G.R. No. 110053 October 16, 1995
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS, CELEBRADA MANGUBAT and ABNER MANGUBAT, respondents.
vs.
COURT OF APPEALS, CELEBRADA MANGUBAT and ABNER MANGUBAT, respondents.
REGALADO, J.:
This appeal by certiorari sprouted from the judgment of respondent Court of Appeals promulgated on September 9, 1992 in CA-G.R. CV No. 28311, and its resolution dated April 7, 1993 denying petitioner's motion for reconsideration. 1 Said adjudgments, in turn, were rooted in the factual groundwork of this case which is laid out hereunder.
On July 20, 1981, herein petitioner Development Bank of the Philippines (DBP) executed a "Deed of Absolute Sale" in favor of respondent spouses Celebrada and Abner Mangubat over a parcel of unregistered land identified as Lot 1, PSU-142380, situated in the Barrio of Toytoy, Municipality of Garchitorena, Province of Camarines Sur, containing an area of 55.5057 hectares, more or less.
The land, covered only by a tax declaration, is known to have been originally owned by one Presentacion Cordovez, who, on February 4, 1937, donated it to Luciano Sarmiento. On June 8, 1964, Luciano Sarmiento sold the land to Pacifico Chica.
On April 27, 1965, Pacifico Chica mortgaged the land to DBP to secure a loan of P6,000.00. However, he defaulted in the payment of the loan, hence DBP caused the extrajudicial foreclosure of the mortgage. In the auction sale held on September 9, 1970, DBP acquired the property as the highest bidder and was issued a certificate of sale on September 17, 1970 by the sheriff. The certificate of sale was entered in the Book of Unregistered Property on September 23, 1970. Pacifico Chica failed to redeem the property, and DBP consolidated its ownership over the same.
On October 14, 1980, respondent spouses offered to buy the property for P18,599.99. DBP made a counter-offer of P25,500.00 which was accepted by respondent spouses. The parties further agreed that payment was to be made within six months thereafter for it to be considered as cash payment. On July 20, 1981, the deed of absolute sale, which is now being assailed herein, was executed by DBP in favor of respondent spouses. Said document contained a waiver of the seller's warranty against eviction. 2
Thereafter, respondent spouses applied for an industrial tree planting loan with DBP. The latter required the former to submit a certification from the Bureau of Forest Development that the land is alienable and disposable. However, on October 29, 1981, said office issued a certificate attesting to the fact that the said property was classified as timberland, hence not subject to disposition. 3
The loan application of respondent spouses was nevertheless eventually approved by DBP in the sum of P140,000.00, despite the aforesaid certification of the bureau, on the understanding of the parties that DBP would work for the release of the land by the former Ministry of Natural Resources. To secure payment of the loan, respondent spouses executed a real estate mortgage over the land on March 17, 1982, which document was registered in the Registry of Deeds pursuant to Act No. 3344.
The loan was then released to respondent spouses on a staggered basis. After a substantial sum of P118,540.00 had been received by private respondents, they asked for the release of the remaining amount of the loan. It does not appear that their request was acted upon by DBP, ostensibly because the release of the land from the then Ministry of Natural Resources had not been obtained.
On July 7, 1983, respondent spouses, as plaintiffs, filed a complaint against DBP in the trial court 4 seeking the annulment of the subject deed of absolute sale on the ground that the object thereof was verified to be timberland and, therefore, is in law an inalienable part of the public domain. They also alleged that petitioner, as defendant therein, acted fraudulently and in bad faith by misrepresenting itself as the absolute owner of the land and in incorporating the waiver of warranty against eviction in the deed of sale. 5
In its answer, DBP contended that it was actually the absolute owner of the land, having purchased it for value at an auction sale pursuant to an extrajudicial foreclosure of mortgage; that there was neither malice nor fraud in the sale of the land under the terms mutually agreed upon by the parties; that assuming arguendo that there was a flaw in its title, DBP can not be held liable for anything inasmuch as respondent spouses had full knowledge of the extent and nature of DBP's rights, title and interest over the land.
It further averred that the annulment of the sale and the return of the purchase price to respondent spouses would redound to their benefit but would result in petitioner's prejudice, since it had already released P118,540.00 to the former while it would be left without any security for the P140,000.00 loan; and that in the remote possibility that the land is reverted to the public domain, respondent spouses should be made to immediately pay, jointly and severally, the total amount of P118,540.00 with interest at 15% per annum, plus charges and other expenses. 6
On May 25, 1990, the trial court rendered judgment annulling the subject deed of absolute sale and ordering DBP to return the P25,500.00 purchase price, plus interest; to reimburse to respondent spouses the taxes paid by them, the cost of the relocation survey, incidental expenses and other damages in the amount of P50,000.00; and to further pay them attorney's fees and litigation expenses in the amount of P10,000.00, and the costs of suit. 7
In its recourse to the Court of Appeals, DBP raised the following assignment of errors:
1. The trial court erred in declaring the deed of absolute sale executed between the parties canceled and annulled on the ground that therein defendant-appellant had no title over the property subject of the sale.
2. The trial court erred in finding that defendant-appellant DBP acted fraudulently and in bad faith or that it had misrepresented facts since it had prior knowledge that subject property was part of the public domain at the time of sale to therein plaintiffs-appellees.
3. The trial court erred in finding said plaintiffs-appellees' waiver of warranty against eviction void.
4. The trial court erred awarding to therein plaintiffs-appellees damages arising from an alleged breach of contract.
5. The trial court erred in not ordering said plaintiffs-appellees to pay their loan obligation to defendant-appellant DBP in the amount of P118,540. 8
As substantially stated at the outset, respondent Court of Appeals rendered judgment modifying the disposition of the court below by deleting the award for damages, attorney's fees, litigation expenses and the costs, but affirming the same in all its other aspects. 9 On April 7, 1993, said appellate court also denied petitioner's motion for reconsideration. 10
Not satisfied therewith, DBP interposed the instant petition for review on certiorari, raising the following issues:
1. Whether or not private respondent spouses Celebrada and Abner Mangubat should be ordered to pay petitioner DBP their loan obligation due under the mortgage contract executed between them and DBP; and
2. Whether or not petitioner should reimburse respondent spouses the purchase price of the property and the amount of P11,980.00 for taxes and expenses for the relocation Survey. 11
Considering that neither party questioned the legality and correctness of the judgment of the court a quo, as affirmed by respondent court, ordering the annulment of the deed of absolute sale, such decreed nullification of the document has already achieved finality. We only need
The Court of Appeals, after an extensive discussion, found that there had been no bad faith on the part of either party, and this r, therefore, to dwell on the effects of that declaration of nullity.emains uncontroverted as a fact in the case at bar. Correspondingly, respondent court correctly applied the rule that if both parties have no fault or are not guilty, the restoration of what was given by each of them to the other is consequently in order. 12 This is because the declaration of nullity of a contract which is void ab initio operates to restore things to the state and condition in which they were found before the execution thereof. 13
We also find ample support for said propositions in American jurisprudence. The effect of an application of the aforequoted rule with respect to the right of a party to recover the amount given as consideration has been passed upon in the case of Leather Manufacturers National Bank vs. Merchants National Bank 14 where it was held that: "Whenever money is paid upon the representation of the receiver that he has either a certain title in property transferred in consideration of the payment or a certain authority to receive the money paid, when in fact he has no such title or authority, then, although there be no fraud or intentional misrepresentation on his part, yet there is no consideration for the payment, the money remains, in equity and good conscience, the property of the payer and may be recovered back by him."
Therefore, the purchaser is entitled to recover the money paid by him where the contract is set aside by reason of the mutual material mistake of the parties as to the identity or quantity of the land sold. 15 And where a purchaser recovers the purchase money from a vendor who fails or refuses to deliver the title, he is entitled as a general rule to interest on the money paid from the time of payment. 16
A contract which the law denounces as void is necessarily no contract whatever, and the acts of the parties in an effort to create one can in no wise bring about a change of their legal status. The parties and the subject matter of the contract remain in all particulars just as they did before any act was performed in relation thereto. 17
An action for money had and received lies to recover back money paid on a contract, the consideration of which has failed. 18 As a general rule, if one buys the land of another, to which the latter is supposed to have a good title, and, in consequence of facts unknown alike to both parties, he has no title at all, equity will cancel the transaction and cause the purchase money to be restored to the buyer, putting both parties in status quo. 19
Thus, on both local and foreign legal principles, the return by DBP to respondent spouses of the purchase price, plus corresponding interest thereon, is ineluctably called for.
Petitioner likewise contends that the trial court and respondent Court of Appeals erred in ordering the reimbursement of taxes and the cost of the relocation survey, there being no factual or legal basis therefor. It argues that private respondents merely submitted a "list of damages" allegedly incurred by them, and not official receipts of expenses for taxes and said survey. Furthermore, the same list has allegedly not been identified or even presented at any stage of the proceedings, since it was vigorously objected to by DBP.
Contrary to the claim of petitioner, the list of damages was presented in the trial court and was correspondingly marked as "Exhibit P." 20 The said exhibit was, thereafter, admitted by the trial court but only as part of the testimonial evidence for private respondents, as stated in its Order dated August 16, 1988. 21
However, despite that admission of the said list of damages as evidence, we agree with petitioner that the same cannot constitute sufficient legal basis for an award of P4,000.00 and P7,980.00 as reimbursement for land taxes and expenses for the relocation survey, respectively. The list of damages was prepared extrajudicially by respondent spouses by themselves without any supporting receipts as bases thereof or to substantiate the same. That list, per se, is necessarily self-serving and, on that account, should have been declared inadmissible in evidence as the factum probans.
In order that damages may be recovered, the best evidence obtainable by the injured party must be presented. Actual or compensatory damages cannot be presumed, but must be duly proved, and so proved with a reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered and on evidence of the actual amount thereof. If the proof is flimsy and unsubstantial, no damages will be awarded. 22
Turning now to the issue of whether or not private respondents should be made to pay petitioner their loan obligation amounting to P118,540.00, we answer in the affirmative.
In its legal context, the contract of loan executed between the parties is entirely different and discrete from the deed of sale they entered into. The annulment of the sale will not have an effect on the existence and demandability of the loan. One who has received money as a loan is bound to pay to the creditor an equal amount of the same kind and quality. 23
The fact that the annulment of the sale will also result in the invalidity of the mortgage does not have an effect on the validity and efficacy of the principal obligation, for even an obligation that is unsupported by any security of the debtor may also be enforced by means of an ordinary action. Where a mortgage is not valid, as where it is executed by one who is not the owner of the
property, 24 or the consideration of the contract is simulated 25 or false, 26 the principal obligation which it guarantees is not thereby rendered null and void. That obligation matures and becomes demandable in accordance with the stipulations pertaining to it.
property, 24 or the consideration of the contract is simulated 25 or false, 26 the principal obligation which it guarantees is not thereby rendered null and void. That obligation matures and becomes demandable in accordance with the stipulations pertaining to it.
Under the foregoing circumstances, what is lost is only the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the mortgage deed remains as evidence or proof of a personal obligation of the debtor, and the amount due to the creditor may be enforced in an ordinary personal action. 27
It was likewise incorrect for the Court of Appeals to deny the claim of petitioner for payment of the loan on the ground that it failed to present the promissory note therefor. While respondent court also made the concession that its judgment was accordingly without prejudice to the filing by petitioner of a separate action for the collection of that amount, this does not detract from the adverse effects of that erroneous ruling on the proper course of action in this case.
The fact is that a reading of the mortgage contract 28 executed by respondent spouses in favor of petitioner, dated March 17, 1982, will readily show that it embodies not only the mortgage but the complete terms and conditions of the loan agreement as well. The provisions of said contract, specifically paragraphs 16 and 28 thereof, are so precise and clear as to thereby render unnecessary the introduction of the promissory note which would merely serve the same purpose.
Furthermore, respondent Celebrada Mangubat expressly acknowledged in her testimony that she and her husband are indebted to petitioner in the amount of P118,000.00, more or less. 29 Admissions made by the parties in the pleadings or in the course of the trial or other proceedings do not require proof and can not be contradicted unless previously shown to have been made through palpable mistake. 30
Thus, the mortgage contract which embodies the terms and conditions of the loan obligation of respondent spouses, as well as respondent Celebrada Mangubat's admission in open court, are more than adequate evidence to sustain petitioner's claim for payment of private respondents' aforestated indebtedness and for the adjudication of DBP's claim therefor in the very same action now before us.
It is also worth noting that the adjustment and allowance of petitioner's demand by counterclaim or set-off in the present action, rather than by another independent action, is favored or encouraged by law. Such a practice serves to avoid circuitry of action, multiplicity of suits, inconvenience, expense, and unwarranted consumption of the time of the court. The trend of judicial decisions is toward a liberal extension of the right to avail of counterclaims or set-offs. 31
The rules on counterclaim are designed to achieve the disposition of a whole controversy of the conflicting claims of interested parties at one time and in one action, provided all parties can be brought before the court and the matter decided without prejudicing the rights of any party. 32
WHEREFORE, the judgment appealed from is hereby MODIFIED, by deleting the award of P11,980.00 as reimbursement for taxes and expenses for the relocation survey, and ordering respondent spouses Celebrada and Abner Mangubat to pay petitioner Development Bank of the Philippines the amount of P118,540.00, representing the total amount of the loan released to them, with interest of 15% per annum plus charges and other expenses in accordance with their mortgage contract. In all other respects, the said judgment of respondent Court of Appeals is AFFIRMED.
SO ORDERED.
Narvasa, C.J., Puno, Mendoza and Francisco, JJ., concur.
G.R. No. L-5267 October 27, 1953
LUZ HERMOSA, as administratrix of the Intestate Estate of Fernando Hermosa, Sr., and FERNANDO HERMOSA, JR., petitioners,
vs.
EPIFANIO M. LONGARA, respondent.
vs.
EPIFANIO M. LONGARA, respondent.
Manuel O. Chan for petitioners.
Jacinto R. Bohol for respondent.
Jacinto R. Bohol for respondent.
LABRADOR, J.:
This is an appeal by way of certiorari against a decision of the Court of Appeals, fourth division, approving certain claims presented by Epifanio M. Longara against the testate estate of Fernando Hermosa, Sr. The claims are of three kinds, namely, P2,341.41 representing credit advances made to the intestate from 1932 to 1944, P12,924.12 made to his son Francisco Hermosa, and P3,772 made to his grandson, Fernando Hermosa, Jr. from 1945 to 1947, after the death of the intestate, which occurred in December, 1944. The claimant presented evidence and the Court of Appeals found, in accordance therewith, that the intestate had asked for the said credit advances for himself and for the members of his family "on condition that their payment should be made by Fernando Hermosa, Sr. as soon as he receive funds derived from the sale of his property in Spain." Claimant had testified without opposition that the credit advances were to be "payable as soon as Fernando Hermosa, Sr.'s property in Spain was sold and he receive money derived from the sale." The Court of Appeals held that payment of the advances did not become due until the administratrix received the sum of P20,000 from the buyer of the property. Upon authorization of the probate court in October, 1947, and the same was paid for subsequently. The Claim was filed on October 2, 1948.
It is contended on this appeal that the obligation contracted by the intestate was subject to a condition exclusively dependent upon the will of the debtor (a condicion potestativa) and therefore null and void, in accordance with article 1115 of the old Civil Code. The case of Osmeña vs. Rama, (14 Phil. 99) is cited to support appellants contention. In this case, this court seems to have filed that a promise to pay an indebtedness "if a house of strong materials is sold" is an obligation the performance of which depended on the will of the debtor. We have examined this case and we find that the supposed ruling was merely an assumption and the same was not the actual ruling of the case.
A careful consideration of the condition upon which payment of the sums advanced was made to depend, "as soon as he (intestate) receive funds derived from the sale of his property in Spain," discloses the fact that the condition in question does not depend exclusively upon the will of the debtor, but also upon other circumstances beyond his power or control. If the condition were "if he decides to sell his house." or "if he likes to pay the sums advanced," or any other condition of similar import implying that upon him (the debtor) alone payment would depend, the condition would be protestativa, dependent exclusively upon his will or discretion. In the form that the condition was found by the Court of Appeals however the condition implies that the intestate had already decided to sell his house, or at least that he had made his creditors believe that he had done so, and that all that we needed to make his obligation (to pay his indebtedness) demandable is that the sale be consummated and the price thereof remitted to the islands. Note that if the intestate would prevent or would have prevented the consummation of the sale voluntarily, the condition would be or would have been deemed or considered complied with (article 1119, old Civil Code).The will to sell on the part of the intestate was, therefore, present in fact, or presumed legally to exist, although the price and other conditions thereof were still within his discretion and final approval. But in addition of the sale to him (the intestate-vendor), there were still other conditions that had no concur to effect the sale, mainly that of the presence of a buyer, ready, able and willing to purchase the property under the conditions demanded by the intestate. Without such a buyer the sale could not be carried out or the proceeds thereof sent to the islands. It is evident, therefore sent to the islands. It is evident, therefore, that the condition of the obligation was not a purely protestative one, depending exclusively upon the will of the intestate, but a mixed one, depending partly upon the will of intestate and partly upon chance, i.e., the presence of a buyer of the property for the price and under the conditions desired by the intestate. The obligation is clearly governed by the second sentence of article 1115 of the old Civil Code (8 Manresa, 126). The condition is, besides, a suspensive condition, upon the happening of which the obligation to pay is made dependent. And upon the happening of the condition, the debt became immediately due and demandable. (Article 1114, old Civil Code; 8 Manresa, 119).
One other point needs to be considered, and this is the fact that the sale was not effected in the lifetime of the debtor (the intestate), but after his death and by his administrator, the very wife of the claimant. On this last circumstance we must bear in mind that the Court of Appeals found no evidence to show that the claim was the product of a collusion or connivance between the administratrix and the claimant. That there was really a promise made by the intestate to pay for the credit advances maybe implied from the fact that the receipts thereof had been preserved. Had the advances been made without intention of demanding their payment later, said receipts would not have been preserved. Regularity of the advances and the close relationship between the intestate and the claimant also support this conclusion.
As to the fact that the suspensive condition took place after the death of the debtor, and that advances were made more than ten years before the sale, we supported in our conclusion that the same is immaterial by Sanchez Roman, who says, among other things, as to conditional obligations:
1a La obligacion contractual afectada por condicion suspensiva. no es exigible hasta que se cumpla la condicion, . . .
2 a El cumplimiento de la condicion suspensiva retrotae los efectos del acto juridico originario de la obligacion a que aquella afecta, al tiempo de lacelebracion de este;
3 a La referida retroaccion, no solo tiene lugar cuando el cumplimiento de la condicion se verifica en vida de los contrayentes, que tambien se produce cuando aquel se realiza despues de la muerte de estos. (4 Sanchez Roman, p. 122) (Emphasis supplied.)
As the obligation retroacts to the date when the contract was entered into, all amounts advanced from the time of the agreement became due, upon the happening of the suspensive condition. As the obligation to pay became due and demandable only when the house was sold and the proceeds received in the islands, the action to recover the same only accrued, within the meaning of the statute of limitations, on date the money became available here hence the action to recover the advances has not yet prescribed.
The above considerations dispose of the most important questions raised on this appeal. It is also contended that the third group of claims, i.e., credits furnished the intestate's grandson after his (intestate's) death in 1944, should have been allowed. We find merit in this contention. Even if authorization to furnish necessaries to his grandson may have been given, this authorization could not be made to extend after his death, for two obvious reasons. First because the obligation to furnish support is personal and is extinguished upon the death of the person obliged to give support(article 150, old Civil Code), and second because upon the death of a principal (the intestate in this case), his agent's authority or authorization is deemed terminated (article 1732, old Civil Code). That part of the decision allowing this group of claims, amounting to P3,772 should be reversed.
One last contention of the appellant is that the claims are barred by the statute of non-claims. It does not appear from the record that this question was ever raised in any of the courts below. We are, therefore, without authority under our rules to consider this issue at this stage of the proceedings.
The judgment appealed from is hereby affirmed in so far as it approves the claims of appellee in the amounts of P2,341 and P12,942.12, and reversed as to that of P3,772. Without costs.
Bengzon, Padilla, Tuason, Montemayor, Reyes, Jugo, and Bautista Angelo, JJ., concur.
Separate Opinions
PARAS, C. J., concurring and dissenting:
I concur in the majority decision insofar as it reverses the appealed judgment allowing the claim for P3,772, but dissent therefrom insofar as it affirms the appealed judgment approving appellee's other claims.
The principal question is whether the stipulation to pay the advances "on condition that their payment should be made by Fernando Hermosa, Sr. as soon as he receives funds derived from the sale of his property in Spain, and making said advances "payable as soon as Fernando Hermosa, Sr.'s property in Spain was sold and he received money derived from the sale," condicion potestativa and therefore null and void in accordance with article 1115 of the old Civil Code. My answer is in the affirmative, because it is very obvious that the matter of the sale of the house rested on the sole will of the debtor, unaffected by any outside consideration or influence. The majority admit that if the condition were "if he decides to sell his house" or "if he likes to pay the sums advanced, the same would be potestative. I think a mere play or words is invoked, as I cannot see any substantial difference. Under the condition imposed by Fernando Hermosa, Sr., it is immaterial whether or not he had already decided to sell his house, since there is no pretence that acceptable conditions of the sale had been made the subject of an agreement, such that if such conditions presented themselves the debtor would be bound to proceed with the sale. In the case at bar, the terms are still subject to the sale judgment — if not whims and caprice — of Fernando Hermosa, Sr. In fact no sale was effected during his lifetime.
As the condition above referred to is null and void, the debt resulting from the advances made to Fernando Hermosa, Sr. became either immediately demandable or payable within a term to be fixed by the court. In both cases the action has prescribed after the lapse of ten years. In the case of Gonzales vs. De Jose (66 Phil., 369, 371), this court already held as follows:
We hold that the two promissory notes are governed by article 1128 because under the terms thereof the plaintiff intended to grant the defendant a period within which to pay his debts. As the promissory notes do not affix this period, it is for the court to fix the same. (Citing cases.) The action to ask the court to fix the period has already prescribed in accordance with section 43 (1) of the Code of Civil Procedure. This period of prescription is ten years, which has already elapsed from the execution of the promissory notes until the filing of the action on June 1, 1934. The action which should be brought in accordance with articles 1128 is different from the action for the recovery of the amount of the notes, although the effects of both are the same, being, like other civil actions, subject to the rules of prescription.
The majority also contend that the condition in question depended on other factors than the sole will of the debtor, and cite the presence of a buyer, ready, able and willing to purchase the property. This is of no moment, because, as already stated, in the absence of any contract setting forth the minimum or maximum terms which would be acceptable to the debtor, nobody could legally compel Fernando Hermosa, Sr. to make any sale.
G.R. No. 83851. March 3, 1993.
VISAYAN SAWMILL COMPANY, INC., and ANG TAY, petitioners, vs. THE HONORABLE COURT OF APPEALS and RJH TRADING, represented by RAMON J. HIBIONADA, proprietor, respondents.
Saleto J. Erames and Edilberto V. Logronio for petitioners.
Eugenio O. Original for private respondent.
SYLLABUS
1. CIVIL LAW; CONTRACT TO SELL; EFFECT OF VENDEE'S FAILURE TO COMPLY WITH POSITIVE SUSPENSIVE CONDITION; CASE AT BAR. — The petitioner corporation's obligation to sell is unequivocally subject to a positive suspensive condition, i.e., the private respondent's opening, making or indorsing of an irrevocable and unconditional letter of credit. The former agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. Otherwise stated, the contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery. Thus, there was to be no actual sale until the opening, making or indorsing of the irrevocable and unconditional letter of credit. Since what obtains in the case at bar is a mere promise to sell, the failure of the private respondent to comply with the positive suspensive condition cannot even be considered a breach — casual or serious — but simply an event that prevented the obligation of petitioner corporation to convey title from acquiring binding force. In Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., this Court stated: ". . . The upshot of all these stipulations is that in seeking the ouster of Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract, but precisely enforcing it according to its express terms. In its suit Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment of a resolutory condition, express or implied (Article 1190); neither was it seeking a declaration that its obligation to sell was extinguished. What it sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object of the contract, possession being a mere incident to its right of ownership. It is elementary that, as stated by Castan, -- 'b) Si la condicion suspensiva llega a faltar, la obligacion se tiene por no existente, y el acreedor pierde todo derecho, incluso el de utilizar las medidas conservativas.'(3 Castan, Derecho Civil, 7a Ed., p. 107). (Also Puig Peña, Der. Civ., T. IV (1), p. 113).'"
2. ID.; ID.; ID.; RESCISSION. — The obligation of the petitioner corporation to sell did not arise; it therefore cannot be compelled by specific performance to comply with its prestation. In short, Article 1191 of the Civil Code does not apply; on the contrary, pursuant to Article 1597 of the Civil Code, the petitioner corporation may totally rescind, as it did in this case, the contract. Said Article provides: "ART. 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations, thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer."
3. ID.; ID.; IN CASE AT BAR, VENDOR'S CONSENT TO DIGGING UP AND GATHERING OF SCRAP IRON NOT CONSTRUED AS DELIVERY THEREOF; REASONS THEREFOR. — Paragraph 6 of the Complaint reads: "6. That on May 17, 1983 Plaintiff with the consent of defendant Ang Tay sent his men to the stockyard of Visayan Sawmill Co., Inc. at Cawitan, Sta. Catalina, Negros Oriental to dig and gather the scrap iron and stock the same for weighing." This permission or consent can, by no stretch of the imagination, be construed as delivery of the scrap iron in the sense that, as held by the public respondent, citing Article 1497 of the Civil Code, petitioners placed the private respondent in control and possession thereof. In the first place, said Article 1497 falls under the Chapter Obligations of the Vendor, which is found in Title VI (Sales), Book IV of the Civil Code. As such, therefore, the obligation imposed therein is premised on an existing obligation to deliver the subject of the contract. In the instant case, in view of the private respondent's failure to comply with the positive suspensive condition earlier discussed, such an obligation had not yet arisen. In the second place, it was a mere accommodation to expedite the weighing and hauling of the iron in the event that the sale would materialize. The private respondent was not thereby placed in possession of and control over the scrap iron. Thirdly, We cannot even assume the conversion of the initial contract or promise to sell into a contract of sale by the petitioner corporation's alleged implied delivery of the scrap iron because its action and conduct in the premises do not support this conclusion. Indeed, petitioners demanded the fulfillment of the suspensive condition and eventually cancelled the contract.
4. ID.; CONTRACTS; DAMAGES; MORAL DAMAGES; PURPOSE OF AWARD THEREOF; EXEMPLARY DAMAGES. — In contracts, such as in the instant case, moral damages may be recovered if defendants acted fraudulently and in bad faith, while exemplary damages may only be awarded if defendants acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. In the instant case, the refusal of the petitioners to deliver the scrap iron was founded on the non-fulfillment by the private respondent of a suspensive condition. It cannot, therefore, be said that the herein petitioners had acted fraudulently and in bad faith or in a wanton, reckless, oppressive or malevolent manner. What this Court stated in Inhelder Corp. vs. Court of Appeals needs to be stressed anew: "At this juncture, it may not be amiss to remind Trial Courts to guard against the award of exhorbitant (sic) damages that are way out of proportion to the environmental circumstances of a case and which, time and again, this Court has reduced or eliminated. Judicial discretion granted to the Courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity." For, indeed, moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason of the defendant's culpable action. Its award is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and it must be proportional to the suffering inflicted.
ROMERO, J., dissenting:
1. CIVIL LAW; CONTRACT OF SALE; DEFINED; WHEN PERFECTED; CASE AT BAR. — Article 1458 of the Civil Code has this definition: "By a contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent." Article 1475 gives the significance of this mutual undertaking of the parties, thus: "The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts." Thus, when the parties entered into the contract entitled "Purchase and Sale of Scrap Iron" on May 1, 1983, the contract reached the stage of perfection, there being a meeting of the' minds upon the object which is the subject matter of the contract and the price which is the consideration. Applying Article 1475 of the Civil Code, from that moment, the parties may reciprocally demand performance of the obligations incumbent upon them, i.e., delivery by the vendor and payment by the vendee.
2. ID.; ID.; DELIVERY; HOW ACCOMPLISHED; CASE AT BAR. — From the time the seller gave access to the buyer to enter his premises, manifesting no objection thereto but even sending 18 or 20 people to start the operation, he has placed the goods in the control and possession of the vendee and delivery is effected. For according to Article 1497, "The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee." Such action or real delivery (traditio) is the act that transfers ownership. Under Article 1496 of the Civil Code, "The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee."
3. ID.; ID.; PROVISION IN CONTRACT REGARDING MODE OF PAYMENT NOT ESSENTIAL REQUISITE THEREOF; WHEN PROVISION CONSIDERED A SUSPENSIVE CONDITION. — a provision in the contract regarding the mode of payment, like the requirement for the opening of the Letter of Credit in this case, is not among the essential requirements of a contract of sale enumerated in Articles 1305 and 1474, the absence of any of which will prevent the perfection of the contract from happening. Likewise, it must be emphasized that not every provision regarding payment should automatically be classified as a suspensive condition. To do so would change the nature of most contracts of sale into contracts to sell. For a provision in the contract regarding the payment of the price to be considered a suspensive condition, the parties must have made this clear in certain and unambiguous terms, such as for instance, by reserving or withholding title to the goods until full payment by the buyer. This was a pivotal circumstance in the Luzon Brokerage case where the contract in question was replete with very explicit provisions such as the following: "Title to the properties subject of this contract remains with the Vendor and shall pass to, and be transferred in the name of the Vendee only upon complete payment of the full price . . .;" 10 the Vendor (Myers) will execute and deliver to the Vendee a definite and absolute Deed of Sale upon full payment of the Vendee . . .; and "should the Vendee fail to pay any of the monthly installments, when due, or otherwise fail to comply with any of the terms and conditions herein stipulated, then this Deed of Conditional Sale shall automatically and without any further formality, become null and void." It is apparent from a careful reading of Luzon Brokerage, as well as the cases which preceded it and the subsequent ones applying its doctrines, that the mere insertion of the price and the mode of payment among the terms and conditions of the agreement will not necessarily make it a contract to sell. The phrase in the contract "on the following terms and conditions" is standard form which is not to be construed as imposing a condition, whether suspensive or resolutory, in the sense of the happening of a future and uncertain event upon which an obligation is made to depend. There must be a manifest understanding that the agreement is in what may be referred to as "suspended animation" pending compliance with provisions regarding payment. The reservation of title to the object of the contract in the seller is one such manifestation. Hence, it has been decided in the case of Dignos v. Court of Appeals that, absent a proviso in the contract that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within the fixed period, the transaction is an absolute contract of sale and not a contract to sell.
4. ID.; ID.; CONTRACT OF SALE DISTINGUISHED FROM CONTRACT TO SELL; EFFECT OF NON-PAYMENT OF PURCHASE PRICE; EFFECT OF DELIVERY ON OWNERSHIP OF OBJECT OF CONTRACT. — In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder. On the other hand, "the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price." In such a contract to sell, the full payment of the price is a positive suspensive condition, such that in the event of non-payment, the obligation of the seller to deliver and transfer ownership never arises. Stated differently, in a contract to sell, ownership is not transferred upon delivery of property but upon full payment of the purchase price. Consequently, in a contract of sale, after delivery of the object of the contract has been made, the seller loses ownership and cannot recover the same unless the contract is rescinded. But in the contract to sell, the seller retains ownership and the buyer's failure to pay cannot even be considered a breach, whether casual or substantial, but an event that prevented the seller's duty to transfer title to the object of the contract.
5. ID.; ID.; CASE OF SYCIP V. NATIONAL COCONUT CORPORATION, ET AL., G.R. NO. L-6618, APRIL 28, 1956, DISTINGUISHED FROM CASE AT BAR. — Worthy of mention before concluding is Sycip v. National Coconut Corporation, et al. since, like this case, it involves a failure to open on time the Letter of Credit required by the seller. In Sycip, after the buyer offered to buy 2,000 tons of copra, the seller sent a telegram dated December 19, 1946 to the buyer accepting the offer but on condition that the latter opens a Letter of Credit within 48 hours. It was not until December 26, 1946, however, that the Letter of Credit was opened. The Court, speaking through Justice Bengzon, held that because of the delay in the opening of the Letter of Credit; the seller was not obliged to deliver the goods. Two factors distinguish Sycip from the case at bar. First, while there has already been a perfected contract of sale in the instant case, the parties in Sycip were still undergoing the negotiation process. The seller's qualified acceptance in Sycip served as a counter offer which prevented the contract from being perfected. Only an absolute and unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract. Second, the Court found in Sycip that time was of the essence for the seller who was anxious to sell to other buyers should the offeror fail to open the Letter of Credit within the stipulated time. In contrast, there are no indicia in this case that can lead one to conclude that time was of the essence for petitioner as would make the eleven-day delay a fundamental breach of the contract.
6. ID.; OBLIGATIONS AND CONTRACTS; RESCISSION UNDER ARTICLE 1191 OF THE CIVIL CODE; WHEN PROPER; DELAY IN PAYMENT FOR TWENTY DAYS NOT CONSIDERED A SUBSTANTIAL BREACH OF CONTRACT; CASE AT BAR. — The right to rescind pursuant to Article 1191 is not absolute. Rescission will not be permitted for slight or casual breach of the contract. Here, petitioners claim that the breach is so substantial as to justify rescission . . . I am not convinced that the circumstances may be characterized as so substantial and fundamental as to defeat the object of the parties in making the agreement. None of the alleged defects in the Letter of Credit would serve to defeat the object of the parties. It is to be stressed that the purpose of the opening of a Letter of Credit is to effect payment. The above-mentioned factors could not have prevented such payment. It is also significant to note that petitioners sent a telegram to private respondents on May 23, 1983 cancelling the contract. This was before they had even received on May 26, 1983 the notice from the bank about the opening of the Letter of Credit. How could they have made a judgment on the materiality of the provisions of the Letter of Credit for purposes of rescinding the contract even before setting eyes on said document? To be sure, in the contract, the private respondents were supposed to open the Letter of Credit on May 15, 1983 but, it was not until May 26, 1983 or eleven (11) days later that they did so. Is the eleven-day delay a substantial breach of the contract as could justify the rescission of the contract? In Song Fo and Co. v. Hawaiian-Philippine Co., it was held that a delay in payment for twenty (20) days was not a violation of an essential condition of the contract which would warrant rescission for non-performance. In the instant case, the contract is bereft of any suggestion that time was of the essence. On the contrary, it is noted that petitioners allowed private respondents' men to dig and remove the scrap iron located in petitioners' premises between May 17, 1983 until May 30, 1983 or beyond the May 15, 1983 deadline for the opening of the Letter of Credit. Hence, in the absence of any indication that the time was of the essence, the eleven-day delay must be deemed a casual breach which cannot justify a rescission.
D E C I S I O N
DAVIDE, JR., J p:
By this petition for review under Rule 45 of the Rules of Court, petitioners urge this Court to set aside the decision of public respondent Court of Appeals in C.A.-G.R. CV No. 08807, 1 promulgated on 16 March 1988, which affirmed with modification, in respect to the moral damages, the decision of the Regional Trial Court (RTC) of Iloilo in Civil Case No. 15128, an action for specific performance and damages, filed by the herein private respondent against the petitioners. The dispositive portion of the trial court's decision reads as follows:
"IN VIEW OF THE ABOVE FINDINGS, judgment is hereby rendered in favor of plaintiff and against the defendants ordering the latter to pay jointly and severally plaintiff, to wit:
1) The sum of Thirty-Four Thousand Five Hundred Eighty Three and 16/100 (P34,583.16), as actual damages;
2) The sum of One Hundred Thousand (P100,000.00) Pesos, as moral damages;
3) The sum of Ten Thousand (P10,000.00) Pesos, as exemplary damages;
4) The sum of TWENTY Five Thousand (P25,000.00) Pesos, as attorney's fees; and
5) The sum of Five Thousand (P5,000.00) Pesos as actual litis expenses." 2
The public respondent reduced the amount of moral damages to P25,000.00.
The antecedent facts, summarized by the public respondent, are as follows:
"On May 1, 1983, herein plaintiff-appellee and defendants-appellants entered into a sale involving scrap iron located at the stockyard of defendant-appellant corporation at Cawitan, Sta. Catalina, Negros Oriental, subject to the condition that plaintiff-appellee will open a letter of credit in the amount of P250,000.00 in favor of defendant-appellant corporation on or before May 15, 1983. This is evidenced by a contract entitled `Purchase and Sale of Scrap Iron' duly signed by both parties.
On May 17, 1983, plaintiff-appellee through his man (sic), started to dig and gather and (sic) scrap iron at the defendant-appellant's (sic) premises, proceeding with such endeavor until May 30 when defendants-appellants allegedly directed plaintiff-appellee's men to desist from pursuing the work in view of an alleged case filed against plaintiff-appellee by a certain Alberto Pursuelo. This, however, is denied by defendants-appellants who allege that on May 23, 1983, they sent a telegram to plaintiff-appellee cancelling the contract of sale because of failure of the latter to comply with the conditions thereof.
On May 24, 1983, plaintiff-appellee informed defendants-appellants by telegram that the letter of credit was opened May 12, 1983 at the Bank of the Philippine Islands main office in Ayala, but then (sic) the transmittal was delayed.
On May 26, 1983, defendants-appellants received a letter advice from the Dumaguete City Branch of the Bank of the Philippine Islands dated May 26, 1983, the content of which is quited (sic) as follows:
'Please be advised that we have received today cable advise from our Head Office which reads as follows:
'Open today our irrevocable Domestic Letter of Credit No. 01456-d fot (sic) P250,000.00 favor ANG TAY c/o Visayan Sawmill Co., Inc. Dumaguete City, Negros Oriental Account of ARMACO-MARSTEEL ALLOY CORPORATION 2nd Floor Alpap 1 Bldg., 140 Alfaro stp (sic) Salcedo Village, Makati, Metro Manila Shipments of about 500 MT of assorted steel scrap marine/heavy equipment expiring on July 24, 1983 without recourse at sight draft drawn on Armaco Marsteel Alloy Corporation accompanied by the following documents: Certificate of Acceptance by Armaco-Marsteel Alloy Corporation shipment from Dumaguete City to buyer's warehouse partial shipment allowed/transhipment (sic) not allowed'.
For your information'.
On July 19, 1983, plaintiff-appellee sent a series of telegrams stating that the case filed against him by Pursuelo had been dismissed and demanding that defendants-appellants comply with the deed of sale, otherwise a case will be filed against them.
In reply to those telegrams, defendants-appellants' lawyer, on July 20, 1983 informed plaintiff-appellee's lawyer that defendant-appellant corporation is unwilling to continue with the sale due to plaintiff-appellee's failure to comply with essential pre-conditions of the contract.
On July 29, 1983, plaintiff-appellee filed the complaint below with a petition for preliminary attachment. The writ of attachment was returned unserved because the defendant-appellant corporation was no longer in operation and also because the scrap iron as well as other pieces of machinery can no longer be found on the premises of the corporation." 3
In his complaint, private respondent prayed for judgment ordering the petitioner corporation to comply with the contract by delivering to him the scrap iron subject thereof; he further sought an award of actual, moral and exemplary damages, attorney's fees and the costs of the suit. 4
In their Answer with Counterclaim, 5 petitioners insisted that the cancellation of the contract was justified because of private respondent's non-compliance with essential pre-conditions, among which is the opening of an irrevocable and unconditional letter of credit not later than 15 May 1983.
During the pre-trial of the case on 30 April 1984, the parties defined the issues to be resolved; these issues were subsequently embodied in the pre-trial order, to wit:
"1. Was the contract entitled Purchase and Sale of Scrap Iron, dated May 1, 1983 executed by the parties cancelled and terminated before the Complaint was filed by anyone of the parties; if so, what are the grounds and reasons relied upon by the cancelling parties; and were the reasons or grounds for cancelling valid and justified?
2. Are the parties entitled to damages they respectively claim under the pleadings?" 6
On 29 November 1985, the trial court rendered its judgment, the dispositive portion of which was quoted earlier.
Petitioners appealed from said decision to the Court of Appeals which docketed the same as C.A.-G.R. CV No. 08807. In their Brief, petitioners, by way of assigned errors, alleged that the trial court erred:
"1. In finding that there was delivery of the scrap iron subject of the sale;
2. In not finding that plaintiff had not complied with the conditions in the contract of sale;
3. In finding that defendants-appellants were not justified in cancelling the sale;
4. In awarding damages to the plaintiff as against the defendants-appellants;
5. In not awarding damages to defendants-appellants." 7
Public respondent disposed of these assigned errors in this wise:
"On the first error assigned, defendants-appellants argue that there was no delivery because the purchase document states that the seller agreed to sell and the buyer agreed to buy 'an undetermined quantity of scrap iron and junk which the seller will identify and designate.' Thus, it is contended, since no identification and designation was made, there could be no delivery. In addition, defendants-appellants maintain that their obligation to deliver cannot be completed until they furnish the cargo trucks to haul the weighed materials to the wharf.
The arguments are untenable. Article 1497 of the Civil Code states:
'The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee.'
In the case at bar, control and possession over the subject matter of the contract was given to plaintiff-appellee, the buyer, when the defendants-appellants as the sellers allowed the buyer and his men to enter the corporation's premises and to dig-up the scrap iron. The pieces of scrap iron then (sic) placed at the disposal of the buyer. Delivery was therefore complete. The identification and designation by the seller does not complete delivery.
On the second and third assignments of error, defendants-appellants argue that under Articles 1593 and 1597 of the Civil Code, automatic rescission may take place by a mere notice to the buyer if the latter committed a breach of the contract of sale.
Even if one were to grant that there was a breach of the contract by the buyer, automatic rescission cannot take place because, as already (sic) stated, delivery had already been made. And, in cases where there has already been delivery, the intervention of the court is necessary to annul the contract.
As the lower court aptly stated:
'Respecting these allegations of the contending parties, while it is true that Article 1593 of the New Civil Code provides that with respect to movable property, the rescission of the sale shall of right take place in the interest of the vendor, if the vendee fails to tender the price at the time or period fixed or agreed, however, automatic rescission is not allowed if the object sold has been delivered to the buyer (Guevarra vs. Pascual, 13 Phil. 311; Escueta vs. Pando, 76 Phil 256), the action being one to rescind judicially and where (sic) Article 1191, supra, thereby applies. There being already an implied delivery of the items, subject matter of the contract between the parties in this case, the defendant having surrendered the premises where the scraps (sic) were found for plaintiff's men to dig and gather, as in fact they had dug and gathered, this Court finds the mere notice of resolution by the defendants untenable and not conclusive on the rights of the plaintiff (Ocejo Perez vs. Int. Bank, 37 Phi. 631). Likewise, as early as in the case of Song Fo vs. Hawaiian Philippine Company, it has been ruled that rescission cannot be sanctioned for a slight or casual breach (47 Phil. 821).'
In the case of Angeles vs. Calasanz (135 (1935) SCRA 323), the Supreme Court ruled:
'Article 1191 is explicit. In reciprocal obligations, either party has the right to rescind the contract upon failure of the other to perform the obligation assumed thereunder.
Of course, it must be understood that the right of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court.'
Thus, rescission in cases falling under Article 1191 of the Civil Code is always subject to review by the courts and cannot be considered final.
In the case at bar, the trial court ruled that rescission is improper because the breach was very slight and the delay in opening the letter of credit was only 11 days.
'Where time is not of the essence of the agreement, a slight delay by one party in the performance of his obligation is not a sufficient ground for rescission of the agreement. Equity and justice mandates (sic) that the vendor be given additional (sic) period to complete payment of the purchase price.' (Taguda vs. Vda. de Leon, 132 SCRA (1984), 722).'
There is no need to discuss the fourth and fifth assigned errors since these are merely corollary to the first three assigned errors." 8
Their motion to reconsider the said decision having been denied by public respondent in its Resolution of 4 May 1988, 9 petitioners filed this petition reiterating the abovementioned assignment of errors.
There is merit in the instant petition.
Both the trial court and the public respondent erred in the appreciation of the nature of the transaction between the petitioner corporation and the private respondent. To this Court's mind, what obtains in the case at bar is a mere contract to sell or promise to sell, and not a contract of sale.
The trial court assumed that the transaction is a contract of sale and, influenced by its view that there was an "implied delivery" of the object of the agreement, concluded that Article 1593 of the Civil Code was inapplicable; citing Guevarra vs. Pascual 10 and Escueta vs. Pando, 11 it ruled that rescission under Article 1191 of the Civil Code could only be done judicially. The trial court further classified the breach committed by the private respondent as slight or casual, foreclosing, thereby, petitioners' right to rescind the agreement.
Article 1593 of the Civil Code provides:
"ARTICLE 1593. With respect to movable property, the rescission of the sale shall of right take place in the interest of the vendor, if the vendee, upon the expiration of the period fixed for the delivery of the thing, should not have appeared to receive it, or, having appeared, he should not have tendered the price at the same time, unless a longer period has been stipulated for its payment."
Article 1191 provides:
"ARTICLE 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period."
xxx xxx xxx
Sustaining the trial court on the issue of delivery, public respondent cites Article 1497 of the Civil Code which provides:
"ARTICLE 1497. The thing sold shall be understood as delivered, when it is placed in the control and possession of the vendee."
In the agreement in question, entitled PURCHASE AND SALE OF SCRAP IRON, 12 the seller bound and promised itself to sell the scrap iron upon the fulfillment by the private respondent of his obligation to make or indorse an irrevocable and unconditional letter of credit in payment of the purchase price. Its principal stipulation reads, to wit:
xxx xxx xxx
"Witnesseth:
That the SELLER agrees to sell, and the BUYER agrees to buy, an undetermined quantity of scrap iron and junk which the SELLER will identify and designate now at Cawitan, Sta. Catalina, Negros Oriental, at the price of FIFTY CENTAVOS (P0.50) per kilo on the following terms and conditions:
1. Weighing shall be done in the premises of the SELLER at Cawitan, Sta. Catalina, Neg. Oriental.
2. To cover payment of the purchase price, BUYER will open, make or indorse an irrevocable and unconditional letter of credit not later than May 15, 1983 at the Consolidated Bank and Trust Company, Dumaguete City, Branch, in favor of the SELLER in the sum of TWO HUNDRED AND FIFTY THOUSAND PESOS (P250,000.00), Philippine Currency.
3. The SELLER will furnish the BUYER free of charge at least three (3) cargo trucks with drivers, to haul the weighed materials from Cawitan to the TSMC wharf at Sta. Catalina for loading on BUYER's barge. All expenses for labor, loading and unloading shall be for the account of the BUYER.
4. SELLER shall be entitled to a deduction of three percent (3%) per ton as rust allowance." (Emphasis supplied).
The petitioner corporation's obligation to sell is unequivocally subject to a positive suspensive condition, i.e., the private respondent's opening, making or indorsing of an irrevocable and unconditional letter of credit. The former agreed to deliver the scrap iron only upon payment of the purchase price by means of an irrevocable and unconditional letter of credit. Otherwise stated, the contract is not one of sale where the buyer acquired ownership over the property subject to the resolutory condition that the purchase price would be paid after delivery. Thus, there was to be no actual sale until the opening, making or indorsing of the irrevocable and unconditional letter of credit. Since what obtains in the case at bar is a mere promise to sell, the failure of the private respondent to comply with the positive suspensive condition cannot even be considered a breach — casual or serious — but simply an event that prevented the obligation of petitioner corporation to convey title from acquiring binding force. In Luzon Brokerage Co., Inc. vs. Maritime Building Co., Inc., 13 this Court stated:
" . . . The upshot of all these stipulations is that in seeking the ouster of Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more properly, resolving) the contract, but precisely enforcing it according to its express terms. In its suit Myers was not seeking restitution to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment of a resolutory condition, express or implied (article 1190); neither was it seeking a declaration that its obligation to sell was extinguished. What it sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the property object of the contract, possession being a mere incident to its right of ownership. It is elementary that, as stated by Castan, —
'b) Si la condicion suspensiva llega a faltar, la obligacion se tiene por no existente, y el acreedor pierde todo derecho, incluso el de utilizar las medidas conservativas.' (3 Cast n, Derecho Civil, 7a Ed., p. 107). (Also Puig Peña, Der. Civ., T. IV (1), p. 113)'."
In the instant case, not only did the private respondent fail to open, make or indorse an irrevocable and unconditional letter of credit on or before 15 May 1983 despite his earlier representation in his 24 May 1983 telegram that he had opened one on 12 May 1983, the letter of advice received by the petitioner corporation on 26 May 1983 from the Bank of the Philippine Islands Dumaguete City branch explicitly makes reference to the opening on that date of a letter of credit in favor of petitioner Ang Tay c/o Visayan Sawmill Co. Inc., drawn without recourse on ARMACO-MARSTEEL ALLOY CORPORATION and set to expire on 24 July 1983, which is indisputably not in accordance with the stipulation in the contract signed by the parties on at least three (3) counts: (1) it was not opened, made or indorsed by the private respondent, but by a corporation which is not a party to the contract; (2) it was not opened with the bank agreed upon; and (3) it is not irrevocable and unconditional, for it is without recourse, it is set to expire on a specific date and it stipulates certain conditions with respect to shipment. In all probability, private respondent may have sold the subject scrap iron to ARMACO-MARSTEEL ALLOY CORPORATION, or otherwise assigned to it the contract with the petitioners. Private respondent's complaint fails to disclose the sudden entry into the picture of this corporation.
Consequently, the obligation of the petitioner corporation to sell did not arise; it therefore cannot be compelled by specific performance to comply with its prestation. In short, Article 1191 of the Civil Code does not apply; on the contrary, pursuant to Article 1597 of the Civil Code, the petitioner corporation may totally rescind, as it did in this case, the contract. Said Article provides:
"ARTICLE 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations, thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer."
The trial court ruled, however, and the public respondent was in agreement, that there had been an implied delivery in this case of the subject scrap iron because on 17 May 1983, private respondent's men started digging up and gathering scrap iron within the petitioner's premises. The entry of these men was upon the private respondent's request. Paragraph 6 of the Complaint reads:
"6. That on May 17, 1983 Plaintiff with the consent of defendant Ang Tay sent his men to the stockyard of Visayan Sawmill Co., Inc. at Cawitan, Sta. Catalina, Negros Oriental to dig and gather the scrap iron and stock the same for weighing." 14
This permission or consent can, by no stretch of the imagination, be construed as delivery of the scrap iron in the sense that, as held by the public respondent, citing Article 1497 of the Civil Code, petitioners placed the private respondent in control and possession thereof. In the first place, said Article 1497 falls under the Chapter 15 Obligations of the Vendor, which is found in Title VI (Sales), Book IV of the Civil Code. As such, therefore, the obligation imposed therein is premised on an existing obligation to deliver the subject of the contract. In the instant case, in view of the private respondent's failure to comply with the positive suspensive condition earlier discussed, such an obligation had not yet arisen. In the second place, it was a mere accommodation to expedite the weighing and hauling of the iron in the event that the sale would materialize. The private respondent was not thereby placed in possession of and control over the scrap iron. Thirdly, We cannot even assume the conversion of the initial contract or promise to sell into a contract of sale by the petitioner corporation's alleged implied delivery of the scrap iron because its action and conduct in the premises do not support this conclusion. Indeed, petitioners demanded the fulfillment of the suspensive condition and eventually cancelled the contract.
All told, Civil Case No. 15128 filed before the trial court was nothing more than the private respondent's preemptive action to beat the petitioners to the draw.
One last point. This Court notes the palpably excessive and unconscionable moral and exemplary damages awarded by the trial court to the private respondent despite a clear absence of any legal and factual basis therefor. In contracts, such as in the instant case, moral damages may be recovered if defendants acted fraudulently and in bad faith, 16 while exemplary damages may only be awarded if defendants acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 17 In the instant case, the refusal of the petitioners to deliver the scrap iron was founded on the non-fulfillment by the private respondent of a suspensive condition. It cannot, therefore, be said that the herein petitioners had acted fraudulently and in bad faith or in a wanton, reckless, oppressive or malevolent manner. What this Court stated in Inhelder Corp. vs. Court of Appeals 18 needs to be stressed anew:
"At this juncture, it may not be amiss to remind Trial Courts to guard against the award of exhorbitant (sic) damages that are way out of proportion to the environmental circumstances of a case and which, time and again, this Court has reduced or eliminated. Judicial discretion granted to the Courts in the assessment of damages must always be exercised with balanced restraint and measured objectivity."
For, indeed, moral damages are emphatically not intended to enrich a complainant at the expense of the defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to obviate the moral suffering he has undergone, by reason of the defendant's culpable action. Its award is aimed at the restoration, within the limits of the possible, of the spiritual status quo ante, and it must be proportional to the suffering inflicted. 19
WHEREFORE, the instant petition is GRANTED. The decision of public respondent Court of Appeals in C.A.-G.R. CV No. 08807 is REVERSED and Civil Case No. 15128 of the Regional Trial Court of Iloilo is ordered DISMISSED.
Costs against the private respondent.
SO ORDERED.
Narvasa, C .J ., Cruz, Feliciano, Padilla, Bidin and Bellosillo, JJ ., concur.
Gutierrez, Jr., J ., On terminal leave.
Melo and Quiason, JJ ., No part.
Separate Opinions
ROMERO, J., dissenting:
I vote to dismiss the petition.
Petitioner corporation, Visayan Sawmill Co., Inc., entered into a contract on May 1, 1983 with private respondent RJH Trading Co. represented by private respondent Ramon J. Hibionada. The contract, entitled "PURCHASE AND SALE OF SCRAP IRON," stated:
This contract for the Purchase and Sale of Scrap Iron, made and executed at Dumaguete City, Phil., this 1st day of May, 1983 by and between:
VISAYAN SAWMILL CO., INC., . . . hereinafter called the SELLER, and
RAMON J. HIBIONADA, . . . hereinafter called the BUYER,
witnesseth:
That the SELLER agrees to sell, and the BUYER agrees to buy, an undetermined quantity of scrap iron and junk which the SELLER will identify and designate now at Cawitan, Sta. Catalina, Negros Oriental, at the price of FIFTY CENTAVOS (P.50) per kilo on the following terms and conditions:
1. Weighing shall be done in the premises of the SELLER at Cawitan, Sta. Catalina, Negros Oriental.
2. To cover payment of the purchase price BUYER will open, make or indorse an irrevocable and unconditional letter of credit not later than May 15, 1983 at the Consolidated Bank and Trust Company, Dumaguete City Branch, in favor of the SELLER in the sum of TWO HUNDRED AND FIFTY THOUSAND PESOS (P250,000.00), Philippine currency.
3. The SELLER will furnish the BUYER free of charge at least three (3) cargo trucks with drivers, to haul the weighed materials from Cawitan to the TSMC wharf at Sta. Catalina for loading on BUYER'S barge. All expenses for labor, loading and unloading shall be for the account of the BUYER.
4. SELLER shall be entitled to a deduction of three percent (3%) per ton as rust allowance.
xxx xxx xxx
On May 17, 1983, the workers of private respondents were allowed inside petitioner company's premises in order to gather the scrap iron. However, on May 23, 1983, petitioner company sent a telegram which stated:
"RAMON HIBIONADA
RJH TRADING
286 QUEZON STREET
ILOILO CITY
DUE YOUR FAILURE TO COMPLY WITH CONDITIONS BEFORE DEADLINE OUR CONTRACT FOR PURCHASE SCRAP IRON CANCELLED
VISAYAN SAWMILL CO., INC."
Hibionada wired back on May 24, 1983 the following:
"ANG TAY VISAYAN SAWMILL
DUMAGUETE CITY
LETTER OF CREDIT AMOUNTING P250,000.00 OPENED MAY 12, 1983 BANK OF PI MAIN OFFICE AYALA AVENUE MAKATI METRO MANILA BUT TRANSMITTAL IS DELAYED PLEASE CONSIDER REASON WILL PERSONALLY FOLLOW-UP IN MANILA THANKS REGARDS.
RAMON HIBIONADA"
On May 26, 1983, petitioner company received the following advice from the Dumaguete City Branch of The Bank of Philippine Islands: cdll
"Opened today our Irrevocable Domestic Letter of Credit 2-01456-4 for P250,000.00 in favor ANG TAY c/o Visayan Sawmill Co., Inc. Dumaguete City Negros Oriental Account of ARMACO-MARSTEEL ALLOW (sic) CORPORATION 2nd Floor Alpap 1 Bldg., 140 Alfaro st. Salcedo Village Makati Metro Manila Shipments of about 500 MT of assorted steel scrap marine/heavy equipment expiring on July 23, 1983 without recourse at slight draft drawn on Armaco-Marsteel Alloy Corporation accompanied by the following documents: Certificate of acceptance by Armaco-Marsteel Allow (sic) Corporation shipment from Dumaguete City to buyer's warehouse partial shipment allowed/transhipment not allowed."
Subsequently, petitioners' counsel sent another telegram to private respondents stating that:
"VISAYAN SAWMILL COMPANY UNWILLING TO CONTINUE SALE OF SCRAP IRON TO HIBIONADA DUE TO NON COMPLIANCE WITH ESSENTIAL PRE CONDITIONS"
Consequently, private respondents filed a complaint for specific performance and damages with the Regional Trial Court (RTC) of Iloilo (Branch XXXV) which decided in favor of private respondents. The RTC decision having been affirmed by the Court of Appeals, the present petition was filed.
Finding the petition meritorious, the ponencia reversed the decision of the Court of Appeals. Based on its appreciation of the contract in question, it has arrived at the conclusion that herein contract is not a contract of sale but a contract to sell which is subject to a positive suspensive condition, i.e., the opening of a letter of credit by private respondents. Since the condition was not fulfilled, the obligation of petitioners to convey title did not arise. The lengthy decision of Luzon Brokerage Co., Inc. v. Maritime Co. Inc. 1 penned by Justice J.B.L. Reyes, was cited as authority on the assumption that subject contract is indeed a contract to sell but which will be shown herein as not quite accurate.
Evidently, the distinction between a contract to sell and a contract of sale is crucial in this case. Article 1458 of the Civil Code has this definition: "By a contract of sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing and the other to pay therefor a price certain in money or its equivalent."
Article 1475 gives the significance of this mutual undertaking of the parties, thus: "The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts."
Thus, when the parties entered into the contract entitled "Purchase and Sale of Scrap Iron" on May 1, 1983, the contract reached the stage of perfection, there being a meeting of the' minds upon the object which is the subject matter of the contract and the price which is the consideration. Applying Article 1475 of the Civil Code, from that moment, the parties may reciprocally demand performance of the obligations incumbent upon them, i.e., delivery by the vendor and payment by the vendee.
Petitioner, in its petition, admits that "[b]efore the opening of the letter of credit, buyer Ramon Hibionada went to Mr. Ang Tay and informed him that the letter of credit was forthcoming and if it was possible for him (buyer) to start cutting and digging the scrap iron before the letter of credit arrives and the former (seller) manifested no objection, and he immediately sent 18 or 20 people to start the operation." 2
From the time the seller gave access to the buyer to enter his premises, manifesting no objection thereto but even sending 18 or 20 people to start the operation, he has placed the goods in the control and possession of the vendee and delivery is effected. For according to Article 1497, "The thing sold shall be understood as delivered when it is placed in the control and possession of the vendee." 3
Such action or real delivery (traditio) is the act that transfers ownership. Under Article 1496 of the Civil Code, "The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee."
That payment of the price in any form was not yet effected is immaterial to the transfer of the right of ownership. In a contract of sale, the non-payment of the price is a resolutory condition which extinguishes the transaction that, for a time, existed and discharges the obligations created thereunder. 4
On the other hand, "the parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price." 5 In such a contract to sell, the full payment of the price is a positive suspensive condition, such that in the event of non-payment, the obligation of the seller to deliver and transfer ownership never arises. Stated differently, in a contract to sell, ownership is not transferred upon delivery of property but upon full payment of the purchase price. 6
Consequently, in a contract of sale, after delivery of the object of the contract has been made, the seller loses ownership and cannot recover the same unless the contract is rescinded. But in the contract to sell, the seller retains ownership and the buyer's failure to pay cannot even be considered a breach, whether casual or substantial, but an event that prevented the seller's duty to transfer title to the object of the contract.
At the outset, it must be borne in mind that a provision in the contract regarding the mode of payment, like the requirement for the opening of the Letter of Credit in this case, is not among the essential requirements of a contract of sale enumerated in Articles 1305 7 and 1474, 8 the absence of any of which will prevent the perfection of the contract from happening. Likewise, it must be emphasized that not every provision regarding payment should automatically be classified as a suspensive condition. To do so would change the nature of most contracts of sale into contracts to sell. For a provision in the contract regarding the payment of the price to be considered a suspensive condition, the parties must have made this clear in certain and unambiguous terms, such as for instance, by reserving or withholding title to the goods until full payment by the buyer. 9 This was a pivotal circumstance in the Luzon Brokerage case where the contract in question was replete with very explicit provisions such as the following: "Title to the properties subject of this contract remains with the Vendor and shall pass to, and be transferred in the name of the Vendee only upon complete payment of the full price . . .;" 10 the Vendor (Myers) will execute and deliver to the Vendee a definite and absolute Deed of Sale upon full payment of the Vendee . . .; 11 and "should the Vendee fail to pay any of the monthly installments, when due, or otherwise fail to comply with any of the terms and conditions herein stipulated, then this Deed of Conditional Sale shall automatically and without any further formality, become null and void." 12
It is apparent from a careful reading of Luzon Brokerage, as well as the cases which preceded it 13 and the subsequent ones applying its doctrines, 14 that the mere insertion of the price and the mode of payment among the terms and conditions of the agreement will not necessarily make it a contract to sell. The phrase in the contract "on the following terms and conditions" is standard form which is not to be construed as imposing a condition, whether suspensive or resolutory, in the sense of the happening of a future and uncertain event upon which an obligation is made to depend. There must be a manifest understanding that the agreement is in what may be referred to as "suspended animation" pending compliance with provisions regarding payment. The reservation of title to the object of the contract in the seller is one such manifestation. Hence, it has been decided in the case of Dignos v. Court of Appeals 15 that, absent a proviso in the contract that the title to the property is reserved in the vendor until full payment of the purchase price or a stipulation giving the vendor the right to unilaterally rescind the contract the moment the vendee fails to pay within the fixed period, the transaction is an absolute contract of sale and not a contract to sell. 16
In the instant case, nowhere in the contract did it state that the petitioners reserve title to the goods until private respondents have opened a letter of credit. Nor is there any provision declaring the contract as without effect until after the fulfillment of the condition regarding the opening of the letter of credit.
Examining the contemporaneous and subsequent conduct of the parties, which may be relevant in the determination of the nature and meaning of the contract, 17 it is significant that in the telegram sent by petitioners to Hibionada on May 23, 1983, it stated that "DUE [TO] YOUR FAILURE TO COMPLY WITH CONDITIONS BEFORE DEADLINE OUR CONTRACT FOR PURCHASE SCRAP IRON CANCELLED." And in some of the pleadings in the course of this litigation, petitioners referred to the transaction as a contract of sale. 18
In light of the provisions of the contract, contemporaneous and subsequent acts of the parties and the other relevant circumstances surrounding the case, it is evident that the stipulation for the buyer to open a Letter of Credit in order to cover the payment of the purchase price does not bear the marks of a suspensive condition. The agreement between the parties was a contract of sale and the "terms and conditions" embodied therein which are standard form, are clearly resolutory in nature, the breach of which may give either party the option to bring an action to rescind and/or seek damages. Contrary to the conclusions arrived at in the ponencia, the transaction is not a contract to sell but a contract of sale.
However, the determination of the nature of the contract does not settle the controversy. A breach of the contract was committed and the rights and liabilities of the parties must be established. The ponencia, notwithstanding its conclusion that no contract of sale existed, proceeded to state that petitioner company may rescind the contract based on Article 1597 of the Civil Code which expressly applies only to a contract of sale. It provides:
"ARTICLE 1597. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract of sale, or has manifested his inability to perform his obligations, thereunder, or has committed a breach thereof, the seller may totally rescind the contract of sale by giving notice of his election so to do to the buyer." (Emhasis supplied).
The ponencia was then confronted with the issue of delivery since Article 1597 applies only "[w]here the goods have not yet been delivered." In this case, as aforestated, the workers of private respondents were actually allowed to enter the petitioners' premises, thus, giving them control and possession of the goods. At this juncture, it is even unnecessary to discuss the issue of delivery in relation to the right of rescission nor to rely on Article 1597. In every contract which contains reciprocal obligations, the right to rescind is always implied under Article 1191 of the Civil Code in case one of the parties fails to comply with his obligations. 19
The right to rescind pursuant to Article 1191 is not absolute. Rescission will not be permitted for slight or casual breach of the contract. 20 Here, petitioners claim that the breach is so substantial as to justify rescission, not only because the Letter of Credit was not opened on May 15, 1983 as stipulated in the contract but also because of the following factors: (1) the Letter of Credit, although opened in favor of petitioners was made against the account of a certain Marsteel Alloy Corporation, instead of private respondent's account; (2) the Letter of Credit referred to "assorted steel scrap" instead of "scrap iron and junk" as provided in the contract; (3) the Letter of Credit placed the quantity of the goods at "500 MT" while the contract mentioned "an undetermined quantity of scrap iron and junk"; (4) no amount from the Letter of Credit will be released unless accompanied by a Certificate of Acceptance; and (5) the Letter of Credit had an expiry date.
I am not convinced that the above circumstances may be characterized as so substantial and fundamental as to defeat the object of the parties in making the agreement. 21 None of the alleged defects in the Letter of Credit would serve to defeat the object of the parties. It is to be stressed that the purpose of the opening of a Letter of Credit is to effect payment. The above-mentioned factors could not have prevented such payment. It is also significant to note that petitioners sent a telegram to private respondents on May 23, 1983 cancelling the contract. This was before they had even received on May 26, 1983 the notice from the bank about the opening of the Letter of Credit. How could they have made a judgment on the materiality of the provisions of the Letter of Credit for purposes of rescinding the contract even before setting eyes on said document?
To be sure, in the contract, the private respondents were supposed to open the Letter of Credit on May 15, 1983 but, it was not until May 26, 1983 or eleven (11) days later that they did so. Is the eleven-day delay a substantial breach of the contract as could justify the rescission of the contract?
In Song Fo and Co. v. Hawaiian-Philippine Co. 22 it was held that a delay in payment for twenty (20) days was not a violation of an essential condition of the contract which would warrant rescission for non-performance. In the instant case, the contract is bereft of any suggestion that time was of the essence. On the contrary, it is noted that petitioners allowed private respondents' men to dig and remove the scrap iron located in petitioners' premises between May 17, 1983 until May 30, 1983 or beyond the May 15, 1983 deadline for the opening of the Letter of Credit. Hence, in the absence of any indication that the time was of the essence, the eleven-day delay must be deemed a casual breach which cannot justify a rescission.
Worthy of mention before concluding is Sycip v. National Coconut Corporation, et al. 23 since, like this case, it involves a failure to open on time the Letter of Credit required by the seller. In Sycip, after the buyer offered to buy 2,000 tons of copra, the seller sent a telegram dated December 19, 1946 to the buyer accepting the offer but on condition that the latter opens a Letter of Credit within 48 hours. It was not until December 26, 1946, however, that the Letter of Credit was opened. The Court, speaking through Justice Bengzon, held that because of the delay in the opening of the Letter of Credit; the seller was not obliged to deliver the goods.
Two factors distinguish Sycip from the case at bar. First, while there has already been a perfected contract of sale in the instant case, the parties in Sycip were still undergoing the negotiation process. The seller's qualified acceptance in Sycip served as a counter offer which prevented the contract from being perfected. Only an absolute and unqualified acceptance of a definite offer manifests the consent necessary to perfect a contract. 24 Second, the Court found in Sycip that time was of the essence for the seller who was anxious to sell to other buyers should the offeror fail to open the Letter of Credit within the stipulated time. In contrast, there are no indicia in this case that can lead one to conclude that time was of the essence for petitioner as would make the eleven-day delay a fundamental breach of the contract.
In sum, to my mind, both the trial court and the respondent Court of Appeals committed no reversible error in their appreciation of the agreement in question as a contract of sale and not a contract to sell, as well as holding that the breach of the contract was not substantial and, therefore, petitioners were not justified in law in rescinding the agreement.
PREMISES CONSIDERED, the Petition must be DISMISSED and the decision of the Court of Appeals AFFIRMED.
Griño-Aquino, Regalado, Nocon and Campos, Jr., JJ ., join Justice Romero's dissent.
G.R. No. 141634 February 5, 2001
Heirs of Spouses REMEDIOS R. SANDEJAS and ELIODORO P. SANDEJAS SR. -- ROBERTO R. SANDEJAS, ANTONIO R. SANDEJAS, CRISTINA SANDEJAS MORELAND, BENJAMIN R. SANDEJAS, REMEDIOS R. SANDEJAS, and heirs of SIXTO S. SANDEJAS II, RAMON R. SANDEJAS, TERESITA R. SANDEJAS, and ELIODORO R. SANDEJAS JR., all represented by ROBERTO R. SANDEJAS, petitioners,
vs.
ALEX A. LINA, respondent.
vs.
ALEX A. LINA, respondent.
PANGANIBAN, J.:
A contract of sale is not invalidated by the fact that it is subject to probate court approval. The transaction remains binding on the seller-heir, but not on the other heirs who have not given their consent to it. In settling the estate of the deceased, a probate court has jurisdiction over matters incidental and collateral to the exercise of its recognized powers. Such matters include selling, mortgaging or otherwise encumbering realty belonging to the estate. Rule 89, Section 8 of the Rules of Court, deals with the conveyance of real property contracted by the decedent while still alive. In contrast with Sections 2 and 4 of the same Rule, the said provision does not limit to the executor or administrator the right to file the application for authority to sell, mortgage or otherwise encumber realty under administration. The standing to pursue such course of action before the probate court inures to any person who stands to be benefited or injured by the judgment or to be entitled to the avails of the suit.1âwphi1.nêt
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to reverse and set aside the Decision1 dated April 16, 1999 and the Resolution2 dated January 12, 2000, both promulgated by the Court of Appeals in CA-GR CV No. 49491. The dispositive portion of the assailed Decision reads as follows:3
"WHEREFORE, for all the foregoing, [w]e hereby MODIFY the [O]rder of the lower court dated January 13, 1995, approving the Receipt of Earnest Money With Promise to Buy and Sell dated June 7, 1982, only to the three-fifth (3/5) portion of the disputed lots covering the share of [A]dministrator Eliodoro Sandejas, Sr. [in] the property. The intervenor is hereby directed to pay appellant the balance of the purchase price of the three-fifth (3/5) portion of the property within thirty (30) days from receipt of this [O]rder and x x x the administrator [is directed] to execute the necessary and proper deeds of conveyance in favor of appellee within thirty (30) days thereafter."
The assailed Resolution denied reconsideration of the foregoing disposition.
The Facts
The facts of the case, as narrated by the Court of Appeals (CA), are as follows:4
"On February 17, 1981, Eliodoro Sandejas, Sr. filed a petition (Record, SP. Proc. No. R-83-15601, pp. 8-10) in the lower court praying that letters of administration be issued in his favor for the settlement of the estate of his wife, REMEDIOS R. SANDEJAS, who died on April 17, 1955. On July 1, 1981, Letters of Administration [were issued by the lower court appointing Eliodoro Sandejas, Sr. as administrator of the estate of the late Remedios Sandejas (Record, SP. Proc. No. R-83-15601, p. 16). Likewise on the same date, Eliodoro Sandejas, Sr. took his oath as administrator (Record, SP. Proc. No. R-83-15601, p. 17). x x x.
"On November 19, 1981, the 4th floor of Manila City Hall was burned and among the records burned were the records of Branch XI of the Court of First Instance of Manila. As a result, [A]dministrator Eliodoro Sandejas, Sr. filed a [M]otion for [R]econstitution of the records of the case on February 9, 1983 (Record, SP. Proc. No. R-83-15601, pp. 1-5). On February 16, 1983, the lower court in its [O]rder granted the said motion (Record, SP. Proc. No. R-83-15601, pp. 28-29).
"On April 19, 1983, an Omnibus Pleading for motion to intervene and petition-in-intervention was filed by [M]ovant Alex A. Lina alleging among others that on June 7, 1982, movant and [A]dministrator Eliodoro P. Sandejas, in his capacity as seller, bound and obligated himself, his heirs, administrators, and assigns, to sell forever and absolutely and in their entirety the following parcels of land which formed part of the estate of the late Remedios R. Sandejas, to wit:
1. 'A parcel of land (Lot No.22 Block No. 45 of the subdivision plan Psd-21121, being a portion of Block 45 described on plan Psd-19508, G.L.R.O. Rec. No. 2029), situated in the "Municipality of Makati, province of Rizal, containing an area of TWO HUNDRED SEVENTY (270) SQUARE METERS, more or less, with TCT No. 13465;
2. 'A parcel of land (Lot No. 21 Block No. 45 of the subdivision plan Psd-21141, being a portion of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, containing an area of TWO HUNDRED SEVENTY (270) SQUARE METERS, more or less, with TCT No. 13464;'
3. 'A parcel of land (Lot No. 5 Block No. 45 of the subdivision plan Psd-21141, being a portion of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE METERS, more or less, with TCT No. 13468;'
4. 'A parcel of land (Lot No. 6, Block No. 45 of the subdivision plan Psd-21141, being a portion of Block 45 described on plan Psd-19508 G.L.R.O. Rec. No. 2029), situated in the Municipality of Makati, Province of Rizal, containing an area of TWO HUNDRED EIGHT (208) SQUARE METERS, more or less, with TCT No. 13468;'
"The [R]eceipt of the [E]arnest [M]oney with [P]romise to [S]ell and to [B]uy is hereunder quoted, to wit:
'Received today from MR. ALEX A. LINA the sum of ONE HUNDRED THOUSAND (P100,000.00) PESOS, Philippine Currency, per Metropolitan Bank & Trust Company Chec[k] No. 319913 dated today for P100,000.00, x x x as additional earnest money for the following:
xxx xxx xxx
all registered with the Registry of Deeds of the [P]rovince of Rizal (Makati Branch Office) in the name of SELLER 'EL!ODORO SANDEJAS, Filipino Citizen, of legal age, married to Remedios Reyes de Sandejas;' and which undersigned, as SELLER, binds and obligates himself, his heirs, administrators and assigns, to sell forever and absolutely in their entirety (all of the four (4) parcels of land above described, which are contiguous to each other as to form one big lot) to said Mr. Alex A. Lina, who has agreed to buy all of them, also binding on his heirs, administrators and assigns, for the consideration of ONE MILLION (P1,000,000.00) PESOS, Philippine Currency, upon such reasonable terms of payment as may be agreed upon by them. The parties have, however, agreed on the following terms and conditions:
'1. The P100,000.00 herein received is in addition to the P70,000.00 earnest money already received by SELLER from BUYER, all of which shall form part of, and shall be deducted from, the purchase price of P1,000,000.00, once the deed of absolute [sale] shall be executed;
'2. As a consideration separate and distinct from the price, undersigned SELLER also acknowledges receipt from Mr. Alex A. Lina of the sum of ONE THOUSAND (P1,000.00) PESOS, Philippine Currency, per Metropolitan Bank & Trust Company Check No. 319912 dated today and payable to SELLER for P1,000.00;
'3. Considering that Mrs. Remedios Reyes de Sandejas is already deceased and as there is a pending intestate proceedings for the settlement of her estate (Spec. Proc. No.138393, Manila CFI, Branch XI), wherein SELLER was appointed as administrator of said Estate, and as SELLER, in his capacity as administrator of said Estate, has informed BUYER that he (SELLER) already filed a [M]otion with the Court for authority to sell the above parcels of land to herein BUYER, but which has been delayed due to the burning of the records of said Spec. Pro. No. 138398, which records are presently under reconstitution, the parties shall have at least ninety (90) days from receipt of the Order authorizing SELLER, in his capacity as administrator, to sell all THE ABOVE DESCRIBED PARCELS OF LAND TO HEREIN BUYER (but extendible for another period of ninety (90) days upon the request of either of the parties upon the other), within which to execute the deed of absolute sale covering all above parcels of land;
'4. In the event the deed of absolute sale shall not proceed or not be executed for causes either due to SELLER'S fault, or for causes of which the BUYER is innocent, SELLER binds himself to personally return to Mr. Alex A. Lina the entire ONE HUNDRED SEVENTY THOUSAND ([P]170,000.00) PESOS In earnest money received from said Mr. Lina by SELLER, plus fourteen (14%) percentum interest per annum, all of which shall be considered as liens of said parcels of land, or at least on the share therein of herein SELLER;
'5. Whether indicated or not, all of above terms and conditions shall be binding on the heirs, administrators, and assigns of both the SELLER (undersigned MR. ELIODORO P. SANDEJAS, SR.) and BUYER (MR. ALEX A. LINA).' (Record, SP. Proc. No. R-83-15601, pp. 52-54)
"On July 17, 1984, the lower court issued an [O]rder granting the intervention of Alex A. Lina (Record, SP. Proc. No. R-83-15601, p. 167).
"On January 7, 1985, the counsel for [A]dministrator Eliodoro P. Sandejas filed a [M]anifestation alleging among others that the administrator, Mr. Eliodoro P. Sandejas, died sometime in November 1984 in Canada and said counsel is still waiting for official word on the fact of the death of the administrator. He also alleged, among others that the matter of the claim of Intervenor Alex A. Lina becomes a money claim to be filed in the estate of the late Mr. Eliodoro P. Sandejas (Record, SP. Proc. No. R-83-15601, p. 220). On February 15, 1985, the, lower court issued an [O]rder directing, among others, that the counsel for the four (4) heirs and other heirs of Teresita R. Sandejas to move for the appointment of [a] new administrator within fifteen (15) days from receipt of this [O]rder (Record, SP. Proc. No. R-83-15601, p. 227). In the same manner, on November 4, 1985, the lower court again issued an order, the content of which reads:
'On October 2, 1985, all the heirs, Sixto, Roberto, Antonio, Benjamin all surnamed Sandejas were ordered to move for the appointment of [a] new administrator. On October 16, 1985, the same heirs were given a period of fifteen (15) days from said date within which to move for the appointment of the new administrator. Compliance was set for October 30, 1985, no appearance for the aforenamed heirs. The aforenamed heirs are hereby ordered to show cause within fifteen (15) days from receipt of this Order why this Petition for Settlement of Estate should not be dismissed for lack of interest and failure to comply with a lawful order of this Court.
'SO ORDERED.' (Record, SP. Proc. No. R-83-15601, p. 273).
"On November 22, 1985, Alex A. Lina as petitioner filed with the Regional Trial Court of Manila an Omnibus Pleading for (1) petition for letters of administration [and] (2) to consolidate instant case with SP. Proc. No. R-83-15601 RTC-Branch XI-Manila, docketed therein as SP. Proc. No. 85- 33707 entitled 'IN RE: INTESTATE ESTATE OF ELIODORO P. SANDEJAS, SR., ALEX A. LINA PETITIONER", [for letters of administration] (Record, SP. Proc. No.85-33707, pp. 1-7). On November 29, 1985, Branch XXXVI of the Regional Trial Court of Manila issued an [O]rder consolidating SP. Proc. No. 85-33707, with SP. Proc. No. R-83-15601 (Record, SP. Proc. No. 85-33707, p. 13). Likewise, on December 13, 1985, the Regional Trial Court of Manila, Branch XI, issued an [O]rder stating that 'this Court has no objection to the consolidation of Special proceedings No. 85-331707, now pending before Branch XXXVI of this Court, with the present proceedings now pending before this Branch' (Record, SP. Proc. No. R-83- 15601, p. 279).
"On January 15, 1986, Intervenor Alex A. Lina filed [a] Motion for his appointment as a new administrator of the Intestate Estate of Remedios R. Sandejas on the following reasons:
'5.01. FIRST, as of this date, [i]ntervenor has not received any motion on the part of the heirs Sixto, Antonio, Roberto and Benjamin, all surnamed Sandejas, for the appointment of anew [a]dministrator in place of their father, Mr. Eliodoro P. Sandejas, Sr.;
'5.02. SECOND, since Sp. Proc. 85-33707, wherein the [p]etitioner is herein Intervenor Alex A. Lina and the instant Sp. PROC. R-83-15601, in effect are already consolidated, then the appointment of Mr. Alex Lina as [a]dministrator of the Intestate Estate of Remedios R. Sandejas in instant Sp. Proc. R-83-15601, would be beneficial to the heirs and also to the Intervenor;
'5.03. THIRD, of course, Mr. Alex A. Lina would be willing to give way at anytime to any [a]dministrator who may be proposed by the heirs of the deceased Remedios R. Sandejas, so long as such [a]dministrator is qualified.' (Record, SP. Proc. No. R-83-15601, pp. 281-283)
"On May 15, 1986, the lower court issued an order granting the [M]otion of Alex A. Lina as the new [a]dministrator of the Intestate Estate of Remedios R. Sandejas in this proceedings. (Record, SP. Proc. No. R-83-15601, pp. 288- 290)
"On August 281 1986, heirs Sixto, Roberto, Antonio and Benjamin, all surnamed Sandejas, and heirs [sic] filed a [M]otion for [R]econsideration and the appointment of another administrator Mr. Sixto Sandejasl in lieu of [I]ntervenor Alex A. Lina stating among others that it [was] only lately that Mr. Sixto Sandejas, a son and heir, expressed his willingness to act as a new administrator of the intestate estate of his mother, Remedios R. Sandejas (Record, SP. Proc. No. 85-33707, pp. 29-31). On October 2, 1986, Intervenor Alex A. Lina filed his [M]anifestation and [C]ounter [M]otion alleging that he ha[d] no objection to the appointment of Sixto Sandejas as [a]dministrator of the [i]ntestate [e]state of his mother Remedios R. Sandejas (Sp. Proc. No.85-15601), provided that Sixto Sandejas be also appointed as administrator of the [i]ntestate [e]state of his father, Eliodoro P . Sandejas, Sr. (Spec. Proc. No. 85-33707), which two (2) cases have been consolidated (Record, SP. Proc. No. 85-33707, pp. 34-36). On March 30, 1987, the lower court granted the said [M]otion and substituted Alex Lina with Sixto Sandejas as petitioner in the said [P]etitions (Record, SP. Proc. No. 85-33707, p. 52). After the payment of the administrator's bond (Record, SP. Proc. No. 83-15601, pp. 348-349) and approval thereof by the court (Record, SP. Proc. No. 83-15601, p. 361), Administrator Sixto Sandejas on January 16, 1989 took his oath as administrator of the estate of the deceased Remedios R. Sandejas and Eliodoro P. Sandejas (Record, SP. Proc. No. 83-15601, p. 367) and was likewise issued Letters of Administration on the same day (Record, SP. Proc. No. 83-15601, p. 366).
"On November 29, 1993, Intervenor filed [an] Omnibus Motion (a) to approve the deed of conditional sale executed between Plaintiff-in-lntervention Alex A. Lina and Elidioro [sic] Sandejas, Sr. on June 7, 1982; (b) to compel the heirs of Remedios Sandejas and Eliodoro Sandejas, Sr. thru their administrator, to execute a deed of absolute sale in favor of [I]ntervenor Alex A. Lina pursuant to said conditional deed of sale (Record, SP. Proc. No. 83-15601, pp. 554-561) to which the administrator filed a [M]otion to [D]ismiss and/or [O]pposition to said omnibus motion on December 13, 1993 (Record, SP. Proc. No.83-15601, pp. 591-603).
"On January 13, 1995, the lower court rendered the questioned order granting intervenor's [M]otion for the [A]pproval of the Receipt of Earnest Money with promise to buy between Plaintiff-in-lntervention Alex A. Lina and Eliodoro Sandejas, Sr. dated June 7, 1982 (Record, SP. Proc. No. 83-15601, pp. 652-654 ). x x x."
The Order of the intestate courts disposed as follows:
"WHEREFORE, [i]ntervenor's motion for the approval of the Receipt Of Earnest Money With Promise To Sell And To Buy dated June 7, 1982, is granted. The [i]ntervenor is directed to pay the balance of the purchase price amounting to P729,000.00 within thirty (30) days from receipt of this Order and the Administrator is directed to execute within thirty (30) days thereafter the necessary and proper deeds of conveyancing."6
Ruling of the Court of Appeals
Overturning the RTC ruling, the CA held that the contract between Eliodoro Sandejas Sr. and respondent was merely a contract to sell, not a perfected contract of sale. It ruled that the ownership of the four lots was to remain in the intestate estate of Remedios Sandejas until the approval of the sale was obtained from the settlement court. That approval was a positive suspensive condition, the nonfulfillment of which was not tantamount to a breach. It was simply an event that prevented the obligation from maturing or becoming effective. If the condition did not happen, the obligation would not arise or come into existence.
The CA held that Section 1, Rule 897 of the Rules of Court was inapplicable, because the lack of written notice to the other heirs showed the lack of consent of those heirs other than Eliodoro Sandejas Sr. For this reason, bad faith was imputed to him, for no one is allowed to enjoyed a claim arising from one’s own wrongdoing. Thus, Eliodoro Sr. was bound, as a matter of justice and good faith, to comply with his contractual commitments as an owner and heir. When he entered into the agreement with respondent, he bound his conjugal and successional shares in the property.
Hence, this Petition.8
Issues
In their Memorandum, petitioners submit the following issues for our resolution:
"a) Whether or not Eliodoro P. Sandejas Sr. is legally obligated to convey title to the property referred to in the subject document which was found to be in the nature of a contract to sell - where the suspensive condition set forth therein [i.e.] court approval, was not complied with;
"b) Whether or not Eliodoro P. Sandejas Sr. was guilty of bad faith despite the conclusion of the Court of Appeals that the respondent [bore] the burden of proving that a motion for authority to sell ha[d] been filed in court;
"c) Whether or not the undivided shares of Eliodoro P. Sandejas Sr. in the subject property is three-fifth (3/5) and the administrator of the latter should execute deeds of conveyance therefor within thirty days from receipt of the balance of the purchase price from the respondent; and
"d) Whether or not the respondent's petition-in-intervention was converted to a money claim and whether the [trial court] acting as a probate court could approve the sale and compel the petitioners to execute [a] deed of conveyance even for the share alone of Eliodoro P. Sandejas Sr."9
In brief, the Petition poses the main issue of whether the CA erred in modifying the trial court's Decision and in obligating petitioners to sell 3/5 of the disputed properties to respondent, even if the suspensive condition had not been fulfilled. It also raises the following collateral issues: (1) the settlement court's jurisdiction; (2) respondent-intervenor's standing to file an application for the approval of the sale of realty in the settlement case, (3) the decedent's bad faith, and (4) the computation of the decedent's share in the realty under administration.
This Court’s Ruling
The Petition is partially meritorious.
Main Issue:
Obligation With a Suspensive Condition
Petitioners argue that the CA erred in ordering the conveyance of the disputed 3/5 of the parcels of land, despite the nonfulfillment of the suspensive condition -- court approval of the sale -- as contained in the "Receipt of Earnest Money with Promise to Sell and to Buy" (also referred to as the "Receipt"). Instead, they assert that because this condition had not been satisfied, their obligation to deliver the disputed parcels of land was converted into a money claim.
We disagree. Petitioners admit that the agreement between the deceased Eliodoro Sandejas Sr. and respondent was a contract to sell. Not exactly. In a contract to sell, the payment of the purchase price is a positive suspensive condition. The vendor's obligation to convey the title does not become effective in case of failure to pay.10
On the other hand, the agreement between Eliodoro Sr. and respondent is subject to a suspensive condition -- the procurement of a court approval, not full payment. There was no reservation of ownership in the agreement. In accordance with paragraph 1 of the Receipt, petitioners were supposed to deed the disputed lots over to respondent. This they could do upon the court's approval, even before full payment. Hence, their contract was a conditional sale, rather than a contract to sell as determined by the CA.
When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the condition happens or is fulfilled.11 Thus, the intestate court's grant of the Motion for Approval of the sale filed by respondent resulted in petitioners' obligation to execute the Deed of Sale of the disputed lots in his favor. The condition having been satisfied, the contract was perfected. Henceforth, the parties were bound to fulfil what they had expressly agreed upon.
Court approval is required in any disposition of the decedent's estate per Rule 89 of the Rules of Court. Reference to judicial approval, however, cannot adversely affect the substantive rights of heirs to dispose of their own pro indiviso shares in the co-heirship or co-ownership.12 In other words, they can sell their rights, interests or participation in the property under administration. A stipulation requiring court approval does not affect the validity and the effectivity of the sale as regards the selling heirs. It merely implies that the property may be taken out of custodia legis, but only with the court's permission.13 It would seem that the suspensive condition in the present conditional sale was imposed only for this reason.
Thus, we are not persuaded by petitioners' argument that the obligation was converted into a mere monetary claim. Paragraph 4 of the Receipt, which petitioners rely on, refers to a situation wherein the sale has not materialized. In such a case," the seller is bound to return to the buyer the earnest money paid plus interest at fourteen percent per annum. But the sale was approved by the intestate court; hence, the proviso does not apply.
Because petitioners did not consent to the sale of their ideal shares in the disputed lots, the CA correctly limited the scope of the Receipt to the pro-indiviso share of Eliodoro Sr. Thus, it correctly modified the intestate court's ruling by excluding their shares from the ambit of the transaction.
First Collateral Issue:
Jurisdiction of Settlement Court
Petitioners also fault the CA Decision by arguing, inter alia, (a) jurisdiction over ordinary civil action seeking not merely to enforce a sale but to compel performance of a contract falls upon a civil court, not upon an intestate court; and (b) that Section 8 of Rule 89 allows the executor or administrator, and no one else, to file an application for approval of a sale of the property under administration.
Citing Gil v. Cancio14 and Acebedo v. Abesamis,15 petitioners contend that the CA erred in clothing the settlement court with the jurisdiction to approve the sale and to compel petitioners to execute the Deed of Sale. They allege factual differences between these cases and the instant case, as follows: in Gil, the sale of the realty in administration was a clear and an unequivocal agreement for the support of the widow and the adopted child of the decedent; and in Acebedo, a clear sale had been made, and all the heirs consented to the disposition of their shares in the realty in administration.
We are not persuaded. We hold that Section 8 of Rule 89 allows this action to proceed. The factual differences alleged by petitioners have no bearing on the intestate court's jurisdiction over the approval of the subject conditional sale. Probate jurisdiction covers all matters relating to the settlement of estates (Rules 74 & 86-91) and the probate of wills (Rules 75-77) of deceased persons, including the appointment and the removal of administrators and executors (Rules 78-85). It also extends to matters incidental and collateral to the exercise of a probate court's recognized powers such as selling, mortgaging or otherwise encumbering realty belonging to the estate. Indeed, the rules on this point are intended to settle the estate in a speedy manner, so that the benefits that may flow from such settlement may be immediately enjoyed by the heirs and the beneficiaries.16
In the present case, the Motion for Approval was meant to settle the decedent's obligation to respondent; hence, that obligation clearly falls under the jurisdiction of the settlement court. To require respondent to file a separate action -- on whether petitioners should convey the title to Eliodoro Sr.'s share of the disputed realty -- will unnecessarily prolong the settlement of the intestate estates of the deceased spouses.
The suspensive condition did not reduce the conditional sale between Eliodoro Sr. and respondent to one that was "not a definite, clear and absolute document of sale," as contended by petitioners. Upon the occurrence of the condition, the conditional sale became a reciprocally demandable obligation that is binding upon the parties.17 That Acebedo also involved a conditional sale of real property18 proves that the existence of the suspensive condition did not remove that property from the jurisdiction of the intestate court.
Second Collateral Issue:
Intervenor's Standing
Petitioners contend that under said Rule 89, only the executor or administrator is authorized to apply for the approval of a sale of realty under administration. Hence, the settlement court allegedly erred in entertaining and granting respondent's Motion for Approval.1âwphi1.nêt
We read no such limitation. Section 8, Rule 89 of the Rules of Court, provides:
"SEC. 8. When court may authorize conveyance of realty which deceased contracted to convey. Notice. Effect of deed. -- Where the deceased was in his lifetime under contract, binding in law, to deed real property, or an interest therein, the court having jurisdiction of the estate may, on application for that purpose, authorize the executor or administrator to convey such property according to such contract, or with such modifications as are agreed upon by the parties and approved by the court; and if the contract is to convey real property to the executor or administrator, the clerk of the court shall execute the deed. x x x."
This provision should be differentiated from Sections 2 and 4 of the same Rule, specifically requiring only the executor or administrator to file the application for authority to sell, mortgage or otherwise encumber real estate for the purpose of paying debts, expenses and legacies (Section 2);19 or for authority to sell real or personal estate beneficial to the heirs, devisees or legatees and other interested persons, although such authority is not necessary to pay debts, legacies or expenses of administration (Section 4).20 Section 8 mentions only an application to authorize the conveyance of realty under a contract that the deceased entered into while still alive. While this Rule does not specify who should file the application, it stands to reason that the proper party must be one .who is to be benefited or injured by the judgment, or one who is to be entitled to the avails of the suit.21
Third Collateral Issue:
Bad Faith
Petitioners assert that Eliodoro Sr. was not in bad faith, because (a) he informed respondent of the need to secure court approval prior to the sale of the lots, and (2) he did not promise that he could obtain the approval.
We agree. Eliodoro Sr. did not misrepresent these lots to respondent as his own properties to which he alone had a title in fee simple. The fact that he failed to obtain the approval of the conditional sale did not automatically imply bad faith on his part. The CA held him in bad faith only for the purpose of binding him to the conditional sale. This was unnecessary because his being bound to it is, as already shown, beyond cavil.
Fourth Collateral Issue:
Computation of Eliodoro's Share
Petitioners aver that the CA's computation of Eliodoro Sr.'s share in the disputed parcels of land was erroneous because, as the conjugal partner of Remedios, he owned one half of these lots plus a further one tenth of the remaining half, in his capacity as a one of her legal heirs. Hence, Eliodoro's share should be 11/20 of the entire property. Respondent poses no objection to this computation.22
On the other hand, the CA held that, at the very least, the conditional sale should cover the one half (1/2) pro indiviso conjugal share of Eliodoro plus his one tenth (1/10) hereditary share as one of the ten legal heirs of the decedent, or a total of three fifths (3/5) of the lots in administration.23
Petitioners' correct. The CA computed Eliodoro's share as an heir based on one tenth of the entire disputed property. It should be based only on the remaining half, after deducting the conjugal share.24
The proper determination of the seller-heir's shares requires further explanation. Succession laws and jurisprudence require that when a marriage is dissolved by the death of the husband or the wife, the decedent's entire estate - under the concept of conjugal properties of gains -- must be divided equally, with one half going to the surviving spouse and the other half to the heirs of the deceased.25 After the settlement of the debts and obligations, the remaining half of the estate is then distributed to the legal heirs, legatees and devices. We assume, however, that this preliminary determination of the decedent's estate has already been taken into account by the parties, since the only issue raised in this case is whether Eliodoro's share is 11/20 or 3/5 of the disputed lots.
WHEREFORE, The Petition is hereby PARTIALLY GRANTED. The appealed Decision and Resolution are AFFIRMED with the MODIFICATION that respondent is entitled to only a pro-indiviso share equivalent to 11/20 of the disputed lots.
SO ORDERED.
Melo, Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.
G.R. No. L-41161 September 10, 1981
FEDERATION OF FREE FARMERS, MELQUIADES BETIOS CRESENCIANO FERNANDEZ, SANCHO PEREZ and AGATON POSA petitioners,
vs.
THE HONORABLE COURT OF APPEALS, VICTORIAS MILLING COMPANY, INC., VICTORIAS MILL DISTRICT PLANTERS' ASSOCIATION, INC., and ALL SUGARCANE PLANTERS OF SUGARCANE PLANTATIONS SITUATED IN THE VICTORIAS MILLING DISTRICT, WHO HAVE AT ONE TIME OR ANOTHER, SINCE JUNE 22,1952, MILLED THEIR SUGARCANE IN THE MILL OF VICTORIAS MILLING COMPANY, INC., respondents.
vs.
THE HONORABLE COURT OF APPEALS, VICTORIAS MILLING COMPANY, INC., VICTORIAS MILL DISTRICT PLANTERS' ASSOCIATION, INC., and ALL SUGARCANE PLANTERS OF SUGARCANE PLANTATIONS SITUATED IN THE VICTORIAS MILLING DISTRICT, WHO HAVE AT ONE TIME OR ANOTHER, SINCE JUNE 22,1952, MILLED THEIR SUGARCANE IN THE MILL OF VICTORIAS MILLING COMPANY, INC., respondents.
G.R. No. L-41222 September 10, 1981
VICTORIAS MILLING COMPANY, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, FEDERATION OF FREE FARMERS, MELQUIADES BETIOS CRESENCIANO FERNANDEZ, SANCHO PEREZ and AGATON POSA VICTORIAS MILL DISTRICT PLANTERS' ASSOCIATION, INC., and, ALL SUGARCANE PLANTERS OF SUGARCANE PLANTATIONS SITUATED IN THE VICTORIAS MILLING DISTRICT, respondents.
vs.
THE HONORABLE COURT OF APPEALS, FEDERATION OF FREE FARMERS, MELQUIADES BETIOS CRESENCIANO FERNANDEZ, SANCHO PEREZ and AGATON POSA VICTORIAS MILL DISTRICT PLANTERS' ASSOCIATION, INC., and, ALL SUGARCANE PLANTERS OF SUGARCANE PLANTATIONS SITUATED IN THE VICTORIAS MILLING DISTRICT, respondents.
G.R. No. L-43153 September 10, 1981
PLANTERS, VICTORIAS MILL DISTRICT, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, FEDERATION OF FREE FARMERS, MELQUIADES BETIOS, CRESENCIANO FERNANDEZ, SANCHO PEREZ AGATON POSA, and VICTORIAS MILLING COMPANY, INC., respondents.
vs.
THE HONORABLE COURT OF APPEALS, FEDERATION OF FREE FARMERS, MELQUIADES BETIOS, CRESENCIANO FERNANDEZ, SANCHO PEREZ AGATON POSA, and VICTORIAS MILLING COMPANY, INC., respondents.
G.R. No. L-43369 September 10, 1981
PRIMO SANTOS and ROBERTO H. TIROL, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, FEDERATION OF FREE FARMERS, MELQUIADES BETIOS CRESENCIANO FERNANDEZ, SANCHO PEREZ, AGATON POSA and VICTORIAS MILLING COMPANY, INC., respondents.
vs.
THE HONORABLE COURT OF APPEALS, FEDERATION OF FREE FARMERS, MELQUIADES BETIOS CRESENCIANO FERNANDEZ, SANCHO PEREZ, AGATON POSA and VICTORIAS MILLING COMPANY, INC., respondents.
BARREDO, J:
Four separate petitions of the respective parties concerned for the review of the decision of the Court of Appeals in CA G.R. No. 47298-R, entitled Federation of Free Farmers, et al. vs. Victorias Milling Co., Inc., et al. of August 12,1975.
The appellate court held that notwithstanding the provisions of Section 9, in relation to Section 1 of the Sugar Act of 1952, Republic Act 809, providing that of any increase in the share of the proceeds of milled sugarcane and derivatives obtained by the planters from the centrals in any sugar milling district in the Philippines, 60% of said increase shall correspond to and should be paid by the planters to their respective laborers, the laborers of the planters affiliated to the Victorias Milling District who are members of or represented by the Federation of Free Farmers, one of herein petitioners, have not been fully paid their share thus provided by law, corresponding to crop years 1955 to 1974, in spite of clear evidence in the record showing that the increase of 4% in the share of the Planters, Victorias Milling District, corresponding to all the years since the enforcement of the aforementioned Act had already been paid by petitioner Victorias Milling Co., Inc. to said planters. The Court of Appeals further found that even the shares of the laborers corresponding to crop years 1952-1955, when by operation of the Act, the increase was 10%, had not been paid. The appellate court rendered judgment holding the planters of the district and Victorias Milling Co., Inc. jointly and severally liable to the said laborers for all said alleged unpaid amounts.
All the four parties involved, namely, (1) the FEDERATION, (2) the PLANTERS, as an association and on behalf of all planters in the Victorias district, (3) two individual planters (SANTOS and TIROL) as well as (4) the CENTRAL (VICTORIAS) are now before Us with their respective opposing positions relative to such decision.
In G. R. No. L-41161, the FEDERATION maintains that (1) the plantation laborers, its members, have not only not been fully paid the amounts indisputably due them from crop year 1952-1953 to November 1, 1955, during which period all the parties are agreed that Section I of Republic Act 809 was fully applicable, but that (2) in 1956, VICTORIAS and the PLANTERS had entered into an agreement which they had no legal right to enter into the way they did, (providing for a 64-36 ratio) that is, in a manner that did not conform with the ratio of sharing between planters and millers specified in the just mentioned legal provision, (which correspondingly provides for a 70-30 ratio) the FEDERATION maintaining that after the enactment of Republic Act 809, all planters and millers in all the sugar milling districts in the Philippines were deprived of the freedom to stipulate any ratio of sharing of the proceeds of sugarcane milled by the respective centrals, as well as their derivatives, in any proportion different from, specially if less for the planters, than that listed in Section 1 of the Act; and (3) assuming the PLANTERS and VICTORIAS had the legal right to enter into any such agreement, that the 60% of the increase given to the PLANTERS under said agreement has not been paid up to now to the respective laborers of said PLANTERS. In this connection, the FEDERATION further urges, in this instance, that the Court of Appeals' decision is correct in holding that under the law on torts, the PLANTERS and the CENTRAL are jointly and severally liable for the payment of the amounts thus due them.
In G.R. No. L-41222, the contentions of petitioner VICTORIAS are: (1) that the evidence incontrovertibly shows that it has already paid in full to the PLANTERS their respective shares in the proceeds of the sugarcane and derivatives milled by said central from the moment it was legally decided and agreed that it should do so, (aside, of course, from other issues which albeit related thereto may need not be resolved here anymore, for reasons herein under to be stated) (2) in its initial petitions in the trial court, the FEDERATION admitted that the laborers have been given what is due them as far as the 1952-53 to 1954-55 crops are concerned, and (3) that, even if it were true that the PLANTERS have not paid their laborers the corresponding share provided for them by law, the facts and circumstances extant in the records do not factually and legally justify the holding of the Court of Appeals that the Victorias Milling Company, Inc. is jointly and severally liable to the laborers for what the latter's respective planters-employers might have failed or refused to pay their laborers or which said planters might have otherwise appropriated unto themselves or absconded. The CENTRAL also posits that the action as filed below was not founded on torts but on either an obligation created by contract or by law, under neither of which it could be liable, and moreover, even if such action might be deemed based on torts, it has already prescribed, apart from the fact that since the Federation's pleadings alleged and prayed for payment of the laborers' share in 1955-56-1973-74 crop years, the Court of Appeals had no jurisdiction to render judgment concerning the 1952-53-1954-55 crop years, the latter not having been the subject of the allegations and prayers of the FEDERATION in its pleadings in the trial court and all evidence regarding said matters outside of the pleaded issues were properly and opportunely objected to.
In G. R. No. L-43153, the PLANTERS, aside from asserting (1) their freedom to stipulate with the CENTRAL such ratio of sharing as they might agree upon, regardless of the ratios specified in Section 1 of the Sugar Act, (2) insist that their respective laborers have already been fully paid what is due them, under the law insofar as the 1952-53 to 1954-55 crop years are concerned, thereby impliedly if not directly admitting that as provided by law, the CENTRAL or VICTORIAS had already paid them the increase they had agreed upon and (3) that, in any event, the milling company should reimburse them whatever amounts they might be adjudged to pay the laborers.
Lastly, in G. R. No. L-43369, planters PRIMO SANTOS and ROBERTO H. TIROL, who are among the planters in the Victorias District, complain that the decision of the Court of Appeals ignored their plea of lack of jurisdiction of the trial court over their persons in spite of their proven claim that they had not been properly served with summons, and that the portion of said decision holding them jointly and severally liable with VICTORIAS and the PLANTERS to the latter's laborers for the amounts here in question has no factual and legal basis, considering they were not parties to the pertinent questioned agreements.
I
In its petition, the FEDERATION assigns the following alleged errors in the decision under review:
I RESPONDENT THE HONORABLE COURT OF APPEALS erred in not holding that as contended by the Honorable Secretary of Labor, and, in effect the Honorable Secretary of Justice, the phrase 'written milling agreements' in the aforequoted Section I of Republic Act No. 809 has exclusive reference to written milling agreements still existing upon the effectivity of the law on June 22, 1952, and, not to those executed subsequent to said date.
II RESPONDENT THE HONORABLE COURT OF APPEALS erred in not holding that the purpose and intendment of Republic Act No. 809 is to exempt from its operation milling districts in which there were still existing, on June 22, 1952, written milling agreements between the majority of planters and the millers.
III RESPONDENT THE HONORABLE COURT OF APPEALS erred in not holding that as contended by the Honorable Secretary of Labor, and ,in effect, the Honorable Secretary of Justice, the purpose and intendment of Republic Act No. 809, admittedly pattern after the Rice Share Tenancy Act, is to firmly fix by law, effective and, therefore, the legal effect June 22, 1952, the sharing participation among the millers, the planters and the latter's laborers in the unrefined sugar produced in districts not exempt, as well as all by-products and derivatives thereof, and, consequently, to prohibit in said districts written milling agreements, executed subsequent to said date, providing for sharing arrangements different from or contrary to the schedule fixed under said Sections 1 and 9, and, to prevent any form of circumvention thereof.
IV RESPONDENT THE HONORABLE COURT OF APPEALS erred in holding that in order 'to safeguard, preserve, and maintain the integrity, viability, and health of an industry so vital to the entire economy of the country' as sugar industry the lawmakers intended to place in the hands of the millers and the planters the operation of Republic Act No. 809 -- i. e. to enable them to stipulate in their written milling agreements executed subsequent to June 22, 1952 participations those prescribed in Section 1 thereof
V RESPONDENT THE HONORABLE COURT OF APPEALS erred in invoking the 'Rules and Regulations to Implement Section 9 of Republic Act 809 dated February 23,1956, as amended on May 4, 1956 (Exhibit GGG) to support its conclusion that the lawmakers intended to place in the hands of the millers and the planters the operation of Republic Act No. 809 - i. e. to enable them to stipulate in their written milling agreements executed subsequent to June 22, 1952 participations different from those prescribed in Section 1 thereof (Pp. 44-45, L-41161 Rec., Vol. 1.)
In its brief here, however, it assigns ten alleged errors thus:
-I-
RESPONDENT COURT ERRED IN DISREGARDING THE OPINION OF THE HONORABLE SECRETARY OF LABOR AND, IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE, AND, IN NOT HOLDING THAT THE 'WRITTEN MILLING AGREEMENTS' CONTEMPLATED IN SECTION I OF REPUBLIC ACT NO. 809 BY THE FRAMERS THEREOF WERE THOSE LONG-TERM WRITTEN MILLING AGREEMENTS REFERRED TO IN THE REPORT OF CHIEF JUSTICE MANUEL V. MORAN, MOST, IF NOT ALL, OF WHICH HAD EXPIRED AS EARLY AS 1951, AND, NOT THOSE WHICH THE MILLERS AND THE PLANTERS MIGHT EXECUTE SUBSEQUENT TO THE DATE THE ACT WOULD TAKE EFFECT
-II-
RESPONDENT COURT ERRED IN DISREGARDING THE EXPLANATION MADE BY REPRESENTATIVE CARLOS HILADO, SPONSOR OF HOUSE BILL NO. 1517, AND, IN NOT HOLDING THAT, BY INSERTING BEFORE THE TEXT OF SECTION I OF REPUBLIC ACT NO. 809 THE PHRASE IN THE ABSENCE OF WRITTEN MILLING AGREEMENTS BETWEEN THE MAJORITY OF PLANTERS AND THE MILLERS OF SUGARCANE IN ANY MILLING DISTRICT,' THE FRAMERS OF SAID LAW INTENDED TO EXEMPT FROM THE OPERATION THEREOF THOSE MILLING DISTRICTS, IF ANY, WHEREIN THERE WERE STILL EXISTING, ON THE DATE THE LAW WOULD TAKE EFFECT, THOSE LONG-TERM WRITTEN MILLING AGREEMENTS BETWEEN THE MILLERS AND A MAJORITY OF THEIR ADHERENT PLANTERS PROVIDING FOR SHARING ARRANGEMENTS; SAID EXEMPTION BEING MERELY A PRECAUTIONARY MEASURE TO PRECLUDE SAID MILLERS, IF ANY, FROM CHALLENGING THE LAW AS BEING VIOLATIVE OF PARAGRAPH 10, SECTION 1, ARTICLE III OF THE OLD CONSTITUTION
-III-
RESPONDENT COURT ERRED IN DISREGARDING THE OPINION OF THE HONORABLE SECRETARY OF LABOR AND, IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE, AND, IN NOT HOLDING THAT IT IS CONTRARY TO THE PURPOSE AND INTENDMENT OF THE FRAMERS OF REPUBLIC ACT NO. 809 THAT 'THE OPERATION AND APPLICABILITY OF THE SUGAR ACT WOULD REST UPON THE AGREEMENT, THE BILATERAL WILL OF THE CENTRAL AND THE MAJORITY OF THE PLANTERS OR PERHAPS THEIR COLLUSION, TO THE EXCLUSION OF AND THE DETRIMENT OF THE LABORERS, WHOM CONGRESS AS A MEASURE OF LAW AND PUBLIC POLICY CLEARLY INTENDED TO BENEFIT'
-IV-
RESPONDENT COURT ERRED IN NOT HOLDING THAT WHAT THE FRAMERS OF REPUBLIC ACT NO. 809 HAD CONTEMPLATED IN ORDER TO SAFEGUARD, PRESERVE, AND MAINTAIN THE INTEGRITY, VIABILITY, AND HEALTH OF AN INDUSTRY SO VITAL TO THE ENTIRE ECONOMY OF THE COUNTRY AS THE SUGAR INDUSTRY WAS TO PROMOTE SOCIAL JUSTICE AND PROTECT THE PLANTATION LABORERS THEREIN BY DETERMINING AND FIXING THE RESPECTIVE JUST PARTICIPATIONS IN THE BENEFITS FROM SAID INDUSTRY AMONG THE MILLERS, THE PLANTERS AND THE PLANTATION LABORERS
-V-
RESPONDENT COURT ERRED IN DISREGARDING THE OPINION OF THE HONORABLE SECRETARY OF LABOR AND, IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE, AND, IN NOT HOLDING THAT, EFFECTIVE JUNE 22, 1952 AND THEREAFTER, EVEN BEYOND CROP MILLING YEAR 1973-1974 AS LONG AS THE ACTUAL PRODUCTION CONTINUES TO EXCEED ONE MILLION TWO HUNDRED THOUSAND (1,200,000) PICULS, THE SUGAR PRODUCE IN THE VICTORIAS MILL DISTRICT, AS WELL AS ALL ITS BY-PRODUCTS AND DERIVATIVES, SHOULD BE DIVIDED AMONG THE CENTRAL, THE PLANTERS AND THE LABORERS AS FOLLOWS: THIRTY (30%) PER CENT FOR THE CENTRAL, SIXTY-FOUR (64%) PER CENT FOR THE PLANTERS AND SIX (6%) PER CENT FOR THE LABORERS.
-VI-
RESPONDENT COURT ERRED IN DISREGARDING THE OPINION OF THE HONORABLE SECRETARY OF LABOR AND, IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE, THAT THE 'AMICABLE SETTLEMENT-COMPROMISE AGREEMENT DATED MARCH 5, 1956 (EXHIBITS XXX THRU XXX-6) IS CONTRARY TO REPUBLIC ACT NO. 809, AND, THEREFORE, NULL AND VOID AB INITIO
-VII-
RESPONDENT COURT ERRED IN DISREGARDING THE OPINION OF THE HONORABLE SECRETARY OF LABOR AND, IN EFFECT, OF THE HONORABLE SECRETARY OF JUSTICE, THAT 'THE GENERAL COLLECTIVE SUGAR MILLING CONTRACT (EXHIBITS YYY THRU YYY-7) AND THE INDIVIDUAL SUGAR MILLING CONTRACTS' (EXHIBITS SSS THRU SSS-28 AND ZZZ THRU ZZZ-7), IN SO FAR AS THEY REPRODUCE, CONFIRM AND RATIFY THE 'AMICABLE SETTLEMENT- COMPROMISE AGREEMENT' DATED MARCH 5,1956 (EXHIBITS XXX THRU XXX-6) AND/OR ARE DERIVED THEREFROM, ARE CONTRARY TO REPUBLIC ACT NO. 809, AND, THEREFORE, NULL AND VOID AB INITIO
-VIII-
RESPONDENT COURT ERRED IN NOT ORDERING THE CENTRAL AND THE PLANTERS, JOINTLY AND SEVERALLY, TO ACCOUNT AND PAY FOR THE FAIR MARKET VALUE OF THE SIX (6%) PER CENT SHARE OF THE LABORERS IN THE PROCEEDS OF THE ANNUAL UNREFINED SUGAR PRODUCE AS WELL AS ITS BY-PRODUCTS AND DERIVATIVES FOR THE PERIOD BEGINNING NOVEMBER 1, 1955, WITH LEGAL INTEREST THEREON COMMENCING FROM OCTOBER 31, 1956 UNTIL FULLY PAID
-IX-
RESPONDENT COURT ERRED IN FAILING TO CONSIDER AND RESOLVE THE LABORERS' TWENTY-SEVENTH ASSIGNMENT OF ERROR AND IN NOT IMPOSING UPON THE CENTRAL AND THE PLANTERS, JOINTLY AND SEVERALLY, THE LIABILITY TO PAY THE LABORERS BY WAY OF EXEMPLARY DAMAGES, TO SET AN EXAMPLE FOR THE PUBLIC GOOD, THE SUM EQUIVALENT TO AT LEAST TWENTY (20%) PER CENT OF ALL THE AMOUNTS TO WHICH THE LABORERS MAY BE ENTITLED
-X-
RESPONDENT COURT ERRED IN REDUCING THE JOINT AND SEVERAL LIABILITY OF THE CENTRAL AND THE PLANTERS FOR CONTINGENT ATTORNEY'S FEES FROM THE STIPULATED SUM EQUIVALENT TO TWENTY (20%) PER CENT OF ALL THE AMOUNTS TO WHICH THE LABORERS MAY BE ENTITLED TO A SUM EQUIVALENT TO TEN (10%) PER CENT THEREOF
On the other hand, VICTORIAS presents in its petition the following so-called issues of substance and grounds for allowance of its petition:
1. Considering the attendant existence of written milling agreements between petitioner Vicmico and the planters, which written milling agreements were held to be legal and valid by the Court of Appeals, is Republic Act No. 809 applicable in the case at bar?
2. In interpreting the phrase 'under this Act' appearing in Section 9 of Republic Act No. 809, as embracing written milling agreements executed subsequent to the effectivity of said law, did not the Court of Appeals unauthorizedly and unfoundedly indulge in judicial legislation?
3. Assuming arguendo that the phrase 'under this Act' includes subsequently executed written milling contracts providing for increased participation on the part of the planters in the amount of 4%, on the basis of which milling contracts the claim of the FFF et als. to 60% of said 4% share' is founded, did not the Court of Appeals erroneously hold, said Court acting contrary to law and to the facts and admissions of the parties, that petitioner Vicmico is jointly and solidarily liable, on the ground of tort, with the planters for said 60% of 4%?
4. May petitioner Vicmico be held jointly and solidarily liable for tort for 60% of the 4% increased participation of the planters as provided for the latter under the milling contracts, even in the absence of allegations or evidence of acts constituting tort and notwithstanding the admitted fact that petitioner Vicmico has, since November 1, 1955, regularly delivered to the planters, as required by law and contract, said 4% increase in participation?
5. May respondent Court of Appeals, on the basis of tort, validly hold petitioner Vicmico jointly and severally liable with the planters (a) for said 60% of the 4% increase in the planters' participation notwithstanding the fact that FFF et als. did not proceed on the theory of tort which had long prescribed, as admitted by FFF et als. but on the basis of contract or obligations created by law, (b) as well as for alleged causes of action that accrued subsequent to the filing on November 9, 1962 of the petition of the FFF et als., even in the absence of any supplemental petition or amendment to the pleadings effected before judgment?
6. Did not the Court of Appeals gravely abuse its discretion, said abuse amounting to lack of jurisdiction when it awarded the laborers P 6,399,105.00, plus interest thereon at 6% and P180,769.38, plus interest thereon at 6%, said awards allegedly representing the share pertaining to the laborers from June 22, 1952 to October 31, 1955, - (a) in the face of the laborers' admission that they had received their lawful participation during said period; (b) in the face of any lack of allegation in the petition concerning any cause of action relative thereto; (c) in the face of the Court of Appeals' ruling that the amicable settlement is legal and valid; and (d) in the face of the undeniable fact that, as per the very evidence presented by the FFF, et als., Vicmico delivered all the amounts pertaining to the laborers to the planters, and the laborers actually received said amounts as demonstrated by Exhibit '23-Vicmico'?
7. The petition of the FFF, et als. being essentially a suit for accounting, considering that the amicable settlement and milling agreements are valid and binding, as held by the Court of Appeals on the basis of facts found by it, and considering, further, the evidence and admissions of the parties to the effect that petitioner Vicmico complied with all of its obligations thereunder, by delivering all of the increased share to the planters, as required by law and contract, did not the Court of Appeals manifestly err and grossly abuse its discretion in not taking the foregoing matters into consideration and nevertheless holding petitioner Vicmico jointly and severally liable with the planters?
8. In any event, is Republic Act No. 809, otherwise known as the 'Sugar Act of 1952', constitutional?
9. Is the action filed by the laborers properly brought as a class suit?
10. Did the Court of Agrarian Relations have jurisdiction over the subject matter of the laborers' suit at the time the same was filed on November 9,1962?" (Pp 18-22, Rec., G.R. No. L-41222)
and the following assignment of errors:
I
First Assignment of Error
THE COURT OF APPEALS ERRED IN HOLDING THAT REPUBLIC ACT 809 IS APPLICABLE EVEN IN THE PRESENCE OF WRITTEN MILLING AGREEMENTS BETWEEN THE CENTRAL AND THE PLANTERS, SINCE THE PROVISIONS OF SAID ACT AS CLEARLY STATED IN THE STATUTE ITSELF BECOME OPERATIVE ONLY 'IN THE ABSENCE' OF WRITTEN MILLING AGREEMENTS.
II
Second Assignment of Error
THE COURT OF APPEALS ERRED IN CONSTRUING THE PHRASE UNDER THIS ACT EMBODIED IN SECTION 9 OF REPUBLIC ACT NO. 809 AS INCLUDING OR EMBRACING WRITTEN MILLING AGREEMENTS EXECUTED AFTER SAID ACT TOOK EFFECT ON JUNE 22,1952, IN VIEW OF THE FACT THAT THE EXPRESS IMPORT OF SAID PHRASE CLEARLY EXCLUDES WRITTEN MILLING AGREEMENTS AND IN VIEW OF THE CIRCUMSTANCE THAT THE APPLICABILITY OF SECTION 9 IS DEPENDENT UPON THE ENFORCEMENT OF SECTION I OF THE SAME LAW.
III
Third Assignment of Error
THE COURT OF APPEALS ERRED IN HOLDING THAT THE LEGISLATIVE INTENT AND HISTORY OF REPUBLIC ACT 809 POINT TO NO OTHER CONCLUSION THAN THAT SECTION 9 OF SAID ACT ALSO EMBRACES WRITTEN MILLING AGREEMENTS, SINCE THE LEGISLATIVE INTENT AND HISTORY DEMONSTRATE OTHERWISE AND CLEARLY SHOW THAT SECTION 9 IS NOT AT ALL APPLICABLE DURING PERIODS WHEN MILLING CONTRACTS EXIST BETWEEN THE CENTRAL AND THE PLANTERS.
IV
Fourth Assignment of Error
THE COURT OF APPEALS ERRED IN HOLDING THAT REPUBLIC ACT 809 IS A PIECE OF SOCIAL LEGISLATION THAT UNCONDITIONALLY AND EQUALLY GRANTS BENEFITS TO LABORERS IN THE SUGAR INDUSTRY. SINCE SAID ACT IS DISCRIMATORY, SAID SELECTIVE OR DISCRIMINATORY FEATURE BEING MADE MORE MANIFEST BY THE INTERPRETATION OF THE COURT OF APPEALS AS WELL AS BY THE AMENDED RULES OF THE DEPARTMENT OF LABOR, WHICH AMENDED RULES ARE NULL AND VOID AS CONTRARY TO LAW.
V
Fifth Assignment of Error
ASSUMING ARGUENDO, THAT THE HONORABLE COURT OF APPEALS CORRECTLY INTERPRETED REPUBLIC ACT 809 AS APPLICABLE EVEN WHEN THE CENTRAL AND THE PLANTERS HAVE SUBSEQUENTLY EXECUTED WRITTEN MILLING AGREEMENTS, AS IN THE CASE AT BAR, THE COURT OF APPEALS ERRED IN HOLDING PETITIONER VICMICO JOINTLY AND SEVERALLY LIABLE WITH THE PLANTERS ON THE BASIS OF TORT FOR 60% OF THE 4% INCREASED PARTICIPATION OF THE PLANTERS AND FOR AMOUNTS ALLEGEDLY DUE THE LABORERS FROM JUNE 22,1952 TO OCTOBER 31,1955, SAID ERROR BEING EVIDENT IN VIEW OF THE FACT THAT RESPONDENTS FFF ET ALS. DID NOT PROCEED ON THE THEORY OF TORT BUT ON THE THEORY OF CONTRACTS OR OBLIGATIONS CREATED BY LAW AND IN VIEW OF THE FACT THAT SAID WRITTEN MILLING AGREEMENTS HAVE NOT PROVIDED FOR ANY SOLIDARY LIABILITY, THE TERMS OF SAID WRITTEN MILLING AGREEMENTS HAVING, MOREOVER, BEEN FAITHFULLY COMPLIED WITH BY PETITIONER VICMICO
VI
Sixth Assignment of Error
THERE BEING NO ALLEGATION OR PROOF OF ACTS CONSTITUTING TORT OR EVEN CONSTITUTING ANY VIOLATION OF THE WRITTEN MILLING CONTRACTS ON THE PART OF PETITIONER VICMICO IN CONNECTION WITH THE LABORERS CLAIM OF 60% OF THE 4% INCREASED PARTICIPATION OF THE PLANTERS AND THERE BEING, MOREOVER, NO AMENDED OR SUPPLEMENTAL PLEADINGS FILED BY FFF ET ALS. INVOLVING ANY CAUSE OF ACTION BASED ON TORT, THE COURT OF APPEALS ERRED IN NEVERTHELESS HOLDING PETITIONER VICMICO JOINTLY AND SEVERALLY LIABLE WITH PLANTERS, ON THE BASIS OF TORT
VII
Seventh Assignment of Error
THE COURT OF APPEALS ERRED, IN ANY EVENT, IN NOT HOLDING THAT ANY ACTION BASED ON TORTS HAS LONG PRESCRIBED.
VIII
Eighth Assignment of Error
IN ANY EVENT, THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE PLANTERS WERE THE AGENTS OF THE LABORERS WHOSE CAUSE OF ACTION, IF ANY, FOR 60% OF THE 4% INCREASED PARTICIPATION OR FOR THOSE AMOUNTS PERTAINING TO 'THE PERIOD FROM JUNE 1952 TO OCTOBER 31, 1955, SOLELY LIES AGAINST SAID PLANTERS AS THEIR AGENTS. IN VIEW OF THE FACT THAT PETITIONER VICMICO FAITHFULLY DELIVERED, AS ADMITTED BY THE PARTIES AND FOUND BY THE HONORABLE COURT, ALL OF SAID AMOUNTS TO THE PLANTERS WHOSE OBLIGATION, IN TURN, WAS TO DISTRIBUTE TO THEIR RESPECTIVE LABORERS THE LATTER'S SHARE.
IX
Ninth Assignment of Error
WITH REFERENCE TO THE AMOUNT OF P6,399,105.00 AND THE AMOUNT OF P180,769.38, WHICH ACCRUED IN FAVOR OF THE LABORERS FROM JUNE 22, 1952 TO OCTOBER 31,1955 WHEN THERE WAS AS YET NO WRITTEN MILLING AGREEMENT, IN VIEW OF THE FACT THAT THE LABORERS ADMITTED IN THEIR PETITION THAT THE PLANTERS GAVE THEM THEIR LAWFUL PARTICIPATION FROM JUNE 22,1952 TO OCTOBER 31,1955 AND THERE BEING, MOREOVER, NO ALLEGATION OF ANY CAUSE OF ACTION RELATIVE THERETO, THE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT HELD PETITIONER VICMICO AND THE PLANTERS JOINTLY AND SEVERALLY LIABLE VIA TORT FOR SAID AMOUNTS.
X
Tenth Assignment of Error
HAVING FOUND THE MILLING AGREEMENT AND THE AMICABLE SETTLEMENT-COMPROMISE AGREEMENT (ASCA) TO BE VALID, THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER VICMICO AND THE PLANTERS HAD NO AUTHORITY TO STIPULATE IN SAID ASCA ON THE DISPOSITION OF THE AMOUNTS PERTAINING TO THE LABORERS FROM JUNE 22, 1952 TO OCTOBER 31,1955, THE PLANTERS BEING THE AUTHORIZED AGENTS OF THE LABORERS BY, AMONG OTHERS, HAVING RECEIVED ALL THE AMOUNTS DUE THEM, HAVING MOREOVER RATIFIED SAID ASCA.
XI
Eleventh Assignment of Error
THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE LABORERS DID NOT RECEIVE THE AMOUNT OF P6,399,105.00 AND IN HOLDING, ON THE BASIS OF TORT, PETITIONER VICMICO, JOINTLY AND SEVERALLY LIABLE WITH THE PLANTERS THEREFOR, EXHIBIT 23-VICMICO CLEARLY SHOWING ON ITS FACE THAT THE LABORERS ACTUALLY RECEIVED A TOTAL OF P6,536,741.98 AND THE COURT OF APPEALS HAVING FOUND THAT ALL AMOUNTS PERTAINING TO THE LABORERS HAD BEEN RECEIVED BY THE PLANTERS, THE FOREGOING DEMONSTRATING, AMONG OTHERS, THAT PETITIONER VICMICO CANNOT BE ACCUSED OF ANY TORTIOUS ACT.
XII
Twelfth Assignment of Error
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE PETITION OF FFF, ET ALS. IS ESSENTIALLY AN ACTION FOR ACCOUNTING, SAID ACTION REQUIRING A PRIOR DETERMINATION OF THE RIGHT TO ACCOUNTING AND THE ACCOUNTING ITSELF, A SEQUENCE THAT HAS NOT BEEN ADHERED TO BY THE COURT OF APPEALS WHEN IT ENTERED A FINAL JUDGMENT FOR UNDETERMINED AND SPECIFIC AMOUNTS, NOTWITHSTANDING FFF, ET ALS.' ABSENCE OF ANY RIGHT TO ACCOUNTING AGAINST PETITIONER VICMICO, THEIR RIGHT, IF ANY, BEING EXCLUSIVELY AGAINST THE PLANTERS.
XIII
Thirteenth Assignment of Error
IN ANY EVENT, THE COURT OF APPEALS ERRED IN NOT HOLDING THAT REPUBLIC ACT 809, OTHERWISE KNOWN AS THE SUGAR ACT OF 1952, IS UNCONSTITUTIONAL.
XIV
Fourteenth Assignment of Error
THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACTION FFF, ET ALS. HAS BEEN IMPROPERLY BROUGHT AS A CLASS SUIT.
XV
Fifteenth Assignment of Error
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COURT OF AGRARIAN RELATIONS HAD NO JURISDICTION OVER THE SUBJECT MATTER OF THE SUIT AT THE TIME THE SAME WAS FILED ON NOVEMBER 9, 1962.
XVI
Sixteenth Assignment of Error
THE COURT OF APPEALS ACCORDINGLY ERRED IN NOT ABSOLVING PETITIONER VICMICO FROM ALL OBLIGATIONS (A) FOR 60% OF THE 4%, INCREASED PARTICIPATION OF THE PLANTERS, (B) FOR P 6,399,105.00 AND P 180,768.38, AND (C) FOR ATTORNEY'S FEES. (A to K of VICTORIAS' Brief)
On its part, as grounds relied upon for the allowance of their petition, the PLANTERS submit that:
- A -
THE COURT OF APPEALS ERRED IN CONCLUDING THAT, WHILE THE AGREEMENT BETWEEN THE CENTRAL AND THE PLANTERS WITH RESPECT TO THE 64-36 SHARING BASIS IS VALID, YET THERE MUST BE READ INTO IT THE PROVISO THAT 60% OF THE INCREASE IN THE PARTICIPATION OF THE PLANTERS SHALL PERTAIN TO THE PLANTATION LABORERS IN ACCORDANCE WITH SECTION 9 OF REPUBLIC ACT NO. 809, OTHERWISE KNOWN AS THE SUGAR ACT OF 1952.
-B -
THE COURT OF APPEALS ERRED IN HOLDING PETITIONER PLANTERS JOINTLY AND SEVERALLY LIABLE, ON THE BASIS OF TORT WITH CENTRAL NOTWITHSTANDING THE FACT THAT IT FOUND THE ASCA PERFECTLY VALID AND NOT IN CIRCUMVENTION OF THE LAW.
- C -
THE COURT OF APPEALS ERRED IN FINDING THAT THE P4,000,000.00, OF THE P5,186,083.34, PERTAINING TO THE SHARE OF THE PLANTATION LABORERS WITHIN THE VICTORIAS MILL DISTRICT FROM JUNE 22,1952 TO OCTOBER 31, 1955, WAS NOT DISTRIBUTED TO THE SAID PLANTATION LABORERS SIMPLY BECAUSE NEITHER THE CENTRAL, NOR THE PLANTERS NOR THE SPECIAL COMMITTEE PRESENTED EVIDENCE AS TO ITS DISTRIBUTION.
-D -
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE RESPONDENTS' PETITION IS NOT PROPER AS A CLASS SUIT.
-E-
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COURT OF AGRARIAN RELATIONS HAD NO JURISDICTION OVER THE SUBJECT MATTER OF THE SUIT AT THE TIME THE SAME WAS FILED BY THE FFF, ET ALS. ON NOVEMBER 9,1962.
- F -
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COURT OF AGRARIAN RELATIONS HAD NOT ACQUIRED JURISDICTION OVER THE PERSONS OF THE PLANTERS WHO WERE SERVED SUMMONS BY PUBLICATION, DUE TO DEFECTIVE SERVICE OF SUMMONS BY PUBLICATION. (Pp. 33-34, L-43153 Rec., Vol, 1.)
Petitioners Primo Santos and Roberto H. Tirol formulate their reasons for their petition for review thus:
1. — The Hon. Court of Appeals failed to resolve a most important question as to whether or not the lower court had acquired jurisdiction over the persons of defendants-appellees Primo Santos and Roberto H. Tirol due to defective service of summons by publication.
2. — The Sugar Act of 1952 (Rep. Act No. 809) may be interpreted as not to preclude freedom of contract between the majority of the plantation owners and the central; but the law should not later be applied only in part as to benefit and favor the Central to the great prejudice of both the plantation owners and the laborers.
3. — Defendant Primo Santos being a mere LESSEE, not the owner of "Hda. Kana-an" and NOT having signed any milling contract with the Victorias Milling Co., he should not be made jointly and severally liable with the central and the plantation owners for acts and/or contracts in which he had no part nor intervention whatsoever.
4. — There is no evidence that the individual planters, particularly the defendants-movants herein had any knowledge of nor intervention in the custody of the sum of P4,000,000 belonging to the plantation laborers which was supposedly entrusted to a "Special Committee" of five (5) members; and, therefore, they (the movants) should not be adjudged jointly and severally liable for the alleged loss of such amount and its increments. (Page 7, L- 43369 Rec.)
The foregoing numerous assignments of error supposedly committed by the Court of Appeals would, if all of them were to be separately considered, call for a very extended discussion, necessarily making this opinion tediously long. But We have repeatedly received from all the parties motions for early resolution of these cases, which although relatively new in this Court, were indeed started in the Court of Agrarian Relations, Bacolod Branch, more than eighteen (18) years ago. And, considering they involve an enormous amount constituting, as it were, another windfall for the least favored element - the farm laborers - of the once prosperous sugar industry in Negros Occidental, We will limit Ourselves to the fundamental and pivotal matters, and thus put finis as briefly as possible, to this important controversy together with all hardships its long pendency has entailed for all the parties concerned, particularly the laborers.
Anyway, going carefully with detailed attention over the numerous issues raised in the so-called grounds for allowance alleged by the parties in their respective petitions, it would be readily noted, that most of them deal with but a few fundamental issues, some of them, already settled and determined, as a matter of fact, by this Supreme Court, in its decision in a related case, that of Asociacion de Agricultores de Talisay-Silay Inc. vs. Talisay-Silay Milling Co., Inc., 88 SCRA 294, and its resolution of the motion for reconsideration thereof as reported in 89 SCRA 311. Indeed, in its second motion dated July 8,1980 for promulgation of decision, the FEDERATION acknowledges expressly that "the constitutionality of the Sugar Act of 1952 as well as the construction and interpretation thereof" have been set at rest by Us in said case. In the main, therefore, insofar as such basically similar and resolved issues are concerned, We shall refer to them here already as settled juridical premises whenever it should be proper to do so in resolving the issues in these cases.
II
To set them forth briefly, among the issues in these instant cases, which this Court has already resolved with finality in the Talisay- Silay case are the following:
- A -
That Republic Act 809, as a social legislation founded not only on police power but more importantly on the social welfare mandates of the Constitution, is undoubtedly constitutional in all its aspects material and relevant to the instant cases. We deem it would be a fruitless exercise for Us to rediscuss and belabor that point here. Indeed, We find the position of the Court of Appeals thereon to be well studied and discussed and totally correct, being as they are substantially in line with the pertinent considerations on the same point expressed in Our Talisay-Silay decision.
- B -
Aside from upholding the constitutionality of Republic Act 809, We further ruled in Talisay-Silay that the predicate or prerequisite of absence of milling agreements for the application of Section 1 of the Act does not refer exclusively to the expiration of the then existing contracts (those that expired before the approval of the Act) but even to future failure of centrals and planters to enter into written milling contracts; that, therefore, there is nothing in the law that excludes the right of said parties to enter into new contracts, and that in said new contracts, they could provide for a ratio of sharing different from that stipulated in Section I of the Act, provided, of course, that any increase of their share in the proceeds of milling that the PLANTERS would get, 60% thereof must be paid by them to their respective plantation laborers.
Suffice it, therefore, to refer, insofar as said issues are concerned, to the decision of the Court of Appeals, which We hereby uphold, and to Our own discourse thereon as well as Our construction of Section 1 thereof regarding the freedom of the centrals and the planters to agree on how they would share the proceeds of the milled sugarcane made in Our decision of April 3, 1979 and resolution of February 19, 1979 earlier mentioned above. Covered here by this adoption by reference and, therefore deemed resolved in line with Talisay-Silay are the following assignments of error of the parties hereto, an of which We have quoted at the outset of this opinion:
A. I to V in the FEDERATION's brief in G.R.No.L-41161 in Federation, etc., et al. vs. Court of Appeals, et al.;
B. Nos. 1, 2 and 8 of its so-called questions of substance and assignment of errors I, II and IX, of VICTORIAS in G.R. No. L-41222 in Victorias Milling Co., Inc. vs. Court of Appeals, et al.; and
C. Ground A of the PLANTERS in G.R. No. L-43153 in Planters, Victorias Milling District vs. Court of Appeals, et al.
as well as the corresponding refutations thereof and counter-assignments of the respective parties relative to the just-mentioned assignments of error or grounds for allowance, but none of the points raised by petitioners in Santos and Tirol vs. Court of Appeals, et al. G.R. No. L-43369.
III
To facilitate understanding of the resolution of these cases, let it be recalled that, as is more extensively discussed in the portions of the decision of the Court of Appeals herein under to be quoted, previous to the passage of Republic Act 809 or the Sugar Act of 1952, almost all over the country, and particularly in the sugar milling districts of Negros Occidental, the centrals practically dominated the economic fate of the planters and the laborers of the latter. The common prevalent ratio of sharing of the proceeds of the sugarcane milled by said centrals was fixed at 40% for the centrals and 60% for the planters, both parties dealing with and paying their respective laborers at rates which were considered subnormal, so much so that President Manuel Quezon had to appoint a committee headed by Chief Justice Manuel Moran to investigate the economic and social conditions in the whole sugar industry. As expected, the report recommended more effective measures to ease the stranglehold of the centrals over the planters, and more importantly, to ameliorate the conditions of labor, even to the extent of utilizing police power steps for the purpose, if needed. Hence, the above mentioned Sugar Act came into being . 1
Section 1 thereof provides thus:
SECTION 1 In the absence of written milling agreements between the majority of planters and the millers of sugar-cane in any milling district in the Philippines, the unrefined sugar produced in that district from the milling by any sugar central of the sugar-cane of any sugar-cane planter or plantation owner as well as all by-products and derivatives thereof, shall be divided between them as follows:
Sixty per centum for the planter, and forty per centum for the central in any milling district the maximum actual production of which is not more than four hundred thousand piculs: Provided, That the provisions of this section shall not apply to sugar centrals with an actual production of less than one hundred fifty thousand piculs;
Sixty-two and one-half per centum for the planter, and thirty-seven and one-half per centum for the central in any milling district the maximum actual production of which exceeds four hundred thousand piculs but does not exceed six hundred thousand piculs;
Sixty-five per centum for the planter, and thirty-five per centum for the central in any milling district the maximum actual production of which exceeds six hundred thousand piculs but does not exceed nine hundred thousand piculs;
Sixty-seven and one-half per centum for the planter, and thirty-two and one-half per centum for the central in any milling district the maximum actual production of which exceeds nine hundred thousand piculs but does not exceed one million two hundred thousand piculs;
Seventy per centum for the planter, and thirty per centum for the central in any milling district the maximum actual production of which exceeds one million two hundred thousand piculs.
Complementing the above provision, Section 9 thereof provides for a 60/40 partition between the planters and laborers (60% for the laborers and 40% for the planters) of any increase that the planters might obtain under the Act. (Sec. 9 is quoted in the portion of the decision of the Court of Appeals to be quoted on pages 25 and 26 hereof.)
In the wake of such legislation, litigations were started questioning the constitutionality thereof, and among such cases was Talisay- Silay which, as already stated, We have already decided. To reiterate, in that case, We did not only uphold the statute's validity, We also held that the Act was not intended to deprive the mills and the planters of the right to divide the proceeds of the milled sugarcane in each district in the proportion they might agree on, without regard to the ratios specified in Section 1 of the Act, provided that any increase that the planters might be given, as expected in consequence of the implicit compulsion of the law, has to be shared by them with their respective laborers in their plantations, whether owned or leased by them, in the proportion of 60% for said laborers and 40% only for them. Nothing in the pleadings and the briefs of the parties in the instant cases persuades Us to rule otherwise. In fact, at the request of the FEDERATION, We already had occasion to go over the main points raised by it here, when they asked Us to consider in deciding that case their arguments in their brief filed with the Court of Appeals, copy of which was furnished Us. The decision of this case must then be predicated fundamentally on the Talisay-Silay rulings insofar as they may be pertinent here.
We can now, therefore, proceed to discuss the aspects of the cases that require disquisition and disposal.
IV
To start with, the PLANTERS, VICTORIAS and SANTOS-TIROL impugn the jurisdiction of the Court of Agrarian Relations, 11th Regional District, Branch I Bacolod City, in taking cognizance of this case, with SANTOS and TIROL contending that since this is an action in personam, service to them by publication is invalid, hence, the trial court did not acquire jurisdiction over their person; even as VICTORIAS and PLANTERS maintain that not all the planters' members have been properly summoned, considering that some of them were served summons only also by publication.
We are not going to tarry long on these two points of jurisdiction. We are sufficiently convinced that, by and large, Sections 1 and 7 of Republic Act 1267, which created the Court of Agrarian Relations, providing that:
SEC. 1. Creation. — For the enforcement of all laws and regulations governing the relation of capital and labor on all agricultural lands under any system of cultivation, there is hereby created a court of Agrarian Relations, which shall be under the executive supervision of the Department of Justice.
xxx xxx xxx
SEC. 7. Jurisdiction of the Court. - The Court shall have original and exclusive jurisdiction over the entire Philippines, to consider and investigate, decide and settle all questions, matters, controversies, or disputes involving all those relationships established by law which determine the varying rights of those persons in the cultivation and use of agricultural land where one of the parties works the land; Provided, however, that cases pending in the Court of Industrial Relations upon approval of the Act which are within the jurisdiction of the Court of Agrarian Relations, shall be transferred to, and the proceedings therein continued in, the latter court.
and which was the law at the time of the filing of the FEDERATION's suit on November 10, 1962, contemplated the transfer from the Court of Industrial Relations, established under Commonwealth Act No. 3, to the Court of Agrarian Relations of all controversies of whatever nature involving agricultural laborers, particularly those referring to the employer-employee relationship with their respective employers, which naturally include the sugar planters and their plantation workers. (Santos vs. C.I.R., 3 SCRA 759.) Hence, it cannot be said that the trial court, the Court of Agrarian Relations of Bacolod City, had no jurisdiction to take cognizance of the vital petition that spawned the instant cases before Us.
V
Also, considering the number of laborers involved herein, We hold that it cannot be seriously argued that the trial court erred in holding that the laborers and/or the FEDERATION had properly initiated their action as a class suit, it being a matter of common knowledge that "the subject matter of the controversy (herein) is one of common or general interest to persons - (so) numerous that it is impracticable to bring them all before the court," and after all, it appears that "the parties actually before (the trial court were) sufficiently numerous and representative, so that all interests concerned (were) sufficiently protected." (Sec. 12, Rule 3.)
Anent the plaint of the PLANTERS that since not all the 422 individual planters named respondents in the amended petition filed below were personally or by proper substitute form of service served with summons, the court did not acquire jurisdiction over the persons of all the planters concerned, suffice it to say that the record shows that at the hearing of December 14, 1967 in the court below, there was the following clarification of the PLANTERS' appearance:
Atty. SOTO:
Attys. Sanicas and Soto appearing for Planters' Association.
ATTY. SABIO
Do I understand that Attys. Soto, Banzon and Associates represent the members of the Victorias Mill District Planters' Association, Inc.?
ATTY. SOTO:
Those planters who are respondents in this case as well as planters which (sic) are not duly represented by counsel, who are not present in court. (t.s.n. pp. 5-6)
We understand this manifestation to mean that Atty. Soto assumed representation presumably with due authority of all the planters in the district. In any event, the filing of the FEDERATION's petition must have been well known or was of public knowledge in the Victorias milling district and We believe that all the rest of the planters not here mentioned by name were as much concerned as the latter and may be deemed to have felt that all of them would eventually have the same fate. Besides, it is Our impression that the interests of all the planters concerned cannot be better presented and defended than by how the PLANTERS have done in these cases before Us now. In view whereof, We consider it rather superfluous to cite any authorities for a holding, as We do hold, that the persons of all the planters in the Victorias Mill District had been properly placed within the jurisdiction of the trial court. (Aguilos vs. Sepulveda, 53 SCRA 269.)
Moreover, the issues of jurisdiction just discussed may be considered as resolved by the provisions of the law reorganizing the Courts of Agrarian Relations, under which technical rules have hardly any force or applicability, and considering that the acquisition of jurisdiction over the persons of defendants is an adjective matter, this significant modification of the procedural rules in the Court of Agrarian Relations from which these cases originated may be given retroactive effect. (See Presidential Decree 946, Sec. 16.)
VI
Coming now to the real meat of the problem before Us, which is the question of how much money the laborers belonging to the FEDERATION should be paid by the PLANTERS and/or VICTORIAS, corresponding to all the years from the passage of Republic Act 809 up to November 1974 (which is the year both parties seemingly are agreed the factual premises of further controversy among them came to an end due to shortage of production), it should be helpful for a deeper insight into the issues between the parties to quote pertinent portions of the decision of the Court of Appeals. According to said court:
Section 9 of the Sugar Act provides as follows:
SECTION 9. In addition to the benefits granted by the Minimum Wage Law, the proceeds of any increase in the participation granted the planters under this Act and above their present share shall be divided between the planter and his laborer in the plantation in the following proportion:
Sixty per centum of the increased participation for the laborers and forty per centum for the planters. The distribution of the share corresponding to the laborers shall be made under the supervision of the Department of Labor.
The benefits granted to laborers in sugar plantations under this Act and in the Minimum Wage Law shall not in any way be diminished by such labor contracts known as "by the piece", "by the volume, "by the area", or by any other system of "pakyaw", the Secretary of Labor being hereby authorized to issue the necessary orders for the enforcement of this provision.
The petition in the lower court alleged that, while pursuant to Section 9 of the Act. as above quoted, "respondents PLANTERS gave to petitioners LABORERS the latter's participation in the sugar production as well as in the by-products and derivatives thereof and continued to give the same until November 1, 1955", they "ceased to do so until the present ," (par. 10, petition). It likewise charged that 'with evident intent to evade compliance with said Act and to the grave prejudice of the laborers, some of the respondents PLANTERS and respondent CENTRAL prepared and executed a General Collective Sugar Milling Contract sometime in March, 1956', (par. 11, petition) the substance of which is discussed, supra. Appellants forthwith prayed for a judgment: declaring the applicability to the Victorias Mill District of the sharing participation prescribed by the Act, starting with the 1955-1956 crop year; ordering Central and/or Planters to pay Appellants' lawful share in the production beginning the crop year 1955- 1956, plus legal interests thereon; awarding exemplary damages in an amount that the Court may deem sufficient; and granting attorney's fees of 20% of whatever amount the Appellants might be entitled to.
Denying material allegations of the petition, respondent Central, in its answer, claims in substance that petitioners did not have any cause of action against it since it had existing written milling agreements with respondent Planters, and Republic Act 809 is applicable only in the absence of written milling agreements. As special defenses, it advanced the propositions that the lower court had no jurisdiction over the subject-matter of the action at the time of the filing thereof prior to the effectivity of the Land Reform Code; that Republic Act 809 is unconstitutional; that appellant Federation of Free Farmers has no legal authority and capacity to intervene in the action; and that the action was not proper for a class suit. It likewise filed a counterclaim for attorney's fees in the amount of P 20,000.00, alleging that the action instituted against it was clearly unfounded.
On their part, respondent Planters, in answers filed singly or in groups, substantially echoed Central's defenses, adding, however, that should judgment be rendered against them, they should be entitled to reimbursement from Central.
Assuming jurisdiction over the action, recognizing the personality of the respondent Federation of Free Farmers, and considering the case as proper for a class suit, the lower court, after hearing, relying principally on the interpretation of Section 1 of Republic Act 809 that the law applies only in the absence of written milling agreements, dismissed the petition, having found that written milling agreements do exist between respondent Central and respondent Planters, the dispositive portion of the decision, dated December 14, 1970, reading as follows:
IN VIEW OF THE FOREGOING PREMISES, judgment is hereby rendered, dismissing this case as it is hereby ordered DISMISSED, without pronouncement as to cost.
The matter now before this Court is the appeal taken by the petitioners from the decision referred to. Respondents Central and Planters did not interpose any appeal
In their appeal, appellants ventilate twenty-eight assignments of error (pp. 67 to 77, Appellant's Brief). These, however, may be reduced to the following issues, namely:
First: Whether, as held by the lower court, the existence of written milling agreements between Central and Planters (Exhibits XXX thru XXX-6; YYY thru YYY-7, and SSS thru SSS-28 and ZZZ thru ZZZ-7) renders inapplicable the operation of Republic Act 809;
Second: Whether, as appellants' claim these milling agreements have been entered into in circumvention of Republic Act 809 and are, for that reason, void ab initio; and
Third; Whether, Central and Planters misappropriated money belonging to appellants amounting to million of pesos.
We find substantial merit in the appeal. On the basis of the historical facts bearing upon the case, we find the decision of the lower court in error.
For, historically, the facts that triggered the enactment of Republic Act 809 and the case at bar are as follows:
In 1918, 1919, and 1920, Central and Planters executed 30-year milling agreements under which the former was to receive 40% and the latter 60% of the proceeds of sugarcane produced and milled in the Victorias Mill District in Negros Occidental. As early as the 1930's, however, agitations were already made to increase the participation of the Planters. Planters sought to justify their demands upon the claims that there was too great a disparity in profits in favor of Central and that the increase was necessary to improve the condition of their plantation laborers.
The situation in the sugar industry at the time was such that on February 23, 1938, President Manuel L. Quezon appointed Chief Justice Moran of the Supreme Court as Special Investigator to study the 'alleged inequitable distribution of sugar resulting from the milling of sugarcane between the centrals and the plantations, with a view to ameliorating the condition of the planters' laborers'. On April 30, 1939, Justice Moran, in his report, verified the disparity and observed that unless the participation of the planters were increased, they could not be made to ameliorate the condition of their plantation laborers.
Moran's investigations were followed up by similar ones conducted by the National Sugar Board created by President Quezon under Executive Orders Nos. 157 and 168, and the Board's findings confirmed those of Justice Moran's according to its report of August 2,1939.
On June 7, 1940, Commonwealth Act No. 567 took effect. Noting the great disparity in the proportion of benefits "being received from the industry by each of its component elements", it declared it to be a 'national policy to obtain a re-adjustment of the benefits derived from the sugar industry by the component elements thereof — the mill the landowner, the planters of the sugarcane, and the laborers in the factory and the field.'
The years during World War Il may have momentarily stilled and agitations for the increase, but during the Second Congress of the Republic the same were resumed with vigor. Four bills were filed, three in the House and one in the Senate, all entitled "An Act To Regulate the Relations between Planters and Millers of Sugarcane". After a series of amendments, the Senate version (SB No. 138) was finally sent to President Quirino who, however, vetoed the same on grounds, among others, "that the bill contains no provisions granting to the laborers a share in the increased participation of the planters nor does it expressly require the latter to improve the lot of their laborers".
On January 15, 1951, House Bill No. 1517 (which ultimately became Republic Act No. 809) entitled 'An Act To Regulate the Relations Among Persons Engaged in the Sugar Industry', was introduced to remedy the presidential objections to the vetoed SB No. 138. The remedy introduced by HB No. 1517 was in the form of its Section 10 (which was amended later to become Section 9 of Republic Act 809) providing, in essence, that 60% of any increase in participation granted to planters under the Act 'above their present share' should go to their plantation laborers.
In the meantime, Planters, on the one hand, and Central, on the other, were locked in a tug-of-war, the former continuing the demand for increase, the latter insisting in refusing to grant any. Meanwhile, a new element had entered into the dimensions of the controversy: the Planters now contended that new written milling agreements should be concluded because their 30-year contracts with Central had already expired. Central countered with the argument that its contracts were still in force although the 30-year period may already have run out, because 6 years had to be excluded from the computation of the 30-year period for the reason that during 4 of the 6 years, the mills were not in operation because of the Japanese occupation, and during the last 2 years of the 6, the mills had to be reconstructed and rehabilitated so that the mills were not in operation either. As the conflict continued unresolved, with Central adamant in its position not to offer any increase in Planters' participation the expiration of the preferential treatment of sugar in the American market was fast approaching: beginning July 4, 1954, graduated customs duties were going to be taxed on Philippine sugar. There was therefore, in the language of Section 1 of the sugar bills deliberated on in Congress on May 9, 1950, a need 'to insure the maximum utilization of the benefits of preferential treatment for the Philippine sugar in the American market for the few remaining years.
The need for increasing the planters' participation, the approaching expiry date of the preferential treatment of Philippine sugar in the American market, the impasse between Central and Planters despite the termination or near termination of their 30- year written milling contracts, and the need for Congress to step in and pass a sugar law, found expression in the 'Explanatory Note' of House Bill No. 1517 introduced on January 15, 1951, thus:
The necessity for increasing the share of the planters and the laborers in the income derived from the sugar industry for its stabilization is not a new question but an admitted fact even before the outbreak of World War II.
On February 23, 1938, President Quezon appointed Justice Manuel V. Moran to make a study of the distribution of sugar resulting from the milling of sugarcane between the centrals and the planters with a view to ameliorating the condition of the planters "laborers", and after an exhaustive investigation covering several months, Justice Moran filed his report on April 30, 1939, recommending the increase in the participation of sugar planters, even in violation of existing milling contracts, contending that such a law is constitutional as a valid exercise of the police power of the state. The National Sugar Board created by Executive Orders Nos. 157 and 168, which made another investigation of the sugar industry, in its report to the President of the Philippines on August 2, 1939, confirmed practically the findings of Justice Moran.
Five crop years after liberation find the Philippine sugar industry still behind its production allotment. In the meantime, only three more years of preferential treatment in the American market remain.
Serious as the situation is, it is further aggravated by the fact that a determined struggle continues between millers and planters. Most of the milling contracts are due to expire next year, if they have not already done so. Recently, a serious crisis faced the industry when planters of the Victorias-Manapla district with a quota of 1,711,235.11 piculs declared a sit-down strike, refusing to mill their canes due to the obstinate refusal of the central to discuss terms for a new milling contract. It is feared that with this antecedent, the disagreement between the millers and planters will lead to more serious disruption of the industry and ultimately to a complete paralization of production. The dispute as to the ownership of the sugar quota has already reached our Courts.
It is therefore believed that national interest requires that Congress should take immediate steps to save or promote an industry, which is not only a source of livelihood for many millions of Filipinos but is also one of our most important dollar producing industries. Our country can ill afford to waste time in long-drawn out disagreements and litigations between millers and planters with only three more years of free American trade under the terms of the PhilippineTrade Act of 1946.
The present bill seeks to avoid fatal controversies in the sugar industry by determining the respective share of millers and sugar cane planters in the absence of milling agreements, on the pattern set by the Rice Share Tenancy Act, the constitutionality of which has been already upheld and on the basis of the declarations of emergency and national interest made in Act No. 4166. Commonwealth Act No. 567, and Republic Act No. 279.
This bill is also in harmony with the recommendation of the Bell Report for the improvement of the living condition of the laboring class by providing higher wages therefor. This bill does not violate existing milling agreements between planters and millers of sugar-cane as its provisions are only applicable in the absence of such milling contracts.'
Notwithstanding the facts faithfully reflected in the aforequoted 'Explanatory Note' to HB 1517, Central and Planters still had not entered into new written milling contracts, and there were no prospects that such contracts would soon be entered into. In fact, on June 16, 1952, Planters went to court in Civil Case No. 16815 filed with the Manila Court of First Instance praying that a judgment be rendered declaring their 30-year written milling agreements with Central terminated.
Under this air of extreme uncertainty and necessity, Congress approved HB 1517 to become law as Republic Act 809 on June 22, 1952.
Under this law, Planters claimed, the Victorias Mill District fell in the category of districts producing, 1,200,000 piculs or more. By prescription of its Section 1, Central would have a share of 30% and Planters, 70%. Since, before June 22, 1952, Planters had a participation of only 60% while Central had 40% , and since, under their contention, their 30-year milling contracts had already expired. Planters demanded that Central, pursuant to the new law, give them an increase equivalent to 10% over their previous 60% participation.
On July 1, 1952, however, Central replied to Planters (Exhibit N-14):
We refer to your letter of June 25, 1952.
We reiterate our opinion that our milling contracts have not yet expired, and that we are under no obligation to deliver to the planters the increased participation of 70% provided in the Sugar Act of 1952.
On the other hand, there is pending in the Court of First Instance of Manila (Case No. 16815), the action instituted by you against our Company for a declaratory judgment as to whether or not our milling contracts have already expired.
In view of the foregoing, we suggest matters be held in abeyance until final judgment is rendered in the said case No. 16815.
Notwithstanding this reply, Central beginning June 22, 19,52. set aside a "reserve" of 10% as a precautionary measure to take care of Planters' demand just in case it had to glue that 10% increase. Central, however, did not actually give it to. Planters; it merely set it aside for future disposition, "because", explained Central's treasurer-comptroller, "apparently there was no milling contract at that time and the company was afraid to incur liability under Republic Act 809 and therefore the company set aside every year 10%" (tsn., August 14, 1969, p. 6).
On April 19, 1954, Central filed an action (Exhibits H to H- 12) against Planters in Civil Case No. 22577 asking the Manila Court of First Instance to declare Republic Act 809 unconstitutional.
In the meantime, on March 19, 1953, the Manila Court of First Instance, in Civil Case No. 16815 brought by Planters (Exhibits F thru F-22) decided that the 30-year milling contracts had indeed expired in 1951, at the latest, or before June 22, 1952. On appeal, this decision was affirmed by the Supreme Court in G. R. No. L- 6648 dated July 25, 1955 (Exhibits G-1 thru G-6).
On December 14, 1955, some 20 months after filing Civil Case No. 22577, Central filed a motion (Exhibit U) alleging that negotiations were in progress for the amicable settlement of its differences with Planters. On February 25, 1956, similar motions (Exhibit V) were filed by both Central and Planters manifesting to the court that such negotiations were going on and that there was probability that they would reach an amicable settlement.
On March 5, 1956, Central and Planters executed the controversial 'Amicable Settlement-Compromise Agreement' (Exhibits XXX thru XXX-6).
On April 23, 1956, Central and Planters filed a manifestation (Exhibit Y) to the effect that they had already compromised and settled their differences, but that the execution by the majority of Planters of their new individual sugar milling contracts had not yet been completed, and that as soon as this was done, Central would ask for the dismissal of Civil Case No. 22577.
On May 2, 1956, three persons, planters themselves (the spouses Jose V. Coruña and Jesusa Rodriquez, and Felipe L. Lacson), filed a "Motion for Intervention" (Exhibits Z thru Z-19) in which they attacked the "Amicable Settlement-Compromise Agreement" (referred to hereafter as ASCA for convenience), as a circumvention and violation of Republic Act 809 because it eliminates the share of the laborers, from November 1, 1955 to October 31, 1974.
On May 5, 1956, the Secretary of Labor filed a manifestation (Exhibits AA thru AA-1) adopting the allegations of the three planters' motion for intervention, and assailing the ASCA as being contrary to law because it totally deprives the plantation laborers of the benefits granted them by Republic Act 809 for the period commencing November 1, 1955 up to the end of the 1973-1974 crop milling season, and because, with respect to the period from June 22, 1952 to October 31, 1955, their share is not being disposed of in accordance with the provisions of republic A ct 809.
On May 28, 1956, another group of 6 laborers filed a motion (Exhibits BB thru BB-17) with the court, likewise attacking the ASCA as a 'device by which the petitioner and a majority of the planters seek to circumvent the provisions of the Sugar Act of 1952, and conniving and confabulating together thereby denying to labor its just rights granted them by the said law'.
On June 4, 1956, almost three months to the day from the execution of the ASCA on March 5, 1956, Central filed with the court, in Civil Case No. 22577, a 'Petition for Provisional Dismissal' (Exhibit FF-2).
On June 8, 1956, the 3 planters earlier referred to file an opposition (Exhibits II thru II-3) to the petition for provisional dismissal.
On the same date, June 8, 1956, the Secretary of Labor filed a similar opposition (Exhibits JJ thru JJ-10), assailing the ASCA sharing of the sugar between Planters and Central at 64% and 36%, respectively, with nothing going to the plantation laborers, as being contrary to Section 1 of Republic Act 809 which had increased Planters' participation from 60% to 70%, representing an increase of 10% and to Section 9 of the Act which grants the plantation laborers a participation of 60% of such 10% increase.
On June 22, 1956, the Manila Court of First Instance denied the motions for intervention and dismissed Civil Case No. 22577, without prejudice, from which denial and dismissal (Exhibits KK thru KK-6) the Secretary of Labor, the three planters, and the six laborers referred to above, took an appeal to the Supreme Court. In G. R. No. L-11218 (Exhibit UU-1) the Supreme Court dismissed the appeal on November 5, 1956.
As is readily evident from the foregoing recital of facts, the major bone of contention between the appellants, on the one hand, and the appellees, on the other, consists in the "Amicable Settlement-Compromise Agreement" (Exhibits XXX thru XXX-6, hereafter referred to as the ASCA for convenience) executed on March 5, 1956 by Central, on the one hand, and Planters, on the other, and reproduced in substance in the "General Collective Sugar Milling Contract" (Exhibits YYY thru YYY-7) and the 'Individual Sugar Milling Contracts' (Exhibits SSS thru SSS-28 and ZZZ thru ZZZ-7). For a deeper insight into the conflicts that divide the parties to this case, the ASCA is hereunder reproduced in full as follows:
AMICABLE SETTLEMENT-COMPROMISE
AGREEMENT
This document, executed by
VICTORIAS MILLING COMPANY, INC., a corporation organized and existing under the laws of the Philippines, and domiciled in the City of Manila (hereinafter referred to as the 'COMPANY') represented herein by its President, Carlos L. Locsin, of age, Philippine citizen, married, and resident of the Province of Negros Occidental. as Party of the First Part.
- a n d -
VICENTE F. GUSTILO, JESUS SUAREZ, SIMON DE PAULA, FERNANDO J. GONZAGA and JOSE GASTON, of age, Philippine citizens, married, and residents of the Province of Negros Occidental, and duly authorized to execute this document by the sugarcane planters affiliated with the COMPANY, (hereinafter referred to as the 'PLANTERS') as Party of the Second Part;
WITNESSETH: That
WHEREAS, long before the war in 1941 the COMPANY and NORTH NEGROS SUGAR CO., INC., (a domestic corporation, domiciled in the City of Manila, whose obligations were assumed by the COMPANY) and several sugarcane planters in Manapla, Cadiz and Victorias, Negros Occidental, entered into, and executed, sugar milling contracts which have already expired;
WHEREAS, on June 22,1952, Republic Act 809 was passed;
WHEREAS, prior to June 22, 1952, the sugar manufactured by the Party of the First Part from the sugarcane delivered to it by the planters affiliated with the COMPANY was divided between the COMPANY and the PLANTERS on a 40-60 basis, respectively, pursuant to the aforementioned sugar milling contracts;
WHEREAS, after the passage of said Republic Act 809 the PLANTERS made a demand on the COMPANY for a division of the sugar and by-products manufactured by the COMPANY from the sugarcane delivered to it by the PLANTERS from and after said date, June 22, 1952, on a basis of 70-30, for the PLANTERS and the COMPANY, respectively, under the provisions of said Republic Act 809;
WHEREAS, the COMPANY denied said demand made by the PLANTERS;
WHEREAS, the COMPANY has heretofore filed a petition in the Court of first Instance of Manila for a declaratory judgment declaring Republic Act 809 unconstitutional and invalid, and for other relief, which petition was opposed by the PLANTERS
WHEREAS pending the determination of the action or petition above-mentioned, the COMPANY, as an accounting precautionary measure, has, since the enactment of Republic Act 809, annually set aside a reserve corresponding to the disputed TEN PERCENT (10%) increase in participation demanded by the planters under said Republic Act 809;
WHEREAS , the COMPANY and the PLANTERS desire to avoid a prolonged litigation and amicably settle and compromise their differences, and enter into, and execute new sugar milling contracts
WHEREAS, a "Special Committee" herein accepted and recognized by the Party of the First part, has been created by the PLANTERS for the purpose of effectuating the present amicable settlement and compromise, which 'Special Committee' is composed of the five (5) sugarcane planters hereinabove mentioned, executing this agreement as "Party of the Second Part",
NOW, THEREFORE, the COMPANY and the PLANTERS affiliated with it, the latter being represented herein by the Party of the Second Part, hereby agree to amicably settle and compromise, and do hereby amicably settle and compromise, all their differences, as follows:
(l) The PLANTERS shall execute the "General Collective Sugar Milling Contract" as well as supplemental new individual sugar milling contracts, effective November 1, 1955, the sugar and by-products manufactured by the COMPANY from the sugarcane delivered to it by the PLANTERS to be divided between them, SIXTY-FOUR PER CENT (64%) for the PLANTERS and THIRTY SIX PER CENT (36%) for the COMPANY;
As to the sugar and molasses manufactured by the COMPANY from June 22, 1952 (the date of the passage of Republic Act 809), to October 31, 1955, (the end of the COMPANY's fiscal year), the COMPANY suggested to divide the same on a 65-35 basis, SIXTY-FIVE PER CENT (65%) for the PLANTERS and THIRTY- FIVE PER CENT (35%) for the COMPANY, as part of a 65-35 milling contract to begin June 16, 1952, and to end with the 1973-1974 crop milling year, on the same basis of participation. But as the COMPANY and the PLANTERS failed to reach an agreement thereon the COMPANY agrees to reduce its share or participation to 30, in favor of the PLANTERS, for the said period of June 22, 1952-October 31, 1955, and the PLANTERS, in turn agree to reduce their share or participation to 64, in favor of the COMPANY, for the period commencing November 1, 1955, to the end of the 1973-1974 crop milling season, that is, October 31, 1974, and the COMPANY, upon all the PLANTERS affiliated with it executing their new individual milling contracts shall pay them the total value of the reserve referred to in the seventh "WHEREAS' clause now amounting to P 8,643,472.24, as follows:
(a) The Party of the Second Part shall set aside Sixty Per Cent (60%) of the said sum of P8,643,472-24 as received by them to be held in trust for the benefit of their laborers that may be entitled thereto because some of them have already died and their heirs are unknown while a great number of them are hard to locate and Identify, the Party of the Second Part, shall dispose of the said Sixty Per Cent (60%) of the sum of P8,643,472,24 as received by them as follows:
(b) The Party of the Second Part shall invest P4,000,000.00 of the P5,186,083.34, w``hich is Sixty Per Cent (60%) of the said sum of P8,643,472.24, in 40,000 voting and transferable shares of capital stock of the COMPANY of the par value of P 100.00 per share which shall be issued in four (4) blocks of 10,000 shares per block by the COMPANY to the Party of the Second Part upon effectivity, of this agreement as provided in Clause (2) hereof, it being understood that the issuance of such shares does not involve an increase in the present authorized capitalization of the COMPANY.
The above-mentioned 40,000 shares of the capital stock of the COMPANY will enable the laborers/planters to become part owners of the COMPANY but if within the period of eighteen (18) months, but not earlier than six (6) months, from and after date of delivery of the said 40,000 shares by the COMPANY to the Party of the Second Part, the Party of the Second Part should desire to have the value of the said 40,000 shares to wit, P4,000,000 00, or such portions thereof in blocks of 10,000 shares at P1,000,000.00 per block, paid in cash, the COMPANY will pay in cash to the Party of the Second Part or its successors the said value of the said 4O,000 shares or of such blocks of 10,000 shares per block, as the Party of the Second Part may decide to have converted into cash as to such blocks of 10,000 shares per block, that the Party of the Second Part may retain such shares may be retained by the PLANTERS for their own account upon their payment to the Party of the Second Part or its successors of the value thereof of P l,000,000.00 per block. The COMPANY shall have a period of Thirty (30) days after receipt of written request of the Party of the Second Part within which to make such cash payment of the value of the shares.
The balance of P l,186,083.34 shall be distributed under the supervision of the Secretary of Labor among the present laborers of the party of the Second Part who were already laborers of the PLANTERS during the period comprised between June 22, 1952 (the date of the passage of Republic Act 809) and October 31, 1955 (the end of the COMPANY's fiscal year);
(ii) As to the sum of P 3,457,388.90, which is the Forty Per Cent (40%) of the P8,643,472.24, the Party of the Second Part shall distribute this amount among the PLANTERS in proportion to the sugar milled for them by the COMPANY during the aforementioned period of June 22, 1952, to October 31. 1955.
(b) As to the manner of delivery of the cash involved in the foregoing transaction amounting to P 4,643,472.24, a "General Collective Sugar Milling Contract" has heretofore been prepared for the signature of the PLANTERS affiliated with the COMPANY signing the said "General Collective Sugar Milling Contract", the COMPANY shall pay and deliver to the Party of the Second Part at least fifty per cent (50%) of the said cash balance of P4,643,472.24 or that portion thereof corresponding to the said majority of the PLANTERS affiliated with the COMPANY who have already signed the said "General Collective Sugar Milling Contract", and the remaining fifty per cent (50%) or remainder thereof will be paid, one half upon the execution of their new individual sugar milling contracts, and the other half upon the registration thereof in the Office of the Register of Deeds for the Province of Negros Occidental;
(c) It is understood, as part of this settlement agreement, that the block of the COMPANY's common shares mentioned in sub- paragraph (i) and all its earnings shall constitute a trust fund to be dedicated to the amelioration of the plantation laborers of the PLANTERS in the Victorias-Manapla-Cadiz milling district Said trust fund shall be administered by the Party of the Second Part for the benefit of the PLANTERS' laborers under the supervision of the Secretary of Labor and in accordance with the trust laws of the Philippines. Should the trust fund be liquidated by order of the Court of justice or in the manner provided for in paragraph (1) (a) (i) then the PLANTERS shall have the first option from the trustees, and the COMPANY the second option from the trustees and or from the planters themselves to buy said Victorias Milling Co., Inc, shares in blocks of 10,000 shares at their value of P 1,000,000.00 per block. And in case both the Party of the First Part and Party of the Second Part refuse to exercise their right, then said block of VMC shares may be sold in. the open market'
(2) This agreement will become effective if and when the majority of the planters affiliated with the Party of the First Part have signed the said "General Collective Sugar Milling Contract".
Executed at Victorias, Negros Occidental, this 5th day of March, 1957.
VICTORIAS MILLING CO., INC.
By:
(Sgd.) CARLOS L. LOCSIN
CARLOS L. LOCSIN
President
(Party of the First Part)
CARLOS L. LOCSIN
President
(Party of the First Part)
(Sgd.) VICENTE F. GUSTILO
VICENTE F. GUSTILO
VICENTE F. GUSTILO
(Sgd.) JESUSSUAREZ
JESUS SUAREZ
JESUS SUAREZ
(Sgd.) SIMON DE PAULA
SIMON DE PAULA
SIMON DE PAULA
(Sgd.) FERNANDO J. GONZAGA
FERNANDO J. GONZAGA
FERNANDO J. GONZAGA
(Sgd.) JOSE GASTON
JOSE GASTON
(Party of Second Part)
JOSE GASTON
(Party of Second Part)
(Decision of CA, pp. 177-198, Rollo of L-41161)
VII
Before proceeding any further, and in order to place in proper perspective the matters covered by the numerous assignment of errors presented by the parties for Our resolution, We believe We must underscore at this point that as may be readily noted in the portion of the decision under review We have just quoted, the Court of Appeals summed up the allegations of the petition (and presumably the amended one) filed with the trial court and stated unqualifiedly the premises that, per its own petition the Federation admitted that the laborers' share in the 1952-53 to 1954-55, the PLANTERS gave to petitioners LABORERS the latters' participation in the sugar production as well as in the by-products and' derivatives thereof and continued to give the same until November 1, 1955, etc. (Italics Ours) Then the Court proceeded to state the defense of the defendants PLANTERS and CENTRAL or VICTORIAS. And after quoting the dispositive portion of the trial court's judgment, the Court went on to say that appellants (meaning the laborers represented by the FEDERATION) ventilate twenty-eight assignment of errors giving rise, in that Court's view to the three issues it enumerated. (supra) The point We want to clarify as early as at this juncture is that it is at once evident that technically, the second and third issues referred to cannot be deemed to contemplate any question beyond those raised in the petition, namely, the non-payment of the laborers' share in the proceeds of production after November 1, 1955. Whatever, therefore, might have been covered by the FEDERATION's twenty eight assignment of errors in respect to matters before November 1, 1955 were obviously new matter, and could be resolved by the Appellate Court only if evidence thereon were received by the trial court without objection of the adverse parties seasonably as if the same were tried with by agreement of all the parties.
We have to make this early elucidation and setting of the proper perspective of the issues, because, as will be seen later, one of the decisive considerations We will dwell on will be whether or not the Appellate Court legally acquired authority to act on said new matter and/or whether or not it resolved the issues of fact and law relative thereto in accordance with the evidence and the law. Hereunder is how the Court of Appeals resolved the three issues that it held came out from the assignment of errors of appellant Federation.
VII
The appellate court resolved the three issues it enumerated as follows:
Regarding the first issue, the Court held:
We agree that millers and planters may indeed enter into written milling agreements stipulating participations different from those prescribed in Section 1 of the Sugar Act. This conclusion is justified by the language of Section I itself which declares that -
In the absence of written milling agreements between the majority of the planters and the millers of sugarcane in any milling district in the Philippines, the unrefined sugar produced in that district . . . . shall be divided between them.
in the proportions established therein. The phrase "in the absence of clearly" indicates that the division of the sugar between the millers and the planters in accordance with the schedule of participations mentioned, has to be complied with only during periods when millers and planters are bound by no written milling agreements, and need not govern the sharing system of the contracting parties who have entered into such agreements.
That this is the real intendment of the law can hardly be shrouded in doubt. For the law is not merely social in that it means to uplift the wretched condition of the laborers in the country's sugarcane plantations; it is also economic in that the law is calculated to safeguard, preserve, and maintain the integrity, viability, and health of an industry so vital to the entire economy of the country. When the sugar bill (which ultimately became Republic Act 809) was being debated in Congress in 1950, 1951, and 1952, one of the urgent reasons advanced by its sponsors in pleading for the expeditious passage of the measure was the fact that in a year or so the preferential treatment of Philippine sugar in the American market was expiring, and it was imperative that the situation in the sugar industry be stabilized as quickly as possible by the passage of the bill in order to take advantage of the remaining few years of such preferential treatment. The provisions of the law authorizing the take-over by the government of centrals which refuse to mill or of plantations which neglect to plant, indicate the concern of the industry to the over-all posture of the national economy. The respective participations of the millers and the planters cannot, therefore, be regulated, at all times, by the same proportions established in Section I of the law. On the contrary, such participations should be understood as subordinated, at all times, to the superior interests of the industry as a whole. No one, least of all the very people involved in the industry - millers, planters, and laborers - has a right, so to speak, "to kill the goose that lay the golden eggs." Particularly when production costs are so high and sales are so low, sacrifice on the part of everyone is in order. In such cases, millers and planters should be able to adjust their respective participations in response to the economic realities obtaining in the industry, that is, stipulate in their written milling agreements participations lower or higher than those prescribed in Section 1 of the law.
Fears may be expressed, as a result of the conclusion we have reached, that millers and planters may be thrown back into the same situation that the Sugar Act was passed to remedy that is, a situation where the weak planters would be continually demanding an increase in their participation and the strong millers would persist in refusing to grant the increase, the same stalemate, in the same impasse that characterized the relations between Central and Planters before the Act became law and which, in fact, precipitated the enactment of the law in 1952. Such fears, however, may not be seriously entertained. A continuing period of no contract would result in a definite disadvantage to the centrals. Section 1 provides summary increases dictated by Section I would continue to accrue in favor of the planters. For reasons of sheer self-interest, therefore, the centrals would thus be compelled to negotiate written contracts with the planters.
In such a situation, the planters, understandably would not be in too great hurry. If, however, they must write new contracts with the millers, there is hardly any doubt that, after enjoying the increases as decreed in Section I of the law in the absence of written milling agreements they would not yield to less in negotiating new milling agreements with the millers. Proof of this is the fact, in the instant case, that Planters, enjoying a 4% increase in their participation by virtue of Section 1 when they had no milling agreements with Central, did not settle for less when they finally executed the ASCA with Central on March 5, 1956.
But we disagree with appellees when they assert that plantation laborers have no right to any share in any increase in planters' participation where such increase is granted not "under this Act " (a phrase used in Section 9 of the law) but by contract, as in the case of the ASCA of March 5, 1956. The argument loses sight of the fact that the Sugar Act of 1952 is, by and large, a piece of social legislation intended to grant increases in the planters' participation for the primary purpose of enabling the planters to improve the lot of their plantation laborers. Thus, in 1938, when President Manuel L. Quezon appointed Chief Justice Moran to study the "alleged inequitable distribution of sugar resulting from the milling of Sugarcane between the centrals and the plantation", the study was undertaken with a view to "ameliorating the condition of the planters" laborers. When Justice Moran finally submitted his report on April 30, 1939, he came up with the conclusion that unless the participation of the planters was increased, they could not be made to 'ameliorate the condition of their plantation laborers.
The Court then went into an extended discussion of practically the same considerations discussed by Us in Talisay-Silay, hence We will not quote them anymore. As We did in Talisay-Silay, the Court concluded:
In keeping with this spirit, the Department of Labor has made a correct interpretation of the scope and extent of the applicability of Republic Act 809 in respect to the benefits of plantation laborers, in issuing the 'Rules and Regulations to implement Section 9 of Republic Act 809 (Exhibit GGG), dated February 23, 1956, as amended on May 4,1956, providing:
SECTION 1. The benefits granted to laborers under the Act shall apply to all laborers of sugar plantations in any milling district wherein the planters' sharehas increased in accordance with the schedule of participations established in Section 1 of said Act, due either to the absence or expiration of written milling agreements between the majority of the planters and their respective millers or under subsequent milling agreements executed after the date of effectivity of the Act.
It is clear from the foregoing provisions of the "Rules and Regulations", that the benefits to which the plantation laborers are entitled refer to the increases in planters' participation granted either under Section 1 of the law (in the absence of written milling agreements on the date said law became effective, June 22, 1952) or under any subsequent contracts executed after the date of effectivity of the said Act.
It is likewise clear that such increase is the difference determined, as basis, either on the lower participation of the planter under the last milling contract expired immediately prior to June 22, 1952, or on the lower participation of the planter under a milling contract which, although subsisting on that date, expired immediately thereafter, in relation either to the higher participation of the planter under Section 1 of the law (in the absence of a milling contract) or to the higher participation of the planter under a milling agreement executed subsequent to June 22, 1952. Thus, provides the 'Rules and Regulations -
Increase in participation shall mean the difference between the participation of the planters under Section 1 of the Act or the participation of the planters in any milling agreement subsequent to the effectivity of the Act, and the participation of said planters under the milling contract subsisting at the date of the effectivity of the Act, or in the absence thereof, under the last milling contract immediately prior to the enactment of said Act.'
Consequently, we hold that, since, as the facts of this case show, under their milling contracts which expired before June 22, 1952, Planters had a participation of 60%, while Central had 40%, and since, under the ASCA executed between them on March 5, 1956, but made retroactive to November 1, 1955, Planters have a participation of 64% while Central has 36%, with such participations to run and remain in force until October 31, 1974, Planters enjoy a 4% increase in participation under the said ASCA. Pursuant to Section 9 of Republic Act 809, the plantation laborers, or appellants herein, are entitled to a share of 60% of such 4% increase during the entire period of the 19-year term of the ASCA.
In the light of all the foregoing, we hold, in disposing of the first issue herein discussed, that the existence of milling agreements does not necessarily render Republic Act 809 inapplicable or inoperative as to the contracting parties but the Act remains applicable and operative in all cases where the milling agreements, executed subsequent to June 22, 1952, provide any increase in planters' participation, as the term 'increase in participation 'is defined herein.
Accordingly, the ASCA and the other derivative sugar milling contracts are hereby declared modified so as to be caused to be read thereinto a provision granting the plantation laborers, or the appellants herein, 60% of the 4% increase in planters' participation stipulated therein, commencing from November 1, 1955 to October 31, 1974. They should likewise be entitled to legal interest for the same period.
As already stated earlier in this opinion, the above ruling of the Court of Appeals conforms with Our decision in Talisay-Silay ,which We here reaffirm for the purposes of these cases, no new and cogent reasons having been advanced by the FEDERATION to convince Us to alter Our view. As We have earlier indicated, in the latest motions filed by it for early resolution of these cases, it is quite apparent that the FEDERATION is more or less resigned to accept Our Talisay-Silay rulings.
- VIII -
Anent the second issue, the Court discoursed thus:
We shall now take up the second issue under which appellants claim that the ASCA of March 5, 1956 (Exhibits XXX thru XXX-6), and derivative contracts, the 'General Collective Sugar Milling Contract' (Exhibits YYY thru YYY-7) and the 'Individual Sugar Milling Contract' (Exhibits SSS thru SSS-28 and ZZZ thru ZZZ-7) executed by Central, on the one hand, and Planters, on the other, have been entered into in circumvention of Republic Act 809 and are, for that reason, void ab initio.
In their twelfth assignment of error (appellants' brief, pp. 265-278), appellants argue that while appellees are free to enter into written milling agreements subsequent to June 22, 1952, the intent of Republic Act 809 is that the provisions of such agreements 'must be without prejudice to the sharing arrangement laid down in Sections I and 9 of the law. In support of this position, they cite the proceedings on the deliberations of the Senate on House Bill No. 1517 (which ultimately became Republic Act 809) particularly on what became Section 5 of the law. In their sixteenth assignment of error (appellants' brief, pp. 292-306), appellants charge that the motive of the appellees in executing the milling agreements is 'to have a pretext for evading and circumventing Sections 1 and 9 of Republic 809 and thereby to be able to appropriate with impunity the six (6%) per cent share' of appellants in the unrefined sugar and its derivatives.
We have gone over the arguments of appellants in both assignments of error but found no evidence of circumvention as appellants have charged. Under their twelfth assignment of error, it is true that Senator Zulueta introduced an amendment so as to subject the schedule of participations under Section 1 of the law to decisions by a proposed Board of Arbitration to be appointed by the President of the Philippines 'in the event that any central, shall be unable to arrive at a milling agreement with a majority of the planters affiliated with it, and shall refuse to mill the sugar cane of such planters in the absence of such agreement', and that this amendment was voted down on the ground, strongly advocated by Senator Tañada, that since the bill already fixed the ratio of participation between the millers and the planters, it would be wrong to 'open it to further inquiry or arbitration.'
Senator Tañada was correct in taking such position. There was no point to creating a Board of Arbitration to determine the participations of the millers and the planters which the bill under discussion had already fixed as a congressional determination of the matter. But no inference may be drawn from Senator Tañada's position that the sharing proportions established under Section 1 of the law may not be deviated from in contracts executed subsequent to the passage of the law on June 22, 1952. Appellees are correct in their view that indeed if it were the intention of Congress for the millers and planters to observe no other sharing arrangements than those established under Section 1, there would be little point, if at all, entering into any written milling agreements which cannot stipulate other proportions in the sharing arrangements than those prescribed under Section 1. In our resolution of the first issue, we adverted to the fact that Republic Act 809, although not a revenue-raising measure, is, in addition to being social, also an economic piece of legislation. It bears repeating in connection with the issue at hand that Congress could not have intended, by Section 1, to prevent the millers and planters from agreeing to other sharing proportions, even at the cost of the preservation of the sugar industry. We do not believe we need say more.
Under their sixteenth assignment of error, appellants cite the various acts of Central in resorting to maneuvers to get Planters to execute the ASCA of March 5, 1956, and the other derivative sugar milling agreements. Appellants are of the view that they are entitled to 6% of the sugar proceeds effective June 22, 1952 without contract, as under Section 1 of the law, or with contract, as under the ASCA, and that the maneuvers of Central in offering Planters 64%, provided Central got 36%, which the latter finally succeeded in getting the former to agree to under the ASCA, constitute a circumvention of the law.
Central's tactics may not be exactly moral, but they are standard operating procedure of businesses - using every possible leverage and device to bring about the best bargain under given circumstances -- for profit. The contracts, therefore, which it wrung from Planters are not in circumvention of the law but in legitimate pursuit of profit -- which is the end all and be-all of business. That Central, as a result of the ASCA which appellants claim it (Central) to have 'engineered', got 36% and Planters 64%, while the plantation laborers got nothing, is no reason for considering the contract a circumvention of the law which does not in the first place impose upon it any duty or require of it the performance of any obligation to yield any part of its participation in favor of planters laborers. In other words, we do not find in Central's conduct in the premises anything so odious or so obnoxious as to render the contracts it has entered into with Planters illegal or repugnant to public policy. In the course of negotiations, Central acted under the belief that if it succeeded in writing new written milling agreements, the agreements could stipulate other proportions in the sharing system than those established under Section 1 of the law, since in its view, the law would no longer be applicable the moment such agreements were entered into. There is evidence that Planters, on their part, at first recoiled from Central's suggestion that the latter was willing to increase the former's participation from 60% to 64% provided Planters agreed to give 36% to Central for the duration of the contract. The sense of repulsion was understandable, since, under Central's suggestion, the 6% which the Planters' laborers were to enjoy from June 22, 1952 to October 31, 1955, would an go to Central during the next 19 years, from November 1, 1955 to October 31, 1974. But Planters seemed to have little choice as Central appeared to have all the aces: from June 22, 1952, it had started setting aside a 'reserve' equivalent to 10% of the annual production, this being the amount of increase which the Planters had demanded as due to them under Section 1 of the law. Although Central still insisted, even after the passage of the law on June 22, 1952, that its 30-year milling contracts with Planters had not yet expired because of its belief that 4 years of Japanese occupation and 2 years of rehabilitation of the mills during which the mills were not in operation should be deducted from the 30- year periods of the contracts, it set aside this 'reserve' just in case it was finally decided by the courts before which the issue had been brought by the planters, that its 30-year contracts had indeed expired as of the date of effectivity of the law. As of October 31, 1955, this 'reserve' had accumulated to P 8,643,472.24. Central's suggestion was that this amount of 'reserve' built up during the period from June 22, 1952, to October 31, 1955, be divided between Planters and the plantation laborers on the proportion of 40% for the former and 60% for the latter, the same proportions prescribed by Section 9 of republic Act 809. With 40% of the 'reserve, Planters would stand to get P 3,457,388.90, while the plantation laborers, with 60% would have P 5,186,083.34. These participations in the 'reserve of 40% for Planters and 60% for the plantation laborers in the 'reserve', would be equivalent to participations of 4% and 6%, respectively, in the total annual production within the period from June 22, 1952 to October 31, 1955, Planters' total participation for the period, therefore, would be 64%.
Confronted by an acute need for money and these enticements dangled before them: 3,457,388.90 in cash (equivalent to 40% of their participation in the reserve or to 4% in the total annual production) for the period June 22, 1952 to October 31, 1955, and a similar total participation of 64% for the next 19 years, that is, from November 1, 1955 to October 31, 1974, coupled by the speculation perhaps that their 4% increase for the 19 years could not be touched by the plantation laborers because of the argument that Republic Act 809 would no longer be applicable once written milling agreements were entered into, Planters found no better alternative than sign, as they did sign, on March 5, 1956, the controversial ASCA and subsequently, the other agreements reproducing the provisions of the ASCA.
That Planters might not have gotten the better end of the bargain since, under the ASCA the 6% that would go to their plantation laborers for the period from June 22, 1952 to October 31, 1.955, would go instead to Central for the next 19 years, from November 1, 1955 to October 31, 1974, is no evidence of circumvention of Republic Act 809. As we have said in our resolution of the first issue, the millers and planters may stipulate in their written milling agreements other sharing proportions than those prescribed in Section 1 of the law which were so prescribed only in the absence or because of the absence of written milling agreements. Central's drive, therefore, to get all the 6% for itself is a perfectly legitimate one, not a circumvention
Again, fundamentally, the above position of the Court of Appeals is in accord with Talisay-Silay, except for some apparent inconsistencies therein, to which We will hereinunder address Ourselves regarding the conduct of VICTORIAS in entering into the so-called ASCA. It is quite obvious that the Appellate Court tried very hard to look for some way of making VICTORIAS somehow liable for whatever might be due the laborers of the PLANTERS, notwithstanding its categorical finding and holding that VICTORIAS did nothing more than to obtain as legitimate a bargain as any sensible businessman or industrialist having an eye for profit would do.
We see no legal, equitable nor moral reason for such effort, even as We reaffirm for the purposes of the instant cases, Our ruling in Talisay-Silay that under no circumstances should the plantation laborers be deprived of 60% of whatever increase in share their respective planters employers had obtained from the Central, that is, whether by the application of Section 1 of the Act when there were not enough written contracts, or, under the said contracts upon there being a majority of them.
After holding that the ASCA is legal and, what is more, not conceived to circumvent the law, surprisingly, the Court went into a matter not alleged in the petitions in the trial court. It proceeded to go into a disquisition of the effects of the provisions of the ASCA regarding the manner of paying the. share of the laborers in the 10% increase of the PLANTERS' share from June 22, 1952 to October 31, 1955. As will be noted in the earlier quoted provisions of the ASCA, it was stipulated that the PLANTERS would be paid their: 10% increase, 60% of which would pertain to the laborers, with the condition, however, that instead of the PLANTERS receiving the total share of the laborers in cash, only a portion would be in cash and the balance of Four Million (P 4-M) Pesos would be in the form of certificates of shares of stock to be issued to the PLANTERS, who formed a Special Committee or Board of Trustees for the purpose, expressly in trust for the laborers. The Court condemned such provisions as entirely beyond the authority of the PLANTERS and VICTORIAS to stipulate just between them without the express consent or prior assent of the laborers or the Federation or even the Secretary (now Minister) of Labor, who, under Section 9 of the Act, was supposed to supervise "the distribution of the share corresponding to the laborers. " On such premises, the Court concluded:
In the light of all the foregoing, we hold, in resolution of the second issue, that, while we do not find appellees to have circumvented Republic Act 809 in entering into the ASCA and in stipulating a participation of 64% for Planters and 36% for Central, and for this reason, declare the ASCA and the other derivative sugar milling contracts valid, the appellees are jointly and severally liable for tort in disposing, upon their own accord, and without any authority of the plantation laborers, of the money of the said laborers in the total amount of P5,186,083.34, and in thus causing the loss of shares of stock and their earnings purchased out of the P 4,000,000.00 of such amount.
X
While, as We have said, We are in agreement with the Court of Appeals in its construction and application of Sections 1 and 9 of Republic Act 809 as discussed above, We cannot, as We will show anon, fully accept its conclusions as to the pretended liability of the PLANTERS and VICTORIAS for the amount that the FEDERATION claims the laborers of the PLANTERS have not been paid as their share of the proceeds of the crop years 1952- 1953 to 1954-1955 as well as those of the crop years 1956-1957 to 1973-1974. In passing upon, as We have just quoted, the second issue formulated by it to resolve the appeal to it of the Federation, it held the appellees, the PLANTERS (including Primo Santos and Benjamin Tirol) and VICTORIAS "jointly and severally liable for tort in disposing, upon their own accord, and without any authority of the plantation laborers, of the money of the said laborers in the total amount of P 5,186,083.34 and thus Causing the loss of shares of stock and their earnings purchased out of P 4,000,000.00 of such amount." Not only that, the Court of Appeals adjudged the PLANTERS and VICTORIAS also jointly and severally liable for the 2.4% share of the laborers in the proceeds, which they maintain they have not received, of the crop years 1956-57 to 1973-74. Indeed, in the course of resolving the second issue and in disposing of the third issue, the Appellate Court found the PLANTERS and VICTORIAS guilty of misappropriation and conversion of P7,385,950.00 corresponding to the P4M worth of VICTORIAS shares of stock which under the ASCA was stipulated to be received by the PLANTERS in trust for the laborers.
Obviously, this particular aspect of these instant cases before Us involve questions both of fact and of law. To put things in their proper order and to pin liability for the claim of the laborers on the proper part or parties it would be best to discuss and dispose of separately the two stages of sharing and payment in question, namely, (1) that which refers to the proceeds of the 1952-53 to 1954-55 crop years and (2) that referring to the proceeds from crop year 1955-56 to crop year 1973-74.
XI
-A-
We will start with what We feel is the stage that involves factual and legal issues which may be easily and readily determined, which is that referring to the proceeds of 1955-56 to 1973-74 crop years. Under the terms of the ASCA, the ratio of sharing between the PLANTERS and VICTORIAS during that period was to be 64% of said proceeds for the former and 36% thereof for the latter. As this Supreme Court held in Talisay-Silay and as held in the decision of the Court of Appeals under review, We reiterate, it is indubitable that said proportion of sharing is legal, the ratios fixed in Section 1 of Republic Act 809 notwithstanding. Although nothing is provided in the ASCA as to the share of the laborers in the 4% increase the PLANTERS were thus given by VICTORIAS, which under Talisay-Silay and the decision of the Court of Appeals ought to be 2.4%, or 60% of said 4%, it is admitted on all sides that VICTORIAS religiously gave the PLANTERS their full increase of 4% annually from crop year 1955- 56 to crop year 1973-74 thereby leaving it to the PLANTERS to pay their respective laborers the said 2.4%.
The FEDERATION claims and the Court of Appeals so found that the laborers were not paid by their respective planters-employers what is legally due them. Such being the case, We cannot but affirm the judgment of the Court of Appeals that the PLANTERS are liable therefor.
-B-
We cannot, however, share the Appellate Court's holding that VICTORIAS is jointly and severally liable with the PLANTERS. We cannot perceive any factual or legal basis for such solidary liability. From the very beginning of the sugar industry, the centrals have never had any privity of any kind with the plantation laborers, since they had their own laborers to take care of. In other words, both the centrals and the planters have always been the one dealing with their respective laborers regarding the terms and condition of their employment, particularly, as to wages. Nowhere in Republic Act 809 can We find anything that creates any relationship between the laborers of the planters and the centrals. Under the terms of said Act, the old practice of the centrals issuing the quedans to the respective PLANTERS for their share of proceeds of milled sugar per their milling contracts has not been altered or modified. In other words, the language of the Act does not in any manner make the central the insurer on behalf of the plantation laborers that the latter's respectively employers-planters would pay them their share. Had the legislature intended to make the central as such insurer, We have no doubt that clear words to such effect would have been used. Much less is there in the ASCA any provision making VICTORIAS responsible in any way for the share due the plantation laborers in the 4% obtained by the PLANTERS under said agreement.
Section 9 of the Act unequivocally provides that 60% of "the proceeds of any increase in the participation granted the planters under this Act and above their present share shall be divided between the planter and his laborer. Further, the same provision explicitly mandates that the "distribution of the share corresponding to the laborers shall be made under the supervision of the Department of Labor." Accordingly, the only obligation of the centrals, like VICTORIAS, is to give to the respective planters, like the PLANTERS herein, the planters' share of the proceeds of the milled sugar in the proportion stipulated in the milling contract, which would necessarily include the portion of 60%, pertaining to the laborers. Once this has been done, the central is already out of the picture, and thereafter, the matter of paying the plantation laborers of the respective planters becomes the exclusively the concern of the planters, the laborers and the Department of Labor . Under no principle of law or equity can We impose on the central - here VICTORIAS - any liability to the plantation laborers, should any of their respective planters-employers fail to pay their legal share. After all, since, under the law, it is the Department of Labor which is the office directly called upon to supervise such payment, it is but reasonable to maintain that if any blame is to be fixed for the unfortunate situation of the unpaid laborers, the same should principally be laid on the planters and secondarily on the Department of Labor, but surely, never on the central.
-C-
Moreover, when We consider that according to their own petitions, both original and amended in the court below, the laborers had not been paid their share since after the 1954-55 crop year, and their original petition was filed only in November 1962, We feel inclined to believe that if the laborers were convinced that they had any kind of cause of action against VICTORIAS, it is quite unexplainable why it took them practically more than six years to file their suit. It is just as remarkable that they did not move even against their very employers, the PLANTERS, during all that time. In any event, as We have already stated, We find no legal nor equitable basis for the pretended joint and several or solidary liability of VICTORIAS with the PLANTERS to the laborers. Its act of paying the PLANTERS the full 4% increase was not illegal or contrary to law, for it was in fact in fulfillment of its obligation both under Our Talisay-Silay ruling and the provisions of the ASCA.
-D-
Incidentally, it may be added, the Rules and Relations to implement Section 9 of Republic Act 809, "issued by the Secretary of Labor on February 23, 1956, as amended on May 4, 1956, do provide pertinently that the laborers' share in the increase in participation accruing to the planters shall be included in the quedans covering said increase issued in the planters' name with the following notation on the face of the quedan sixty per centum (60%) share of laborers in the increase in the participation of planters under Sugar Act of 1952 included." But absent any iota of evidence indicating that such was not done, We are under the law supposed to presume that the regulations have been complied with. Nowhere in the Federation's unusually lengthy and prolific brief is there any indication otherwise. And whatever the respective PLANTERS did after those quedans were issued to them cannot under any concept of law or equity be imputed to VICTORIAS or to any imaginable connivance between it and the PLANTERS to prejudice the laborers. There was nothing that VICTORIAS could conceivably gain in any such nefarious arrangement to induce it to take the risk of ultimately being made liable in the manner done by the Court of Appeals.
-E-
It is indeed noteworthy that whereas, as We shall discuss presently, with regard to the payment of the laborers' share in the proceeds of the 1952-53 to 1954-55 crop year (60% of 6% out of the 10% provided in Section 1 of Republic Act 809), the Court of Appeals rather extensively argued and discoursed, with, to be sure, seeming or apparent plausibility what considerations, in its view, ought to make VICTORIAS, jointly and severally or solidarily liable with the PLANTERS, 2 hardly did said Court lay down any premise for the following portion of its judgment now under review:
3. Declaring that the participation of 64% for Planters and 36% for Central commencing from November 1, 1955 to October 31, 1974, as stipulated in these written milling agreements, is valid, but that there should be deemed written into said agreements a stipulation providing that 60% of Planters '4% increase in participation belongs to appellants herein for the entire duration of the same period pursuant to Section 9 of Republic Act 809;
xxx xxx xxx
5. Ordering appellees, jointly and severally, to pay appellants:
(a) The sum equivalent to sixty (60) percent of Planters' increase in participation of four (4%) percent, beginning November 1, 1955, and ending October 31, 1974, inclusive, with interests thereon at the legal rate of 6% per annum until fully paid;" (Pp. 79-80, Annex A, CENTRAL's Brief)
The only statement or finding or holding We can see in such challenged decision which might be said to refer to the point under discussion is the following:
In the light of all the foregoing, we hold, in disposing of the first issue herein discussed, that the existence of milling agreements does not necessarily render Republic Act 809 inapplicable or inoperative as to the contracting parties but the Act remains applicable and operative in all cases where the milling agreements, executed subsequent to June 22, 1952, provide any increase in planters' participation, as the term 'increase in participation is defined herein.
Accordingly, the ASCA and the other derivative sugar milling contracts are hereby declared modified so as to be caused to be read thereinto a provision granting the plantation laborers, or the appellants herein, 60% of the 4% increase in planters' participation stipulated therein, commencing from November 1, 1955 to October 31, 1974. They should likewise be entitled to legal interest for the same period. (Page 49, Id.)
Well and good, but the Appellate Court did not say that with such construction it had made of the Act, (to be sure, in accord with Talisay-Silay) it became the obligation of VICTORIAS to see to it that the respective laborers of the PLANTERS were duly paid their share of 2.4% or 10% of the 4% increase the PLANTERS were given.
The foregoing judgment becomes more incomprehensible when it is recalled that in its minute analysis of the ASCA insofar as the provisions thereof stipulating a 64%-36% sharing between the PLANTERS and the CENTRAL of the proceeds of milled sugar during crop years l955-56 to 1973-74, it found that in so stipulating such ratio of sharing in said ASCA, there was no evidence at all that on the part of VICTORIAS and the PLANTERS, for that matter-of any circumvention, and We can add, even of any intent to circumvent, the provisions of the Section 1 of the Act. To Our mind, for the Appellate Court to impose upon VICTORIAS join and several liability with the PLANTERS, in the light of its just quoted predicates, for the latter's failure to pay their respective laborers the 2.4% corresponding to said workers, is not only a veritable non sequitur but an utterly baseless legal conclusion that cannot be allowed to stand uncorrected. Accordingly, it is Our considered opinion, and We so hold , that the portion of the judgement of the Court of Appeals just quoted should be as it is hereby REVERSED, and whatever liability there exists in favor of the plantation laborers should be pinned exclusively on the PLANTERS, their respective employers. We must add though, that it was the Department of Labor's unexplainable inattention, not to say negligence, in performing its own corresponding obligations under Section 9 of the act that contributed to a considerable extent to the said plight that befell the said laborers. 'There was perceptible lack of sufficient concern and initiative, to say the least, in the Department's attitude and actuations in the premises. lt may be said that its vigilance concerning the rights of labor was unhappily not up to the expectations of the lawmakers when they approved the Act.
XII
With the matter of the liabilities relative to the share of the laborers in the proceeds of the 1955-56 to 1973-74 crop year thus clarified and determined, We can now pass to what happened to the participation due the laborers during the 1952-53 to 1954-55 crop years. Again, this is an inquiry that involves both issues of fact and of law.
In this connection, let us hearken first to how the Court of Appeals made its conclusion of fact in respect to P5,185,083.34 that it found to be the unpaid share of the laborers before the execution of the ASCA:
In resolving the third and last issue set forth above, we have taken note of appellants' position that Central and Planters are guilty Of 'misappropriation' of the amount of P 5,185,083.34 belonging to them which accrued during the period from June 22, 1952, to October 31, 1955 as their 60% share of Planters 10% increase in participation totalling, during the same period, P 8,643,472.24. That will now be resolved, therefore, is whether or not appellants have, in fact, received the amount of P 5,185,083.34.
By way of a short flashback, it is to be recalled that the laborers' P5,185,083.34 was under the ASCA, to be disposed of as follows: P1,186,083.34 was to be distributed to the laborers, under the supervision of the Secretary of Labor, and P4,000,000.00 was to be invested in Central's shares of stock.
It may be pertinent, at this point, to make a brief reference to the mechanics of this investment. As provided in the ASCA, the P4,000,000.00 of the P5,185,083.34 belonging to the appellants laborers was to be invested in 40,000 shares of Central's capital stock (with par value of P100.00 per share) redeemable after a period of time by Central. This investment was to be administered by the 'Special Committee', designated in the ASCA as representative of Planters. On August 13,1956, pursuant to the ASCA of March 5,1956, Central issued the 40,000 shares in four certificates of 10,000 shares each, in the names of five members of the 'Special Committee' or 'Board of Trustees', to wit: Vicente F. Gustilo, Jesus Suarez, Simon de Paula, Fernando J. and Jose Gaston, in their capacity as 'trustees' for appellants-laborers. Three of these five having died, Gustilo and Gaston, with the assistance of legal counsel of Central, filed a petition for their replacement, with the Court of First Instance of Negros Occidental (Exhibits JJJJJ-1 thru JJJJJ-3) resulting in the appointment of three new members: Ysmael Reinoso, Newton Jison, and Enrique Hinlo (Exhibits JJJJJ-7 thru JJJJJ-9). Gaston and Gustilo themselves having died, only the three new members could testify during the hearing of the case in the court below.
Through subpoenas duces tecum (Exhibits IIIIII, KKKKKK and LLLLLL each of the three was commanded:
... to bring with him the complete record of the Board of Trustees beginning March 5, 1956, of the sums of P4,000,000.00 and Pl,186,083.34 referred to in the Amicable Settlement Compromise Agreement dated March 5, 1956, executed between Victorias Milling Co., Inc., represented by its President Carlos L. Locsin and, Vicente F. Gustilo, Jesus Suarez, Simon de Paula, Fernando.
The evidence shows that, except for a small part (P 180,679.38) of the sum of P 5,185,083.34, the entire P l,186,083.34 was actually paid to the laborers. Thus, testified witness Felipe de Guia, representative of the Department of Labor in charge of the distribution:
COURT:
Q. Mr. de Guia, you said that there were some amounts that were not distributed because some laborers cannot be located; is this the amount mentioned in this Exh. "23", under the words 'amount of undistributed of windfall'?
A. Yes, sir, P 180,679.38 (tsn.p.23,Junel8,1970)
Appellants themselves, in their brief, have made the following observations;
So, it can be assumed without fear of contradiction that the last portion of the said amount of P l,186,083.34 was delivered, if ever, to PLANTERS-APPELLANTS-LABORERS after February 18,1957.(Appellants' Brief, p. 326)
The evidence, however, fails to show that the amount of P 4,000,000.00 (invested in Central's shares of stock pursuant to the ASCA) and its accruals have ever been received by appellants-laborers.
S. Gonzaga and Jose Gaston, representing the sugarcane planters affiliated with the Company in connection with Civil Case No. 22577 of the CFI of Manila.
Testifying on June 17, 1970, Jison, vice-chairman said he could not bring the documents asked of him because Gaston, as chairman of the Board of Trustees, had taken custody of all the records; that these records remained in Gaston's custody up to the time of his death; that since Gaston's death in 1969, 'we did not have any meeting and practically we forgot all about it. And he has still all the records so I cannot bring the records requested of me.' (p. 37, tsn., June 17, 1970).
Hinlo, secretary to the Board of Trustees, could not bring any of the documents subpoenaed, either, 'because I have resigned already as Secretary of the Board of Trustees in February, 1970, and the records are all in the hands of the late Jose Gaston.' (P. 58, tsn., June 18,1970).
Reinoso, treasurer of the Board of Trustees, did not appear at the hearing set for June 18, 1970, but his lawyer manifested that the only document he, Reinoso, had, was a copy of the ASCA of March 5, 1956.
For his part, Pfiffner, treasurer-comptroller of Central, testified that Central had nothing to do with the sale of the 40,000 shares in which the P4,000,000.00 was invested; that it was the Board of Trustees, which sold the shares. Thus:
Q. Are you trying to say, Mr. Pfiffner that the amount of 40,000 shares of stock and their dividend also in stock were sold with the consent only of the Board of Trustees?
A. Yes, Sir.
Q. ... And the defendant Victorias Milling Co., Inc., had nothing to do with it?
A. That is correct.'(p.86,tsn.,June 16, 1970).
Appellees claim that witness Felipe de Guia, Chief of the Agricultural Wage Section of the Department of Labor, had testified on the distribution to and receipt by appellants-laborers of the principal and earnings of the P 4,000,000.00 invested in the 40,000 shares. This claim however, is not borne out by the records in fact, de Guia denied any knowledge of the whereabouts of the proceeds of the sale and earnings of the 40,000 shares of stock. (Emphasis Ours)
Testifying on June 18, 1970, as a representative of the Secretary of Labor, witness de Guia stated: that he had no knowledge of the 40,000 share of stock, and that he did not know about the prices at which the 40,000 shares of stock were sold (p. 14, tsn., June 18, 1970). He further stated that he did not know about the income in dividends earned by the 40,000 shares of stock (p. 16, tsn., June 18, 1970), although he admitted having supervised the first distribution of the amount of P l,186,083.36 to appellants-laborers (p. 2 1, tsn., June 18, 1970).
It is clear from the evidence that, after Central issued the 40,000 shares of stock in the names of the five members of the "Special Committee'" or "Board of Trustees" representing, vis-a-vis Central ,both Planters and appellants-laborers, the said 'Special Committee" or "Board of Trustees" in its capacity as trustee for appellants-laborers, sold these 40,000 shares to various buyers, some of the shares going to Central and some to Planters, and that proceeds of the sales of these shares were received by the said "Special Committee" or 'Board of Trustees' and delivered to Planters for distribution to appellants-laborers. Thus, 'Special Committee' vice-chairman Jison explained:
Q. Would you like to tell this Honorable Court what happened to the money, whether in cash, check or in terms of shares of stock which was delivered by the Victorias Milling Co., Inc. to the Board of Trustees?
A. The stock of shares of the Victorias Milling Co., Inc. which was delivered to the Board of Trustees was sold and liquidated according to the Amicable Settlement-Compromise Agreement and in such case, checks were issued to be delivered to the respective laborers under the supervision of the Department of Labor. So fat the record is concerned, the Department of labor has all the records.' (pp. 37-38, tsn., June 17, 1970).
Not a shred of evidence, however, has been introduced into the record to show that the proceeds of the sales of the 40,000 shares of stock and the increments in cash and stock dividends have been actually delivered to or received by appellants-laborers. The three surviving members of the 'Special Committee' or 'Board of Trustees', namely Messrs. Ismael Reinoso Newton Jison, and Enrique Hinlo, who were supposed to be the guardians or administrators of the P4,000,000.00 invested in Central's 40,000 shares of stock, could not present any document whatsoever showing or tending to show that the proceeds of the sales were actually delivered to the Planters concerned and subsequently paid to the laborers.
Central argues that in the petition of appellants-laborers, no issue has been raised by the allegations concerning the latter's 6% participation from June 22, 1952 to October 31, 1955, amounting to P 5,186,083.34. Neither, it says, have appellants-laborers prayed for any relief in connection therewith. In fact, it goes on to say, appellants-laborers have admitted receipt of all amounts due them within the period mentioned, citing paragraphs 8, 9 and 10 of the petition, thereby estopping themselves from raising any issue as to such amounts in the instant appeal.
These arguments are more technical than substantial. It is true enough that the petition does not categorically state any specific relief desired with respect to the amount of 15,186,083.34, but it does contain a general prayer 'for such other relief as may be just and equitable in the premises'. And this general prayer is broad enough 'to justify extension of a remedy different from or together with the specific remedy sought. (Schenker v. Gemperk L-16449, Aug. 31, 1962, 5 SCRA 1042). lt is also true that paragraph 10 of the petition states -
That pursuant to Sec. 9 of said Act, respondents PLANTERS gave to petitioners LABORERS the latters' lawful participation in the sugar production as well as in the by-products and derivatives thereof and continue to give the same until November 1, 1955, when they ceased to do so until the present
but appellants-laborers have explained that what they meant by the quoted paragraph was that their 6% share had actually been set aside during the period from June 22,1952, to October 31, 1955 (p. 1446, Appellants' Reply Brier, not that the amounts due were actually delivered to or received by plaintiffs-appellants-laborers. Besides, no questions were raised during the trial of this case when the matter of the investment of the P4,000,000.00 was taken up by counsel of plaintiffs-appellants-laborers. In fact, counsel of Central agreed that what happened to the P4,000,000.00 was a proper issue in the case (p. 26, tsn., April 28, 1970). Furthermore, when Felipe de Guia, Chief Agricultural Wage Section, Department of Labor, testified as representative of the Secretary of Labor, on the matter of distribution of the P1,186,083.34, no objections were raised either by defendants-appellees. Again, when counsel for plaintiffs-appellants-laborers asked witness de Guia about the records of the distribution of the amounts of P1,186,083.34 and the P4,000,000.00 and its dividend earnings, counsel for Central likewise agreed to the production of whatever records there were available concerning these amounts (p. 157, tsn., June 16, 1970).
But no records whatsoever were produced until the presentation of the evidence of the parties was closed.
In effect what has been established by the evidence is that the P4,000,000.00 together with its earnings in dividends in the total amount of P3,385,950.00 (p. 66, tsn., June 16, 1970), has not be en distributed to or received by plaintiffs-appellants-laborers. (Pp. 6574, Appendix A, Victorias' Brief)
-B-
In their brief filed with Us, the PLANTERS vehemently dispute these conclusions and argue thus:
THIRD ASSIGNMENT OF ERROR
THAT THE COURT OF APPEALS ERRED IN FINDING AND CONCLUDING THAT THE SUM OF FOUR MILLION (P 4,000,000.00) PESOS OUT OF THE FIVE MILLION ONE HUNDRED EIGHTY SIX THOUSAND AND EIGHTY THREE & 34/ (P5.186,083.34) PESOS CONSTITUTING THE 60% SHARE OF THE LABORERS IN THE 10% INCREASE IN PARTICIPATION OF THE PLANTERS FROM THE CENTRAL UNDER REPUBLIC ACT NO. 809 FROM JUNE 22, 1952 (THE DATE OF THE EFFECTIVITY OF SAID ACT) TO OCTOBER 31, 1955 (THE DAY PREVIOUS TO NOVEMBER 1, 1955 WHICH IS THE EFFECTIVE DATE OF THE MILLING AGREEMENTS OF THE PLANTERS AND THE CENTRAL), WAS NOT DISTRIBUTED TO AND RECEIVED BY THE LABORERS, SUCH FINDINGS BEING BASED ON A MISAPPREHENSION OF THE SPECIFIC ISSUES INVOLVED IN THE CASE AND GOES BEYOND THE RANGE OF SUCH ISSUES, ASIDE FROM BEING CONTRARY TO THE ALLEGATIONS OF THE ORIGINAL PETITION. AS A COROLLARY, THE COURT OF APPEALS ERRED IN HOLDING THAT THE PLANTERS AND THE CENTRAL ARE JOINTLY AND SOLIDARILY LIABLE THEREFOR.
In relation to this assignment of error, the Honorable Court of Appeals stated thus:
... if it is further considered, as shown in our resolution of the third issue, that this amount of P 4,000,000.00, along with its accruals, was never received by the plantation laborers to this day, the unwisdom of investment, let alone its illegality, is hardly in doubt.'
(Appendix "A" pp. 75-76).
... and the fact that the laborer's P4,000,000.00 worth of shares and their earnings have, without any explanation from anyone from the Central from the Planters. or from the Special Committee, vanished into limbo without the laborers being able to actually receive any cent of the same.'
(Appendix "A", p. 77)
In effect, what has been established by the evidence is that the P4,000,000.00, together with its earnings in dividends in the total amount of P3,385,950.00 (pp. 6, tsn., June 16,1970), has not been distributed to or received by the plaintiffs-appellants-laborers.
(Appendix "A", p. 91).
For the Purposes of clarification, let us inquire into the question as to what P4,000,000.00 does the Court of Appeals refer to:
On pages 17 et seq. of the Decision of the Court of Appeals, reference is made to a document known as the "Amicable Settlement-Compromise Agreement' and referred to by the Court of Appeals for convenience as ASCA. This ASCA is quoted in full on pages 18-24 of the Decision. (Appendix 'A', pp. 25-35).
In said ASCA, which was executed on 5 March 1956, it was stipulated that from June 22, 1952, when the Sugar Act took effect, to October 31, 1955, the parties recognized that said Sugar Act was applicable. Consequently, the Planters were entitled to a 70- 30 sharing basis from the Central, thereby earning a 10% increase in their previous participation of 60%. This 10% increase amounted to P8,643,472.24.
Of this P8,643,472.24, the Planters were entitled to 40% thereof or P3,457,388.90 and the laborers were entitled to 60% thereof or to the amount of P5,186,083.34. Of this latter amount, it was agreed that P1,186,083.34 was to be distributed by the Planters to their laborers while the remaining P4,000,000.00 was to be invested by a Special Committee in shares of stock of the Central.
It is this amount of P4,000,000.00, therefore, that is involved in the present consideration.
The Court of Appeals held that this amount was not distributed to and received by the Laborers.
We respectfully and humbly submit that this finding and conclusion of the Court of Appeals has no basis in law and fact, and is contrary to the law of evidence and to evidence on records.
Said finding has no basis in law and in act.
Before we proceed, it might be pertinent to inquire into what is being claimed (their cause of action) by the Laborers in their petition or complaint.
A simple perusal of the petition will reveal that the Laborers are asking for their share under the Sugar Act of 1952, from November 1, 1955 to date. In other words, there is no claim whatsoever in the petition for any amount corresponding to the period covered from June 22, 1952 to October 31, 1955.
Thus, the Laborers in their petition dated November 9, 1962 alleged:
That pursuant to Sec. 9 of said act, respondents planters gave petitioners-laborers the latter's lawful participation in the sugar production as well as in the by-products and derivatives thereof and continued to give the same until November 1, 1955 when they ceased to do so until the present.'
In consonance with their allegations in said paragraph 10 of their petition dated November 9, 1962, laborers in paragraphs 1 and 2 of their prayer, prayed that judgment be rendered:
(1) Declaring the applicability of the Victorias Mills District of the sharing participation prescribed by Republic Act 809 for every crop year starting with the crop year 1955-56.
(2) Ordering respondent planters and/or respondent Central to account for and petitioners laborers' lawful share in the sugar produce, as well as the by-products and derivatives thereof, for every crop year from the crop year 1955-56, in accordance with Rep. Act No. 809. plus legal interests thereon computed on the basis of the average market price during the month in which the sugar was sold;
(See Annex 'C' of the Petitioner's Petition)
Said admission of the laborers in paragraph 10 of their petition dated November 9, 1962 and in their prayer, to the effect that they have already received their lawful participation in the sugar production as well as in the by-products and derivatives thereof from 1952 until November 1, 1955 was again reiterated in the 'consolidated opposition to the motion to dismiss', dated February 28, 1963, when they argued and we quote:
To recapitulate, inasmuch as the present action is not merely for the recovery of money, but is primarily brought for the enforcement of Republic Act No. 809 and the declaration of its applicability to the respondents for the crop year starting with the crop year 1955-56, we respectfully submit that this Honorable Court has jurisdiction over the subject matter of the present action. (See Annex 'C' of respondents' Petition for Review on certiorari by respondent Victorias Milling Co., Inc.' (emphasis supplied).
Said allegation in paragraph 10 of the laborers petition dated November 9, 1962 as well as in paragraphs 1 and 2 of the prayer were again reproduced verbatim in their amended petition dated March 6, 1964, (See Annex C-1, Central's petition for review on certiorari).
The Honorable Court of Appeals itself found also as a fact that:
... it is also true that paragraph 10 of the petition states-
That pursuant to Sec. 9 of said Act, respondents PLANTERS gave to petitioners laborers the tatters' lawful participation in the sugar production as well as in the by-products and derivatives thereof and continued to give the same until November 1, 1955, when they ceased to do so until the present;
(Appendix "A", p. 89, Italic supplied)
From the foregoing, it is obvious that the share pertaining to the laborers covering the period from October 31, 1952 to June 22, 1955 was never made an issue in the case at bar.
Since the share pertaining to the laborers was never made an issue in the case at bar for the simple reason that the Laborers have expressly admitted in their pleadings the receipt of their entire share covering from October 31, 1932 to June 22, 1955, therefore, the Court of Appeals, in holding the planters jointly and solidarily liable with the central for P6,399,105.00 plus 6% interest per annum and P180,768.38 plus 6% per annum all representing the laborers' share pertaining to said period, gravely abused its discretion said abuse of discretion amounting to lack of jurisdiction.
It is a well settled principle in procedure that courts of justice have no jurisdiction or power to decide question not in issue (Limtoco vs. Go Fay, 80 Phil. 166-176).
Thus in the following cases this court held:
It is a fundamental principle that judgments must conform to both the pleadings and the proof, and must in accordance with theory of the action upon which the pleadings were framed and the case was tried; that a party can no more succeed upon a case proved, but, not alleged than upon one alleged but not proved (Ramon vs. Ortuzar, 89 Phil. 730, 742). (emphasi supplied)
A judgment going outside the issues and purporting to adjudicate something upon which the parties were not heard, is not merely irregular, but extrajudicial and invalid.' Salvante vs. Cruz, 88 Phil. 236, 244; Lazo vs. Republic Surety & Insurance Co., Inc., 31 SCRA 329, 334).
The actuation of the trial court was not legally permissible, especially because the theory on which it proceeded involved factual considerations neither touched upon in the pleadings nor made the subject of evidence at the allegations of the parties of their respective claims and defenses submitted to the court for trial and judgment.' This rule has been consistently applied and adhered to by the courts.
Moreover, to award damages in favor of petitioner Miguel Tolentino, Sr., and against herein private respondents would violate the cardinal rule that a judgment must conform to and be supported by both the pleadings and the proofs, and should be in accordance with the theory of the action on which the pleadings were framed and the case was tried (Secundum allegata et probata Republic vs. de los Angeles, 41 SCRA 422, 450, Emphasis supplied).
Said findings is contrary to the law on evidence
As previously shown, the Laborers have expressly admitted in their pleadings the receipt of their entire share covering the period from October 31, 1952 to June 22, 1955, or all of the P5,186,083.00.
What then is the legal effect of said admission by the Laborers.
Section 2, Rule 129 of the Rules of Court provides:
Judicial admissions. — Admissions made by the parties in their pleadings, or in the course of the trial or other proceedings do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistake.
(Emphasis supplied)
In relation to the foregoing rule, this Honorable Court in the following cases held:
Soriano is bound by his own petition and by the adjudication of his claim made in consonance with his prayer. A party cannot trifle with a court's decision or order which he himself sought with full awareness of his rights under the premises, by taking it or leaving it at pleasure. The allegations, statements or admissions contained in a pleading are conclusive as against the pleader. A party cannot subsequently take a position contradictory to, or inconsistent with, his pleadings, (Mc Daniel vs. Apacible, 44 Phil., 448; 49 C.J. 128-134). Specifically, he is not allowed to ask his money back when the peso value is good, and later say he wants to keep the land when the peso purchasing power is down. 'Cunanan vs. Amparo, et al., 45 Off. Gaz., 3796, (The Revised Rules of Court by Francisco Evidence, p. 66).
An admission in a pleading may be made by an express acknowledgment of some fact or facts set forth in the pleading of the opposite party, or by a failure to deny or otherwise controvert the truth of such fact or facts. Thus, facts alleged in the complaint are deemed admissions of the plaintiff and binding upon him. Facts alleged in the answer are deemed admissions of the defendant and binding upon him. And facts stipulated in an agreement Of facts are deemed admissions of both parties and binding upon them. Facts stated in a motion are deemed admissions of the movant and binding upon him. The allegations, statements or admissions in a pleading are conclusive as against the pleader who cannot subsequently take a position contradictory to, or inconsistent with his pleadings.' (Cunanan vs. Amparo, 45 O.G. 3796) (The Revised Rules of Court, Evidence, Francisco, p. 66).
An admission may occur in the complaint as well as in the answer. Thus where a complaint alleged the amount of the account to be $541.90, and that there was a balance due, after deducting all payments, of $175.75, it was held that the plaintiff admitted the payment of $366.15, and that the defendant was not precluded from insisting upon this admission by disputing the correctness of the items of the account. (White vs. Smith, 46 N. Y. 418.)
The defendant's allegation in his answer that the plaintiff still owes him after deducting the value of the goods alleged to have been taken by the defendant from the plaintiff, if, interpreted in conjunction with the defendant's counterclaim for the balance resulting, after deducting the price of said goods, is an express admission of the existence of the obligation for the value of said goods. (Jurika vs. Castillo, 36 Off. Gaz., 476.)
Notwithstanding that the law on evidence So declares that such an admission does not require proof and cannot be contradicted, the Court of Appeals still gave credence to respondent Laborers' explanation in their Reply Brief. (Appendix "A", pp. 89-90), which is not evidence at all. To sustain this finding is to give evidentiary value to an argument in party's reply brief. This is against all rules of evidence required such test as to admissibility, competency, relevancy, and materiality and which can only be accomplished during the trial proper.
The Honorable Court of Appeals, in futile effort to justify its ruling that the share pertaining to labor covering the period from June 22, 1952 to October 31, 1955 was not distributed to the laborers despite the admission made by the laborers in their pleadings that they have already received their share covering said period, argued that respondents laborers have explained that what they meant by the quoted paragraph was that their 60% had actually been set aside during the period from June 22, 1952 to October 31, 1955, (page 1446, appellants' Reply Brief), not that the amounts due were actually delivered to or received by plaintiff appellants laborers. (Appendix 'A', pp. 89-90)
But it should be noted that this contention of the Laborers was raised for the first time only in their Reply Brief long after the trial of the case. In other words, it was a second thought of the Laborers brought about in their Reply Brief, thus amounting to change in theory and a deprivation of the right of the Planters to be apprised of the real issue for their defense.
Although it may be true, that under Section 2, Rule 129 of the Rules of Court by way of exception the Court may in its reasonable discretion relieve the party from the effects of his admission, yet the same can be had only upon proper showing that said admission was made thru palpable mistake. In the instant case the admission made by the respondent-laborers found in paragraph 10 of their petition as well as paragraphs 1 and 2 of their prayer was never shown to have been made thru palpable mistake.
Reading of the explanation of respondent-laborers as appearing in page 1446 of their reply brief relied upon by the Court of Appeals reveals that the allegations in paragraph 10 of their petition dated November 9, 1962 as well as the amended petition dated March 6, 1964 was never made thru palpable mistake.
What was explained by respondents-laborers in page 1446 of their reply brief was the meaning of said paragraph 10. According to the respondent-laborers what they meant by their allegation in paragraph 10 ... .
that pursuant to Sec. 9 of said act, respondent-planters gave petitioners-laborers the latter's lawful participation in the sugar production as well as in the by-products and derivatives thereof and continued to give the same until November 1, 1955 when they ceased to do so until the present..
is that ...
the 60% of plaintiff-appellant-laborers in the annual 10% increase participation of the defendant appellees planters had in fact been set aside pursuant to Section 9 of Republic Act 809 for the duration of the period beginning June 22, 1952 and ending October 31, 1955.
Since said admissions were never withdrawn, modified or explained or shown to have been made thru palpable mistake, therefore, Laborers were never relieved of the effects of their admission which under the rule on evidence is conclusive upon them.
Suffice it to state their admission in paragraph 10 of their petition being conclusive as against them which they cannot thereafter contradict (Cunanan v. Amparo, Supra) established the fact that they already received their share under the Sugar act of 1952 up to November 1, 1955 and against this fact no argument can prevail.
CONTRA FACTUM NON VALET ARGUMENTUM.
That the record is replete
with evidence showing that
the share of the laborers
were distributed to them.
Not only is there an admission by the Laborers of their receipt of the participation granted them by the Sugar Act up to November 1, 1955, but the record is replete with evidence showing that there was a distribution of this amount of P4,000,000.00 and its accruals, from year to year from a witness presented by the Laborers themselves.
Mr. Felipe de Guia, Chief of Agriculture wage Section of the Department of Labor, a witness for the laborers testified that they made a distribution, or supervised the distribution of the participation of labor covering the period from June 22, 1952 to October 31, 1955, pursuant to the provision of Section 9, paragraph 2 of the Sugar Act that 'The distribution of the share corresponding to the laborers shall be made under the supervision of the Department of Labor.' Thus he testified:
xxx xxx xxx
Q. Mr. Guia, what steps, if you know the Department of Labor has taken. . . . I withdraw the question.
Q. As Chief of the Agricultural Wages Section under the Department of Labor, do you know what steps your section of the Department of Labor has taken to implement Section 9 of RA 809, otherwise, known as Sugar Act of 1952, with the Victorias Milling District, Negros Occidental?
A. Yes, sir, we have distributed also the supposed share of the laborers amounting to 6,717,360.00.
COURT
Q. When was that distribution made?
A. It was made in the year 1955.
Proceed.
ATTY. SABIO
Q. This distribution covered the period from June 22, 1952 to what period?
A. To October 3l, 1955.
Q. Will you kindly tell the Court the basis of the distribution of the amount distributed?
A. As I understand, this amount was the participation due to the laborers working in that milling district, from June 22, 1952 up to October 31,1955.
COURT
Q. June 22 of what year?
A. June 22, 1952 to October 3l, 1955.
Proceed.
ATTY. SABIO
Q. Under what law that is due to them? 'A. RA 809, otherwise, known as Sugar Act of 1952.
A. By the way, Mr. Guia, what section or Division of the Department of Labor is embodied the implementation of RA 809? 'A. The Agricultural Wage Section of which I am the Chief.
ATTY. HAGAD
CROSS EXAMINATION
Q. How was this amount of P9,612,421.36 distributed?
A. The original amount which is supposed to be distributed is P5,186,083.36; but on account of converting the 4,000 shares of the laborers' shares of the stock, it was distributed continuously year to year. The dividends amounted to more than 1,000,000.00, which is added to this amount. It was based practically on the 10% increase participation due to the planters of the Victorias Milling District, wherein 60% of the 10% increase participation represented the said amount which was distributed among the laborers of the Victorias Milling District.
Q So, P5,186,083.36 was 60% Of 10% was the increase participation of the planters within the Victorias Milling District, for the period from June 22, 1952 to October 31, 1955; is that right?
A. Yes, sir.
(t.s.n., pp. 17-21, December 15, 1967) Lorenzo C. Caraig; emphasis supplied).
ATTY. SABIO
Q. Do you have in your possession the record on how this amount of P1,186,083.34 marked as Exhibits 'XXX' thru XXX-6?
A. Yes, sir.
Q. Would you be able to bring that next time?
A. I think so.
Q. Would you be able or do you have in your possession a record showing how the amount of P4,000,000.00 marked as Exhibit XXX-10 was disposed of ?
A. Not with the P4,000,000.00 because the distribution of this amount was made in five releases as per what is stated in the statement as presented here.
Q. At any rate, my question is: Do you have in your possession the record of the distribution of the P 4,000,000.00?
A. Yes, sir.
(t.s.n., pp. 143-144, June 16, 1970, L. Caraig; emphasis supplied).
Again:
COURT:
What is the purpose now of Atty. Sabio in presenting those records?
ATTY. SABIO: '
We will show that not only a portion of the amount of P5,186,083.34, including of course the earnings, was distributed that properly belong to the laborers.
COURT:
Why not find out from Mr. de Guia the record about the distribution how much was distributed?
WITNESS:
Atty. Sabio, I just want to clarify your statement the distribution I personally handled, I want that to be corrected. If you will allow me, sir, if Mr. Bascug can recall that in our distribution from the first to the fourth I think each and everyone of them even their members could really testify to the effect that the distribution was orderly undertaken. I just want to put that on record. There should be no insinuations, with due tolerance, being the supervisor of the distribution.
ATTY. SABIO:
We do not make any insinuation. We only want the record. In the interest of all concerned and in the interest of justice, if the records will be brought here we hope that the records are not irregular and we believe if they are regular no responsibility would be incurred by any official of the Department of Labor.
WITNESS:
Which are you referring to, Atty. Sabio ?
ATTY. SABIO:
Any official of the Department of Labor.
WITNESS:
What charge of irregularity?
ATTY. SABIO:
The distribution of P5,186,083.34.
WITNESS:
In order to facilitate all those records in bringing here, can I request Atty. Sabio any personnel that can accompany me. Because the records are so voluminous. For one distribution of one planter there are no less than 28 pages and there are five distributions. So I am requesting Atty. Sabio to give me an assistant to come as well as bring the records and I am willing to bring all those records because I have nothing to hide. It is also shown that there are those laborers who were not able to receive and it stated in the undistributed amount.'
(t.s.n., pp. 151-154, June 16, 1970, V. Salvarino emphasis supplied).
On cross examination, this witness further testified thus:
Atty. Hagad
O. My question Mr. de Guia, is this, the figures referred to in Exh. 23. Victorias Milling Co., Inc. came from the records of your office, is that correct?
A. Yes, sir.
Q. Exh. 23 mentioned first, second and up to the fifth distribution. What do you mean by this ?
A. There are distributions undertaken in the Victorias Milling Co., Inc. The first distribution was stated here is in accordance with the number that is corresponding to the amount distributed or released for distribution among the laborers of the Victorias Milling Co., Inc.
Q. By the first distribution, you are referring to the Amicable Settlement Compromise Agreement the amount of P1,186,083.36 and this correspond to the same amount indicated in the Amicable Settlement-Compromise Agreement you also Identified,: is that correct ?
A. I do not know exactly if this figure stated there is correct but I have to check whether it tallies with it.
Q. Which figures is reflected in Exh. XXX and Exh-XXX-9?
A. There is difference of 2 centavos.
Q. These other distributions that you made, were those also done under your supervision beginning from the second up to the fifth distribution')?
A. (Correction, please). I was not the one who made the distribution: I was only concerned on the first distribution which was supervised.
Q. As first of the team of supervisors, you supervised the actual delivery of the money to the laborers; is that correct?
A. Yes, sir.
(t.s.n., pp. 20-22, June 18, 1970; Lorenzo Caraig).
Silence of Central Planters,
and Special Committee
According to this Honorable Court, because there was no 'explanation from anyone from the Central ,from the Planters or from the Special Committee. (Appendix 'A', p. 77) as to the distribution of this amount of P4,000,000.00 then the conclusion is that the said amount was never distributed to the plantation laborers. This conclusion is entirely lacking in basis. For it has been established in the preceding paragraphs that according to law (Section 2, Rule 129, Rules of Court), such an admitted fact does not require proof. If so, what was there to be proved by the Planters, the Central or the Special Committee as to the distribution of the said P4,000,000.00 when there is no dispute as to this fact, the same being admitted in the pleadings.
Not only did this Honorable Court err in finding that the P4,000,000.00 was not distributed to the Plantation laborers, but it also fell into error when it held that it could order Planters and Central to pay the said amount to the Laborers even something they did not ask specifically under the general prayer, especially so because such a relief is inconsistent with the admission of the respondent laborers that they were already given their share corresponding to the period from June 22, 1952 to October 31, 1955. While it may be true that a general prayer is probably broad enough 'to justify extension of a remedy different from or together with specific remedy sought' a general prayer is no longer broad enough to justify extension of a remedy which is INCONSISTENT with the specific allegation in the petition as in the case at bar. The case of Schenker vs. Gemperk, L-16449, Aug. 31, 1962, 5 SCRA 1042 relied upon by the Court of Appeal cannot, therefore, be made applicable to the case at bar, for the facts in said case are far different from the one at bar. In the aforecited case, the remedy extended is merely different from or together with the specific prayer sought; in the case at bar, the remedy extended is INCONSISTENT with the specific allegation and cause of action of respondent laborers' petition.
The cause of action of the respondent laborers is only for their alleged share from November 1, 1955 and is further bolstered by paragraph 1 of their prayer reading thus;
Declaring the applicability of the Victorias Mill District of the sharing participation prescribed by Republic Act 809 for every crop year starting with the crop year 1955-56
(EMPHASIS SUPPLIED)
With respect to the investment of the P4,000,000.00 in 40,000 shares of stock of the Victorias Milling Co., Inc., no prejudice was really caused to the plantation laborers because these shares of stock remained their property. It was never claimed by the PLANTERS or by the Special Committee as theirs. It was only held in trust for them by the Board of Trustees. (Art. 1448, New Civil Code). This was not only a wise investment; it also earned a good return, for on the principal of P4,000,000.00, its stock and cash dividends amounted to about P3,385,950.00 (p. 50, Decision). (Pp 69-97, PLANTERS' Brief.)
We have carefully scrutinized the foregoing arguments, supported as they are by the pleadings on record as well as unexpurgated and unquestioned parts of the transcript of the stenographic notes of the testimony of the FEDERATION's principal witness, Mr. de Guia, in the light of the pertinent conclusions of the Court of Appeals, and at this point, We are already apprehensive that said conclusions can be said to be supported by such substantial evidence as would preclude this Court from accepting them as unreviewable by this Court under the general limitation of this Supreme Court in regard to findings of fact of the Court of Appeals.
- C -
'This impression of Ours that the Appellate Court's above conclusions cannot be said to be sufficiently grounded gathers added force when the following able discussion of the same apparent misapprehension of the evidence by the Appellate Court in the brief of VICTORIAS' ninth to eleventh (IX to XI) assignments of error in its brief with Us is taken into account:
Ninth Assignment of Error
WITH REFERENCE TO THE AMOUNT OF P6,399,105.00 AND THE AMOUNT OF P180,769.38, WHICH ACCRUED IN FAVOR OF THE LABORERS FROM JUNE 22, 1952 to OCTOBER 31, 1955 WHEN THERE WAS AS YET NO WRITTEN MILLING AGREEMENT, IN VIEW OF THE FACT THAT THE LABORERS ADMITTED IN THEIR PETITION THAT THE PLANTERS GAVE THEM THEIR LAWFUL PARTICIPATION FROM JUNE 22, 1952 TO OCTOBER 31, 1955 AND THERE BEING, MOREOVER, NO ALLEGATION OF ANY CAUSE OF ACTION RELATIVE THERETO, THE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT HELD PETITIONER VICMICO AND THE PLANTERS JOINTLY AND SEVERALLY LIABLE VIA TORT FOR SAID AMOUNTS.
Aside from adjudging petitioner VICMICO and the planters jointly and severally liable for the money equivalent of 60% of the 4% increased participation of the planters from November 1, 1955 to October 31, 1974, which amount would run to tens of millions of pesos, a judgment that, as previously discussed, finds no basis in law and in fact, the Court of Appeals likewise adjudged petitioner VICMICO and the planters jointly and severally liable for tort for P6,399,105.00 and for P180,769.38, which sums pertained to the amounts that accrued in favor of the laborers from June 22, 1952 to October 31, 1955, during which period there was no milling agreement.
The Court of Appeals, in attempted justification of its aforesaid ruling, stated that while FFF, et als. admitted in paragraph 10 of their petition that the 'planters gave to petitioners-laborers the latter's lawful participation in the sugar production as well as in the by-products or derivatives thereof and continued giving the same until November 1, 1955' (Par. 10, Petition of FFF et als.), the FFF et als. in their brief filed before the Court of Appeals, 'explained that what they meant ... was that their 6% share had actually been set aside during the period from June 22, 1952 to October 31, 1955' (Decision, p. 61). The Court of Appeals further stated that counsel for petitioner VICMICO allegedly agreed that what happened to the P4 Million was a proper issue in this case' (ibid., p. 62) and that the general prayer of FFF et als. 'for such other relief as may be just and equitable under the premises is broad enough to justify extension of a remedy not specifically sought' (ibid., p. 61 ).
Petitioner VICMICO respectfully submits that the justification advanced by the Court of Appeals is untenable as we shall hereunder discuss and as shown by the fact that the laborers did actually receive said amounts (Vide Exh. 23-VICMICO or Annex I of VICMICO's Petition for Certiorari), as discussed at length in the Tenth Assignment of Error.)
The FFF, et als. did not allege any cause of action in their petition concerning their share from June 22, 1952 to October 31, 1.955, during the period when there was as yet no written milling agreement; as a matter of fact, FFF et als. expressly admitted receipt of their lawful participation pertaining to said period. (emphasis supplied)
As previously noted, VICMICO and the planters did not have any written milling Contract from Julie 22, 1952, when Republic Act 809 took effect, until October 31,1955 the last day prior to the written milling agreements' having become effective. The amounts pertaining to the planters' laborers representing 60% of the planters' increased participation, pursuant to the sharing proportion prescribed in Section I of Republic Act 809, were expressly provided for in the amicable settlement-compromise agreement ASCA executed between the central and the planters.
The Court of Appeals, in its Decision (Annex Q to VICMICO'S petition for Certiorari) declared the foregoing amicable settlement-compromise agreement or ASCA to be valid and legal and not violative of Republic Act 809. (Vide, Annex Q, p. 43) pursuant to the amicable settlement-compromise agreement, the entire share of the planters' laborers was eventually delivered and distributed to them ,the distribution having amounted to a grand total of P 6,536,741.98, involving 474,811 laborers in five (5) distributions. (Vide Exh. 23 VICMICO or Annex I hereof). FFF et als. expressly admitted receipt of all amounts pertaining to the laborers during the period June 22, 1952 to October 31, 1955. Thus the petition of FFF et als., reads in part:
08. That on June 22, 1952, Republic Act No. 809 otherwise known as the Sugar Act of 1952, was enacted the pertinent provisions of which are as follows:
xxx xxx xxx
9. That at the time that the said Act went into effect, a majority of sugarcane planters of the Victorias Mill District had no milling agreements with respondents CENTRAL.
10. That pursuant to Sec. 9 of said Act, respondent PLANTERS gave to petitioners LABORERS the latter's lawful participation in the sugar production as well as in the by-products and derivatives thereof and continued to give the same until November 1, 1955 when they ceased to do so until the present;' (Vide Annex A to VICMICO's petition for certiorari.)
In view of the foregoing express admissions of et als., herein petitioner VICMICO stated in its answer to the petition that the 'windfall bonuses, if any, given by the adherent planters to their plantation laborers was the consequence of the terms of the amicable settlement-compromise agreement arrived at between respondent central and its adherent planters within the district in relation to a then pending court case between them'. (Vide, par. 7 of Annex E to VICMOCO's petition for Centiorari.) On the part of the planters, they averred that the 'windfall bonuses that respondent planters herein gave to their plantation laborers ... are legal and valid and were the result or consequence of the terms and conditions of the amicable settlement arrived at between the respondent central and its adherent planters within the district ... (Vide Annex 'G' to VICMICO's Petition for Certiorari.)
It is obvious that FFF, et als. did not allege any cause of action with reference to those amounts which accrued in favor of the laborers from June 22, 1952 to October 31, 1955) as they, in fact, admitted that the planters gave to petitioners laborers the latter's lawful participation in the sugar production as well as in the by-products or derivatives thereof and continued to give the same until November 1, 1955. That FFF et als. did not allege ally cause of action relative thereto is evident, the essential elements constituting a cause of action not being present. There is a cause of action only if certain essential elements are alleged in the petition. We quote:
A cause of action is an act or omission of one party in violation of the legal right of the others. Its essential elements are, namely: (1) the existence of a legal right in the plaintiff, (2) a correlative legal duty in the defendant, and (3) an act or omission of the defendant in violation of plaintiff's right with consequential injury or damage to the plaintiff for which he may maintain an action for the recovery of damages or other appropriate relief.' (Mathay vs. Consolidated Bank & Trust Co., 58 SCRA 559.)
While FFF et als. alleged that the laborers had the legal right to a certain percentage share of the sugar produced from June 22, 1952 to October 31, 1955, they did not allege any correlative duty on the part of petitioner VICMICO to deliver those shares to the laborers, as said laborers, in fact, expressly admitted that the planters, who had that exclusive correlative duty under Section 9 of Republic Act 809 had already delivered to the laborers the latter's lawful participation. Moreover, insofar as any amounts due the laborers during the period when there was no milling contract are concerned, the petition of FFF et als. did not allege any act or omission whatsoever, on the part of petitioner VICMICO or on the part of the planters in violation of the laborer's rights. There having been no allegation whatsoever of such a cause of action, the Court of Appeals acted with grave abuse of discretion in nevertheless adjudging petitioner VICMICO jointly and severally liable with the planters for the amounts pertaining to the laborers during the period June 22, 1952 to October 31, 1955.
FFF et als. could not be permitted to controvert their express admission and any proof contrary thereto or inconsistent therewith should have been ignored. (Underlining of emphasis supplied)
It is a fundamental principle that an admission made in a pleading cannot be controverted by the party making such an admission. We quote:
Our decisions from Irlanda v. Pitargue, announced in a 1912 decision, to De Borja v. Vda. de Borja, promulgated in 1972, speak to that effect. It is a familiar doctrine according to Justice J.B.L. Reyes in Joe's Radio & Electrical Supply v. Alto Electronics Corp., 'that an admission made in the pleadings cannot be controverted by the party making such admission and are conclusive as to him, and that all proofs submitted by him contrary thereto or inconsistent therewith, should be ignored, whether objection is interposed by the party or not (Santiago vs. De los Santos, 61 SCRA 146, 149.)
The explanation given by FFF et als. to the effect that what they meant by the word 'gave' is that the laborers' share during the period was merely set aside for said laborers is not only a belated and forced explanation advanced only at the time FFF et als., filed their reply brief with the Court of Appeals under date of April 30, 1972, or almost ten years from the date said parties filed their petition on or about November 9, 1962, but is also contrary to the ordinary and generally understood meaning of the word 'gave'. The matter is rather substantial in the sense that it involves an amount representing millions of pesos which has not been treated as a cause of action in the petition of FFF et als., nor has it been specifically mentioned in their prayer. What was required of the FFF was that they amend their petition, with prior leave of court, so that petitioner VICMICO as well as the planters could have directly met the issue. This procedural requirement not having been complied with by the FFF et als. and the Court of Appeals having proceeded to decide the case on certain issues not raised by the parties, said Court of Appeals acted with grave abuse of discretion, (Evangelista vs. Alto Surety and Insurance Co., Inc., 103 Phil. 40 1).
The Court of Appeals moreover contends (Vide Annex Q to VICMICO's Petition for Certiorari, p. 61) that while the petition of the FFF et als., did not specifically pray for recovery of the amounts pertaining to the period from June 22, 1952 to October 31, 1955, their general prayer 'for such other relief as may be just and equitable in the premises' is broad enough to justify extensions of a remedy different from the specific amounts sought. While the phrase 'for such other relief as may be just and equitable in the premises' may embrace all other reliefs not specifically prayed for, only those reliefs which are alleged or supported by the allegations in the petition or the complaint can validly be adjudged. In the absence of any such allegation, as in the case at bar, no relief other than that justified by the allegations and proof may be awarded. We quote:
Moreover, to award damages in favor of petitioner Miguel Tolentino, Sr., and against herein private respondents would violate the cardinal rule that a judgment must conform to and be supported by both the pleadings and the proofs, and should be in accordance with the theory of the action on which the pleadings were framed and the case was tried (secundum allegata et probata )(Republic vs. De los Angeles, 41 SCRA 422, 450).
xxx xxx xxx
The actuation of the trial court was not legally permissible, especially because the theory on which it proceeded involved factual considerations neither touched upon in the pleadings nor made the subject of evidence at the trial. Rule 6, Section 1, is quite explicit in providing that 'pleadings are written allegations of the parties of their respective claims and defenses submitted to the court for trial and judgment.' This rule has been consistently applied and adhered to by the courts.
The subject matter of any given case is determined ... by the nature and character of the pleadings submitted by the parties to the court for trial and judgment. (Belandres vs. Lopez Sugar Central Mill Co., Inc., 97 Phil. 100, 103).
It is a fundamental principle that judgments must conform to both the pleadings and the proof, and must be in accordance with the theory of the action upon which the pleadings were framed and the case was tried; that party can no more succeed upon a case proved, but not alleged, than upon one alleged but not proved. (Ramon v. Ortuzar, 89 Phil. 730, 742).
It is a well-known principle in procedure that courts of justice have no jurisdiction or power to decide a question not in issue. (Lim Toco vs. Go Fay, 80 Phil. 166).
A judgment going outside the issues and purporting to adjudicate something upon which the parties were not heard, is not merely irregular, but extrajudicial and invalid. (Salvante vs. Cruz, 88 Phil. 236, 244).' [Lazo vs. Republic Surety & Insurance Co., Inc. 31 SCRA 329, 334).]
Plaintiffs-appellants FFF et als. sought to bang up matters concerning the share of the laborers from June 22,1952 to October 3l, 1955 not by way of recovery thereof, as FFF et als. in fact admitted receipt of everything due, but merely by way of pursuing their theory that the amicable settlement-compromise agreement is allegedly null and void (Emphasis supplied)
When counsel for plaintiffs-appellants propounded questions to Mr. de Guia concerning the alleged disagreement of the Department of Labor concerning the procedure adopted in the disposition of the shares of the laborers, Atty. Ditching, a planter, as counsel for himself and his wife, objected thereto on the ground that, as per paragraph 10 of their petition, plaintiffs-appellants admitted receipt of all of the shares up to October 31, 1955.
Q You stated that your Department disagreed with the procedure adopted by the Victorias Milling Co., Inc. and its planters in the disposition of the amount of money due the laborers under Republic Act 809; and you also mentioned that you have document in your possession of the objection of your Department to such procedure; is that right?
ATTY. DITCHING:
We object to that because there is no necessity of bringing that point because the petition itself admitted that the petitioners received their participation. lt is here in paragraph 10 of the petition.
COURT:
I believe the objection is tenable because the supposed participation of the laborers from the 40-60 sharing which was later on increased to 60-40 according to that amicable settlement.
ATTY. SABIO:
This amicable settlement, Your Honor, we are trying to impugn it. (t.s.n. pp. 64-66, December 15, 1967).
When counsel for plaintiffs-appellants FFF et als. was reminded that, pursuant to his petition, FFF et als., had admitted receipt of what was due them prior to November 1, 1955 and that said counsel could not introduce evidence which would contradict said admission unless the petition would first be amended, counsel for plaintiffs-appellants stated that he was not amending his petition, as his purpose was only to pursue his theory that the milling contracts were null and void. We quote:
ATTY. TIROL
I think we are trying this case and not to impugn that document, whereas compañero stated that there is an allegation in the petition that prior to November 1, 1955, the planters have complied with the law . . . that is your pleading. Are you going to amend your petition?
ATTY. SABIO:
We are not but paragraph 11 of the petition states: '11. That with evident intent to evade compliance of said Act and to the grave prejudice of the laborers, some of respondents PLANTERS and respondent CENTRAL prepared and executed a General Collective Sugar Milling Contract sometime in March, 1956; and, that adherence thereto, even as late as April 29, 1960, was made to retroact to November 1, 1955;' This contract which we are trying to impugn was not presented to court.
ATTY. HILADO, JR.
We doubt very much if counsel for the plaintiffs can give us reason why this amicable settlement was not presented by the parties in court. In that case then, granting that he can so prove his allegation, because the Victorias Milling Co., Inc. under Par. 10 of the petition, states that up to October 31, 1955, the laborers received their lawful participation under RA 809. This milling contract was executed but that was after October, 1955 already. She cannot go against his allegation.
COURT:
Let us go to the question now so the ruling could be issued.
ATTY. SABIO:
My question is the matter of document presented by the witness was not asked by me but by Atty. Hilado Jr. So the document was mentioned by the witness.
ATTY. HILADO, JR.
The Rules of Court says that, agreement of the parties could not be contradicted.
ATTY. SABIO:
We disagree on the qualification of the fact.
COURT:
Let us go to the question now. Proceed.
ATTY. SABIO:
You stated during the cross examination by Atty. Hilado Jr. That you have a document in your possession to show that your office disagreed with the procedure in the disposition of the money due to the laborer's share which was made by the Central and the planters; where is that document now?
ATTY. DITCHING:
Objection. In the pleading, par. 10 of the petition, the petitioners admitted that they have received their lawful share up to November, 1955
COURT:
That is not denied.
ATTY. DITCHING:
The petitioners admitted that in par. 10 of petition, they have received their lawful share up to November 1, 1955; so that question is immaterial.
COURT:
The question asked is, with reference only to the procedure of the Department of Labor.
ATTY. HILADO, JR.
Are they not in a position to ascertain all their allegations in the petition?
COURT:
The position of counsel for the plaintiff is that, he is trying to find out his procedure that is being followed. Let the witness answer.
A. Witness is showing a certain document which for purposes of Identification has been marked as Exhibit HHHHHH-5 for the plaintiffs. It is a Memorandum addressed to the Hon. Secretary of Labor by Mr. Ruben F. Santos of the Wage Board Division.
COURT:
Q. Why did your Department object to such arrangement of the planters and Victorias Milling Co., Inc. referring to the disposition of increase participation?
A . The only objection of our Department as stated in the memorandum is the conversion of P4,000,000.00 into shares of stock.
Q. So your objection is in the conversion into share of stock of certain amount of dividend is that it?
A Yes, Sir, the memorandum in our office speaks for it .
(t.s.n., pp. 67-72, December 15, 1967).
It is obvious that plaintiffs-appellants were not seeking recovery of what pertained to them from June 22, 1952 to October 3 1, 1955, not only because they admitted receipt of their shares corresponding to said period, but also because Mr. de Guia likewise affirmed the laborers' receipt of the corresponding share. While, according to Mr. de Guia, the Department of Labor disagreed merely with reference to the initial conversion of the P4 Million into VICMICO shares, said VICMICO shares were subsequently converted into cash and, ultimately, distributed to the laborers who interposed no disagreements or objection thereto, Mr. de Guia testified:
Q. Is it not a fact that those shares of stock were sold and proceeds of your distribution as indicated in your report was up to the 5th distribution made by your office?
A. Yes, Sir.
Q. And as a matter of fact, with the sale of shares of stock, you realized that not only the original amount of investment which correspond to the part of 60% for the laborers but by more than million dividend; is that right?
A. Yes, Sir.
Q. Is it not a fact that the reason why after October 31, 1955 your office did not distribute the windfall or bonuses because there had been milling contracts that were signed by the management and the planters in the milling district?
A. Yes, Sir.
Q. Was there a report of your office with reference to the 5th distribution of payments of money?
A. Yes, Sir.
Q. Who gave the money?
A. The planters.
(t.s.n., pp. 35-36, December 15, 1967.)
xxx xxx xxx
Q. And there was no disagreement on that matter, correct ?
A. Yes, Sir.
Q. And there was no complaint from the laborers after the participation; is that correct?
A. There was none.
Q. So that its distribution was accepted by all, including the laborers who were the participants in this distribution; correct?
A. There was none.
Q. So that this distribution was accepted by all, including the laborers who were the participants in this distribution; correct?
A. That is only within the period that is covered by the distribution.
(t.s.n., p. 53, December 15, 1967.)
As a matter of fact, when Mr. de Guia testified that one planter did not allegedly distribute the share corresponding to his own laborers, Atty. Ditching, as counsel for himself and his wife, moved to strike out the answer of the witness on the ground that the laborers, in their petition, admitted having received all of their shares, and the trial court granted the motion. We quote from the transcript:
Q. Of the 400 planters adhered to the Victorias Milling District, only one planter has not distributed the corresponding participation of the laborers; is that right?
A. Yes, Sir.
ATTY. DITCHING:
I move for the striking out of the answer of the witness, it is admitted by the petitioners themselves in par. 10 of the petition filed with this court on November 9, 1962, which says: '10. That pursuant to Sec. 9 of said Act, respondents PLANTERS gave to petitioners LABORERS the latter's lawful participation in the sugar production as well as in the by-products and derivatives thereof and continued to give the same until November 1, 1955 when they ceased to do so until the present.' So regarding the distribution, I object to that because there was already an answer. I move to strike out with respect to the answer because it will affect us.
COURT:
Strike out that from the record regarding that one planter has not distributed the participation of the laborers. It is enough that the Department of Labor have that in the record.
(t.s.n., pp. 48-50, December 16, 1967).
The contention of the Court of Appeals that 'Counsel for central agreed that whatever happened to the P4,000,000 was a proper issue in this case' (Annex Q, p. 62) finds no justification. While counsel for VICMICO made the foregoing remark in the course of an exchange of manifestations with counsel for FFF et als., said remark should be taken in the context in which it was uttered. Counsel for FFF et als. was requesting for records concerning the P4,000,000 invested in VICMICO shares of stock, and counsel for VICMICO insisted that counsel for FFF et. als. specify the documents being asked for (tsn, pp. 7 to 32, April 28, 1970). It should be noted moreover that counsel for VICMICO objected to the presentation of evidence concerning the existence of any alleged fraud because 'there is no allegation to the effect that complaint and that should not be brought in the rebuttal because that is improper. (tsn, pp. 14-15, April 28, 1970).
Moreover, the said statement of counsel of VICMICO was meant merely to emphasize what VICMICO alleged in Par. 7 of its answer to the petition, which Par. 7 reads as follows:
7. —That, being the mill company, respondent Central does not have sufficient information so as to be able to admit or deny the truth of the allegations of paragraph 10 of the petition; and it here further states that the wind-fall bonuses, if any, given by the adherent planters to their plantation laborers was the consequence of the terms of the amicable settlement arrived at between the respondent Central and its adherent planters within the district in relation to the pending court case between them.' (Vide, Annex E, Par. 7, thereof, Petition for certiorari of Vicmico)
If there was any issue at an with reference to the P4,000,000 investment in VICMICO shares, it was not an issue in relation to any cause of action filed by FFF et als. to recover the proceeds thereof, as FFF. et als. never made such an allegation and even expressly admitted receipt of said amount.
X
Tenth Assignment of Error
HAVING FOUND THE MILLING AGREEMENT AND THE AMICABLE SETTLEMENT-COMPROMISE AGREEMENT (ASCA) to be valid, THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER VICMICO AND THE PLANTERS HAD NO AUTHORITY TO STIPULATE IN SAID ASCA ON THE DISPOSITION OF THE AMOUNTS PERTAINING TO THE LABORERS FROM JUNE 22,1952 TO OCTOBER 31, 1955, THE PLANTERS BEING THE AUTHORIZED AGENTS OF THE LABORERS BY, AMONG OTHERS, HAVING RECEIVED ALL THE AMOUNTS DUE THEM, HAVING MOREOVER RATIFIED SAID ASCA.
The ruling by the Court of Appeals to the effect that the milling agreements and the ASCA are valid renders legally untenable its conclusion that the parties thereto had no authority to provide for the disposition of the amounts pertaining to the laborers from June 22,1952 to October 31, 1955. (Emphasis supplied)
The Court of Appeals, after a review of the records, "found no evidence of circumvention" in the execution of the milling agreements and of the ASCA 'as appellants (FFF et als.) charged.' (Decision, p. 41, Annex 'Q' to Vicmico's Petition for Certiorari). It added that the 'contracts, therefore, which it (Vicmico) wrung from Planters are not in circumvention of the law but in legitimate pursuit of profit — which is the end all and be-all of business. That Central (Vicmico), as a result of the ASCA which appellants (FFF et als.) claim it (Central) to have 'engineered' got 36 % and Planters 64 % while the plantation laborers got nothing, is no reason for considering the contracts a circumvention of the law which does not in the first place interpose upon it any duty or require of it the performance of any obligation to yield any part of its participation in favor of planters laborers. In other words, we do not find in Central's conduct anything so odious or so obnoxious as to render the contracts it has entered into with Planters illegal or repugnant to public policy.' (Ibid., p. 43). The Court of Appeals, thus, declared 'the ASCA and the other derivative sugar milling contracts valid.' (Ibid., p. 54)
Notwithstanding its finding and conclusion that the ASCA and its derivative sugar milling contracts were valid, the Court of Appeals stated that the Central and the Planters had no authority to provide in the ASCA for the disposition of the amounts pertaining to the laborers from June 22, 1952 to October 31, 1955. Thus, the Court of Appeals ruled in part:
Central and Planters could stipulate whatever they might wish upon the share (P3,457,388.90) of Planters in the 'reserve how or when such share would be paid to the latter. After all they were the only contracting parties in the ASCA. But it was absolutely beyond the power and competence of either Central or Planters or both Central and Planters to stipulate upon the share (115,186,083.34) of the plantation laborers in the 'reserve'. As though the share of the plantation laborers were their own property, however, both Central and Planters, on March 5, 1956, sat down in judgment upon the question of its disposition. On that date, therefore, they both decided, in the ASCA, on how the laborers' share was to be disposed of. P4,000,000.00 was to be invested in shares of capital stock of Central, the balance of P1,186,083.34 to be distributed among the plantation laborers " under the supervision of the Secretary of Labor". (Decision, pp. 48-49; Vide, Annex "Q" to Vicmico's Petition for Certiorari.)
The foregoing conclusion of the Court of Appeals is legally inconsistent with its finding and ruling that the ASCA was legal and valid. A ruling that a contract is valid presupposes that all the essential elements of a contract are present, namely: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. (Art. 1318, Civil Code). Consent presupposes legal capacity, that is, that the Planters who entered into said ASCA on behalf of their laborers had been authorized by the latter. (Tolentino, Civil Code of the Philippines, p. 407 [1956]; cf. Tolentino v. Paraiso, 34 Phil. 609 [1916]).
In any event the planters were the authorized agents of the respective laborers, and Vicmico had the right to rely on that authority. (Emphasis supplied)
Section 9 of Republic Act 809 reads:
In addition to the benefits granted by the Minimum Wage Law, the proceeds of any increase in the participation granted the planters under this Act and above their present share shall be divided between the planter and his laborer in the plantation in the following proportion:
Sixty per centum of the increased participation for the laborers and forty per centum for the planters. The distribution of the share corresponding to the laborers shall be made under the supervision of the Department of Labor.
The benefits granted to laborers in sugar plantations under this Act and in the Minimum Wage Law shall not in any way be diminished by such labor contracts known as "by the piece", "by the volume", "by the area", or by any other system of "pakyaw", the Secretary of Labor being hereby authorized to issue the necessary orders for the enforcement of this provision.
The above provision has constituted the planters the agents of their respective laborers with reference to any share to which they may be entitled from the increased participation of the planters granted under the Act. It is an agency created by law (Art. 1317, Civil Code). Accordingly, when the planters entered into the ASCA with the Central, they did so, insofar as the share of their laborers was concerned, as agents of their laborers and no authority was necessary from the laborers because the planters had, by law, a right to represent them.
Moreover, the planters are the employers of their respective laborers; they speak for their laborers in matters involving whatever percentage share the laborers would be entitled to from the increased participation of the planters granted under Republic Act 809. These laborers were so numerous (cf. Exh. 23-Vicmico) that only the respective planters who, under the law, are obliged to prepare their payrolls, knew who they were. Hence, Vicmico has the right to rely on the representations of the planters relative to their laborers.
Moreover, the laborers ratified the ASCA by their silence for six (6) years and by their enjoyment of the benefits accruing therefrom. (Emphasis supplied)
From November 5, 1956 when this Honorable Court dismissed the appeal of the laborers in G. R. No. L-11218 up to November 9, 1962 when the petition of FFF, et als. was filed with the trial court, about six (6) years had elapsed. Within that long period, the laborers never questioned the validity of the ASCA on the ground that the Central and the Planters had no authority to provide for the manner of preservation and distribution of their share corresponding to the period from June 22, 1952 to October 31, 1955 when there was as yet no written milling contract in the Victorias-Manapla-Cadiz mill district. They never, within such period, filed any action to nullify the ASCA for lack of consent on their part, notwithstanding their knowledge thereof, some of the laborers having intervened in Civil Case No. 22577 (Exh. "H") and in G. R. No. L-11218, where the question of validity of the ASCA and of the milling agreement was in issue (Exhs. "VV", "VV-I", "VV-2").
Article 1317 of the Civil Code reads:
... . No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party.
By their silence for six (6) years, notwithstanding their knowledge of the ASCA, the laborers are deemed to have ratified the contract. We quote:
Nor has Concepcion directly impugned the validity of the obligation contracted by her mother in her behalf and therefore it may be taken for granted that she has by her silence ratified the obligation to pay, jointly with her mother and brothers, the sum her father owed when he died. (Art. 1313, Civil Code.)' (Fable v. Yulo, 24 Phil. 240, 247 [1913], emphasis supplied.)
On the contrary, the case comes squarely within the purview of the provisions of the Civil Code under the subject of Nullity of Contracts which pertain to ratification. Codal article 1309 provides: 'The action of nullity is extinguished from the moment the contract may have been validly ratified.' Article 1311 following provides: 'Ratification may be either express or implied. It shall be deemed that there is an implied ratification when a person entitled to avail himself of any ground for the annulment of the contract should, with knowledge of its existence and after it has ceased, do anything which necessarily implies an intention to waive such right.' Finally comes article 1313 which provides: 'Ratification purges the contract of all defects to which it may have been subject as from the moment it was entered into'. It results, therefore, that after a contract is validly ratified, no action to annul the same can be maintained based upon defects relating to its original validity. (Gutierrez Hermanos vs. Orense [1914], 28 Phil. 571; Vales vs. Villa [1916], 35 Phil. 769.)' [Ten Ah Chan and Kwong Kam Koon vs, Gonzales, No. 28595, October 11, 1928.)
Article 1313 of the Old Civil Code cited by the Supreme Court in the Fable v. Yulo case quoted above corresponds to Article 1396 of the New Civil Code, which reads:
Art. 1396. Ratification cleanses the contract from all its defects from the moment it was constituted (Art. 1313).
When FFF, et als. did file on November 9, 1962 a petition with the trial court, they also did not question the authority of the Central or the Planters to provide, in the ASCA, the manner in which their share from June 22, 1952 to October 31, 1955 would be held and distributed. In fact, they expressly admitted that the planters gave them their corresponding participation. We quote paragraph 10 of their petition:
That pursuant to Sec. 9 of said Act, respondents PLANTERS gave petitioners LABORERS the latters' lawful participation in the sugar production as well as in the by-products and derivatives thereof and continued to give the same until November 1, 1955 when they ceased to do so until the present; ... (Annex "A", Vicmico's Petition).
Moreover, the laborers received the benefits of the ASCA when their share was distributed to them (Exh. 23-Vicmico; see also Eleventh Assignment of Error, infra.) Their receipt of such benefits amounted to a ratification of the authority of the planters to represent them in the ASCA. (Zamboanga Transportation Co. v. Bachrach Motor Co., 52 Phil 244; Ibanez u. Rodriguez, 47 Phil. 554; Tacalinar v. Corro, 34 Phil. 889; Emphasis supplied)
XI
Eleventh Assignment of Error
THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE LABORERS DID NOT RECEIVE THE AMOUNT OF P6,399,105.00 AND IN HOLDING, ON THE BASIS OF TORT, PETITIONER VICMICO, JOINTLY AND SEVERALLY LIABLE WITH THE PLANTERS THEREFOR, EXHIBIT 23-VICMICO CLEARLY SHOWING ON ITS FACE THAT THE LABORERS ACTUALLY RECEIVED A TOTAL OF P6,536,741.98 AND THE COURT OF APPEALS HAVING FOUND THAT ALL AMOUNTS PERTAINING TO THE LABORERS HAD BEEN RECEIVED BY THE PLANTERS. THE FOREGOING DEMONSTRATING, AMONG OTHERS, THAT PETITIONER VICMICO CANNOT BE ACCUSED OF ANY TORTIOUS ACT.
The conclusion of the Court of Appeals to the effect that the laborers received only Pl,186,083.34 and not the whole amount of P6,399,105.00 has no basis in fact, the evidence as testified to by a representative of the Labor Department being to the contrary.
Notwithstanding the express admission in the petition of FFF, et als., to the effect that the 'Planters gave petitioners (FFF, et als.) the latter's lawful participation in the sugar production and derivatives thereof and continued to give the same until November 1, 1955, when they ceased to do so until the present' (Par. 10, Petition of FFF, et als., filed with the trial court, Vide Annex "A" to Vicmico's Petition for Certiorari), which fact, having been admitted, requires no proof and cannot be contradicted (Rule 129, Sec. 2, Rules of Court; Sta. Ana v. Maliwat, 24 SCRA 1018), the Court of Appeals made the following unfounded statements:
... if it is further considered, as shown in our resolution of the third issue, that this amount of P4,000,000.00, along with its accruals was never received by the plantation laborers to this day, the unwisdom of the investment, let alone, its illegality, is hardly in doubt.' (p. 52, Decision, Annex "Q" to Vicmico's Petition for Certiorari).
xxx xxx xxx
... and the fact that the laborers' P4,000,000.00 worth of shares and their earnings have, without any explanation from anyone from the Central, from the Planters, or from the Special Committee vanished into limbo without the laborers being able to actually receive any cent of the same.' (Idem., p. 53).
xxx xxx xxx
In effect, what has been established by the evidence is that the P4,000,000.00, together with its earnings in dividends in the total amount of P3,385,950.00 (p. 6, tsn.. June 16, 1970), has not been distributed to or received by plaintiffs- appellants-laborers. (Idem., p. 62).
xxx xxx xxx
The evidence shows that, except for a small part (P180,679.38) of the sum of P5,185,083.34, the entire P1,186,083.34 was actually paid to the laborers ...' (Idem, p. 55; Annex "Q" to Vicmico's Petition for certiorari
xxx xxx xxx
Not a shred of evidence, however, has been introduced into the record to show that the proceeds of the sales of the 40,000 shares of stock and the increments in cash and stock dividends have been actually delivered to or received by appellants-laborers. ... ' (Annex "Q"to Vicmico's Petition for Certiorari, p. 60).
None of the foregoing statements finds any basis in fact and the Court of Appeals' unwarranted conclusions constitute a grave abuse of discretion tantamount to an excess of jurisdiction. (Duran v. Court of Appeals, L-39758, May 7, 1976). Mr. Felipe de Guia testified lengthily on the point, but the Court of Appeals apparently was oblivious of his testimony which established distributions of over P 6,000,000.00 in favor of the laborers. We quote the testimony of Mr. de Guia:
Q. Mr. Guia, what steps, if you know the Department of Labor has taken . . . I withdraw the question.
Q. As Chief of the Agricultural Wages Section under the Department of Labor, do you know what steps your section of the Department of Labor has taken to implement Section 9 of RA 809, otherwise, known as Sugar Act of 1952, with the Victorias Milling District, Negros Occidental?
A. Yes, sir, we have distributed also the supposed share of the laborers amounting to P6,717,360.00. (emphasis supplied).
COURT:
Q. When was that distribution made?
A. It was made in the year 1995. Proceed.
ATTY. SABIO:
Q. This distribution covered the period from June 22, 1952 to what period?
A. To October 31, 1955.
Q. Will you kindly tell the Court the basis of the distribution of the amount distributed?
A. As I understand, this amount was the participation due to the laborers working in that milling district, from June 22, 1952 up to October 31, 1955 (Emphasis supplied).
COURT:
Q. June 22 of what year?
A. June 22, 1952 to October 3l, 1955. Proceed.
ATTY. SABIO:
Q. Under what law that is due to them?
A. RA 809, otherwise known as Sugar Act of l952.
Q. By the way, Mr. Guia, what Section or Division of the Department of Labor is embodied the implementation of RA 809?
A. The Agricultural Wage Section of which I am the Chief.
ATTY. HAGAD:
CROSS EXAMINATION:
Q. How was this amount of P9,612,421.36 distributed?
A. The original amount which is supposed to be distributed is P5,186,083.36; but on account of converting the 4,000 shares of the laborers' share of stock, it was distributed continuously year to year. The dividends amounted to more than Pl,000,000.00 which is added to this amount. It was based practically on the 10% increase participation due to the planters of the Victorias Milling District, wherein 60% represent this said amount; otherwise, 60% of the 10% increase participation represented the said amount which was distributed among the laborers of the Victorias Milling District.
Q So, P 5,186,183.36 was 60% of 10% was the increase participation of the planters within the Victorias Milling District, for the period from June 22, 1952 to October 31, 1955; is that right?
A. Yes, sir. (pp. 17-21, December 15, 1967, Lorenzo C. Caraig; emphasis supplied)
xxx xxx xxx
ATTY. SABIO:
Q Do you have in your possession the record on how this amount of Pl,186,083.34 marked as Exhibits 'XXX' thru XXX-6
A Yes, sir.
Q. Would you be able to bring that next time?
A. I think so.
Q. Would you be able or do you have in your possession a record showing how this amount of P4,000,000.00 marked as Exhibit XXX-10 was disposed of?
A. Not with the P4,000,000.00 because the distribution of this amount was made in five releases as per what is stated in the statement as presented here.
Q. At any rate, my question is: Do you have in your possession the record of the distribution of the P4,000,000.00?
A. Yes, sir. (pp. 143-144, June 16, 1970, L. Caraig; Emphasis supplied).
COURT:
What is the purpose now of Atty. Sabio in presenting those records?
ATTY. SABIO:
We will show that not only a portion of the amount of P5,186,083.34, including of course the earnings, was distributed that properly belong to the laborers.
COURT:
Why not find out from Mr. de Guia the record about the distribution how much was distributed?
WITNESS:
Atty. Sabio, I just want to clarify your statement the distribution I personally handled, I want that to be corrected. If you will allow me, sir, If Mr. Bascug can recall that in our distribution from the first to the fourth I think each and everyone of them even their members could really testify to the effect that the distribution was orderly undertaken just want to put that on record. There should be no insinuations, with due tolerance, being the supervisor of the distribution.
ATTY. SABIO:
We do not make any insinuation. We only want the record. In the interest of all concerned and in the interest of justice, if the records will be brought here we hope that the records are not irregular and we believe if they are regular no responsibility would be incurred by any official of the Department of Labor.
WITNESS:
Which are you referring to, Atty. Sabio?
ATTY. SABIO:
Any official of the Department of Labor.
WITNESS:
What charge of irregularity.
ATTY. SABIO:
The distribution of P5.186,083.34.
WITNESS:
In order to facilitate all those records in bringing here, can I request Atty. Sabio any personnel that can accompany me. Because the records are so voluminous. For one distribution of one planter there are no less than 28 pages and there are five distributions. So I am requesting Atty. Sabio to give me an assistant to come as well as bring the records and I am willing to bring all those records because I have nothing to hide, It is also shown that there are those laborers who were not able to receive and it is stated in the undistributed amount.( t.s.n., pp. 151-154, June 16, 1970, V. Salvarino, italics supplied).
On cross examination, this witness further testified thus:
ATTY. HAGAD:
Q My question Mr. be Guia is this, the figures referred to in Exh. 23 Victorias Milling Co., Inc. came from the records of your office, is that correct ?
A. Yes sir.
Q. Exh. 23 mentioned first, second and up to the fifth distribution. What do you mean by this?
A. There are distributions undertaken in the Victorias Milling Co., Inc. The first distribution as stated here is in accordance with the number that is corresponding to the amount distributed or release for distribution among the laborers of the Victorias Milling Co., Inc.
Q. By first distribution you are referring to the Amicable Settlement-Compromise Agreement the amount of P 1,166,083.36 and this correspond to the same amount indicated in the Amicable Settlement-Compromise Agreement you also Identified; is that correct?
A. I do not know exactly if this figure stated there is correct but I have to check whether it tallies with it.
Q. Which figure is reflected in Exh. XXX and Exh. XXX-9?
A. There is a difference of 2 centavos.
Q These other distributions that you made, were those also done under your supervision beginning from the second up to the fifth distribution'?
A. (Correction, please). I was not the one who made the distribution; I was only concerned on the first distribution which was supervised.
Q. As first of the team of supervisors, you supervised the actual delivery of the money to laborers; is that correct?
A. Yes, sir. (t.s.n., pp. 20-22, June 18, 1970; Lorenzo Caraig).
The above testimony of Mr. de Guia clearly demonstrates that the laborers received their entire share corresponding to the period from June 22, 1952 to October 31, 1955 when there was as yet no written milling contract between the Central and the Planters.
Exh. 23-Vicmico which summarizes the amounts received by the laborers totalling P6,536,741.,98 (except for the sum of P180,679.38) having been relied upon in part by the Court of Appeals when it required payment of P180,679.38 to the laborers, the whole contents thereof deserve full credit, namely, that the laborers received the total amount of P6,536,741.98. (emphasis supplied)
The Court of Appeals, quoting the testimony of Mr. Felipe de Guia, stated in part:
The evidence shows that, except for a small part (P 180,679.38) of the sum of P 5,185,083.34, the entire P 1,186,083.34 was actually paid to the laborers. Thus, testified witness Felipe de Guia, representative of the Department of Labor in charge of the distribution:
COURT:
Q. Mr. de Guia, you said that there were some amounts that were not distributed because some laborers cannot be located; is this the amount mentioned in this 'Exhibit 23', under the words 'amount of undistributed or wind-fall?
A. Yes, sir, P180,679.38. (t.s.n., p. 28, June 18, 1970; Annex 'Q' to Vicmicos Petition for Certiorari, p. 55).
Apparently giving full credit to the foregoing testimony of Mr. de Guia, the Court of Appeals, in the dispositive part of the decision, ordered the Central and the Planters, jointly and severally, to pay the laborers '(1) the sum of P180,679.38, not distributed to appellants, with interests thereon at 6% per annum commencing from February 19, 1957, until fully paid'. (Decision, pp. 68-69; Annex 'Q' to Vicmicos Petition for Certiorari). But Exh. '23' which was the basis of Mr. de Guia's testimony to the effect that there was an undistributed amount of P 180,679.38 (t. t.s.n., p. 28, June 18, 1970) clearly shows that P6,536,741.98 was distributed in favor of the laborers, with only P 18O,679.38 remaining undistributed. Exh. '23' reads:
Republic of the Philippines
Department of Labor
BUREAU OF LABOR STANDARDS
M a n i l a
Statement of Windfall Distributions of the
Victorias Milling Districts
Victorias, Negros Occidental
As of June 30, 1967
AMOUNT RELEASED FOR DISTRIBUTION:
1st Distribution .........................P1,186.083.36
2nd Distribution ..........................1,841,338.00
3rd Distribution ..........................1,390,000.00
4th Distribution ..........................1,100,000.00
5th Distribution ...........................1,200,000.00 P6,717,421.36
AMOUNT PAID BY DISTRIBUTOR:
1st Distribution ............................P1,162,040.79
2nd Distribution .............................1,815,326.40
3rd Distribution ..............................1,357,067.88
4th Distribution ...............................1,059,895.05
5th Distribution ...............................1,142,411.86 P6,536,741.98
AMOUNT OF UNDISTRIBUTED WINDFALLS BY DISTRIBUTION:
1st Distribution .................................P 24,042.57
2nd Distribution ...................................26,011.60
3rd Distribution ...................................32,932.12
4th Distribution ....................................40,104.9,5
5th Distribution .....................................57,588.14 P 180,679.38
LABORERS PAID BY DISTRIBUTION:
1st Distribution .....................................96,229
2nd Distribution.................................... 97,170
3rd Distribution .....................................95,411
4th Distribution .....................................93,747
5th Distribution .....................................92,254 474,811
Respectfully submitted:
(Sgd.) ROM J. MALACON
Explaining the distribution appearing in Exhibit '23', Mr. de Guia testified:
Q. As first of the team of supervisors, you supervised the actual delivery of the money to the laborers: is that correct ?
A. Yes, sir.
Q. In other words, you went to the haciendas and gathered all the laborers and gave the corresponding amount to the laborers; is that correct ?
A. Yes, sir.
Q. And before that distribution, your supervisor inquired if all those payrolls are prepared by the respective planters concerned; is it not?
A. Yes, sir.
Q. And your obligation is to check the payrolls regarding the names of the laborers and the amount indicated in the payrolls; is that correct ?
A. Not necessarily check the individual names appearing on the payrolls but also verify whether the amount released to be distributed tally with the amount appearing on the payrolls.
Q What about the actual payment of the amount to the laborers, were you present there?
A. Yes, sir.
Q. So that, in all those distributions reflected in this Exhibit '23' - Victorias Milling Company' Inc. either you or the member of your team or any representative of the laborer see to it that the money is delivered to the laborers concerned; is that correct'?
A. Yes, sir, that is the duty of the supervisor to see to it that the corresponding amount is actually received by the laborers.
Q. And you keep that record in the course of the distributions; is that correct?
A. Yes, sir.
Q. If I correctly get, there would be about 20,000 payrolls of the planters in the haciendas; is that correct'?
A. I can say that there are some planters who have 15 to 50 sheets of payrolls of the haciendas: so you can just imagine the number of payrolls of the haciendas.
(T.s.n., pp. 22-25, June is, 19-10).
Since the Court of Appeals relied upon the foregoing Exhibit '23' in its finding that the sum of P180,679.38 had not been distributed, that exhibit should not have been segregated in parts with the Court having chosen that portion which afforded advantage to the laborers and disregard the other parts which were to the advantage of the Central and the planters. (cf. inter alia, Orient Insurance Co. vs. Revilla, 54 Phil. 919. where it was held that when a party introduces in evidence part of the privileged document, he cannot remove the seal of confidentiality as makes for his advantage and insist that is previleged as to so much as makes for the advantage of his adversary). The whole contents of Exh. '23' should therefore be given full weight and credit, namely that P6,536,741.98 had been actually distributed in favor of the laborers. (VICTORIA'S Brief, pp. 286-336, G.R. No.
L-41222).
L-41222).
- D -
True it is, as already stated earlier, that in petitions for review of decisions of the Court of Appeals, well and long settled it is that We are as a rule bound by its findings or conclusions of fact. In the instant cases, however, after carefully considering its ratiocination and bases in finding that the share of the laborers in the proceeds of the 1952-53 to 1954-55 crop years, and after mature study of and searching deliberation on the arguments and authorities very comprehensively advanced and cited in the briefs of the PLANTERS and VICTORIAS in the portions thereof extensively quoted above, We find Ourselves sufficiently convinced that the clear and unequivocal admission of such payment in the FEDERATION'S original and amended petitions in the trial court, if it cannot be deemed strictly binding upon it, is a significant persuasive factor We have to count with in deciding the particular issue of fact now under discussion. In our opinion, there is hardly anything in the FEDERATION'S main and reply briefs cogent enough to convince Us contrariwise.
We wish to make it clear that in connection with said issue, We have not overlooked the laudable principles and guidelines that inform both Republic Act 1257, the charter of the agrarian courts, and Presidential Decree 946, both of which prod the courts to be as liberal as possible in disposing of labor cases and to be ever mindful of the constitutional precept on the promotion of social justice, (Sec. 6, Art. II, Philippine Constitution of 1973) and of the rather emphatic injunction in the constitution that "the State shall afford protection to labor. " 3 But We have are of the considered opinion that the secondary force to which the ordinary rules of procedure and evidence have been relegated by the aforementioned agrarian court laws do not oblige Us to be unjust and unfair to employers. After all, in the eyes of all fair-minded men, injustice to the more affluent and fortunate sectors of society cannot be less condemnable and reprehensible, and should be avoided as much as injustice to labor and the poor. It is divinely compassionate no doubt to afford more in law those who have less in life, but clear injustice to anyone amounts definitely to injustice to everyone, and all hopes for judicial redress for wrongdoings would vanish, if the even hand of law, justice and equity were to be made to favor anyone or any group or level of society, whoever they maybe. It is verily not an exaggeration to assert that in a sense, courts that uphold and afford real justice can hold back and even repel the forces of malcontent and subversion more effectively and without loss of lives and blood and without destruction or devastation than the best equipped regiments of soldiers of the army. Justice, in its real and deepest essence, more than statute law must always prevail, and the courts are inexorably expected to do justice to every men at all times. This Supreme Court yields to no one in that respect. That is its sacred duty and its sworn pledge that will remain unbroken ruat caelum
- E -
Thus, while We are in agreement with the Court of Appeals in its construction and application of Sections 1 and 9 of Republic Act 809 as discussed above, We cannot agree with its conclusions regarding the pretended liability of the PLANTERS and VICTORIAS for the amount that the FEDERATION claims the laborers of the PLANTERS have not been paid as their share of the proceeds of the crop years 1952-53 to 1954-55. In resolving in the manner We have quoted, the second issue formulated by it relative to the appeal to it of the FEDERATION, it holds the appellees, the PLANTERS, including petitioners herein Primo Santos and Benjamin Tirol, and VICTORIAS "jointly and severally liable for tort in disposing, upon their own accord, and without any authority of the plantation laborers, of the money of the said laborers in the total amount of P5,186,083.34 and thus causing the loss of shares of stock and their earnings purchased out of P4,000,000.00 of such amount." Indeed, in the course of resolving the second issue and in disposing of the third issue, the Appellate Court found the PLANTERS and VICTORIAS guilty of misappropriation and conversion of the P5,186,083.34 plus the accrual thereof, corresponding to P4 M worth of VICTORIAS shares of stock which under the ASCA was stipulated to be received by the PLANTERS in trust for the laborers.
Again, this aspect of these instant cases before Us involve questions both of fact and of law.
- F -
At this juncture, and referring first to the issues of fact, let it be clear that We find from the record as found by the Court of Appeals, of the cash portion of P5,185,083.34 corresponding to the laborers pursuant to the ASCA, namely, P1,185,083.34, what actually the laborers received under the supervision of the representative of the Secretary (now Ministry) of Labor, was short only by P180,679.38 per the testimony of Mr. Felipe de Guia, the representative of the Department of Labor:
The evidence shows that, except for a small part (P180,679.38) of the sum of P5,185,083.34, the entire P1,186,083.34 was actually paid to the laborers. Thus, testified witness Felipe de Guia, representative of the Department of Labor in charge of the distribution:
COURT:
Q. Mr. de Guia, you said that there were some amounts that were not distributed because some laborers cannot be located; is this the amount mentioned in this Exh. '23', under the words 'amount of undistributed or windfall"?
A. Yes, sir, P180,679.38 (tsn. p. 28, June 18, 1970)
Appellants themselves, in their brief, have made the following observations:
So, it can be assumed without fear of contradiction that the last portion of the said amount of P1,186,083.34 was delivered, if ever, to PLANTERS-APPELLANTS-LABORERS after February 18, 1957. (Appellants' Brief, p. 326) (VICTORIAS' Brief, pp. 65-66, Appendix 'A', G. R. No. L41222.)
There is no explanation anywhere in the records as to what happened subsequently to the shortage of P180,679.38, and We, therefore, agree with the Court of Appeals that judgment should be rendered for the payment thereof, there being no dispute that the said amount has not been received by the laborers.
-G-
We find it difficult, however, to subscribe to the finding of the Court of Appeals that the greater portion of the P5,185,083.34 in cash and in shares of stock of VICTORIAS was not received by the laborers and was instead malversed and misappropriated by the PLANTERS and VICTORIAS.
To start with, We have to state again that the petition that initiated the instant cases before Us was filed only under date of November 9, 1962 with the Court of Agrarian Relations in Bacolod City, that is to say, more than six years after the execution of the ASCA on March 5, 1956 and the subsequent payment and transfer of shares pursuant thereto had been factually accomplished. The inaction of the laborers for such a long space of time cannot but cast shadows of doubt as to the truthfulness of their claim, considering particularly the hugeness of the amount involved, which anyone aggrieved would lose no time to move to recover, specially if one takes into account the value of the Philippine peso during said period.
Second, and indeed rather importantly, the said initial petition made no reference whatsoever to the now pretended non-payment, but, on the contrary, as well shown and argued by the PLANTERS and VICTORIAS in the portions of their respective briefs We have quoted above, such payment was not only admitted in said petition as well as in the amended one filed in March, 1964, both of which referred exclusively to the laborers' share in the 1955-56 to 1973-74 crop years but even in the prayer portions thereof. What is more, as will be presently discussed, the payment in question appears proven by the evidence both oral and documentary submitted to the trial court.
Of course, We must say again, as a general rule, in petitions for review of decisions of the Court of Appeals, this Supreme Court is bound by the findings of fact of that Court and that We are limited only to any inquiry as to whether or not its decision predicated on its factual conclusions is in accordance with law. In these cases at bar, however, the factual matter of whether or not the laborers had already been paid their share corresponding to the 1952-53 to 1954-55 crop years is being laid before Us inextricably intertwined with a question of law arising from the indisputable fact that in the initial pleadings below what is manifest is not only that there is an express admission in paragraph 10 of the petition of the laborers "that pursuant to Section 9 of said Act (R.A. 809), respondent planters gave petitioners-laborers the latter's lawful participation in the sugar production as well as in the by-products and derivatives thereof and continued to give the same until November 1, 1955 when they ceased to do so until the present" but even in the prayer thereof, the FEDERATION confined the remedy it asked for to the payment of the laborers' share in the proceeds of the crop years after 1954-55 and up to 1973-74. We cannot conceive of a more emphatic and unequivocal words to convey the admission of the payment here in question.
We are now asked to rule on the legal effect of such admission in the light of the other circumstances extent in the record.
In that connection, there appears no alternative for Us than to rule that as contended by the PLANTERS and VICTORIAS, under the law, even if liberally applied, such admission should be considered as having some persuasive force, unless it was made through palpable mistake or misapprehension of the relevant circumstances. And what makes such admission more credible is the fact that not one single laborer was presented at the trial to deny that he had received his due share.
The Court of Appeals has attempted to extricate the laborers from their lamentable predicament by accepting the explanation of counsel for the FEDERATION that what the above-quoted paragraph actually was intended to mean was that VICTORIAS had only reserved the corresponding amount in the liquidation of the share of the planters in the proceeds during that period. Quite misleadingly, to be sure, the FEDERATION argues in its brief that they could not have made such a factual admission since at the time their petition was prepared and filed, the money was still with the central. How false such a pretension is can be readily perceived by merely recalling that the FEDERATION filed its initial petition below in November of 1962, whereas the record shows indisputably that the payments and transfer of shares had already been made more than five years before. And as regards the rather naive acceptance by the Court of Appeals of the explanation of the FEDERATION, We hold that it was legally improper to do so, it appearing that such explanation was made, according to the brief of the PLANTERS, very much belatedly, only in the FEDERATION'S reply brief in that court at page 1446 thereof, without any hint as to why it was not made earlier in the trial court, where it appears that FEDERATION had even filed an amended petition in 1964. Besides, there was no allegation of mistake; all that was done was to unconvincingly attribute a different subjective meaning to a word that is clear and unmistakable in itself, by explaining that what the pleader wished to convey by the word "given" was that the corresponding amount due that laborers had already been placed in reserve by the central.
The Court of Appeals further tried to sustain the Federation by citing Section 5 of Rule 10 of the Rules of Court authorizing the courts to decide cases on the basis of evidence on matters not alleged in the pleadings. In the first place, the cited rule applies only when the evidence on which the court would rely is presented without objection of the adverse party, since they would then correspond to issues "tried by express and implied consent of the parties." Here, however, the record shows that the PLANTERS and VICTORIAS vehemently objected to any evidence touching on the 1952-53 to 1954-55 crop years, precisely because of the explicit admissions contained in the plaintiff FEDERATION'S petition. This is not, however, to ignore that nevertheless, the record shows that somehow both parties did present evidence touching on such payment. But judging from what such evidence consisted of, as reproduced in all the briefs before Us, We are fully satisfied that the findings and conclusions of fact of the Court of Appeals on the point at issue do not square with such evidence. To cite just one example, the testimony of the principal witness of the Federation, Atty. de Guia is more indicative of the complete and full payment in question than otherwise. For another instance, the ruling of the Court of Appeals that Exhibit 23 VICMICO is inadmissible because it is merely secondary evidence is, in Our view, erroneous, considering not only that the trial court was informed by Mr. de Guia himself that the original documents are so voluminous as to make it impracticable to take them to the court, but also that it was precisely on the basis of said exhibit that that court made the finding of a shortage of P180,679.38 in the cash payment, not to mention the obvious fact that the same witness actually made continuous reference to said exhibit while he was explaining the distribution of the full amount due the laborers. The contention of the Federation that said exhibit is a worthless piece of paper is an exaggeration that cannot hold water. In fact, no one pretends it is a mere fabrication, being part of the records of the Department of Labor. Of course, it is possible, as Mr. de Guia claimed, that he did not know of the actual issuance, sale and proceeds of sale of the 40,000 shares of stock, but the fact remains that it was he himself who referred to said documents with notable degree of certainty, at the start, and it was only later in his testimony that he disclaimed personal knowledge of the truth of its contents.
Thirdly, insofar as the joining of issues in regard to the point under discussion, by the PLANTERS and VICTORIAS, on the one hand, with the FEDERATION, on the other, in their briefs filed with the Court of Appeals, it is understandable that the PLANTERS and VICTORIAS had no alternative than to do so as a matter of defense, even as they maintained all the time it was not a proper issue and was beyond the jurisdiction of the Court of Appeals to consider. Moreover, it is quite obvious that the cited provision is by its very nature and context applicable only in trial courts and not in the Appellate Courts. 4 What is more, it bears repeating, there was actually no allegation of mistake here; all that was done by the FEDERATION was to unconvincingly attribute to the word "give" another meaning convenient and suitable to its purposes, casting aside the obvious fact that said word is clear and unmistakable in itself. Moreover, it appears that said purported explanation was made only in its reply brief, by way of argument unsupported by any scintilla of relevant evidence presented in the court below.
Perhaps, We may emphasize again that We are not unaware that We are dealing with a review of a decision of the Court of Appeals in an appeal from a case which originated in the Court of Agrarian Relations in Bacolod City and that, therefore, We are not supposed to adhere strictly to the tenets regarding evidence of the Rules of Court, but must be guided as liberally as possible in favor of the laborers in searching for the true facts upon which their claim is based, having in view Republic Act 1257 and Presidential Decree 946 and more imperatively, the constitutional provisions on social justice and protection to labor. But, as can be seen, it is indeed in the light of these principles that We have scrutinized the reasoning and argumentation of the Appellate Court. We reiterate, at this point, that observing the Rules of Court only secondarily per mandate of Republic Act 1267 and Presidential Decree No. 946 does not, in Our considered opinion, preclude the Courts of Agrarian Relations and the Appellate Courts, from applying long established principles in judicial fact finding that are founded on reason and the common sense and experience of mankind. Admissions, specially if express, have always been universally considered by all authorized triers of facts as evidence of the highest order. To obviate their effect as such, there must be potent and cogent considerations that are as equally convincing to the mind as the compulsive persuasiveness of a man's statement or declaration against his own interest. In the cases at bar, We are satisfied, We regret to say, that the FEDERATION has failed to provide Us with anything but pleas for emotional sympathy to enable this Court to pay little heed to or much less ignore the persuasive force of its written formal admission that their members have already been given and "continue to be given" their due legal share of the proceeds of 1952-53 to 1954-55 crop years in question except for the amount of P 180,679.38. lt is Our conclusion from such admission and the evidence supporting the same, and more particularly from the absence of contrary evidence duly presented by the FEDERATION at the trial, that the truth is what said admission expressly declares.
- H -
With the matter of the cash payment thus resolved, We may now turn Our eyes to the Four Million (P4M) Pesos worth of shares of stock of VICTORIAS which, under the terms of the ASCA, were stipulated to be issued to the PLANTERS or their authorized Special Committee or Board of Trustees in trust for the benefit of the laborers. In regard to this matter, there are, as We view the situation, two controversial issues to be settled, namely, first, whether or not, it was proper for the PLANTERS and VICTORIAS to provide for such manner of payment to the laborers instead of in cash, and, second, disregarding the matter of such alleged impropriety, whether or not said shares or the proceeds thereof were received by the laborers.
For obvious reasons, We have to deal with the second issue ahead of the other. And in this respect, suffice it to say that the question of whether or not the proceeds of the VICTORIAS shares of stock corresponding to them under the ASCA had been actually received by them from their respective planters has already been resolved by Us above not only as necessarily included in the binding force of the admission of the FEDERATION in its original petition and amended petitions below but as proven by overwhelming evidence overlooked apparently by the Court of Appeals. To be clearer, contrary to the finding of the Court of Appeals, We hereby hold that the proceeds of all the P 4M worth of VICTORIAS shares corresponding to the laborers under the ASCA were not only received in the form of shares by the PLANTERS from VICTORIAS but that the proceeds of the sale thereof by the Board of Trustees, together with their accruals, were actually received by the laborers from their respective planters-employers. We reiterate that not a single laborers had testified to the contrary. Additionally, Chairman Newton Jison testified positively to such effect.
With the foregoing conclusion, it is hardly of any consequence for Us to discuss what the Court of Appeals, breathing, as it were, with evident indignation and a stirring sense of reprobation, condemned to be an unauthorized and improper act of the PLANTERS and VICTORIAS of planning, so to speak, and agreeing just between the two of them how the share of the laborers of 6% of the proceeds from 1952 to 1955 should be paid. Inferentially, if not directly, the Appellate Court found that the payment partly in cash and partly in shares of stock could have been done and should have been done only upon consultation with and with the consent or assent of the laborers either thru the FEDERATION or any of their authorized representative. We can admit that indeed that would have been most Ideal to do. Actually, however, what happened was not exactly that way. Just the same, We shall proceed to show that the laborers were never at the short end of the bargain. The pertinent portions of the ASCA read as follows:
(a) The Party of the Second Part shall set aside Sixty Per Cent (60%) of the said sum of P8,643,472.24 as received by them to be held in trust for the benefit of their laborers that may be entitled thereto because some of them have already died and their heirs are unknown while a great number of them are hard to locate and Identify, the Party of the Second Part, shall dispose of the said Sixty Per Cent (60%) of the sum of P8,643,472.24 as received by them, as follows:
(1) The Party of the Second Part shall invest P4,000,000.00 of the P5,186,083.34, which is Sixty Per Cent (60%) of the said sum of P8,643,472.24, in 40,000 voting and transferable shares of capital stock of the COMPANY of the par value of P100.00 per share which shall be issued in four (4) blocks of 10,000 shares per block by the COMPANY to the Party of the Second Part upon effectivity, of this agreement as provided in Clause (2) hereof, it being understood that the issuance of such shares does not involve an increase in the present authorized capitalization of the COMPANY.
The above-mentioned 40,000 shares of the capital stock of the COMPANY will enable the laborers/planters to become part owners of the COMPANY but if within the period of eighteen (18) months, but not earlier than six (6) months, from and after date of delivery of the said 40,000 shares by the COMPANY to the Party of the Second Part, the Party of the Second Part should desire to have the value of the said 40,000 shares to wit, P4,000,000.00 or such portions thereof in blocks of 10,000 shares at Pl,000.00 per block, paid in cash, the COMPANY will pay in cash to the Party of the Second Party or its successors the said value of the said 40,000 shares or of such blocks of 10,000 shares per block, as the Party of the Second Part may decide to have converted into cash, as to such blocks of 10,000 shares per block, that the Party of the Second Part may decide within the period above stipulated to retain, such shares may be retained by the PLANTERS for their own account upon their payment to the Party of the Second Part or its successors of the value thereof of P1,000,000.00 per block. The COMPANY shall have a period of Thirty (30) days after receipt of written request of the Party of the Second Part within which to make such cash payment of the value of the shares.
The balance of P1,186,083.34 shall be distributed under the supervision of the Secretary of Labor among the present laborers of the Party of the Second Part who were already laborers of the PLANTERS during the period comprised between June 22, 1952 (the date of the passage of Republic Act 809) and October 31, 1955 (the end of the COMPANY's fiscal year);
(ii) As to the sum of P3,457,388.90, which is the Forty Per Cent (40%) of the P8,643,472.24, the Party of the Second Part shall distribute this amount among the PLANTERS in proportion to the sugar milled for them by the COMPANY during the aforementioned period of June 22, 1952, to October 31, 1955.'
(b) As to the manner of delivery of the cash involved in the foregoing transaction amounting to P4,643,472.24, a 'General Collective Sugar Milling Contract' has heretofore been prepared for the signature of the PLANTERS affiliated with the COMPANY signing the said 'General Collective, Sugar Milling Contract, the Company shall pay and deliver to the Party of the Second Part at least fifty per cent (50%) of the said cash balance of P4,643,472.24 or that portion thereof corresponding to the said majority of the PLANTERS affiliated with the COMPANY who have already signed the said 'General Collective Sugar Milling Contract', and the remaining fifty per cent (50%) or remainder thereof will be paid, one half upon the execution of their new individual sugar milling contracts, and the other half upon the registration thereof in the Office of the Register of Deeds for the Province of Negros Occidental;
(c) It is understood, as part of this settlement agreement, that the block of the COMPANY's common shares mentioned in subparagraph (i) and all its earnings shall constitute a trust fund to be dedicated to the amelioration of the plantation laborers of the PLANTERS in the Victorias-Manapla-Cadiz milling district. Said trust fund shall be administered by the Party of the Second Part for the benefit of the PLANTERS' laborers under the supervision of the Secretary of Labor and in accordance with the trust laws of the Philippines. Should the trust fund be liquidated by order of the Court of Justice or in the manner provided for in paragraph (1) (a) (i) then the PLANTERS shall have the first option from the trustees, and the COMPANY the second option from the trustees and/or from the planters themselves, to buy said Victorias Milling Co., Inc., shares in blocks of 10,000 shares at their value of P1,000,000.00 per block. And in case both the Party of the First Part and Party of the Second Part refuse to exercise their right, then said block of VMC shares may be sold in the open market.'
(2) This agreement will become effective if and when the majority of the planters affiliated with the Party of the First Part have signed the said 'General Collective Sugar Milling Contract'.
Executed at Victorias, Negros Ocidental this 5th day of March, 1957. (VICTORIAS' Brief, pp. 26-30, Appendix A, G.R. No. L-41222.)
Thus, it is unmistakably clear that as far as VICTORIAS was concerned, it agreed to give to the PLANTERS the 10% it has precisely reserved for that purpose in order to comply with the mandate of the law in the event its challenge against its constitutionality should fail. And as it happened, it opted soon enough not to continue pressing that challenge by extrajudicially entering into a settlement with the PLANTERS. And as regards the actual implementation of the portion of the agreement regarding the share of the laborers, apart from the admission of the FEDERATION, oft repeated earlier; relative to the actual receipt by its members of their legal share of 1952 to 1955 crop years, We might relevantly point out that Chairman Jison testified without contradiction thus:
Q. Would you like to tell this Honorable Court what happened to the money, whether in cash, check or in terms of shares of stock which was delivered by the Victorias Milling Co., Inc. to the Board of Trustees?
A. The stock of shares of the Victorias Milling Co.,Inc. which was delivered to the Board of Trustees was sold and liquidated according to the Amicable Settlement-Compromise Agreement and in such case, checks were issued to the respondents planters and also to be delivered to the respective laborers under the supervision of the Department of Labor. So far the record is concerned, the Department of Labor has all the records. (pp. 37-38, tsn., June 17, 1970). (VICTORIAS' Brief, Appendix A, p. 71, G.R. No. L-41222.)
These, in addition to the testimony to the same effect of Mr. de Guia of the Department (now Ministry) of Labor lengthily quoted above as parts of the portions of the briefs of the PLANTERS and VICTORIAS. We say, to the same effect, because it is Our definite impression that read as a whole, and evaluated together with Exhibit 23-VICMICO, that testimony, albeit rather vague, confusing and at some places evasive, proved sufficiently that what were due the laborers in cash and in shares of stock (or the proceeds of the sale thereof) had been fully settled under the supervision of Mr. de Guia and his men not later than 1956 or 1957 in five phases of distribution. True it is that Exhibit 23-VICMICO was declared inadmissible as secondary evidence by the Court of Appeals, but what is even more legally accurate is that such ruling is erroneous, if only because said exhibit was precisely used by Mr. de Guia as basis for his testimony, and he explained that the pertinent records supporting the same were so voluminous that it would be impractical to take them to the court.
Incidentally, We are persuaded it cannot be said that the FEDERATION or the laborers did not agree to the modality of payment provided for in the ASCA. If at all they muttered against it, it was only belatedly during the trial, that is, after they had already received the cash portion therein provided.
Indeed, We cannot share the view implicit in the decision of the Court of Appeals that the principal witness regarding the same, Mr. Felipe de Guia, the representative of the Secretary of Labor, under whose supervision, Section 9 of the Act requires the payments to the laborers to be made, was not duly aware of the medium provided in said ASCA that P4 M of the share due the laborers would not be paid in cash but would be invested in the form of 40,000 shares of VICTORIAS. As may be noted from the Appellate Court's decision, the transcript of the stenographic notes of Mr. de Guia's testimony evidences that he had in his possession the record of the distribution of the P4 M, although the said court held such assertion not to be the best evidence. Whether such ruling is correct or not, it refers only to the actual distribution of the cash and the shares of stock or the proceeds of the sale thereof, but the fact that P4 M were to be paid in shares appears indubitably proven. We are thus of the considered opinion that the findings of fact of the Court of Appeals inconsistent with Our observations herein do not accord with conventional knowledge of men and the general experience of the business world, hence Our authority to modify the same. 5 It is to Us but natural to assume that said witness, Mr. de Guia, knew or ought to have known of such medium of settling the laborers' claim because it is to be presumed that in the regularity of the performances of his duties to supervise the payment to the laborers, on behalf of the Secretary of Labor, he had read and did know the pertinent contents of the ASCA before supervising any payment at all to the laborers. He admitted that of P1,186,083.34 due in cash to the laborers, the latter were actually paid under his supervision, the said amount minus P180,679.38. We cannot suppose that he undertook that task without inquiring into the whys and wherefores thereof, that is to say, the reasons and details related to the amount being then paid. How could it have been possible for him to have supervised the payment of any amount to the laborers without determining first whether such payment was in full or not or in faithful compliance with Section 9 of the Republic Act 809? We have no doubt he must have been told about or even shown the ASCA, which was the basis for the payment. If it were otherwise, it was his inescapable duty to inquire. We presume, by mandate of the law, that he had complied with that duty. More, it is highly improbable that the FEDERATION did not know that what was due its members was P5,186,083.34. In truth, there is nothing before Us showing that the FEDERATION objected at all to the manner of payment provided in the ASCA when the time for implementation came. As far as the records before Us indicate, the laborers received under Mr. de Guia's supervision P1,186,083.34 (minus P180,679.38) without a word of complaint from anyone, either the FEDERATION or the SECRETARY. We are, therefore, not disposed to find that the mode of payment agreed upon in the ASCA was without the conformity or consent, even if subsequent to its execution, of the laborers and the Secretary of Labor. We hold that there was such consent.
In this connection, it should be recalled that after Civil Case No. 16815 of the Court of First Instance of Manila, wherein it was held that all the contracts being insisted upon by VICTORIAS as still existent had already expired on June 22, 1952, which decision was affirmed by this Supreme Court in G. R. No. L-6648 on July 25, 1955, in another suit, Civil Case No. 22577, also in the Court of First Instance of Manila, wherein the constitutionality of Republic Act 809 was impugned by VICTORIAS, the validity of ASCA itself was put to question when VICTORIAS and the PLANTERS submitted to the court their manifestation on April 23, 1956 that they had come to an extrajudicial settlement effective upon the signing of the General Collective Sugar Contract (Exhibits YYY and YYY-7) which was ultimately signed by majority of the PLANTERS on or before May 31, 1956. The challenge was made not only by some individual planters, like the Coruñas, Lacson, Chapa, Valencia, et al., but more importantly also by the Secretary of labor. However, the intervention of these challengers was not allowed by the court, and on November 5, 1956, We issued a resolution in G. R. No. L-11218 dismissing a petition against such denial.
So, while it is true that the ASCA was questioned as being violative of Section 1 of the Sugar Act of 1952, the challenge was in relation alone to the contention of the FEDERATION, the SECRETARY OF LABOR and some planters that the ratio of sharing provided for in Section 1 of the Act is unalterable by contract. Insofar as the manner in which the payment of what is due to the laborers was concerned, that is, that stipulated in the ASCA, We are impressed convincingly that the same must have appeared satisfactory to all the parties concerned. Indeed, if the FEDERATION had felt that the mode or medium of payment stipulated in the ASCA was prejudicial or in any way inimical to the interests of its members, why was the cash payment of P1.8 M plus accepted without, as far as We can see from the records, any qualification or reservation on its part or on that of the Secretary of labor. 6 On the contrary, what We note is that the transfer to the PLANTERS of 40,000 shares of VICTORIAS in trust for the laborers could have been viewed by the laborers with alacrity, not only because of the attractively high increment it was supposed to earn for them, but, what is more, the laborers would become thereby co-owners of the mill.
It is to Us of little, nay insignificant, moment who conceived or "engineered" the plan, whether VICTORIAS or any other party and what motivated the same. What cannot be denied is that under normal standards, no one can perceive therein any prejudice or risk to the pecuniary interests of the laborers. To speak of it, therefore, as approximating something immoral or improper, even illegal, for VICTORIAS to agree to it, as the Appellate Court did, is to miscomprehend entirely its concept, which under the circumstances then prevailing appeared to be the most practical and feasible way of meeting the situation for the convenience and benefit of the laborers themselves, the PLANTERS and VICTORIAS.
- I -
Having arrived at the conclusion that of the cash portion stipulated in the ASCA plus the proceeds of the sale of the 40,000 shares of VICTORIAS stock had already been "given", to use the word of the FEDERATION itself in its pleadings below, long before the case in the trial court was initiated, only P180,679.38 of the claim of the laborers pertaining to the 195253 to 1954-55 crop years remain unpaid, We shall now dwell on the curious and strange holding of the Court of Appeals that VICMICO and the PLANTERS are jointly and solidarily liable to the laborers for the payment of their claims, but only insofar as said P 180,679.38 are concerned.
Referring to the FEDERATION'S position in this respect, that is, the joint and solidary liability of the PLANTERS and VICTORIAS vis-a-vis the 1952 to 1955 phase of these cases, We must say that the same looks more like a dragnet intended to catch both the PLANTERS and VICTORIAS one way or another. After having admitted in its initial pleadings with an express assertion that the laborers concerned had already been "given" what is due them for the period in question, at the trial, its claim bulged to over P7 M for the 1952-1955 period, albeit it came out from the evidence that of such claim only P180,679.38 had not been paid. (According to Mr. de Guia, the corresponding laborers could not be located. Under the law, however, in such an instance, the money due the lost laborers goes to be a designated government fund for the general amelioration of labor and labor conditions in the whole country.) Actually, We might reiterate, said initial pleadings of the Federation made no reference at all to the crop years 1952-53 to 1954-55, but was confined itself to the claim that from 1955-56 crop year to 1973-74, the laborers were not being paid what is due them under the law, which they insisted then was 6% of the 10% increase due the PLANTERS. In other words, the FEDERATION based its original claim on the theory of obligation created by law, but, of course, in reference only to the 1956 to 1974 crop years nothing of 1952-53 to 1954-55.
However, as may be gleaned from the decision of the Court of Appeals, in that Court, the FEDERATION shifted to another pose. It claimed, contrary to its admission in its original and amended petition in the trial court, that the laborers had not been actually fully paid what is due them for 1952 to 1955, and notwithstanding their receipt or acceptance, without any protest or qualification of the cash portion (which turned out to be short by P180,679.38) provided in the ASCA, it assailed, rather belatedly, the legality and propriety of that agreement's provision to the effect that P4 M due them would be paid in 40,000 shares of stock to be entrusted to a Special Committee or Board of Trustees composed of five planters, and what is more, it contended vehemently that the laborers had not received any of said shares or any portion of the proceeds of the sale thereof. As to the legal aspect of such belated claim, its basis became no longer an obligation created by law but a liability imposed according to it by Articles 20 and 21 of the Civil Code. But it must have also relied on torts, for in its decision, the Court of Appeals found "the Central (VICTORIAS) and PLANTERS jointly and severally liable for tort", while citing in another portion of its decision also Articles 20 and 21 of the Civil Code. We must confess We are perplexed by such evident confusion of the pertinent juridical concepts in civil law in such postures of the Court of Appeals and the FEDERATION. The only legal provision that could impute joint and several or solidarity to the PLANTERS and VICTORIAS is Article 2194 of the Civil Code which reads:
ART. 2194. The responsibility of two or more persons who are liable for a quasi-delict is solidary.
Since in this jurisdiction torts is generally equated with the quasi-delict or culpa aquiliana or extra-contractual defined and elucidated in Chapter 2, Title XVII, comprising of Articles 2176 to 2194 of the Civil Code, it must have been for this reason, that without mentioning the codal provisions just referred to, and trying to play safe, as it were, with its reference to torts in general, the Court of Appeals made its holding under discussion. Surprisingly, however, it later on cited Articles 20 and 21 of the Civil Code, thereby implying that its reference to torts might be in relations to these two later articles under Chapter 2 on Human Relations of Chapter I of the Code. We do not hesitate to hold as We hereby hold that such a confusion of simple and well-known civil law concepts is unfortunate, to say the least. There is an obvious mix-up of the several sources of obligation under existing laws, and one is left uncertain whether what is being relied on is only one of them or a combination of them or all of them together, which would naturally be a veritable juridical and legal abnormality. For the benefit of everyone concerned, We shall make a brief analysis of each of them that have been directly or indirectly referred to by the Court of Appeals or the FEDERATION.
In regard to the FEDERATION'S initial contention about obligation created by law, undoubtedly, it had in mind Sections 1 and 9 of Republic Act 809. But since in such initial pleading, the subject matter and cause of action referred to crop years 1955-56 to 1973- 74, the FEDERATION is correct in sustaining that the laborers are entitled to a 60% share in the increase given to the PLANTERS by the CENTRAL. Its only misconception in such posture is that it assumed that the ratios in Section I of the Act have to be followed even if there were a majority of planters with written contracts with VICTORIAS. Under Talisay-Silay and the decision of the Court of Appeals, that position is untenable. However, the laborers are nevertheless entitled to 2.4% out of the 4% increase that pertained to the PLANTERS under the ASCA. Accordingly, the PLANTERS are liable to their respective laborers for the 2.4% that indisputably they have not paid since 1955 to 1974. Obviously, that is an obligation created by law.
But arising as it does from Republic Act 809, the relevant question that arises is whether such liability of the PLANTERS is joint and several or solidary. After mature deliberation, considering the peculiar facts of these cases wherein it appears that the PLANTERS always acted in concert with one another or as a single unit, We hold that the PLANTERS as an association, if it is, or all the planters in the Victorias sugar milling district, whether members or not of such possible association, and this includes petitioners Santos, as a lessee planter, and Tirol, are jointly and severally liable for the whole amount due all the laborers involved in these cases. As regards the pretended liability of VICTORIAS in this respect, We have already disposed of that matter earlier above.
Coming now to the matter of torts, the FEDERATION cites from Judge C. P. Caguioa's Comments and Cases on Civil Law, Vol. I, 1967 ed. to evidently give the impression that Article 20 of the Civil Code has adopted or imported into Our jurisdiction the so-called Anglo-American concept of torts which adds malice to the fault or negligence contemplated in the quasi-delict or culpa aquiliana or extra-contractual of our Civil Code. Such citation, We regret to say, does not reenforce at all the stand of the laborers. 'Truth to tell, with all due respect to the opinion of Judge Caguioa, a known civilian, Article 20 does not contemplate malice per se. The article reads thus:
ART. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.
This article creates a new source of obligation in addition to culpa aquiliana. While Article 2176 mentions only fault or negligence, as can be seen, the above-quoted article requires that the person to be held liable must have acted "contrary to law" unwilfully or negligently caus(ing) damage to another." If We are to believe the following citation in VICTORIAS brief:
In order that liability under Article 2176 of the Civil Code will arise the following requisites must exist: (a) There must be damage or prejudice which must be proven by the party claiming it; (b) There must be an unlawful act or omission amounting to fault or negligence; and (c) There must be a direct causal connection between the damage or prejudice and the act or omission. (12 Manresa, 640-641; Taylor v. Manila Electric Co., 16 Phil. 8; Jarencio, Torts and Damages, 1968 Edition, p. 25). (Page 222).
even under culpa aquiliana "there must be an unlawful act or omission" for any liability to attach.
It is thus clear from the foregoing brief discussion of the juridical concepts of torts, culpa aquiliana and Article 20 of the Civil Code that neither the PLANTERS, and much less VICTORIAS, appears to be guilty of tort in any sense. Accordingly, the holding of the Court of Appeals that "the Central and PLANTERS are liable in tort" to the laborers of the former has no factual nor legal basis. In consequence, it necessarily follows that the joint and several liability imposed by the Court of Appeals upon VICTORIAS must be, as it is hereby, held to be erroneous and uncalled for, factually, as shown earlier in Our discussion of the relationship between the laborers of the PLANTERS and VICTORIAS, and legally, in the light of what we have just explained is the only correct legal basis of the laborers' claim, namely, an obligation arising from law. To reiterate, the law, that is, Republic Act 809, does not impose upon the centrals, whether expressly or impliedly, any joint and several liability with the planters for the share which the Act apportions for the laborers of the planters, since it is the responsibility exclusively of the planters to pay their laborers after they have been given by the central what is due them. In other words, the inherent nature of the obligation of the planters, that of paying their own laborers, has never been from the inception of the sugar industry up to the present, solidary with the Centrals. Article 1207 of the Civil Code provides in this respect thus:
ART. 1207. The concurrence of two or more creditors or two or more debtors in one and the same obligation does not imply that each one of the former has a right to demand, or that each one of the latter is bound to render, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity.
In these premises, We cannot see how VICTORIAS may be held jointly and severally liable with the PLANTERS, contrary to what has been held by the Court of Appeals.
XIII
The foregoing sufficiently resolve, the first eight (I to VIII) of the ten (10) assignment of errors of the FEDERATION. We shall now tackle the remaining two of them.
- A -
In its Assignment of Error IX, the FEDERATION ascribes to the Court of Appeals the alleged error of not holding VICTORIAS and the PLANTERS jointly and severally liable for exemplary damages for the losses that the laborers have suffered because they were not paid their share of the 1952-53 to 1954-55 crop years production. Needless to say, as a consequence of Our holding that by their own admission and the evidence misapprehended, in Our view, by the Court of Appeals, all the amounts due them for said period have already been paid, except P180,679.38, We can perceive no legal reason why such claim for exemplary damages should be awarded. With particular reference to the P180,679.38 left unpaid in 1955, FEDERATION'S own witness de Guia explained that the laborers to which the same correspond could not be located. In the light of such explanation, it would be unfair to even think of exemplary damages for the non-payment thereof.
- B -
As to the matter of the non-payment by the PLANTERS of the 2.4% due their laborers, a little clarification may be called for. We feel that the legal provision mandating such payment may indeed not be readily understood by or comprehensible to everyone in the same sense it was construed by this Court in Talisay-Silay and by the Court of Appeals in its subject decision. For, it is undeniable that Section 9 of Republic Act 809 uses the words "any increase in participation granted the planters under this Act". (emphasis supplied) Read literally, there could be a little shade of plausibility in the posture of VICTORIAS and PLANTERS that only any increase as a result of the application of Section 1 of the Act is contemplated in its Section 9, and not an increase by virtue of a written milling contract executed after the effectivity of the Act, even if those who do so might constitute the majority of the planters in the district. But, as We postulated in Talisay-Silay, any increase given to the planters by any central after the passage of the Act cannot be viewed in any way than that which has been induced or forced to be done on account of the compulsive effect of the various related provisions of the Act. Virtually, therefore, any such increase should be deemed as an "increase — under this Act", since it is a result of its operation. Understandably, since it is only because of this Court's construction of the Act rather liberally, to be sure, in favor of labor, We cannot say that, in the words of Article 2233 of the Civil Code, the laborers here are entitled to recover exemplary damages "as a matter of right. " We must consider that per Article 2234, "the plaintiff must show that he is entitled to moral, temperate or compensatory damages before the court may consider the question of whether or not exemplary damages should be awarded." In the instant cases, all relevant circumstances considered, We fail to see Our way clear to granting any kind of moral, temperate or compensatory damages to the laborers, and We are not doing so. In fact and in law, We have no basis to go that far. Thus, it is pointless to speak of exemplary damages here.
- C -
Lastly, the FEDERATION complains that the Court of Appeals erred in reducing to 10% the 20% attorney's contingent fees stipulated in the laborers' contract with their counsel. (Page 307, Laborers' Brief) Every material point discussed in the brief taken into account, We share the conclusion of the Appellate Court that the said ten (10%) per centum award of attorney's fees is just and adequate.
XIV
Insofar as VICTORIAS' petition is concerned, there are only three assignments of error (VII, VIII and XII) that may not be said to be squarely resolved in the above opinion.
- A -
VICTORIAS vehemently maintains in its Assignment of Errors No. VII that nowhere in the course of the proceedings below, starting from the allegations of both the original and amended petition of the FEDERATION through the evidence it presented without opportune and appropriate objection, may there be traced any theory having the semblance of reliance on the law on torts, whether in the concept of culpa aquiliana or under Articles 20 and 21 of the Civil Code, the alleged Anglo-Saxon version, per Judge Caguioa, supra, or, any other variant thereof. According to VICTORIAS, the alternative bases perceptible in the FEDERATION'S petitions which ultimately led to the instant cases before Us now were either an obligation arising from law (Republic Act, 809) or one that is contractual, the latter being somewhat vague to Us, since it is in fact premised on the alleged invalidity of the provisions of the ASCA. And here, it is the position of VICTORIAS that assuming the cause of action of the FEDERATION could still be legally convertible in the appellate stage of the proceedings, either in the Court of Appeals or here, to one of "torts", We should dismiss the FEDERATION'S petition, the same having been filed in November 1962 or more than four (4) years after the alleged cause of action arose in 1955 or 1956, citing Article 1146 (2) of the Civil Code.
With the view We have taken of the whole controversy as discussed in the above opinion, We deem it unnecessary to pass on such seventh assignment of error of VICTORIAS regarding prescription of an action on torts, whether We look at it in relation to the 1952-53 to 1954-55 crop years controversy or in connection with the 2.4% claim of the laborers for crop years 1956 to 1974.
- B -
It is VICTORIAS' posture in its assignment of error No. XII that the real nature of the action of the laborers in these cases is one for accounting, hence, as a preliminary matter, We should first determine whether or not they are entitled to such accounting. Stated otherwise, it looks to Us that VICTORIAS claim is that it is premature yet at this stage of the controversy to deal with any sums of money or amounts due the laborers, there being no showing extant in the record that such entitlement exists. Again, We hold We do not have to spend more ink and paper to deal with such contention. Either it is quite clear that the FEDERATION has sufficiently established the predicate for accounting insofar as the PLANTERS are concerned or We consider it superfluous to make any ruling as to the point in question for the purposes of these cases, since the ultimate result of Our above opinion would virtually not be different anyway.
- C -
There is one point raised by VICTORIAS which although generally covered somehow in the above opinion, deserves special mention and discussion. The central maintains that in the interrelation among the planters, the plantation laborers and the miller, it has always been the practice and actually a legal axiom that the central, on the one hand, and the planter, on the other, whether the latter be a landowner or lessee or one who just factually plants and delivers his harvest for milling to the central of the corresponding district under any other arrangement with the landowner concerned, are the only ones who enter into contractual relations with each other, and in all the contracts between them, since the sugar industry began, nothing whatsoever has been provided with respect to the laborers, either of the miller or the planters, except, in any event, precisely to make it clear that neither of them would have anything to do with the terms and conditions of each other's workers or laborers. We have stated earlier and We reiterate Our view that there is nothing in Republic Act No. 809 that alters such a long standing factual and juridical situation.
However, it cannot be denied that under Republic Act 809, for the first time, outside of enacting the Minimum Wage Law and expressly extending fringe benefits, like cost-of-living allowances, bonuses, etc. to the workers in the sugar industry not only in the farms but also in the mills, the government has never fixed the manner in which the planters should share the proceeds of milled sugarcane with their respective plantation laborers. And notably, in Section 9 of the Act, the Congress made it abundantly specific that what the provision contemplates in the partition between the planters, on the one hand, and their respective plantation laborers, on the other, is of "any increase in the participation granted the planters under this Act and above their present share," which the provision explicitly mandates "shall be divided between the planter and his laborer in the plantation (and that) (T)he (said) distribution of the share corresponding to the laborers shall be made under the supervision of the Department of Labor."
Such being the case, VICTORIAS suggests the proposition that, therefore, if somehow the Act creates any link at all between the plantation laborers and the central, Section 9 itself makes the planter the agent of his laborers in such relationship and speaks for them and is responsible to them, as their principal. When, therefore, the PLANTERS entered into and signed the ASCA, they did so not only for themselves but for and on behalf of their principal, the laborers, in respect to all matters concerning the latter. Consequently, VICTORIAS argues that the plantation laborers are bound by the terms and conditions of the ASCA as parties thereto, represented by their agent, the PLANTERS. There may be something in such pose, but rather than go into the intricacies and complications that evidently would need to be elucidated and resolved in relation thereto, but which anyway would be inconsequential as far as the basic views of these cases expressed in Our above opinion are concerned, We prefer to deal with VICTORIAS' argument under discussion on some other appropriate occasion when its resolution should become indispensable, After all, in the cases at bar, it is already altogether clear, as We have discussed in Our above opinion, that whatever the plantation laborers are claiming is due them must be the exclusive responsibility and liability of the PLANTERS jointly and severally among themselves, to the complete exclusion of VICTORIAS.
XV
All of the assignments of errors of the PLANTERS (I to VI) in their brief with Us have been resolved in Our opinion above. There is, however, something they mentioned in their prayer that We might just as well clear up and dispose of. The PLANTERS pray that they should not be made liable to their respective laborers for any of the claims herein involved because they have not "engineered nor pocketed that which allegedly belong to the laborers as a result of the ASCA, for they (the PLANTERS) got only what they are entitled to under Republic Act 809", and elsewhere, they suggest that should they be found somehow liable, VICTORIAS should be adjudged to reimburse them therefor.
We shall not concern Ourselves about the "engineering" that brought forth the ASCA. The Court of Appeals discussed that matter in detail in its decision now under review, and its factual conclusions relative thereto, whether right or wrong, cannot, to Our mind be of pivotal influence in the ultimate resolution of these cases. In a sense, what circumstances go into the process of formulating contracts between the sugar centrals and the planters are matters of public knowledge among all those duly informed about and concerned with the sugar industry, and We must assume that whatever comes out of their bargaining cannot be but their voluntary and mutual agreements, even if, in this connection, it is but fair to admit that by force of the inherent nature of the indispensability of the centrals as the last factor of production of the saleable milled sugar, its superior position is an economic reality everyone must accept. The Court of Appeals realistically considered the matter as something that is not illegal (and not exactly immoral), much less in contravention or circumvention of the Sugar Act, but dictated by the legitimate exercise of all individuals to make a profitable bargain. Emphatically, it must be said though, that the PLANTERS were not entirely helpless, for as We see the scenario that may be flashed out of Republic Act 809, all that the PLANTERS had to do was to refuse to sign any contract with VICTORIAS, in which event, the government, thru a receiver, would have run the mill and the PLANTERS could have gotten the 10% increase provided in Section I. If they signed, as they did, a contract, the ASCA, providing for a 36-64% partition, We can only deduce ineluctably that such was the better option for them under the circumstances. And since, everyone is presumed to know the law, for ignorance thereof "excuses no one from compliance therewith ", and the courts, after all, are not guardians of parties, sui juris, who might get the shorter end at bargaining tables, We have no alternative but to conclude that when they signed the ASCA, the PLANTERS were well aware that of the 4% increase granted therein to them, 60% had to be paid by them to their respective laborers. Thus, when they plead that what they got under the ASCA was only what they are entitled to under the Act, they must not be understood as referring to the whole 4% but only to 1.6%.
Let it be plainly understood, in this connection, that under Our Talisay-Silay ruling, the laborers are entitled to no more than 60% of any increase in any increase in participation their respective planters-employers might be granted. Beyond that whatever goes to the PLANTERS and to VICTORIAS, for that matter, are theirs as a matter of law and right. To speak of "pocketing" by anyone of somebody else's rightful and lawful share is somehow malicious and entirely unwarranted.
From the facts extant in the record, and applying the law thereto, it is the conclusion of this Court that the PLANTERS are inescapably liable to their respective laborers in the amounts and manner hereinabove set forth. They should know better than to place the blame on anyone else. Their respective laborers have been deprived long enough of what is legally and rightfully theirs. It is unimaginable how said laborers could have had better lives and living conditions, worthy of their work, had the PLANTERS been more socially-minded and humanely concerned about the welfare of those that have made them the "sugar lords" during better times in Negros Occidental. To make things clearer, the claim for reimbursement by the PLANTERS is hereby overruled.
XVI
The petition of planters Primo Santos and Roberto Tirol requires no separate discussion. Their claims that the trial court had no jurisdiction over their persons and that they should not be held liable for obligations under a contract they have not signed deserve scant consideration. In fact, those points are already properly dealt with in the above opinion, hence all their assignment of errors are hereby held to be untenable.
JUDGMENT
Accordingly, the Court AFFIRMS the judgment of the Court of Appeals holding that the LABORERS are entitled to the payment of 60% of the 4% increase paid by VICTORIAS to the PLANTERS every crop year, from crop year 1955-56 to crop year 1973-74, the exact amount thereof in pesos to be determined by the trial court after a hearing to be held within thirty (30) days from the finality of this decision, the yearly amount thus determined to bear the corresponding legal interests up to the date of payment to the LABORERS, 7 the PLANTERS, including appellants Primo Santos and Roberto Tirol, are sentenced to pay the said LABORERS the amount to be so determined, under the supervision of the Ministry of Labor. In addition, the said PLANTERS shall also pay to the LABORERS, the sum of P 180,679.38, the balance unpaid of the latter's share in the 1952- 53 to 1954-55 crop years 8 also with the same rates of interest and under the same supervision.
The judgment of the Court of Appeals is hereby modified by eliminating the joint and several or solidary liability of VICTORIAS with the PLANTERS for the above amounts, the said liability being solely and exclusively of the PLANTERS. Moreover, contrary to the finding of the Court of Appeals, the Court finds and holds that per their own admission in their complaint and the extant evidence, the laborers had already been paid their share in the 1952-53 to 1954-55 crop years, except for the P 180,679.38 aforementioned. In all other respects, the judgment of the Court of Appeals is AFFIRMED insofar as the liability of the PLANTERS to their laborers are concerned. And We hold that said liability is joint and several among all the planters in the Victorias District from 1952 to 1973, provided that in the execution of this judgment, the primary and priority recourse should be against the members of the Special Committee or Board of Trustees and secondly, the PLANTERS, as an association, before they (the planters) are proceeded against individually.
This estimate is subject to the amount to be determined by the trial court.
Costs against the PLANTERS also in the same character of liability just set forth as to their principal liability.
Concepcion, Jr., Fernandez, Guerrero, Abad Santos, De Castro and Melencio-Herrera, JJ., concur.
Fernando, C.J., concurs in the result.
Teehankee, Aquino, J., took no part.
Makasiar, J., the Court of Appeals should be entirely affirmed.
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