformation has not prescribed, the Court of Appeals upheld
the ruling of the Regional Trial Court that the 10-year prescriptive period should be
reckoned not from the execution of the contract of lease in 1968, but from the date of the
alleged 4-year extension of the lease contract after it expired in 1988. Consequently,
when the action for reformation of instrument was filed in 1992 it was within ten (10)
years from the extended period of the lease. Private respondent theorized, and the Court
of Appeals agreed, that the extended period of lease was an "implied new lease" within
the contemplation of Article 1670 of the Civil Code,[14] under which provision, the other
terms of the original contract were deemed revived in the implied new lease.

We do not agree. First, if, according to respondent corporation, there was an agreement
between the parties to extend the lease contract for four (4) years after the original
contract expired in 1988, then Art. 1670 would not apply as this provision speaks of an
implied new lease (tacita reconduccion) where at the end of the contract, the lessee
continues to enjoy the thing leased "with the acquiescence of the lessor", so that the
duration of the lease is "not for the period of the original contract, but for the time
established in Article 1682 and 1687." In other words, if the extended period of lease was
expressly agreed upon by the parties, then the term should be exactly what the parties
stipulated, not more, not less. Second, even if the supposed 4-year extended lease be
considered as an implied new lease under Art. 1670, "the other terms of the original
contract" contemplated in said provision are only those terms which are germane to the
lessee’s right of continued enjoyment of the property leased.[15] The prescriptive period of
ten (10) years provided for in Art. 1144[16] applies by operation of law, not by the will of
the parties. Therefore, the right of action for reformation accrued from the date of
execution of the contract of lease in 1968.

Even if we were to assume for the sake of argument that the instant action for reformation
is not time-barred, respondent corporation’s action will still not prosper. Under Section 1,
Rule 64 of the New Rules of Court,[17] an action for the reformation of an instrument is
instituted as a special civil action for declaratory relief. Since the purpose of an action for
declaratory relief is to secure an authoritative statement of the rights and obligations of
the parties for their guidance in the enforcement thereof, or compliance therewith, and not
to settle issues arising from an alleged breach thereof, it may be entertained only before
the breach or violation of the law or contract to which it refers.[18] Here, respondent
corporation brought the present action for reformation after an alleged breach or violation
of the contract was already committed by petitioner Bentir. Consequently, the remedy of
reformation no longer lies.

We no longer find it necessary to discuss the other issues raised considering that the same
are predicated upon our affirmative resolution on the issue of the prescription of the
action for reformation.

WHEREFORE, the petition is hereby GRANTED. The Decision of the Court of

Appeals dated January 17, 1997 is REVERSED and SET ASIDE. The Order of the
Regional Trial Court of Tacloban City, Branch 7, dated December 15, 1995 dismissing
the action for reformation is REINSTATED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 158901, March 09, 2004 ]
PROCESO QUIROS AND LEONARDA VILLEGAS, PETITIONERS, VS.
MARCELO ARJONA, TERESITA BALARBAR, JOSEPHINE ARJONA, AND
CONCHITA ARJONA, RESPONDENTS.

DECISION

YNARES-SATIAGO, J.:

Assailed in this petition for review is the decision of the Court of Appeals in an action for
the execution/enforcement of amicable settlement between petitioners Proceso Quiros
and Leonarda Villegas and respondent Marcelo Arjona.  Appellate court reversed the
decision of the Regional Trial Court of Dagupan City-Branch 44 and reinstated the
decision of the Municipal Trial Court of San Fabian-San Jacinto, Pangasinan.

On December 19, 1996, petitioners Proceso Quiros and Leonarda Villegas filed with the
office of the barangay captain of Labney, San Jacinto, Pangasinan, a complaint for
recovery of ownership and possession of a parcel of land located at Labney, San Jacinto,
Pangasinan. Petitioners sought to recover from their uncle Marcelo Arjona, one of the
respondents herein, their lawful share of the inheritance from their late grandmother Rosa
Arjona Quiros alias Doza, the same to be segregated from the following parcels of land:
a)  A parcel of land (Lot 1, plan Psu-189983, L.R. Case No. D-614, LRC Record No. N-
22630), situated in the Barrio of Labney, Torud, Municipality of San Jacinto, Province of
Pangasinan x x x Containing an area of Forty Four Thousand Five Hundred and Twenty
(44,520) square meters, more or less, covered by Tax Decl. No. 607;

b) A parcel of Unirrig. riceland situated at Brgy. Labney, San Jacinto,  San Jacinto, Pangasinan
with an area of 6450 sq. meters, more or less declared under Tax Decl. No. 2066 of the land
records of San Jacinto, Pangasinan assessed at P2390.00 x x x;

c) A parcel of Unirrig. riceland situated at Brgy. Labney, San Jacinto, Pangasinan with an area
of 6450 sq. meters, more or less, declared under Tax Declaration No. 2047 of the land
records of San Jacinto, Pangasinan assessed at P1700.00 x x x

d) A parcel of Unirrig. riceland situated at Brgy. Labney, San Jacinto, Pangasinan assessed at
P5610.00 x x x;

e) A parcel of Cogon land situated at Brgy. Labney, San Jacinto, Pangasinan, with an area of
14133 sq. meters, more or less declared under Tax Declaration No. 14 of the land records of
San Jacinto, Pangasinan assessed at P2830.00 x x x.[1]
On January 5, 1997, an amicable settlement was reached between the parties. By reason
thereof, respondent Arjona executed a document denominated as “PAKNAAN”
(“Agreement”, in Pangasinan dialect), which reads:
AGREEMENT

I, MARCELO ARJONA, of legal age, resident of Barangay Sapang, Buho, Palayan City,
Nueva Ecija, have a land consisting of more or less one (1) hectare which I gave to
Proceso Quiros and Leonarda Villegas, this land was inherited by Doza that is why I am
giving the said land to them for it is in my name, I am affixing my signature on this
document for this is our agreement besides there are witnesses on the 5 th day (Sunday) of
January 1997.

Signed in the presence of:

(Sgd) Avelino N. De la Masa, Jr.

(Sgd) Marcelo Arjona

Witnesses:

1)      (Sgd.) Teresita Balarbar

2)      (Sgd.) Josephine Arjona
3)      (Sgd.) Conchita Arjona
On the same date, another “PAKNAAN” was executed by Jose Banda, as follows:
 AGREEMENT

I, JOSE BANDA, married to Cecilia L. Banda, of legal age, and resident of Sitio Torrod,
Barangay Labney, San Jacinto, Pangasinan. There is a land in which they entrusted to me
and the same land is situated in Sitio Torrod, Brgy. Labney, San Jacinto, Pangasinan,
land of Arjona family.

I am cultivating/tilling this land but if ever Leonarda Villegas and Proceso Quiros would
like to get this land, I will voluntarily surrender it to them.

In order to attest to the veracity and truthfulness of this agreement, I affixed (sic) my
signature voluntarily below this document this 5th day (Sunday) of January 1997.

(Sgd.) Jose Banda

Signed in the presence of:

(Sgd) Avelino N. de la Masa, Sr.

Barangay Captain
Brgy. Labney, San Jacinto
Pangasinan

Witnesses:

1) Irene Banda
(sgd.)
2) Jose (illegible) x x x
Petitioners filed a complaint with the Municipal Circuit Trial Court with prayer for the
issuance of a writ of execution of the compromise agreement which was denied because
the subject property cannot be determined with certainty.

The Regional Trial Court reversed the decision of the municipal court on appeal and
ordered the issuance of the writ of execution.

Respondents appealed to the Court of Appeals, which reversed the decision of the
Regional Trial Court and reinstated the decision of the Municipal Circuit Trial Court. [2]

Hence, this petition on the following errors:

I
THE PAKNAAN BEING A FINAL AND EXECUTORY JUDGMENT UNDER THE
LAW IS AN IMMUTABLE JUDGMENT CAN NOT BE ALTERED, MODIFIED OR
CHANGED BY THE COURT INCLUDING THE HIGHEST COURT; and
 II
THE SECOND PAKNAAN ALLEGEDLY EXECUTED IN CONJUNCTION WITH
THE FIRST PAKNAAN WAS NEVER ADDUCED AS EVIDENCE BY EITHER OF
THE PARTIES, SO IT IS ERROR OF JURISDICTION TO CONSIDER THE SAME IN
THE DECISION MAKING.
The pivotal issue is the validity and enforceability of the amicable settlement between the
parties and corollary to this, whether a writ of execution may issue on the basis thereof.

In support of their stance, petitioners rely on Section 416 of the Local Government Code
which provides that an amicable settlement shall have the force and effect of a final
judgment upon the expiration of 10 days from the date thereof, unless repudiated or
nullified by the proper court.  They argue that since no such repudiation or action to
nullify has been initiated, the municipal court has no discretion but to execute the
agreement which has become final and executory.

Petitioners likewise contend that despite the failure of the Paknaan to describe with
certainty the object of the contract, the evidence will show that after the execution of the
agreement, respondent Marcelo Arjona accompanied them to the actual site of the
properties at Sitio Torod, Labney, San Jacinto, Pangasinan and pointed to them the 1
hectare property referred to in the said agreement.

In their Comment, respondents insist that respondent Arjona could not have accompanied
petitioners to the subject land at Torrod, Labney because he was physically incapacitated
and there was no motorized vehicle to transport him to the said place.

The Civil Code contains salutary provisions that encourage and favor compromises and
do not even require judicial approval.  Thus, under Article 2029 of the Civil Code, the
courts must endeavor to persuade the litigants in a civil case to agree upon some fair
compromise. Pursuant to Article 2037 of the Civil Code, a compromise has upon the
parties the effect and authority of res judicata, and this is true even if the compromise is
not judicially approved.  Articles 2039 and 2031 thereof also provide for the suspension
of pending actions and mitigation of damages to the losing party who has shown a sincere
desire for a compromise, in keeping with the Code’s policy of encouraging amicable
settlements.[3]

Cognizant of the beneficial effects of amicable settlements, the Katarungang

Pambarangay Law (P.D. 1508) and later the Local Government Code provide for a
mechanism for conciliation where party-litigants can enter into an agreement in
the barangay level to reduce the deterioration of the quality of justice due to
indiscriminate filing of court cases.  Thus, under Section 416 of the said Code, an
amicable settlement shall have the force and effect of a final judgment of the court upon
the expiration of 10 days from the date thereof, unless repudiation of the settlement has
been made or a petition to nullify the award has been filed before the proper court
Petitioners submit that since the amicable settlement had not been repudiated or
impugned before the court within the 10-day prescriptive period in accordance with
Section 416 of the Local Government Code, the enforcement of the same must be done as
a matter of course and a writ of execution must accordingly be issued by the court.

Generally, the rule is that where no repudiation was made during the 10-day period, the
amicable settlement attains the status of finality and it becomes the ministerial duty of the
court to implement and enforce it. However, such rule is not inflexible for it admits of
certain exceptions.  In Santos v. Judge Isidro,[4] the Court observed that special and
exceptional circumstances, the imperatives of substantial justice, or facts that may have
transpired after the finality of judgment which would render its execution unjust, may
warrant the suspension of execution of a decision that has become final and executory.  In
the case at bar, the ends of justice would be frustrated if a writ of execution is issued
considering the uncertainty of the object of the agreement.  To do so would open the
possibility of error and future litigations.

The Paknaan executed by respondent Marcelo Arjona purports to convey a parcel of land

consisting of more or less 1 hectare to petitioners Quiros and Villegas. Another Paknaan,
prepared on the same date, and executed by one Jose Banda who signified his intention to
vacate the parcel of land he was tilling located at Torrod, Brgy. Labney, San Jacinto,
Pangasinan, for and in behalf of the Arjona family. On ocular inspection however, the
municipal trial court found that the land referred to in the second Paknaan was different
from the land being occupied by petitioners. Hence, no writ of execution could be issued
for failure to determine with certainty what parcel of land respondent intended to convey.

In denying the issuance of the writ of execution, the appellate court ruled that the contract
is null and void for its failure to describe with certainty the object thereof. While we
agree that no writ of execution may issue, we take exception to the appellate court’s
reason for its denial.

Since an amicable settlement, which partakes of the nature of a contract, is subject to the
same legal provisions providing for the validity, enforcement, rescission or annulment of
ordinary contracts, there is a need to ascertain whether the Paknaan in question has
sufficiently complied with the requisites of validity in accordance with Article 1318 of
the Civil Code.[5]

There is no question that there was meeting of the minds between the contracting parties.
In executing the Paknaan, the respondent undertook to convey 1 hectare of land to
petitioners who accepted.  It appears that while the Paknaan was prepared and signed by
respondent Arjona, petitioners acceded to the terms thereof by not disputing its contents
and are in fact now seeking its enforcement.  The object is a 1-hectare parcel of land
representing petitioners’ inheritance from their deceased grandmother. The cause of the
contract is the delivery of petitioners’ share in the inheritance. The inability of the
municipal court to identify the exact location of the inherited property did not negate the
principal object of the contract. This is an error occasioned by the failure of the parties to
describe the subject property, which is correctible by reformation and does not indicate
the absence of the principal object as to render the contract void. It cannot be disputed
that the object is determinable as to its kind, i.e.1 hectare of land as inheritance, and can
be determined without need of a new contract or agreement.[6] Clearly, the Paknaan has
all the earmarks of a valid contract.

Although both parties agreed to transfer one-hectare real property, they failed to include
in the written document a sufficient description of the property to convey.  This error is
not one for nullification of the instrument but only for reformation.

Article 1359 of the Civil Code provides:

When, there having been a meeting of the minds of the parties to a contract, their true
intention is not expressed in the instrument purporting to embody the agreement by
reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for
the reformation of the instrument to the end that such true intention may be expressed.

If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds
of the parties, the proper remedy is not reformation of the instrument but annulment of
the contract.
Reformation is a remedy in equity whereby a written instrument is made or construed so
as to express or conform to the real intention of the parties where some error or mistake
has been committed.[7] In granting reformation, the remedy in equity is not making a new
contract for the parties, but establishing and perpetuating the real contract between the
parties which, under the technical rules of law, could not be enforced but for such
reformation.

In order that an action for reformation of instrument as provided in Article 1359 of the
Civil Code may prosper, the following requisites must concur: (1) there must have been a
meeting of the minds of the parties to the contract; (2) the instrument does not express the
true intention of the parties; and (3) the failure of the instrument to express the true
intention of the parties is due to mistake, fraud, inequitable conduct or accident. [8]

When the terms of an agreement have been reduced to writing, it is considered as

containing all the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the written
agreement, except when it fails to express the true intent and agreement of the parties
thereto, in which case, one of the parties may bring an action for the reformation of the
instrument to the end that such true intention may be expressed.[9]

Both parties acknowledge that petitioners are entitled to their inheritance, hence, the
remedy of nullification, which invalidates the Paknaan, would prejudice petitioners and
deprive them of their just share of the inheritance. Respondent can not, as an
afterthought, be allowed to renege on his legal obligation to transfer the property to its
rightful heirs. A refusal to reform the Paknaan under such circumstances would have the
effect of penalizing one party for negligent conduct, and at the same time permitting the
other party to escape the consequences of his negligence and profit thereby. No person
shall be unjustly enriched at the expense of another.

WHEREFORE, in view of the foregoing, the petition is DENIED.  The Decision dated
March 21, 2003 of the Court of Appeals, which reversed the decision of the Regional
Trial Court and reinstated the decision of the Municipal Trial Court, is AFFIRMED. 
This is without prejudice to the filing by either party of an action for reformation of the
Paknaan executed on January 5, 1997.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 174240, March 20, 2013 ]
SPOUSES LEHNER AND LUDY MARTIRES, PETITIONERS, VS. MENELIA
CHUA, RESPONDENT.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules
of Court seeking to reverse and set aside the Amended Decision, [1] as well as the
Resolutions[2] of the Court of Appeals (CA), dated September 30, 2005, July 5, 2006 and
August 28, 2006, respectively, in CA-G.R. CV No. 76388. The assailed Decision of the CA
reversed and set aside its earlier Decision, dated April 30, 2004, in favor of petitioners.
The July 5, 2006 Resolution denied petitioners' Motion for Reconsideration, while the
August 28, 2006 Resolution denied petitioners' Second Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:

Subject of the instant controversy are twenty-four memorial lots located at the Holy
Cross Memorial Park in Barangay Bagbag, Novaliches, Quezon City. The property, more
particularly described as “Lot: 24 lots, Block 213, Section: Plaza of Heritage-Reg.,” is
covered by Transfer Certificate of Title (TCT) No. 342914. Respondent, together with her
mother, Florencia R. Calagos, own the disputed property. Their co-ownership is
evidenced by a Deed of Sale and Certificate of Perpetual Care, denominated as Contract
No. 31760, which was executed on June 4, 1992. [3]

On December 18, 1995, respondent borrowed from petitioner spouses the amount of
P150,000.00. The loan was secured by a real estate mortgage over the abovementioned
property. Respondent committed to pay a monthly interest of 8% and an additional 10%
monthly interest in case of default. [4] Respondent failed to fully settle her obligation.

Subsequently, without foreclosure of the mortgage, ownership of the subject lots were
transferred in the name of petitioners via a Deed of Transfer.[5]

On June 23, 1997, respondent filed with the Regional Trial Court (RTC) of Quezon City a
Complaint against petitioners, Manila Memorial Park Inc., the company which owns the
Holy Cross Memorial Park, and the Register of Deeds of Quezon City, praying for the
annulment of the contract of mortgage between her and petitioners on the ground that
the interest rates imposed are unjust and exorbitant. Respondent also sought
accounting to determine her liability under the law. She likewise prayed that the
Register of Deeds of Quezon City and Manila Memorial Park, Inc. be directed to
reconvey the disputed property to her.[6]

On November 20, 1998, respondent moved for the amendment of her complaint to
include the allegation that she later discovered that ownership of the subject lots was
transferred in the name of petitioners by virtue of a forged Deed of Transfer and
Affidavit of Warranty. Respondent prayed that the Deed of Transfer and Affidavit of
Warranty be annulled.[7] In their Manifestation dated January 25, 1999, petitioners did
not oppose respondent's motion.[8] Trial ensued.

After trial, the RTC of Quezon City rendered a Decision in favor of petitioners, the
dispositive portion of which reads, thus:
 Wherefore, premises considered, judgment is hereby rendered against Menelia
R. Chua and in favor of the Sps. Lehner Martires and Ludy Martires; and Manila
Memorial Park Cemetery, Inc. as follows:

1. The Complaint is denied and dismissed for lack of merit;

2. The counterclaims are granted as follows:

a. Menelia R. Chua is ordered to pay the Sps. Martires the amount of P100,000.00
as moral damages; the amount of P50,000.00 as exemplary damages; and the
amount of P30,000.00 as reasonable attorney’s fees plus costs of suit.

b. Menelia R. Chua is ordered to pay Manila Memorial Park Cemetery, Inc. the
amount of P30,000.00 as reasonable attorney's fees plus costs of suit.

SO ORDERED.[9]

On appeal, the CA affirmed, with modification, the judgment  of the RTC, disposing as
follows:

WHEREFORE,  premises considered, the instant appeal is hereby DENIED for lack

of merit, and the decision of the trial court dated 03 August 2002 is
hereby AFFIRMED with MODIFICATION as to the amount of moral and exemplary
damages, and attorney's fees. Plaintiff-appellant Menelia R. Chua is hereby ordered to
pay the defendant-appellees Spouses Martires the amount of P30,000.00 as moral
damages; P20,000.00 as exemplary damages; and attorney's fees of P10,000.00 plus
costs of suit.

Insofar as defendant-appellee Manila Memorial Park Cemetery, Inc. is concerned, the

attorney's fees awarded is reduced to P10,000.00 plus costs of suit.

SO ORDERED.[10]

The CA ruled that respondent voluntarily entered into a contract of loan and that the
execution of the Deed of Transfer is sufficient evidence of petitioners' acquisition of
ownership of the subject property.

Respondent filed a Motion for Reconsideration. [11] Petitioners opposed it.[12]

On September 30, 2005, the CA promulgated its assailed Amended Decision with the
following dispositive portion:

WHEREFORE, the Court grants the movant's Motion for Reconsideration.

Accordingly, the decision of this Court dated April 30, 2004 in CA-G.R. CV No. 76388,
which had affirmed the judgment of the Regional Trial Court of Quezon City, Branch 221,
in Civil Case No. Q-97-31408, is REVERSED and SET ASIDE, and it is hereby declared that:
(1) The assailed decision dated August 3, 2002 of the Regional Trial Court of
Quezon City Branch 221 in Civil Case No. Q-97-31408 is hereby Reversed with the
following MODIFICATIONS, to wit:
(1) The Deed of Transfer dated July 3, 1996, as well as the Affidavit of Warranty,
are hereby declared void ab initio;

(2) The loan of P150,000.00 is hereby subject to an interest of 12% per annum.

(3) The Manila Memorial Park Cemetery, Inc. and the Register of Deeds of Quezon City
[are] hereby directed to cancel the registration or annotation of ownership of the
spouses Martires on Lot: 24 lots, Block 213, Section: Plaza Heritage – Regular, Holy Cross
Memorial Park, being a portion of Transfer Certificate of Title No. 342914 issued by the
Register of Deeds of Quezon City, and revert registration of ownership over the same in
the name of appellant Menelia R. Chua, and Florencia R. Calagos.

(4) The movant, Menelia R. Chua, is hereby ordered to pay the spouses Martires the
amount of P150,000.00 plus interest of 12% per annum computed from December 18,
1995 up to the time of full payment thereof and, after deducting payments made in the
total amount of P80,000.00, the same shall be paid within ninety (90) days from the
finality of this decision. In case of failure to pay the aforesaid amount and the accrued
interests from the period hereinstated, the property shall be sold at public auction to
satisfy the mortgage debt and costs, and if there is an excess, the same is to be given to
the owner.
No costs.
SO ORDERED.[13]

The CA reconsidered its findings and concluded that the Deed of Transfer which, on its
face, transfers ownership of the subject property to petitioners, is, in fact, an equitable
mortgage. The CA held that the true intention of respondent was merely to provide
security for her loan and not to transfer ownership of the property to petitioners. The
CA so ruled on the basis of its findings that: (1) the consideration, amounting to
P150,000.00, for the alleged Deed of Transfer is unusually inadequate, considering that
the subject property consists of 24 memorial lots; (2) the Deed of Transfer was executed
by reason of the same loan extended by petitioners to respondent; (3) the Deed of
Transfer is incomplete and defective; and (4) the lots subject of the Deed of Transfer are
one and the same property used to secure respondent's P150,000.00 loan from
petitioners.

Petitioners filed a Motion for Reconsideration, [14] but the CA denied it in its Resolution
dated July 5, 2006.

On July 26, 2006, petitioners filed a Second Motion for Reconsideration, [15] but again, the
CA denied it via its Resolution dated August 28, 2006.

Hence, the present petition based on the following grounds:

A.  THE COURT OF APPEALS PATENTLY ERRED IN NOT UPHOLDING THE DEED OF
TRANSFER EXECUTED BY THE RESPONDENT IN FAVOR OF THE PETITIONERS BY RULING
THAT:

1. The Deed of Transfer executed by respondent in favor of petitioners over the

subject property was not entered in the Notarial Book of Atty. Francisco Talampas and
reported in the Notarial Section of the Regional Trial Court of Makati City.

2. The Deed of Transfer was not duly notarized by Atty. Francisco Talampas inasmuch as
there was no convincing proof that respondent appeared before Notary Public Atty.
Talampas.

B.  THE COURT OF APPEALS PATENTLY ERRED IN RULING THAT THE DEED OF TRANSFER
EXECUTED BETWEEN THE RESPONDENT AND THE PETITIONERS CONSTITUTED AN
EQUITABLE MORTGAGE CONSIDERING THAT:
1. Said issue was not raised in any pleading in the appellate and trial courts.
2. Respondent herself admitted that a separate mortgage was executed to secure the
loan.[16]

The petition lacks merit.

At the outset, the instant petition should be denied for being filed out of time. 
Petitioners admit in the instant petition that: (1) on July 18, 2006, they received a copy
of the July 5, 2006 Resolution of the CA which denied their Motion for Reconsideration
of the assailed Amended Decision; (2) on July 26, 2006, they filed a Motion  to Admit
Second Motion for Reconsideration attaching thereto the said Second Motion for 
Reconsideration; (3) on September 5, 2006, they received a copy of the August 28, 2006
Resolution of the CA which denied their Motion to Admit as well as their Second Motion
for Reconsideration; and (4) they filed the instant petition on October 20, 2006.

Section 2, Rule 45 of the Rules of Court provides that a petition for review
on certiorari under the said Rule “shall be filed within fifteen (15) days from notice of
the judgment or final order or resolution appealed from or of the denial of the
petitioner's motion for new trial or reconsideration filed in due time after notice of the
judgment.” Relative thereto, Section 2, Rule 52 of the same Rules provides that “[n]o
second motion for reconsideration of a judgment or final resolution by the same party
shall be entertained.”  Based on the abovementioned dates, the start of the 15-day
period for the filing of this petition should have been reckoned from July 18, 2006, the
time of petitioners' receipt of the CA Resolution denying their Motion for
Reconsideration, and not on September 5, 2006,  the date when they received the CA
Resolution denying their Second Motion for Reconsideration. Thus, petitioners should
have filed the instant petition not later than August 2, 2006. It is wrong for petitioners
to reckon the 15-day period for the filing of the instant petition from the date when
they received the copy of the CA Resolution denying their Second Motion for 
Reconsideration. Since a second motion for reconsideration is not allowed, then
unavoidably, its filing did not toll the running of the period to file an appeal by certiorari.
[17]
 Petitioners made a critical mistake in waiting for the CA to resolve their second
motion for reconsideration before pursuing an appeal.

Perfection of an appeal within the reglementary period is not only mandatory but also
jurisdictional.[18] For this reason, petitioners' failure to file this petition within the 15-day
period rendered the assailed Amended CA Decision and Resolutions final and executory,
thus, depriving this Court of jurisdiction to entertain an appeal therefrom. [19] On this
ground alone, the instant petition should be dismissed.

In any case, even granting, arguendo, that the present petition is timely filed, the Court
finds no cogent reason to depart from the findings and conclusions of the CA in its
disputed Amended Decision.

Anent the first assigned error, petitioners are correct in pointing out that notarized
documents carry evidentiary weight conferred upon them with respect to their due
execution and enjoy the presumption of regularity which may only be rebutted by
evidence so clear, strong and convincing as to exclude all controversy as to falsity.
[20]
 However, the presumptions that attach to notarized documents can be affirmed only
so long as it is beyond dispute that the notarization was regular. [21] A defective
notarization will strip the document of its public character and reduce it to a private
instrument.[22] Consequently, when there is a defect in the notarization of a document,
the clear and convincing evidentiary standard normally attached to a duly-notarized
document is dispensed with, and the measure to test the validity of such document is
preponderance of evidence.[23]

In the present case, the CA has clearly pointed out the dubious circumstances and
irregularities attendant in the alleged notarization of the subject Deed of Transfer, to
wit: (1) the Certification[24] issued by the Clerk of Court of the Notarial Section of the RTC
of Makati City which supposedly attested that a copy of the subject Deed of Transfer  is
on file with the said court, was contradicted by the Certification [25] issued by the
Administrative Officer of the Notarial Section of the same office as well as by the
testimony of the court employee who prepared the Certification issued by the Clerk of
Court, to the effect that the subject Deed of Transfer cannot, in fact, be found in their
files; (2) respondent's categorical denial that she executed the subject Deed of Transfer;
and (3) the subject document did not state the date of execution and lacks the marital
consent of respondent's husband.

Indeed, petitioners' heavy reliance on the Certification issued by the notary public who
supposedly notarized the said deed, as well as the Certification issued by the Clerk of
Court of the Notarial Section of the RTC of Makati City, is misplaced for the following
reasons: first, the persons who issued these Certifications were not presented as
witnesses and, as such, they could not be cross-examined with respect to the
truthfulness of the contents of their Certifications; second, as mentioned above, these
Certifications were contradicted by the  Certification issued by the Administrative Officer
of the Notarial Section of the RTC of Makati City as well as by the admission, on cross-
examination, of the clerk who prepared the Certification of the Clerk of Court,  that their
office cannot, in fact, find a copy of the subject Deed of Transfer in their files;
[26]
 and third, the further admission of the said clerk that the Certification, which was
issued by the clerk of court and relied upon by petitioners, was not based on documents
existing in their files, but was simply based on the Certification issued by the notary
public who allegedly notarized the said Deed of Transfer. [27]

Assuming further that the notarization of the disputed Deed of Transfer was regular, the
Court, nonetheless, is not persuaded by petitioners' argument that such Deed is a
sufficient evidence of the validity of the agreement between petitioners and
respondent.

While indeed a notarized document enjoys the presumption of regularity, the fact that a
deed is notarized is not a guarantee of the validity of its contents. [28] The presumption is
not absolute and may be rebutted by clear and convincing evidence to the contrary.
[29]
 In the present case, the presumption cannot be made to apply, because aside from
the regularity of its notarization, the validity of the contents and execution of the
subject Deed of Transfer was challenged in the proceedings below where its prima
facie validity was subsequently overthrown by the questionable circumstances
attendant in its supposed execution. These circumstances include: (1) the alleged
agreement between the parties that the ownership of the subject property be simply
assigned to petitioners instead of foreclosure of the contract of mortgage which was
earlier entered into by them; (2) the Deed of Transfer was executed by reason of the
loan extended by petitioners to respondent, the amount of the latter's outstanding
obligation being the same as the amount of the consideration for the assignment of
ownership over the subject property; (3) the inadequacy of the consideration; and (4)
the claim of respondent that she had no intention of transferring ownership of the
subject property to petitioners.

Based on the foregoing, the Court finds no cogent reason to depart from the findings of
the CA that the agreement between petitioners and respondent is, in fact, an equitable
mortgage.

An equitable mortgage has been defined as one which, although lacking in some
formality, or form or words, or other requisites demanded by a statute, nevertheless
reveals the intention of the parties to charge real property as security for a debt, there
being no impossibility nor anything contrary to law in this intent.[30]

One of the circumstances provided for under Article 1602 of the Civil Code, where a
contract shall be presumed to be an equitable mortgage, is “where it may be fairly
inferred that the real intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation.” In the instant case, it
has been established that the intent of both petitioners and respondent is that the
subject property shall serve as security for the latter's obligation to the former. As
correctly pointed out by the CA, the circumstances surrounding the execution of the
disputed Deed of Transfer would show that the said document was executed to
circumvent the terms of the original agreement and deprive respondent of her
mortgaged property without the requisite foreclosure.

With respect to the foregoing discussions, it bears to point out that in Misena v.
Rongavilla,[31] a case which involves a factual background similar to the present case, this
Court arrived at the same ruling. In the said case, the respondent mortgaged a parcel of
land to the petitioner as security for the loan which the former obtained from the latter.
Subsequently, ownership of the property was conveyed to the petitioner via a Deed of
Absolute Sale. Applying Article 1602 of the Civil Code, this Court ruled in favor of the
respondent holding that the supposed sale of the property was, in fact, an equitable
mortgage as the real intention of the respondent was to provide security for the loan
and not to transfer ownership over the property.

Since the original transaction between the parties was a mortgage, the subsequent
assignment of ownership of the subject lots to petitioners without the benefit of
foreclosure proceedings, partakes of the nature of a pactum  commissorium, as
provided for under Article 2088 of the Civil Code.

Pactum commissorium is a stipulation empowering the creditor to appropriate the thing

given as guaranty for the fulfillment of the obligation in the event the obligor fails to live
up to his undertakings, without further formality, such as foreclosure proceedings, and a
public sale.[32]

In the instant case, evidence points to the fact that the sale of the subject property, as
proven by the disputed Deed of Transfer, was simulated to cover up the automatic
transfer of ownership in petitioners' favor. While there was no stipulation in the
mortgage contract which provides for petitioners' automatic appropriation of the
subject mortgaged property in the event that respondent fails to pay her obligation, the
subsequent acts of the parties and the circumstances surrounding such acts point to no
other conclusion than that petitioners were empowered to acquire ownership of the
disputed property without need of any foreclosure.

Indeed, the Court agrees with the CA in not giving credence to petitioners' contention in
their Answer filed with the RTC that respondent offered to transfer ownership of the
subject property in their name as payment for her outstanding obligation. As this Court
has held, all persons in need of money are liable to enter into contractual relationships
whatever the condition if only to alleviate their financial burden albeit temporarily.
[33]
 Hence, courts are duty-bound to exercise caution in the interpretation and resolution
of contracts lest the lenders devour the borrowers like vultures do with their prey. [34] 
Aside from this aforementioned reason, the Court cannot fathom why respondent
would agree to transfer ownership of the subject property, whose value is much higher
than her outstanding obligation to petitioners. Considering that the disputed property
was mortgaged to secure the payment of her obligation, the most logical and practical
thing that she could have done, if she is unable to pay her debt, is to wait for it to be
foreclosed. She stands to lose less of the value of the subject property if the same is
foreclosed, rather than if the title thereto is directly transferred to petitioners. This is so
because in foreclosure, unlike in the present case where ownership of the property was
assigned to petitioners, respondent can still claim the balance from the proceeds of the
foreclosure sale, if there be any. In such a case, she could still recover a portion of the
value of the subject property rather than losing it completely by assigning its ownership
to petitioners.

As to the second assigned error, the Court is not persuaded by petitioners' contention
that the issue of whether or not the subject Deed of Transfer is, in fact, an equitable
mortgage was not raised by the latter either in the RTC or the CA.

It is true that, as a rule, no issue may be raised on appeal unless it has been brought
before the lower tribunal for its consideration. [35] Higher courts are precluded from
entertaining matters neither alleged in the pleadings nor raised during the proceedings
below, but ventilated for the first time only in a motion for reconsideration or on
appeal.[36] However, as with most procedural rules, this maxim is subject to exceptions.
[37]
 In this regard, the Court's ruling in Mendoza v. Bautista[38] is instructive, to wit:

x x x Indeed, our rules recognize the broad discretionary power of an appellate

court to waive the lack of proper assignment of errors and to consider errors not
assigned. Section 8 of Rule 51 of the Rules of Court provides:
SEC. 8 Questions that may be decided. - No error which does not affect the
jurisdiction over the subject matter or the validity of the judgment appealed from or the
proceedings therein will be considered, unless stated in the assignment of errors, or
closely related to or dependent on an assigned error and properly argued in the brief,
save as the court may pass upon plain errors and clerical errors.
Thus, an appellate court is clothed with ample authority to review rulings even if
they are not assigned as errors in the appeal in these instances: (a) grounds not assigned
as errors but affecting jurisdiction 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 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; and (f) matters not assigned as errors on appeal but upon which the
determination of a question properly assigned, is dependent. [39]

In the present case, petitioners must be reminded that one of the main issues raised
by respondent in her appeal with the CA is the validity and due execution of the
Deed of Transfer which she supposedly executed in petitioners' favor. The Court
agrees with respondent that, under the factual circumstances obtaining in the
instant case, the determination of the validity of the subject Deed of Transfer would
necessarily entail or involve an examination of the true nature of the said
 agreement. In other words, the matter of validity of the disputed Deed of Transfer
and the question of whether the agreement evidenced by such Deed was, in fact, an
equitable mortgage are issues which are closely related, which can, thus, be resolved
jointly by the CA.

WHEREFORE, the instant petition is DENIED. The assailed Amended Decision and
Resolutions of the Court of Appeals, dated September 30, 2005, July 5, 2006 and
August 28, 2006, respectively, in CA-G.R. CV No. 76388, are AFFIRMED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 212731, September 06, 2017 ]
SPOUSES FIRMO S. ROSARIO AND AGNES ANNABELLE DEAN-
ROSARIO, PETITIONERS, VS. PRISCILLA P. ALVAR, RESPONDENT.

DECISION

DEL CASTILLO, J.:

"Under the doctrine of conclusiveness of judgment, facts and issues actually and
directly resolved in a former suit cannot again be raised in any future case between the
same parties, even if the latter suit may involve a different claim or cause of action." [1]

This Petition for Review on Certiorari[2] under Rule 45 of the Rules of Court assails the
May 27, 2014 Decision[3] of the Court of Appeals (CA) in CA-G.R.CV No. 98928.

Factual Antecedents

On separate dates in 1989, petitioner Agnes Annabelle Dean-Rosario (Agnes) borrowed

from respondent Priscilla Alvar (Priscilla) a total of P600,000.00, secured by real estate
mortgages over two parcels of land covered by Transfer Certificates of Title Nos. 167438
(residence of petitioner spouses Agnes and Firmo Rosario) and 167439 (a five-door
rental apartment).[4]
In December 1990, the mortgages were discharged. [5]

On March 16, 1992 and July 17, 1992, Agnes executed two Deeds of Absolute Sale over
the two lots in favor of Priscilla's daughter, Evangeline Arceo (Evangeline), for the
amount of P900,000.00 each.[6] Evangeline later sold the lots to Priscilla also for the
price of P900,000.00 each.[7]

On April 27, 1994, Priscilla sent a demand letter to petitioner spouses Rosario asking
them to vacate Lot 1.[8] This prompted petitioner spouses Rosario to file before the
Regional Trial Court (RTC) of Makati City a Complaint for Declaration of Nullity of
Contract of Sale and Mortgage, Cancellation of Transfer Certificates of Title and Issuance
of new TCTs with Damages, docketed as Civil Case No. 94-1797, against Priscilla.
[9]
 Petitioner spouses Rosario alleged that Priscilla deceived Agnes into signing the Deeds
of Absolute Sale in favor of Evangeline, as Agnes merely intended to renew the
mortgages over the two lots. [10]

Priscilla, in turn, filed with the RTC a Complaint for Recovery of Possession, docketed as
Civil Case No. 96-135.[11] She claimed that she is the absolute owner of the subject lots
and that Agnes sold the lots because she was in dire need of money. [12]

The cases were consolidated and on April 4, 2003, the RTC rendered a Decision granting
Priscilla's complaint for recoveiy of possession while denying petitioner spouses
Rosario's complaint for declaration of nullity of contract of sale. [13] The dispositive
portion of the Decision reads:
WHEREFORE, premises considered, Civil Case No. 94-1797 is ordered dismissed
for lack of merit Defendants' counterclaims are also ordered dismissed.

[Respondent] having proven her claim in Civil Case No. 96-135, [petitioner spouses
Rosario] are hereby ordered to vacate die bouse and lot located at No. 2703 Apolinario
comer General Capinpin Streets, Bangkal, Makati City, covered by TCT No. 188995 and
restore possession thereof to its rightful owner, [respondent].

SO ORDERED.[14]
On appeal, the CA reversed the April 4, 2003 Decision of the RTC. In its November
15, 2006 Decision,[15] the CA ruled that although the transfers from Agnes to Priscilla
were identified as absolute sales, the contracts are deemed equitable mortgages
pursuant to Article 1602[16] of the Civil Code.[17] Thus, the CA disposed of the case in this
wise:
In view of these, We resolve [petitioner spouses'] prayers in the following
manner:

Anent their prayer for the issuance of new certificates of titles, We hold the cancellation
of [petitioner Agnes'] title over the 2 lots was void. Titles to the subject lots, which had
supposedly been transferred to [Evangeline] and later to [Priscilla], actually remained
with [petitioner Agnes], as owner-mortgagor, conformably with the well-established
doctrine that the mortgagee does not automatically become the owner of the
mortgaged property as the ownership thereof remains with the mortgagor. Hence, it is
not necessary for Us to order the issuance of new titles under the name of [petitioner
Agnes]. Accordingly, TCT No. 167438 and TCT No. 167439 issued under the name of
[petitioner Agnes] must be reinstated, while TCT No. 188920 and TCT No. 188995 issued
in the name of [Priscilla] must be nullified.

Anent their prayer for the nullification of the Deeds of Absolute Sale and the Mortgage,
We resolve to deny the same. Although the subject deeds of sale in favor of [Evangeline]
were actually for mortgage, said type of simulation of contracts does not result in the
nullification of the deeds but requires the reformation of the instrument, pursuant to
Article 1365 of the Civil Code.

Moreover, as [petitioner spouses Rosario] admitted they mortgaged the 2 lots to

[Priscilla] as security for the payment of their loans. Absent any proof that [petitioner
spouses Rosario] had fully paid their loans to [Priscilla], [Priscilla] may seek the
foreclosure of the 2 lots if [petitioner spouses Rosario] failed to pay their loans of P1.8
Million, the amounts appearing in the Deeds of Absolute Sale.

WHEREFORE, the Appeal is GRANTED. The assailed Decision dated April 4, 2003 of the
Regional Trial Court of Makati City, Branch 150, in Civil Cases Nos. 94-1797 & 96-135, is
hereby REVERSED and SET ASIDE.

A new one is hereby entered ordering the reinstatement of TCT No. 167438 and TCT No.
167439 issued under the name of [petitioner] Agnes Dean-Rosario aid ordering the
cancellation of TCT No. 188920 and TCT No. 188995 issued under the name of [Priscilla].
[18]

Since the parties did not file a motion for reconsideration or an appeal, the CA
Decision became final and executory. [19]

On October 17, 2007, Priscilla sent a letter to Agnes demanding the payment of her
outstanding obligation amounting to P1.8 million. [20] Due to the failure or refusal of
petitioner spouses Rosario to heed the demand, Priscilla filed before the RTC of Makati,
Branch 148, a Complaint[21] for Judicial Foreclosure of Real Estate Mortgage, docketed as
Civil Case No. 07-997.[22]

Petitioner spouses Rosario moved for the dismissal of the Complaint, but the RTC
denied the same.[23]

They then filed a Petition for Certiorari before the CA, docketed as CA-G.R. SP No.
107484, questioning the denial of their Motion to Dismiss. [24]

On May 25, 2010, the CA rendered a Decision dismissing the Petition for lack of merit. [25]

On September 5, 2011, the Supreme Court issued a Resolution denying the Petition for
Review on Certiorari filed by petitioner spouses Rosario. [26]

Meanwhile, on May 5, 2009, Priscilla filed a Motion to Declare Defendants in Default for
the failure of petitioner spouses Rosario to file an answer within the reglernentary
period, which the RTC granted.[27]

Ruling of the Regional Trial Court

On January 25, 2012, the RTC rendered a Decision[28] in favor of Priscilla, the dispositive
portion of which reads:
WHEREFORE, premises considered, decision is hereby rendered ordering
[petitioner] Spouses Firmo S. Rosario and Agnes Annabelle Dean-Rosario to pay the
[respondent] Priscilla Alvar, jointly and severally, the following sums:

1. Php1,800,000.00 as the aggregate amount of [petitioner spouses Agnes and Firmo

Rosario's] obligation to [Priscilla], plus 12% legal interest per annum from the time of
demand on October 18, 2007 until the obligation is fully paid;

2. Php62,903.88 as reimbursement for payment of real property taxes due on the

subject lots;

3. Php200,000.00 as attorney's fees and litigation expenses in the amount of

Php200,000.00

All the above must be paid within a period of not less than ninety (90) days nor more
than one hundred twenty (120) days from the entry of judgment. In default of such
payment, the two (2) parcels of land covered by TCT Nos. 167438 and 167439 subject
matter of the suit including its improvements shall be sold to realize the mortgage debt
and costs, in the manner and under the regulations that govern sales of real estate
under execution.

SO ORDERED.[29]
Aggrieved, petitioner spouses Rosario appealed to the CA.

Ruling of the Court of Appeals

On May 27, 2014, the CA affirmed the January 25, 2012 Decision of the RTC with
modification that: (1) the interest rate imposed shall be 6% per annum in accordance
with Bangko Sentral ng Pilipinas (BSP) Circular No. 799, Series of 2013; and (2) the
attorney's fees and litigation expenses shall be reduced to P50,000.00. [30]

Issues

Hence, petitioner spouses Rosario filed the instant Petition with the following issues:
I.

WHETHER THE HONORABLE [CA] COMMITTED GRAVE ABUSE OF DISCRETION IN

HOLDING THAT A REFORMATION OF INSTRUMENT BETWEEN THE PARTIES IS NO
LONGER NECESSARY DESPITE AN EARLIER RULING BY THE HONORABLE [CA] THAT
REFORMATION IS REQUIRED ESPECIALLY BECAUSE:

[Respondent] had no personality to file a complaint for judicial foreclosure. To allow this
) would violate the ruling of this Honorable Court in Borromeo v. Court of Appeals, 550 SCRA 269
and Article 1311 of the New Civil Code.
The obligation of the petitioner [spouses Rosario] in the amount of P1,800,000.00 has no
) legal and factual basis.
The original real estate mortgages between the parties have been cancelled or discharged.
) The alleged new Deeds of Sale to the daughter of the [respondent] are fake and simulated.

II.

WHETHER THE RULING OF THE [CA] IS CONTRARY TO THE CASE OF GO V. BACARON, 472
SCRA 339.

III.

WHETHER THE HONORABLE [CA] COMMITTED GRAVE ABUSE OF DISCRETION IN NOT

HOLDING THAT A REFORMATION OF THE INSTRUMENTS CAN BE MADE PRIOR TO
FORECLOSURE PROCEEDINGS (AS A RESULT OF THE RULING THAT THE CONTRACT
BETWEEN TOE PARTIES SHOULD BE TREATED AS AN EQUITABLE MORTGAGE).[31]
Simply put, the issue is whether the CA erred in dismissing the appeal.

Petitioner spouses Rosario's Arguments

Petitioner spouses Rosario contend that Priscilla had no legal personality to institute the
judicial foreclosure proceedings as the Deeds of Absolute Sale, which were deemed
equitable mortgages, were executed by them in favor of Evangeline, not Priscilla.
[32]
 They also claim that the obligation in the amount of P1.8 million has no legal and
factual bases as the only loan they obtained was in the amount of P600,000.00. [33] Lastly,
they insist that before the subject lots can be judicially foreclosed, a reformation of the
fake and simulated Deeds of Absolute Sale must first be done to enable them to present
documentary and parol evidence.[34]

Respondent's Arguments

Priscilla, on the other hand, maintains that she has a legal personality to institute the
foreclosure proceedings pursuant to the November 15, 2006 Decision. [35] The
indebtedness of petitioner spouses Rosario was also established in the said Decision,
which has long attained finality.[36] She asseverates that the loan has not been paid and
that the judicial foreclosure is not based on the old mortgages that have been
discharged, but on the Deeds of Absolute Sale, which were considered as equitable
mortgages in the November 15, 2006 Decision. [37] As to the reformation of the
instruments, Priscilla asserts that there is no need for such reformation as the
declaration in the November 15, 2006 Decision is sufficient. [38]

Our Ruling

The Petition lacks merit.

There is conclusiveness of judgment as to the issues pertaining to the existence of the

loan and the legal personality of Priscilla to file a case for judicial foreclosure.

At the outset, it must be pointed out that the November 15, 2006 Decision of the CA in
CA-G.R. CV No. 81350, from which this case arose, has attained finality due to the failure
of the parties to file a motion for reconsideration or an appeal. As such, the factual
findings and conclusions in the November 15, 2006 Decision may no longer be disputed
by petitioner spouses Rosario as res judicata by conclusiveness of judgment, which bars
them from challenging the same issues.

Unlike res judicata by prior judgment, where there is identity of parties, subject matter,
and causes of action, there is only identity of parties and subject matter in res
judicata by conclusiveness of judgment.[39] Since there is no identity of cause of action,
the judgment in the first case is conclusive only as to those matters actually and directly
controverted and determined.[40] Thus, there is res judicata by conclusiveness of
judgment when all the following elements are present:
(1) the judgment sought to bar the new action must be final;

(2) the decision must have been rendered by a court having jurisdiction over the subject
matter and the parties;

(3) the disposition of the case must be a judgment on the merits; and

(4) there must be as between the first and second action, identity of parties, but not
identity of causes of action.[41]
 In this case, all the elements are present: first, the November 15, 2006 Decision
has attained finality; second, the said decision was rendered by a court having
jurisdiction over the subject matter and the parties; third, the said decision disposed of
the case on the merits; and fourth, there is, as between the previous case and the
instant case, an identity of parties.

Since there is conclusiveness of judgment in this case, petitioner spouses Rosario are
estopped from raising issues that were already adjudged in the November 15, 2006
Decision as "the dictum laid down in the earlier final judgment is conclusive and
continues to be binding between the parties, their privies and successors-in-interest, as
long as the facts on which that judgment was predicated continue to be the facts of the
case or incident before the court in a later case x x x." [42] In short, "the binding effect and
enforceability of that earlier dictum can no longer be re-litigated in a later case since the
issue has already been resolved and finally laid to rest in the earlier case." [43]

Consequently, there is no need for Us to delve into the issues raised by petitioner
spouses Rosario pertaining to the existence of the loan and the legal personality of
Priscilla to file a case for judicial foreclosure as the November 15, 2006 Decision already
established the existence of the loan in the amount of P1.8 million [44] and recognized the
legal personality of Priscilla to foreclose the subject property, as she was the one who
loaned spouses Rosario the amount of P1.8 million. [45]

The pronouncement in the November 15, 2006 Decision that the parties' intention was
to execute an equitable mortgage is sufficient reformation of such instrument.

The only issue left for us to determine is whether a reformation of the contract is
required before the subject lots may be foreclosed.

We rule in the negative.

Reformation of an instrument is a remedy in equity where a written instrument already

executed is allowed by law to be reformed or construed to express or conform to the
real intention of the parties. [46] The rationale of the doctrine is that it would be unjust
and inequitable to allow the enforcement of a written instrument that does not express
or reflect the real intention of the parties. [47]
In the November 15, 2006 Decision, the CA denied petitioner spouses' Complaint for
declaration of nullity of contract of sale on the ground that what was required was the
reformation of the instruments, pursuant to Article 1365 [48] of the Civil Code.[49] In ruling
that the Deeds of Absolute Sale were actually mortgages, [50] the CA, in effect, had
reformed the instruments based on the true intention of the parties. Thus, the filing of a
separate complaint for reformation of instrument is no longer necessary because it
would only be redundant and a waste of time.

Besides, in the November 15, 2006 Decision, the CA already declared that absent any
proof that petitioner spouses Rosario had fully paid their obligation, respondent may
seek the foreclosure of the subject lots. [51]

In view of the foregoing, we find no error on the part of the CA in ruling that a separate
action for reformation of instrument is no longer necessary as the declaration in the
November 15, 2006 Decision that the parties' intention was to execute an equitable
mortgage is sufficient reformation of such instrument.

WHEREFORE, the Petition is hereby DENIED. The assailed May 27, 2014 Decision of the
Court of Appeals in CA-G.R. CV No. 98928 is hereby AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 185530, April 18, 2018 ]
MAKATI TUSCANY CONDOMINIUM CORPORATION, PETITIONER, VS.
MULTI-REALTY DEVELOPMENT CORPORATION, RESPONDENT.

DECISION

LEONEN, J.:
Reformation of an instrument may be allowed if subsequent and
contemporaneous acts of the parties show that their true
intention was not accurately reflected in the written instrument.

This resolves the Petition for Review on Certiorari[1] filed by

Makati Tuscany Condominium Corporation (Makati Tuscany),
assailing the April 28, 2008 Amended Decision[2] and December
4, 2008 Resolution[3] of the Court of Appeals in CA-G.R. CV
No. 44696.

In 1974, Multi-Realty Development Corporation (Multi-Realty)

built Makati Tuscany, a 26-storey condominium building
located at the corner of Ayala Avenue and Fonda Street, Makati
City.[4]

Makati Tuscany had a total of 160 units, with 156 ordinary units
from the 2nd to the 25th floors and four (4) penthouse units on the
26th floor.[5] It also had 270 parking slots which were
apportioned as follows: one (1) parking slot for each ordinary
unit; two (2) parking slots for each penthouse unit; and the
balance of 106 parking slots were allocated as common areas. [6]

On July 30, 1975, Multi-Realty, through its president Henry Sy,

Sr., executed and signed Makati Tuscany's Master Deed and
Declaration of Restrictions (Master Deed),[7] which was
registered with the Register of Deeds of Makati in 1977.[8]

Sometime in 1977, pursuant to Republic Act No. 4726, or the

Condominium Act, Multi-Realty created and incorporated
Makati Tuscany Condominium Corporation (MATUSCO) to
hold title over and manage Makati Tuscany's common areas.
That same year, Multi-Realty executed a Deed of Transfer of
ownership of Makati Tuscany's common areas to MATUSCO.[9]

On April 26, 1990, Multi-Realty filed a complaint for damages

and/or reformation of instrument with prayer for temporary
restraining order and/or preliminary injunction against
MATUSCO. This complaint was docketed as Civil Case No. 90-
1110 and raffled to Branch 59 of Makati Regional Trial Court.[10]

Multi-Realty alleged in its complaint that of the 106 parking

slots designated in the Master Deed as part of the common areas,
only eight (8) slots were actually intended to be guest parking
slots; thus, it retained ownership of the remaining 98 parking
slots.[11]

Multi-Realty claimed that its ownership over the 98 parking

slots was mistakenly not reflected in the Master Deed "since the
documentation and the terms and conditions therein were all of
first impression,"[12] considering that Makati Tuscany was one of
the first condominium developments in the Philippines.[13]

On October 29, 1993, the Regional Trial Court[14] dismissed

MultiRealty's complaint. It noted that Multi-Realty itself
prepared the Master Deed and Deed of Transfer; therefore, it
was unlikely that it had mistakenly included the 98 parking slots
among the common areas transferred to MATUSCO. It also
emphasized that Multi-Realty's prayer for the reformation of the
Master Deed could not be granted absent proof that MATUSCO
acted fraudulently or inequitably towards Multi-Realty. Finally,
it ruled that Multi-Realty was guilty of estoppel by deed.
[15]
 The fallo of its Decision read:
 Premises considered, this case is dismissed. [MATUSCO's] counterclaim is likewise
dismissed the same not being compulsory and no filing fee having been paid. [Multi-
Realty] is however ordered to pay [MATUSCO's] attorney's fees in the amount of
P50,000.00

Cost against plaintiff.

SO ORDERED.[16]
Both parties appealed the Regional Trial Court Decision to the Court of Appeals.
On August 21, 2000, the Court of Appeals[17] dismissed both appeals on the ground of
prescription.

In dismissing Multi-Realty's appeal, the Court of Appeals held that an action for
reformation of an instrument must be brought within 10 years from the execution of
the contract. As to the dismissal of MATUSCO's appeal, the Court of Appeals ruled that
its claim was based on a personal right to collect a sum of money, which had a
prescriptive period of four (4) years, and not based on a real right, with a prescriptive
period of 30 years.[18]

The fallo of the Court of Appeals August 21, 2000 Decision read:

WHEREFORE, foregoing premises considered, no merit in fact and in law is hereby
ORDERED DISMISSED, and the judgment of the trial court is MODIFIED by deleting the
award of attorney's fees not having been justified but AFFIRMED as to its Order
dismissing both the main complaint of [Multi-Realty] and the counterclaim of
[MATUSCO]. With costs against both parties.

SO ORDERED.[19]
Multi-Realty moved for reconsideration, [20] but its motion was denied in the Court
of Appeals January 18, 2001 Resolution. [21] It then filed a petition for review [22] before
this Court.

On June 16, 2006, this Court in Multi-Realty Development Corporation v. The Makati
Tuscany Condominium Corporation[23] granted Multi-Realty's petition, set aside the
assailed Court of Appea]s August 21, 2000 Decision, and directed the Court of Appeals
to resolve Multi-Realty's appeal.
Multi-Realty Development Corporation ruled that the Court of Appeals should have
resolved the appeal on the merits instead of motu proprio resolving the issue of
whether or not the action had already prescribed, as the issue of prescription was never
raised by the parties before the lower courts. [24]

Nonetheless, Multi-Realty Development Corporation held that even if prescription was

raised as an issue, the Court of Appeals still erred in dismissing the case because Multi-
Realty's right to file an action only accrued in 1989 when MATUSCO denied Multi-
Realty's ownership of the 98 parking slots. The Court of Appeals ruled that it was only
then that Multi-Realty became aware of the error in the Master Deed, thereafter
seeking its reformation to reflect the true agreement of the parties. Thus, prescription
had not yet set in when Multi-Realty filed its complaint for reformation of instrument in
1990.[25]

The fallo in Multi-Realty Development Corporation read:

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the
Court of Appeals in CA-G.R. CV No. 44696 is SET ASIDE. The Court of Appeals is directed
to resolve [Multi-Realty's] appeal with reasonable dispatch. No costs.

ORDERED.[26] (Emphasis in the original)

On November 5, 2007, the Court of Appeals [27] denied both appeals.

Regarding Multi-Realty's appeal, the Court of Appeals held that the Master Deed could
only be read to mean that the 98 parking slots being claimed by Multi-Realty belonged
to MATUSCO. It highlighted that the language of the Master Deed, as prepared by Multi-
Realty, was clear and not susceptible to any other interpretation. [28]

The Court of Appeals upheld the Regional Trial Court's finding that Multi-Realty was
guilty of estoppel by deed and likewise declared that MATUSCO was not estopped from
questioning Multi-Realty's claimed ownership over and sales of the disputed parking
slots.[29]

The fallo of the Court of Appeals November 5, 2007 Decision read:

 WHEREFORE, the instant appeals are hereby DENIED. The assailed Decision dated
October 29, 1993 of the Regional Trial Court (Branch 65), Makati, Metro Manila (now
Makati City), in Civil Case No.

90-1110 is MODIFIED-in that: (1) the counterclaim of The Makati Tuscany Condominium
Corporation is DISMISSED-not on the ground of non-payment of docket fees but on
ground of prescription; and, (2) the award of attorney's fees in favor of The Makati
Tuscany Condominium Corporation is DELETED for not having been justified. We
however AFFIRM in all other aspects. Costs against both parties.

SO ORDERED.[30] (Emphasis in the original)

Multi-Realty moved for the reconsideration of the Court of Appeals November 5,
2007 Decision and on April 28, 2008, the Court of Appeals promulgated an Amended
Decision,[31] reversing its November 5, 2007 Decision and directing the reformation of
the Master Deed and Deed of Transfer.

In reversing its November 5, 2007 Decision, the Court of Appeals ruled that the Master
Deed and Deed of Transfer did not reflect the true intention of the parties on the
ownership of the 98 parking slots. [32]

The Court of Appeals stated that in reformation cases, the party asking for reformation
had the burden to overturn the presumption of validity accorded to a written contract.
It held that Multi-Realty was able to discharge this burden. [33]

The fallo of the Court of Appeals April 28, 2008 Amended Decision read:
WHEREFORE, premises considered, the present Motion for

Reconsideration is PARTLY GRANTED. Our Decision dated November

05, 2007 is hereby MODIFIED-in that We ORDER the reformation of the Master Deed

and Declaration of Restrictions of the Makati Tuscany Condominium Project and
the Deed of Transfer-to clearly provide that the ownership over the ninety[-]eight (98)
extra parking lots be retained by Multi-Realty Development Corporation. We
however DENY the damages and attorney's fees prayed for by Multi-Realty
Development Corporation. We AFFIRM in all other respects. No costs.
SO ORDERED.[34] (Emphasis in the original)
MATUSCO moved for the reconsideration [35] of the Amended Decision, but its
motion was denied in the Court of Appeals December 4, 2008 Resolution. [36]

On February 5, 2009, MATUSCO filed its Petition for Review [37] on Certiorari before this
Court.

In its Petition, petitioner claims that the Court of Appeals erred in granting Multi-
Realty's appeal because there was no basis to reform the Master Deed and Deed of
Transfer. It asserts that there was no mistake, fraud, inequitable conduct, or accident
which led to the execution of an instrument that did not express the true intentions of
the parties. It avers that the instruments clearly expressed what the parties agreed
upon.[38]

Petitioner also assails the Court of Appeals' ruling that it was estopped from questioning
respondent's sales of26 out of the 98 contested parking slots and from claiming
ownership of the remaining unsold parking slots because it was supposedly fully aware
of respondent's ownership of them and did not oppose its sales for 9 years. [39]

Petitioner maintains that estoppel cannot apply because the sales made by respondent
were patently illegal as they went against the stipulations in the Master Deed.
Furthemore, petitioner contends that it never misled respondent regarding ownership
of the 98 parking slots since it was respondent itself which drafted the Master Deed and
Deed of Transfer that turned over ownership of the common areas, including the 98
parking slots, to MATUSCO.[40]

In its Comment,[41] respondent insists that it never intended to include the 98 parking

slots among the common areas transferred to MATUSCO. It avers that due to its then
inexperience with the condominium business, with Makati Tuscany being one of the
Philippines' first condominium projects, the Master Deed and Deed of Transfer failed to
reflect the original intention to exclude the 98 parking slots from Makati Tuscany's
common areas.[42]

Respondent points to the parties' subsequent acts that led to the only conclusion that it
was always the intention to exclude the 98 parking slots from the common areas, and
that this was known and accepted by petitioner from the beginning. [43]

Respondent maintains that the Petition raises factual findings and prays that this Court
take a second look at the evidence presented and come up with its own factual findings,
in derogation of the purpose of an appeal under Rule 45 of the Rules of Court, which
generally limits itself to questions of law.[44]

Respondent also points out that in Multi-Realty Development Corporation, this Court, in
its recital of material facts, acknowledged that it retained ownership over the 98 parking
slots, but that its ownership over them was not reflected in the Master Deed and Deed
of Transfer. Thus, respondent asserts that the issue of ownership can no longer be
threshed out on appeal on the ground of res judicata.[45]

In its Reply,[46] petitioner claims that just like respondent, it also committed a mistake in
good faith and "also labored under a mistaken appreciation of the nature and
ownership of the ninety[-]eight (98) parking slots" [47] when it failed to object to
respondent's sales of some of the parking slots from 1977 to 1986 and when it issued
Certificates of Management over the sold parking slots. It was only later that petitioner
realized the extent of its legal right over the 98 parking slots; consequently, it exerted
effort to exercise its dominion over them. Petitioner argues that this cannot be
characterized as bad faith on its part. [48]

Petitioner adds that the Master Deed and Deed of Transfer are public documents, being
duly registered with the Register of Deeds of Makati City, ergo, their terms, conditions,
and restrictions are valid and binding in rem. It opines that for the Court of Appeals to
change the clear and categorical wordings of the Master Deed more than 30 years after
its registration goes against public policy and the Condominium Act. [49]

Petitioner insists that if respondent merely made a mistake in including the 98 parking
slots among the common areas transferred to petitioner, this mistake must be
construed in petitioner's favor as respondent is owned by one of the wealthiest family
corporations in the country while petitioner is merely an association of innocent
purchasers for value.[50]
The issues raised for this Court's resolution are as follows:

First, whether or not there is a need to reform the Master Deed and the Deed of
Transfer; and

Second, whether or not this Court is bound by the factual findings in Multi-Realty
Development Corporation v. The Makati Tuscany Condominium Corporation on the
ground of conclusiveness of judgment.

Reformation of an instrument is a remedy in equity where a valid existing contract is

allowed by law to be revised to express the true intentions of the contracting parties.
[51]
 The rationale is that it would be unjust to enforce a written instrument which does
not truly reflect the real agreement of the parties. [52] In reforming an instrument, no
new contract is created for the parties, rather, the reformed instrument establishes the
real agreement between the parties as intended, but for some reason, was not
embodied in the original instrument.[53]

An action for reformation of an instrument finds its basis in Article 1359 of the Civil Code
which provides:
Article 1359. When, there having been a meeting of the minds of the parties to a
contract, their true intention is not expressed in the instrument purporting to embody
the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the
parties may ask for the reformation of the instrument to the end that such true
intention may be expressed.

If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds
of the parties, the proper remedy is not reformation of the instrument but annulment of
the contract.
The National Irrigation Administration v. Gamit[54] stated that there must be a
concurrence of the following requisites for an action for reformation of instrument to
prosper:
(1) there must have been a meeting of the minds of the parties to the contract;
(2) the instrument does not express the true intention of the parties; and (3) the failure
of the instrument to express the true intention of the parties is due to mistake, fraud,
inequitable conduct or accident.[55]
The burden of proof then rests upon the party asking for the reformation of the
instrument to overturn the presumption that a written instrument already sets out the
true intentions of the contracting parties. [56]

It is not disputed that the parties entered into a contract regarding the management of
Makati Tuscany's common areas. A Master Deed and a Deed of Transfer were executed
to contain all the terms and conditions on the individual ownership of Makati Tuscany's
units and the co-ownership over the common areas. The question to be resolved is
whether the provisions in the Master Deed and Deed of Transfer over the 98 parking
slots, as part of the common areas, expressed the true intentions of the parties, and if
not, whether it was due to mistake, fraud, inequitable conduct, or accident.

Sections 5 and 7(d) of the Master Deed provide as follows:

SEC. 5. Accessories to Units. - To be considered as part of each unit and reserved
for the exclusive use of its owner are the balconies adjacent thereto and the parking lot
or lots which are to be assigned to each unit.

....

SEC. 7. The Common Areas. - The common elements or areas of The Makati Tuscany
shall comprise all the parts of the project other than the units, including without
limitation the following:

....

(d) All driveways, playgrounds, garden areas and parking areas other than those
assigned to each unit under Sec. 5 above[.][57]
A plain and literal reading of Section 7(d) in relation to Section 5 shows that all
parking areas which are not assigned to units come under petitioner's authority because
they are part of the common areas.

Respondent argues that what was written in the Master Deed and Deed of Transfer
failed to fully capture what was actually intended by the parties. However, intentions
involve a state of mind, making them difficult to decipher; therefore, the subsequent
and contemporaneous acts of the parties must be presented into evidence to reflect the
parties' intentions.[58]

To substantiate its claim that there was a difference between the written terms in the
Master Deed and Deed of Transfer and the parties' intentions, respondent refers to
their prior and subsequent acts.

First, respondent points out that in the color-coded floor plans for the ground floor,
upper basement, and lower basement, only eight (8) guest parking slots were indicated
as part of the common areas. However, respondent alleges that due to its inexperience
with documenting condominium developments, it failed to reflect the correct number
of guest parking slots in the Master Deed and Deed of Transfer. [59]

Second, acting under the honest belief that it continued to own the 98 parking slots,
respondent sold 26 of them to Makati Tuscany's unit owners from 1977 to 1986,
without any hint of a complaint or opposition from petitioner. Respondent also states
that petitioner repeatedly cooperated and supported its sales by issuing Certificates of
Management for the condominium units and parking slots sold by respondent. [60]

Third, petitioner's Board of Directors made repeated offers to purchase the parking slots
from respondent, signifying petitioner's recognition of respondent's retained ownership
over the disputed parking slots. This was made evident in an excerpt from the minutes
of the June 14, 1979 meeting of MATUSCO's Board of Directors:
UNASSIGNED PARKING SLOTS

Mr. Jovencio Cinco informed the Board of the final proposal of Multi-Realty
Development Corp. to sell the condominium corp. all of the unassigned parking lots at a
discounted price of P15,000.00 per lot, or some 50% lower than their regular present
price of P33,000.00 each.

After discussion, it was agreed to hold in abeyance any decision on the matter for all the
members of the Board in attendance to pass upon.[61]
Finally, respondent highlights that it was only in September 1989, when the value
of the 72 remaining unallocated parking slots had risen to approximately P250,000.00
each or approximately P18,000,000.00 for the 72 parking slots, that petitioner first
claimed ownership of the remaining parking slots. [62]

At this juncture, it must be pointed out that petitioner never rebutted any of
respondent's statements regarding the subsequent acts of the parties after the
execution and registration of the Master Deed and Deed of Transfer. Petitioner even
adopted the narration of facts in Multi-Realty Development Corporation and declared in
its Reply that:
1. The Petition does not raise questions of fact because no doubt or difference
exists between the parties' appreciation of the truth or falsehood of alleged facts, nor
does it require the Honorable Court to evaluate the credibility of witnesses or their
testimonies. The resolution of the instant controversy rests solely upon the correct
application of principles of law and pertinent jurisprudence, as well as hallowed ideals of
fairness and public policy which are specific or germane to the undisputed facts. These
facts have already been framed by this Honorable Court in a related case brought before
it by the same parties, albeit limited to the sole issue of prescription of the action for
reformation of instruments initiated by [Multi-Realty]. For the avoidance of doubt, these
facts are reproduced hereunder as follows:

....

1.3 Makati Tuscany consisted of 160 condominium units, with 156 units from the 2 nd to
the 25th floors, and 4 penthouse units in the 26 th floor. Two hundred seventy (270)
parking slots were built therein for appointment among its unit owners. One hundred
sixty-four (164) of the parking slots were so allotted, with each unit at the 2 nd to the
25th floors being allotted one ( 1) parking slot each, and each penthouse unit with two
slots. Eight (8) other parking slots, found on the ground floor of the Makati Tuscany
were designated as guest parking slots, while the remaining ninety[-]eight (98) were to
be retained by Multi-Realty for sale to unit owners who would want to have additional
slots.

....

1.7. The Master Deed was filed with the Register of Deeds in 1977. Multi-Realty
executed a Deed of Transfer in favor of Makati Tuscany over these common areas.
However, the Master Deed and the Deed of Transfer did not reflect or specify the
ownership of the 98 parking slots. Nevertheless, Multi-Realty sold 26 of them in 19 to
1986 to condominium unit buyers who needed additional parking slots. Makati Tuscany
did not object, and certificates of title were later issued by the Register of Deeds in favor
of the buyers. Makati Tuscany issued Certificates of Management covering the
condominium units and parking slots which Multi-Realty has sold.

1.8 At a meeting of Makati Tuscany's Board of Directors on 13 March 1979, a resolution

was approved, authorizing its President, Jovencio Cinco, to negotiate terms under which
Makati Tuscany would buy 36 of the unallocated parking slots from Multi-Realty. During
another meeting of the Board of Directors on 14 June 1979, Cinco informed the Board
members of Multi-Realty's proposal to sell all of the unassigned parking lots at a
discounted price of P15,000.00 per lot, or some 50% lower than the then prevailing
price of P33,000.00 each. The Board agreed to hold in abeyance any decision on the
matter to enable all its members to ponder upon the matter. [63] (Emphasis supplied,
citations omitted)
Just like respondent, petitioner invokes mistake in good faith to explain its
seeming recognition of respondent's ownership of the 72 remaining parking slots,
showing its acquiescence to respondent's sale of the 26 parking slots and its issuance of
the Certificates of Management for the sold condominium units and parking slots. [64]

Petitioner fails to convince.

The totality of the undisputed evidence proving the parties' acts is consistent with the
conclusion that the parties never meant to include the 98 parking slots among the
common areas to be transferred to petitioner. The evidence is consistent to support the
view that petitioner was aware of this fact.

From 1977 to 1986, respondent sold 26 of the 98 parking lots now under contention
without protest from petitioner. Petitioner recognized respondent's ownership of the
disputed parking lots on at least two (2) occasions when its Board of Directors made
known its intention to purchase them from respondent.

In its Manifestation Ad Cautelam,[65] petitioner asked to be allowed to file a reply to

respondent's comment to rectify the "erroneous statements of fact and conclusions of
law"[66] contained in it. However, petitioner in its Reply [67] did not contradict any of the
subsequent acts of the parties narrated by respondent, showing petitioner's repeated
acquiescence to respondent's acts of dominion over the parking slots. Petitioner even
adopted this Court's narration of facts in Multi-Realty Development Corporation where
this Court stated that "[e]ight (8) other parking slots, found on the ground floor of the
Makati Tuscany were designated as guest parking slots, while the remaining 98 were to
be retained by Multi-Realty for sale to unit owners who would want to have additional
slots."[68]

Petitioner claims that it was confusion and not bad faith that caused its belated
assertion of ownership over the parking slots. [69] However, the facts show that it was the
intention of the parties all along for Multi-Realty to retain ownership of the 98 parking
slots and then sell them to unit owners who wanted additional parking slots.

Petitioner argues its lack of bad faith in claiming ownership over the 98 parking slots.
Whether or not it acted in bad faith was never in issue. Instead, the issue to be resolved
was whether or not respondent committed a mistake in drafting and executing the
Master Deed and Deed of Transfer, thereby leading to the inadvertent inclusion of the
98 parking slots among the common areas transferred to petitioner.

Further, it is difficult to impute confusion and bad faith, which are states of mind
appropriate for a natural individual person, to an entire corporation. The fiction where
corporations are granted both legal personality separate from its owners and a capacity
to act should not be read as endowing corporations with a single mind. In truth, a
corporation is a hierarchical community of groups of persons both in the governing
board and in management. Corporations have different minds working together
including its lawyers, auditors, and, in some cases, their compliance officers.

To grant the argument that a corporation, like a natural person, was confused or not in
bad faith is to extend to it too much analogy and to endow it more of the human
characteristics beyond its legal fiction. This Court is not endowed with such god-like
qualities of a creator or should allow illicit extensions of legal fiction to cause injustice.

Respondent, through a preponderance of evidence, was able to prove its claim that the
Master Deed and Deed of Transfer failed to capture the true intentions of the parties;
hence, it is but right that the instruments be reformed to accurately reflect the
agreement of the parties.

Petitioner asserts that respondent's admission of committing a mistake in drafting the

Master Deed and Deed of Transfer makes it liable to suffer the consequences of its
mistake and should be bound by the plain meaning and import of the instruments. It
contends that respondent should be estopped from claiming that the Master Deed and
Deed of Transfer failed to show the parties' true intentions.

Again, petitioner fails to convince.

In Philippine National Bank v. Court of Appeals,[70] this Court held:

"The doctrine of estoppel is based upon the grounds of public policy, fair dealing,
good faith and justice, and its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one to whom they were directed and
who reasonably relied thereon. The doctrine of estoppel springs from equitable
principles and the equities in the case. It is designed to aid the law in the administration
of justice where without its aid injustice might result." It has been applied by this Court
wherever and whenever special circumstances of a case so demand. [71]
In this case, except for the words in the contract, all of respondent's acts were
consistent with its position in the case.

Petitioner does not deny that it stayed silent when respondent sold the parking slots on
several occasions or that it offered to buy the parking slots from respondent on at least
two (2) occasions. It excuses itself by saying that just like respondent, it "also labored
under a mistaken appreciation of the nature and ownership of the ninety[-]eight (98)
parking slots in question."[72]

Both parties recognized respondent's ownership of the parking slots. Petitioner initially
respected respondent's ownership despite the Master Deed's and Deed of Transfer's
stipulations. It was petitioner that changed its position decades after it acted as if it
accepted respondent's ownership.

Petitioner cannot claim the benefits of estoppel. It was never made to rely on any false
representations. It knew from its inception as a corporation that ownership of the
parking slots remained with respondent. Its dealings with respondent and the
actuations of its Board of Directors convincingly show that it was aware of and
respected respondent's ownership. The Court of Appeals ruled as follows:
Not even the registration of the Master Deed with the Makati City Register of
Deeds renders Multi-Realty guilty of estoppel by deed. For one, [MATUSCO] was not
made to believe that it shall be the owner of the questioned extra parking lots. And for
another, [MATUSCO] was not made to rely on any false representation. As we have
earlier discussed-evidence is replete that both parties knew at the outset that
ownership over the said extra parking lots were to be retained by Multi-Realty. It is sad
to note, however, that such fact was not clearly reflected in the Master Deed and the
Deed of Transfer. Besides, it was only after the issue of ownership cropped up that
Multi-Realty realized that, indeed, there was a mistake in the drafting of the Master
Deed.[73]
II

Despite petitioner's adoption of this Court's recital of facts in Multi-Realty Development

Corporation, this Court deems it proper to address respondent's claim that this Court
upheld its ownership of the disputed parking slots, as Multi-Realty Development
Corporation supposedly contained final factual findings on this very issue, which ought
to be respected on the ground of res judicata.[74]

Respondent is mistaken.

There is res judicata when the following concur:

the former judgment must be final;
)
the court which rendered judgment had jurisdiction over the parties and the subject
) matter;
it must be a judgment on the merits;
)
and there must be between the first and second actions identity of parties, subject matter,
) and cause of action.[75] (Emphasis in the original, citation omitted)
Multi-Realty Development Corporation did not take on the merits of the case but
only tackled the issue of prescription n.ised to this Court on appeal. After finding that
the action had not yet prescribed and was mistakenly dismissed by the Court of Appeals
because of a supposedly stale claim, this Court directed that it be remanded to the
Court of Appeals for a resolution of the appeal:
 Nevertheless, given the factual backdrop of the case, it was inappropriate for the
CA, motu proprio, to delve into and resolve the issue of whether [Multi-Realty's] action
had already prescribed. The appellate court should have proceeded to resolve [Multi-
Realty's] appeal on its merits instead of dismissing the same on a ground not raised by
the parties in the RTC and even in their pleadings in the CA.

....

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 44696 is SET ASIDE. The Court of Appeals is directed to
resolve petitioner's appeal with reasonable dispatch. No costs.

ORDERED.[76]
Clearly, res judicata had not yet set in and this Court was not precluded from
evaluating all of the evidence vis-a-vis the issues raised by both parties.

WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED. The
Court of Appeals April 28, 2008 Amended Decision and December 4, 2008 Resolution in
CA-G.R. CV No. 44696 are AFFIRMED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 117009, October 11, 1995 ]
SECURITY BANK & TRUST COMPANY AND ROSITO C. MANHIT,
PETITIONERS, VS. COURT OF APPEALS AND YSMAEL C. FERRER,
RESPONDENTS.

DECISION

PADILLA, J.:
 In this petition for review under Rule 45 of the Rules of Court, petitioners seek a
review and reversal of the decision* of respondent Court of Appeals in CA-G.R. CV No.
40450, entitled "Ysmael C. Ferrer v. Security Bank and Trust Company, et.al." dated 31
August 1994, which affirmed the decision** of the Regional Trial Court, Branch 63,
Makati in Civil Case No. 42712, a complaint for breach of contract with damages.

Private respondent Ysmael C. Ferrer was contracted by herein petitioners Security Bank
and Trust Company (SBTC) and Rosito C. Manhit to construct the building of SBTC in
Davao City for the price of P1,760,000.00.  The contract dated 4 February 1980 provided
that Ferrer would finish the construction in two hundred (200) working days. 
Respondent Ferrer was able to complete the construction of the building on 15 August
1980 (within the contracted period) but he was compelled by a drastic increase in the
cost of construction materials to incur expenses of about P300,000.00 on top of the
original cost.  The additional expenses were made known to petitioner SBTC thru its
Vice-President Fely Sebastian and Supervising Architect Rudy de la Rama as early as
March 1980.  Respondent Ferrer made timely demands for payment of the increased
cost.  Said demands were supported by receipts, invoices, payrolls and other documents
proving the additional expenses.

In March 1981, SBTC thru Assistant Vice-President Susan Guanio and a representative of
an architectural firm consulted by SBTC, verified Ferrer's claims for additional cost.  A
recommendation was then made to settle Ferrer's claim but only for P200,000.00. 
SBTC, instead of paying the recommended additional amount, denied ever authorizing
payment of any amount beyond the original contract price. SBTC likewise denied any
liability for the additional cost based on Article IX of the building contract which states:

"If at any time prior to the completion of the work to be performed hereunder,
increase in prices of construction materials and/or labor shall supervene through no
fault on the part of the contractor whatsoever or any act of the government and its
instrumentalities which directly or indirectly affects the increase of the cost of the
project, OWNER shall equitably make the appropriate adjustment on mutual agreement
of both parties."

Ysmael C. Ferrer then filed a complaint for breach of contract with damages.  The trial
court ruled for Ferrer and ordered defendant SBTC and Rosito C. Manhit to pay:
 a)      P259,417.23 for the increase in price of labor and materials plus 12%
interest thereon per annum from 15 August 1980 until fully paid;

b)      P24,000.00 as actual damages;

c)      P20,000.00 as moral damages;

d)      P20,000.00 as exemplary damages;

e)      attorney's fees equivalent to 25% of the principal amount due; and

f)        costs of suit.

On appeal, the Court of Appeals affirmed the trial court decision.

In the present petition for review, petitioners assign the following errors to the
appellate court:

"x x x IN HOLDING THAT PLAINTIFF-APPELLEE HAS, BY PREPONDERANCE OF

EVIDENCE SUFFICIENTLY PROVEN HIS CLAIM AGAINST THE DEFENDANTS-APPELLANTS

x x x IN INTERPRETING AN OTHERWISE CLEAR AND UNAMBIGUOUS PROVISION OF THE

CONSTRUCTION CONTRACT

x x x IN DISREGARDING THE EXPRESS PROVISION OF THE CONSTRUCTION CONTRACT,

THE LOWER COURT VIOLATED DEFENDANTS-APPELLANTS' CONSTITUTIONAL GUARANTY
OF NON-IMPAIRMENT OF THE OBLIGATION OF CONTRACT.[1]

Petitioners argue that under the aforequoted Article IX of the building contract, any
increase in the price of labor and/or materials resulting in an increase in construction
cost above the stipulated contract price will not automatically make petitioners liable to
pay for such increased cost, as any payment above the stipulated contract price has
been made subject to the condition that the "appropriate adjustment" will be made
"upon mutual agreement of both parties".  It is contended that since there was no
mutual agreement between the parties, petitioners' obligation to pay amounts above
the original contract price never materialized.
Respondent Ysmael C. Ferrer, through counsel, on the other hand, opposed the
arguments raised by petitioners. It is of note however that the pleadings filed with this
Court by counsel for Ferrer hardly refute the arguments raised by petitioners, as the
contents of said pleadings are mostly quoted portions of the decision of the Court of
Appeals, devoid of adequate discussion of the merits of respondent's case.  The Court,
to be sure, expects more diligence and legal know-how from lawyers than what has
been exhibited by counsel for respondent in the present case. Under these
circumstances, the Court had to review the entire records of this case to evaluate the
merits of the issues raised by the contending parties.

Article 22 of the Civil Code which embodies the maxim, Nemo ex  aIterius incommodo
debet lecupletari (no man ought to be made rich out of another's injury) states:

"Art. 22.  Every person who through an act of performance by another, or any
other means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him."

The above-quoted article is part of the chapter of the Civil Code on Human Relations,
the provisions of which were formulated as "basic principles to be observed for the
rightful relationship between human beings and for the stability of the social order, x x x
designed to indicate certain norms that spring from the fountain of good conscience, x x
x guides for human conduct [that] should run as golden threads through society to the
end that law may approach its supreme ideal which is the sway and dominance of
justice."[2]

In the present case, petitioners' arguments to support absence of liability for the cost of
construction beyond the original contract price are not persuasive.

Under the previously quoted Article IX of the construction contract, petitioners would
make the appropriate adjustment to the contract price in case the cost of the project
increases through no fault of the contractor (private respondent). Private respondent
informed petitioners of the drastic increase in construction cost as early as March 1980.

Petitioners in turn had the increased cost evaluated and audited.  When private
respondent demanded payment of P259,417.23, petitioner bank's Vice-President Rosito
C. Manhit and the bank's architectural consultant were directed by the bank to verify
and compute private respondent's claims of increased cost.  A recommendation was
then made to settle private respondent's claim for P200,000.00.  Despite this
recommendation and several demands from private respondent, SBTC failed to make
payment.  It denied authorizing anyone to make a settlement of private respondent's
claim and likewise denied any liability, contending that the absence of a mutual
agreement made private respondent's demand premature and baseless.

Petitioners' arguments are specious.

It is not denied that private respondent incurred additional expenses in constructing

petitioner bank's building due to a drastic and unexpected increase in construction cost.
In fact, petitioner bank admitted liability for increased cost when a recommendation
was made to settle private respondent's claim for P200,000.00.  Private respondent's
claim for the increased amount was adequately proven during the trial by receipts,
invoices and other supporting documents.

Under Article 1182 of the Civil Code, a conditional obligation shall be void if its
fulfillment depends upon the sole will of the debtor.  In the present case, the mutual
agreement, the absence of which petitioner bank relies upon to support its non-liability
for the increased construction cost, is in effect a condition dependent on petitioner
bank's sole will, since private respondent would naturally and logically give consent to
such an agreement which would allow him recovery of the increased cost.

Further, it cannot be denied that petitioner bank derived benefits when private
respondent completed the construction even at an increased cost.

Hence, to allow petitioner bank to acquire the constructed building at a price far below
its actual construction cost would undoubtedly constitute unjust enrichment for the
bank to the prejudice of private respondent.  Such unjust enrichment, as previously
discussed, is not allowed by law.

Finally, with respect to the award of attorney's fees to respondent, the Court has
previously held that, "even with the presence of an agreement between the parties, the
court may nevertheless reduce attorney's fees though fixed in the contract when the
amount thereof appears to be unconscionable or unreasonable." [3] As previously noted,
the diligence and legal know-how exhibited by counsel for private respondent hardly
justify an award of 25% of the principal amount due, which would be at least
P60,000.00. Besides, the issues in this case are far from complex and intricate.  The
award of attorney's fees is thus reduced to P 10,000.00.

WHEREFORE, with the above modification in respect of the amount of attorney's fees,

the appealed decision of the Court of Appeals in CA G.R. CV No. 40450 is AFFIRMED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 195872, March 12, 2014 ]
FORTUNE MEDICARE, INC., PETITIONER, VS. DAVID ROBERT U.
AMORIN, RESPONDENT.

DECISION

REYES, J.:

This is a petition for review on certiorari[1] under Rule 45 of the Rules of Court, which
challenges the Decision[2] dated September 27, 2010 and Resolution[3] dated February 24,
2011 of the Court of Appeals (CA) in CA- G.R. CV No. 87255.

The Facts

David Robert U. Amorin (Amorin) was a cardholder/member of Fortune Medicare, Inc.

(Fortune Care), a corporation engaged in providing health maintenance services to its
members.  The terms of Amorin’s medical coverage were provided in a Corporate Health
Program Contract[4] (Health Care Contract) which was executed on January 6, 2000 by
Fortune Care and the House of Representatives, where Amorin was a permanent
employee.

While on vacation in Honolulu, Hawaii, United States of America (U.S.A.) in May 1999,
Amorin underwent an emergency surgery, specifically appendectomy, at the St. Francis
Medical Center, causing him to incur professional and hospitalization expenses of
US$7,242.35 and US$1,777.79, respectively.  He attempted to recover from Fortune Care
the full amount thereof upon his return to Manila, but the company merely approved a
reimbursement of P12,151.36, an amount that was based on the average cost of
appendectomy, net of medicare deduction, if the procedure were performed in an
accredited hospital in Metro Manila.[5]  Amorin received under protest the approved
amount, but asked for its adjustment to cover the total amount of professional fees which
he had paid, and eighty percent (80%) of the approved standard charges based on
“American standard”, considering that the emergency procedure occurred in the U.S.A.
To support his claim, Amorin cited Section 3, Article V on Benefits and Coverages of the
Health Care Contract, to wit:

A. EMERGENCY CARE IN ACCREDITED HOSPITAL.  Whether as an in-patient or

out-patient, the member shall be entitled to full coverage under the benefits provisions of
the Contract at any FortuneCare accredited hospitals subject only to the pertinent
provision of Article VII (Exclusions/Limitations) hereof.  For emergency care attended
by non affiliated physician (MSU), the member shall be reimbursed 80% of the
professional fee which should have been paid, had the member been treated by an
affiliated physician.  The availment of emergency care from an unaffiliated physician
shall not invalidate or diminish any claim if it shall be shown to have been reasonably
impossible to obtain such emergency care from an affiliated physician.

B. EMERGENCY CARE IN NON-ACCREDITED HOSPITAL

1.  Whether as an in-patient or out-patient, FortuneCare shall reimburse the total

hospitalization cost including the professional fee (based on the total approved charges)
to a member who receives emergency care in a non-accredited hospital.  The above
coverage applies only to Emergency confinement within Philippine Territory.  However,
if the emergency confinement occurs in a foreign territory, Fortune Care will be
obligated to reimburse or pay eighty (80%) percent of the approved standard
charges which shall cover the hospitalization costs and professional fees. x x x[6]

Still, Fortune Care denied Amorin’s request, prompting the latter to file a complaint[7] for
breach of contract with damages with the Regional Trial Court (RTC) of Makati City.

For its part, Fortune Care argued that the Health Care Contract did not cover
hospitalization costs and professional fees incurred in foreign countries, as the contract’s
operation was confined to Philippine territory.[8] Further, it argued that its liability to
Amorin was extinguished upon the latter’s acceptance from the company of the amount
of P12,151.36.

The RTC Ruling

On May 8, 2006, the RTC of Makati, Branch 66 rendered its Decision [9] dismissing
Amorin’s complaint.  Citing Section 3, Article V of the Health Care Contract, the RTC
explained:

Taking the contract as a whole, the Court is convinced that the parties intended to use the
Philippine standard as basis.  Section 3 of the Corporate Health Care Program
Contract provides that:

xxxx

On the basis of the clause providing for reimbursement equivalent to 80% of the
professional fee which should have been paid, had the member been treated by an
affiliated physician, the Court concludes that the basis for reimbursement shall be
Philippine rates.  That provision, taken with Article V of the health program contract,
which identifies affiliated hospitals as only those accredited clinics, hospitals and medical
centers located “nationwide” only point to the Philippine standard as basis for
reimbursement.

The clause providing for reimbursement in case of emergency operation in a foreign

territory equivalent to 80% of the approved standard charges which shall cover
hospitalization costs and professional fees, can only be reasonably construed in
connection with the preceding clause on professional fees to give meaning to a somewhat
vague clause.  A particular clause should not be studied as a detached and isolated
expression, but the whole and every part of the contract must be considered in fixing the
meaning of its parts.[10]

In the absence of evidence to the contrary, the trial court considered the amount of
P12,15[1].36 already paid by Fortune Care to Amorin as equivalent to 80% of the
hospitalization and professional fees payable to the latter had he been treated in an
affiliated hospital.[11]

Dissatisfied, Amorin appealed the RTC decision to the CA.

The CA Ruling

On September 27, 2010, the CA rendered its Decision[12] granting the appeal.  Thus, the
dispositive portion of its decision reads:

WHEREFORE, all the foregoing premises considered, the instant appeal is hereby
GRANTED.  The May 8, 2006 assailed Decision of the Regional Trial Court (RTC) of
Makati City, Branch 66 is hereby REVERSED and SET ASIDE, and a new one entered
ordering Fortune Medicare, Inc. to reimburse [Amorin] 80% of the total amount of the
actual hospitalization expenses of $7,242.35 and professional fee of $1,777.79 paid by
him to St. Francis Medical Center pursuant to Section 3, Article V of the Corporate
Health Care Program Contract, or their peso equivalent at the time the amounts became
due, less the [P]12,151.36 already paid by Fortunecare.

SO ORDERED.[13]

In so ruling, the appellate court pointed out that, first, health care agreements such as the
subject Health Care Contract, being like insurance contracts, must be liberally construed
in favor of the subscriber.  In case its provisions are doubtful or reasonably susceptible of
two interpretations, the construction conferring coverage is to be adopted and
exclusionary clauses of doubtful import should be strictly construed against the provider.
[14]
 Second, the CA explained that there was nothing under Article V of the Health Care
Contract which provided that the Philippine standard should be used even in the event of
an emergency confinement in a foreign territory.[15]

Fortune Care’s motion for reconsideration was denied in a Resolution [16] dated February
24, 2011.  Hence, the filing of the present petition for review on certiorari.

The Present Petition

Fortune Care cites the following grounds to support its petition:

I. The CA gravely erred in concluding that the phrase “approved standard charges”
is subject to interpretation, and that it did not automatically mean “Philippine
Standard”; and

II. The CA gravely erred in denying Fortune Care’s motion for reconsideration,
which in effect affirmed its decision that the American Standard Cost shall be
applied in the payment of medical and hospitalization expenses and professional
fees incurred by the respondent.[17]

The Court’s Ruling

The petition is bereft of merit.

The Court finds no cogent reason to disturb the CA’s finding that Fortune Care’s liability
to Amorin under the subject Health Care Contract should be based on the expenses for
hospital and professional fees which he actually incurred, and should not be limited by
the amount that he would have incurred had his emergency treatment been performed in
an accredited hospital in the Philippines.

We emphasize that for purposes of determining the liability of a health care provider to
its members, jurisprudence holds that a health care agreement is in the nature of non-life
insurance, which is primarily a contract of indemnity.  Once the member incurs hospital,
medical or any other expense arising from sickness, injury or other stipulated contingent,
the health care provider must pay for the same to the extent agreed upon under the
contract.[18]

To aid in the interpretation of health care agreements, the Court laid down the following
guidelines in Philamcare Health Systems v. CA[19]:

When the terms of insurance contract contain limitations on liability, courts should
construe them in such a way as to preclude the insurer from non-compliance with his
obligation.  Being a contract of adhesion, the terms of an insurance contract are to be
construed strictly against the party which prepared the contract – the insurer.  By reason
of the exclusive control of the insurance company over the terms and phraseology of the
insurance contract, ambiguity must be strictly interpreted against the insurer and liberally
in favor of the insured, especially to avoid forfeiture.  This is equally applicable to Health
Care Agreements.  The phraseology used in medical or hospital service contracts, such as
the one at bar, must be liberally construed in favor of the subscriber, and if doubtful or
reasonably susceptible of two interpretations the construction conferring coverage is to be
adopted, and exclusionary clauses of doubtful import should be strictly construed against
the provider.[20] (Citations omitted and emphasis ours)

Consistent with the foregoing, we reiterated in Blue Cross Health Care, Inc. v. Spouses
Olivares[21]:

In Philamcare Health Systems, Inc. v. CA, we ruled that a health care agreement is in the
nature of a non-life insurance.  It is an established rule in insurance contracts that when
their terms contain limitations on liability, they should be construed strictly against the
insurer.  These are contracts of adhesion the terms of which must be interpreted and
enforced stringently against the insurer which prepared the contract.  This doctrine is
equally applicable to health care agreements.

xxxx

x x x [L]imitations of liability on the part of the insurer or health care provider must be
construed in such a way as to preclude it from evading its obligations.  Accordingly, they
should be scrutinized by the courts with “extreme jealousy” and “care” and with a
“jaundiced eye.”   x x x.[22] (Citations omitted and emphasis supplied)

In the instant case, the extent of Fortune Care’s liability to Amorin under the attendant
circumstances was governed by Section 3(B), Article V of the subject Health Care
Contract, considering that the appendectomy which the member had to undergo qualified
as an emergency care, but the treatment was performed at St. Francis Medical Center in
Honolulu, Hawaii, U.S.A., a non-accredited hospital.  We restate the pertinent portions of
Section 3(B):

B.  EMERGENCY CARE IN NON-ACCREDITED HOSPITAL

1. Whether as an in-patient or out-patient, FortuneCare shall reimburse the total

hospitalization cost including the professional fee (based on the total approved charges)
to a member who receives emergency care in a non-accredited hospital.  The above
coverage applies only to Emergency confinement within Philippine Territory. However,
if the emergency confinement occurs in foreign territory, Fortune Care will be
obligated to reimburse or pay eighty (80%) percent of the approved standard
charges which shall cover the hospitalization costs and professional fees. x x
x[23] (Emphasis supplied)

The point of dispute now concerns the proper interpretation of the phrase “approved
standard charges”, which shall be the base for the allowable 80% benefit.  The trial court
ruled that the phrase should be interpreted in light of the provisions of Section
3(A), i.e., to the extent that may be allowed for treatments performed by accredited
physicians in accredited hospitals.  As the appellate court however held, this must be
interpreted in its literal sense, guided by the rule that any ambiguity shall be strictly
construed against Fortune Care, and liberally in favor of Amorin.

The Court agrees with the CA.  As may be gleaned from the Health Care Contract, the
parties thereto contemplated the possibility of emergency care in a foreign country.  As
the contract recognized Fortune Care’s liability for emergency treatments even in foreign
territories, it expressly limited its liability only insofar as the percentage of
hospitalization and professional fees that must be paid or reimbursed was concerned,
pegged at a mere 80% of the approved standard charges.

The word “standard” as used in the cited stipulation was vague and ambiguous, as it
could be susceptible of different meanings.  Plainly, the term “standard charges” could be
read as referring to the “hospitalization costs and professional fees” which were
specifically cited as compensable even when incurred in a foreign country.  Contrary to
Fortune Care’s argument, from nowhere in the Health Care Contract could it be
reasonably deduced that these “standard charges” referred to the “Philippine standard”, or
that cost which would have been incurred if the medical services were performed in an
accredited hospital situated in the Philippines.  The RTC ruling that the use of the
“Philippine standard” could be inferred from the provisions of Section 3(A), which
covered emergency care in an accredited hospital, was misplaced.  Evidently, the parties
to the Health Care Contract made a clear distinction between emergency care in an
accredited hospital, and that obtained from a non-accredited hospital.  The limitation on
payment based on “Philippine standard” for services of accredited physicians was
expressly made applicable only in the case of an emergency care in an accredited
hospital.

The proper interpretation of the phrase “standard charges” could instead be correlated
with and reasonably inferred from the other provisions of Section 3(B), considering that
Amorin’s case fell under the second case, i.e., emergency care in a non-accredited
hospital.  Rather than a determination of Philippine or American standards, the first part
of the provision speaks of the full reimbursement of “the total hospitalization cost
including the professional fee (based on the total approved charges) to a member who
receives emergency care in a non-accredited hospital” within the Philippines.  Thus, for
emergency care in non-accredited hospitals, this cited clause declared the standard in the
determination of the amount to be paid, without any reference to and regardless of the
amounts that would have been payable if the treatment was done by an affiliated
physician or in an affiliated hospital.  For treatments in foreign territories, the only
qualification was only as to the percentage, or 80% of that payable for treatments
performed in non-accredited hospital.

All told, in the absence of any qualifying word that clearly limited Fortune Care’s
liability to costs that are applicable in the Philippines, the amount payable by Fortune
Care should not be limited to the cost of treatment in the Philippines, as to do so would
result in the clear disadvantage of its member.  If, as Fortune Care argued, the premium
and other charges in the Health Care Contract were merely computed on assumption and
risk under Philippine cost and, that the American cost standard or any foreign country’s
cost was never considered, such limitations should have been distinctly specified and
clearly reflected in the extent of coverage which the company voluntarily assumed.  This
was what Fortune Care found appropriate when in its new health care agreement with the
House of Representatives, particularly in their 2006 agreement, the provision on
emergency care in non-accredited hospitals was modified to read as follows:

However, if the emergency confinement occurs in a foreign territory, Fortunecare will be

obligated to reimburse or pay one hundred (100%) percent under approved Philippine
Standard covered charges for hospitalization costs and professional fees but not to
exceed maximum allowable coverage, payable in pesos at prevailing currency exchange
rate at the time of availment in said territory where he/she is confined. x x x [24]

Settled is the rule that ambiguities in a contract are interpreted against the party that
caused the ambiguity.  “[A]ny ambiguity in a contract whose terms are susceptible of
different interpretations must be read against the party who drafted it.”[25]

WHEREFORE, the petition is DENIED.  The Decision dated September 27, 2010 and
Resolution dated February 24, 2011 of the Court of Appeals in CA-G.R. CV No. 87255
are AFFIRMED.

SO ORDERED.
 FIRST DIVISION
[ G.R. No. 220978, July 05, 2016 ]
CENTURY PROPERTIES, INC., PETITIONER, VS. EDWIN J. BABIANO
AND EMMA B. CONCEPCION, RESPONDENTS.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari[1] are the Decision[2] dated April 8,

2015 and the Resolution[3] dated October 12, 2015 of the Court of Appeals (CA) in CA-
G.R. SP No. 132953, which affirmed, with modification the Decision [4] dated June 25,
2013 and the Resolution[5] dated October 16, 2013 of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 05-001615-12, and ordered petitioner Century
Properties, Inc. (CPI) to pay respondents Edwin J. Babiano (Babiano) and Emma B.
Concepcion (Concepcion; collectively, respondents) unpaid commissions in the amounts
of P889,932.42 and P591,953.05, respectively.

The Facts

On October 2, 2002, Babiano was hired by CPI as Director of Sales, and was
eventually[6] appointed as Vice President for Sales effective September 1, 2007. As CPFs
Vice President for Sales, Babiano was remunerated with, inter alia, the following
benefits: (a) monthly salary of P70,000.00; (b) allowance of P50,000.00; and (c) 0.5%
override commission for completed sales. His employment contract [7] also contained a
"Confidentiality of Documents and Non-Compete Clause"[8] which, among others, barred
him from disclosing confidential information, and from working in any business
enterprise that is in direct competition with CPI "while [he is] employed and for a period
of one year from date of resignation or termination from [CPI]." Should Babiano breach
any of the terms thereof, his "forms of compensation, including commissions and
incentives will be forfeited."[9]

During the same period, Concepcion was initially hired as Sales Agent by CPI and was
eventually[10] promoted as Project Director on September 1, 2007.[11] As such, she signed
an employment agreement, denominated as "Contract of Agency for Project
Director"[12] which provided, among others, that she would directly report to Babiano,
and receive, a monthly subsidy of P60,000.00, 0.5% commission, and cash incentives.
[13]
 On March 31, 2008, Concepcion executed a similar contract [14] anew with CPI in which
she would receive a monthly subsidy of P50,000.00, 0.5% commission, and cash
incentives as per company policy. Notably, it was stipulated in both contracts that no
employer-employee relationship exists between Concepcion and CPI. [15]

After receiving reports that Babiano provided a competitor with information regarding
CPFs marketing strategies, spread false information regarding CPI and its projects,
recruited CPI's personnel to join the competitor, and for being absent without official
leave (AWOL) for five (5) days, CPI, through its Executive Vice President for Marketing
and Development, Jose Marco R. Antonio (Antonio), sent Babiano a Notice to
Explain[16] on February 23, 2009 directing him to explain why he should not be charged
with disloyalty, conflict of interest, and breach of trust and confidence for his
actuations.[17]

On February 25, 2009, Babiano tendered[18] his resignation and revealed that he had
been accepted as Vice President of First Global BYO Development Corporation (First
Global), a competitor of CPI.[19] On March 3, 2009, Babiano was served a Notice of
Termination[20] for: (a) incurring AWOL; (b) violating the "Confidentiality of Documents
and Non-Compete Clause" when he joined a competitor enterprise while still working
for CPI and provided such competitor enterprise information regarding CPFs marketing
strategies; and (c) recruiting CPI personnel to join a competitor.[21]

On the other hand, Concepcion resigned as CPFs Project Director through a

letter[22] dated February 23, 2009, effective immediately.

On August 8, 2011, respondents filed a complaint[23] for non-payment of commissions

and damages against CPI and Antonio before the NLRC, docketed as NLRC Case No. NCR-
08-12029-11, claiming that their repeated demands for the payment and release of their
commissions remained unheeded.[24]

For its part, CPI maintained[25] that Babiano is merely its agent tasked with selling its
projects. Nonetheless, he was afforded due process in the termination of his
employment which was based on just causes.[26] It also claimed to have validly withheld
Babiano's commissions, considering that they were deemed forfeited for violating the
"Confidentiality of Documents and Non-Compete Clause."[27] On Concepcion's money
claims, CPI asserted that the NLRC had no jurisdiction to hear the same because there
was no employer-employee relations between them, and thus, she should have litigated
the same in an ordinary civil action.[28]

The LA Ruling

In a Decision[29] dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's favor
and, accordingly, dismissed the complaint for lack of merit. [30]

The LA found that: (a) Babiano's acts of providing information on CPI's marketing
strategies to the competitor and spreading false information about CPI and its projects
are blatant violations of the "Confidentiality of Documents and Non-Compete Clause" of
his employment contract, thus, resulting in the forfeiture of his unpaid commissions in
accordance with the same clause;[31] and (b) it had no jurisdiction over Concepcion's
money claim as she was not an employee but a mere agent of CPI, as clearly stipulated
in her engagement contract with the latter.[32]

Aggrieved, respondents appealed[33] to the NLRC.

The NLRC Ruling

In a Decision[34] dated June 25, 2013, the NLRC reversed and set aside the LA ruling, and
entered a new one ordering CPI to pay Babiano and Concepcion the amounts of
P685,211.76 and P470,754.62, respectively, representing their commissions from
August 9, 2008 to August 8, 2011, as well as 10% attorney's fees of the total monetary
awards.[35]

While the NLRC initially concurred with the LA that Babiano's acts constituted just cause
which would warrant the termination of his employment from CPI, it, however, ruled
that the forfeiture of all earned commissions of Babiano under the "Confidentiality of
Documents and Non-Compete Clause" is confiscatory and unreasonable and hence,
contrary to law and public policy.[36] In this light, the NLRC held that CPI could not invoke
such clause to avoid the payment of Babiano's commissions since he had already earned
those monetary benefits and, thus, should have been released to him. However, the
NLRC limited the grant of the money claims in light of Article 291 (now Article 306) [37] of
the Labor Code which provides for a prescriptive period of three (3) years.
Consequently, the NLRC awarded unpaid commissions only from August 9, 2008 to
August 8, 2011 — i.e., which was the date when the complaint was filed. [38] Meanwhile,
contrary to the LA's finding, the NLRC ruled that Concepcion was CPI's employee,
considering that CPI: (a) repeatedly hired and promoted her since 2002; (b) paid her
wages despite referring to it as "subsidy"; and (c) exercised the power of dismissal and
control over her.[39] Lastly, the NLRC granted respondents' claim for attorney's fees since
they were forced to litigate and incurred expenses for the protection of their rights and
interests.[40]

Respondents did not assail the NLRC findings. In contrast, only CPI moved for
reconsideration,[41] which the NLRC denied in a Resolution[42] dated October 16, 2013.
Aggrieved, CPI filed a petition for certiorari[43] before the CA.

The CA Ruling

In a Decision[44] dated April 8, 2015, the CA affirmed the NLRC ruling with modification
increasing the award of unpaid commissions to Babiano and Concepcion in the amounts
of P889,932.42 and P591.953.05, respectively, and imposing interest of six percent (6%)
per annum on all monetary awards from the finality of its decision until fully paid. [45]

The CA held that Babiano properly instituted his claim for unpaid commissions before
the labor tribunals as it is a money claim arising from an employer-employee
relationship with CPI. In this relation, the CA opined that CPI cannot withhold such
unpaid commissions on the ground of Babiano's alleged breach of the "Confidentiality of
Documents and Non-Compete Clause" integrated in the latter's employment contract,
considering that such clause referred to acts done after the cessation of the employer-
employee relationship or to the "post-employment" relations of the parties. Thus, any
such supposed breach thereof is a civil law dispute that is best resolved by the regular
courts and not by labor tribunals.[46]

Similarly, the CA echoed the NLRC's finding that there exists an employer-employee
relationship between Concepcion and CPI, because the latter exercised control over the
performance of her duties as Project Director which is indicative of an employer-
employee relationship. Necessarily therefore, CPI also exercised control over
Concepcion's duties in recruiting, training, and developing directors of sales because she
was supervised by Babiano in the performance of her functions. The CA likewise
observed the presence of critical factors which were indicative of an employer-
employee relationship with CPI, such as: (a) Concepcion's receipt of a monthly salary
from CPI; and (b) that she performed tasks besides selling CPI properties. To add, the
title of her contract which was referred to as "Contract of Agency for Project Director"
was not binding and conclusive, considering that the characterization of the juridical
relationship is essentially a matter of law that is for the courts to determine, and not the
parties thereof. Moreover, the totality of evidence sustains a finding of employer-
employee relationship between CPI and Concepcion.[47]

Further, the CA held that despite the NLRC's proper application of the three (3)-year
prescriptive period under Article 291 of the Labor Code, it nonetheless failed to include
all of respondents' earned commissions during that time - i.e., August 9, 2008 to August
8, 2011 - thus, necessitating the increase in award of unpaid commissions in
respondents' favor.[48]

Undaunted, CPI sought for reconsideration, [49] which was, however, denied in a

Resolution[50] dated October 12, 2015; hence, this petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA erred in denying CPI's
petition for certiorari, thereby holding it liable for the unpaid commissions of
respondents.

The Court's Ruling

The petition is partly meritorious.

I.

Article 1370 of the Civil Code provides that "[i]f the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal meaning of its
stipulations shall control."[51] In Norton Resources and Development Corporation v. All
Asia Bank Corporation,[52] the Court had the opportunity to thoroughly discuss the said
rule as follows:
The rule is that where the language of a contract is plain and unambiguous, its
meaning should be determined without reference to extrinsic facts or aids. The
intention of the parties must be gathered from that language, and from that language
alone. Stated differently, where the language of a written contract is clear and
unambiguous, the contract must be taken to mean that which, on its face, it purports
to mean, unless some good reason can be assigned to show that the words should be
understood in a different sense. Courts cannot make for the parties better or more
equitable agreements than they themselves have been satisfied to make, or rewrite
contracts because they operate harshly or inequitably as to one of the parties, or alter
them for the benefit of one party and to the detriment of the other, or by construction,
relieve one of the parties from the terms which he voluntarily consented to, or impose
on him those which he did not.[53] (Emphases and underscoring supplied)
Thus, in the interpretation of contracts, the Court must first determine whether a
provision or stipulation therein is ambiguous. Absent any ambiguity, the provision on its
face will be read as it is written and treated as the binding law of the parties to the
contract.[54]

In the case at bar, CPI primarily invoked the "Confidentiality of Documents and Non-
Compete Clause" found in Babiano's employment contract [55] to justify the forfeiture of
his commissions, viz.:
Confidentiality of Documents and Non-Compete Clause

All records and documents of the company and all information pertaining to its business
or affairs or that of its affiliated companies are confidential and no unauthorized
disclosure or reproduction or the same will be made by you any time during or after
your employment.

And in order to ensure strict compliance herewith, you shall not work for whatsoever
capacity, either as an employee, agent or consultant with any person whose business
is in direct competition with the company while you are employed and for a period of
one year from date of resignation or termination from the company.

In the event the undersigned breaches any term of this contract, the undersigned agrees
and acknowledges that damages may not be an adequate remedy and that in addition
to any other remedies available to the Company at law or in equity, the Company is
entitled to enforce its rights hereunder by way of injunction, restraining order or other
relief to enjoin any breach or default of this contract.

The undersigned agrees to pay all costs, expenses and attorney's fees incurred by the
Company in connection with the enforcement of the obligations of the undersigned. The
undersigned also agrees to .pay the Company all profits, revenues and income or
benefits derived by or accruing to the undersigned resulting from the undersigned's
breach of the obligations hereunder. This Agreement shall be binding upon the
undersigned, all employees, agents, officers, directors, shareholders, partners and
representatives of the undersigned and all heirs, successors and assigns of the
foregoing.

Finally, if undersigned breaches any terms of this contract, forms of compensation

including commissions and incentives will be forfeited. [56] (Emphases and underscoring
supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating that
Babiano is barred to "work for whatsoever capacity x x x with any person whose
business is in direct competition with [CPI] while [he is] employed and for a period of
one year from date of [his] resignation or termination from the company," it also
expressly provided in no uncertain terms that should Babiano "[breach] any term of [the
employment contract], forms of compensation including commissions and incentives
will be forfeited." Here, the contracting parties - namely Babiano on one side, and CPI as
represented by its COO-Vertical, John Victor R. Antonio, and Director for Planning and
Controls, Jose Carlo R. Antonio, on the other -indisputably wanted the said clause to be
effective even during the existence of the employer-employee relationship between
Babiano and CPI, thereby indicating their intention to be bound by such clause by
affixing their respective signatures to the employment contract. More significantly, as
CPFs Vice President for Sales, Babiano held a highly sensitive and confidential
managerial position as he "was tasked, among others, to guarantee the achievement of
agreed sales targets for a project and to ensure that his team has a qualified and
competent manpower resources by conducting recruitment activities, training sessions,
sales rallies, motivational activities, and evaluation programs." [57] Hence, to allow
Babiano to freely move to direct competitors during and soon after his employment
with CPI would make the latter's trade secrets vulnerable to exposure, especially in a
highly competitive marketing environment. As such, it is only reasonable that CPI and
Babiano agree on such stipulation in the latter's employment contract in order to afford
a fair and reasonable protection to CPI.[58] Indubitably, obligations arising from contracts,
including employment contracts, have the force of law between the contracting parties
and should be complied with in good faith. [59] Corollary thereto, parties are bound by the
stipulations, clauses, terms, and conditions they have agreed to, provided that these
stipulations, clauses, terms, and conditions are not contrary to law, morals, public order
or public policy,[60] as in this case.

Therefore, the CA erred in limiting the "Confidentiality of Documents and Non-Compete

Clause" only to acts done after the cessation of the employer-employee relationship or
to the "post-employment" relations of the parties. As clearly stipulated, the parties
wanted to apply said clause during the pendency of Babiano's employment, and CPI
correctly invoked the same before the labor tribunals to resist the former's claim for
unpaid commissions on account of his breach of the said clause while the employer-
employee relationship between them still subsisted. Hence, there is now a need to
determine whether or not Babiano breached said clause while employed by CPI, which
would then resolve the issue of his entitlement to his unpaid commissions.

A judicious review of the records reveals that in his resignation letter [61] dated February
25, 2009, Babiano categorically admitted to CPI Chairman Jose Antonio that on February
12, 2009, he sought employment from First Global, and five (5) days later, was admitted
thereto as vice president. From the foregoing, it is evidently clear that when he sought
and eventually accepted the said position with First Global, he was still employed by CPI
as he has not formally resigned at that time. Irrefragably, this is a glaring violation of the
"Confidentiality of Documents and Non-Compete Clause" in his employment contract
with CPI, thus, justifying the forfeiture of his unpaid commissions.

II.

Anent the nature of Concepcion's engagement, based on case law, the presence of the
following elements evince the existence of an employer-employee relationship: (a) the
power to hire, i.e., the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the
employee's conduct, or the so called "control test." The control test is commonly
regarded as the most important indicator of the presence or absence of an employer-
employee relationship.[62] Under this test, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to control not
only the end achieved, but also the manner and means to be used in reaching that end.
[63]

Guided by these parameters, the Court finds that Concepcion was an employee of CPI
considering that: (a) CPI continuously hired and promoted Concepcion from October
2002 until her resignation on February 23, 2009,[64] thus, showing that CPI exercised the
power of selection and engagement over her person and that she performed functions
that were necessary and desirable to the business of CPI; (b) the monthly "subsidy" and
cash incentives that Concepcion was receiving from CPI are actually remuneration in the
concept of wages as it was regularly given to her on a monthly basis without any
qualification, save for the "complete submission of documents on what is a sale policy";
[65]
 (c) CPI had the power to discipline or even dismiss Concepcion as her engagement
contract with CPI expressly conferred upon the latter "the right to discontinue [her]
service anytime during the period of engagement should [she] fail to meet the
performance standards,"[66] among others, and that CPI actually exercised such power to
dismiss when it accepted and approved Concepcion's resignation letter; and most
importantly, (d) as aptly pointed out by the CA, CPI possessed the power of control over
Concepcion because in the performance of her duties as Project Director - particularly in
the conduct of recruitment activities, training sessions, and skills development of Sales
Directors - she did not exercise independent discretion thereon, but was still subject to
the direct supervision of CPI, acting through Babiano.[67]

Besides, while the employment agreement of Concepcion was denominated as a

"Contract of Agency for Project Director," it should be stressed that the existence of
employer-employee relations could not be negated by the mere expedient of
repudiating it in a contract. In the case of Insular Life Assurance Co., Ltd. v. NLRC,[68] it
was ruled that one's employment status is defined and prescribed by law, and not by
what the parties say it should be, viz.:
It is axiomatic that the existence of an employer-employee relationship cannot be
negated by expressly repudiating it in the management contract and providing therein
that the "employee" is an independent contractor when the terms of the agreement
clearly show otherwise. For, the employment status of a person is defined and
prescribed by law and not by what the parties say it should be. In determining the
status of the management contract, the "four-fold test" on employment earlier
mentioned has to be applied.[69] (Emphasis and underscoring supplied)
Therefore, the CA correctly ruled that since there exists an employer-employee
relationship between Concepcion and CPI, the labor tribunals correctly assumed
jurisdiction over her money claims.

III.

Finally, CPI contends that Concepcion's failure to assail the NLRC ruling awarding her the
amount of P470,754.62 representing unpaid commissions rendered the same final and
binding upon her. As such, the CA erred in increasing her monetary award to
P591,953.05.[70]

The contention lacks merit.

As a general rule, a party who has not appealed cannot obtain any affirmative relief
other than the one granted in the appealed decision. However, jurisprudence admits an
exception to the said rule, such as when strict adherence thereto shall result in the
impairment of the substantive rights of the parties concerned. In Global Resource for
Outsourced Workers, Inc. v. Velasco:[71]
Indeed, a party who has failed to appeal from a judgment is deemed to have
acquiesced to it and can no longer obtain from the appellate court any affirmative relief
other than what was already granted under said judgment. However, when strict
adherence to such technical rule will impair a substantive right, such as that of an
illegally dismissed employee to monetary compensation as provided by law, then
equity dictates that the Court set aside the rule to pave the way for a full and just
adjudication of the case.[72] (Emphasis and underscoring supplied)

In the present case, the CA aptly pointed out that the NLRC failed to account for all the
unpaid commissions due to Concepcion for the period of August 9, 2008 to August 8,
2011.[73] Indeed, Concepcion's right to her earned commissions is a substantive right
which cannot be impaired by an erroneous computation of what she really is entitled to.
Hence, following the dictates of equity and in order to arrive at a complete and just
resolution of the case, and avoid a piecemeal dispensation of justice over the same, the
CA correctly recomputed Concepcion's unpaid commissions, notwithstanding her failure
to seek a review of the NLRC's computation of the same.

In sum, the Court thus holds that the commissions of Babiano were properly forfeited
for violating the "Confidentiality of Documents and Non-Compete Clause." On.the other
hand, CPI remains liable for the unpaid commissions of Concepcion in the sum of
P591,953.05.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April 8, 2015 and the
Resolution dated October 12, 2015 of the Court of Appeals (CA) in CA-G.R. SP No.
132953 are hereby MODIFIED in that the commissions of respondent Edwin J. Babiano
are deemed FORFEITED. The rest of the CA Decision stands.

THIRD DIVISION
[ G.R. No. 199180, July 27, 2016 ]
THELMA RODRIGUEZ, JOINED BY HER HUSBAND, PETITIONERS, VS.
SPOUSES JAIME SIOSON AND ARMI SIOSON, ET AL., RESPONDENTS.

DECISION

REYES, J.:

Before the Court is a petition for review [1] under Rule 45 of the Rules of Court
assailing the Decision[2] dated May 26, 2011 and Resolution[3] dated October 21, 2011 of
the Court of Appeals (CA) in CA-G.R. CV No. 94867, which nullified the Joint
Decision[4] dated August 13, 2009 of the Regional Trial Court (RTC) of Bataan, Branch 3.

The Facts

This petition is the aftermath of a series of sales transactions entered into by Neri delos
Reyes (Neri) over a portion of a property formerly identified as Lot 398, with an area of
22,398 square meters, covered by Transfer Certificate of Title (TCT) No. T-86275 and
registered in the name of "Neri delos Reyes, married to Violeta Lacuata."[5]

Sometime in 1997, the Municipality of Orani, Bataan (Municipality) purchased from Neri
an area of about 1.7 hectare of Lot 398, to be used for the extension of the
Municipality's public market. Among other things, it was agreed that upon full payment
of the purchase price, Neri will surrender the mother title to the Municipality for
subdivision of the property on the condition that Neri will equitably share in the
expense thereof.[6]

Lot 398 was subsequently subdivided into 5 lots: Lot 398-A, Lot 398-B, Lot 398-C, Lot
398-D, and Lot 398-E. Lots 398-C and 398-D pertain to the portions that were sold to the
Municipality, while Lot 398-E is a road lot. Consequently, only Lots 398-A and 398-B
were left as the remaining portions over which Neri retained absolute title. TCT Nos. T-
209894 and T-209895 were then respectively issued over Lots 398-A and 398-B and
were both registered in the name of "Neri delos Reyes, married to Violeta Lacuata." The
owner's duplicate copies of TCT Nos. T-209894 and T-209895, however, were retained
by the Municipality pending Neri's payment of his share in the expenses incurred for the
subdivision of Lot 398. These were placed under the custody of the Municipal Treasurer,
where they continue to remain.[7]

Neri, however, alleged that then Municipal Mayor Mario Zuñiga suggested that he sell
Lot 398-A to his aunt, petitioner Thelma Rodriguez (Thelma). The Municipality would
then expropriate the same from Thelma. Neri agreed to the suggestion. [8]

After agreeing to the amount of P1,243,000.00 as the selling price, Thelma, on March
20, 1997, issued a check for said amount payable to Neri. When it fell due, no sufficient
funds were available to cover the check. Consequently, it was agreed that Thelma would
pay the purchase price in installments from March 20, 1997 to September 4, 1997.
Thelma, however, was only able to pay P442,293.50.[9]

On November 12, 2001, Thelma caused the annotation of an adverse claim on TCT No.
T-209894.[10] At about the same time, Thelma saw an announcement that a new Orani
Common Terminal would be built on Lot 398-A. As she has not yet entered into any
agreement regarding the utilization of said lot, Thelma filed a Complaint for
Injunction docketed as Civil Case No. 7394 against then incumbent mayor Efren Pascual,
Jr. (Mayor Pascual), and the Municipality under claim of ownership. To support her
claim, Thelma incorporated in her complaint a copy of an undated and
unnotarized deed of absolute sale allegedly executed by Neri in her favor. [11]

In their joint verified answer, Mayor Pascual and the Municipality acknowledged that
Thelma became the owner of Lot 398-A by way of purchase from Neri. [12]

In 2002, Neri executed an affidavit claiming that the owner's copies of TCT No. T-209894
(covering Lot 398-A) and TCT No. T-209895 (covering Lot 398-B) were lost, which was
annotated on the original copy of TCT No. T-209894 on May 8, 2002. [13] Two days after,
or on May 10, 2002, Neri caused the cancellation of Thelma's adverse claim. [14] Neri also
caused the reconstitution of new owner's copies of TCT Nos. T-209894 and T-209895.
[15]
 Thereafter, new copies of TCT Nos. T-209894 and T-209895 were issued, and Neri
then sold Lot 398-A to Spouses Jaime and Armi Sioson, Spouses Joan and Joseph
Camacho, and Agnes Samonte (respondents) - in a deed of sale dated November 27,
2002. A special power of attorney was executed by Violeta delos Reyes (Violeta) in favor
of Neri for the purpose. Consequently, TCT No. T-209894 was cancelled, and TCT No. T-
226775 was thus issued in the respondents' names. [16]

Upon the issuance of TCT No. T-226775, the respondents declared Lot 398-A for tax
purposes and paid them accordingly. They sought to take actual possession thereof by
filling it; however, after they filled said lot with about 40 truckloads of soil/fillings,
Thelma sent two armed blue guards who entered the premises and set up a tent
therein. The respondents brought the matter to the attention of barangay authorities
who referred them to the municipal mayor. As the municipal mayor did not take any
action, the respondents filed a forcible entry case against Thelma before the Municipal
Circuit Trial Court of Orani-Samal, Bataan, docketed as Civil Case No. 843. The said
ejectment case is still pending.[17]

After Thelma learned of the second sale of Lot 398-A, she filed against the respondents
a complaint for the Declaration of Nullity of the Second Sale and TCT No. T-226775 on
February 11, 2003, docketed as Civil Case No. 7664. In support of her claim, Thelma
once again presented a deed of absolute sale executed by Neri in her favor. This time,
the deed of sale she presented was duly signed by her and Neri, witnessed, notarized
and dated April 10, 1997.[18]
The respondents countered that they are innocent purchasers for value having bought
Lot 398-A at the time when Thelma's adverse claim was already cancelled. While they
admit Thelma's possession of the subject property, they, however, qualify that
possession is being contested in a separate action for forcible entry. [19]

The respondents also filed a verified answer-in-intervention in Civil Case No. 7394

(injunction case) contending that they are the present registered owners of Lot 398-A,
and as such, Thelma is not entitled to any relief.[20]

Ruling of the RTC

The RTC jointly heard Civil Case No. 7394 and Civil Case No. 7664 and after trial,
rendered judgment in favor of Thelma. The dispositive portion of the Joint
Decision[21] dated August 13, 2009 reads:
WHEREFORE, judgment is hereby rendered declaring that:
1) [Thelma] is entitled to the relief of permanent injunction prayed for in Civil
Case No. 7394 against the respondents. Insofar as defendants [Mayor Pascual] and the
[Municipality] are concerned, not only did they acknowledge expressly the ownership of
[Thelma] of Lot 398-A, they have disowned the commission of any act in derogation of
[Thelma's] right of ownership of the lot and did not contest anymore the action of
[Thelma] in said case;

2) Insofar as Civil Case No. 7664 is concerned, the second deed of sale entered into by
[Neri] with the [respondents] is hereby declared null and void, and [TCT] No. T-226775
of the Registry of Deeds of Bataan which was issued by defendant Register of Deeds
pursuant to said second deed of sale is likewise declared null and void, and accordingly,
the Register of Deeds for the Province of Bataan is ordered to cancel said certificate of
title and to reinstate [TCT] No. T-209894 in the name of [Neri], married to [Violeta];

3) The new owner's copy of [TCT] No. T-209894 is hereby declared null and void as the
original owner's copy is not lost but actually exists and is presently in the custody of the
Municipal Treasurer of Orani, Bataan. In consequence, defendant Register of Deeds of
Bataan is directed to cancel said new owner's copy of [TCT] No. T-209894; and
4) [The respondents] are hereby ordered to jointly and severally pay to  [Thelma]
attorney's fees in the amount of Twenty[-]Five Thousand Pesos (P25,000.00).
All counterclaims of [the respondents] are denied for lack of basis in fact and in
law.

No pronouncement as to costs.

SO ORDERED.[22]
The RTC concluded that by Neri's admission that he sold the subject lot to Thelma
for a consideration of P1,243,000.00, and his acknowledgement receipt of P442,293.50
as partial payment from the latter, the transaction between Thelma and Neri should be
regarded as an executed contract of sale. Hence, Lot 398-A was subjected to a double
sale when Neri sold the same property to the respondents. [23] The RTC further ruled that
the contract of sale between Neri and the respondents is null and void because it was
transacted and executed at the time when Neri was no longer the owner of Lot 398-A. It
was legally inexistent for lack of object certain. Thereupon, the fact that the
respondents were able to register their acquisition first is of no moment. Registration
does not legitimize a void contract and thus, TCT No. T-226775 should be cancelled. [24]

The respondents moved for reconsideration but it was denied by the RTC per
Order[25] dated January 13, 2010. Hence, they elevated their case to the CA.

Ruling of the CA

On May 26, 2011, the CA promulgated the assailed Decision,[26] with the following
dispositive portion:
WHEREFORE, the instant Appeal is GRANTED. The Joint Decision dated August
13, 2009 and the Order dated January 13, 2010 of the [RTC] of Bataan are hereby
declared NULL and VOID insofar as it (1) granted permanent injunction in favor of
[Thelma] in Civil Case No. 7394 against [the respondents];T2) declared null and void the
deed of sale between [Neri] and [the respondents] in Civil Case No. 7664; (3) declared
null and void the [TCT] No. T-226775; (4) ordered the cancellation of [TCT] No. T-226775
and reinstatement of [TCT] No. T-209894 in the name of [Neri], married to [Violeta]; and
(5) ordered the payment of attorney's fees.

Consequently, the following are hereby declared VALID: (1) the Deed of Sale between
[Neri] and [the respondents]; and (2) the [TCT] No. T-226775 in the names of [the
respondents].

This Decision is without prejudice to any right which [Thelma] may have against [Neri]
for the refund of the amount of Four Hundred Forty-Two Thousand Two Hundred
Ninety-Three and 50/100 Pesos (P442,293.50).

The Complaints in Civil Cases Nos. 7394 and 7664 are hereby DISMISSED.

SO ORDERED.[27] (Emphasis in the original)

Contrary to the findings of the RTC, the CA found that the contract between Neri
and Thelma was a mere contract to sell and not a contract of sale; hence, there was no
double sale of Lot 93 8-A. According to the CA, the question of whether or not the
respondents are buyers in good faith is unavailing since the concept of a "buyer in good
faith" finds relevance only in cases of double sale. The CA further stated that even if it is
assumed that the contract between Neri and Thelma was an absolute contract of sale,
the same is nonetheless void for lack of consent of Neri's wife, Violeta, insofar as the
object of the transaction is a conjugal property.

Thelma moved for reconsideration of the CA decision, which was denied for lack of
merit in Resolution[28] dated October 21, 2011.

Hence this petition.

Thelma argues that there was double sale and the CA erred in reversing the RTC
decision: (1) by interpreting the sale between Thelma and Neri as a mere contract to
sell; (2) by declaring the deed of sale in favor of Thelma as null and void due to lack of
Violeta's consent or conformity; and (3) by declaring the respondents as buyers in good
faith despite prior registration of Thelma's notice of adverse claim in TCT No. T-209894,
and her actual possession of the subject property. [29]

Ruling of the Court

The resolution of this case basically rests on the determination of whether the
transaction between Neri and Thelma is a contract of sale or a contract to sell. The rule
on double sale, as provided in Article 1544 of the Civil Code,[30] does not apply to a case
where there was a sale to one party of the land itself while the other contract was a
mere promise to sell the land or at most an actual assignment of the right to repurchase
the same land.[31]

Both the RTC and the CA concur in the finding that Neri agreed to sell Lot 398-A to
Thelma for an agreed price of P1,243,000.00. The RTC, however, concluded that by
Neri's admission that he sold the subject lot to Thelma for a consideration of
P1,243,000.00, and that he acknowledged receipt of P442,293.50 as partial payment
from the latter, the transaction between Thelma and Neri should be regarded as an
executed contract of sale, and not a merely executory one. The RTC likewise took into
consideration Thelma's alleged possession of the property and Neri's failure to rescind
the contract as indicative of the nature of their agreement as one of sale. [32]

On the other hand, the CA ruled that "the contract between Thelma and Neri was a
mere contract to sell, the transfer of ownership over Lot 398-A being conditioned on
Thelma's full payment of the purchase price."[33] As regards the existence of the two
contracts of sale, the CA concluded that Thelma admitted on trial that the first deed of
sale was only meant to be an acknowledgment receipt for the down payment she made
on the subject lot, and the second deed of sale was allegedly executed after Thelma
pays in full the purchase price of the lot.

A review of this case shows that the CA ruled in accord with existing jurisprudence.

"The real character of the contract is not the title given, but the intention of the
parties."[34] In this case, there exist two deeds of absolute sale. Though identically
worded, the first contract was undated, not notarized, signed only by Neri, and was
presented in Civil Case No. 7394 for Injunction, [35] while the second deed was dated April
10, 1997, notarized on September 5, 1997, signed by both Neri and Thelma, and was
presented in Civil Case No. 7664 for Declaration of Nullity of Deed of Sale and Title. [36]

In determining the nature of the agreement between Thelma and Neri, the CA took note
of these two documents, and, coupled with Thelma's own admissions, correctly found
that it was a mere contract to sell. According to the CA:
During trial, Thelma explained the apparent disparity between the two (2) "deeds
of absolute sale" by testifying that the undated and unnotarized deed of sale served
only as a "receipt" which was signed by Neri when the latter received the downpayment
for the lot. The dated and notarized deed of sale, on the other hand, was signed by both
Thelma and Neri upon Thelma's alleged full payment of the purchase price:

x x x x

Second, the execution of the "deed of absolute sale" dated August 10, 1997 and the
transfer and delivery of the title to Thelma's name covering Lot No. 398-A were
conditioned upon full payment of the purchase price.

Thelma testified that the "deed of absolute sale" dated August 10, 1997 and which was
attached to Thelma's complaint in Civil Case No. 7664 was signed by her, Neri and their
witnesses only upon full payment of the purchase price. Thelma further testified that
she and Neri agreed to place the amount of the purchase price on the deed of absolute
sale only at the time when Thelma had fully paid the same: x x x [37] (Italics ours and
emphasis deleted)
Despite the denomination of their agreement as one of sale, the circumstances
tend to show that Neri agreed to sell the subject property to Thelma on the condition
that title and ownership would pass or be transferred upon the full payment of the
purchase price. This is the very nature of a contract to sell, which is a "bilateral contract
whereby the prospective seller, while expressly reserving the ownership of the property
despite delivery thereof to the prospective buyer, binds himself to sell the property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, i.e.,
the full payment of the purchase price." [38] As stated by the Court, the agreement to
execute a deed of sale upon full payment of the purchase price "shows that the vendors
reserved title to the subject property until full payment of the purchase price." [39]

It was likewise established that Thelma was not able to pay the full purchase price, and
that she was only able to pay P442,293.50 of the agreed selling price of P1,243,000.00.
The RTC, in fact, made the following findings: (1) the consideration for Lot 398-A was
P1,243,000.00; (2) Thelma issued a check on March 20, 1997 for said amount, payable
to Neri; (3) the agreement was that the check would only be held by Neri for
safekeeping as it was yet unsure if there was ample funds to cover the check; (4) the
check was not covered by sufficient funds when presented for payment, so Thelma
subsequently paid Neri in installments starting from March 20, 1997 to September 4,
1997; and (5) Neri acknowledged receipt from Thelma the total amount of P442,293.50.
[40]

To bolster her claim, Thelma insists that she now holds title over the subject property
after Neri allegedly delivered the subject lot to her right after the execution of the sale.
[41]
 There is, however, nothing on record to support this claim aside from her bare
assertions. There was no testimony or any proof on her part showing when and how she
took possession of the property. At best, what is extant from the records is that Thelma
paid taxes on the property for the years 2000 and 2001, which was three years after the
alleged sale. "But tax declarations, by themselves, are not conclusive evidence of
ownership of real property."[42] Aside from this, the tax receipts showed that the
property was still declared in the name of Neri. [43]

Moreover, the alleged delivery of the property, even if true, is irrelevant considering
that in a contract to sell, ownership is retained by the registered owner in spite of the
partial payment of the purchase price and delivery of possession of the property. Thus,
in Roque v. Aguado,[44] the Court ruled that since the petitioners have not paid the final
installment of the purchase price, the condition which would have triggered the parties'
obligation to enter into and thereby perfect a contract of sale cannot be deemed to
have been fulfilled; consequently, they "cannot validly claim ownership over the
subject portion even if they had made an initial payment and even took possession of
the same."[45]

Accordingly, the CA did not commit any reversible error in concluding that "the contract
between Thelma and Neri was a mere contract to sell, the transfer of ownership over
Lot 398-A being conditioned on Thelma's full payment of the purchase price. Having
failed to pay the purchase price in full, Thelma cannot claim ownership over Lot 398-A
and Neri is not legally proscribed from alienating the same lot to other buyers." [46]

Finally, while the CA correctly ruled that the agreement was a contract to sell, the Court,
however, does not share its position that the subject property is a conjugal property,
and as such, the absence of Violeta's consent should be held as among the factors which
could have adversely affected the validity of the purported contract of sale between
Neri and Thelma. This is due to the following reasons: first, the subject property, Lot
398-A, is registered in the name of "Neri delos Reyes, married to Violeta Lacuata," and
so was its mother lot, Lot 398. In Metropolitan Bank and Trust Company v. Tan,[47] it was
held that such form of registration is determinative of the property's nature as
paraphemal. That the only import of the title is that Neri is the owner of the subject
property, it being registered in his name alone, and that he is married to Violeta;
and second, the record is bereft of proof that said property was acquired during Neri
and Violeta's marriage - such that, the presumption under Article 116 of the Family
Code that properties acquired during the marriage are presumed to be conjugal cannot
apply.

WHEREFORE, the petition is DENIED for lack of merit. Accordingly, the Decision dated
May 26, 2011 and Resolution dated October 21, 2011 of the Court of Appeals in CA-G.R.
CV No. 94867 are AFFIRMED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 171865, October 12, 2016 ]
PHILIPPINE NATIONAL BANK, PETITIONER, VS. HEIRS OF
BENEDICTO AND AZUCENA ALONDAY, RESPONDENTS.

DECISION

BERSAMIN, J.:

The issue is whether the all-embracing or dragnet clause contained in the first mortgage
contract executed between the parties for the security of the first loan could authorize the
foreclosure of the property under the mortgage to secure a second loan despite the full
payment of the second loan.

Antecedents

On September 26, 1974, the Spouses Benedicto and Azucena Alonday (Spouses
Alonday) obtained an agricultural loan of P28,000.00 from the petitioner at its Digos,
Davao del Sur Branch, and secured the obligation by constituting a real estate mortgage
on their parcel of land situated in Sta. Cruz, Davao del Sur registered under Original
Certificate of Title (OCT) No. P-3599 of the Registry of Deeds of Davao del Sur. [1]
On June 11, 1980, the Spouses Alonday obtained a commercial loan for P16,700.00 from
the petitioner's Davao City Branch, and constituted a real estate mortgage over their 598
square meter residential lot situated in Ulas, Davao City registered under Transfer
Certificate of Title (TCT) No. T-66139 of the Registry of Deeds of Davao City.

It is noted that the mortgage contracts contained the following identical provision, to wit:
That for and in consideration of certain loans, overdrafts, and other credit
accommodations, obtained from the Mortgagee, which is hereby fixed at _________,
Philippine Currency, and to secure the payment of the same and those others that the
Mortgagee may extend to the Mortgagor, including interests and expenses, and other
obligations owing by the Mortgagor to the Mortgagee, whether direct or indirect,
principal or secondary, as appearing in the accounts, books and records of the Mortgagee,
the Mortgagor does hereby transfer and convey by way of mortgage unto the Mortgagee,
its successors or assigns, the parcel of land which is/are described in the list inserted at
the back of this document xxx. In case the Mortgagor executes subsequent promissory
note or notes either as renewal of the former note, as an extension thereof, or as a new
loan, or is given any other kind of accommodation, xxx, this mortgage shall also stand as
security for the payment of the said promissory note or notes and/or accommodations
without the necessity of executing a new contract and this mortgage shall have the same
force and effect as if the said promissory note or notes and/or accommodations were
existing on the date thereof, notwithstanding full payments of any or all obligations of the
Mortgagors. This mortgage shall also stand as security for said obligations and any and
all other obligations of the Mortgagor to the Mortgagee of whatever kind and nature,
whether such obligations have been contracted before, during or after the constitution of
this mortgage. However, if the Mortgagor shall pay the Mortgagee, its successors or
assigns, the obligations secured by this mortgage, together with interests, costs and other
expenses, on or before the date they are due, and shall keep and perform all the covenants
and agreements herein contained for the Mortgagor to keep and perform, then this
mortgage shall be null and void, otherwise, it shall remain in full force and effect. [2]
The Spouses Alonday made partial payments on the commercial loan, which they
renewed on December 23, 1983 for the balance of P15,950.00. The renewed commercial
loan, although due on December 25, 1984, was fully paid on July 5, 1984.[3]

On August 6, 1984, respondents Mercy and Alberto Alonday, the children of the Spouses
Alonday, demanded the release of the mortgage over the property covered by TCT No. T-
66139. The petitioner informed them, however, that the mortgage could not be released
because the agricultural loan had not yet been fully paid, and that as the consequence of
the failure to pay, it had foreclosed the mortgage over the property covered by OCT No.
P-3599 on August 17, 1984.

It appeared that notwithstanding such foreclosure, a deficiency balance of P91,525.22

remained.[4] Hence, the petitioner applied for the extrajudicial foreclosure of the mortgage
on the property covered by TCT No. T-66139. A notice of extra-judicial sale was issued
on August 20, 1984, and the property covered by TCT No. T-66139 was sold on
September 28, 1984 to the petitioner in the amount of P29,900.00. Since the Alondays
were unable to redeem the property, the petitioner consolidated its ownership. Later on,
the property was sold for P48,000.00 to one Felix Malmis on November 10, 1989. [5]

According to the petitioner, the deed of mortgage relating to the property covered by
TCT No. T-66139 included an "all-embracing clause" whereby the mortgage secured not
only the commercial loan contracted with its Davao City Branch but also the earlier
agricultural loan contracted with its Digos Branch.

Judgment of the RTC

On July 8, 1994, therefore, the respondents instituted a complaint against the petitioner in
the Regional Trial Court (RTC) in Davao City to recover damages and attorney's fees
(Civil Case No. 23,021-94), averring that the foreclosure and sale of the property covered
by TCT No. T-66139 was illegal.

On November 28, 1997, the RTC rendered judgment finding in favor of the respondents,
[6]
 and disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against
defendant bank, ordering said defendant bank:

1. To pay plaintiffs the sum of One Million Seven Hundred Thousand

(P1,700,000.00) Pesos, representing the value of the land covered by TCT No. T-
66139;

2. To pay plaintiffs the sum of P20,000.00 as attorney's fees; and

3. To pay the costs of this suit.

SO ORDERED.[7]
The RTC observed that if the petitioner had intended to have the second mortgage secure
the pre-existing agricultural loan, it should have made an express reservation to that
effect; that based on the all-embracing clause, the mortgage was a contract of adhesion,
and the ambiguities therein should be construed strictly against the petitioner; that the last
sentence of the all-embracing clause provided that the mortgage would be null and void
upon the payment of the obligations secured by the mortgage; and that the petitioner was
guilty of bad faith in refusing to nullify the mortgage despite full payment of the
commercial loan prior to its maturity.

The RTC also ruled that because the property had already been sold to Malmis, a third
party not brought within the trial court's jurisdiction, it could not order the return of the
property; and that it was ordering the petitioner instead to pay the respondents the value
of the property under its present market valuation.

Decision of the CA

Dissatisfied, the petitioner appealed to the Court of Appeals (CA). The appeal was
docketed as C.A.-G.R. CV No. 60625.

On August 31, 2005, the CA affirmed the RTC,[8] observing that the mortgage, being a
contract of adhesion, should be construed strictly against the petitioner as the patty who
had drafted the same; and that although the petitioner had argued, citing Mojica v. Court
of Appeals,[9] that all-embracing clauses were valid to secure past, present and future
loans, Mojica v. Court of Appeals was not in point inasmuch as the facts therein were
different from the facts herein.

The petitioner filed a motion for reconsideration, but the CA denied the motion on
February 27, 2006.[10]

Hence, this appeal by petition for review on certiorari.

Issues

The petitioner assigns the following errors to the CA, to wit:

I. The Court of Appeals grievously erred in restricting and delimiting the scope and
validity of the standard "all-embracing clause" in real estate mortgage contracts
solely to future indebtedness and not to prior ones, contrary to leading Supreme
Court decisions on the matter.

II. Even assuming arguendo that the xxx decisions are inapplicable to the case at bar,
the Court of Appeals grievously erred in awarding the unsubstantiated amount of
P1.7 million in damages and P20,000.00 as attorney's fees against PNB without
factual and legal basis.[11]

The petitioner submits that Mojica v. Court of Appeals validates the use of an all-

embracing clause in a mortgage agreement to secure not only the amount indicated on the
mortgage instrument, but also the mortgagor's future and past obligations; that by
denying the applicability to the case of Mojica v. Court of Appeals and other similar
rulings, the CA disregarded the principle of stare decisis; and that the CA in effect
thereby regarded allembracing clauses invalid as to prior obligations.

Ruling of the Court

The appeal lacks merit.

The CA opined as follows:

The real estate mortgage on the property covered by TCT No. T-66139 was specifically
constituted to secure the payment of the commercial loan of the Spouses ALONDAY. In
the same manner, the real estate mortgage on the property covered by OCT No. P-3599
was constituted to secure the payment of their agricultural loan with the PNB. With the
execution of separate mortgage contracts for the two (2) loans, it is clear that the intention
of the parties was to limit the mortgage to the loan for which it was constituted.

xxxx

The [Mojica] case is not in point since the facts therein are different from the case at
bench. In Mojica vs. Court of Appeals, the mortgaged real estate property was made to
answer for future advancement or renewal of the loan, whereas in the instant case, the
foreclosure sale included a property which was used as a security for a commercial loan
which was obtained after the agricultural loan.
The mortgage provision relied upon by appellant is known in American jurisprudence as
a "dragnet" clause, which is specifically phrased to subsume all debts of past or future
origin. Such clauses pursuant to the pronouncement of the Supreme Court in DBP vs.
Mirang must be "carefully scrutinized and strictly construed."[12]

The petitioner wrongly insists that the CA, thr ough the foregoing ratiocination, held that
the all-embracing or dragnet clauses were altogether invalid as to prior obligations. What
the CA, although reiterating that the Court upheld the validity of using real estate
mortgages to secure future advancements, only thereby pointed out that it could not find
similar rulings as to mortgages executed to secure prior loans.

There is no question, indeed, that all-embracing or dragnet clauses have been recognized
as valid means to secure debts of both future and past origins.[13] Even so, we have
likewise emphasized that such clauses were an exceptional mode of securing obligations,
and have held that obligations could only be deemed secured by the mortgage if they
came fairly within the terms of the mortgage contract.[14] For the all-embracing or dragnet
clauses to secure future loans, therefore, such loans must be sufficiently described in the
mortgage contract.[15] If the requirement could be imposed on a future loan that was
uncertain to materialize, there is a greater reason that it should be applicable to a past
loan, which is already subsisting and known to the parties.

Nonetheless, it was undeniable that the petitioner had the opportunity to include some
form of acknowledgement of the previously subsisting agricultural loan in the terms of
the second mortgage contract The mere fact that the mortgage constituted on the property
covered by TCT No. T-66139 made no mention of the pre-existing loan could only
strongly indicate that each of the loans of the Spouses Alonday had been
treated separately by the parties themselves, and this sufficiently explained why the loans
had been secured by different mortgages.

Another indication that the second mortgage did not extend to the agricultural loan was
the fact that the second mortgage was entered into in connection only with the
commercial loan. Our ruling in Prudential Bank v. Alviar[16] is then relevant, to wit:
xxx The parties having conformed to the "blanket mortgage clause" or "dragnet clause," it
is reasonable to conclude that they also agreed to an implied understanding that
subsequent loans need not be secured by other securities, as the subsequent loans will be
secured by the first mortgage. In other words, the sufficiency of the first security is a
corollary component of the "dragnet clause." But of course, there is no prohibition, as in
the mortgage contract in issue, against contractually requiring other securities for the
subsequent loans. Thus, when the mortgagor takes another loan for which another
security was given it could not be inferred that such loan was made in reliance solely on
the original security with the "dragnet clause," but rather, on the new security given. This
is the "reliance on the security test."

xxx Accordingly, finding a different security was taken for the second loan no intent that
the parties relied on the security of the first loan could be inferred, so it was held. The
rationale involved, the court said, was that the "dragnet clause" in the first security
instrument constituted a continuing offer by the borrower to secure further loans under
the security of the first security instrument, and that when the lender accepted a different
security he did not accept the offer.[17]
Although the facts in Prudential Bank were not entirely on all fours with those of this
case because the prior mortgage in Prudential Bank was sought to be enforced against a
subsequent loan already secured by other securities, the logic in Prudential Bank is
applicable here. The execution of the subsequent mortgage by the parties herein to secure
the subsequenlloan was an indication that they had intended to treat each loan as distinct
from the other, and that they had intended to secure each of the loans individually and
separately.

We further concur with the CA and the RTC in their holding that the mortgage contracts
executed by the Spouses Alonday were contracts of adhesion exclusively prep red by the
petitioner. Under Article 1306 of the Civil Code, the contracting parties "may establish
such stipulations, clauses, terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order or public policy." This
is an express recognition by the law of the right of the people to enter into all manner of
lawful conventions as part of their safeguarded liberties. The objection against a contract
of adhesion lies most often in its negation of the autonomy of the will of the parties in
contracts. A contract of adhesion, albeit valid, becomes objectionable only when it takes
undue advantage of one of the parties the weaker party- by having such party just adhere
to the terms of the contract. In such situation, the courts go to the succor of the weaker
party by construing any obscurity in the contract against the party who prepared the
contract, the latter being presumed as the stronger party to the agreement, and as the party
who caused the obscurity.[18]

To reiterate, in order for the all-embracing or dragnet clauses to secure future and other
loans, the loans thereby secured must be sufficiently described in the mortgage contract.
Considering that the agricultural loan had been pre-existing when the mortgage was
constituted on the property covered by TCT No. T-66139, it would have been easy for the
petitioner to have expressly incorporated the reference to such agricultural loan in the
mortgage contract covering the commercial loan. But the petitioner did not. Being the
party that had prepared the contract of mortgage, its failure to do so should be construed
that it did not at all contemplate the earlier loan when it entered into the subsequent
mortgage.

Anent the value of the property covered by TCT No. T-66139, the findings of the RTC on
the valuation were as follows:
Considering that the property is located at the junction of the roads leading to Toril and
Calinan districts with big establishments all around, plaintiffs claim that at the time of the
filing of this case which was in 1994, the reasonable market value of the land was
P1,200.00 per square meter. To date, the value could reasonably be P3,000.00 per square
meter.[19]
Opining that the respondents should be indemnified the value of the loss suffered from
the illegal foreclosure of the property covered by TCT No. T-66139, theCA adopted the
valuation by the RTC on the established fair market value of the property being
P3,000.00/square meter, for a total of P1,700,000.00 as damages to be awarded. [20]

The petitioner challenges the valuation as devoid of basis. It points out that the complaint
of the Spouses Alonday had placed the value of the property at P1,200.00/square meter;
and that respondent Alberto Alonday had testified during the trial that the value of the
property had been only P1,200.00/square meter.

We uphold the challenge by the petitioner.

We are at a loss at how the RTC had computed and determined the valuation at
P3,000.00/square meter. Such determination was easily the product of guesswork on the
part of the trial court, for the language employed in its judgment in reference to such
value was "could reasonably be."[21] On its part, the CA adverted to the valuation as
"approximately P3,000.00,"[22] indicating that its own determination of the fair market
value was of similar tenor as that by the RTC. Accordingly, the valuation by both lower
courts cannot be upheld, for it is basic enough that in their determination of actual
damages, the comis should eschew mere assertions, speculations, conjectures or
guesswork;[23] otherwise, they would be guilty of arbitrariness and whimsicality.
Moreover, the courts cannot grant reliefs not prayed for in the pleadings or in excess of
what is being sought by the party.[24]

To accord with what is fair, based on the records, we reduce the basis of the actual
damages to P1,200.00/square meter. Such valuation is insulated from arbitrariness
because it was made by the Spouses Alonday themselves in their complaint, rendering a
total of P717,600.00 as actual damages.

The lower courts did not impose interest on the judgment obligation to be paid by the
petitioner. Such interest is in the nature of compensatory interest, as distinguished from
monetary interest. It is relevant to elucidate on the distinctions between these kinds of
interest. In this regard, the Court has expounded in Siga-an v. Villanueva:[25]
Interest is a compensation fixed by the parties for the use or forbearance of money. This
is referred to as monetary interest. Interest may also be imposed by law or by courts as
penalty or indemnity for damages. This is called compensatory interest. The right to
interest arises only by virtue of a contract or by virtue of damages for delay or failure to
pay the principal loan on which interest is demanded.

Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates
that no interest shall be due unless it has been expressly stipulated in writing. As can be
gleaned from the foregoing provision, payment of monetary interest is allowed only if:
(1) there was an express stipulation for the payment of interest; and (2) the agreement for
the payment of interest was reduced in writing. The concurrence of the two conditions is
required for the payment of monetary interest. Thus, we have held that collection of
interest without any stipulation therefor in writing is prohibited by law.

xxxx

There are instances in which an interest may be imposed even in the absence of express
stipulation, verbal or written, regarding payment of interest. Article 2209 of the Civil
Code states that if the obligation consists in the payment of a sum of money, and the
debtor incurs delay, a legal interest of 12% per annum may be imposed as indemnity for
damages if no stipulation on the payment of interest was agreed upon. Likewise, Article
2212 of the Civil Code provides that interest due shall earn legal interest from the time it
is judicially demanded, although the obligation may be silent on this point.

All the same, the interest under these two instances may be imposed only as a penalty or
damages for breach of contractual obligations. It cannot be charged as a compensation for
the use or forbearance of money. In other words, the two instances apply only to
compensatory interest and not to monetary interest.[26] xxx
The petitioner should be held liable for interest on the actual damages of P717,600.00
representing the value of the propetiy with an area 598 square meters that was lost to
them through the unwarranted foreclosure, the same to be reckoned from the date of
judicial demand (i.e., the filing of the action by the Spouses Alonday). At the time
thereof, the rate was 12% per annum, and such rate shall run until June 30, 2013.
Thereafter, or starting on July 1, 2013, the rate of interest shall be 6% per annum until
full payment of the obligation, pursuant to the ruling in Nacar v. Gallery Frames,
[27]
 which took into consideration the lowering of interest rates by the Monetary Board.

In addition, Article 2212[28] of the Civil Code requires that interest due shall earn legal
interest from the time it is judicially demanded, although the obligation may be silent
upon this point. Accordingly, the interest due shall itself earn legal interest of 6% per
annum from the date of finality of the judgment until its full satisfaction, the interim
period being deemed to be an equivalent to a forbearance of credit.[29]

WHEREFORE, the Court AFFIRMS the decision promulgated in C.A.-G.R. CV No.

60625 on August 31, 2005 in all respects subject to the following MODIFICATIONS,
namely: (1) the award of P1,700,000.00 representing the value of the land covered by
Transfer Certificate of Title No. T-66139 of the Registry of Deeds of Davao City
is REDUCED to P717,600.00, the same to be paid by petitioner Philippine National
Bank; (2) the principal amount of P717,600.00 shall earn interest of 12% per annum from
the filing of the complaint until June 30, 2013, and interest of 6% per annum from July 1,
2013 until full payment; and (3) the interests thus earned shall also earn interest of
6% per annum from the finality of this decision until full payment.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 210209, August 09, 2017 ]
CATHAY LAND, INC. AND CATHAY METAL CORPORATION,
PETITIONERS, V. AYALA LAND, INC., AVIDA LAND
CORPORATION[**] AND LAGUNA TECHNOPARK, INC., RESPONDENTS.

DECISION

DEL CASTILLO, J.:

We resolve the Petition for Review on Certiorari  under Rule 45 of the Rules of
Court assailing the June 28, 2013 Decision [1] and the November 26, 2013 Resolution[2] of
the Court of Appeals (CA) in CA-G.R SP No. 108480.
 The Antecedent Facts

Petitioners Cathay Land, Inc. and Cathay Metal Corporation (Cathay Group) own and
develop a mixed-use and multi-phase subdivision development project known as the
South Forbes Golf City which covers an area of around 213 hectares of contiguous land
in Silang, Cavite.[3]

On February 5, 2003, the Cathay Group filed a Complaint[4] for easement of right of way
with prayer for the issuance of a preliminary injunction/temporary restraining order
against respondents Ayala Land, Inc., Avida Land Corporation, and Laguna Technopark,
Inc., (Ayala Group) before the Regional Trial Court (RTC), Branch 18, Tagaytay City.
The Complaint alleged that the Ayala Group unjustifiably denied passage to Cathay
Group's personnel, vehicles and heavy equipment through its properties by putting up
checkpoints and constructing gates which caused the development of the latter's South
Forbes Golf City project to be interrupted and delayed.[5]

However, before trial could ensue, the parties executed a Compromise Agreement [6] dated
July 4, 2003 where they "mutually agreed to amicably settle all their claims as well as
other claims and causes of action that they may have against each other in relation to the
[Complaint]."[7] Specifically, the Ayala Group granted a pedestrian, vehicular and utility
easement of right of way in favor of the Cathay Group in consideration of and subject to
the latter's faithful compliance of its undertakings in the Compromise Agreement. [8] This
includes undertakings relating to the development of the Cathay Group's properties in the
area:

2 Undertakings of the Cathay Group Relating to the Development of the Cathay

.3 Properties. The Cathay Group will develop the Cathay properties into such developments which are
consistent with the residential character of the adjacent developments of Ayala Land and Laguna
Properties in the Sta. Rosa, Laguna and Silang, Cavite areas. More particularly, but without limiting
the generality of the foregoing, the Cathay Group undertakes that it will not develop and will not
allow the development of one or more of the following types of projects: (i) cemetery, memorial
park, mortuary or similar development or related structures; (ii) industrial park or estate, whether
for heavy, medium or light industries; (iii) high-rise buildings; (iv) low-cost or socialized housing
subdivisions within the purview of Batas Pambansa Blg. 220; and (v) warehouse or warehouse
facilities.[9]

It was also expressly stated in the Compromise Agreement that in the event of breach on
the part of the Cathay Group of any of its undertakings, the Ayala Group has the right to
withdraw or suspend the grant of easement of right of way from the Cathay Group, to
wit:

4 Undertakings Essential. x x x Accordingly and subject to Section 6 hereof, the Ayala Group

. has the right to withdraw or suspend the grant of easement of right-of-way subject to this
 agreement if the Cathay Group or any of the Grantees shall breach any of the provisions of this
Agreement and the Cathay Group or the Grantees shall have failed to rectify such breach within a
period of thirty (30) days from receipt of a notice from the Ayala Group (or any of its assigns). [10]

In fine, in case of breach on the part of Cathay Group, the remedies available to the Ayala
Group are as follows: first, the Ayala Group shall notify the Cathay Group of such
breach; and second, the Ayala Group can either suspend or withdraw the grant of
easement of right of way in case the Cathay Group fails to rectify such breach within 30
days from receipt of notice. Such right may then be enforced through a writ of execution
pursuant to Section 6 of the Compromise Agreement which states:

6 Writ of Execution. Non-compliance by any party with the terms of this Compromise

. Agreement shall entitle the aggrieved party to a writ of execution from the [court] to enforce the
terms of this Agreement.[11]

The RTC approved the Compromise Agreement in its Judgment [12] dated July 30, 2003,
and ordered the parties to strictly comply with the terms and conditions provided therein.
[13]

In 2005, the Cathay Group commenced the development of its South Forbes Golf City
project. Subsequently, however, the Ayala Group noted that Cathay Group's marketing
materials for the project showed plans to develop a thirty-hectare cyber park which will
house, among others, call center offices, and to construct high-rise buildings. [14] The
Ayala Group thus made verbal and written demands to Cathay Group to abide by the
terms and conditions of the Compromise Agreement particularly on its undertaking not to
construct high-rise buildings, but to no avail. It also later found out that the Cathay Group
had applied for a variance[15] from a local zoning ordinance[16] of Silang, Cavite which
then imposed a three-storey height limit on buildings to be constructed in the area. [17]

Thus, on July 29, 2008, the Ayala Group filed a Motion for Execution [18] with Application
for Issuance of a Temporary Restraining Order (TRO) and Writ of Injunction before the
RTC.

Attaching copies of Cathay Group's development plan, building plan, brochures and
newspaper advertisements to its motion for execution, the Ayala Group alleged that the
Cathay Group disregarded its undertaking not to construct high-rise buildings, or
structures which are at least 15 meters high or beyond the building height limit of three
storeys, as provided under the Compromise Agreement. [19] It further claimed that the
Cathay Group's development plan of its South Forbes Golf City project involved the
construction of 97 high-rise residential and commercial buildings having as many as 12
floors.[20] Consequently, the Ayala Group argued that it had a clear legal right to enforce
the terms of the Compromise Agreement and compel the Cathay Group to abide by them.
[21]
 The Ayala Group thus prayed for the issuance of a TRO to enjoin the Cathay Group
"from proceeding with the development of their South Forbes Golf City project;" and a
writ of execution to permanently enjoin Cathay Group "from constructing buildings
fifteen (15) meters and higher, and other developments deviating from the residential
character"[22] of the Ayala Group's projects.

The Cathay Group opposed the motion and insisted that it had not violated the terms of
the July 30, 2003 Judgment and there is simply no justification for the Ayala Group's
motion seeking the execution of any part thereof. [23] It contended that the Compromise
Agreement does not contain a provision limiting building height at three storeys and the
proscription therein only pertains to the construction of high-rise buildings without any
specific qualifications.[24]

The Regional Trial Court Ruling

In its Order[25] dated September 15, 2008, the RTC denied the Motion for Execution filed
by the Ayala Group for lack of merit.

The trial court rejected the Ayala Group's contention that the term "high rise building" as
stated in the Compromise Agreement should follow the definition in the Fire Code of the
Philippines (Fire Code), which defines the same as "at least 15 meters high." It explained
that "the Fire Code x x x is intended not to define the structural configurations of a
building but to advance its clear mandate of preventing fires and avoiding its damaging
effects."[26] It also pointed out that the Compromise Agreement itself never mentioned the
Fire Code as its governing law.[27]

In addition, the trial court ruled that the basic definition of the term "high-rise building"
in the Revised Implementing Rules and Regulations (IRR) of the National Building Code
(NBC), i.e., buildings with 16 storeys or taller in height, or 48 meters above established
grade, should be given weight, especially since the NBC is the governing law on the
construction of buildings.[28]

Following the denial, the Ayala Group filed a Motion for Reconsideration [29] before the
RTC.

In its April 1, 2009 Order,[30] the RTC, through Acting Presiding Judge Emma S. Young
(Judge Young), granted the motion and set aside the September 15, 2008 Order on the
ground that the Compromise Agreement is immediately final and executory.

The RTC thus ordered that a writ of execution be issued to enforce the terms and
conditions of the Compromise Agreement. It likewise directed the issuance of a writ of
injunction against the Cathay Group enjoining the construction of high-rise structures on
the land for being contrary to laws and ordinances of Silang, Cavite then applicable at the
time of the execution of the Compromise Agreement.[31]
On April 27, 2009, the Cathay Group filed a Petition for Certiorari[32] under Rule 65 of
the Rules of Court before the CA, challenging the April 1, 2009 Order.

While the case was pending before the CA, the RTC issued a Writ of Execution [33] and a
Writ of Injunction,[34] both dated December 2, 2009, prohibiting the Cathay Group
from constructing buildings with a height of 15 meters or higher, and other
developments which would deviate from the residential character of the adjacent
properties of the Ayala Group in the area.[35]

The Court of Appeals Ruling

The CA dismissed the Petition for Certiorari in its Decision dated June 28, 2013, as it
found no grave abuse of discretion on the part of the RTC in ordering the execution of the
Compromise Agreement.[36]

The CA found no merit in the Cathay Group's claim that Judge Young failed to provide
any factual or legal basis in reversing the September 15, 2008 Order which denied the
Ayala Group's Motion for Execution. It held that although Judge Young's questioned one-
page Order is extremely concise, the basis for the ruling, i.e., that the act of the Cathay
Group in constructing high-rise buildings on the property was contrary to the laws and
ordinance of Silang, Cavite, was clearly indicated therein.[37]

Moreover, the CA noted that the definition of a "high-rise building" in the IRR of the
NBC could not be applied in this case, since the IRR was promulgated only in 2005, or
after the parties had already entered into the Compromise Agreement. Hence, the CA
ruled that the parties could not have contemplated and considered the definition as part of
their agreement.[38]

The CA likewise pointed out that the limitation on the height of the buildings or
structures to be erected by the Cathay Group is clearly defined in its undertaking to
ensure that its development plan is "consistent with the residential character of the
adjacent developments of [the Ayala Group] in the Sta. Rosa, Laguna and Silang, Cavite
area[s]."[39]

Consequently, the CA ruled that the proper interpretation of the term "high-rise building"
should be in accordance with the laws and ordinance enforced when the parties executed
the Compromise Agreement, which, at the time, limited the permissible building height
to only three storeys.[40]

The Cathay Group moved for reconsideration but the CA denied the motion in its
Resolution dated November 26, 2013. As a consequence, the Cathay Group filed the
present Petition for Review on Certiorari assailing the CA's June 28, 2013 Decision and
the November 26, 2013 Resolution.
 Issues

In the present Petition, the Cathay Group raises the following arguments for the Court's
resolution: first, the one-page April 1, 2009 Order should be nullified as it does not state
the facts and the law on which it is based, in violation of the requirements under Section
14, Article VIII of the Constitution;[41] second, the CA seriously erred when it affirmed
the questioned RTC Order, since it was never shown that the Cathay Group had violated
any of the laws and ordinances of Silang, Cavite; [42] third, the term "high-rise building" as
used in the Compromise Agreement should not be interpreted to imply a "height limit of
three storeys," as such definition in the Fire Code was not contemplated by the parties
when they entered into the Compromise Agreement;[43] and fourth, the Writ of Execution
dated December 2, 2009 is void because it gives the Sheriff unbridled authority to halt
any of the Cathay Group's construction projects which, in his personal view, constitutes a
"high-rise" structure.[44]

The Court's Ruling

The Petition is impressed with merit.

A judgment based on compromise

agreement shall be executed/implemented
based strictly on the terms agreed upon by
the parties.

The Civil Code provides that "[a] compromise is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to one already
commenced."[45] It has the effect and authority of res judicata upon the parties, but there
shall be no execution except in compliance with a judicial compromise.[46]

It is settled that once a compromise agreement is approved by a final order of the court, it
transcends its identity as a mere contract binding only upon the parties thereto, as it
becomes a judgment that is subject to execution in accordance with the Rules of Court.
Judges, therefore, have the ministerial and mandatory duty to implement and enforce it.
[47]

Since the issuance of a writ of execution implementing a judicial compromise is

ministerial in nature, it cannot be viewed as a judgment on the merits as contemplated by
Section 14, Article VIII of the Constitution. [48] To be clear, it is the decision based on a
compromise agreement that is considered as a judgment on the merits, not the order
pertaining to its execution.

Nevertheless, in implementing a compromise agreement, the "courts cannot modify,

impose terms different from the terms of [the] agreement, or set aside the
compromises and reciprocal concessions made in good faith by the parties without
gravely abusing their discretion."[49]

In this case, the RTC, through Judge Young, granted the Ayala Group's Motion for
Execution of the Compromise Agreement on account of the Cathay Group's construction
of "high-rise structures" on its properties. In its assailed Order dated April 1, 2009, the
RTC ruled as follows:

x x x Let the corresponding writ of execution be issued to enforce the [Judgment] of this
court dated July 30, 2003 by then Judge Alfonso S. Garcia enforcing the terms and
conditions of the Compromise Agreement dated [July 4, 2003]. And let [the]
corresponding writ of injunction issue against the plaintiff in this case for construction
of [high-rise] structures on [the] land subject matter of the said agreement [for] being
contrary to [the] laws and ordinance of Silang, [Cavite] then applicable at the time
of the execution of said compromise agreement.[50]

It will be recalled that under the Compromise Agreement, the remedies available to the
Ayala Group should the Cathay Group fail to abide by the terms of the agreement are,
first: to notify the Cathay Group of such breach; and second, either to withdraw or
suspend the grant of easement of right-of-way to the Cathay Group,[51] if the latter does
not undertake to rectify the said breach within 30 days from notice. It is this specific right
that is enforceable through a writ of execution, as expressly provided in Sections 4 and 6
of the Compromise Agreement. In short, the Ayala Group has no right, under the
Compromise Agreement, to seek injunctive relief from the courts in case the Cathay
Group commits an act contrary to its undertakings in the agreement. To emphasize, under
the Compromise Agreement, the Ayala Group has no right to seek to enjoin the Cathay
Group from proceeding with the development of its South Forbes Golf City project or
from constructing high-rise buildings as it did in its Motion for Execution. To be sure, the
Ayala Group's right under the Compromise Agreement that is enforceable through a writ
of execution is only the suspension or withdrawal of the grant of easement of right of
way.

Thus, the RTC, through Judge Young, seriously erred when it issued a Writ of Execution
and Writ of Injunction prohibiting the Cathay Group from constructing buildings with a
height of 15 meters or higher and other developments not in accord with the residential
character of the properties of the Ayala Group in the area. The RTC gravely abused its
discretion when it granted a remedy that is not available to the Ayala Group,
thereby imposing terms different from what was agreed upon by the parties in
their Compromise Agreement. Given these circumstances, the CA seriously erred in
dismissing the Petition for Certiorari filed by the Cathay Group.

The Ayala Group prematurely moved

for the execution of the compromise
agreement.

In addition, there is likewise no sufficient proof that the Cathay Group had violated
the terms of the Compromise Agreement, so as to warrant the RTC's issuance of a writ
of execution and a writ of injunction in favor of the Ayala Group.

The records show that the Ayala Group based its Motion for Execution on mere
development and structural plans, and marketing materials [52] for the Cathay Group's
South Forbes Golf City project which allegedly involved "the construction of ninety-
seven (97) high-rise residential and commercial buildings having as much as twelve (12)
floors."[53] It had simply anticipated that the Cathay Group would violate its undertaking
not to construct high-rise buildings in the area.

In other words, the Ayala Group prematurely moved for execution of the Compromise

Agreement in order to prevent the Cathay Group from actually committing a breach of
the terms of the agreement. It must be pointed out that under the Compromise
Agreement, the Ayala Group must notify first the Cathay Group of any perceived breach
in its undertakings; thereafter, the Cathay Group has 30 days within which to rectify such
breach. It is only when the Cathay Group fails to correct the breach within 30 days from
notice that the Ayala Group may move for the execution of the Compromise Agreement.
Clearly, therefore, the Ayala Group violated the terms of the agreement which afforded
the Cathay Group a period of 30 days from notice to rectify a breach, should it indeed
occur.[54]

The parties did not agree on what

constitutes a "high-rise building".

Moreover, we note that there is no clear definition in the Compromise Agreement as to

what constitutes a "high-rise building." A review of the records shows that the parties
never agreed on the definition of the term "high-rise buildings" when they entered into
the Compromise Agreement on July 4, 2003. In fact, they continued to discuss the matter
through an exchange of letters[55] from August 2005 up until April 2008, right before the
Ayala Group filed its Motion for Execution of the Compromise Agreement before the
RTC on July 29, 2008.

In their correspondence, the Ayala Group insisted on the definition of a "high-rise

building," i.e., one which is at least 15 meters high, in the IRR of the Fire Code, [56] while
the Cathay Group sought the adoption of prevailing industry standards and practices in
determining what a "high-rise building'' is.[57] The Cathay Group later on cited the
definition of the term as found in the IRR of the NBC and insisted that "as long as [it]
does not construct any building beyond the twelve (12) storey building height limit, or
thirty-six (36) meters above the highest grade level, there would be no violation of the
Compromise Agreement x x x."[58] The matter, however, was never resolved.
Note that in the interpretation of documents, the Rules of Court provides for a
presumption that the terms of a contract were used in their primary and general
acceptation:

Sec. 14. Peculiar signification of terms. - The terms of a writing are presumed to have
been used in their primary and general acceptation, but evidence is admissible to show
that they have a local, technical, or otherwise peculiar signification, and were so
used and understood in the particular instance, in which case the agreement must be
construed accordingly.[59]

Thus, when the terms of the agreement are so clear and explicit that they do not justify an
attempt to read into it any alleged intention of the parties, the terms are to be understood
literally just as they appear on the face of the contract.[60]

In this case, the records are bereft of proof to show that the parties had agreed to adopt
the definition of the term "high-rise building" found in the IRR of the Fire Code. The
Compromise Agreement, too, does not contain any provision that points to a reference to
the Fire Code as to the usage of the term.

Besides, the IRR of the Fire Code itself limits its scope to matters dealing with "life
safety from fires and similar emergencies in high-rise buildings," covering ''fire safety
features in construction and protection of exits and passageways and provisions for fire
protection."[61] Consequently, the definition of the term "high-rise building" found therein
is inapplicable to this case, precisely because it is not in keeping with the nature and
object of the Compromise Agreement.[62]

We simply cannot reasonably conclude, in the absence of clear language to this effect,
that the parties intended to use as reference a law that pertains to fire protection in order
to define a term in a contract relating to the construction of buildings. Rather, the term
"high-rise buildings" should be interpreted to follow its general and primacy acceptation,
or in other words, the prevailing industry standards and practices as adopted by the
Department of Public Works and Highways in the IRR of the NBC, at the time the
Compromise Agreement was executed.

We also cannot agree with the CA's ruling which equated the three-storey building height
limit in Silang, Cavite with the definition of the term "high-rise buildings" in the
Compromise Agreement. For one thing, the Municipal Zoning Ordinance imposing such
building height limit does not provide that buildings over three-storeys high are to be
considered as "high-rise buildings." Specifically, Section 12-B-1 of the Ordinance states:

B. General Zoning Regulations:

For areas that are not classified as Residential Subdivisions, the FAR shall be two (2); the
PLO shall be 50% and the [Building Height Limit] shall be not more than three (3)
storeys.

x x x [F]urther, residential structures within subdivisions shall be required to have a PLO

of 50% and a [Building Height Limit] of not more than three (3) storeys.[63]

While it is true that the Ordinance imposed a building height limit of three-storeys, it is a
grave error to read such regulation as a definition of what constitutes as a "high-rise
building" for construction purposes in the area. Consequently, the CA erred when it
declared that said building height limitation "is consistent with the laws and ordinance
enforced at that time and, thus, should be the one deemed contemplated upon by the
parties in their agreement."[64]

For another, the Compromise Agreement itself contains no express prohibition pertaining
to the Cathay Group's construction of buildings which are over three storeys high in the
area. It is also important to point out that the Cathay Group had already applied for and
was granted a variance[65] which exempted it from the coverage of the subject Municipal
Zoning Ordinance. It was then issued all the necessary development permits for its South
Forbes Golf City project, including a Building Permit [66] from the Office of the Municipal
Engineer of Silang, Cavite.

In these lights, it is clear that the CA committed an error when it found that the Cathay
Group had violated the terms of the Compromise Agreement.

WHEREFORE, we GRANT the Petition for Review on Certiorari. The Decision dated

June 28, 2013 and the Resolution dated November 26, 2013 of the Court of Appeals in
CA-G.R. SP No. 108480, as well as the Order dated April 1, 2009 of the Regional Trial
Court, Branch 18, Tagaytay City in Civil Case No. TG-2335, are hereby SET
ASIDE and REVERSED.

SO ORDERED.