G.R. No. 147594

FIRST DIVISION

METRO MANILA TRANSIT G.R. No. 147594

CORPORATION,*

Petitioner,

Present:

PUNO, C.J., Chairperson,

SANDOVAL-GUTIERREZ,

- v e r s u s - CORONA,

AZCUNA and

GARCIA, JJ.

D.M. CONSORTIUM, INC.,

Respondent. Promulgated:

March 7, 2007

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D E C I S I O N

CORONA, J.:

On appeal by certiorari under Rule 45 of the Rules of Court are the decision[1] of the Court of Appeals (CA) dated December 6, 1999 in CA-G.R. CV No. 54294 and its resolution[2] dated March 16, 2001, affirming the judgment[3] of the Regional Trial Court (RTC) of Quezon City, Branch 93.

In 1981, the national government, through petitioner Metro Manila Transit Corporation (MMTC), launched a bus assistance program to aid private bus operators in acquiring new bus units through a “lease–purchase on easy installment payment” scheme. Respondent D.M. Consortium, Inc. (DMCI) availed of the program and entered into a lease–purchase agreement (LPA) with MMTC for the acquisition of 228 buses. Both parties agreed that, pending full payment, the monthly installments were to be treated as rentals. The salient features of the agreement included, among others, the following:

4.05 The operation and use of the [L]eased [E]quipment shall be at the risk of the LESSEE and not of the LESSOR, and the obligation of the LESSEE to pay the rent hereunder to the LESSOR shall be unconditional.

xxx xxx xxx

11.01 It shall be a violation of the Lease Purchase Agreement [:] (a) if the LESSEE shall default in the payment of any rent hereunder and such default shall continue unremedied for a period of three (3) consecutive months;

11.02 In the event of a violation or breach of this lease, as herein defined: (a) the leased equipment shall, upon the LESSOR’s option and demand, forthwith be delivered to the LESSOR, at the LESSEE’s expense, at such place as the LESSOR may designate, and the LESSOR, and/or its agents may, without notice or liability or legal process, enter upon the premises where such leased equipment is situated, and repossess all or any of the leased equipment, using such force as may be necessary and permitted under the law applicable;

xxx xxx xxx

14.01 Title of the [L]eased [E]quipment shall, at all times, remain with the LESSOR. The [L]eased [E]quipment is, and shall remain, personal property of the LESSOR. The original registration of title thereto in the name of the LESSOR or any subsequent registration in the name of the LESSOR shall be effected by the LESSEE at its expense.

xxx xxx xxx

15. 01 The LESSEE shall have the option to purchase or otherwise acquire title to or ownership of any of the [L]eased [E]quipment, upon expiration of the lease period, or prior to the expiration of said lease period, provided, that the LESSEE shall have paid in full all outstanding obligations to the LESSOR.[4]

After an alleged default in its amortizations, DMCI was informed by MMTC that it was taking immediate possession of all the bus units and accessories.

Meanwhile, because of the national emergency caused by a coup d’ etat attempt, then President Corazon Aquino issued Memorandum Order (MO) No. 267 on December 7, 1989 directing the Secretary of Transportation and Communication to temporarily take over the operations of DMCI. Under the MO, the DOTC Secretary was to recommend payment of “just compensation to the owner for the use of their buses and facilities.”[5]

On December 9, 1989, MMTC repossessed the buses by occupying the premises of DMCI, including its offices.

Consequently, MMTC took steps to sell the repossessed buses at a public auction. Before the public bidding, however, DMCI filed a petition for injunction with prayer for the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction in the RTC of Quezon City, Branch 93.[6]

On April 11, 1990, a TRO was issued enjoining the scheduled public auction of the buses. After due notice and hearing, the lower court later issued a writ of preliminary injunction in favor of DMCI.

MMTC filed a motion for reconsideration (MR) of said order but this was denied. It subsequently filed a petition for certiorari in the CA questioning the issuance of the writ of preliminary injunction but it was likewise dismissed for lack of merit.

Thereafter, trial of the main case ensued.

On September 11, 1995, the RTC decided in favor of DMCI and found no basis for MMTC to repossess the buses or to sell them at public auction. According to the trial court, under 11.01[7] of the LPA, repossession was possible only if there was failure on the part of DMCI to pay within three consecutive months but, contrary to MMTC’s claim, DMCI made partial payments which were accepted without protest. The trial court added that long before the December 9, 1989 takeover, DMCI had already paid about P106 million or more than its original obligation of P71 million under the LPA. The dispositive portion of the decision read:

WHEREFORE, premises considered, judgment is hereby rendered in favor of [DMCI] and the [MMTC] is hereby ordered to:

1. Pay [DMCI] the amount of P200,000.00 by way of moral damages.

2. Pay the [DMCI] the amount of P100,000.00 for the use of the furniture[s], fixtures and other equipments.

3. [Pay] the [DMCI] the amount of P500,000.00 for the reasonable rent for the use of DMC[I]’s buses from December 9, 1989 up to the present.

4. [Return] all DMC[I]’s buses that were taken by [MMTC].

5. [Pay] attorney’s fees in the amount of P100,000.00[;] and

6. [Pay] the costs.

SO ORDERED.[8]

On appeal to the CA, the appellate court sustained the RTC’s order for MMTC to return the buses to DMCI. However, it deleted the award to DMCI of moral damages, payment for the use of its buses and office facilities and attorney’s fees. The decretal portion of the decision read:

WHEREFORE, foregoing considered, a new decision is hereby entered by (1) AFFIRMING the return of all the DMC[I] buses taken by the [MMTC] as embodied in no. 4 of the dispositive portion of the appealed decision; and (2) we REVERSED and SET ASIDE the rest of the dispositive portion of the questioned decision as appearing in no. 1,2,3,5 and 6.

SO ORDERED.[9]

MMTC and DMCI filed their respective MRs of the CA decision.

In its MR, MMTC contended that it owned the buses and its takeover/repossession of said buses was justified under the LPA. On the other hand, DMCI insisted that it was not the LPA that was involved but MO No. 267 which expressly called for payment of just compensation on account of the government’s takeover of its facilities during the national emergency declared by then President Aquino. It also argued that it was entitled to damages since the buses could no longer be returned in their original condition.

On March 16, 2001, the CA issued a resolution modifying its questioned decision. It held:

1. Adjudging … MMTC liable to pay [DMCI] the value of the subject 228 DMC[I] buses as of December, 1989, to be determined by the lower court after appropriate proceedings. For this purpose[,] the case is remanded to the lower court only for this purpose and thereafter to enforce this judgment.

2. Requiring … MMTC to pay [DMCI] the amount of P2,000,000.00 for the appropriation and use of its furniture, fixtures and other equipments.

Except as herein modified, the dispositive part of the Decision of December 6, 1999 is maintained.

SO ORDERED. (emphasis supplied)[10]

The appellate court’s bases for modifying its previous decision read:

There is preponderant evidence that MMTC took over not only of the transport facilities of [DMCI], but also the latter’s furniture, equipments, fixtures….It is not disputed that MMTC did not have the semblance of authority whether under the LPA or MO 267 to appropriate the said properties thus listed. MMTC in fact admitted that [DMCI was] entitled to reasonable compensation for the use of these properties.

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While the total value of the items listed by [DMCI] was P5,220,997.59 …, MMTC pray[ed] in their Brief and Motion for Reconsideration for an award of P2,000,000.00. We now find this reasonable and supported by evidence.

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The last matter to be resolved is DMCI’s assertion that MMTC should pay the market value of the 228 bus units as of December 9, 1989, the date of the repossession.

The lower court decreed that the subject buses should be returned to DMCI as a necessary consequence of the absence of legal and factual basis for the taking thereof. On this, we sustained the lower court.

DMCI…pointed out, however, that the subject buses can no longer be returned in the same condition that they were at the time of repossession, understandably so considering that eleven (11) years had lapsed. In any event, there seems to be no disagreement on this point. It is then posited that DMCI … should be paid the corresponding value of the repossessed buses as of the time of the taking, the return thereof having become impractical, if not possible.

We agree.[11]

Only MMTC appealed the CA decision and resolution to us.

In this petition, MMTC raises the following issues: (1) whether it can be ordered to return the repossessed buses after exercising its right of possession as owner/lessor thereof and (2) whether the award of P2 million as payment for the use and appropriation of DMCI’s furniture, fixture and other equipment was warranted.[12]

On the first issue, MMTC argues that the assailed CA decision and resolution were contrary to the provisions of Article 1485[13] in relation to Article 1484[14] of the Civil Code. On the second issue, MMTC insists that the lower courts had no basis for holding it liable for P2 million for the use of DMCI’s furniture, fixtures and equipment.

We deny the petition.

It is futile for MMTC to challenge the CA’s order to return the repossessed buses to DMCI because the CA already vacated this pronouncement in its assailed resolution of March 16, 2001. Instead, the CA directed MMTC to reimburse DMCI the value of the buses at the time of their unlawful seizure considering that they could no longer be returned in their original condition.

MMTC’s invocation of Articles 1484 and 1485 is misplaced. Although these refer to the installment sales of personal properties and to lease, respectively, both provisions find no application in this case.

First, the records indicate that MMTC did not avail of the options set forth in Article 1484; instead it utilized the option to repossess the buses under 11.02[15] of the LPA. Second, the LPA governed the rights of the parties, hence, the CA and the RTC correctly resolved their conflicting claims based on the LPA’s provisions. Well-settled is the rule that a contract voluntarily entered into by the parties is the law between them and all issues or controversies shall be resolved mainly by the provisions thereof.[16]

At any rate, MMTC may still be ordered to return the repossessed buses notwithstanding that, as owner/lessor, it had the right to possess them in the first place.

Undeniably, under the law, jus possidendi is a necessary incident of ownership.[17] However, the owner cannot exercise this right to the prejudice of a party whose possession is predicated on a contract like agency, trust, pledge or lease, as in this case.[18] Under the LPA between MMTC and DMCI, the latter, as lessee, had a right of possession over the buses and it may be deprived of said right only if it failed to pay its dues for three consecutive months.[19] Both the trial court and the appellate court established that there was actually no default on the part of DMCI justifying MMTC’s seizure of the buses. MMTC cannot now use the principle of jus possidendi as an excuse for its unwarranted act and frustrate the redelivery of the vehicles to DMCI.

In addition, a party vested with the right of possession to the property may set up this right even against the owner thereof. Under Article 539 of the Civil Code, every possessor has a right to be respected in his possession and, if deprived of such right, the law shall restore it to him. In the case at bar, after having been unjustly denied of its right of possession to the buses, DMCI is entitled to get them back from MMTC. But since the buses can no longer be returned in their original state and considering further that DMCI has already paid their full amount, the CA resolution ordering MMTC to instead pay DMCI their value at the time of repossession is correct.

In particular, we agree with the CA’s disquisition on the reimbursement order that:

Although the payments made by DMCI were in the concept of rentals, in reality, these form part of the purchase price because the agreement provided for the transfer of ownership from MMTC to DMCI upon full payment of the value of the buses supposedly under lease, it being expressly provided that “the sum total of all the rentals of the [L]eased [E]quipment…shall constitute as the purchase price of the equipment[s].

Considering the payment of the P 106 Million and MMTC’s conduct that rendered it impossible for DMCI to fully comply with its remaining obligations under the LPA, if any, we find applicable and so apply Article 1234 of the Civil Code, which reads:

“ART. 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been strict and complete fulfillment, less damages suffered by the oblige.”

For all intents and purposes…DMCI has acquired ownership of the 228 buses and therefore[,] it is entitled to the value thereof as of the date of unlawful seizure by MMTC. xxx[20]

On the second issue, we hold that the determination of whether the award of P2 million was warranted requires a review of this case’s facts and evidence. This Court is not a trier of facts[21] and it shall only pass upon them for compelling reasons[22] which unfortunately are not present here.

WHEREFORE, the assailed decision of the Court of Appeals dated December 6, 1999 in CA-G.R. CV No. 54294 and its resolution dated March 6, 2001 are hereby AFFIRMED. Let the records of this case be REMANDED to the Regional Trial Court of Quezon City, Branch 93 for the purpose of determining the value of the buses to be paid by petitioner Metro Manila Transit Corporation to respondent D.M. Consortium, Incorporated.

Costs against petitioner.

SO ORDERED.

RENATO C. CORONA

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Chief Justice

Chairperson

ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA

Associate Justice Associate Justice

CANCIO C. GARCIA

Associate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO

Chief Justice

* The then Secretary of Transportation and Communication was included as petitioner in this case. A perusal of the records reveals that he was a party-respondent in the RTC but was exonerated from any liability and did not interpose any appeal, hence, he was excluded as petitioner herein.

[1] Penned by Associate Justice Eugenio S. Labitoria (retired) and concurred in by Associate Justices Marina L. Bauzon and Edgardo P. Cruz of the Fifteenth Division of the Court of Appeals, rollo, pp. 30-39.

[2] Id., pp. 42-49.

[3] Decided by Judge Amado M. Costales.

[4] Rollo, pp. 32-34.

[6] Docketed as Civil Case No. Q-90-5199.

[8] Rollo, pp. 30-31.

[10] CA Resolution, rollo, p. 49.

[12] Petition, rollo, pp. 19-20.

[13] Art. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.

[14] Art. 1484. In a contract of sale of personal property, the price of which is payable in installments, the vendor may exercise any of the following remedies:

(1) Exact fulfillment of the obligation, should the vendee fail to pay;

(2) Cancel the sale, should vendee’s failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void.

[16] Henson v. Intermediate Appellate Court, No. L-72456, 19 February 1987, 148 SCRA 11.

[17] Civil Code, Article 428. See also Archipelago Management and Marketing Group v. Court of Appeals, G.R. No. 128850, 20 November 1998, 299 SCRA 43.

[18] CIVIL LAW: PROPERTY, OWNERSHIP AND ITS MODIFICATIONS by (Ret.) Justice Jose C. Vitug, Vol. II., 2003 Edition, p. 56.

[21] Towne and City Development Corporation v. Court of Appeals, G.R. No. 135043, 14 July 2004, 434 SCRA 356.

[22] 1) The conclusion is a finding grounded entirely on speculation, surmise and conjectures; 2) the interference made is manifestly mistaken; 3) there is grave abuse of discretion; 4) the judgment is based on misapprehension of facts; 5) the findings of facts are conflicting; 6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admission of both appellant and appellee; 7) the findings of fact by the Court of Appeals are contrary to those of the trial court; 8) said findings of fact are conclusion without citation of specific evidence on which they are based; 9) the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; and 10) the findings of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by evidence on record. See Policarpio v. Court of Appeals, 336 Phil. 329 (1997); Mamsar Agro-Industrial v. Varley Trading, Inc., G.R. No. 142729, 29 November 2005.