CASES TO READ:

1) FIRST DIVISION[G.R. No. 55372. May 31, 1989.]LETTY HAHN, petitioner, vs. COURT OF APPEALS, JOSIE M. SANTOS and FRANCISCO SANTOS, respondents.Raymundo A. Armovit for petitioner.Mary Concepcion Bautista for respondents.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS; EXTINGUISHMENT OF OBLIGATIONS; UPWARD ADJUSTMENT OF ORIGINAL AMOUNT DUE, ERRONEOUS; FLOATING RATE JUSTIFIED BY EXTRAORDINARY INFLATION. — We agree with the respondent court that (upward) adjustment (of the original amount due) was erroneous for, as explained by Justice Serafin M. Cuevas: We, however, find the contention of appellant under her fifth assignment of error — that the lower court erred in applying the floating rate to the purely peso transaction — to be meritorious. In this regard, Article 1250 of the Civil Code provides — In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation should be the basis of payment, unless there is an agreement to the contrary. By extraordinary inflation or deflation of currency is understood to be any uncommon decrease or increase in the purchasing power of currency which the parties could not have reasonably foreseen and which has been due to war and the effects thereof, or any unusual force majeure or fortuitous event. (Civil Code of the Philippines, Dean Capistrano, Vol. III, p. 186.)2. ID.; ID.; ID.; DEBTOR OF A THING CANNOT COMPEL CREDITOR TO RECEIVE A DIFFERENT ONE. — As for the private respondent's offer to return the solitaire ring, which was also refused, the pertinent rule is Article 1244, providing that "the debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due." More so then in the case at bar if, as averred by the petitioner, the ring offered was less valuable than the one that was due.3. ID.; DAMAGES; MORAL AND EXEMPLARY DAMAGES; RESTORED IN LIGHT OF DEFENDANT'S DUBIOUS CONDUCT. — We cannot sustain the respondent court, however, on the moral and exemplary damages which it disallowed on the ground that "there was no clear showing of malice and bad faith on the part of the defendant." The Court thinks otherwise. We hold that the moral and exemplary damages should be restored in light of her dubious conduct as recounted in the petitioner's brief and the following findings of the trial court which we have no reason to disturb: The Court cannot but take note of the relative ease with which Josie M. Santos says one thing at one given time and another altogether different

version subsequently afterwards, even if the statements are both under the sanction of an oath. This seeming lack of scruples and conscientiousness on her part do not place her in a favorable light under the painstaking scrutiny of the Court. There is so much deviousness and complexity in her testimony that does not invite the confidence of the Court.

D E C I S I O NCRUZ, J p:It is said that diamonds are a girl's best friend, but private respondent Josie M. Santos may have her doubts about this. The fact is that they have caused her not a little difficulty, and her troubles are not yet over. This case was decided against her by the trial court and later by the respondent court which, however, mitigated the judgment of the former. The petitioner does not like this and wants the earlier decision reinstated. That is why she is now before this Court.The basic facts as determined by the trial court 1 and affirmed by the respondent court 2 are no longer in issue. It has been established that Santos received two diamond rings with a total value of P47,000.00 in 1966 from the petitioner. She issued separate receipts therefor in which she acknowledged that they had been delivered by Letty Hahn to her for sale on commission and that they would be returned upon demand if unsold. 3 The rings were not sold nor were they returned when demanded by Hahn.Hahn sued for recovery of the rings or their value. While the civil case was pending, she also filed a criminal action for estafa against Santos. Santos was acquitted on reasonable doubt. 4 In the civil action, however, where she also pleaded that the contracts between her and Hahn were not of agency but of sale, Santos did not fare as well.The trial court ordered her to return the two rings or pay the plaintiff their value, which was increased to P65,000.00, with legal interest, plus P10,000 moral damages, P5,000 exemplary damages, and P6,000.00 attorney's fees. 5 The increase on the original value of the rings was based on Article 1250 of the Civil Code calling for an adjustment of the payment due in case of extraordinary inflation or deflation. The moral and exemplary damages were imposed because of the defendant's "seeming lack of scruples and conscientiousness."On appeal, this decision was modified. The Court of Appeals found that Article 1250 was not applicable and that the appellant had not acted in bad faith or with malice. Accordingly, it rendered judgment:A. Ordering the defendants to return to the plaintiff the two rings in question; to pay plaintiff legal interest on the value of the ring, P47,000.00, from the time of the filing of the complaint until restitution in made; and attorney's fees in the amount of P6,000.00.B. Sentencing the defendants, in case return of the rings is no longer feasible, to pay to the plaintiff the value thereof, which is P47,000.00, with interest at the legal rate from the time of the filing of the complaint until full payment and P6,000.00 attorney's fees. 6

In challenging this decision, the petitioner contends that the respondent erred in not allowing an upward adjustment of the original price of the two rings and in disallowing the moral and exemplary damages granted by the trial court. These are the issues in this petition.On the first question, the petitioner cites Central Bank figures to show that the amount of P47,000.00 in 1966, when the obligation to return it or the rings fell due, was equivalent to about P235,000.00 in 1980 (and necessarily to an even higher amount now in view of the continued reduction in the purchasing power of the peso). As the increase ordered by the trial court (to P65,000.00 on August 7, 1971) was a finding of fact based on official figures, the Court of Appeals was not justified in reversing the same. LLprThe petitioner also argues that the award of moral and exemplary damages by the trial court was entirely justified and should not have been disallowed by the respondent court. The reason is that there was sufficient showing that the private respondent had acted with malice and in bad faith toward the petitioner who had trusted her.Thus, Santos misrepresented her agreements with the petitioner as contracts of sale when the very language of the receipts she herself had written and signed clearly shows that she was receiving the rings in trust from the petitioner, as later found in both the criminal and civil cases. 7 Second, she claimed she had made installment payments directly and personally to the petitioner during the period from August 14 to November 20, 1966, and when this lie was exposed with evidence that the petitioner was abroad during that period, changed her testimony to make it appear that the alleged payments had been made when Hahn was in the country. 8 In fact, the finding of the trial court as sustained by the respondent court was that she had made no payment at all at any time. 9 Third, when Santos offered to return the solitaire ring to the petitioner, the latter readily saw that it was not the same ring she had entrusted to the private respondent, who evidently wanted to foist another deception upon her. 10 For her part, the private respondent dismisses the claim for upward adjustment of the amount due and says Article 1250 of the Civil Code is not applicable, there being no inflation or deflation. The Central Bank statistics Hahn invokes are hearsay and immaterial. Not in point either is the case of Zulueta v. PanAmerican World Airways, 11 as cited by the petitioner, where the issue of inflation was not even raised. Moreover, the delay in the payment of the amount due was imputable not to her but to the petitioner, who had unreasonably prevented her from discharging her obligation.As early as December of 1966, she says she had offered to return the marquisette ring to the petitioner but the petitioner's lawyer, acting on her instructions, refused to accept it and demanded the return also of the P35,000.00 solitaire ring. 12 She offered to pay for this other ring on installment but this offer was also rejected. 13 At the trial of the criminal case against her, she brought the solitaire ring to prove that she had not disposed of it, but the petitioner denied it was the ring she had delivered to the accused. 14 Still later, she offered to pay for both rings on installment, but

the offer was also rejected without reason by the petitioner. 15 In sum, it is the petitioner who has delayed payment of the amount due and not the private respondent, who was ready to settle her obligation.The trial court cited no legal basis for the upward adjustment of the original amount due although the reason was presumably Article 1250 of the Civil Code. We agree with the respondent court that such adjustment was erroneous for, as explained by Justice Serafin M. Cuevas (later a member of this Court):We, however, find the contention of appellant under her fifth assignment of error — that the lower court erred in applying the floating rate to the purely peso transaction — to be meritorious.In this regard, Article 1250 of the Civil Code provides —In case an extraordinary inflation or deflation of the currency stipulated should supervene, the value of the currency at the time of the establishment of the obligation should be the basis of payment, unless there is an agreement to the contrary. cdllBy extraordinary inflation or deflation of currency is understood to be any uncommon decrease or increase in the purchasing power of currency which the parties could not have reasonably foreseen and which has been due to war and the effects thereof, or any unusual force majeure or fortuitous event. (Civil Code of the Philippines, Dean Capistrano, Vol. III, p. 186.)Under the circumstances, we do not find any legal justification in applying the so-called "floating rate," since there has been no "extraordinary inflation" of currency within the meaning of the aforequoted Art. 1250 of the Civil Code. 16 The Court holds that, in determining the accountability of the private respondent, the trial judge should have applied the following provisions of the Civil Code, as the respondent court apparently did:Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.Art. 2210. Interest may, in the discretion of the court, be allowed upon damages awarded for breach of contract.Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.The Court notes, however, that the respondent court should also have imposed interest on the interest due on the principal amount of P47,000.00, conformably to Article 2212. The interest due started to earn interest from the date it was judicially demanded with the filing of the complaint on January 6, 1967. prcdAs to the delay in the performance of the private respondent's obligation, our ruling is that it was caused by the private respondent herself and not the petitioner who had the right to demand performance in full of the former's obligation she had assumed under their written agreement.

The receipts composed and signed by Santos, which were offered as Exhibits A and B, read as follows:June 2, 1966Received from Mrs. Letty Hahn 1 ring marquise dia, worth P12,000 to be sold on commission or to be return upon demand.Josie M. Santos266 A. del MundoGrace ParkTel. No. 3-57-87June 7, 1966Received from Mrs. Letty Hahn 1 ring solo diamond worth P35,000 to be sold on commission basis or to be return upon demand.Josie M. Santos266 A. del MundoGrace ParkTels. 2-28-21 & 2-57-87From the moment demand was made upon Santos and she did not or could not comply, she has already incurred in delay. The meaning of the receipts is unmistakable. Her contention that it was the private respondent who had prevented her from fulfilling her obligation is simply untenable and unacceptable.There is no doubt that the petitioner could validly reject the private respondent's offer to pay for the rings on installment because Hahn was entitled to payment in full. If such payment could not be made, Santos was obligated to return both of the rings — and not one or the other only at her option — "upon demand," under the separate receipts she had signed. According to Article 1233 of the Civil Code, "a debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered as the case may be."As for the private respondent's offer to return the solitaire ring, which was also refused, the pertinent rule is Article 1244, providing that "the debtor of a thing cannot compel the creditor to receive a different one, although the latter may be of the same value as, or more valuable than that which is due." More so then in the case at bar if, as averred by the petitioner, the ring offered was less valuable than the one that was due. 17 We cannot sustain the respondent court, however, on the moral and exemplary damages which it disallowed on the ground that "there was no clear showing of malice and bad faith on the part of the defendant." The Court thinks otherwise. We hold that the moral and exemplary damages should be restored in light of her dubious conduct as recounted in the petitioner's brief and the following findings of the trial court which we have no reason to disturb: cdllThe Court cannot but take note of the relative ease with which Josie M. Santos says one thing at one given time and another altogether different version subsequently afterwards, even if the statements are both under the sanction of an oath. This seeming lack of scruples and conscientiousness on

her part do not place her in a favorable light under the painstaking scrutiny of the Court. There is so much deviousness and complexity in her testimony that does not invite the confidence of the Court. 18 WHEREFORE, the petition is partly GRANTED. The decision of the respondent court dated August 29, 1980, is MODIFIED as follows: a) the award of moral damages in the sum of P10,000.00 and exemplary damages in the sum of P5,000.00 is added to the other amounts to be paid by the private respondent to the petitioner in accordance with the said decision; and b) interest on the principal amount of P47,000.00 shall earn interest, also at the legal rate, from January 6, 1967, and until full payment is made. Costs against the private respondent.SO ORDERED.Narvasa, Gancayco and Medialdea, JJ., concur.Griño-Aquino, J., took no part.

2) EN BANC[G.R. No. L-23191. December 19, 1967.]GERONIMO G, ESGUERRA and CRISTINA G ESGUERRA, petitioners-appellants, vs. THE HON. FELIPE M. VILLANUEVA, Municipal Judge of Dagupan City, THE PROVINCIAL SHERIFF OF PANGASINAN, ISIDRO DE GUZMAN and SEGUNDA DE GUZMAN, respondents-appellees.Leopoldo Africa for petitioners-appellants.Alejo de Guzman and Manuel D. Ancheta for respondents-appellees.SYLLABUS1. OBLIGATION, EXTINGUISHMENT OF; ARTICLE 1235 CONSTRUED. — The verb "accept," as used in article 1235, means to take as "satisfactory or sufficient," or to "give assent" or to "agree" or "accede" to an incomplete or irregular performance. The circumstances obtaining in the case at bar clearly show that Esguerra had neither acceded or assented to the payment made by the debtor, nor taken the same as satisfactory or sufficient compliance with the judgment rendered. The law does not require the protest or objection of the creditor to be made in a particular manner or at a particular time so long as the acts of the creditor at the time of the incomplete or irregular payment of the debtor or within a reasonable time thereafter evince that the former is not satisfied with or agreeable to said payment or performance. The obligation in this case is deemed not extinguished.2. OBLIGATION, PAYMENT OF; PAYMENT MADE NOT DEEMED ACCEPTED AS FULL PERFORMANCE. — The creditors for receiving the payment of P800.00 and P1,400 patently manifested their dissatisfaction with the said payment which are necessarily implied objection or protest to — said partial payment, and leave no room for doubt that the creditors have never received the partial payments as satisfactory compliance with the latter's obligation under the compromise agreement. Hence the receipt of said amount do not constitute an acceptance of the incomplete and irregular performance of respondents obligation under the judgment by compromise.

D E C I S I O NCONCEPCION, C.J p:Direct appeal, on questions purely of law, from a decision of the Court of First Instance of Pangasinan dismissing petitioner's complaint.On July 13, 1961, petitioner Geronimo G. Esguerra — hereinafter referred to as Esguerra — and respondent Isidro de Guzman — hereinafter referred to as De Guzman — the latter acting in his own behalf and in that of a corporation (Institute of Electronics) he then intended to organize — which eventually was not organized — entered into a contract whereby Esguerra leased to De Guzman a portion of the Esguerra-Gueco building, belonging to Esguerra and his wife, Cristina Gueco — hereinafter referred to collectively as the Esguerras — and located at Torres Bugallon Street, Dagupan City, for a term of ten (10) years, beginning from July 12, 1961, at a monthly rental of P300.00, up to July 11, 1962, and P400.00 thereafter payable in advance within the first 10 days of each month. Inasmuch as De Guzman had failed to pay the rental from February to August, 1962, aggregating P1,800.00, in addition to the sum of P300.00, representing the balance of the purchase price of equipment bought by him from the Esguerras, on August 6, 1962, respondent's mother, Segunda de Guzman — hereinafter referred to as Mrs. De Guzman — executed, in favor of the Esguerras, a promissory note for P2,100.00, payable as follows: P1,000.00, not later than August 12, 1962, and the balance of P1,100.00 not later than August 31, 1962. The promissory note further stipulated that:"If the first payment of P1,000.00 as stated above is not paid on the date it falls due, August 12, 1962, this note or the entire value thereof becomes immediately due and demandable."None of the aforementioned payments having been made when due, the Esguerras commenced, on September 11, 1962, Civil Case No. 1074 of the Municipal Court of Dagupan City, against Mrs. De Guzman, for the collection of said sum of P2,100.00, with interest thereon from August 6, 1962, plus interest, at the legal rate, on the aggregate amount due on September 11, 1962, and P520.00 as and for attorney's fees and expenses of litigation. Three (3) days later, Esguerra instituted Civil Case No. 1075 of the same court, against De Guzman, to recover:"(a) The sum of P160.00 representing the unpaid rentals in arrears for the period from July 12, 1962 to August 12, 1962, with interest thereon at the legal rate from and after August 17, 1962, the date of the formal demand;"(b) The amount of P400.00 monthly rental from and after August 12, 1962, until defendant finally vacates the leased premises;"(c) The sum of P2,000.00, as liquidated damages, as stipulated in the lease agreement Annex 'A' and its corresponding interest, at the legal rate, from the filing of this complaint;"(d) The sum of P400.00, as and for attorney's fees."On the same date, writs of attachment were issued in the two cases. Soon thereafter, or on October 22, 1962, the parties therein reached a compromise agreement to the effect that:

"1. That both defendants in the above-entitled cases admit, jointly and severally, liability to plaintiffs in the amount of TWO THOUSAND TWO HUNDRED AND SIXTY PESOS (P2,260.00) which they promise to pay on or before November 26, 1962;"2. That should defendants fail to perform their respective undertakings in the first two foregoing paragraphs hereof:"(a) Defendant Segunda D. de Guzman agrees and urges the Honorable Court to render judgment immediately against her for the total amount claimed by plaintiffs-spouses in Civil Case No. 1074 now pending before this court;"(b) Defendant Isidro de Guzman agrees and urges the Honorable Court to immediately cause the promulgation of judgment against him for all the amounts claimed by the plaintiff, Geronimo G. Esguerra, in his complaint in Civil Case No. 1075;"(c) That upon failure of any or both of defendants herein to perform their respective undertakings under this compromise agreement, they agree and urge the Honorable Court to cause immediate execution of the judgment against them upon their respective properties which have been attached under process in connection with the proceedings in the above-mentioned civil cases;" (Exh. "E," pp. 38-39, Record on Appeal).This compromise agreement was approved by Judge Felipe M. Villanueva, of the aforementioned municipal court, in a judgment dated November 27, 1962 the dispositive part of which reads:"WHEREFORE, finding the said compromise agreement not to be contrary to moral, public policy and law, the same is hereby approved and judgment is rendered in these two cases accordingly. Also, the parties are hereby enjoined to abide with the terms and conditions of the same compromise agreement."Admittedly, the sum of P2,260.00 was not paid or delivered to the Esguerras on or before November 26, 1962. On motion of the Esguerras, Judge Villanueva issued, therefore, on December 14, 1962, the corresponding writs of execution in cases Nos. 1074 and 1075. Alleging that De Guzman had, through his counsel, delivered to Esguerra P800.00, on December 13, 1962, and P1,460.00, on January 5, 1963, and that the receipt of said sums by the Esguerras, constituted full satisfaction of the aforementioned judgment by compromise, De Guzman and his mother, Mrs. De Guzman — hereinafter referred to as the respondents — filed, on February 4, 1962, a joint motion for the release of the properties seized pursuant to the writs of attachment above referred to. This motion was, on February 11, 1963, granted by Judge Villanueva.A reconsideration of the order to this effect having been denied, on February 23, 1963, the Esguerras instituted, against respondents herein, the provincial sheriff of Pangasinan and Judge Villanueva, on February 28, 1963, the present action for certiorari, prohibition and mandamus, with preliminary injunction, which was docketed as Civil Case No. D-1450, of the Court of First Instance of Pangasinan, to annul the orders of Judge Villanueva of

February 11, and 23, 1963; to restrain Judge Villanueva from enforcing said orders; and to compel him to issue an alias writ of execution for the satisfaction of the unpaid balance of the judgment in said Civil Case Nos. 1074 and 1075. After appropriate proceedings, the Court of First Instance rendered the decision appealed from, dismissing the petition herein. Hence this appeal by the Esguerras.Respondents maintain, and the lower court held, that the "receipt" of said sums of P800.00 and P1,400.00 by the Esguerras constituted "acceptance" of the incomplete and irregular performance of respondents' obligation under the judgment in cases Nos. 1074 and 1075, and that, this "acceptance" having been made without any "protest or objection" on the part of the Esguerras, said obligation must be "deemed fully complied with," pursuant to Article 1235 of the Civil Code of the Philippines.This theory is based upon the premise that "receipt" of a partial payment is necessarily an "acceptance" thereof, within the purview of said provision, and that the Esguerras had not protested or objected to said payment. Such premise is untenable. The verb "accept," as used in Article 1235, means to take as "satisfactory or sufficient," or to "give assent to," or to "agree" or "accede" to an incomplete or irregular performance. The circumstances obtaining in the case at bar clearly show that the Esguerras had neither acceded or assented to said payment, nor taken the same as satisfactory or sufficient compliance with the judgment aforementioned.Indeed, the day immediately following that of the first payment of P800.00, or on December 14, 1962, the Esguerras asked Judge Villanueva to issue the corresponding writs of execution in the two (2) cases. Thus, the Esguerras patently manifested their dissatisfaction with — which necessarily implied an objection or protest to — said partial payment. Moreover, Judge Villanueva must have so understood the reaction of the Esguerras to the same payment, for he was present when it was made, and still he caused the writs to be issued. What is more, the respondents evidently had the same impression, for, otherwise, they would not have paid the additional sum of P1,460.00 on January 5, 1963. Then, again, the insistence of the Esguerras in causing the attached properties of respondents herein to be disposed of, pursuant to the writs of execution, despite said additional payments, leave no room for doubt that the former had never regarded the partial payments as satisfactory compliance with the latter's obligation under said judgment.After all, the law does not require the protest or objection of the creditor to be made in a particular manner or at a particular time. So long as the acts of the creditor, at the time of the incomplete or irregular payment by the debtor, or within a reasonable time thereafter, evince that the former is not satisfied with or agreeable to said payment or performance, the obligation shall not be deemed fully extinguished. In the case at bar, the Esguerras had performed said acts within such time.WHEREFORE, the decision appealed from should be, as it is hereby, reversed, and another one shall be entered directing respondent Municipal Judge to issue the corresponding alias writs of execution, with costs against

respondents Isidro de Guzman and Mrs. Segunda de Guzman. It is so ordered.Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.

3) FIRST DIVISION[G.R. No. 142938. August 28, 2007.]MIGUEL INGUSAN, petitioner, vs. HEIRS OF AURELIANO I. REYES, represented by CORAZON REYES-REGUYAL and ARTEMIO S. REYES, * respondents.D E C I S I O NCORONA, J p:This is a petition for review on certiorari 1 of a decision 2 and resolution 3 of the Court of Appeals (CA) dated January 21, 2000 and April 10, 2000, respectively, in CA-G.R. CV No. 56105 which modified the decision 4 dated April 17, 1997 5 of the Regional Trial Court (RTC) of Cabanatuan City, Nueva Ecija, Branch 25 in Civil Case No. 2145-A1. ESTcIAThis case involves a 1,254 sq. m. residential land located in Poblacion, San Leonardo, Nueva Ecija 6 originally owned by Leocadio Ingusan who was unmarried and childless when he died in 1932. His heirs were his two brothers and a sister, namely, Antonio, Macaria and Juan. 7 Antonio died and was succeeded by his son Ignacio who also later died and was succeeded by his son, petitioner Miguel Ingusan. 8 Macaria also died and was succeeded by her child, Aureliano I. Reyes, Sr. (father of respondents Artemio Reyes, Corazon Reyes-Reguyal, Elsa Reyes, Estrella Reyes-Razon, Aureliano Reyes, Jr., Ester Reyes, Reynaldo Reyes and Leonardo Reyes). 9 Thus, petitioner is the grandnephew of Leocadio and Aureliano, Sr. was the latter's nephew. 10 After the death of Leocadio, Aureliano, Sr. was designated by the heirs as administrator of the land. 11 In 1972, while in possession of the land and in breach of trust, he applied for and was granted a free patent over it. 12 As a result, he was issued OCT No. P-6176 in 1973. 13 In 1976, petitioner filed an accion reivindicatoria against Aureliano, Sr. and his wife Jacoba Solomon seeking the recovery of Lot 120-A with an area of 502 sq. m. which was part of the land at issue here. 14 But the case was dismissed because petitioner did not pursue it. EHCaDSAlso in 1976, Aureliano, Sr. executed a special power of attorney (SPA) in favor of his son Artemio authorizing him to mortgage the land in question to any bank. Using that SPA, Artemio mortgaged the land to secure a loan of P10,000 from the Philippine National Bank (PNB). 15 In 1983, Aureliano, Sr. died intestate. He was survived by his children, the respondents. 16 In 1986, petitioner paid the PNB loan. The mortgage over the land was released and the owner's duplicate copy of OCT No. P-6176 was given to him. 17

On June 19, 1988, respondents and petitioner entered into a Kasulatan ng Paghahati-hati Na May Bilihan wherein they adjudicated unto themselves the land in question and then sold it to their co-heirs, as follows: (a) to petitioner, 1,171 sq. m. and (b) to respondent Estrella, 83 sq. m. This deed was notarized but not registered. 18 On January 8, 1990, respondent Corazon, despite signing the Kasulatan, executed an affidavit of loss, stating that she could not find the owner's duplicate copy of OCT No. P-6176. This was registered and annotated on the original copy of said title. 19 Subsequently, the following documents appeared purportedly with the following dates: cACEHIa) April 23, 1994 20 — notarized deed of donation of titled property supposedly executed by the spouses Aureliano, Sr. and Jacoba, 21 whereby said spouses donated 297 sq. m. of the subject land to respondent Artemio and the remaining 957 sq. m. to petitioner;b) September 5, 1994 — cancellation of affidavit of loss supposedly executed by respondent Corazon stating that the annotation of the affidavit of loss on the title should be canceled and the petition for a new title was no longer necessary because she had already found the missing owner's duplicate copy of OCT No. P-6176;c) September 27, 1994 — agreement of subdivision with sale purportedly executed by respondent Artemio and petitioner, with the consent of their wives. Pursuant to this document, the land was subdivided into Lot 120-A with an area of 297 sq. m. corresponding to the share of Artemio and Lot 120-B with an area of 957 sq. m. which was the share of petitioner. The document also indicated that Artemio sold Lot 120-A to one Florentina Fernandez. 22 IEaATDWhen respondent Corazon learned about the cancellation of the annotation of her affidavit of loss, she executed an affidavit of adverse claim on January 17, 1995 stating that the cancellation of affidavit of loss and the agreement of subdivision with sale were both spurious and the signatures appearing thereon were forgeries. This affidavit of adverse claim was not registered. 23 On April 17, 1995, petitioner brought the owner's duplicate copy of OCT No. P-6176, the cancellation of affidavit of loss, deed of donation of titled property and agreement of subdivision with sale to the Registry of Deeds for registration. Consequently, the following took place on that same day:1. Corazon's annotated affidavit of loss was canceled;2. by virtue of Aureliano, Sr. and Jacoba's deed of donation of titled property to Artemio and petitioner, OCT No. P-6176 was canceled and in lieu thereof, TCT No. NT-241155 in the name of petitioner and TCT No. NT-241156 in the name of respondent Artemio were issued and3. by virtue of the agreement of subdivision with sale, TCT Nos. NT-241155 and NT-241156 were canceled and TCT Nos. NT-239747 and NT-239748 were issued in the names of petitioner and Florentina Fernandez, respectively. 24 HASTCa

On June 27, 1995, petitioner took possession of his portion and built his house thereon. 25 On July 4, 1995, respondents filed an action for cancellation, annulment and surrender of titles with damages against petitioner and Florentina Fernandez in the RTC of Cabanatuan City, Nueva Ecija, Branch 25. In their complaint, they alleged the following, among others: they inherited the land in question from their father, Aureliano, Sr.; petitioner caused the preparation of the spurious deed of donation of titled property, cancellation of affidavit of loss, agreement of subdivision with sale and forged the signatures appearing thereon except his (petitioner's) own and, in conspiracy with Fernandez, fraudulently registered said documents which resulted in the cancellation of OCT No. P-6176 and the eventual issuance to them of TCT Nos. NT-239747 and NT-239748. They prayed that these titles be declared null and void and that petitioner and Fernandez be ordered to surrender the land and pay damages to them. 26 acCTISIn his defense, petitioner alleged that respondents' father, Aureliano, Sr., fraudulently secured a free patent in his name over the land using a fictitious affidavit dated April 10, 1970 purportedly executed by Leocadio selling to him the land in question and, as a result, OCT No. P-6176 was issued to him; that it was respondent Artemio who proposed to petitioner the scheme of partition that would assure the latter of his share with the condition, however, that he (Artemio) would get a portion of 297 sq. m. (which included the share of respondent Estrella of 83 sq. m.) because he had already earlier sold it to Fernandez and in fact had already been partially paid P60,000 for it; that to implement this scheme, respondent Artemio caused the execution of several documents namely: (1) deed of donation of titled property; (2) agreement of subdivision with sale and (3) cancellation of affidavit of loss and that, thereafter, he instructed petitioner to present the said documents to the Registry of Deeds of Nueva Ecija for registration. 27 On October 26, 1995, respondents moved that Fernandez be dropped as defendant because she was no longer contesting their claim and in fact had surrendered to them her owner's duplicate copy of TCT No. NT-239748. Thus, she was excluded from the suit. 28 CEDScAIn a decision dated April 17, 1997, the RTC dismissed the case and declared OCT No. P-6176 as well as the subsequent certificates of title (TCT Nos. NT-239747 and NT-239748), the deed of donation of titled property, agreement of subdivision with sale and cancellation of affidavit of loss as null and void. It held that the aforementioned documents were spurious since the signatures were falsified by respondent Artemio.Furthermore, having found that OCT No. P-6176 was issued on the basis of a document falsified by Aureliano, Sr., the RTC ordered the reversion of the land to its status before the OCT was issued.Finally, it held that petitioner, being an innocent victim, was entitled to damages. 29 On appeal, the CA modified the RTC decision. It ruled that only TCT Nos. NT-241155, NT-241156, NT-239747 and NT-239748 were null and void.

Their source, OCT No. P-6176, remained valid because it had already become indefeasible and could no longer be attacked collaterally. It also found that petitioner schemed with Artemio in defrauding their co-heirs and was therefore in pari delicto. Consequently, neither party was entitled to claim damages from the other. 30 Petitioner's motion for reconsideration was denied.Hence this petition raising the following issues:1) whether OCT No. P-6176 was valid or invalid, and2) whether or not petitioner is entitled to damages. cSIADHThere is no doubt that the deed of donation of titled property, cancellation of affidavit of loss and agreement of subdivision with sale, being falsified documents, were null and void. It follows that TCT Nos. NT-241155, NT-241156, NT-239747 and NT-239748 which were issued by virtue of these spurious documents were likewise null and void. Neither side disputes these findings and conclusions.The question is whether the source of these titles, OCT No. P-6176, was valid. Petitioner argues that it should be invalidated because it was issued based on a fictitious affidavit purportedly executed in 1970 by Leocadio (who died in 1932) wherein the latter supposedly sold the land to Aureliano, Sr. According to petitioner, Aureliano, Sr. used this to fraudulently and in breach of trust secure a free patent over the land in his name.We agree with the CA that OCT No. P-6176 remains valid. The issue of the validity of title (e.g. whether or not it was issued fraudulently or in breach of trust) can only be assailed in an action expressly instituted for that purpose. 31 A certificate of title cannot be attacked collaterally. Section 48 of PD 1529 32 states:SEC. 48. Certificate not subject to collateral attack. — A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or canceled except in a direct proceeding in accordance with law. EADSIaThe rationale behind the Torrens System is that the public should be able to rely on a registered title. The Torrens System was adopted in this country because it was believed to be the most effective measure to guarantee the integrity of land titles and to protect their indefeasibility once the claim of ownership is established and recognized. In Fil-estate Management, Inc. v. Trono, 33 we explained:It has been invariably stated that the real purpose of the Torrens System is to quiet title to land and to stop forever any question as to its legality. Once a title is registered, the owner may rest secure, without the necessity of waiting in the portals of the court, or sitting on the "mirador su casa" to avoid the possibility of losing his land. 34 Petitioner merely invoked the invalidity of OCT No. P-6176 as an affirmative defense in his answer and prayed for the declaration of its nullity. Such a defense partook of the nature of a collateral attack against a certificate of title. 35

Moreover, OCT No. P-6176 which was registered under the Torrens System on the basis of a free patent became indefeasible and incontrovertible after the lapse of one year as provided in Section 32 of PD 1529: AIcECSSec. 32. Review of decree of registration; Innocent purchaser for value. — The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgment, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.Upon the expiration of said period of one year, the decree of registration and the certificate of title issued shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue his remedy by action for damages against the applicant or any other person responsible for the fraud. (Emphasis supplied) ECaAHSIndeed, both the RTC and CA found that Aureliano, Sr. fraudulently and in breach of trust secured OCT No. P-6176 in his name. Unfortunately, petitioner chose not to pursue a direct proceeding to have this certificate of title annulled. In 1976, he filed an accion reivindicatoria 36 against the spouses Aureliano, Sr. and Jacoba questioning the validity of OCT No. P-6176 and seeking to recover a portion of the land (specifically, Lot 120-A with an area of 502 sq. m.) but he voluntarily withdrew the case. 37 Now, the title has undeniably become incontrovertible since it was issued in 1973 or more than 30 years ago. 38 We now proceed to the issue of whether petitioner is entitled to damages. The RTC held that he is entitled to moral damages (P50,000), exemplary damages (P30,000) and attorney's fees (P20,000) because he was not aware that the documents were falsified and he was merely instructed by respondent Artemio to have them registered. The CA shared the finding of the RTC that it was respondent Artemio who masterminded the preparation and use of the spurious documents. 39 Nevertheless, it did not find petitioner an innocent victim who was merely dragged into litigation:. . .[Petitioner] was far from innocent. [Respondent Artemio] and [petitioner] signed the bogus "Deed of Donation of Titled Property" and the fraudulently baseless "Agreement of Subdivision with Sale." It was [petitioner] who personally submitted all the bogus documents with the Registry of Deeds of Nueva Ecija. He stood to benefit from the registration of said fake documents. It was he who received the titles issued in consequence of said

fraudulent registration. In the natural course of things and in the ordinary experience of man, the conclusion is inevitable that [he] knew [about] the spurious nature of said documents but he made use of them because of the benefit which he would derive therefrom. In short, [petitioner] confabulated with [respondent Artemio] in defrauding all their co-heirs of their shares in said property. 40 cSDIHTWe agree. Petitioner was not in good faith when he registered the fake documents.Good faith is ordinarily used to describe that state of mind denoting "honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render the transaction unconscientious." 41 Petitioner claims that he was not aware of the contents of the falsified documents and their legal consequences because of his low level of intelligence and educational attainment. But from his own narration, it is clear that he was aware of the fraudulent scheme conceived by respondent Artemio:[Respondent Artemio] approached [petitioner] and propose[d] a [scheme] of partition that [would] assure [petitioner] of getting his share including that which he and his predecessor-in-interest have purchased from the other heirs of the late LEOCADIO INGUSAN, but with the condition that in implementing the document known as PAGHAHATI-HATI NA MAY BILIHAN, the corresponding shares of ESTRELLA RAZON will go to him [respondent Artemio who] has agreed to have it sold in favor of one FLORENTINA FERNANDEZ for P120,000.00, partial payment of which has already been received by [respondent Artemio], which negotiation of SALE and the payment made by FLORENTINA FERNANDEZ was acknowledged to be true. Without much ado, a survey of Lot No. 120 was conducted by one Restituto Hechenova upon instruction of [respondent Artemio], partitioning the land into two (2), one share goes to [petitioner] with an area of 957 square meters and the other with an area of 297 square meters in the name of [respondent Artemio], the latter share was to be sold in favor of Florentina Fernandez. To have this IMPLEMENTED, incidental documentation must be made thus; A DEED OF DONATION OF REAL PROPERTY allegedly executed by Sps. Aureliano Reyes and JACOBA SOLOMON; SUBDIVISION AGREEMENT WITH SALE by and between [petitioner] and [respondent Artemio] as alleged DONEES and SALE in the same document in favor of Florentina Fernandez, making in the process [petitioner] presentor of all these questioned documents, adding among others an AFFIDAVIT OF LOSS of Original Certificate of Title No. P-6176 allegedly falsified by [petitioner] of the signature of [respondent] CORAZON REYES REGUYAL. 42 THAECcPetitioner does not deny that he signed the fictitious deed of donation of titled property and the agreement of subdivision with sale. Even if he reached only grade 3, he could not have feigned ignorance of the net effect of these

documents, which was to exclude the other heirs of the spouses and the original owner Leocadio from inheriting the property and, in the process, acquiring a big chunk of the property at their expense. The cancellation of respondent Corazon's affidavit of loss of the owner's duplicate copy of OCT No. P-6176 also removed all obstacles to the registration of the title covering his portion of the lot. In short, by registering the spurious documents, he had everything to gain.Although it was respondent Artemio, an educated individual, who engineered the whole scheme and prepared the fraudulent documents, still petitioner cannot deny that he was a willing co-conspirator in a plan that he knew was going to benefit him handsomely.As a result, there is no basis for the award of damages to petitioner. Coming to the court with unclean hands, he cannot obtain relief. Neither does he fall under any of the provisions for the entitlement to damages. aIcDCHRespondents presented an additional issue involving the recovery of possession of the subject land. They contend that petitioner, his heirs and relatives illegally occupied it and constructed houses thereon. 43 However, it is well-settled that a party who has not appealed cannot obtain from the appellate court any affirmative relief other than those obtained from the lower court whose decision is brought up on appeal. 44 While there are exceptions to this rule, such as if they involve (1) errors affecting the lower court's jurisdiction over the subject matter; (2) plain errors not specified and (3) clerical errors, none applies here. 45 Lastly, we note that petitioner entered into certain agreements with respondents to ensure that he would obtain a portion of the subject land. He not only paid the loan of respondent Artemio to PNB in order to release the mortgage over the land but also bought from respondents 1,171 sq. m. (almost 94% of the 1,254 sq. m. lot) under the Kasulatan ng Paghahati-hati Na May Bilihan. These are undisputed facts. Ultimately, however, he failed to get his portion of the property. Although petitioner did not demand the return of the amounts he paid, we deem it just and equitable to direct respondents to reimburse him for these. ADaSEHArticle 1236 of the Civil Code provides:Art. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor. (emphasis ours)Respondent Artemio was the debtor in this case, PNB the creditor and petitioner the third person who paid the obligation of the debtor. The amount petitioner may recover will depend on whether Artemio knew or approved of such payment.Petitioner should also be able recover the amount (if any) he paid to respondents under the Kasulatan since this agreement was never

implemented. Otherwise, it will result in the unjust enrichment of respondents at the expense of petitioner, a situation covered by Art. 22 of the Civil Code:Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. acCTSEPetitioner is not entitled to legal interest since he never made a demand for it.WHEREFORE, the petition is hereby DENIED. However, respondents are ordered to return to petitioner the amounts he paid to the Philippine National Bank and under the Kasulatan ng Paghahati-hati Na May Bilihan. The court a quo is directed to determine the exact amount due to petitioner. The January 21, 2000 decision and April 10, 2000 resolution of the Court of Appeals in CA-G.R. CV No. 56105 are AFFIRMED.Costs against petitioner.SO ORDERED.Puno, C.J., Sandoval-Gutierrez, Azcuna and Garcia, JJ., concur.

4) EN BANC[G.R. No. L-18639. January 31, 1963.]"JAVIER SECURITY SPECIAL WATCHMAN AGENCY" and CONCEPCION D. JAVIER, in her own behalf and as guardian ad litem of the minors CLARO D. JAVIER and RENE D. JAVIER, plaintiffs-appellants, vs. SHELL CRAFT & BUTTON CORPORATION, defendant-appellee.Navarro & Layosa for plaintiffs-appellants.Concepcion & Llacer for defendant-appellee.SYLLABUS1. OBLIGATIONS AND CONTRACTS; CONTRACTS WHEREIN THE PERSONAL QUALIFICATIONS OF THE DEBTOR HAVE BEEN TAKEN INTO CONSIDERATION; PRINCIPLE IN OLD CIVIL CODE BROADENED IN NEW CIVIL CODE. — Although Article 1161 of the old Civil code has not been reenacted in the new Civil Code, its spirits is latent in other provisions of the said Code, such as its Articles 1311 and 1726, which have broadened the principle that the creditor cannot be compelled to accept the performance of the obligation or the rendition of a service by a third person whom the personal qualifications and circumstances of the debtor have been taken into consideration in the fulfillment of the obligation, making it applicable not only to obligations to do but to all kinds of obligations.2. ID.; ID.; ID.; APPLICATION OF PRINCIPLE IN CASE AT BAR. — The fact that the owner and manager of the watchman agency in the present case was not required to guard in person the premises of the company, does not negate that the guarding job was entrusted to him by reason of his personal qualifications. After his death, therefore, the company is free to engage other guards, and it can not be compelled to repose its trust and confidence in the deceased owner's wife and heirs as to whom the contract is to be deemed not transmissible.D E C I S I O N

REYES, J.B.L., J p:This case for breach of contract with damages was filed originally with the Court of First Instance of Manila. After trial, the court a quo dismissed the complaint on 14 October 1958. Plaintiffs elevated it to the Court of Appeals, but the latter remanded it to this Court, because only questions of law are involved.The facts are simple and undisputed.Since 1954, H. L. Swiryn had engaged at P290.00 a month the services of Federico E. Javier to guard the premises of appellee Shell-Craft & Button Corporation, of which Swiryn is the vice-president and manager. Because the services rendered by Federico E. Javier were efficient, defendant corporation renewed annually its contract with him. The last renewal, on 4 May 1956 (Exhibit 3), would have expired on 1 December 1957, as per agreement, which stipulated the following:"For and in consideration of the sum of P290.00 per month, the JAVIER SECURITY SPECIAL WATCHMAN AGENCY with business address at 3195 Sta. Mesa Blvd., Manila, through its representative, Federico E. Javier, hereby agrees to guard the establishment of SHELL-CRAFT and BUTTON CORPORATION, located at 114 Beata, Pandacan, subject to the following conditions;1. That in order to carry out this agreement, the JAVIER SECURITY SPECIAL WATCHMAN AGENCY will furnish the necessary guards or watchmen between the hours of 4:00 P.M. and 8:00 A.M. daily, seven days a week;2. That the number of said guards or watchmen will not be less than two (2);3. That Javier Security Special Watchman Agency shall be responsible for the payment of the salaries of said guards or watchmen and such other benefits to which they may be entitled under existing labor laws;4. That the JAVIER SECURITY SPECIAL WATCHMAN AGENCY shall furnish the SHELL-CRAFT & BUTTON CORPORATION every 15th and end of the month a copy of the payrolls and time records duly signed by each and every guard or watchman who might be employed by the said JAVIER SECURITY SPECIAL WATCHMAN AGENCY;5. That this Contract shall expire on December 1, 1957 renewable for another year upon mutual consent."It is pertinent to note that the "Javier Security Special Watchman Agency" is merely a service name adopted by the late Federico E. Javier to identify his business, which was owned and managed exclusively by him. The "Javier Security Special Watchman Agency" is not a corporation nor a registered partnership. Hence, it has no personality to sue or to be sued.Before the contract expired, Federico E. Javier died suddenly on 9 May 1957. His widow, appellant Concepcion D. Javier, was then in Hongkong. To guard the compound of the corporation, Swiryn engaged the services of another agency on the same day. For this reason, the heirs of Federico E.

Javier sued for breach of contract, with damages for its unexpired term from 9 May to 1 December 1957.The only issue to be resolved is whether or not said Exhibit "C" is a personal contract, in the sense that the rights and obligations thereunder are intransmissible to the heirs of a party thereto. The trial court held the contract to be "intuitu personae", and dismissed the action; whereupon the plaintiffs appealed.From the conditions of Exhibit "C", and according to the findings of fact of the trial court, the primordial consideration which prompted Swiryn to enter into the contract was the personality (i.e., the qualifications) of the deceased, who supervised personally the watchmen employed and controlled by him. To the corporation, it was immaterial who were the guards assigned by Federico E. Javier to watch its establishment. The lower court, in its decision above-referred to, aptly stated:". . . In the matter of security guard duty, discipline and promptness on the part of the guards is indispensable, and this was the primary reason why the defendant engaged the services of the Javier Security Special Watchman Agency, because with the personal supervision and attention the late Federico Javier had over his guards, the defendant had found their services very satisfactory, for which reason since 1954, it had retained the services of said watchman agency until the death of said Federico Javier on May 9, 1957, as testified to by Mr. H. L. Swiryn, manager of the defendant corporation. Considering that at that time Mr. Swiryn could not have expected any other person to render the same personal supervision and attention that the deceased Federico Javier had exercised over his guards during his lifetime, and considering further the immediate need of guard duty in the premises of the defendant after his death, specially so when it was not until one week after his death that the widow went to see Mr. Swiryn to have plaintiffs' guards continue guarding its premises, the defendant was justified in replacing the guards of plaintiffs' agency." (Record on Appeal, pp. 25-26).While the Civil Code of the Philippines of 1950 has not seen fit to reenact Article 1161 of the Civil Code of 1889 to the effect that —"In obligations to do the creditor can not be compelled to accept the performance of the obligation or the rendition of a service by third person when the personal qualifications and circumstances of the debtor have been taken into consideration in the creation of the obligation."it is not to be assumed that the omission implies that the rule embodied in that article has been discarded altogether. The spirit of Article 1161 of the old Civil Code is latent in other provisions of the new Code, such as its Articles 1311 and 1726."ART. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent."

"ART. 1726. When a piece of work has been entrusted to a person by reason of his personal qualifications, the contract is rescinded upon his death."If at all, the Civil Code of the Philippines appears to have broadened the principle, and made it applicable to all kinds of obligations, not only to obligations to do; for among the rules governing performance (payment) of obligations, Article 1236 (paragraph 1) prescribes that:"ART. 1236. The creditor is not bound to accept payment or performance by a third person who has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary."The fact that the late Federico Javier was not required to guard in person the premises of the appellee company does not negate that the guarding job was entrusted to him by reason of his personal qualifications. It is clear that the failure to specify in the contract the conditions required of the individual guards and watchmen proves, not that they were of no concern to the company, but that the latter relied upon their proper selection and supervision by Javier himself. This trust and confidence the company can not be compelled to repose in Javier's wife or heirs, and as to them, the contract is to be deemed not transmissible.Because the widow could not be expected to perform the contract for custodial services celebrated by her husband, and because upon the death of Javier no one could take his place (his widow being at the time in Hongkong and his children minors), while the premises could not be left unguarded by trusted persons, the appellee was entitled to regard its contract with Javier terminated then and there. Hence it was free to engage other guards.The decision appealed from is affirmed, with costs against the plaintiffs-appellants.Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.

5) FIRST DIVISION[G.R. No. 152317. November 10, 2004.]VICTORIA MOREÑO-LENTFER, * GUNTER LENTFER and JOHN CRAIGIE YOUNG CROSS, petitioners, vs. HANS JURGEN WOLFF, respondent.Rodrigo C. Dimayacyac for petitioners.Manolo Puno & Jocson Law Offices for respondent.SYNOPSISRespondent filed a complaint for annulment of sale and reconveyance of property with damages and prayer for a writ of attachment against petitioners. He alleged that the Lentfer spouses, who held in trust for him a time deposit account, urged him to buy petitioner Cross' beach house and lease rights in Puerto Galera, Oriental Mindoro. Respondent agreed, and through a bank-to-bank transaction, he paid Cross the amount of 221,700 Deutsche marks as total consideration for the sale and assignment of the lease rights. However, petitioners executed a deed of sale whereby the

beach house was made to appear as sold to Victoria Moreño-Lentfer for only P100,000. The assignment of the lease right was likewise made in favor of Moreño-Lentfer. After trial, the court dismissed the complaint for failure to establish a cause of action. Upon appeal, the Court of Appeals reversed the decision of the trial court. Hence, the instant petition which resolved the issue on the applicability of Article 1238 of the New Civil Code, the principle of solutio indebiti under Article 2154 and the principle of justice and equity. AICHaSIn denying the petition, the Supreme Court ruled that Article 1238 is not applicable in the instant case. The absence of intention to be reimbursed, which is the qualifying circumstance in Article 1238, was negated by the facts of this case. Respondent's acts contradicted any intention to donate the properties to petitioner Moreño-Lentfer.The Court likewise held that the principle of solutio indebiti applies in the present case. Since Moreño-Lentfer received something when there was no right to demand it, she had an obligation to return it. Moreover, she acquired the subject properties through deceit, fraud and abuse of confidence. The principle of justice and equity does not wok in her favor but in favor of respondent. Whatever she may have received by mistake from and at the expense of respondent should thus be returned to the latter, if the demands of justice are to be served.SYLLABUS1. CIVIL LAW; ARTICLE 1238 OF THE NEW CIVIL CODE; INAPPLICABLE IN CASE AT BAR. — The absence of intention to be reimbursed, the qualifying circumstance in Art. 1238, is negated by the facts of this case. Respondent's acts contradict any intention to donate the properties to petitioner Moreño-Lentfer. When respondent learned that the sale of the beach house and assignment of the lease right were in favor of Victoria Moreño-Lentfer, he immediately filed a complaint for annulment of the sale and reconveyance of the property with damages and prayer for a writ of attachment. DEcTIS2. ID.; DONATION; MUST COMPLY WITH THE MANDATORY FORMAL REQUIREMENTS SET FORTH BY LAW FOR ITS VALIDITY. — A donation is a simple act of liberality where a person gives freely of a thing or right in favor of another, who accepts it. But when a large amount of money is involved, equivalent to P3,297,800, based on the exchange rate in the year 1992, we are constrained to take the petitioners' claim of liberality of the donor with more than a grain of salt. Petitioners could not brush aside the fact that a donation must comply with the mandatory formal requirements set forth by law for its validity. Since the subject of donation is the purchase money, Art. 748 of the New Civil Code is applicable. Accordingly, the donation of money equivalent to P3,297,800 as well as its acceptance should have been in writing. It was not. Hence, the donation is invalid for non-compliance with the formal requisites prescribed by law.3. ID.; OBLIGATIONS AND CONTRACTS; QUASI-CONTRACTS; PRINCIPLE OF SOLUTIO INDEBITI; WHEN APPLICABLE. — The quasi-

contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another. It applies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment, and (2) the payment is made through mistake, and not through liberality or some other cause.4. ID.; PRINCIPLE OF JUSTICE AND EQUITY; APPLIED IN CASE AT BAR. — Following Article 22 of the New Civil Code, two conditions must concur to declare that a person has unjustly enriched himself or herself, namely: (a) a person is unjustly benefited, and (b) such benefit is derived at the expense of or to the damage of another. We are convinced petitioner Moreño-Lentfer had been unjustly enriched at the expense of respondent. She acquired the properties through deceit, fraud and abuse of confidence. The principle of justice and equity does not work in her favor but in favor of respondent Wolff. Whatever she may have received by mistake from and at the expense of respondent should thus be returned to the latter, if the demands of justice are to be served.5. ID.; DAMAGES; NOMINAL DAMAGES; AWARDED IN CASE AT BAR. — [W]e deem it just and equitable under the circumstances to award respondent nominal damages in the amount of P50,000, pursuant to Articles 2221 and 2222 of the New Civil Code, since respondent's property right has been invaded through defraudation and abuse of confidence committed by petitioners. ACaDTHD E C I S I O NQUISUMBING, J p:For review on certiorari are the Decision 1 dated June 14, 2001, and Resolution 2 dated February 22, 2002, of the Court of Appeals in CA-G.R. CV No. 48272. The decision reversed the judgment 3 of the Regional Trial Court of Calapan City, Oriental Mindoro, Branch 39, in Civil Case No. R-4219. IaHDcTThe facts are as follows:The petitioners are Gunter Lentfer, a German citizen; his Filipina wife, Victoria Moreño-Lentfer; and John Craigie Young Cross, an Australian citizen, all residing in Sabang, Puerto Galera, Oriental Mindoro. Respondent Hans Jurgen Wolff is a German citizen, residing in San Lorenzo Village, Makati City.Petitioners alleged that with respondent, on March 6, 1992, they engaged the notarial services of Atty. Rodrigo C. Dimayacyac for: (1) the sale of a beach house owned by petitioner Cross in Sabang, Puerto Galera, Oriental Mindoro, and (2) the assignment of Cross' contract of lease on the land where the house stood. The sale of the beach house and the assignment of the lease right would be in the name of petitioner Victoria Moreño-Lentfer, but the total consideration of 220,000 Deutschmarks (DM) would be paid by respondent Hans Jurgen Wolff. A promissory note was executed by said respondent in favor of petitioner Cross.

According to respondent, however, the Lentfer spouses were his confidants who held in trust for him, a time deposit account in the amount of DM 200,000 4 at Solid Bank Corporation. Apprised of his interest to own a house along a beach, the Lentfer couple urged him to buy petitioner Cross' beach house and lease rights in Puerto Galera. Respondent agreed and through a bank-to-bank transaction, he paid Cross the amount of DM 221,700 5 as total consideration for the sale and assignment of the lease rights. However, Cross, Moreño-Lentfer and Atty. Dimayacyac surreptitiously executed a deed of sale whereby the beach house was made to appear as sold to Moreño-Lentfer for only P100,000. 6 The assignment of the lease right was likewise made in favor of Moreño-Lentfer. 7 Upon learning of this, respondent filed a Complaint docketed as Civil Case No. R-4219 with the lower court for annulment of sale and reconveyance of property with damages and prayer for a writ of attachment. DEHaASAfter trial, the court a quo dismissed the complaint for failure to establish a cause of action, thus:ACCORDINGLY, judgment is hereby rendered in favor of the defendants and against the plaintiff, dismissing the complaint for the reason that plaintiff has not established a cause of action against the defendants with costs against the plaintiff.SO ORDERED. 8 Aggrieved, respondent appealed to the Court of Appeals. 9 But in its Decision 10 dated June 14, 2001, the appellate court reversed the decision of the trial court, thus:WHEREFORE, the judgment appealed from is hereby REVERSED and a new one is hereby rendered, as follows:1. Defendants-appellees spouses Genter 11 and Victoria Moreno-Lentfer and John Craigie Young Cross are jointly and severally held liable to pay plaintiff-appellant the amount of 220,000.00 DM German Currency or its present peso equivalent plus legal interest starting from March 8, 1993, the date of the last final demand letter;2. The above defendants-appellees are jointly and severally held liable to pay plaintiff-appellant the amount of P200,000.00 Philippine Currency, representing the amount of expenses incurred in the repairs and maintenance of the property plus legal interest starting from October 28, 1992, the date the amount was received by defendant-appellee Victoria Moreno-Lentfer; and3. The case against defendant-appellee Rodrigo Dimayacyac is dismissed. ATaDHCSO ORDERED. 12 Hence, the instant petition raising the following issues:1) DOES ARTICLE 1238 OF THE NEW CIVIL CODE APPLY IN THE CASE AT BAR? 13 2) DOES THE PRINCIPLE OF SOLUTIO INDEBITI UNDER ARTICLE 2154 OF THE NEW CIVIL CODE, THE PRINCIPLE OF JUSTICE AND EQUITY, APPLY IN THE CASE AT BAR? 14

Article 1238 of the New Civil Code provides:ART. 1238. Payment made by a third person who does not intend to be reimbursed by the debtor is deemed to be a donation, which requires the debtor's consent. But the payment is in any case valid as to the creditor who has accepted it.Petitioners posit that in a contract of sale, the seller is the creditor, who in this case is Cross, and the buyer is the debtor, namely Moreño-Lentfer in this case. Respondent is the third person who paid the consideration on behalf of Moreño-Lentfer, the debtor. Petitioners insist that respondent did not intend to be reimbursed for said payment and debtor Moreño-Lentfer consented to it. Thus, by virtue of Article 1238, payment by respondent is considered a donation.Respondent counters that Article 1238 bears no relevance to the case since it applies only to contracts of loan where payment is made by a third person to a creditor in favor of a debtor of a previously incurred obligation. The instant case, in contrast, involves a contract of sale where no real creditor-debtor relationship exists between the parties. Further, respondent argues his conduct never at any time intimated any intention to donate in favor of petitioner Moreño-Lentfer. aCTcDHMoreover, respondent contends that the alleged donation is void for non-compliance with the formal requirements set by law. Citing Article 748 15 of the New Civil Code, respondent avers that since the amount involved exceeds P5,000, both the donation and its acceptance must be in writing for the donation to be valid. Respondent further says there was no simultaneous delivery of the money as required by Art. 748 for instances of oral donation. Respondent also calls our attention to the sudden change in petitioners' theory. Previously, before the Court of Appeals, the petitioners claimed that what was donated were the subject properties. But before this Court, they insist that what was actually donated was the money used in the purchase of subject properties.

On this point, we find petitioners' stance without merit. Article 1238 of the New Civil Code is not applicable in this case.Trying to apply Art. 1238 to the instant case is like forcing a square peg into a round hole. The absence of intention to be reimbursed, the qualifying circumstance in Art. 1238, is negated by the facts of this case. Respondent's acts contradict any intention to donate the properties to petitioner Moreño-Lentfer. When respondent learned that the sale of the beach house and assignment of the lease right were in favor of Victoria Moreño-Lentfer, he immediately filed a complaint for annulment of the sale and reconveyance of the property with damages and prayer for a writ of attachment. Respondent Moreño-Lentfer at that time claimed the beach house, together with the lease right, was donated to her. Noteworthy, she had changed her theory, to say that it was only the money used in the purchase that was donated to her. But in any event, respondent actually stayed in the beach house in the concept of an owner and shouldered the expenses for its maintenance and repair

amounting to P200,000 for the entire period of his stay for ten weeks. Moreover, the appellate court found that respondent is not related or even close to the Lentfer spouses. Obviously, respondent had trusted the Lentfer spouses to keep a time deposit account for him with Solid Bank for the purpose of making the purchase of the cited properties. CEIHcTPetitioner Moreño-Lentfer's claim of either cash or property donation rings hollow. A donation is a simple act of liberality where a person gives freely of a thing or right in favor of another, who accepts it. 16 But when a large amount of money is involved, equivalent to P3,297,800, based on the exchange rate in the year 1992, we are constrained to take the petitioners' claim of liberality of the donor with more than a grain of salt.Petitioners could not brush aside the fact that a donation must comply with the mandatory formal requirements set forth by law for its validity. Since the subject of donation is the purchase money, Art. 748 of the New Civil Code is applicable. Accordingly, the donation of money equivalent to P3,297,800 as well as its acceptance should have been in writing. It was not. Hence, the donation is invalid for non-compliance with the formal requisites prescribed by law.Anent the second issue, petitioners insist that since the deed of sale in favor of Moreño-Lentfer was neither identified or marked nor formally offered in evidence, the same cannot be given any evidentiary value. They add that since it was not annulled, it remains valid and binding. Hence, petitioners argue, the principle of solutio indebiti under Article 2154 17 of the New Civil Code should be the applicable provision in the resolution of this controversy. If so, the parties unjustly enriched would be liable to the other party who suffered thereby by being correspondingly injured or damaged.The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another. 18 It applies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who received the payment, and (2) the payment is made through mistake, and not through liberality or some other cause. 19 In the instant case, records show that a bank-to-bank payment was made by respondent Wolff to petitioner Cross in favor of co-petitioner Moreño-Lentfer. Respondent was under no duty to make such payment for the benefit of Moreño-Lentfer. There was no binding relation between respondent and the beneficiary, Moreño-Lentfer. The payment was clearly a mistake. Since Moreño-Lentfer received something when there was no right to demand it, she had an obligation to return it. 20 Following Article 22 21 of the New Civil Code, two conditions must concur to declare that a person has unjustly enriched himself or herself, namely: (a) a person is unjustly benefited, and (b) such benefit is derived at the expense of or to the damage of another. 22 We are convinced petitioner Moreño-Lentfer had been unjustly enriched at the expense of respondent. She acquired the properties through deceit, fraud and abuse of confidence. The principle of justice and equity does not work in

her favor but in favor of respondent Wolff. Whatever she may have received by mistake from and at the expense of respondent should thus be returned to the latter, if the demands of justice are to be served. aEHTScThe Court of Appeals held that respondent was not entitled to the reconveyance of the properties because, inter alia, of the express prohibition under the Constitution 23 that non-Filipino citizens cannot acquire land in the Philippines. We note, however, that subject properties consist of a beach house and the lease right over the land where the beach house stands. The constitutional prohibition against aliens from owning land in the Philippines has no actual bearing in this case. A clear distinction exists between the ownership of a piece of land and the mere lease of the land where the foreigner's house stands. Thus, we see no legal reason why reconveyance could not be allowed.Since reconveyance is the proper remedy, respondent's expenses for the maintenance and repair of the beach house is for his own account as owner thereof. It need not be an issue for now.However, we deem it just and equitable under the circumstances to award respondent nominal damages in the amount of P50,000, 24 pursuant to Articles 2221 25 and 2222 26 of the New Civil Code, since respondent's property right has been invaded through defraudation and abuse of confidence committed by petitioners.WHEREFORE, the petition is hereby DENIED. The assailed Decision, dated June 14, 2001 and Resolution dated February 22, 2002, of the Court of Appeals in CA-G.R. CV No. 48272 reversing the lower court's judgment are AFFIRMED with MODIFICATION. Petitioners — particularly the spouses Gunter Lentfer and Victoria Moreño-Lentfer — are hereby ORDERED to:1. RECONVEY to respondent Hans Jurgen Wolff the beach house and the lease right over the land on which it is situated; and2. PAY respondent Wolff nominal damages in the amount of P50,000.00.Costs against petitioners. IAcDETSO ORDERED.Davide, Jr., C .J ., Ynares-Santiago, Carpio and Azcuna, JJ ., concur.

6) SECOND DIVISION[G.R. No. 125862. April 15, 2004.]FRANCISCO CULABA and DEMETRIA CULABA, doing business under the name and style "Culaba Store," petitioners, vs. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents.Public Attorney's Office for petitioners.Dollete Blanco Ejercito & Associates for private respondent.SYNOPSISPetitioner spouses were engaged in the sale and distribution of San Miguel Corporation's (SMC) beer products. Respondent SMC filed an action for collection of a sum of money against them as they failed to pay the balance of P24,910.00 despite repeated demands. During trial, petitioners testified

that they made payments to an SMC supervisor who came to collect using an SMC van. For its part, however, SMC submitted a publisher's affidavit to prove that the entire booklet of receipts, which reflected payments of the petitioners, were reported lost and such notice of loss was published in the Daily Express. After trial on the merits, the trial court rendered judgment in favor of SMC, and held petitioners liable on the balance of its obligation. The Court of Appeals affirmed the decision of the trial court. Hence, the instant petition. HSIADcThe Supreme Court dismissed the instant petition. According to the Court, the petitioners question the findings of the Court of Appeals as to whether the payment of the petitioners' obligation to SMC was properly made, thus, extinguishing the same. This is clearly a factual issue, and beyond the purview of the Court to delve into. The issue raised by the petitioners did not involve a question of law, but a question of fact, not cognizable by the Supreme Court in a petition for review under Rule 45 of the Rules of Court.SYLLABUS1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF THE TRIAL COURT; ACCORDED HIGHEST RESPECT ESPECIALLY WHEN AFFIRMED BY THE COURT OF APPEALS AS A RULE. — The petitioners question the findings of the Court of Appeals as to whether the payment of the petitioner's obligation to the private respondent was properly made, thus, extinguishing the same. This is clearly a factual issue, and beyond the purview of the Court to delve into. This is in consonance with the well-settled rule that findings of fact of the trial court, especially when affirmed by the Court of Appeals, are accorded the highest degree of respect, and generally will not be disturbed on appeal. Such findings are binding and conclusive on the Court. Furthermore, it is not the Court's function under Rule 45 of the Rules of Court, as amended, to review, examine and evaluate or weigh the probative value of the evidence presented. To reiterate, the issue being raised by the petitioners does not involve a question of law, but a question of fact, not cognizable by this Court in a petition for review under Rule 45. The jurisdiction of the Court in such a case is limited to reviewing only errors of law, unless the factual findings being assailed are not supported by evidence on record or the impugned judgment is based on a misapprehension of facts. HDIATS2. CIVIL LAW; OBLIGATIONS; PAYMENT AS A MODE OF EXTINGUISHING OBLIGATION SHOULD BE MADE TO THE PERSON IN WHOSE FAVOR THE OBLIGATION HAS BEEN CONSTITUTED; NOT PRESENT IN CASE AT BAR. — Payment is a mode of extinguishing an obligation. Article 1240 of the Civil Code provides that payment shall be made to the person in whose favor the obligation has been constituted, or his successor-in-interest, or any person authorized to receive it. In this case, the payment were purportedly made to a "supervisor" of the private respondent, who was clad in an SMC uniform and drove an SMC van. He appeared to be authorized to accept payments as he showed a list of customers' accountabilities and even issued SMC liquidation receipts which looked

genuine. Unfortunately for petitioner Francisco Culaba, he did not ascertain the identity and authority of the said supervisor, nor did he ask to be shown any identification to prove that the latter was, indeed, an SMC supervisor. The petitioners relied solely on the man's representation that he was collecting payments for SMC. Thus, the payments the petitioners claimed they made were not the payments that discharged their obligation to the private respondent. acADIT3. ID.; AGENCY; A PERSON DEALING WITH AN AGENT IS PUT UPON INQUIRY AND MUST DISCOVER UPON HIS PERIL THE AUTHORITY OF THE AGENT; WHEN NOT COMPLIED WITH; CASE AT BAR. — The basis of agency is representation. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. In the instant case, the petitioners' loss could have been avoided if they had simply exercised due diligence in ascertaining the identity of the person to whom they allegedly made the payments. The fact that they were parting with valuable consideration should have made them more circumspect in handling their business transactions. Persons dealing with an assumed agent are bound at their peril to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. The petitioners in this case failed to discharge this burden, considering that the private respondent vehemently denied that the payments were accepted by it and were made to its authorized representative.4. ID.; ID.; ID.; ID.; WHEN NEGLIGENCE IS PRESENT; EFFECT THEREOF. — Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something, which a prudent and reasonable man would not do. In the case at bar, the most prudent thing the petitioners should have done was to ascertain the identity and authority of the person who collected their payments. Failing this, the petitioners cannot claim that they acted in good faith when they made such payments. Their claim therefor is negated by their negligence, and they are bound by its consequences. Being negligent in this regard, the petitioners cannot seek relief on the basis of a supposed agency. cTDIaCD E C I S I O NCALLEJO, SR., J p:This is a petition for review under Rule 45 of the Revised Rules of Civil Procedure of the Decision 1 of the Court of Appeals in CA-G.R. CV No. 19836 affirming in toto the Decision 2 of the Regional Trial Court of Makati, Branch 138, in Civil Case No. 1033 for collection of sum of money, and the Resolution 3 denying the motion for reconsideration of the said decision. cSaADCThe Undisputed FactsThe spouses Francisco and Demetria Culaba were the owners and proprietors of the Culaba Store and were engaged in the sale and distribution of San Miguel Corporation's (SMC) beer products. SMC sold beer products

on credit to the Culaba spouses in the amount of P28,650.00, as evidenced by Temporary Credit Invoice No. 42943. 4 Thereafter, the Culaba spouses made a partial payment of P3,740.00, leaving an unpaid balance of P24,910.00. As they failed to pay despite repeated demands, SMC filed an action for collection of a sum of money against them before the RTC of Makati, Branch 138.The defendant-spouses denied any liability, claiming that they had already paid the plaintiff in full on four separate occasions. To substantiate this claim, the defendants presented four (4) Temporary Charge Sales (TCS) Liquidation Receipts, as follows:April 19, 1983 Receipt No. 27331 for P8,000 5 April 22, 1983 Receipt No. 27318 for P9,000 6 April 27, 1983 Receipt No. 27339 for P4,500 7 April 30, 1983 Receipt No. 27346 for P3,410 8 Defendant Francisco Culaba testified that he made the foregoing payments to an SMC supervisor who came in an SMC van. He was then showed a list of customers' accountabilities which included his account. The defendant, in good faith, then paid to the said supervisor, and he was, in turn, issued genuine SMC liquidation receipts.For its part, SMC submitted a publisher's affidavit 9 to prove that the entire booklet of TCSL Receipts bearing Nos. 27301-27350 were reported lost by it, and that it caused the publication of the notice of loss in the July 9, 1983 issue of the Daily Express, as follows:NOTICE OF LOSS OUR CUSTOMERS ARE HEREBY INFORMED THAT TEMPORARY CHARGE SALES LIQUIDATION RECEIPTS WITH SERIAL NOS. 27301-27350 HAVE BEEN LOST.ANY TRANSACTION, THEREFORE, ENTERED INTO WITH THE USE OF THE ABOVE RECEIPTS WILL NOT BE HONORED. cITaCSSAN MIGUEL CORPORATIONBEER DIVISIONMakati Beer Region 10 The Trial Court's RulingAfter trial on the merits, the trial court rendered judgment in favor of SMC, and held the Culaba spouses liable on the balance of its obligation, thus:Wherefore, judgment is hereby rendered in favor of the plaintiff, as follows:1. Ordering defendants to pay the amount of P24,910.00 plus legal interest of 6% per annum from April 12, 1983 until the whole amount is fully paid;2. Ordering defendants to pay 20% of the amount due to plaintiff as and for attorney's fees plus costs.SO ORDERED. 11 According to the trial court, it was unusual that defendant Francisco Culaba forgot the name of the collector to whom he made the payments and that he did not require the said collector to print his name on the receipts. The court also noted that although they were part of a single booklet, the TCS

Liquidation Receipts submitted by the defendants did not appear to have been issued in their natural sequence. Furthermore, they were part of the lost booklet receipts, which the public was duly warned of through the Notice of Loss the plaintiff caused to be published in a daily newspaper. This confirmed the plaintiff's claim that the receipts presented by the defendants were spurious ones.The Case on AppealOn appeal, the appellants interposed the following assignment of errors:ITHE TRIAL COURT ERRED IN FINDING THAT THE RECEIPTS PRESENTED BY DEFENDANTS EVIDENCING HIS PAYMENTS TO PLAINTIFF SAN MIGUEL CORPORATION, ARE SPURIOUS.IITHE TRIAL COURT ERRED IN CONCLUDING THAT PLAINTIFF-APPELLEE HAS SUFFICIENTLY PROVED ITS CAUSE OF ACTION AGAINST THE DEFENDANTS. AaDSECIIITHE TRIAL COURT ERRED IN ORDERING DEFENDANTS TO PAY 20% OF THE AMOUNT DUE TO PLAINTIFF AS ATTORNEY'S FEES. 12 The appellants asserted that while the trial court's observations were true, it was the usual business practice in previous transactions between them and SMC. The SMC previously honored receipts not bearing the salesman's name. According to appellant Francisco Culaba, he even lost some of the receipts, but did not encounter any problems.According to appellant Francisco, he could not be faulted for paying the SMC collector who came in a van and was in uniform, and that any regular customer would, without any apprehension, transact with such an SMC employee. Furthermore, the respective receipts issued to him at the time he paid on the four occasions mentioned had not yet then been declared lost. Thus, the subsequent publication in a daily newspaper declaring the booklets lost did not affect the validity and legality of the payments made. Accordingly, by its actuations, the SMC was estopped from questioning the legality of the payments and had no cause of action against the appellants.Anent the issue of attorney's fees, the order of the trial court for payment thereof is without basis. According to the appellant, the provision for attorney's fees is a contingent fee, already provided for in the SMC's contract with the law firm. To further order them to pay 20% of the amount due as attorney's fees is double payment, tantamount to undue enrichment and therefore improper. 13 The appellee, for its part, contended that the primary issue in the case at bar revolved around the basic and fundamental principles of agency. 14 It was incumbent upon the defendants-appellants to exercise ordinary prudence and reasonable diligence to verify and identify the extent of the alleged agent's authority. It was their burden to establish the true identity of the assumed agent, and this could not be established by mere representation,

rumor or general reputation. As they utterly failed in this regard, the appellants must suffer the consequences.The Court of Appeals affirmed the decision of the trial court, thus:In the face of the somewhat tenuous evidence presented by the appellants, we cannot fault the lower court for giving more weight to appellee's testimonial and documentary evidence, all of which establish with some degree of preponderance the existence of the account sued upon. CTEacHALL CONSIDERED, we cannot find any justification to reject the factual findings of the lower court to which we must accord respect, for which reason, the judgment appealed from is hereby AFFIRMED in all respects.SO ORDERED. 15 Hence, the instant petition.The petitioners pose the following issues for the Court's resolution:I. WHETHER OR NOT THE RESPONDENT HAD PROVEN BY PREPONDERANT EVIDENCE THAT IT HAD PROPERLY AND TIMELY NOTIFIED PETITIONER OF LOST BOOKLET OF RECEIPTS.II. WHETHER OR NOT RESPONDENT HAD PROVEN BY PREPONDERANT EVIDENCE THAT PETITIONER WAS REMISS IN THE PAYMENT OF HIS ACCOUNTS TO ITS AGENT. 16 According to the petitioners, receiving receipts from the private respondent's agents instead of its salesmen was a usual occurrence, as they had been operating the store since 1979. Thus, on four occasions in April 1983, when an agent of the respondent came to the store wearing an SMC uniform and driving an SMC van, petitioner Francisco Culaba, without question, paid his accounts. He received the receipts without fear, as they were similar to what he used to receive before. Furthermore, the petitioners assert that, common experience will attest that unless the attention of the customers is called for, they would not take note of the serial number of the receipts.The petitioners contend that the private respondent advertised its warning to the public only after the damage was done, or on July 9, 1993. Its belated notice showed its glaring lack of interest or concern for its customers' welfare, and, in sum, its negligence.Anent the second issue, petitioner, Francisco Culaba avers that the agent to whom the accounts were paid had all the physical and material attributes or indications of a representative of the private respondent, leaving no doubt that he was duly authorized by the latter. Petitioner Francisco Culaba's testimony that "he does not necessarily check the contents of the receipts issued to him except for the amount indicated if [the] same accurately reflects his actual payment" is a common attitude of customers. He could, thus, not be faulted for paying the private respondent's agent on four occasions. Petitioner Francisco Culaba asserts that he made the payment in good faith, to an agent who issued SMC receipts which appeared to be genuine. Thus, according to the petitioners, they had duly paid their obligation in accordance with Articles 1240 and 1242 of the New Civil Code. ISCaDHThe private respondent, for its part, avers that the burden of proving payment is with the debtor, in consonance with the express provision of Article 1233 of

the New Civil Code. The petitioners miserably failed to prove the self-serving allegation that they already paid their liability to the private respondent. Furthermore, under normal circumstances, an obligor would not just pay a substantial amount to someone whom he saw for the first time, without even asking for the latter's name.The Ruling of the CourtThe petition is dismissed.The petitioners question the findings of the Court of Appeals as to whether the payment of the petitioners' obligation to the private respondent was properly made, thus, extinguishing the same. This is clearly a factual issue, and beyond the purview of the Court to delve into. This is in consonance with the well-settled rule that findings of fact of the trial court, especially when affirmed by the Court of Appeals, are accorded the highest degree of respect, and generally will not be disturbed on appeal. Such findings are binding and conclusive on the Court. 17 Furthermore, it is not the Court's function under Rule 45 of the Rules of Court, as amended, to review, examine and evaluate or weigh the probative value of the evidence presented. 18 To reiterate, the issue being raised by the petitioners does not involve a question of law, but a question of fact, not cognizable by this Court in a petition for review under Rule 45. The jurisdiction of the Court in such a case is limited to reviewing only errors of law, unless the factual findings being assailed are not supported by evidence on record or the impugned judgment is based on a misapprehension of facts. 19 A careful study of the records of the case reveal that the appellate court affirmed the trial court's factual findings as follows:First. Receipts Nos. 27331, 27318, 27339 and 27346 were included in the private respondent's lost booklet, which loss was duly advertised in a newspaper of general circulation; thus, the private respondent could not have officially issued them to the petitioners to cover the alleged payments on the dates appearing thereon.Second. There was something amiss in the way the receipts were issued to the petitioners, as one receipt bearing a higher serial number was issued ahead of another receipt bearing a lower serial number, supposedly covering a later payment. The petitioners failed to explain the apparent mix-up in these receipts, and no attempt was made in this regard. HTSIEaThird. The fact that the salesman's name was invariably left blank in the four receipts and that the petitioners could not even remember the name of the supposed impostor who received the said payments strongly argue against the veracity of the petitioners' claim.We find no cogent reason to reverse the said findings.The dismissal of the petition is inevitable even upon close perusal of the merits of the case.Payment is a mode of extinguishing an obligation. 20 Article 1240 of the Civil Code provides that payment shall be made to the person in whose favor the obligation has been constituted, or his successor-in-interest, or any person

authorized to receive it. 21 In this case, the payments were purportedly made to a "supervisor" of the private respondent, who was clad in an SMC uniform and drove an SMC van. He appeared to be authorized to accept payments as he showed a list of customers' accountabilities and even issued SMC liquidation receipts which looked genuine. Unfortunately for petitioner Francisco Culaba, he did not ascertain the identity and authority of the said supervisor, nor did he ask to be shown any identification to prove that the latter was, indeed, an SMC supervisor. The petitioners relied solely on the man's representation that he was collecting payments for SMC. Thus, the payments the petitioners claimed they made were not the payments that discharged their obligation to the private respondent.

The basis of agency is representation. 22 A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. 23 In the instant case, the petitioners' loss could have been avoided if they had simply exercised due diligence in ascertaining the identity of the person to whom they allegedly made the payments. The fact that they were parting with valuable consideration should have made them more circumspect in handling their business transactions. Persons dealing with an assumed agent are bound at their peril to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. 24 The petitioners in this case failed to discharge this burden, considering that the private respondent vehemently denied that the payments were accepted by it and were made to its authorized representative.Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something, which a prudent and reasonable man would not do. 25 In the case at bar, the most prudent thing the petitioners should have done was to ascertain the identity and authority of the person who collected their payments. Failing this, the petitioners cannot claim that they acted in good faith when they made such payments. Their claim therefor is negated by their negligence, and they are bound by its consequences. Being negligent in this regard, the petitioners cannot seek relief on the basis of a supposed agency. 26 WHEREFORE, the instant petition is hereby DENIED. The assailed Decision dated April 16, 1996, and the Resolution dated July 19, 1996 of the Court of Appeals are AFFIRMED. Costs against the petitioners. ATICcSSO ORDERED.Puno, Quisumbing, Austria-Martinez and Tinga, JJ ., concur.

7) SECOND DIVISION[G.R. No. 82233. March 22, 1990.]

JOSE BARITUA and EDGAR BITANCOR, petitioners, vs. HONORABLE COURT OF APPEALS, NICOLAS NACARIO and VICTORIA RONDA NACARIO, respondents.Ernesto A. Atienza for private respondents.SYLLABUS1. CIVIL LAW; OBLIGATION; MODES OF EXTINGUISHMENT. — Obligations are extinguished by various modes among them being by payment. Article 1231 of the Civil Code of the Philippines provides: Art. 1231. Obligations are extinguished: (1) By payment or performance; (2) By the loss of the thing due; (3) By the condonation or remission of the debt; (4) By the confusion or merger of the rights of creditor and debtor; (5) By compensation; (6) By novation.2. ID.; ID.; ID.; SUCCESSORS IN INTEREST AUTHORIZED TO RECEIVE PAYMENT IN FAVOR OF DECEASED PERSON. — Article 1240 of the Civil Code of the Philippines enumerates the persons to whom payment to extinguish an obligation should be made. Art. 1240. Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. Certainly there can be no question that Alicia and her son with the deceased are the successors in interest referred to in law as the persons authorized to receive payment.3. ID.; WILLS AND SUCCESSION; COMPULSORY HEIRS; PARENTS OF THE DECEASED SUCCEED ONLY WHEN THE LATTER DIES WITHOUT A LEGITIMATE DESCENDANT. — The Civil Code states: Article 887. The following are compulsory heirs: 1. Legitimate children and descendants, with respect to their legitimate parents and ascendants; 2. In default of the foregoing, legitimate parents and ascendants, with respect to their legitimate children and descendants; 3. The widow or widower; 4. Acknowledged natural children, and natural children by legal fiction; 5. Other illegitimate children referred to in Article 287. Compulsory heirs mentioned in Nos. 3, 4 and 5 are not excluded by those in Nos. 1 and 2. Neither do they exclude one another. Article 985. In default of legitimate children and descendants of the deceased, his parents and ascendants shall inherit from him, to the exclusion of collateral relatives. It is patently clear that the parents of the deceased succeed only when the latter dies without a legitimate descendant. On the other hand, the surviving spouse concurs with all classes of heirs. As it has been established that Bienvenido was married to Alicia and that they begot a child, the private respondents are not successors-in-interest of Bienvenido; they are not compulsory heirs.4. ID.; ID.; ID.; ESTRANGEMENT OF SURVIVING SPOUSE WITH THE DECEASED SPOUSE, NOT A GROUND FOR DISQUALIFICATION. — The petitioners acted correctly in settling their obligation with Alicia as the widow of Bienvenido and as the natural guardian of their lone child. This is so even if Alicia had been estranged from Bienvenido. Mere estrangement is not a legal ground for the disqualification of a surviving spouse as an heir of the deceased spouse.

5. REMEDIAL LAW; SPECIAL PROCEEDINGS; CLAIMS AGAINST THE ESTATE; LOAN FOR THE PURCHASE OF PERSONAL PROPERTY AND FUNERAL EXPENSES CONSIDERED MONEY CLAIMS AGAINST THE ESTATE OF THE DECEASED. — Private respondents, as alleged creditors of Bienvenido, seek relief and compensation from the petitioners. While it may be true that the private respondents loaned to Bienvenido the purchase price of the damaged tricycle and shouldered the expenses for his funeral, the said purchase price and expenses are but money claims against the estate of their deceased son.D E C I S I O NSARMIENTO, J p:This petition for review on certiorari assails as erroneous and contrary to existing relevant laws and applicable jurisprudence the decision 1 of the Court of Appeals dated December 11, 1987 which reversed and set aside that of the Regional Trial Court, Branch XXXII, at Pili, Camarines Sur. 2 The challenged decision adjudged the petitioners liable to the private respondents in the total amount of P20,505.00 and for costs. LexLibThe facts are as follows:In the evening of November 7, 1979, the tricycle then being driven by Bienvenido Nacario along the national highway at Barangay San Cayetano, in Baao, Camarines Sur, figured in an accident with JB Bus No. 80 driven by petitioner Edgar Bitancor and owned and operated by petitioner Jose Baritua. 3 As a result of that accident Bienvenido and his passenger died, 4 and the tricycle was damaged. 5 No criminal case arising from the incident was ever instituted. 6 Subsequently, on March 27, 1980, as a consequence of the extra-judicial settlement of the matter negotiated by the petitioners and the bus' insurer — Philippine First Insurance Company, Incorporated (PFICI for brevity) — Bienvenido Nacario's widow, Alicia Baracena Vda. de Nacario, received P18,500.00. In consideration of the amount she received, Alicia executed on March 27, 1980 a "Release of Claim" in favor of the petitioners and PFICI, releasing and forever discharging them from all actions, claims, and demands arising from the accident which resulted in her husband's death and the damage to the tricycle which the deceased was then driving. Alicia likewise executed an affidavit of desistance in which she formally manifested her lack of interest in instituting any case, either civil or criminal, against the petitioners. 7 On September 2, 1981, or about one year and ten months from the date of the accident on November 7, 1979, the private respondents, who are the parents of Bienvenido Nacario, filed a complaint for damages against the petitioners with the then Court of First Instance of Camarines Sur. 8 In their complaint, the private respondents alleged that during the vigil for their deceased son, the petitioners through their representatives promised them (the private respondents) that as extra-judicial settlement, they shall be indemnified for the death of their son, for the funeral expenses incurred by reason thereof, and for the damage to the tricycle the purchase price of

which they (the private respondents) only loaned to the victim. The petitioners, however, reneged on their promise and instead negotiated and settled their obligations with the long-estranged wife of their late son. The Nacario spouses prayed that the defendants, petitioners herein, be ordered to indemnify them in the amount of P25,000.00 for the death of their son Bienvenido, P10,000.00 for the damaged tricycle, P25,000.00 for compensatory and exemplary damages, P5,000.00 for attorney's fees, and for moral damages. 9 After trial, the court a quo dismissed the complaint, holding that the payment by the defendants (herein petitioners) to the widow and her child, who are the preferred heirs and successors-in-interest of the deceased Bienvenido to the exclusion of his parents, the plaintiffs (herein private respondents), extinguished any claim against the defendants (petitioners). 10 The parents appealed to the Court of Appeals which reversed the judgment of the trial court. The appellate court ruled that the release executed by Alicia Baracena Vda. de Nacario did not discharge the liability of the petitioners because the case was instituted by the private respondents in their own capacity and not as "heirs, representatives, successors, and assigns" of Alicia; and Alicia could not have validly waived the damages being prayed for (by the private respondents) since she was not the one who suffered these damages arising from the death of their son. Furthermore, the appellate court said that the petitioners "failed to rebut the testimony of the appellants (private respondents) that they were the ones who bought the tricycle that was damaged in the incident. Appellants had the burden of proof of such fact, and they did establish such fact in their testimony . . . ." 11 Anent the funeral expenses," (T)he expenses for the funeral were likewise shouldered by the appellants (the private respondents). This was never contradicted by the appellees (petitioners). . . . Payment (for these) were made by the appellants, therefore, the reimbursement must accrue in their favor." 12 Consequently, the respondent appellate court ordered the petitioners to pay the private respondents P10,000.00 for the damage of the tricycle, P5,000.00 for "complete" funeral services, P450.00 for cemetery lot, P55.00 for oracion adulto, and P5,000.00 for attorney's fees. 13 The petitioners moved for a reconsideration of the appellate court's decision 14 but their motion was denied. 15 Hence, this petition. cdllThe issue here is whether or not the respondent appellate court erred in holding that the petitioners are still liable to pay the private respondents the aggregate amount of P20,505.00 despite the agreement of extrajudicial settlement between the petitioners and the victim's compulsory heirs.The petition is meritorious.Obligations are extinguished by various modes among them being by payment. Article 1231 of the Civil Code of the Philippines provides:Art. 1231. Obligations are extinguished:(1) By payment or performance;(2) By the loss of the thing due;(3) By the condonation or remission of the debt;

(4) By the confusion or merger of the rights of creditor and debtor;(5) By compensation;(6) By novation.(Emphasis ours.)There is no denying that the petitioners had paid their obligation arising from the accident that occurred on November 7, 1979. The only question now is whether or not Alicia, the surviving spouse and the one who received the petitioners' payment, is entitled to it. LLprArticle 1240 of the Civil Code of the Philippines enumerates the persons to whom payment to extinguish an obligation should be made.Art. 1240. Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it.Certainly there can be no question that Alicia and her son with the deceased are the successors in interest referred to in law as the persons authorized to receive payment. The Civil Code states:Article 887. The following are compulsory heirs:1. Legitimate children and descendants, with respect to their legitimate parents and ascendants;2. In default of the foregoing, legitimate parents and ascendants, with respect to their legitimate children and descendants;3. The widow or widower;4. Acknowledged natural children, and natural children by legal fiction;5. Other illegitimate children referred to in Article 287.Compulsory heirs mentioned in Nos. 3, 4 and 5 are not excluded by those in Nos. 1 and 2. Neither do they exclude one another. (Emphasis ours.)Article 985. In default of legitimate children and descendants of the deceased, his parents and ascendants shall inherit from him, to the exclusion of collateral relatives.(Emphasis ours.) CdprIt is patently clear that the parents of the deceased succeed only when the latter dies without a legitimate descendant. On the other hand, the surviving spouse concurs with all classes of heirs. As it has been established that Bienvenido was married to Alicia and that they begot a child, the private respondents are not successors-in-interest of Bienvenido; they are not compulsory heirs. The petitioners therefore acted correctly in settling their obligation with Alicia as the widow of Bienvenido and as the natural guardian of their lone child. This is so even if Alicia had been estranged from Bienvenido. Mere estrangement is not a legal ground for the disqualification of a surviving spouse as an heir of the deceased spouse.Neither could the private respondents, as alleged creditors of Bienvenido, seek relief and compensation from the petitioners. While it may be true that the private respondents loaned to Bienvenido the purchase price of the damaged tricycle and shouldered the expenses for his funeral, the said purchase price and expenses are but money claims against the estate of their deceased son. 16 These money claims are not the liabilities of the petitioners who, as we have said, had been released by the agreement of the

extra-judicial settlement they concluded with Alicia Baracena Vda. de Nacario, the victim's widow and heir, as well as the natural guardian of their child, her co-heir. As a matter of fact, she executed a "Release Of Claim" in favor of the petitioners.

WHEREFORE, the petition is GRANTED; the decision of the Court of Appeals is REVERSED and SET ASIDE and the decision of the Regional Trial Court is hereby REINSTATED. Costs against the private respondents. prLLSO ORDERED.Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.