Obligations and Contracts

OBLIGATIONS and CONTRACTS (Cases)

i. LAW (1158)

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-26002 October 31, 1969

ABELARDO BAUTISTA and ROBERTO TAN TING, petitioners-appellees, vs.FEDERICO O. BORROMEO, INC., HONORABLE CESAR C. CRUZ, Judge of the Municipal Court of Mandaluyong, Rizal and JESUS BAUTISTA, Deputy Sheriff of Manila as Special Sheriff, respondents-appellants.

SANCHEZ, J.:

Respondents-appellants seek to overturn the decision of the Court of First Instance of Rizal of January 6, 1966 granting petitioners-appellees' petition for relief from judgment, setting aside the July 23, 1965 decision of the Municipal Court of Mandaluyong, Rizal, in Civil Case 1365 and ordering a new trial.

The background facts are as follows:

On September 15, 1964, the Ford truck of petitioner Roberto Tan Ting driven by Abelardo Bautista, the other petitioner, and the Volkswagen delivery panel truck owned by respondent Federico O. Borromeo, Inc. (hereinafter called Borromeo) were involved in a traffic accident along Epifanio de los Santos Avenue. In said traffic accident, Quintin Delgado, a helper in Borromeo's delivery panel truck, sustained injuries which resulted in his instantaneous death. Borromeo had to pay Delgado's widow the sum of P4,444 representing the compensation (death benefit) and funeral expenses due Delgado under the Workmen's Compensation Act.

On June 17, 1965, upon the averment that the said vehicular accident was caused by petitioners' negligence, Borromeo started suit in the Municipal Court of Mandaluyong, Rizal to recover from petitioners the compensation and funeral expenses it paid to the widow of Quintin Delgado.1

At the scheduled hearing of the case on July 23, 1965, neither petitioners nor their counsel appeared. Borromeo was thus allowed to present its evidence ex parte. On the same day, July 23, 1965, the municipal court rendered judgment in favor of Borromeo and against the petitioners in the principal sum of P4,444, and P500 attorney's fees, and costs. Respondents aver that this judgment has been executed and satisfied.

On August 6, 1965, petitioners received copy of the municipal court's decision.

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On August 13, 1965, petitioners moved to set aside the decision. On August 14, 1965, this motion was denied.

On August 16, 1965, copy of this order of denial was sent by registered mail to counsel of petitioners. Said counsel did not receive this registered mail and the mail matter was returned to the court unclaimed. However, said counsel learned of this denial on September 2, 1965 allegedly "in the course of his investigation."

Petitioners filed a notice of appeal dated September 2, 1965. They, however, paid the appellate docket fee and deposited their cash appeal bond only on September 28, 1965. Their appeal was consequently turned down by the municipal court, for the reason that the deposit of the bond and the payment of the docket fee were done after the lapse of the reglementary period.

Nothing was done by petitioners until October 26, 1965, when they lodged a petition for relief from the inferior court's judgment in the Court of First Instance of Rizal.2 They there claimed excusable negligence for the failure of petitioners' counsel to appear in the July 23, 1965 hearing at the municipal court and asserted that they had a good and substantial defense in that "there was no contractual relationship between the parties, whether express or implied." They sought preliminary injunction, prayed for trial de novo on the merits. A restraining order was at first issued by the court; but the prayer for preliminary injunction was eventually denied.

Respondents' answer contended that the petition for relief was filed out of time; that petitioners' counsel's failure to attend the hearing of July 23, 1965 does not constitute excusable negligence; and that the affidavits attached to the petition do not show good and substantial defense.

Petitioners thereafter moved for judgment on the pleadings. No objection thereto was interposed by respondents. The lower court then rendered the judgment mentioned in the first part of this opinion.

A move to reconsider failed. Hence, this appeal.

We vote to reverse the lower court's judgment for the following reasons:

1. The petition for relief from judgment under Rule 38 of the Rules of Court is unavailable to petitioners.

A basic precept is that when another remedy at law is open to a party, he cannot sue out a petition for relief under Rule 38.3 Thus, a petition for relief is not a substitute for appeal. It has been held that where a defendant could have appealed — but did not appeal — from the decision of the inferior court to the Court of First Instance but instead filed a petition for relief, his petition was inappropriate as it "would amount to reviving his right to appeal which he had irretrievably lost through the gross inaction of his counsel."4

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Here, petitioners learned of the municipal court judgment on August 6, 1965, when they received a copy of its decision. They moved to set aside that judgment on August 13, 1965. At that time, a petition for relief could not be availed of because the judgment of the municipal court had not yet become final.5 But, on September 2, 1965, petitioners learned of the court's order of August 14, 1965 denying their motion to set aside. They could have appealed. Because, nothing in the record suggests that the notices to petitioners to take delivery of the registered envelope — containing the inferior court's resolution denying petitioners' motion to set aside the decision — were ever served on said petitioners. On the contrary, Teresita Roxas, secretary of petitioners' counsel, in her affidavit dated October 23, 1965, Annex E of the petition for relief, categorically denied receipt of any such notice, thus: "That I have not received any registry notice corresponding to a registered mail at the Manila Post Office containing an order by the Municipal Court of Mandaluyong, Rizal, dated August 14, 1965."6

But petitioners did not perfect their appeal to the Court of First Instance on time — they paid the appellate docket fee and deposited their appeal bond only on September 28, eleven (11) days late. Clearly, their failure to seasonably appeal was through their own fault.

And, when they did file a petition for relief on October 26, 1965, it was way beyond the sixty-day period from August 6, 1965, the time they first learned of the judgment to be set aside, as required by Section 3, Rule 38 of the Rules of Court.

We accordingly, rule that petitioners' petition for relief must fail.

2. Petitioners failed to make out a case of excusable negligence for counsel's non-attendance at the July 23, 1965 hearing.

Their counsel, Atty. Leopoldo V. Repotente, Jr., explains his failure to attend the hearing in this wise — "he relied on the assurance of his associate, Atty. Lucenito N. Tagle, that the latter will attend to the case for him since on that same date he (Atty. Repotente) had another case before the City Court of Quezon City." In his sworn statement, Atty. Tagle in turn stated that he was unable to attend the hearing despite his promise to do so because, in his own words, "when I transferred to my new office at A & T Building, Escolta, Manila, the record of this case was misplaced, mislaid or otherwise lost by my helpers and was not among those turned over to my possession" and "it was only a few days after the date of hearing on July 23, 1965, that I found the record of this case in one of the drawers of my table in my former office and it was only then that I realized my failure to attend the hearing on July 23, 1965, ... ."

We cannot view such negligence of petitioners' two attorneys as excusable. There was no plausible reason for Repotente to entrust the hearing of the case to another lawyer. His lame excuse was that he requested Tagle to attend the hearing of said case for him because he had another hearing at the City Court of Quezon City. This is unworthy of serious consideration. For, as respondents aver — and this is not denied by petitioners — the hearing of July 23, 1965 before the municipal court was set in open court during the initial date of hearing held on July 1, 1965 after Atty.

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Repotente consulted his calendar. When Repotente agreed in open court to set the trial of the case for July 23, 1965, it may very well be presumed that his other case in Quezon City was not yet calendared for hearing. He could not have, in good faith, agreed to set the case for hearing on the day on which he had another previously scheduled trial. Further, he failed to notify his clients of the hearing set for July 23, 1965; they also failed to appear thereat. Certainly, Repotentes' inadvertence cannot be labeled as excusable.

Nor may Atty. Tagle offer as excuse the fact that the record of the case "was misplaced, mislaid or otherwise lost." This is a stereotyped excuse. It is resorted to by lawyers in order to win new trial of the case and thereby move farther away the day of reckoning. To be remembered is that the life of each case is in its record. If the record of the case was misplaced, mislaid or lost, he should have nevertheless attended the scheduled hearing and requested for a postponement by reason thereof. But he did not. Appropriate it is to recall here that a prudent lawyer keeps a separate record or diary of hearings of cases he handles and of his professional engagements. A lawyer's schedules of hearings — intended as reminder — are not noted by the lawyer in his record of the case. That would be useless for the purpose.

There is then no excusable negligence to which the petition for relief can cling.

3. Even on the merits, petitioners' case must fall.

Borromeo paid the widow of its employee, Quintin Delgado, compensation (death benefit) and funeral expenses for the latter's death while in the course of employment. This obligation arises from law — Section 2 of the Workmen's Compensation Act.7 The same law in its Section 6 also provides that "[i]n case an employee suffers an injury for which compensation is due under this Act by any other person besides his employer, it shall be optional with such injured employee either to claim compensation from his employer, under this Act, or sue such other person for damages, in accordance with law; and in case compensation is claimed and allowed in accordance with this Act, the employer who paid such compensation or was found liable to pay the same, shall succeed the injured employee to the right of recovering from such person what he paid: ..."8

It is evident from the foregoing that "if compensation is claimed and awarded, and the employer pays it, the employer becomes subrogated to and acquires, by operation of law, the worker's rights against the tortfeasor."9

No need then there is to establish any contractual relationship between Quintin Delgado and herein petitioners. Indeed, there is none. The cause of action of respondent corporation is one which does not spring from a creditor-debtor relationship. It arises by virtue of its subrogation to the right of Quintin Delgado to sue the guilty party. Such subrogation is sanctioned by the Workmen's Compensation Law aforesaid. It is as a subrogee to the rights of its deceased employee, Quintin Delgado, that Borromeo filed a suit against petitioners in the Municipal Court of Mandaluyong, Rizal. 10

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FOR THE REASONS GIVEN, the appealed decision of January 6, 1966 under review is hereby reversed and the petition for relief is hereby dismissed.

Costs against petitioners-appellees. So ordered.

DIGEST

Abelardo Bautista and Roberto Tan Ting vs. Federico O. Borromeo, Inc., Hon. Cesar C. Cruz, Judge of the Municipal Court of Mandaluyong, Rizal and Jesus Bautista, Deputy Sheriff of Manila as Special SheriffG.R. No. L-26002, October 31, 1969

SANCHEZ, L:

Facts: The truck of petitioner Roberto Tan Ting driven by Abelardo Bautista, the other petitioner, and the Volkswagen delivery panel truck owned by respondent Federico O. Borromeo, Inc. were involved in a traffic accident along Epifanio de los Santos Avenue. In said traffic accident, Quintin Delgado, a helper in Borromeo's delivery panel truck, sustained injuries which resulted in his instantaneous death. Borromeo had to pay Delgado's widow the sum of P4,444 representing the compensation (death benefit) and funeral expenses due Delgado under the Workmen's Compensation Act.

Upon the averment that the said vehicular accident was caused by petitioners' negligence, Borromeo started suit to recover from petitioners the compensation and funeral expenses it paid to the widow of Quintin Delgado. At the scheduled hearing, neither petitioners nor their counsel appeared. Borromeo was thus allowed to present its evidence ex parte. On the same day, the municipal court rendered judgment in favor of Borromeo and against the petitioners in the principal sum of P4,444, and P500 attorney's fees, and costs.

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Issues:1. Is the petition for relief from judgment under Rule 38 of the Rules of Court unavailable to petitioners?2. Is there excusable negligence for counsel's non-attendance at the hearing?3. Is there obligation on the part of Borromeo, Inc. to pay Delgado’s widow death benefits?

Held:1. Yes. A basic precept is that when another remedy at law is open to a party, he cannot sue out a petition for relief under Rule 38. Thus, a petition for relief is not a substitute for appeal. It has been held that where a defendant could have appealed - but did not appeal - from the decision of the inferior court to the Court of First Instance but instead filed a petition for relief, his petition was inappropriate as it "would amount to reviving his right to appeal which he had irretrievably lost through the gross inaction of his counsel."

2. No. Petitioners failed to make out a case of excusable negligence for counsel's non-attendance at the July 23, 1965 hearing. Their counsel, Atty. Leopoldo V. Repotente, Jr., explains his failure to attend the hearing was his reliance on the assurance of his associate, Atty. Lucenito N. Tagle, that the latter will attend to the case for him since on that same date he (Atty. Repotente) had another case before the City Court of Quezon City. Atty. Tagle in turn stated that he was unable to attend the hearing despite his promise to do so because when he transferred to his new office at A & T Building, Escolta, Manila, the record of the case was misplaced, mislaid or otherwise lost by the helpers and was not among those turned over to his possession and it was only a few days after the date of hearing on July 23, 1965, that he found the record of the case in one of the drawers of his table in his former office and it was only then that he realized his failure to attend the hearing on July 23, 1965.

We cannot view such negligence of petitioners' two attorneys as excusable. There was no plausible reason for Repotente to entrust the hearing of the case to another lawyer. His lame excuse was that he requested Tagle to attend the hearing of said case for him because he had another hearing at the City Court of Quezon City. This is unworthy of serious consideration. For, as respondents aver - and this is not denied by petitioners - the hearing of July 23, 1965 before the municipal court was set in open court during the initial date of hearing held on July 1, 1965 after Atty. Repotente consulted his calendar. When Repotente agreed in open court to set the trial of the case for July 23, 1965, it may very well be presumed that his other case in Quezon City was not yet calendared for hearing. He could not have, in good faith, agreed to set the case for hearing on the day on which he had another previously scheduled trial. Further, he failed to notify his clients of the hearing set for July 23, 1965; they also failed to appear thereat.

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Nor may Atty. Tagle offer as excuse the fact that the record of the case "was misplaced, mislaid or otherwise lost." This is a stereotyped excuse. It is resorted to by lawyers in order to win new trial of the case and thereby move farther away the day of reckoning. To be remembered is that the life of each case is in its record. If the record of the case was misplaced, mislaid or lost, he should have nevertheless attended the scheduled hearing and requested for a postponement by reason thereof. But he did not. Appropriate it is to recall here that a prudent lawyer keeps a separate record or diary of hearings of cases he handles and of his professional engagements. A lawyer's schedules of hearings - intended as reminder - are not noted by the lawyer in his record of the case. That would be useless for the purpose.

3. Borromeo paid the widow of its employee, Quintin Delgado, compensation (death benefit) and funeral expenses for the latter's death while in the course of employment. This obligation arises from law - Section 2 of the Workmen's Compensation Act. The same law in its Section 6 also provides that "[i]n case an employee suffers an injury for which compensation is due under this Act by any other person besides his employer, it shall be optional with such injured employee either to claim compensation from his employer, under this Act, or sue such other person for damages, in accordance with law; and in case compensation is claimed and allowed in accordance with this Act, the employer who paid such compensation or was found liable to pay the same, shall succeed the injured employee to the right of recovering from such person what he paid: ..." virtual law libraryIt is evident from the foregoing that if compensation is claimed and awarded, and the employer pays it, the employer becomes subrogated to and acquires, by operation of law, the worker's rights against the tortfeasor."

No need then there is to establish any contractual relationship between Quintin Delgado and herein petitioners. Indeed, there is none. The cause of action of respondent corporation is one which does not spring from a creditor-debtor relationship. It arises by virtue of its subrogation to the right of Quintin Delgado to sue the guilty party. Such subrogation is sanctioned by the Workmen's Compensation Law aforesaid. It is as a subrogee to the rights of its deceased employee, Quintin Delgado, that Borromeo filed a suit against petitioners.

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Manila

EN BANC

G.R. No. L-4089 January 12, 1909

ARTURO PELAYO, plaintiff-appellant, vs.MARCELO LAURON, ET AL., defendants-appellees.

TORRES, J.:

On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a complaint against Marcelo Lauron and Juana Abella setting forth that on or about the 13th of October of said year, at night, the plaintiff was called to the house of the defendants, situated in San Nicolas, and that upon arrival he was requested by

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them to render medical assistance to their daughter-in-law who was about to give birth to a child; that therefore, and after consultation with the attending physician, Dr. Escaño, it was found necessary, on account of the difficult birth, to remove the fetus by means of forceps which operation was performed by the plaintiff, who also had to remove the afterbirth, in which services he was occupied until the following morning, and that afterwards, on the same day, he visited the patient several times; that the just and equitable value of the services rendered by him was P500, which the defendants refuse to pay without alleging any good reason therefor; that for said reason he prayed that the judgment be entered in his favor as against the defendants, or any of them, for the sum of P500 and costs, together with any other relief that might be deemed proper.

In answer to the complaint counsel for the defendants denied all of the allegation therein contained and alleged as a special defense, that their daughter-in-law had died in consequence of the said childbirth, and that when she was alive she lived with her husband independently and in a separate house without any relation whatever with them, and that, if on the day when she gave birth she was in the house of the defendants, her stay their was accidental and due to fortuitous circumstances; therefore, he prayed that the defendants be absolved of the complaint with costs against the plaintiff.

The plaintiff demurred to the above answer, and the court below sustained the demurrer, directing the defendants, on the 23rd of January, 1907, to amend their answer. In compliance with this order the defendants presented, on the same date, their amended answer, denying each and every one of the allegations contained in the complaint, and requesting that the same be dismissed with costs.

As a result of the evidence adduced by both parties, judgment was entered by the court below on the 5th of April, 1907, whereby the defendants were absolved from the former complaint, on account of the lack of sufficient evidence to establish a right of action against the defendants, with costs against the plaintiff, who excepted to the said judgment and in addition moved for a new trial on the ground that the judgment was contrary to law; the motion was overruled and the plaintiff excepted and in due course presented the corresponding bill of exceptions. The motion of the defendants requesting that the declaration contained in the judgment that the defendants had demanded therefrom, for the reason that, according to the evidence, no such request had been made, was also denied, and to the decision the defendants excepted.

Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of having been sent for by the former, attended a physician and rendered professional services to a daughter-in-law of the said defendants during a difficult and laborious childbirth, in order to decide the claim of the said physician regarding the recovery of his fees, it becomes necessary to decide who is bound to pay the

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bill, whether the father and mother-in-law of the patient, or the husband of the latter.

According to article 1089 of the Civil Code, obligations are created by law, by contracts, by quasi-contracts, and by illicit acts and omissions or by those in which any kind of fault or negligence occurs.

Obligations arising from law are not presumed. Those expressly determined in the code or in special laws, etc., are the only demandable ones. Obligations arising from contracts have legal force between the contracting parties and must be fulfilled in accordance with their stipulations. (Arts. 1090 and 1091.)

The rendering of medical assistance in case of illness is comprised among the mutual obligations to which the spouses are bound by way of mutual support. (Arts. 142 and 143.)

If every obligation consists in giving, doing or not doing something (art. 1088), and spouses are mutually bound to support each other, there can be no question but that, when either of them by reason of illness should be in need of medical assistance, the other is under the unavoidable obligation to furnish the necessary services of a physician in order that health may be restored, and he or she may be freed from the sickness by which life is jeopardized; the party bound to furnish such support is therefore liable for all expenses, including the fees of the medical expert for his professional services. This liability originates from the above-cited mutual obligation which the law has expressly established between the married couple.

In the face of the above legal precepts it is unquestionable that the person bound to pay the fees due to the plaintiff for the professional services that he rendered to the daughter-in-law of the defendants during her childbirth, is the husband of the patient and not her father and mother- in-law, the defendants herein. The fact that it was not the husband who called the plaintiff and requested his assistance for his wife is no bar to the fulfillment of the said obligation, as the defendants, in view of the imminent danger, to which the life of the patient was at that moment exposed, considered that medical assistance was urgently needed, and the obligation of the husband to furnish his wife in the indispensable services of a physician at such critical moments is specially established by the law, as has been seen, and compliance therewith is unavoidable; therefore, the plaintiff, who believes that he is entitled to recover his fees, must direct his action against the husband who is under obligation to furnish medical assistance to his lawful wife in such an emergency.

From the foregoing it may readily be understood that it was improper to have brought an action against the defendants simply because they were the parties who called the plaintiff and requested him to assist the patient during her difficult confinement, and also, possibly, because they were her father and mother-in-law and the sickness occurred in their house. The defendants were not, nor are they

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now, under any obligation by virtue of any legal provision, to pay the fees claimed, nor in consequence of any contract entered into between them and the plaintiff from which such obligation might have arisen.

In applying the provisions of the Civil Code in an action for support, the supreme court of Spain, while recognizing the validity and efficiency of a contract to furnish support wherein a person bound himself to support another who was not his relative, established the rule that the law does impose the obligation to pay for the support of a stranger, but as the liability arose out of a contract, the stipulations of the agreement must be held. (Decision of May 11, 1897.)

Within the meaning of the law, the father and mother-in-law are strangers with respect to the obligation that devolves upon the husband to provide support, among which is the furnishing of medical assistance to his wife at the time of her confinement; and, on the other hand, it does not appear that a contract existed between the defendants and the plaintiff physician, for which reason it is obvious that the former can not be compelled to pay fees which they are under no liability to pay because it does not appear that they consented to bind themselves.

The foregoing suffices to demonstrate that the first and second errors assigned to the judgment below are unfounded, because, if the plaintiff has no right of action against the defendants, it is needless to declare whether or not the use of forceps is a surgical operation.

Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the judgment appealed from should be affirmed with the costs against the appellant. So ordered.

Case Digest on PELAYO vs. LAURON (Mutual Support)

Facts: Oct. 13, 1906, nighttime – Arturo Pelayo, a physician based in Cebu, was called to the house of Marcelo Lauron & Juana Abella (defendants) in San Nicolas. Their daughter-in-law was about to give birth & they requested him to render medical assistance. Since it was a difficult birth, he had to perform a surgery to

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remove the fetus using forceps. He also removed the afterbirth. He finished all of these until the following morning.

He visited the patient several times the following day. Just & equitable value for the services he rendered: P500.00. Without any good reason, defendants refused to pay said amount. Thus he filed a case praying for a judgment in his favor against defendants for the sum of P500.00 + costs along with other relief that may be deemed proper.

The Defendants alleged that their daughter-in-law died in consequence of the childbirth. Also, that their son & daughter-in-law lived independently & her giving birth in their house was only accidental. They prayed that they be absolved.

CFI: Defendants absolved due to lack of sufficient evidence to establish right of action.

ISSUE: WON the defendants are bound to pay the bill for the services Pelayo has rendered.

HELD: NO. CFI judgment affirmed.

RATIO: Rendering of medical assistance in case of illness is among the mutual obligations to which spouses are bound by way of mutual support. (Arts. 142 & 143, CC) The party bound to give support should therefore be liable for all the expenses including the fees of the physician. Thus, it is the husband’s obligation to pay Pelayo and not the defendants. The husband would still be liable even if his parents were the one who called & requested for Pelayo’s assistance. The defendants are not under any obligation to pay the fees claimed (An obligation according to CC Art. 1089 is created by law, contracts, quasi-contracts, & by illicit acts & omissions or by those in which any kind of fault/negligence occurs.). There was no contract between Pelayo & the defendants thus they can’t be compelled to pay him.

SECOND DIVISION

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[G.R. No. 162084. June 28, 2005]

APRIL MARTINEZ, FRITZ DANIEL MARTINEZ and MARIA OLIVIA MARTINEZ, petitioners, vs. RODOLFO G. MARTINEZ, respondent.

D E C I S I O N

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 59420 setting aside and reversing the decision of the Regional Trial Court (RTC) of Manila, Branch 30, in Civil Case No. 00-96962 affirming, on appeal, the decision of the Metropolitan Trial Court (MTC) of Manila in Civil Case No. 164761 (CV) for ejectment.

The Antecedents

The spouses Daniel P. Martinez, Sr. and Natividad de Guzman-Martinez were the owners of a parcel of land identified as Lot 18-B-2 covered by Transfer Certificate of Title (TCT) No. 54334, as well as the house constructed thereon.[2] On March 6, 1993, Daniel, Sr. executed a Last Will and Testament[3] directing the subdivision of the property into three lots, namely, Lots 18-B-2-A, 18-B-2-B and 18-B-2-C. He then bequeathed the three lots to each of his sons, namely, Rodolfo, Manolo and Daniel, Jr.; Manolo was designated as the administrator of the estate.

In May 1995, Daniel, Sr. suffered a stroke which resulted in the paralysis of the right side of his body. Natividad died on October 26, 1996.[4] Daniel, Sr. passed away on October 6, 1997.[5]

On September 16, 1998, Rodolfo found a deed of sale purportedly signed by his father on September 15, 1996, where the latter appears to have sold Lot 18-B-2 to Manolo and his wife Lucila.[6] He also discovered that TCT No. 237936 was issued to the vendees based on the said deed of sale.[7]

Rodolfo filed a complaint[8] for annulment of deed of sale and cancellation of TCT No. 237936 against his brother Manolo and his sister-in-law Lucila before the RTC. He also filed a criminal complaint for estafa through falsification of a public document in the Office of the City Prosecutor against Manolo, which was elevated to the Department of Justice.[9]

On motion of the defendants, the RTC issued an Order[10] on March 29, 1999, dismissing the complaint for annulment of deed of sale on the ground that the trial court had no jurisdiction over the action since there was no allegation in the complaint that the last will of Daniel Martinez, Sr. had been admitted to probate. Rodolfo appealed the order to the CA.[11]

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http://sc.judiciary.gov.ph/jurisprudence/2005/jun2005/162084.htm#_ftn11












On October 4, 1999, Rodolfo filed a Petition with the RTC of Manila for the probate of the last will of the deceased Daniel Martinez, Sr.[12]

In the meantime, the spouses Manolo and Lucila Martinez wrote Rodolfo, demanding that he vacate the property. Rodolfo ignored the letter and refused to do so. This prompted the said spouses to file a complaint for unlawful detainer against Rodolfo in the MTC of Manila. They alleged that they were the owners of the property covered by TCT No. 237936, and that pursuant to Presidential Decree (P.D.) No. 1508, the matter was referred to the barangay for conciliation and settlement, but none was reached. They appended the certification to file action executed by thebarangay chairman to the complaint.

In his Answer[13] to the complaint filed on October 11, 1999, Rodolfo alleged, inter alia, that the complaint failed to state a condition precedent, namely, that earnest efforts for an amicable settlement of the matter between the parties had been exerted, but that none was reached. He also pointed out that the dispute had not been referred to the barangay before the complaint was filed.

On October 20, 1999, the spouses Martinez filed an Amended Complaint in which they alleged that earnest efforts toward a settlement had been made, but that the same proved futile. Rodolfo filed his opposition thereto, on the ground that there was no motion for the admission of the amended complaint. The trial court failed to act on the matter.

The spouses Martinez alleged in their position paper that earnest efforts toward a compromise had been made and/or exerted by them, but that the same proved futile.[14] No amicable settlement was, likewise, reached by the parties during the preliminary conference because of irreconcilable differences. The MTC was, thus, impelled to terminate the conference.[15]

On February 21, 2000, the trial court rendered judgment in favor of the spouses Martinez. The fallo of the decision reads:

WHEREFORE, premises considered, judgment is rendered in favor of plaintiff. The defendant, including any person claiming right under him, is ordered:

1) To vacate the subject premises;

2) To pay plaintiff the sum of P10,000.00 a month starting July 17, 1999, the date of last demand until he vacates the same;

3) To pay the sum of P10,000.00 as and for attorney’s fees; and

4) Costs of suit.

SO ORDERED.[16]

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The trial court declared that the spouses Martinez had substantially complied with Article 151 of the Family Code of the Philippines[17] based on the allegations of the complaint and the appended certification to file action issued by the barangay captain.

Rodolfo appealed the decision to the RTC. On May 31, 2000, the RTC rendered judgment affirming the appealed decision. He then filed a petition for review of the decision with the CA, alleging that:

1. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND WITHOUT MERIT THE DEFENSE OF PETITIONER THAT THERE IS NO ALLEGATION IN THE COMPLAINT THAT PETITIONER HAS UNLAWFULLY WITHHELD POSSESSION OF THE PROPERTY FROM RESPONDENTS – A REQUIREMENT IN [AN] UNLAWFUL DETAINER SUIT.

2. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND THAT PETITIONER’S POSSESSION OF THE PROPERTY IS BY MERE TOLERANCE OF RESPONDENTS.

3. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND THAT THE RESPONDENTS HAVE A CAUSE OF ACTION.

4. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH DID NOT RESOLVE THE SIXTH ISSUE, TO WIT, “Whether or not this Court has jurisdiction over this case considering that the allegations in the complaint makes out a case of accion publiciana.”

5. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH HAS NO JURISDICTION OVER THE CASE.

6. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND THAT THE MANDATORY REQUIREMENT OF CONCILIATION HAS BEEN COMPLIED WITH.

7. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND THAT THERE WAS SUBSTANTIAL COMPLIANCE WITH THE KATARUNGANG PAMBARANGAY LAW.

8. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH FOUND THAT THE PENDENCY OF CIVIL CASE NO. 98-91147 AND SPECIAL PROCEEDINGS NO. 99-95281, INVOLVING THE PETITIONER AND RESPONDENTS AND INVOLVING THE SAME PROPERTY DID NOT DIVEST THE MTC OF AUTHORITY TO DECIDE THE CASE.

9. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC WHICH GRANTED THE RELIEF PRAYED FOR BY THE RESPONDENTS.

10. THE RTC ERRED IN AFFIRMING THE DECISION OF THE MTC.[18]

Page | 15Shaney




On November 27, 2003, the CA rendered judgment granting the petition and reversing the decision of the RTC. The appellate court ruled that the spouses Martinez had failed to comply with Article 151 of the Family code. The CA also held that the defect in their complaint before the MTC was not cured by the filing of an amended complaint because the latter pleading was not admitted by the trial court.

Upon the denial of their motion for reconsideration of the said decision, the spouses Martinez filed the present petition for review on certiorari, in which they raise the following issues:

I.

WHETHER OR NOT THE CERTIFICATION TO FILE ACTION AND THE ALLEGATIONS IN THE COMPLAINT THAT THE CASE PASSED [THROUGH] THE BARANGAY BUT NO SETTLEMENT WAS REACHED, ARE SUFFICIENT COMPLIANCE TO PROVE THAT, INDEED, EARNEST EFFORTS WERE, IN FACT, MADE BUT THE SAME HAVE FAILED PRIOR TO THE FILING OF THE COMPLAINT.

II.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY AND SERIOUSLY ERRED IN FINDING THAT THERE WAS NON-COMPLIANCE WITH THE REQUIREMENT PROVIDED FOR UNDER ARTICLE 151 OF THE FAMILY CODE, CONSIDERING THAT ONE OF THE PARTIES TO A SUIT IN THIS CASE IS NOT A MEMBER OF THE SAME FAMILY.[19]

The petitioners alleged that they substantially complied with Article 151 of the Family Code, since they alleged the following in their original complaint:

2. In compliance with P.D. 1508, otherwise known as the “Katarungang Pambarangay,” this case passed [through] the Barangay and no settlement was forged between plaintiffs and defendant as a result of which Certification to File Action was issued by Barangay 97, Zone 8, District I, Tondo, Manila. xxx” (Underscoring supplied)[20]

Further, the petitioners averred, they alleged in their position paper that they had exerted earnest efforts towards a compromise which proved futile. They also point out that the MTC resolved to terminate the preliminary conference due to irreconcilable difference between the parties. Besides, even before they filed their original complaint, animosity already existed between them and the respondent due to the latter’s filing of civil and criminal cases against them; hence, the objective of an amicable settlement could not have been attained. Moreover, under Article 150 of the Family Code, petitioner Lucila Martinez had no familial relations with the respondent, being a mere sister-in-law. She was a stranger to the respondent; hence, there was no need for the petitioners [21] to comply with Article 151 of the Family Code.

Page | 16Shaney





The petition is meritorious.

Article 151 of the Family Code provides:

Art. 151. No suit between members of the same family shall prosper unless it should appear from the verified complaint or petition that earnest efforts toward a compromise have been made, but that the same have failed. If it is shown that no such efforts were, in fact, made, the case must be dismissed.

This rule shall not apply to cases which may not be the subject of compromise under the Civil Code.

The phrase “members of the family” must be construed in relation to Article 150 of the Family Code, to wit:

Art. 150. Family relations include those:

(1) Between husband and wife;

(2) Between parents and children;

(3) Among other ascendants and descendants; and

(4) Among brothers and sisters, whether of the full or half-blood.

Article 151 of the Family code must be construed strictly, it being an exception to the general rule. Hence, a sister-in-law or brother-in-law is not included in the enumeration.[22]

As pointed out by the Code Commission, it is difficult to imagine a sadder and more tragic spectacle than a litigation between members of the same family. It is necessary that every effort should be made toward a compromise before a litigation is allowed to breed hate and passion in the family and it is known that a lawsuit between close relatives generates deeper bitterness than between strangers.[23]

Thus, a party’s failure to comply with Article 151 of the Family Code before filing a complaint against a family member would render such complaint premature.

In this case, the decision of the CA that the petitioners were mandated to comply with Article 151 of the Family code and that they failed to do so is erroneous.

First. Petitioner Lucila Martinez, the respondent’s sister-in-law, was one of the plaintiffs in the MTC. The petitioner is not a member of the same family as that of her deceased husband and the respondent:

As regards plaintiff’s failure to seek a compromise, as an alleged obstacle to the present case, Art. 222 of our Civil Code provides:

Page | 17Shaney




“No suit shall be filed or maintained between members of the same family unless it should appear that earnest efforts toward a compromise have been made, but that the same have failed, subject to the limitations in Article 2035.”

It is noteworthy that the impediment arising from this provision applies to suits “filed or maintained between members of the same family.” This phrase, “members of the same family,” should, however, be construed in the light of Art. 217 of the same Code, pursuant to which:

“Family relations shall include those:

(1) Between husband and wife;

(2) Between parent and child;

(3) Among other ascendants and their descendants;

(4) Among brothers and sisters.”

Mrs. Gayon is plaintiff’s sister-in-law, whereas her children are his nephews and/or nieces. Inasmuch as none of them is included in the enumeration contained in said Art. 217 – which should be construed strictly, it being an exception to the general rule – and Silvestre Gayon must necessarily be excluded as party in the case at bar, it follows that the same does not come within the purview of Art. 222, and plaintiff’s failure to seek a compromise before filing the complaint does not bar the same.[24]

Second. The petitioners were able to comply with the requirements of Article 151 of the Family Code because they alleged in their complaint that they had initiated a proceeding against the respondent for unlawful detainer in the Katarungang Pambarangay, in compliance with P.D. No. 1508; and that, after due proceedings, no amicable settlement was arrived at, resulting in thebarangay chairman’s issuance of a certificate to file action.[25] The Court rules that such allegation in the complaint, as well as the certification to file action by the barangay chairman, is sufficient compliance with article 151 of the Family Code. It bears stressing that under Section 412(a) of Republic Act No. 7160, no complaint involving any matter within the authority of the Lupon shall be instituted or filed directly in court for adjudication unless there has been a confrontation between the parties and no settlement was reached.[26]

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 59420 is REVERSED AND SET ASIDE. The Decision of the Metropolitan Trial Court of Manila, as affirmed on appeal by the Regional Trial Court of Manila, Branch 30, in Civil Case No. 164761(CV) is REINSTATED. No costs.

SO ORDERED.

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Martinez vs Martinez (CASE DIGEST)

GR No. 162084, June 28, 2005

FACTS:

Daniel Martinez Sr. and Natividad de Guzman-Martinez were the owners of a parcel of land. The former executed a last will and testament directing the subdivision of the property into 3 lots bequeathed to each of his sons namely Rodolfo, Manolo (designated as administrator of the estate), and Daniel Jr. In October 1997, Daniel Sr. died. Rodolfo then found a deed of sale purportedly signed by his father on September 1996 where it appears that the land was sold to Manolo and his wife Lucila and was also issued to them. Rodolfo filed a complaint against his brother Manolo and sister-in-law Lucila for the annulment of the deed of sale and cancellation of the TCT. Spouses wrote Rodolfo demanding him to vacate the property which the latter ignored and refused to do so. This prompted the spouses to file a complaint for unlawful detainer against Rodolfo. This matter was referred to the barangay for conciliation and settlement but none was reached. It was alleged in the position paper of the spouses that earnest efforts toward a compromise had been made but the same proved futile.

ISSUE: WON spouses Martinez complied with the requirements of Art 151 of the Family Code.

Page | 19Shaney


HELD: No suit between members of the same family shall prosper unless it should appear from the verified complaint that earnest efforts toward a compromise have been made, but the same have failed.

Lucila Martinez, the respondent’s sister-in-law was one of the plaintiffs in the case at bar. The petitioner is not a member of the same family as that of her deceased husband and the respondent. Her relationship with the respondent is not one of those enumerated in Article 150. It should also be noted that the petitioners were able to comply with the requirements of Article 151 because they alleged in their complaint that they had initiated a proceeding against the respondent for unlawful detainer in the katarungan Pambarangay in compliance with PD1508 and that after due proceedings, no amicable settlement was arrived at resulting in the barangay chairman’s issuance of a certificate to file action.

(Other Martinez vs Martinez) DIGEST

Facts: Pedro Martinez Ilustre brought an action against his father Francisco for a

declaration of prodigality against him. Pedro alleges that his father has been

dissipating and squandering his estate by making donations to his 2nd wife, as well

as the administration of his estate. The father denied such allegations, instead he

posted that his son was actually mismanaging and misappropriating the property of

the estate.

Issue: What constitutes prodigality?

Held: Since prodigality is not defined in our law, it may be inferred that the acts of

prodigality must show a morbid state of bind and a disposition to spend, waste, and

lessen the estate to such an extent as is likely to expose the family to want of

support, or to deprive the forced heirs of their undisposable part of the estate. The

testimony of the plaintiff was insufficient to support his allegations against his

father. There was no evidence to show his father has been transferring by sale or

mortgage any property, which will reflect in the city record of public deeds. The

court found the defendant is far from being prodigal, and is still in the full exercise

of his faculties and still possess the industry, thrift and ability in managing the

estate.

Page | 20Shaney


ii. CONTRACTS (1159; 1305)


Manila

EN BANC

G.R. No. L-1299 November 16, 1903

VICENTE PEREZ, plaintiff-appellee, vs.EUGENIO POMAR, Agent of the Compañia General de Tabacos, defendant-appellant.

Francisco Dominguez for appellant.Ledesma, Sumulong and Quintos for appellee.

TORRES, J.:

In a decision dated February 9, 1903, the judge of the Sixth Judicial District, deciding a case brought by the plaintiff against the defendant for the recovery of wages due and unpaid, gave judgment against the latter for the sum of $600 and the costs of suit, less the sum of $50, Mexican.

On August 27, 1902, Don Vicente Perez filed in the Court of First Instance of Laguna a complaint, which was amended on the 17th of January of this year, asking that the court determine the amount due the plaintiff, at the customary rate of compensation for interpreting in these Islands, for services

Page | 21Shaney


rendered in the Tabacalera Company, and that, in view of the circumstances of the case, judgment be rendered in his favor for such sum. The complaint also asked that the defendant be condemned to the payment of damages in the sum of $3,200, gold, together with the costs of suit. In this complaint it was alleged that Don Eugenio Pomar, as general agent of the Compañia General de Tabacos in the said province, verbally requested the plaintiff on the 8th of December, 1901, to act as interpreter between himself and the military authorities; that after the date mentioned the plaintiff continued to render such services up to and including May 31, 1902; that he had accompanied the defendant, Pomar, during that time at conferences between the latter and the colonel commanding the local garrison, and with various officers and doctors residing in the capital, and at conferences with Captain Lemen in the town of Pilar, and with the major in command at the town of Pagsanjan, concerning the shipment of goods from Manila, and with respect to Pagsanjan to this city; that the plaintiff during this period held himself in readiness to render services whenever required; that on this account his private business, and especially a soap factory established in the capital, was entirely abandoned; that to the end that such services might be punctually rendered, the agent, Pomar, assured him that the Tabacalera Company always generously repaid services rendered it, and that he therefore did not trouble himself about his inability to devote the necessary amount of time to his business, the defendant going so far as to make him flattering promises of employment with the company, which he did not accept; that these statements were made in the absence of witnesses and that therefore his only proof as to the same was Mr. Pomar's word as a gentleman; that the employees of the company did not understand English, and by reason of the plaintiff's mediation between the agent, and the military authorities large profits were obtained, as would appear from the account and letterpress books of the agency corresponding to those dates. In the amended complaint it was added that the defendant, on behalf of the company, offered to renumerate the plaintiff for the services rendered in the most advantageous manner in which such services are compensated, in view of the circumstances under which they were requested; and that the plaintiff, by rendering the company such services, was obliged to abandon his own business, the manufacture of soap, and thereby suffered damages in the sum of $3,200, United States currency.

The defendant, on the 25th of September, 1902, filed an answer asking for the dismissal of the complaint, with costs to the plaintiff. In his answer the defendant denied the allegation in the first paragraph of the complaint, stating that it was wholly untrue that the company, and the defendant as its agent, had solicited the services of the plaintiff as interpreter before the military authorities for the period stated, or for any other period, or that the plaintiff had accompanied Pomar at the conferences mentioned, concerning shipments from Manila and exports from some of the towns of the province to this capital. He stated that he especially denied paragraphs 2 of the complaint, as it was absolutely untrue that the plaintiff had been at the disposal of the defendant for the purpose of rendering such services; that he therefore had not been obliged to abandon his occupation or his soap factory, and that the statement that an offer of employment with the company had been made to him was false. The defendant also denied that through the mediation of the plaintiff the company and himself had obtained large profits. The statements in paragraphs 6, 7, 8, and 9 of the complaint were also denied. The defendant stated that, on account of the friendly relations which sprang up between the plaintiff and himself, the former borrowed from him from time to time money amounting to $175 for the purposes of his business, and that he had also delivered to the plaintiff 36 arrobas of oil worth $106, and three packages of resin for use in coloring his soap; that the plaintiff accompanied the defendant to Pagsanjan, Pilar, and other towns when the latter made business trips to them for the purpose of extending his business and mercantile relations therein; that on these excursions, as well as on private and official visits which he had to make, the plaintiff occasionally accompanied him through motives of friendship, and especially because of the free transportation given him, and not on behalf of the company of which he was never interpreter and for which he rendered no services; that the plaintiff in these conferences acted as interpreter of his own free will, without being requested to do so by the defendant and without any offer of payment or compensation; that therefore there existed no legal relation whatever between the company and the

Page | 22Shaney


plaintiff, and that the defendant, when accepting the spontaneous, voluntary and officious services of the plaintiff, did so in his private capacity and not as agent of the company, and that it was for this reason that he refused to enter into negotiations with the plaintiff, he being in no way indebted to the latter. The defendant concluded by saying that he answered in his individual capacity.

A complaint having been filed against the Compañia General de Tabacos and Don Eugenio Pomar, its agent in the Province of Laguna, the latter, having been duly summoned, replied to the complaint, which was subsequently amended, and stated that he made such reply in his individual capacity and not as agent of the company, with which the plaintiff had had no legal relations. The suit was instituted between the plaintiff and Pomar, who, as such, accepted the issue and entered into the controversy without objection, opposed the claim of the plaintiff, and concluded by asking that the complaint be dismissed, with the costs to the plaintiff. Under these circumstances and construing the statutes liberally, we think it proper to decide the case pending between both parties in accordance with law and the strict principles of justice.

From the oral testimony introduced at the trial, it appears that the plaintiff, Perez, did on various occasions render Don Eugenio Pomar services as interpreter of English; and that he obtained passes and accompanied the defendant upon his journeys to some of the towns in the Province of Laguna. It does not appear from the evidence, however, that the plaintiff was constantly at the disposal of the defendant during the period of six months, or that he rendered services as such interpreter continuously and daily during that period of time.

It does not appear that any written contract was entered into between the parties for the employment of the plaintiff as interpreter, or that any other innominate contract was entered into; but whether the plaintiff's services were solicited or whether they were offered to the defendant for his assistance, inasmuch as these services were accepted and made use of by the latter, we must consider that there was a tacit and mutual consent as to the rendition of the services. This gives rise to the obligation upon the person benefited by the services to make compensation therefor, since the bilateral obligation to render services as interpreter, on the one hand, and on the other to pay for the services rendered, is thereby incurred. (Arts. 1088, 1089, and 1262 of the Civil Code). The supreme court of Spain in its decision of February 12, 1889, holds, among other things, "that not only is there an express and tacit consent which produces real contract but there is also a presumptive consent which is the basis of quasi contracts, this giving rise to the multiple juridical relations which result in obligations for the delivery of a thing or the rendition of a service."

Notwithstanding the denial of that defendant, it is unquestionable that it was with his consent that the plaintiff rendered him services as interpreter, thus aiding him at a time when, owing to the existence of an insurrection in the province, the most disturbed conditions prevailed. It follows, hence, that there was consent on the part of both in the rendition of such services as interpreter. Such service not being contrary to law or to good custom, it was a perfectly licit object of contract, and such a contract must necessarily have existed between the parties, as alleged by the plaintiff. (Art. 1271, Civil Code.)

The consideration for the contract is also evident, it being clear that a mutual benefit was derived in consequence of the service rendered. It is to be supposed that the defendant accepted these services and that the plaintiff in turn rendered them with the expectation that the benefit would be reciprocal. This shows the concurrence of the three elements necessary under article 1261 of the Civil Code to constitute a contract of lease of service, or other innominate contract, from which an obligation has arisen and whose fulfillment is now demanded.

Article 1254 of the Civil Code provides that a contract exists the moment that one or more persons consent to be bound, with respect to another or others, to deliver some thing or to render some

Page | 23Shaney


service. Article 1255 provides that the contracting parties may establish such covenants, terms, and conditions as they deem convenient, provided they are not contrary to law, morals or public policy. Whether the service was solicited or offered, the fact remains that Perez rendered to Pomar services as interpreter. As it does not appear that he did this gratuitously, the duty is imposed upon the defendant, having accepted the benefit of the service, to pay a just compensation therefor, by virtue of the innominate contract of facio ut des implicitly established.

The obligations arising from this contract are reciprocal, and, apart from the general provisions with respect to contracts and obligations, the special provisions concerning contracts for lease of services are applicable by analogy.

In this special contract, as determined by article 1544 of the Civil Code, one of the parties undertakes to render the other a service for a price certain. The tacit agreement and consent of both parties with respect to the service rendered by the plaintiff, and the reciprocal benefits accruing to each, are the best evidence of the fact that there was an implied contract sufficient to create a legal bond, from which arose enforceable rights and obligations of a bilateral character. lawphi1.net

In contracts the will of the contracting parties is law, this being a legal doctrine based upon the provisions of articles 1254, 1258, 1262, 1278, 1281, 1282, and 1289 of the Civil Code. If it is a fact sufficiently proven that the defendant, Pomar, on various occasions consented to accept an interpreter's services, rendered in his behalf and not gratuitously, it is but just that he should pay a reasonable remuneration therefor, because it is a well-known principle of law that no one should be permitted to enrich himself to the damage of another.

With respect to the value of the services rendered on different occasions, the most important of which was the first, as it does not appear that any salary was fixed upon by the parties at the time the services were accepted, it devolves upon the court to determine, upon the evidence presented, the value of such services, taking into consideration the few occasions on which they were rendered. The fact that no fixed or determined consideration for the rendition of the services was agreed upon does not necessarily involve a violation of the provisions of article 1544 of the Civil Code, because at the time of the agreement this consideration was capable of being made certain. The discretionary power of the court, conferred upon it by the law, is also supported by the decisions of the supreme court of Spain, among which may be cited that of October 18, 1899, which holds as follows: "That as stated in the article of the Code cited, which follows the provisions of law 1, title 8, of the fifth partida, the contract for lease of services is one in which one of the parties undertakes to make some thing or to render some service to the other for a certain price, the existence of such a price being understood, as this court has held not only when the price has been expressly agreed upon but also when it may be determined by the custom and frequent use of the place in which such services were rendered."

No exception was taken to the judgment below by the plaintiff on account of the rejection of his claim for damages. The decision upon this point is, furthermore, correct.

Upon the supposition that the recovery of the plaintiff should not exceed 200 Mexican pesos, owing to the inconsiderable number of times he acted as interpreter, it is evident that the contract thus implicitly entered into was not required to be in writing and that therefore it does not fall within article 1280 of the Civil Code; nor is it included within the provisions of section 335 of the Code of Civil Procedure, as this innominate contract is not covered by that section. The contract of lease of services is not included in any of the cases expressly designated by that section of the procedural law, as affirmed by the appellant. The interpretation of the other articles of the Code alleged to have been infringed has also been stated fully in this opinion.

Page | 24Shaney


For the reasons stated, we are of the opinion that judgment should be rendered against Don Eugenio Pomar for the payment to the plaintiff of the sum of 200 Mexican pesos, from which will be deducted the sum of 50 pesos is made as to the costs of this instance. The judgment below is accordingly affirmed in so far as it agrees with this opinion, and reversed in so far as it may be in conflict therewith. Judgment will be entered accordingly twenty days after this decision is filed.

Separate Opinion

MCDONOUGH, J., dissenting:

I dissent from the opinion of the majority. In my opinion there is no legal evidence in the case from which the court may conclude that the recovery should be 200 Mexican pesos. I am therefore in favor of affirming the judgment.


Manila

EN BANC

G.R. No. L-29203 July 26, 1971

MARITIME COMPANY OF THE PHILIPPINES, plaintiff-appellant, vs.REPARATIONS COMMISSION or REPARATION MISSION, defendant-appellee.

Rafael Dinglasan for plaintiff-appellant.

Panfilo M. Manguera and Jober Ayura for defendant-appellee.

FERNANDO, J.:

Decisive of the crucial issue posed by this appeal from a decision of the lower court is the applicability of the well-settled principle that a statute should be considered as entering into and forming part of a contract. Plaintiff Maritime Company of the Philippines, now appellant, would deny that it is controlling in its suit to hold defendant Reparations Commission, now appellee, liable for the freight charges as the consignee of reparations goods, notwithstanding that under Section 11 of the Reparations Act, 1 ocean freight and other expenses incident to importation shall be

Page | 25Shaney


paid by the end-user and not by such agency. That defendant is exempt from such obligation is further stressed by the concluding sentence thereof: "Nothing herein shall be construed as exempting the end-user from paying in full all the necessary costs, charges and expenses incident to the application for and the procurement, production delivery and acquisition, of, the goods concerned." It could not have been entirely unexpected therefore for the lower court to reach the conclusion that it had no choice on the matter in view of the explicit character of such statutory language which must be read into the contract of shipment. So it held in dismissing plaintiff's complaint for the recovery of freight charges. As such decision is not vitiated by any infirmity, we affirm.

In plaintiff's complaint of July 29, 1965, after setting forth its corporate character as well as that of the defendant Reparations Commission, which is vested by law with the power to enter into contracts and to sue and be sued, it alleged that shipments of reparations goods were loaded in three of its vessels consigned to defendant, with corresponding freight charges amounting to P228,250.58. 2 Then came the allegation that said vessels arrived in Manila and discharged all such shipment of reparations goods, which were duly delivered to and received by defendant as consignee in good order and condition, but defendant failed and refused to pay, notwithstanding repeated demands, the total amount of the freight charge, above-mentioned. 3 There was a claim for attorney's fee in the amount of P20,000.00, plaintiff, according to the complaint, being compelled to engage counsel. 4 The prayer was for a judgment against defendant in favor of plaintiff in the aforesaid sum of P228,250.58 as freight charges plus 6% interest thereon from the date of the filing the complaint until fully paid, and the sum of P20,000.0 by way of attorney's fees.

There was no denial in the answer of defendant filed on September 10, 1965 of the facts as alleged, but Section 11 of the Reparations Act was invoked to show that it was not liable at all for the freight charges, a matter which, according to defendant, was fully known to plaintiff as it had in several instances collected, freight charges from the end-users concerned. 5 In its special affirmative defenses, defendant contended that plaintiff's claim was barred by a prior judgment under the principle of res adjudicata and that "as a carrier of reparations goods, [it] is not only presumed to know the law but is chargeable with knowledge of that law, and when it thus entered into a contract of carriage or affreightment of reparations goods, it rendered itself bound by the pertinent provision of Section 11 of the Reparations Law ... on the question of who is liable for said freight charges; that as a matter of fact, plaintiff in its prior dealings with the defendant on this matter had so recognized and accepted the set-up as envisioned by Section 11 of the Reparations Law." 6 Its prayer was for the dismissal of the complaint with costs against plaintiff.

As noted, defendant's contention was sustained by the lower court in its decision of March 29, 1968 dismissing the complaint. After referring to the language of Section

Page | 26Shaney


11 of the Reparations Act, mentioned at the opening of this opinion, it reached the above conclusion, there, being "no doubt on the interpretation as to who will pay for the freight charges." 7 It was likewise set forth therein that plaintiff in fact had been collecting freight charges from end-users and turning over a portion thereof, at least 50%, to defendant to pay its outstanding obligations, plaintiff having purchased several vessels through the Reparations Commission payable on instalIments. 8 There was no question then, to its mind, that plaintiff, considering such conduct, had no right to demand the payment of freight charges from defendant. 9

From the above decision, an appeal was taken to this Court on April 26, 1968. The brief for plaintiff-appellant was filed on September 7 of the same year. Defendant-appellee Reparations Commission, in turn submitted its brief on October 7, 1968. There was no reply brief on the part of the appellant. Notwithstanding the vigorous presentation of the alleged errors imputed to the lower court, there is no legal justification, as was already indicated, for a reversal.

1. It is to be recognized that a large degree of autonomy is accorded contracting parties. Not that it is unfettered. They may, according to the Civil Code, 10 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." The law thus sets limits. It is a fundamental requirement that the contract entered into must be in accordance with, and not repugnant to, an applicable statute. Its terms are embodied therein. The contracting parties need not repeat them. They do not even have to be referred to. Every contract thus contains not only what has been explicitly stipulated, but the statutory provisions that have any bearing on the matter. So it has been invariably held fromUnited States v. Constantino, 11 a 1919 decision, to Lakas Ng Manggagawang Makabayan (LMM) v. Abiera, 12promulgated only a year ago. 13 According to Justice Malcolm, speaking for the Court in the former: "It is an elementary rule of contracts that the laws, in force at the time the contract was made, enter into and govern it." 14This is how the matter is put in the latest decision: "The principle is thus well-settled that an existing law enters into and forms part of a valid contract without the need for the parties expressly making reference to it. Only thus could its validity insofar as some of its provisions are concerned be assured." 15

A fairly recent restatement of the principle, in the language of Justice J.B.L. Reyes, speaking for the Court, appears in Liberation Steamship Co., Inc. vs. Court of Industrial Relations. 16 Thus: "The rule is that the law forms part of, and is, read into, every contract, unless clearly excluded therefrom in those cases where such exclusion is allowed ... ." 17 What is the law that forms part of, and is to be read into, the contract between plaintiff-appellant and defendant-appellee? It is, to repeat, Section 11 of Republic Act No. 1789 as amended. 18 More specifically: "The insurance, ocean freight and other expenses incident to importation shall be paid by

Page | 27Shaney


the end-user in accordance with usual business practice." The Last sentence is equally plain: "Nothing herein shall be construed as exempting the end-user from paying in full all the necessary costs, charges and expenses incident to the application for and the procurement, production, delivery and acquisition, of, the goods concerned." The above provisions, then, form part of and must be read into the shipping contracts between plaintiff-appellant and defendant-appellee, unless they could be "clearly excluded therefrom", assuming "such exclusion is allowed."

There is thus no persuasive force to the first error imputed to the lower court for their being applied to the contractual relationship between the parties. There is no showing that the shipping contracts between them are clearly excluded from the law, much less that such exclusion could be allowed. The lower court had no choice then. It yielded obedience to the law. What it did certainly cannot be stigmatized as error.

It is in that sense that reliance by plaintiff-appellant on the force and effect to be given the usual contracts between shipper and carriers, while finding support in the applicable provisions both of the Civil Code and the Code of Commerce, is far from persuasive. As was pointed out in the equally forceful brief of defendant-appellee, to so view the matter is to ignore what has been explicitly set forth in Section 11 of the Reparations Act which is controlling.

Nor did the attempt by plaintiff-appellant to invoke equitable considerations strengthen an inherently weak case. It asserted that defendant-appellee was in a better position to collect the freight charges. This is the answer of the latter: "Contrary to appellant's contention, it is itself and not the appellee which is in a better position to collect the corresponding ocean freight. This is because under the Reparations Law and established reparations set-up, the incidental charges to reparations importations, including freight charges are to be paid by the end-user to the party concerned upon the arrival but before delivery of the goods to the end-user, and "in accordance with usual business practices." (Sect. 11 R.A. 1789, as amended) Under this concept before the carrier issues the "Permit to deliver" the shipments, it could rightfully demand payment as a settlement of the freight charges. This is the stage more appropriate and commands a better facility in so far as the collection of the freight charges is concerned, and not after the goods shall have been released to the end-user by the carrier and the corresponding contract of Conditional Purchase and Sale executed by and between the Commission and the End-user concerned." 19 It cannot be said then that plaintiff-appellant's effort to thus collect would be futile. Moreover, there is always the remedy of a court action. Both in the answer of defendant-appellee 20, as well as in its brief, 21reference was made to such a suit actually being filed by plaintiff-appellant against a reparations end-user, C. G. Nazario and Sons, Inc. as well as the Reparations Commission as far back as 1961. 22 It was therein decided that defendant-appellee was not liable for the freight

Page | 28Shaney


charges, such obligation being incumbent on its co-defendant C. G. Nazario and Sons, Inc., the end-user.

At bottom then, this is one of those cases where a statutory provision free from any ambiguity, quite specific and definite, calls for application. Under such circumstances, there is not even any need for construction. The task of the judiciary is clear. 23 It must consider the law as controlling. This is what the lower court did. Certainly, no error could justly be imputed to it.

2. Nor is the second assignment of error deserving of a better fate. Plaintiff-appellant would find fault with the holding of the lower court that its having collected the freight charges on certain occasions from the end-users of reparations goods and applying portions thereof to the payment of its obligation to defendant-appellee for the purchase of several vessels indicated it had no right to demand payment thereof from the latter. On this point, the appealed decision reads: "The practice followed by the plaintiff in its dealings with the defendant establishes the fact that the plaintiff has been collecting the freight charges from the end-users and turning over a portion thereof (at least 50%) to the [defendant] in payment of the outstanding obligation of the plaintiff to the defendant, the plaintiff having purchased several vessels thru the Reparations Commission and paying the Latter by installments ... . There is, therefore, no question that as far as the plaintiff in its relation with the defendant is concerned, said plaintiff has been collecting from the end-users the freight charges of reparations goods from the end-users and, therefore, it has no right to demand the same from the defendant." 24 On the face thereof, the imputation of error would be hard to justify. The conclusion reached proceeds from an accurate appraisal of plaintiff-appellant's conduct. Nor is it without support in the evidence.

So it was made manifest in defendant-appellee's brief in these words: "To exemplify and bolster the foregoing view, attention is respectfully invited to the herein quoted contents of Exhs. 6, 7 and 8 of defendant-appellee: From Exh. "6" which is a letter of the plaintiff-appellant to the defendant-appellee, dated August 7, 1963 containing the manifestation of plaintiff to turn over to the defendant 50% of freightage collected, we quote in part: "Allowing some time for the collection of freights from the various end-users, we expect to remit to the Reparations Commission an approximate total of P60,000.00 within 60 days". (emphasis supplied) From Exh. "7" which is a letter dated October 3, 1963, of plaintiff-appellant to defendant-appellee we quote the following: "As of August 28, 1963, the only remaining past due account on this vessel was a delinquency interest of P4,600.46. On that date, however, we paid the Reparations Commission the sum of P37,629.80 representing 50% of the freights on reparations cargo ... ." (Emphasis supplied) And per Exh. "8" which is also a letter of plaintiff-appellant to defendant-appellee, dated Feb. 6, 1964, and which requests authority to load reparations cargoes on non-reparations vessels, there is manifested therein: "We undertake to apply 10% of

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whatever freights collected on reparations cargo loaded on the above vessels to the Reparations Commission for our reparations account with you." (Emphasis supplied)" 25

All that plaintiff-appellant could say on the matter is the following: "It is respectfully submitted, that even assumingarguendo only that on certain occasions plaintiff-appellant would collect the freight charges from the end-users concerned; nevertheless, that practice does not at all affect the question of who is liable for the freight charges under the contracts of carriage, ... . Just because herein plaintiff-appellant would, on certain occasions, collect the freight charges from the end-users by virtue of an understanding with the consignee or owner of said reparations goods, it does not necessarily follow that under the said contracts of affreightment, the end-users are already liable for said freight charges which are collectible and demandable thereunder only from the consignee thereof."26 This attempt by plaintiff-appellant to erode its conduct of its legal significance is unavailing, considering that it is based on an assumption as to defendant-appellee being liable for the payment of the freight charges, which, as had been made clear, is at war with the specific language of the controlling statutory provision.

Clearly, then, this assignment of error is lacking in merit. Plaintiff-appellant, it must be stressed, cannot possibly be unaware of the controlling legal provisions, considering that it has been itself the beneficiary of the Reparations Act, not to mention the fact that it has previously collected from end-users. Such was a finding of the lower court, which we are not at liberty to disturb, the appeal being purely on questions of law. As the last two errors allegedly committed by the lower court were based on plaintiff-appellant's basic premise as to the non-applicability of Section 11 of the Reparations Act, no useful purpose would be served by any further discussion. It suffices to state that the appealed decision can thus stand the vigorous attack launched against it.

3. One last word. This opinion deals with a shipping contract governed by specific provisions of the Reparations Act. Nothing in the opinion is to be considered applicable to contracts of a similar nature where ordinarily what has been explicitly agreed upon in the bill of lading is the measure of the respective rights and obligations of the parties.

WHEREFORE, the lower court decision of March 29, 1968 is affirmed. With costs against plaintiff-appellant.

(the title provided in the outline (NHA vs CA) but with different GR no.)

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Manila

FIRST DIVISION

G.R. No. 156437 March 1, 2004

NATIONAL HOUSING AUTHORITY, petitioner, vs.GRACE BAPTIST CHURCH and the COURT OF APPEALS, respondents.

This is a petition for review under Rule 45 of the Rules of Court, seeking to reverse the Decision of the Court of Appeals dated February 26, 2001,1 and its Resolution dated November 8, 2002,2 which modified the decision of the Regional Trial Court of Quezon City, Branch 90, dated February 25, 1997.3

On June 13, 1986, respondent Grace Baptist Church (hereinafter, the Church) wrote a letter to petitioner National Housing Authority (NHA), manifesting its interest in acquiring Lots 4 and 17 of the General Mariano Alvarez Resettlement Project in Cavite.4 In its letter-reply dated July 9, 1986, petitioner informed respondent:

In reference to your request letter dated 13 June 1986, regarding your application for Lots 4 and 17, Block C-3-CL, we are glad to inform you that your request was granted and you may now visit our Project Office at General Mariano Alvarez for processing of your application to purchase said lots.

We hereby advise you also that prior to approval of such application and in accordance with our existing policies and guidelines, your other accounts with us shall be maintained in good standing.5

Respondent entered into possession of the lots and introduced improvements thereon.6

On February 22, 1991, the NHA’s Board of Directors passed Resolution No. 2126, approving the sale of the subject lots to respondent Church at the price of P700.00 per square meter, or a total price of P430,500.00.7 The Church was duly informed of this Resolution through a letter sent by the NHA.8

On April 8, 1991, the Church tendered to the NHA a manager’s check in the amount of P55,350.00, purportedly in full payment of the subject properties.9 The Church insisted that this was the price quoted to them by the NHA Field Office, as shown by an unsigned piece of paper with a handwritten computation scribbled thereon.10Petitioner NHA returned the check, stating that the amount was insufficient considering that the price of the properties have changed. The Church made several demands on the NHA to accept their tender of payment, but the latter

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refused. Thus, the Church instituted a complaint for specific performance and damages against the NHA with the Regional Trial Court of Quezon City,11 where it was docketed as Civil Case No. Q-91-9148.

On February 25, 1997, the trial court rendered its decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the defendant to reimburse to the plaintiff the amount of P4,290.00 representing the overpayment made for Lots 1, 2, 3, 18, 19 and 20;

2. Declaring that there was no perfected contract of sale with respect to Lots 4 and 17 and ordering the plaintiff to return possession of the property to the defendant and to pay the latter reasonable rental for the use of the property at P200.00 per month computed from the time it took possession thereof until finally vacated. Costs against defendant.

SO ORDERED.12

On appeal, the Court of Appeals, affirmed the trial court’s finding that there was indeed no contract of sale between the parties. However, petitioner was ordered to execute the sale of the lots to Grace Baptist Church at the price of P700.00 per square meter, with 6% interest per annum from March 1991. The dispositive portion of the Court of Appeals’ decision, dated February 26, 2001, reads:

WHEREFORE, the appealed Decision is hereby AFFIRMED with the MODIFICATION that defendant-appellee NHA is hereby ordered to sell to plaintiff-appellant Grace Baptist Church Lots 4 and 17 at the price of P700.00 per square meter, or a total cost P430,000.00 with 6% interest per annum from March, 1991 until full payment in cash.

SO ORDERED.13

The appellate court ruled that the NHA’s Resolution No. 2126, which earlier approved the sale of the subject lots to Grace Baptist Church at the price of P700.00 per square meter, has not been revoked at any time and was therefore still in effect. As a result, the NHA was estopped from fixing a different price for the subject properties. Considering further that the Church had been occupying the subject lots and even introduced improvements thereon, the Court of Appeals ruled that, in the interest of equity, it should be allowed to purchase the subject properties.14

Petitioner NHA filed a Motion for Reconsideration which was denied in a Resolution dated November 8, 2002. Hence, the instant petition for review on the sole issue of: Can the NHA be compelled to sell the subject lots to Grace Baptist Church in the absence of any perfected contract of sale between the parties?

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Petitioner submits that the Court cannot compel it to sell the subject property to Grace Baptist Church without violating its freedom to contract.15 Moreover, it contends that equity should be applied only in the absence of any law governing the relationship between the parties, and that the law on sales and the law on contracts in general apply to the present case.16

We find merit in petitioner’s submission.

Petitioner NHA is not estopped from selling the subject lots at a price equal to their fair market value, even if it failed to expressly revoke Resolution No. 2126. It is, after all, hornbook law that the principle of estoppel does not operate against the Government for the act of its agents,17 or, as in this case, their inaction.

On the application of equity, it appears that the crux of the controversy involves the characterization of equity in the context of contract law. Preliminarily, we reiterate that this Court, while aware of its equity jurisdiction, is first and foremost, a court of law. While equity might tilt on the side of one party, the same cannot be enforced so as to overrule positive provisions of law in favor of the other.18 Thus, before we can pass upon the propriety of an application of equitable principles in the case at bar, we must first determine whether or not positive provisions of law govern.

It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations arising therefrom have the force of law between the parties and should be complied with in good faith.19 However, it must be understood that contracts are not the only source of law that govern the rights and obligations between the parties. More specifically, no contractual stipulation may contradict law, morals, good customs, public order or public policy.20 Verily, the mere inexistence of a contract, which would ordinarily serve as the law between the parties, does not automatically authorize disposing of a controversy based on equitable principles alone. Notwithstanding the absence of a perfected contract between the parties, their relationship may be governed byother existing laws which provide for their reciprocal rights and obligations.

It must be remembered that contracts in which the Government is a party are subject to the same rules of contract law which govern the validity and sufficiency of contract between individuals. All the essential elements and characteristics of a contract in general must be present in order to create a binding and enforceable Government contract.21

It appearing that there is no dispute that this case involves an unperfected contract, the Civil Law principles governing contracts should apply. In Vda. de Urbano v. Government Service Insurance System,22 it was ruled that a qualified acceptance constitutes a counter-offer as expressly stated by Article 1319 of the Civil Code. In said case, petitioners offered to redeem mortgaged property and requested for an extension of the period of redemption. However, the offer was not accepted by the

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GSIS. Instead, it made a counter-offer, which petitioners did not accept. Petitioners again offer to pay the redemption price on staggered basis. In deciding said case, it was held that when there is absolutely no acceptance of an offer or if the offer is expressly rejected, there is no meeting of the minds. Since petitioners’ offer was denied twice by GSIS, it was held that there was clearly no meeting of the minds and, thus, no perfected contract. All that is established was a counter-offer.23

In the case at bar, the offer of the NHA to sell the subject property, as embodied in Resolution No. 2126, was similarly not accepted by the respondent.24 Thus, the alleged contract involved in this case should be more accurately denominated as inexistent. There being no concurrence of the offer and acceptance, it did not pass the stage of generation to the point of perfection.25 As such, it is without force and effect from the very beginning or from its incipiency, as if it had never been entered into, and hence, cannot be validated either by lapse of time or ratification.26 Equity can not give validity to a void contract,27 and this rule should apply with equal force to inexistent contracts.

We note from the records, however, that the Church, despite knowledge that its intended contract of sale with the NHA had not been perfected, proceeded to introduce improvements on the disputed land. On the other hand, the NHA knowingly granted the Church temporary use of the subject properties and did not prevent the Church from making improvements thereon. Thus, the Church and the NHA, who both acted in bad faith, shall be treated as if they were both in good faith.28 In this connection, Article 448 of the Civil Code provides:

The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land and if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.

Pursuant to our ruling in Depra v. Dumlao,29 there is a need to remand this case to the trial court, which shall conduct the appropriate proceedings to assess the respective values of the improvements and of the land, as well as the amounts of reasonable rentals and indemnity, fix the terms of the lease if the parties so agree, and to determine other matters necessary for the proper application of Article 448, in relation to Articles 546 and 548, of the Civil Code.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The Court of Appeals’ Decision dated February 26, 2001 and Resolution dated November 8, 2002 are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Quezon

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City-Branch 90, dated February 25, 1997, is REINSTATED. This case is REMANDED to the Regional Trial Court of Quezon City, Branch 90, for further proceedings consistent with Articles 448 and 546 of the Civil Code.

SO ORDERED.

(the GR no in the outline but not the same title of the case which is NHA vs CA)


Manila

SECOND DIVISION

G.R. No. 128064 March 4, 2004

R.V. MARZAN FREIGHT, INC., petitioner, vs.COURT OF APPEALS and SHIELA’S MANUFACTURING, INC., respondents.

D E C I S I O N

CALLEJO, SR., J.:

This is a petition for review under Rule 45 of the 1997 Rules of Civil Procedure of the Decision1 of the Court of Appeals in CA-G.R. CV No. 49905 affirming with modification the Decision2 of the Regional Trial Court of Rizal, Pasig, Branch 154, in Civil Case No. 61644.

THE FACTS

The petitioner RV Marzan Freight, Inc., owned and operated a customs-bonded warehouse located at the Bachrach Corporation Building, where it accepted all forms of goods and merchandise for storage and safekeeping. Private respondent Shiela’s Manufacturing, Inc., on the other hand, was a corporation organized and existing under Philippines laws, and engaged in the garment business.

Philippine Fire and Marine Insurance Corporation (Philfire) issued Insurance Policy No. F-8952/4358-HO dated December 11, 19893 in favor of the petitioner, covering its warehouse as well as "stocks in trade of every kind and description usual to the warehouse operation of the Assured and/or other interest that may appear during the currency of this policy whilst contained in the building, known as BACHRACH CORP."

On April 12, 1989, raw materials consigned to the private respondent covered by Invoice No. TG-891254 arrived in the Philippines from Keelung, Taiwan on board the

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vessel SS World Lion V-302W owned by Sea-Land Service, Inc. from its supplier, Tricon Enterprises Ltd. The materials were valued at US$32,006.93.5 The Bureau of Customs treated the raw materials as subject to ordinary import taxes and were not immediately released to the private respondent. Moreover, the consignee failed to file the requisite import entry6 and failed to claim the cargo.7

In a Letter8 to the Office of the District Collector of the Bureau of Customs dated July 24, 1989, Sea-Land Service Inc. authorized the petitioner to take delivery of Container No. SEAU-462597 consigned to the private respondent for stripping and safekeeping.

In a Letter9 addressed to Bureau of Customs District Collector Emma M. Rosqueta dated September 11, 1989, the International Container Terminal Services, Inc. (ICTSI) requested for authority "to clear the storage areas of cargoes which have been abandoned by their owners or seized by the Bureau of Customs." Included in the request was the cargo of the private respondent. The District Collector of Customs initiated Abandonment Proceedings No. 288-89 over the cargo. On September 29, 1989, the District Collector issued a Notice10 to the consignee of various overstaying cargo, including that of the private respondent, giving them fifteen (15) days from notice thereof to file entry of the cargoes without prejudice to the right of the consignees to redeem articles pursuant to Section 1801 of the Tariff and Customs Code within the prescribed period therein; otherwise, the cargoes would be deemed abandoned and sold at public auction. As ordered, the Notice of the Abandonment Proceedings was posted on the Bureau’s bulletin board on September 29, 1980.11 No separate notice was sent to the private respondent because per the ICTSI’s records, the address of the consignee was unknown.

Earlier, on November 7, 1989, Leonardo S. Doctor, Chief of the Law Division of the Bureau of Customs, issued a Memorandum12 informing the Chief for Auction and Cargo Disposal Division that the declaration of abandonment in the aforestated proceedings had already become final and executory as of October 30, 1989 and that the cargoes subject matter thereof should be inventoried and sold at public auction.

However, before the inventory and sale at public auction of the goods could be accomplished, part of the warehouse containing the shipment was burned on July 26, 1990. The private respondent’s shipment was, likewise, burned and destroyed. The Philfire paid to the private respondent the amount of P12,000,000, for which the latter was issued a receipt.

On March 19, 1991, the private respondent, through counsel, sent a letter to the petitioner demanding payment of the value of the goods in the amount of US$32,006.93. However, the petitioner rejected the demands. Meanwhile, on October 28, 1991, the petitioner executed a "Release of Claim and Hold Harmless Undertaking."13

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On December 26, 1991, or after the lapse of more than two years from the arrival of the cargo in the Philippines, the private respondent filed a complaint for damages before the RTC of Pasig City, Branch 154, against the petitioner. The private respondent alleged, inter alia, that its goods were stored in the petitioner’s bonded warehouse due to the problem it encountered at the Bureau of Customs; that the goods were gutted by fire on July 26, 1990 while stored in said bonded warehouse; and, despite demands for the release of the goods, the petitioner refused to release the same. The private respondent prayed that the petitioner and Philfire be held jointly and severally liable to pay the following:

a) the sum of US$32,006.93 or its peso equivalent computed based on the rate of exchange prevailing at the time of payment with interest thereon from the time of the filing of complaint up to the time of actual payment;

b) the sum of P30,000.00 as and for attorney’s fees;

c) the costs of suit;14

In its answer, the petitioner interposed special and affirmative defenses. Aside from alleging that there was no privity of contract between it and the private respondent, the petitioner also alleged that the private respondent lost the right of action against it as it was not the real party-in-interest in the case. The petitioner averred that the goods in question were received not from the private respondent but from the Bureau of Customs, under Customs Administrative Order No. 102-88 dated August 30, 1988, covering Forfeited Cargoes (FC), Abandoned Cargoes (AC) and Cargoes held under Warrant/Seizure and Detention (CWSD). According to the petitioner, before the subject cargo was destroyed by accidental fire, the private respondent had violated the Tariff and Customs Code and related laws, rules and regulations, and failed to pay the corresponding taxes, duties and penalties for the importation. Furthermore, the private respondent failed to make the corresponding claim for the release of the said cargo, until the same was declared as "overstaying cargo," and later as "abandoned cargo." The petitioner further asserted that the government, and not the private respondent, was the owner thereof. As such, the private respondent was not entitled to the insurance proceeds arising out of the fire policy covering the petitioner as a customs bonded warehouse. Furthermore, considering that the cause of the loss of the subject cargo was a fortuitous event, an "act of God," and the petitioner, having exercised the required due care under the circumstances, cannot be held legally liable for such loss. Finally, the petitioner alleged that its warehouse is legally considered as an "extension of the Bureau of Customs" and all goods transferred therein continue to be in the custody of the Bureau of Customs, with all its legal implications.15

Defendant Philfire, for its part, filed a motion to dismiss16 on the ground that it had no contractual obligation to the private respondent; hence, the latter had no cause of action against it. The trial court deferred the resolution of the said motion17 until

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the grounds appeared to be indubitable. In its answer,18 Philfire alleged that there was no privity of contract between it and the private respondent, considering that the petitioner was the insured party. Furthermore, the private respondent had no insurable interest in the goods that were burned in the petitioner’s warehouse. Finally, Philfire alleged that the obligation sought to be enforced by the private respondent had already been settled when it paid its obligation under the insurance policy19 as shown in the "Release of Claim and Hold Harmless Undertaking" dated October 28, 1991, executed and signed for and in behalf of the petitioner by its Vice- President, Mr. Cesar D. Catalan.

The private respondent filed its pre-trial brief proposing that the following issues to be litigated by the parties and resolved by the Court:

1. Corporate personality of the plaintiff;

2. Value of plaintiff’s goods stored in R.V. Marzan’s warehouse and which were destroyed by fire;

3. Whether or not at the time of the fire on July 26, 1990. plaintiff’s goods were already "abandoned goods" so that the plaintiff, at the time of the fire, was no longer the owner of the said goods.

4. Attorney’s fees and damages;20

However, the trial court did not issue a pre-trial order.

During the trial, the petitioner presented Atty. Leonardo S. Doctor, the Law Division Chief of the Bureau of Customs, as one of its witnesses to prove that the cargo had already been declared by the District Collector of Customs as "abandoned cargo" in Abandonment Proceedings No. 288-89, and that the cargo was destroyed by fire before it could be sold at public auction.

Thereafter, the private respondent filed its memorandum stating, inter alia, that it did not abandon the goods because it did not receive the notice of abandonment of the cargo from the Bureau of Customs. The petitioner insisted that upon the abandonment of the cargo under Section 1802 of the Tariff and Customs Code of the Philippines (TCCP), it became, ipso facto, the property of the government; hence, the private respondent had no right to claim the value of the shipment.

After trial, the court rendered judgment, the decretal portion of which reads:

WHEREFORE, foregoing premises considered, defendant RV Marzan is held solely liable for the loss suffered by the plaintiff and is hereby ordered to pay the plaintiff the following:

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1. The sum of US$32,006.93 or its peso equivalent computed on the rate of exchange prevailing at the time of payment with 6% interest thereon from the time of filing of complaint up to the time of actual payment;

2. The sum of P30,000.00 as and for attorney’s fees; and

3. Costs of suit.

The complaint against Philfire, the counterclaim against Shiela’s and the cross-claim against R.V. Marzan, are hereby dismissed.21

According to the trial court, the Bureau of Customs’ subsequent declaration that the subject shipment was "abandoned cargo" was ineffective, as the private respondent was not sent a copy of the September 29, 1989 Notice as required by Sec. 1801 of the Tariff and Customs Code. Under the law, notice of the proceedings of abandonment should be given to the private respondent as the consignee or its agent, to enable it to adduce evidence at a public hearing, conformably to the requirement of due process. Since the private respondent was never notified of the abandonment proceedings, it cannot, thus, be said that it impliedly abandoned the shipment and lost its ownership over the same in favor of the government.

The trial court rejected the petitioner’s claim that it could not be held liable for the private respondent’s loss because the fire that destroyed the subject cargo was an "act of God." According to the trial court, this is precisely one of the reasons why a bonded warehouse is required by law to insure the goods received and stored against fire; otherwise, persons dealing with a bonded warehouse would not be afforded due protection. According to the court, the policy procured by the petitioner inures equally and proportionately to the benefit of all the owners of the property insured, even if the owner of the goods did not request or know of the insurance. Citing Section 1902 of the Tariff and Customs Code, the trial court pointed out that the petitioner’s bonded warehouse is considered as an extension of the Bureau of Customs only insofar as it continues with the storage and safekeeping of goods transferred to it by the latter.

Finally, the trial court ruled that the private respondent had no cause of action against the insurer Philfire, as it was not a party to the insurance contract between the petitioner and Philfire. Since the terms of the insurance contract do not confer a benefit upon a third person as required by Article 1311 of the Civil Code, the private respondent had no right to the insurance proceeds.

The petitioner appealed the decision to the Court of Appeals, docketed as CA-G.R. CV No. 49905, and assigned the following errors:

I – THE TRIAL COURT ERRED IN NOT DISMISSING THE COMPLAINT FOR LACK OF A VALID CAUSE OF ACTION AND IN HOLDING THE DEFENDANT MARZAN LIABLE FOR THE LOSS SUFFERED BY PLAINTIFF IN SPITE OF THE FACT THAT, LONG BEFORE THE

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FIRE OF JULY 26, 1990, WHICH GUTTED DEFENDANT’S WAREHOUSE, THE PLAINTIFF’S SHIPMENT HAS ALREADY BEEN DECLARED ABANDONED BY FINAL ORDER OF THE BUREAU OF CUSTOMS.

II – THE TRIAL COURT ERRED IN AWARDING ATTORNEY’S FEE[S] OF P30,000.00.22

The petitioner asserted that the private respondent renounced its interests over the cargo by its continued failure and refusal, despite notice to it, to claim the cargo and pay the corresponding duties and taxes. It disclaimed liability on the following grounds:

1. That contrary to the plaintiff’s submission, it was not exempt from the payment of customs duties and taxes and hence, required to file entry within five (5) days from arrival of the shipment as provided for under 1801 of the Tariff and Customs Code…;

2. The subject shipment was declared abandoned by the Bureau of Customs due to the failure of the plaintiff-consignee to claim the same within the 15-day reglementary period from the date of posting of the notice to claim as provided in Section 1801(b) of Republic Act No. 7651; and,

3. The abandonment of the cargo was already declared final as of October 30, 1989 in the abandonment proceedings conducted by the Bureau of Customs, and, hence the plaintiff’s shipment ipso facto became the property of the government pursuant to Section 1802 of the same Act.

4. It was only on January 6, 1992, that plaintiff filed the present complaint against the defendant or more than two years after the declaration of abandonment of subject shipment became final and executory.23

Anent the award of attorney’s fees in favor of the private respondent, the petitioner averred that, as there was no finding of malice or bad faith in its refusal to pay the private respondent, there was no factual basis for the award.

In its brief, the private respondent contended that, as found by the trial court, there was no valid and effective abandonment over the subject goods. It was also pointed out that if the petitioner’s claim that the subject goods belonging to the private respondent had been declared abandoned cargo and the same had become government property, then the government, through the Bureau of Customs, should have intervened in the case, considering the private respondent’s vigorous stance in denying it had ever abandoned its goods. Despite the fact that the Bureau of Customs was clearly apprised of the case when the petitioner presented Atty. Doctor as its witness, there was no such attempt from the government to intervene and claim ownership over the cargo. The private respondent also pointed out that the petitioner’s refusal to satisfy a valid, just and demandable claim had compelled it to litigate and incur expenses to protect its interest. The petitioner’s refusal to

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satisfy the private respondent’s claim was in furtherance of an intention to unjustly enrich itself, and was evidence of the latter’s gross and evident bad faith.

The Court of Appeals upheld the trial court’s ruling in its Decision dated January 31, 1997. The appellate court held that the District Collector of Customs failed to give due notice of the abandonment proceedings to the private respondent, and that the same constituted denial of due process of law. Although notice of the declaration of abandonment was posted on the Bureau of Customs bulletin board, the same was insufficient; such notice would be proper only in cases where the owner or importer is unknown, pursuant to Section 2304 of the Tariff and Customs Code. The appellate court averred that the private respondent is duly registered with the Garment and Textile Export Board and with the Bureau of Customs as Garments Manufacturer and Exporter; as such, the Bureau of Customs knew or should have known the address of the private respondent and should have sent the required notice to it at said address. For the Collector of Customs’ failure to duly notify the private respondent, the goods in question cannot be considered as impliedly abandoned cargo.

The decretal portion of the decision of the Court of Appeals reads, thus:

WHEREFORE, the appealed decision in Civil Case No. 61644 is hereby AFFIRMED by this Court, with costs against defendant-appellant.24

The petitioner assails the decision of the Court of Appeals contending that:

I

The Court of Appeals erred in failing to consider the fact that the Regional Trial Court did not have jurisdiction over the central issue of the case.

II

The Court of Appeals erred in not dismissing the Respondent’s Complaint outright for lack of cause of action.25

The petitioner asserts that the private respondent had a cause of action against it for the value of the shipment only if the latter was still the owner of the shipment when it was gutted by fire on July 26, 1990. The ultimate issues were as follows: whether the private respondent had impliedly abandoned the cargo and whether the declaration of abandonment made by the Chief of the Law Division of the Bureau of Customs in the abandonment proceedings had become final and executory. However, according to the petitioner, the resolution of such issues is within the exclusive jurisdiction of the District Collector of Customs, and within the appellate jurisdiction of the Court of Tax Appeals. Thus, the RTC had no jurisdiction to delve into and resolve the issue of whether or not the private respondent was duly served with a copy of the notice of the abandonment proceedings and to pass

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upon the validity of the abandonment proceedings itself. The petitioner asserts that the Bureau of Customs has exclusive and original jurisdiction to hear and decide cases concerning the implementation of Customs Laws or any other law that the Bureau is charged to implement. Even if there was a violation of due process in the seizure and forfeiture case, the Bureau retained jurisdiction over the same, to the exclusion of the regular courts. According to the petitioner, it behooved the RTC to dismiss the complaint of the private respondent for lack of jurisdiction, without prejudice to the latter’s right to appeal the notice of abandonment to the Commissioner of Customs, and, from an adverse ruling of the Commissioner of Customs, to the Court of Tax Appeals.

In its Comment, the private respondent avers that the petitioner raised for the first time only in this Court the issue of the trial court’s jurisdiction, as well as the matter of its failure to appeal from the declaration of abandonment of the District Collector of Customs with the Commissioner of Customs. The private respondent never raised the issue in its pleading in the RTC and in the CA. Thus, the petitioner is barred by laches from raising such issue in this case. The private respondent asserts that the petitioner’s motive is clearly to assail the factual findings of the trial court as affirmed by the CA and introduce new matters in the case. According to the private respondent, this runs counter to established jurisprudence that the Supreme Court is not a trier of facts.

The private respondent also asserts that the RTC did not pass upon the validity or invalidity of the administrative proceedings before the Collector of Customs, but merely applied the law, particularly the last sentence of Sec. 1801 of the Tariff and Customs Code. Contrary to the private respondent’s contention, the trial court had jurisdiction over its action. As admitted by the petitioner’s witness, Atty. Leonardo Doctor, the private respondent was not furnished a notice giving it fifteen days to file the appropriate import entry documents. Hence, the private respondent was not deemed to have abandoned the cargo. The private respondent also posits that considering that actions of the Collector of Customs are reviewable to the Court of Tax Appeals, which are, in turn, ultimately reviewable by the Court of Appeals, the latter court, to which the petitioner’s appeal had eventually found its way, would therefore be fully competent to pass upon the validity of the abandonment proceedings. Furthermore, according to the private respondent, an appeal of the abandonment proceedings before the District Collector of Customs would be a futile exercise as the goods had already been burned and destroyed. The private respondent further posits that if, indeed, the goods had been abandoned by the private respondent and became the property of the government, as averred by the petitioner, the Bureau of Customs should have intervened in the case, pursuant to Sec. 1, Rule 19 of the 1997 Rules of Civil Procedure. The fact that the government did not intervene gives rise to doubts as to the petitioner’s claim that the subject goods had been declared abandoned by the Bureau of Customs and, thus, became the property of the government. Finally, the private respondent argued, the Bureau

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of Customs lost jurisdiction over the cargo when it was gutted by fire before the sale at public auction.

In its reply, the petitioner insists that the defense of lack of jurisdiction may be interposed at any time, during appeal or even after final judgment, conformably to the previous rulings of the Court.

THE ISSUE

The core issue raised by the petitioner for resolution in this case is whether or not the trial court had jurisdiction to review and declare ineffective the declaration of the District Collector of Customs in Abandonment Proceedings No. 288-89 that the subject shipment was abandoned cargo and that, thenceforth, the government ipso facto became the owner thereof.

We uphold the contention of the petitioner. Irrefragably, the RTC had jurisdiction over the nature of the private respondent’s action, which was one for the collection of the value of the cargo gutted by fire, while under the custody and control of the petitioner preparatory to its sale at public auction by the Bureau of Customs. The jurisdiction of the court or other tribunal is determined by the relevant allegations of the complaint and the character of the relief sought, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims accorded therein. The jurisdiction of the trial court does not depend upon the defenses in the answer or in a motion to dismiss.26 However, the jurisdiction of the court or tribunal over the issues, as gleaned from the pleadings of the parties, is determined by the law which is determinative and decisive of said issue.

As gleaned from the pleadings of the parties in the trial court, the core issue therein was whether or not the private respondent was the owner of the cargo when it was gutted by fire, as claimed by the private respondent, or owned by the government after it was declared by the District Collector of Customs as abandoned cargo, as claimed by the petitioner. Indeed, the private respondent, in its pre-trial brief, listed this as one of the issues to be resolved by the Court, thus:

…

1. Whether or not at the time of the fire on July 26, 1990. plaintiff’s goods were already "abandoned goods" so that the plaintiff, at the time of the fire, was no longer the owner of said goods."27

If the government owned the cargo before it was gutted by fire, then the private respondent had no cause of action against the petitioner. But the resolution of the issue is riveted to and intertwined with the resolution of the issue of whether the RTC is vested with jurisdiction to review and nullify a declaration made by the District Collector of Customs that the shipment was abandoned cargo and, thus, ipso facto belonged to the government. The resolution of both issues involved the

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application of Section 1801 and Section 1802 of the Tariff and Customs Code, which read:

SEC. 1801. Abandonment, Kinds and Effects of. – Abandonment is expressed when it is made direct to the Collector by the interested party in writing, and is implied when, from the action or omission of the interested party to file the import entry within five (5) days or an extension thereof from the discharge of the vessel or aircraft, or having filed such entry, the interested party fails to claim his importation within five (5) days thereafter or within an extension of not more than five (5) days shall be deemed an implied abandonment. An implied abandonment shall not be effective until the article shall be declared by the Collector to have been abandoned after notice thereof is given to the interested party as in seizure cases.

Any person who abandons an article or who fails to claim his importation as provided for in the preceding paragraph shall be deemed to have renounced all his interests and property rights therein.

SEC. 1802. Abandonment of Imported Articles.- The owner or importer of any articles may, within ten days after filing of the import entry, abandon to the Government all or a part of the articles included in an invoice, and, thereupon, he shall be relieved from the payment of duties, taxes and all other charges and expenses due thereon: Provided, That the portion so abandoned is not less than ten per cent of the total invoice and is not less than one package, except in cases of articles imported for personal or family use. The articles so abandoned shall be delivered by the owner or importer at such place within the port of arrival as the Collector shall designate, and upon his failure to so comply, the owner or importer shall be liable for all expenses that may be incurred in connection with the disposition of the articles.

…

Nothing in this section shall be construed as relieving such owner or importer from any criminal liability which may arise from any violation of law committed in connection with the importation of the abandoned article.

The resolution of the issue also calls for the application of Section 2601 of the said Code which provides that the property in customs’ custody, including abandoned articles, shall be subject to sale under the conditions provided therein. Indeed, the trial court resolved the issues under Section 1801 of the Tariff and Customs Code and found the petitioner liable to the private respondent, under Section 190228 of the said Code.

The trial court held ineffective the declaration made by the District Collector of Customs that the cargo was abandoned because the notice to the consignee as mandated by Section 1801 of the Code was not complied with. Thus, according to

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the trial court, the private respondent owned the cargo and had a cause of action against the petitioner:

In trying to avoid liability, RV Marzan admits that the plaintiff was the consignee of the cargo upon its arrival in the Philippines. However, RV Marzan avers that at the time of the fire, the goods were already the property of the government. Before the fire, RV Marzan received the cargo from the Bureau of Customs pursuant to a Memorandum Order declaring it as "abandoned cargo." This Memorandum Order which is in accordance with Sec. 1801 of the Tariff and Customs Code, provides as follows:

…

An examination of the records reveal that the subject shipment was subsequently declared abandoned by the Bureau of Customs as "abandoned cargo" for the plaintiff’s failure to file the import entry.

This declaration is found by the Court to be ineffective. Under the law, notice of the proceedings of abandonment was not given to the consignee or the plaintiff herein or his agent. The consignee in this case being known, should have been notified of the abandonment of his property in favor of the government and that he should have been given a chance at a public hearing to present evidence and to be heard with respect to the cargo subject of abandonment. This is part of due process.29

Evidently, the resolution of the foregoing issues is within the exclusive competence of the District Collector of Customs, the Commissioner of Customs and within the appellate jurisdiction of the Court of Tax Appeals. Indeed, in Alemar’s, Inc. v. Court of Appeals,30 we held that:

Petitioner primarily seeks the annulment of the act of the Collector of Customs declaring the subject importation abandoned and ordering it sold at public auction, claiming that the abandonment proceeding held by the Collector of Customs was irregular since the latter did not give notice to petitioner of the abandonment before declaring the importation abandoned.

Consequently, the case falls within the jurisdiction of the Commissioner of Customs and the Court of Tax Appeals vis-à-vis the averments in the amended petition, not with the regional trial court.

In Jao v. Court of Appeals,31 we held that the RTC is devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs, and to enjoin or otherwise interfere with the said proceedings even if the seizure was illegal. Such act does not deprive the Bureau of Customs of jurisdiction thereon. Thus, we held:

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There is no question that Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus.

It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act No. 1125, as amended, otherwise known as "An Act Creating the Court of Tax Appeals," specify the proper fora and procedure for the ventilation of any legal objections or issues raised concerning these proceedings. Thus, actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court of Appeals.

The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the government’s drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform.

Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have said that such act does not deprive the Bureau of Customs of jurisdiction thereon.

"Respondents assert that respondent Judge could entertain the replevin suit as the seizure is illegal, allegedly because the warrant issued is invalid and the seizing officer likewise was devoid of authority. This is to lose sight of the distinction between the existence of the power and the regularity of the proceeding taken under it. The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction. It does not mean, however, that correspondingly a court of first instance is vested with competence when clearly in the light of the decisions the law has not seen fit to do so."

The allegations of petitioners regarding the propriety of the seizure should properly be ventilated before the Collector of Customs. We have had occasion to declare:

"The Collector of Customs when sitting in forfeiture proceedings constitutes a tribunal expressly vested by law with jurisdiction to hear and determine the subject

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matter of such proceedings without any interference from the Court of First Instance (Auyong Hian v. Court of Tax Appeals, et al., 19 SCRA 10). The Collector of Customs of Sual-Dagupan in Seizure Identification No. 14-F-72 constituted itself as a tribunal to hear and determine among other things, the question of whether or not the M/V Lucky Star I was seized within the territorial waters of the Philippines. If the private respondents believe that the seizure was made outside the territorial jurisdiction of the Philippines, it should raise the same as a defense before the Collector of Customs and if not satisfied, follow the correct appellate procedures. A separate action before the Court of First Instance is not the remedy."

The trial court was incompetent to pass upon and nullify (1) the seizure of the cargo in the abandonment proceedings, and (2) the declaration made by the District Collector of Customs that the cargo was abandoned and ipso facto owned by the government. It, likewise, had no jurisdiction to resolve the issue of whether or not the private respondent was the owner of the cargo before it was gutted by fire. The trial court should have rendered judgment dismissing the complaint, without prejudice to the right of the private respondent to ventilate the issue before the Commissioner of Customs and/or to the Court of Tax Appeals as provided for in the Tariff and Customs Code.

The District Collector of Customs did not lose jurisdiction over the abandonment proceedings. The loss of the cargo did not extinguish his incipient jurisdiction in the said proceedings, nor render functus officio her declaration that the subject shipment had been abandoned.

The private respondent cannot argue that if its complaint against the petitioner is dismissed, the latter would be enriching itself at the expense of the private respondent. In point of fact, the petitioner is liable to the government for the duties and taxes due for the imported cargo under Section 1902 of the Tariff and Customs Code, which reads:

SEC. 1902. Responsibility of Operators. – The operators of bonded warehouse in case of loss of the imported articles stored shall be liable for the payment of duties and taxes due thereon.

The government assumes no legal responsibility in (sic) respect to the safekeeping of articles stored in any customs warehouses, sheds, yards or premises.

Neither may the private respondent invoke estoppel, because the parties, in their pleadings in the trial court and in the Court of Appeals, raised the same issues for resolution.

It must be stressed that the cargo arrived in the Philippines on April 12, 1989. The private respondent failed to accomplish the required import entry declarations, pay the requisite taxes and duties, if any, and take delivery of the cargo. It was only

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after the lapse of more than two years, or on December 21, 1991, that the private respondent filed its complaint against the petitioner in the RTC. By then, the cargo had been gutted by fire. The private respondent has not made any valid justification for its silence thereon and its inaction. In can be said then that the private respondent went to court with unclean hands.

The refusal of the Bureau of Customs to intervene in the trial court does not, in any way, fortify the private respondent’s claim that it is the owner of the cargo. The government had no legal obligation to intervene in the trial court considering that the latter had no jurisdiction over the complaint. It was enough that then Bureau of Customs Law Division Chief Atty. Doctor testified that the cargo was duly declared by the District Collector of Customs as abandoned property, that the said declaration had become final, and that the government became ipso facto the owner of the cargo. The government had every right to expect that the trial court would dismiss the complaint for lack of jurisdiction over the issue raised therein.

IN THE LIGHT OF THE FOREGOING, the petition is GRANTED. The Decisions of the RTC and of the Court of Appeals are SET ASIDE and REVERSED. The RTC is ORDERED to dismiss the complaint of the private respondent against the petitioner, as well as the counterclaim of the latter against the private respondent.

SO ORDERED.

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Obligations and Contracts

Documents

Transcript of Obligations and Contracts