SECOND DIVISION April 10, 2019 join her husband as a party.

10 She also RTC Ruling

argued that the interest rate agreed upon
G.R. No. 233774 was excessive and unconscionable, thus The dispositive portion of the RTC
illegal.11 She further denied receiving Decision states:
MA. LUISA A. PINEDA, Petitioner ₱500,000.00 from petitioner and claimed
vs. that the said amount was the WHEREFORE, in the light of the foregoing,
VIRGINIA ZUÑIGA VDA. DE VEGA, accumulated amount of another the defendant is hereby ordered to pay
Respondent obligation she earlier secured from plaintiff the loaned amount of P200,000
petitioner.12 plus the interest of 12% per annum from
DECISION September 3, 2004, the date the
In her reply, petitioner averred that defendant received the demand letter
CAGUIOA, J.: respondent's husband did not need to be from the plaintiff, dated August 2004, until
joined because the transaction did not the finality of the decision and the
This is a Petition for Review on Certiorari1 involve him and although the agreement satisfaction of the amount due. She is also
(Petition) under Rule 45 of the Rules of was to charge an interest rate of 8% per ordered to pay the plaintiff the amount of
Court (Rules) assailing the Decision2 dated month, what was actually charged was P50,000 as nominal damages and P30,000
March 21, 2017 and the Resolution3 dated just 4% per month.13 Petitioner admitted as attorney's fees.
August 30, 2017 of the Court of Appeals4 that the original loan which respondent
(CA) in CA-G.R. CV No. 106404. The CA obtained in 2000 was only ₱200,000.00 In default of payment, the mortgaged
Decision reversed and set aside the with an undertaking to pay 3% interest per property, together with all the buildings
Decision dated April 30, 2015 and the month.14 and improvements existing thereon, shall
Resolution dated October 14, 2015 of the be foreclosed and sold and the proceeds
Regional Trial Court of Malolos City, In the written interrogatories addressed to of their sale shall be applied to the
Bulacan, Branch 17 (RTC) in Civil Case No. petitioner, she admitted that the payment of the amounts due the plaintiff,
526-M-2005. The RTC Decision ruled in ₱500,000.00 indicated in the 2003 including damages and attorney's fees.
favor of petitioner Ma. Luisa Pineda Agreement referred to a previously
(petitioner) and the RTC Resolution denied executed undated real estate mortgage SO ORDERED.19 (Italics in the original)
the motion for reconsideration of (undated Agreement) between the parties
respondent Virginia Zuñiga vda. de Vega which secured respondent's loan of Respondent's motion for reconsideration
(respondent). The CA Decision also ₱200,000.00 from her.15 having been denied by the RTC, she
dismissed petitioner's complaint. The CA appealed the RTC Decision to the CA,
Resolution denied petitioner's motion for After the parties underwent mediation which the latter granted in its Decision20
reconsideration. proceedings, which turned out to be dated March 21, 2017. The CA Decision
unsuccessful, the case was set for reversed and set aside the RTC Decision
Facts and Antecedent Proceedings hearing.16 Despite the leeway provided and dismissed the complaint.21 The CA
by the RTC, respondent failed to formally found that petitioner failed to prove that
Petitioner filed a complaint dated June 10, offer her evidence.17 prior demand had been made upon
2005 against respondent, praying for the respondent for the full payment of the
payment of the latter's principal obligation On April 30, 2015, the RTC rendered a latter's obligation.22 While the complaint
and the interest thereon or, in default of Decision finding that (1) the existence of alleged and petitioner testified that
such payment, the foreclosure of the the loan and the real estate mortgage had demand was sent to respondent by
property subject of a real estate been established and, thus, judicial registered mail and received on
mortgage.5 foreclosure would be proper given September 7, 2004, the registry return
respondent's non-compliance therewith; card evidencing such receipt was not
In her complaint, petitioner alleged that, (2) since the undated Agreement had no specifically and formally offered in
on March 25, 2003, respondent borrowed provision on the payment of interest, the evidence.23 The CA noted that what
from her ₱500,000.00 payable within one legal interest of 12% per annum should be petitioner presented was a copy of the
year with an interest rate of 8% per imposed; (3) the 2003 Agreement's said demand letter with only a photocopy
month.6 To secure the loan, respondent interest rate was unconscionable; (4) the of the face of a registry return card which
executed a real estate mortgage (2003 non-joinder of respondent's husband was was claimed to refer to the said letter.24
Agreement) over a parcel of land covered not a jurisdictional defect and did not According to the CA, it thoroughly
by Transfer Certificate of Title No. T- warrant the complaint's dismissal; and (5) reviewed petitioner's formal offer and
339215, together with all the buildings the non-referral to the barangay found no reference to the registry receipt
and improvements existing thereon conciliation proceeding did not prevent card or any competent proof, like a
(Property), in petitioner's favor.7 On the the court from exercising its jurisdiction postman certificate or the testimony of
loan's maturity, respondent failed to pay given that the parties had already the postman, that respondent actually
her loan despite demand.8 As of May undergone several conciliation and received the demand letter.25 The CA
2005, the unpaid accumulated interest mediation proceedings.18 concluded that for failing to prove the
amounted to ₱232,000.00.9 requisite demand under Article 116926 of
the Civil Code, respondent could not be
In her answer, respondent denied considered in default and petitioner's case
petitioner's material allegations and must fail.27
countered that the complaint was
dismissible for lack of prior barangay
conciliation proceeding and for failure to
The CA having arrived at the above (1) the belated filing of the Petition, and Exhibit "C" – Demand Letter sent by
conclusion, it found that it would no (2) the failure of petitioner to pose a plaintiff's lawyer to the defendant,
longer be necessary to discuss the other question of law.34 demanding that the latter comply with the
issues presented by the parties.28 terms and conditions of the [R]eal Estate
As to the first ground raised by Mortgage (REM) between them within
CA Ruling respondent, the Petition was seasonably three (3) months from receipt: otherwise,
filed within the 30-day extension that the the former will be constrained to enforce
The dispositive portion of the CA Decision Court granted in its September 27, 2017 the REM.
states: Resolution.35 Petitioner's motion for
extension of time to file the Petition was Purpose: To prove that when the
WHEREFORE, the appeal is GRANTED. The filed within the 15-day period provided in defendant failed to comply with the terms
assailed Decision and Resolution of the Section 2, Rule 45 of the Rules. and conditions of the said Real Estate
Regional Trial Court, Third Judicial Region, Mortgage, a letter was sent to her
Branch 17, City of Malolos, Bulacan, in As to the second ground, even if it is demanding compliance; otherwise, the
Civil Case No. 526-M-2005 are REVERSED conceded that the exceptions cited by former will enforce the mortgage
and SET ASIDE. Accordingly, the complaint petitioner are applicable, the Court is not contract.
is DISMISSED. persuaded by her argument that
respondent had admitted in her answer [Respondent] properly opposed the said
SO ORDERED.29 and pre-trial brief that respondent evidence as it does not prove that she, in
received on September 3, 200436 the fact, received the letter. We have
Petitioner filed a motion for demand letter dated August 4, 2004. thoroughly reviewed her formal offer as
reconsideration, which was denied by the well and found no reference to the
CA in its Resolution30 dated August 30, Petitioner stresses that in respondent's registry receipt card or any other
2017. answer and pre-trial brief, the latter competent proof i.e., postman certificate
admitted Annex "C", which is a copy of the or the testimony of the postman, that
Hence, the Petition. Respondent filed a demand letter. Petitioner also points out [respondent] actually received the said
Comment/Opposition Ad Cautelam31 that in the complaint, it was alleged: demand letter.
dated November 3, 2017, which the Court
notes. "7. The time for the payment of the [Petitioner] could have simply presented
subject loan is long overdue and the and offered in evidence the registry
Issues defendant, despite repeated demands by receipt or the registry return card
the plaintiff to pay, has continuously failed accompanying the demand letter.
Petitioner, invoking several exceptions to and refused to pay both the principal However, she offered no explanation why
the rule that only questions of law may be obligation and the accumulated interest. A she failed to do so. There is, thus, no
raised in a Rule 45 certiorari petition, copy of the demand letter is appended as satisfactory proof that the letter was
submits for resolution the following Annex "C" and made [integral] part received by [respondent].
factual issues: Was a demand letter sent hereof." (Underscoring supplied)37
by petitioner to respondent and was it In emphasizing further that the registry
received by the latter?32 The admission by respondent of Annex "C" return card is the best evidence of actual
is at most an admission of the demand receipt of [respondent], We find the High
The Court's Ruling letter's existence and due execution. Since Court's discussion in Mangahas v. Court of
there was no allegation of receipt by Appeals,38 apt, viz[.]:
Petitioner recognizes that only questions respondent of Annex "C" in the complaint,
of law may be raised in a Rule 45 certiorari such fact had to be established by In addition, petitioners could have easily
petition, and factual issues are petitioner. presented the original Registry Receipt
entertained only in exceptional cases. To No. A-2094. It would have constituted the
justify the Court's review of the CA's On this point, the Court agrees with the best evidence of tile fact of mailing on 7
factual findings, petitioner cites the CA, to wit: February 2006, even if a different date
following exceptions to the general rule: had been stamped on the envelope of the
(1) the judgment is based on It was, indeed, alleged in the complaint, as subject registered mail. Regrettably,
misapprehension of facts; (2) the well as in her testimony, that demand was petitioners have not seen fit to present
inference is manifestly mistaken, absurd sent to [respondent] by registered mail such original. Their continued failure to
or impossible; (3) the findings of the CA and was received on September 7, 2004. present tile original receipt can only lead
are contrary to those of the trial court; (4) However, the registry return card one to remember the well-settled rule
the CA manifestly overlooked certain evidencing such receipt was not that when the evidence tends to prove a
relevant and undisputed facts that, if specifically and formally offered in material fact which imposes a liability on a
properly considered, would justify a evidence. What she presented, instead, party, and he has it in his power to
different conclusion; and (5) the findings was a copy of the said demand letter with produce evidence which from its very
of the CA are contrary to the admission of only a photocopy of the face of a registry nature must overthrow the case made
the parties.33 return card claimed to refer to the said against him if it is not founded on fact,
letter. Thus, in her formal offer of and he refuses to produce such evidence,
Respondent in her Comment prays for the evidence: the presumption arises that the evidence,
outright dismissal of the Petition based on if produced, would operate to his
these procedural matters: prejudice, and support the case of his
adversary.
 Mere photocopy of Registry Receipt No. comply or is not ready to comply in a To recall, the dispositive portion of the
A-2094 militates against their position as proper manner with what is incumbent RTC Decision states:
there is no indicium of its authenticity. A upon him. From the moment one of the
mere photocopy lacks assurance of its parties fulfills his obligation, delay by the WHEREFORE, in the light of the foregoing,
genuineness, considering that other begins. (1100a) the defendant is hereby ordered to pay
photocopies can easily be tampered with. plaintiff the loaned amount of P200,000
(Emphasis supplied.)39 Default or mora, which is a kind of plus the interest of 12% per annum from
voluntary breach of an obligation, signifies September 3, 2004, the date the
After the CA found that petitioner failed to the idea of delay in the fulfillment of an defendant received the demand letter
prove that extrajudicial demand was made obligation with respect to time.41 In from the plaintiff, dated August 2004, until
upon respondent as required by law and positive obligations, like an obligation to the finality of the decision and the
after it had observed that petitioner had give, the obligor or debtor incurs in delay satisfaction of the amount due. She is also
not asserted any of the exceptions to the from the time the obligee or creditor ordered to pay the plaintiff the amount of
requisite demand under Article 1169 of demands from him the fulfillment of the P50,000 as nominal damages and P30,000
the Civil Code, the CA concluded that obligation.42 Demand may be judicial — if as attorney's fees.
respondent could not be considered in the creditor files a complaint against the
default. Necessarily, petitioner's case debtor for the fulfillment of the obligation In default of payment, the mortgaged
should fail.40 — or extrajudicial — if the creditor property, together with all the buildings
demands from the debtor the fulfillment and improvements existing thereon, shall
While the CA is correct on its factual of the obligation either orally. or in be foreclosed and sold and the proceeds
finding, its legal conclusion is, however, writing.43 Whether the demand is judicial of their sale shall be applied to the
flawed. or extrajudicial, if the obligor or debtor payment of the amounts due the plaintiff,
fails to fulfill or perform his obligations, including damages and attorney's fees.
What petitioner seeks to enforce against like payment of a loan, as in this case, he
respondent is a contract of loan, which is is in mora solvendi, and, thus, liable for SO ORDERED.47 (Italics in the original)
secured by a real estate mortgage. Based damages. 44
on the sources of obligations enumerated Firstly, the RTC erred in granting
under Article 1157 of the Civil Code, the While delay on the part of respondent was petitioner's remedies or demands of
obligation that petitioner seeks to make not triggered by an extrajudicial demand collection and foreclosure of mortgage
respondent liable for is one which arises because petitioner had failed to so successively. The settled rule is that these
from contract. Liability for damages arises establish receipt of her demand letter, this remedies of collection and foreclosure are
pursuant to Article 1170 of the Civil Code delay was triggered when petitioner mutually exclusive. The invocation or
against "[t]hose who in the performance judicially demanded the payment of grant of one remedy precludes the other.
of their obligations are guilty of fraud, respondent's loan from petitioner. While
negligence, or delay, and those who in any the CA was correct in observing that Since Bachrach Motor Co., Inc. v.
manner contravene the tenor thereof." default generally begins from the moment Icarañgal,48 the Court has consistently
Delay or mora is governed by Article 1169 the creditor demands the performance of ruled[49] that:
of the Civil Code, which provides: the obligation, and without such demand,
judicial or extrajudicial, the effects of We hold, therefore, that, in the absence of
ART. 1169. Those obliged to deliver or to default will not arise,45 it failed to express statutory provisions, a mortgage
do something incur in delay from the time acknowledge that when petitioner filed creditor may institute against the
the obligee judicially or extrajudicially her complaint dated June 10, 2005,46 mortgage debtor either a personal action
demands from them the fulfillment of such filing constituted the judicial demand for debt or a real action to foreclose the
their obligation. upon respondent to pay the latter's mortgage. In other words, he may pursue
principal obligation and the interest either of the two remedies, but not both.
However, the demand by the creditor thereon. Respondent, having thus By such election, his cause of action can
shall not be necessary in order that delay incurred in delay (counted from the filing by no means be impaired, for each of the
may exist: of the complaint), is liable for damages two remedies is complete in itself. Thus,
pursuant to Article 1170 of the Civil Code. an election to bring a personal action will
(1) When the obligation or the law leave open to him all the properties of the
expressly so declares; or Consequently, the reversal of the assailed debtor for attachment and execution,
CA Decision and Resolution is justified and even including the mortgaged property
(2) When from the nature and the to that extent, the Petition is meritorious. itself. And, if he waives such personal
circumstances of the obligation it appears action and pursues his remedy against the
that the designation of the time when the Even with the reversal of the CA's ruling, mortgaged property, an unsatisfied
thing is to be delivered or the service is to the Court cannot, however, uphold in toto judgment thereon would still give him the
be rendered was a controlling motive for the RTC's ruling. right to sue for a deficiency judgment, in
the establishment of the contract; or which case, all the properties of the
defendant, other than the mortgaged
(3) When demand would be useless, as property, are again open to him for the
when the obligor has rendered it beyond satisfaction of the deficiency. In either
his power to perform. case, his remedy is complete, his cause of
action undiminished, and any advantages
In reciprocal obligations, neither party attendant to the pursuit of one or the
incurs in delay if the other does not other remedy are purely accidental and
are all under his right of election. On the As to the award of attorney's fees, the
other hand, a rule that would authorize xxxx same is sustained. Attorney's fees are
the plaintiff to bring a personal action recoverable under Article 2208 of the Civil
against the debtor and simultaneously or x x x But, as we have heretofore stated, Code when the defendant's act has
successively another action against the the creditor's cause of action is not only compelled the plaintiff to incur expenses
mortgaged property, would result not only single but indivisible, although the to protect his interest and when the court
in multiplicity of suits so offensive to agreements of the parties, evidenced by deems it just and equitable.
justice (Soriano vs. Enriques, 24 Phil., 584) the note and the deed of mortgage, may
and obnoxious to law and equity (Osorio give rise to different remedies. x x x The WHEREFORE, the Petition is hereby
vs. San Agustin, 25 Phil., 404), but also in cause of action should not be confused PARTLY GRANTED. The Decision of the
subjecting the defendant to the vexation with the remedy created for its Court of Appeals dated March 21, 2017
of being sued in the place of his residence enforcement. And considering, as we have and its Resolution dated August 30, 2017
or of the residence of the plaintiff, and shown, that one of the two remedies in CA-G.R. CV No. 106404 are REVERSED
then again in the place where the available to the creditor is as complete as and SET ASIDE. The Decision dated April
property lies.50 the other, he cannot be allowed to pursue 30, 2015 of the Regional Trial Court of
both in violation of those principles of Malolos City, Bulacan, Branch 17 in Civil
The rationale as to the exclusive effect of procedure intended to secure simple, Case No. 526-M-2005 is PARTLY
the remedies or options is explained, thus: speedy and unexpensive administration of REINSTATED insofar as the order against
justice.51 respondent Virginia Zuñiga vda. de Vega
For non-payment of a note secured by to pay petitioner Ma. Luisa A. Pineda the
mortgage, the creditor has a single cause In Cerna v. CA,52 the Court ruled that the loaned amount of ₱200,000.00 and
of action against the debtor. This single filing of a collection suit barred the ₱30,000.00 as attorney's fees is
cause of action consists in the recovery of foreclosure of the mortgage. concerned. Respondent Virginia Zuniga
the credit with execution of the security. vda. de Vega is also ordered to pay
In other words, the creditor in his action Given the foregoing, the Court sustains petitioner Ma. Luisa A. Pineda interest on
may make two demands, the payment of the RTC's ruling which orders respondent the loaned amount at the rate of 12% per
the debt and the foreclosure of the to pay petitioner the loaned amount of annum from the filing of the original
mortgage. But both demands arise from ₱200,000.00. However, the RTC's ruling complaint up to June 30, 2013 and 6% per
the same cause, the non-payment of the that in default of respondent's payment, annum from July 1, 2013 until the finality
debt, and, for that reason, they constitute petitioner can foreclose on the mortgage of this Decision; and on the total amount
a single cause of action. Though the debt is erroneous. due on the Decision's finality, interest of
and the mortgage constitute separate 6% per annum from such date of finality
agreements, the latter is subsidiary to the Secondly, the RTC erred on the rate of until full payment thereof.
former, and both refer to one and the interest that it imposed. The 12% per
same obligation. Consequently, there annum rate of interest should be revised SO ORDERED.
exists only one cause of action for a single in the light of Nacar v. Gallery Frames.53
breach of that obligation. Plaintiff, then, Since the RTC found that the undated Carpio, (Chairperson), J. Reyes, Jr., and
by applying the rule above stated, cannot Agreement contained no stipulation on Lazaro-Javier, JJ., concur.
split up his single cause of action by filing interest54 and the 2003 Agreement's Perlas-Bernabe, J., on leave.
a complaint for payment of the debt, and interest rate was unconscionable,55 the
thereafter another complaint for rate of interest on the loan of respondent
foreclosure of the mortgage. If he does so, should be 12% per annum from judicial
the filing of the first complaint will bar the demand or filing of the original complaint
subsequent complaint. By allowing the with the RTC until June 30, 2013 and 6%
creditor to file two separate complaints per annum from July 1, 2013 until finality
simultaneously or successively, one to of this Decision. The total amount due as
recover his credit and another to foreclose of such date of finality shall bear an
his mortgage, we will, in effect, be interest of 6% per annum until its full
authorizing him plural redress for a single satisfaction.
breach of contract at so much cost to the
courts and with so much vexation and Thirdly, as already pointed above, the RTC
oppression to the debtor. erred in reckoning the imposition of
interest from extrajudicial demand
because the finding of the CA in this
respect is upheld.

Fourthly, the award of ₱50,000.00

nominal damages is deleted. As reiterated
in Robes-Francisco Realty & Development
Corp. v. Court of First Instance of Rizal
(Branch XXXIV),56 "nominal damages
cannot coexist with compensatory
damages."57
THIRD DIVISION August 7, 2019 1. Compensation: Camp John Hay Development had initially
G.R. No. 198849 estimated that the construction would be
.... completed by 2006. In a Lease
CAMP JOHN DEVELOPMENT Agreement16 executed on October 19,
CORPORATION, Petitioner b. Off-setting against Two (2) Units - Studio 1996, Camp John Hay Development and
vs. Type at Suite 2A. Total amount shall be Bases Conversion and Development
CHARTER CHEMICAL AND COATING based on the final unit[s] chosen by the Authority provided for a period of three
CORPORATION, Respondent Contractor.9 and a half (3.5) years from the execution
of the Lease Agreement to complete the
DECISION Charter Chemical chose Units 102 and 104 various physical components in Camp John
studio type in the second phase of Camp Hay. When this timetable was not
LEONEN, J.: John Hay Suites.10 followed due to alleged mutual delays and
force majeure, they entered into at least
Rescission under Article 1191 of the Civil At the time the Contractor's Agreement four (4) more amendments to the Lease
Code is the proper remedy when a party was signed in 2001, the actual Agreement. Two (2) of these, the July 18,
breaches a reciprocal obligation. Because construction of the Camp John Hay Suites 2003 and July 1, 2008 Memoranda of
each case has its own distinct had not yet commenced.11 Agreement, covered the revision of the
circumstances, this Court's power to fix a Project Implementation Plan providing the
period of an obligation under Article 1197 Later on, the contract price was reduced targeted completion dates of the various
is discretionary and should be exercised to P13,239,734.16, for which Camp John facilities in Camp John Hay.17
only if there is just cause. Hay Development paid ₱7,339,734.16. The
balance of ₱5,900,000.00 was ought to be Under the July 18, 2003 revision, Camp
This resolves a Petition for Review on settled by offsetting the price of the two John Hay Development and Bases
Certiorari1 assailing the May 13, 2011 (2) studio units.12 Conversion and Development Authority
Decision2 and September 30, 2011 estimated that the second phase of the
Resolution3 of the Court of Appeals in CA- In 2003, Charter Chemical completed the Camp John Hay Suites would be
G.R. SP No. 108335. The Court of Appeals painting works, after which Camp John completed by the end of the second
affirmed the March 30, 2009 Final Award4 Hay Development issued a Final Inspection quarter of 2006.18 Admitting various
in CIAC Case No. 19-2008 issued by the and Acceptance Certificate belatedly on unforeseen events, Camp John Hay
Construction Industry Arbitration May 30, 2005. Charter Chemical Development again failed to complete its
Commission, which found that Charter demanded the execution of the deed of construction. Under the July 1, 2008
Chemical and Coating Corporation sale and delivery of the titles of the two revision, the Camp John Hay Suites was
(Charter Chemical) is entitled to the (2) units in September 2004, with a follow- estimated to be completed by 2012.19
payment of the monetary equivalent of up in April 2005.13 In June 2005, Camp
two (2) units in Camp John Hay Suites in John Hay Development and Charter Due to the subsisting construction delay,
the total amount of ₱5,900,000.00 and Chemical executed contracts to sell. The Charter Chemical, through counsel, wrote
attorney's fees in the amount of uniform contracts state in part: Camp John Hay Development, demanding
₱590,000.00.5 that it transfer the units or pay the value
[P]ossession of the Unit shall be delivered of these units in the sum of
Camp John Hay Development Corporation by Seller to Buyer within a reasonable ₱6,996,517.48.20
(Camp John Hay Development) is the period of time from the date of
investment arm of a consortium engaged completion of the Unit either by (a) When it felt that further demands would
in the construction of the Camp John Hay serving written Notice of Completion to be futile, Charter Chemical, on June 12,
Manor in Baguio City.6 the Buyer or (b) by delivering to the Buyer 2008, filed before the Construction
the Limited Warranty Deed covering the Industry Arbitration Commission a
In January 2001, Camp John Hay Unit. The delivery of the Notice of Request for Arbitration21 under the
Development entered into a Contractor's Completion or the Limited Warranty Deed arbitration clause in the Contractor's
Agreement7 with Charter Chemical, the shall constitute constructive delivery of Agreement.
company awarded to complete the the Unit and immediately thereafter the
interior and exterior painting works of unit risk of loss to the Unit and all obligations In its March 30, 2009 Final Award,22 the
2E of the Camp John Hay Manor for the and assessments provided in this Contract, Construction Industry Arbitration
contract price of ₱15,500,000.00. This was the Project Plan and Declaration of Commission ordered Camp John Hay
inclusive of the price of two (2)-studio Restrictions, the Articles of Incorporation Development to pay the amounts of
type units at Camp John Hay Suites, the and By-Laws of the Association, and the ₱5,900,000.00, the monetary value of the
total amount of which would be based on House Rules, shall pertain to Buyer.14 two (2) units in Camp John Hay Suites, and
the units chosen by Charter Chemical.8 ₱590,000.00 as attorney's fees.23
In August 2005, Camp John Hay
Although the Contractor's Agreement Development issued certifications to The arbitral tribunal ruled that Charter
contained no date of the units' turnover, it Charter Chemical that the two (2) units Chemical was entitled to its claim for the
allowed Charter Chemical to choose the were fully paid under their offsetting value of the two (2) units because Camp
units for offsetting under an offsetting scheme. However, the units were not John Hay Development failed to deliver
scheme: delivered because the construction of the units within the targeted completion
Camp John Hay Suites was not yet date.24
complete.15
The Final Award read: Conversion and Development Authority Petitioner relies on Article 131144 of the
stated that the units would be completed Civil Code, which states that "contracts
On the basis of the evidence the by 2006. This showed that there was a take effect only between the parties who
Arbitration Tribunal finds and so holds definite time for the completion of the execute them."45 It also points out that
that: units. Although Charter Chemical was an respondent did not rely on the Master
outsider to this agreement, it was Development Plan in the Memorandum of
1. Claimant is entitled to its claim for the "equivalent to an announcement to all Agreement, maintaining that its
monetary equivalent of the two (2) units concerned that the units would be representative admitted having never seen
CJH Suites in the total sum of completed at such and such a date."32 the Master Development Plan when he
Php5,900,000.00. signed the agreement.46 Petitioner also
On June 3, 2011, Camp John Hay notes that at the time of the execution of
2. Claimant is not entitled to its claim for Development filed a Motion for the Contractor's Agreement, respondent
exemplary damages. Reconsideration, but it was denied by the had not yet selected the two (2) units as
Court of Appeals in its September 30, 2011 part of its compensation for its painting
3. Claimant is entitled to its claim for Resolution.33 works. Petitioner argues that the date of
attorney's fees for the sum of delivery was not specified in the contracts
Php590,000.00 which is 10% of the total Camp John Hay Development received the to sell, which merely indicated that the
monetary value for the two (2) units CJH September 30, 2011 Resolution on delivery would be "within a reasonable
Suites of Php5,900,000.00 which had not October 7, 2011.34 Before the lapse of the time from the date of completion of the
been delivered by respondent. original 15-day period, it filed on October subject units."47
21, 2011 a Motion for Extension of Time to
4. The Court should not fix the period for File Petition for Review under Rule 45, Additionally, petitioner claims that the
the delivery of the subject units as asking for a period of 30 days from arbitral tribunal had no jurisdiction over
provided for in Article 1197 of the Civil October 22, 2011, or until November 21, the Complaint. It asserts that the contracts
Code because the reciprocal nature of the 2011, within which to file the Petition.35 to sell executed following the Contractor's
contract itself provides for the period of This Motion for Extension was granted by Agreement contain a different mode of
their delivery. Moreover, CIAC can fix the this Court.36 dispute resolution.48 The contracts to sell
period if necessary.25 provide the following clause:
On November 23, 2011, Camp John Hay
Camp John Hay Development filed before Development filed a Petition for Review on ARTICLE XIV
the Court of Appeals a Petition for Certiorari.37 Charter Chemical filed its
Review26 under Rule 43 of the Rules of Comment38 on February 6, 2012 and, in MISCELLANEOUS PROVISION
Court. It argued that the arbitral tribunal turn, Camp John Hay Development filed its
did not have jurisdiction over the dispute Reply39 on May 16, 2012. ....
because the arbitration clause had been
superseded by a subsequent dispute Petitioner contends that there is no 4. Venue - All actions involving this
resolution clause contained in the specific date determined for the Contract shall be instituted only in the
contracts to sell.27 It further asserted that completion or delivery of the two (2) units proper courts of Pasig City, Metro Manila
it had neither agreed on the completion in any of its contracts with respondent. It to the exclusion of all other courts.49
date of the two (2) units nor admitted that argues that the action filed should have
the units were to be completed within been for the fixing of a period under From the dispute resolution clause,
three (3) years from 2003 or 2005.28 Articles 119140 and 119741 of the Civil petitioner points out that disputes must
Instead, it asked for a fixing of the term or Code, and not an action for the rescission be adjudicated by the proper courts of
period when the units would be of the contract.42 Pasig City, to the exclusion of all other
completed.29 courts. The contracts to sell also
According to petitioner, both the arbitral effectively removed the parties' dispute
In its May 13, 2011 Decision,30 the Court tribunal and the Court of Appeals erred in outside the ambit of a construction
of Appeals affirmed the arbitral tribunal's ruling that the Contractor's Agreement dispute since they are not the
award. It held that the arbitration clause in between petitioner and respondent had a construction contracts contemplated by
the Contractor's Agreement was neither definite timetable based on the Executive Order No. 1008, or the
modified nor superseded by the contracts Memorandum of Agreement between Construction Industry Arbitration Law.50
to sell, which were merely devices by petitioner and the Bases Conversion and
which to transfer possession and title over Development Authority. Moreover, Petitioner further contests the award of
the units to Charter Chemical. The petitioner argues that the determination attorney's fees to respondent, maintaining
Contractor's Agreement, it noted, of whether there is an agreed completion that neither the Court of Appeals nor the
remained the principal covenant.31 date must be based on the agreement arbitral tribunal has specified the factual
between petitioner and respondent in basis for it. It argues that the award of
The Court of Appeals also ruled that Camp their contract. Thus, when the Court of attorney's fees is not justified when both
John Hay Development was already in Appeals resorted to a separate agreement tribunals denied respondent's claim for
delay when Charter Chemical demanded different from the Contractor's exemplary damages and when petitioner
the transfer of units on August 3, 2007. Agreement, it recognized that the parties has not been found to have acted in bad
When Charter Chemical finished the work had never actually agreed on a specific faith. Respondent, it points out, also failed
in 2003, a timetable based on the 2003 completion date.43 to present any official receipt to support
Memorandum of Agreement between its claim for attorney's fees.51
Camp John Hay Development and Bases
On the other hand, respondent argues The Petition is denied. In HUTAMA-RSEA Joint Operations, Inc. v.
that the Court of Appeals' and the arbitral I Citra Metro Manila Tollways
tribunal's decisions, entitling respondent Corporation:61
to the monetary equivalent of the units for The Construction Industry Arbitration
offsetting, should be respected and Commission was created under Executive Under Section I, Article III of the CIAC
accorded great weight and finality. Order No. 1008 to establish an arbitral Rules, an arbitration clause in a
Respondent points out that it only agreed machinery that will "settle expeditiously construction contract shall be deemed as
to bid for the painting works because problems arising from, or connected with, an agreement to submit an existing or
Interpro, Inc., petitioner's project contracts in the construction industry."58 future controversy to CIAC jurisdiction,
manager, assured that under the Master It has jurisdiction over "construction "notwithstanding the reference to a
Development Plan, the units would be disputes between or among parties to an different arbitration institution or arbitral
available for occupancy two (2) to three arbitration agreement, or those who are body in such contract. . . ."
(3) years from negotiations, or sometime otherwise bound by the latter, directly or
in 2003.52 by reference."59 Its purpose is to . . .. . . The arbitration clause in the
encourage the early and expeditious construction contract ipso facto vested the
Respondent further argues that since settlement of disputes in the construction CIAC with jurisdiction. This rule applies,
petitioner was already delayed in industry, recognizing that it is necessary to regardless of whether the parties
delivering the units in 2007, the arbitral avert delays in the resolution of specifically choose another forum or make
tribunal and the Court of Appeals correctly construction industry disputes, which is reference to another arbitral body. Since
applied Article 1191 of the Civil Code, important to attain the national the jurisdiction of CIAC is conferred by law,
awarding indemnity for damages to development goals.60 it cannot be subjected to any condition;
respondent.53 nor can it be waived or diminished by the
Section 4 of the Construction Industry stipulation, act or omission of the parties,
Moreover, respondent claims that the Arbitration Law lays down the jurisdiction as long as the parties agreed to submit
arbitral tribunal correctly acquired of the Construction Industry Arbitration their construction contract dispute to
jurisdiction over the dispute because the Commission: arbitration, or if there is an arbitration
relationship of the parties was born out of clause in the construction contract. The
the Contractor's Agreement.54 The SECTION 4. Jurisdiction. - The CIAC shall parties will not be precluded from electing
Contractor's Agreement provided the have original and exclusive jurisdiction to submit their dispute to CIAC, because
arbitration clause in case of any dispute. over disputes arising from, or connected this right has been vested in each party by
The contracts to sell "cannot be with, contracts entered into by parties law.
considered to have superseded the involved in construction in the Philippines,
Contractor's Agreement"55 because they whether the dispute arises before or after ....
are merely preparatory contracts required the completion of the contract, or after
for the processing of the titles of the the abandonment or breach thereof. It bears to emphasize that the mere
units.56 These disputes may involve government or existence of an arbitration clause in the
private contracts. For the Board to acquire construction contract is considered by law
Lastly, respondent claims that the award jurisdiction, the parties to a dispute must as an agreement by the parties to submit
of attorney's fees was justified, as agree to submit the same to voluntary existing or future controversies between
petitioner's unwarranted delay and arbitration. them to CIAC jurisdiction, without any
unjustified refusal to settle the matter qualification or condition precedent. To
brought about its filing of the Complaint The jurisdiction of the CIAC may include affirm a condition precedent in the
before the arbitral tribunal.57 but is not limited to violation of construction contract, which would
specifications for materials and effectively suspend the jurisdiction of the
For this Court's resolution are the workmanship; violation of the terms of CIAC until compliance therewith, would be
following issues: agreement; interpretation and/or in conflict with the recognized intention of
application of contractual time and delays; the law and rules to automatically vest
First, whether or not the Court of Appeals maintenance and defects; payment, CIAC with jurisdiction over a dispute
erred in ruling that the Construction default of employer or contractor and should the construction contract contain
Industry Arbitration Commission has changes in contract cost. an arbitration clause.62 (Citations
jurisdiction over the dispute despite the omitted)
existence of a dispute resolution clause; Excluded from the coverage of this law are
disputes arising from employer-employee Arbitration of construction disputes
Second, whether or not the Court of relationships which shall continue to be through the Construction Industry
Appeals correctly rescinded the obligation covered by the Labor Code of the Arbitration Commission was incorporated
under Article 1191 of the Civil Code and Philippines. into the general statutory framework on
whether or not a period should be fixed alternative dispute resolution through
under Article 1197 of the Civil Code; and For the Construction Industry Arbitration Republic Act No. 9285, or the Alternative
Commission to acquire jurisdiction, the Dispute Resolution Act of 2004.63 Chapter
Finally, whether or not the Court of law merely requires that the parties agree 6, Section 34 of this law explicitly
Appeals erred in affirming the award of to submit to voluntary arbitration any referenced the Construction Industry
attorney's fees to respondent Charter dispute arising from construction Arbitration Law, while Section 35 affirmed
Chemical and Coating Corporation. contracts. the Construction Industry Arbitration
Commission's jurisdiction:
 Here, petitioner and respondent agreed to It is worth noting that this dispute has
CHAPTER 6 submit to arbitration any dispute arising been ongoing for over a decade now.
from the construction contract, as clearly Despite numerous meetings and
Arbitration of Construction Disputes stipulated in their Contractor's Agreement. negotiations prior to respondent's filing of
The arbitration clause should, thus, be a Complaint before the arbitral tribunal,
SECTION 34. Arbitration of Construction given primacy in accordance with the no amicable settlement had been reached.
Disputes: Governing Law. - The arbitration State's policy to favor arbitration. It Disregarding the proceedings that took
of construction disputes shall be governed follows that if there is any doubt as to place before the lower tribunals and
by Executive Order No. 1008, otherwise what provision should be given effect, this requiring the parties to submit the dispute
known as the Construction Industry Court will rule in favor of the arbitration before the trial court would be merely
Arbitration Law. clause. dilatory at this point. It would only entail
additional expenses and unnecessary
SECTION 35. Coverage of the Law. Moreover, the contracts to sell, containing delays for both parties.
Construction disputes which fall within the a contrary dispute resolution clause, did
original and exclusive jurisdiction of the not supersede the arbitration clause. The II
Construction Industry Arbitration case records show that the contracts to
Commission (the "Commission") shall sell are not inconsistent with the Rescission on account of breach of
include those between or among parties Contractor's Agreement. They are merely reciprocal obligations is provided under
to, or who are otherwise bound by, an devices to facilitate the transfer of Article 1191 of the Civil Code:
arbitration agreement, directly or by ownership of the two (2) units to
reference whether such parties are project respondent-an offshoot of the offsetting ARTICLE 1191. The power to rescind
owner, contractor, subcontractor, scheme provision in the Contractor's obligations is implied in reciprocal ones, in
fabricator, project manager, design Agreement. case one of the obligors should not
professional, consultant, quantity comply with what is incumbent upon him.
surveyor, bondsman or issuer of an While the contracts to sell and the
insurance policy in a construction project. Contractor's Agreement both refer to the The injured party may choose between
transfer of the two (2) units to the fulfillment and the rescission of the
The Commission shall continue to exercise respondent, the contracts to sell are pro- obligation, with the payment of damages
original and exclusive jurisdiction over forma contracts provided by petitioner in in either case. He may also seek rescission,
construction disputes although the selling the Camp John Hay Suites units. even after he has chosen fulfillment, if the
arbitration is "commercial" pursuant to There is no intent to supersede the latter should become impossible.
Section 21 of this Act. Contractor's Agreement, which remains
the principal contract between petitioner The court shall decree the rescission
Arbitration, "[b]eing an inexpensive, and respondent. claimed, unless there be just cause
speedy[,] and amicable method of settling authorizing the fixing of a period.
disputes . . . is encouraged by the Supreme Petitioner erred in claiming that because
Court."64 If any doubt will arise, it "should the contracts to sell are not construction This is understood to be without prejudice
be resolved in favor of arbitration."65 contracts, they effectively removed the to the rights of third persons who have
parties' dispute outside the ambit of a acquired the thing, in accordance with
In LM Power Engineering Corp. v. Capitol construction dispute. On the contrary, the articles 1385 and 1388 and the Mortgage
Industrial Construction Groups, Inc.,66 this subject of the contracts to sell still falls Law.
Court explained the rationale behind this within the jurisdiction of the Construction
policy: Industry Arbitration Commission. Section This provision refers to rescission
4 of the Construction Industry Arbitration applicable to reciprocal obligations. It is
Aside from unclogging judicial dockets, Law states that its jurisdiction includes invoked when there is noncompliance by
arbitration also hastens the resolution of "payment [and] default of employer or one (1) of the contracting parties in case
disputes, especially of the commercial contractor[.]" Here, the main dispute of reciprocal obligations. "Reciprocal
kind. It is thus regarded as the "wave of concerning the contracts to sell all boils obligations are those which arise from the
the future" in international civil and down to the issue of payment of the two same cause, and in which each party is a
commercial disputes. Brushing aside a (2) units for the services rendered by debtor and a creditor of the other, such
contractual agreement calling for respondent. Hence, the units' transfer as that the obligation of one is dependent
arbitration between the parties would be payment to respondent still falls under the upon the obligation of the other. They are
a step backward. jurisdiction of the arbitral tribunal. to be performed simultaneously such that
the performance of one is conditioned
Consistent with the above-mentioned This dispute is better left to the expertise upon the simultaneous fulfillment of the
policy of encouraging alternative dispute of the Construction Industry Arbitration other."69
resolution methods, courts should liberally Commission, a quasi-judicial body with the
construe arbitration clauses. Provided technical expertise to resolve disputes Rescission under Article 1191 will be
such clause is susceptible of an outside the expertise of regular courts.68 ordered when a party to a contract fails to
interpretation that covers the asserted Aptly, it should adjudicate and determine comply with his or her obligation.
dispute, an order to arbitrate should be the claims and rights of petitioner and Rescission "is a principal action that is
granted. Any doubt should be resolved in respondent with respect to the immediately available to the party at the
favor of arbitration.67 (Citations omitted) construction contract and all its incidents. time that the reciprocal [obligation] was
breached."70 In Spouses Velarde v. Court
of Appeals:71
 In Deudor v. J.M. Tuason & Company, no purpose that to delay or lead to an
The right of rescission of a party to an Inc.:76 unnecessary and expensive multiplication
obligation under Article 1191 of the Civil of suits. Moreover, under Art. 1191 of the
Code is predicated on a breach of faith by Article 1197 is part and parcel of all Civil Code, when one of the obligors
the other party who violates the obligations contemplated therein. Hence, cannot comply with what is incumbent
reciprocity between them. The breach whenever a period is fixed pursuant to upon him, the obligee may seek rescission
contemplated in the said provision is the said Article, the court merely enforces or and the court shall decree the same unless
obligor's failure to comply with an existing carries out an implied stipulation in the there is just cause authorizing the fixing of
obligation. When the obligor cannot contract in question. In fact, insofar as a period. In the absence of any just cause
comply with what is incumbent upon [him contracts not fixing a period are for the court to determine the period of
or her], the obligee may seek rescission concerned, said legal provision applies the compliance, there is no more obstacle
and, in the absence of any just cause for only if, from the nature and circumstances for the court to decree the rescission
the court to determine the period of surrounding the contract involved, "it can claimed.80 (Citation omitted)
compliance, the court shall decree the be inferred that a period was intended" by
rescission.72 (Citations omitted) the parties thereto. For this reason, the In Gregorio Araneta, Inc. v. Philippine
last paragraph of Article 1197, ordains that Sugar Estates Development Company,
"Resolution grants the injured party the "in every case, the courts shall determine Ltd.,81 this Court held that if a reasonable
option to pursue, as principal actions, such period as may under the period was agreed upon in a contract, all
either a rescission or specific performance circumstances have been probably that the court should have done was
of the obligation, with payment of contemplated by the parties." In other determine if that reasonable time had
damages in either case."73 words, in fixing said period, the Court already elapsed:
merely ascertains the will of the parties
Rescission of the contract is sanctioned and gives effect thereto.77 If the contract so provided, then there was
here. Under the contract, petitioner and a period fixed, a "reasonable time"; and all
respondent have reciprocal obligations. As stipulated in Article 1197, this Court that the court should have done was to
Respondent, for its part, was bound to must determine that the obligation does determine if that reasonable time had
render painting services for petitioner's not fix a period or that the period is made already elapsed when suit was filed. If it
property. This was completed by to depend upon the will of the debtor, but had passed, then the court should declare
respondent in 2003, after which it was it can be inferred from its nature and the that petitioner had breached the contract,
belatedly issued a clearance in 2005. circumstances that a period was intended. as averred in the complaint, and fix the
Meanwhile, in accordance with the Then, it must be determined what period resulting damages. On the other hand, if
Contractor's Agreement, petitioner paid was probably contemplated by the the reasonable time had not yet elapsed,
part of the contract price with the parties.78 the court perforce was bound to dismiss
remaining balance to be paid through the action for being premature. But in no
offsetting of two (2) Camp John Hay Suites The power of this Court to fix a period is case can it be logically held that under the
units. However, despite incessant discretionary. The surrounding facts of plea above quoted, the intervention of the
demands from respondent, petitioner each case must be taken into court to fix the period for performance
failed to deliver these units because their consideration in deciding whether the was warranted, for Article 1197 is
construction had yet to be completed. The fixing of a period is sanctioned. The precisely predicated on the absence of any
law, then, gives respondent the right to discretion to fix an obligation's period is period fixed by the parties.82
seek rescission because petitioner could addressed to this Court's judgment and is
not comply with what is incumbent upon tempered by equitable considerations. There is no just cause for this Court to
it. Petitioner, however, claims that the determine the period of compliance. As
fixing of the period under Article 1197 is In Central Philippine University v. Court of can be gleaned from the records of this
the proper remedy, not rescission under Appeals,79 this Court refused to fix a case, the obligation of petitioner to build
Article 1191. period because of the years that had the Camp John Hay Suites had been
already been allowed for the party to dragging for years even before it entered
This Court disagrees. We cannot cure the comply with the condition of the into the Contractor's Agreement with
deficiency here by fixing the period of the obligation. Doing so, it held, would be a respondent.
obligation. There is no just cause for this mere technicality and formality, and would
Court to fix the period for the benefit of only cause further delay. This Court ruled: The Memorandum of Agreement that
petitioner. petitioner executed with the Bases
This general rule however cannot be Conversion and Development Authority
Article 1197 applies "when the obligation applied considering the different set of shows that the construction of the Camp
does not fix a period but from its nature circumstances existing in the instant case. John Hay Suites began in 1996. When
and circumstances it can be inferred that a More than a reasonable period of fifty (50) respondent demanded the units' transfer
period was intended[.]"74 This provision years has already been allowed petitioner in 2007, more than 10 years had lapsed;
allows the courts to fix the duration to avail of the opportunity to comply with yet, within those years, petitioner was still
"because the fulfillment of the obligation the condition even if it be burdensome, to not able to complete the construction of
itself cannot be demanded until after the make the donation in its favor forever the Camp John Hay Suites.
court has fixed the period for compliance valid. But, unfortunately, it failed to do so.
therewith and such period has arrived."75 Hence, there is no more need to fix the
duration of a term of the obligation when
such procedure would be a mere
technicality and formality and would serve
To tolerate petitioner's excuses would only Although rescission repeals the contract
cause more delay and burden to In Spouses Serrano v. Court of Appeals:87 from its inception, it does not disregard all
respondent. Petitioner failed to forward the consequences that the contract has
any just cause to convince this Court to set Generally, the rule is that to rescind a created. What mutual rescission entails is
a period. It merely reasoned force majeure contract is not merely to terminate it, but "the return of the benefits that each party
and mutual delays with Bases Conversion to abrogate and undo it from the may have received as a result of the
and Development Authority without beginning; that is, not merely to release contract."91
offering any explanation for its alleged the parties from further obligations to
difficulty in building the units. each other in respect to the subject of the Here, it is clear that only petitioner
contract, but to annul the contract and benefited from the contract. Respondent
To belatedly fix the period for petitioner's restore the parties to the relative positions has already performed the painting works
compliance would mean refusing which they would have occupied if no such in 2003, and it was accepted by petitioner
immediate payment to respondent. contract had ever been made. Rescission as satisfactory. Since this service cannot be
Petitioner's noncompliance with its necessarily involves a repudiation of the undone and petitioner has already
obligation to deliver the two (2) units as contract and a refusal of the moving party enjoyed the value of the painting services
payment to respondent can no longer be to be further bound by it.88 (Citation over the years, respondent is entitled to
excused. omitted) the payment of the painting services with
interest in accordance with Articles 1191
The law and jurisprudence are clear. When This Court has explained that restitution and 2210 of the Civil Code.92 The interest
the obligor cannot comply with its under Article 1385 of the Civil Code shall be computed from the date of
obligation, the obligee may exercise its equally applies for rescission under Article extrajudicial demand by respondent on
right to rescind the obligation, and this 1191. In Laperal v. Solid Homes, Inc.:89 August 3, 2007 in accordance with Article
Court will order the rescission in the 116993 of the Civil Code and this Court's
absence of any just cause to fix the Despite the fact that Article 1124 of the ruling in Nacar v. Gallery Frames.94
period.83 Here, lacking any reasonable old Civil Code from whence Article 1191
explanation and just cause for the fixing of was taken, used the term "resolution", the IV
the period for petitioner's noncompliance, amendment thereto (presently, Article
the rescission of the obligation is justified. 1191) explicitly and clearly used the term Generally, the parties may stipulate the
"rescission". Unless Article 1191 is recovery of attorney's fees, but in the
III subsequently amended to revert back to absence of such, Article 2208 of the Civil
the term "resolution", this Court has no Code enumerates instances when these
Rescission of the obligation under Article alternative but to apply the law, as it is fees may still be recovered:95
1191 is a declaration that a contract is void written.
at its inception. Its effect is to restore the ARTICLE 2208. In the absence of
parties to their original position, insofar as Again, since Article 1385 of the Civil Code stipulation, attorney's fees and expenses
practicable. Fang v. Dueñas84 is expressly and clearly states that of litigation, other than judicial costs,
illustrative: "rescission creates the obligation to return cannot be recovered, except:
the things which were the object of the
Rescission has the effect of "unmaking a contract, together with their fruits, and (1) When exemplary damages are
contract, or its undoing from the the price with its interest," the Court finds awarded;
beginning, and not merely its no justification to sustain petitioners'
termination." Hence, rescission creates position that said Article 1385 does not (2) When the defendant's act or omission
the obligation to return the object of the apply to rescission under Article 1191.90 has compelled the plaintiff to litigate with
contract It can be carried out only when third persons or to incur expenses to
the one who demands rescission can Article 1385 of the Civil Code provides: protect his interest;
return whatever he may be obliged to
restore. To rescind is to declare a contract ARTICLE 1385. Rescission creates the (3) In criminal cases of malicious
void at its inception and to put an end to it obligation to return the things which were prosecution against the plaintiff; (4) In
as though it never was. It is not merely to the object of the contract, together with case of a clearly unfounded civil action or
terminate it and release the parties from their fruits, and the price with its interest; proceeding against the plaintiff;
further obligations to each other, but to consequently, it can be carried out only
abrogate it from the beginning and restore when he who demands rescission can (5) Where the defendant acted in gross
the parties to their relative positions as if return whatever he may be obliged to and evident bad faith in refusing to satisfy
no contract has been made.85 restore. the plaintiff's plainly valid, just and
demandable claim;
Mutual restitution is required in cases Neither shall rescission take place when
involving rescission under Article 1191. the things which are the object of the (6) In actions for legal support;
"Where a contract is rescinded, it is the contract are legally in the possession of
duty of the court to require both parties to third persons who did not act in bad faith. (7) In actions for the recovery of wages of
surrender that which they have household helpers, laborers and skilled
respectively received and to place each In this case, indemnity for damages may workers;
other as far as practicable in his original be demanded from the person causing the
situation[;] the rescission has the effect of loss. (Emphasis supplied) (8) In actions for indemnity under
abrogating the contract in all parts."86 workmen's compensation and employer's
liability laws;
 Unmistakably, there was breach of faith.
(9) In a separate civil action to recover civil Petitioner violated the reciprocity of its
liability arising from a crime; contract with respondent. This case
dragged on for years because petitioner
(10) When at least double judicial costs unjustifiably refused to pay respondent's
are awarded; valid claim. In the proceedings before the
arbitral tribunal, petitioner even rejected
(11) In any other case where the court respondent's offer to settle the dispute by
deems it just and equitable that attorney's paying the balance of the contract price.
fees and expenses of litigation should be While petitioner enjoyed the benefit of
recovered. the painting services, respondent is forced
to await payment, foregoing the use and
In all cases, the attorney's fees and value of money that have compounded
expenses of litigation must be reasonable. over the years.
(Emphasis supplied)
Clearly, petitioner's refusal to pay
Generally, attorney's fees cannot be compelled respondent to file the
recovered as part of damages, as no Complaint and incur expenses in the
premium should be placed on the right to process. Considering the years that had
litigate. In ABS-CBN Broadcasting lapsed, during which respondent
Corporation v. Court of Appeals:96 incessantly demanded payment, it is only
equitable to award attorney's fees.
[Attorney's fees] are not to be awarded
every time a party wins a suit. The power WHEREFORE, the Petition for Review on
of the court to award attorney's fees Certiorari is DENIED. The Court of Appeals
under Article 2208 demands factual, legal, May 13, 2011 Decision and September 30,
and equitable justification. Even when a 2011 Resolution in CA-G.R. SP No. 108335
claimant is compelled to litigate with third are AFFIRMED WITH MODIFICATION.
persons or to incur expenses to protect his
rights, still attorney's fees may not be Petitioner Camp John Hay Development
awarded where no sufficient showing of Corporation is ordered to pay respondent
bad faith could be reflected in a party's Charter Chemical and Coating
persistence in a case other than an Corporation: (1) the balance of the
erroneous conviction of the righteousness contract price in the amount of Five
of his cause.97 (Citations omitted) Million Nine Hundred Thousand Pesos
(P5,900,000.00) with interest at the rate of
The grant of attorney's fees depends on twelve percent (12%) per annum from
the evaluation of each case and is within August 3, 2007 until June 30, 2013, and six
this Court's discretion. Attorney's fees may percent (6%) per annum from July 1, 2013
be awarded if a party was forced to litigate until its full satisfaction; and (2) attorney's
and incur expenses to protect its right and fees in the amount of Five Hundred Ninety
interest due to another party's unjustified Thousand Pesos (P590,000.00).
act or omission.98
SO ORDERED.
Here, we agree with the findings of the
Construction Industry Arbitration Caguioa,* A. Reyes, Jr., Hernando, and
Commission and the Court of Appeals. Inting, JJ., concur.
Respondent is entitled to the award of
attorney's fees.

In awarding attorney's fees, the arbitral

tribunal explained that respondent was
compelled to engage the services of a
lawyer to recover the two (2) Camp John
Hay Suites units or their monetary value;
thus, it incurred expenses to protect its
interest after petitioner had breached
their contract.99 In affirming this Final
Award, the Court of Appeals found that
respondent undeniably needed adequate
legal representation to recover on a clearly
demandable claim, making the additional
expense inevitable.100