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THIRD DIVISION

SPOUSES RICARDO and ELENA G.R. No. 178317

C. GOLEZ,
Petitioners, Present:

VELASCO, JR, J., Chairperson,

PERALTA,
- versus - VILLARAMA, JR.,
PEREZ,* and
JARDELEZA, JJ.

MELITON NEMENO, 1 Promulgated:

Respondent.

VILLARAMA, JR., J.:

This is a petition for review on certiorari under Rule 45 of the 1997

Rules of Civil Procedure, as amended, assailing the January 20, 2006
Decision2 and April 18, 2007 .Resolution3 of the Court of Appeals (CA) in
CA-G.R. CV No. 60638. The appellate court affirmed with modification
the March 16, 1998 Decision4 of the Regional Trial Court (RTC) ofMolave,
Zamboanga del Sur, Branch 23, ordering petitioners Spouses Ricardo and
Elena C. Golez to pay respondent Meliton Nemefi.o the contract amount in
their lease agreement of P143,823.00 with 12% interest per annum plus
damages.

The antecedents of the case follow:

Respondent is the registered owner of a commercial lot located in

Molave, Zamboanga del Sur known as Lot No. 7728 and covered by

Also referred to as Meliton Nemefto, Sr., Meliton Nemeno and Meliton Nemenio in some parts of the
records.
Designated Acting Member in lieu of Associate Justice Bienvenido L. Reyes, per Special Order No.
2084 dated June 29, 2015.
Rollo, pp. 204-220. Penned by Associate Justice Myrna Dimaranan-Vidal, with Associate Justices
Romulo V. Borja and Ricardo R. Rosario concurring.
Id. at 171-172. Penned by Associate Justice Romulo V. Borja, with Associate Justices Mario V. Lopez
and Michael P. Elbinias concurring.
4
Id. at 118-136. Penned by Presiding Judge Camilo E. Tamin.

tl
Decision 2 G.R. No. 178317

Original Certificate of Title No. 0-2,2335 of the Registry of Deeds of

Zamboanga del Sur.

On May 31, 1989, respondent entered into a Lease Contract6 over a

portion of Lot No. 7728 with petitioners as lessees. The pertinent portion
of the contract is quoted verbatim hereunder:
That, the Party of the First Part/Lessor hereby leased a portion of
that Commercial Lot with an area of 12 meters by 7 meters to the Party of
the Second Part;

That, the Party of the Second Part shall construct a Commercial

Building thereon amounting to ONE HUNDRED FORTY THREE
THOUSAND EIGHT HUNDRED TWENTY THREE (P143,823.00)
PESOS;

That, the Party of the Second Part shall pay a monthly rental of the
space occupied by the building in the amount of TWO THOUSAND
(P2,000) PESOS, of which amount, the Party of the First Part shall not
collect, instead, said amount shall be used/paid to the herein Lessee as
payment of the cost of building built on the aforesaid lot;

That, the total amount payable by the herein Lessor to the Lessee
includes the following: a. Building permit fees; b. Cost of building; c. 21
pcs. tables; d. 23 pcs. chairs; e. 5 pcs[.] benches; f. 1 unit cabinet; g. 3
window trapal; h. 1 unit deepwell handpump with accessories; j. lighting
facilities; and all things permanently attached to the building; of which the
total amount is the one reflected above;

That, the term of this contract shall be for FOUR (4) Years only,
however, if the amount of (P143,823.00) shall not be fully paid within the
period, the parties hereby reserves the right to extend this contract, until
such time that the above[-]mentioned amount shall have been fully paid;

That, as soon as the above amount shall be fully paid, the building
shall be deemed owned by the herein Party of the First Part; however, the
Party of the Second Part is hereby obligated to cause the repair of the
building before it shall be turned over to the Party of the First Part;

That, this contract shall take effect on June 1, 1989, whereby

payment of the rental shall take effect on the said date[.]

On May 23, 1992, the building subject of the lease contract was
burned down.

Because of the destruction of the building, respondent, on May 29,

1992, sent a letter7 to petitioners demanding the accumulated rentals for the
leased property from March 17, 1989 to June 17, 1992 totaling P78,000.00.
As the demand was left unheeded, respondent filed a complaint8 for
collection of rentals plus damages before the Molave RTC.

5
Records (Vol. I), p. 10.
6
Id. at 8.
7
Id. at 9.
8
Id. at 1-6. An amended complaint was filed on December 23, 1994, id. at 188-194.
Decision 3 G.R. No. 178317

Respondent alleged that Ricardo is the proximate cause of the fire that
razed the building to the ground. He also claimed that without his
knowledge, petitioners insured the building with two insurance companies
for face values of more than its cost. He further alleged that Ricardo was
charged with arson before the Municipal Trial Court (MTC) of Molave in
relation to the burning of the subject building. He prayed that petitioners be
ordered to pay him P96,000.00 representing the unpaid rentals from March
17, 1989 until the expiration of the lease and P100,000.00 representing
damages for violating the lease contract. Respondent also sought the
issuance of a writ of attachment in his favor.

Petitioners, for their part, admitted the execution of the contract of

lease but dispute their liability to pay respondent rentals. They contended
that under the contract of lease, the rental payment is amortized over the cost
of the subject building, thus, respondent had already become its co-owner
who must suffer the loss of his property. They also denied liability for the
burning of the building contending that it has been destroyed by a fortuitous
event. They admitted though that they insured the building beyond their
insurable interest over it. By way of counterclaim, they alleged that they
extended various cash loans to respondent in the total amount of P11,000.00
starting April 1989 with an agreed monthly interest of 5%. Because
respondent failed to pay the loan, they claimed that the total demandable
amount from him is already P39,104.00 as of the filing of their Answer.
Petitioners are also demanding P1,000,000.00 in damages from respondent
for publicly imputing to them the burning of the subject building.

On July 9, 1992, Molave MTC Judge Diosdado C. Arriesgado, the

investigating judge on the criminal complaint for arson filed by respondent
against Ricardo, issued an Order9 finding probable cause to indict the latter
for arson. The findings of the investigating judge were approved by
Zamboanga del Sur Provincial Prosecutor Elpidio A. Nacua on September 4,
1992.10 However, upon motion for reconsideration filed by Ricardo, the
criminal case for arson was dismissed in a Resolution11 dated November 3,
1992 issued by Prosecutor Nacua. This prompted respondent to file a motion
for reconsideration of the resolution issued by the Provincial Prosecutor.

In the meantime, the RTC issued a Pre-trial Order12 dated November

18, 1992, which stated, among others, the following issues the parties agreed
to litigate on:
Issues submitted by [respondent]:

1. Whether or not under the contract of lease entered into by [petitioners]

and [respondent], [petitioners are] liable for back rentals to
[respondent];

9
Id. at 74-78.
10
Id. at 79.
11
Rollo, pp. 184-193.
12
Records (Vol. I), pp. 100-101.
Decision 4 G.R. No. 178317

2. Whether or not [petitioners have] any responsibility to the

burning of the house which is the subject matter of the lease
contract.

Issues submitted by [petitioners]:

1. Whether or not [respondent] has unpaid loan in favor of [petitioners]

in the amount of P39,000.00;

2. Whether or not [petitioners have] the right to claim moral damages for
the alleged character assassination made by the [respondent] against
[petitioners] for having burned the house built on the leased
premises.13 (Emphasis supplied)

During trial, respondent testified on the contract he executed in favor of

petitioners; the subject building built thereon by the latter to be delivered at the
end of the term of the contract; the burning of the subject building; and that
after the building was burned, he demanded payment of rentals from petitioners
but said demand remained unheeded. When respondent was about to present
evidence to supposedly prove that Ricardo was the author of the fire that gutted
down the subject building, the trial court prohibited him and his counsel on the
ground that the alleged arson is not the basis of his complaint. The pertinent
portion of respondents testimony is quoted hereunder:
ATTY. ACAIN Q: Do you know if the Office of the Chief of Police
file[d] a case of Arson against defendant Ricardo
Golez?

COURT : If your theory is that the defendant is responsible

for the burning of the building[,] why is this
collection of rental not damages?

xxxx

ATTY. ACAIN : Our theory, Your Honor, is that recollect (sic) the
rental and that there is a breach of contract.

COURT : Then this evidence of the responsibility of the

burning is not relevant to this case.

ATTY. ACAIN : We submit, Your Honor, but we contend that the

defendant is still violating the contract by burning
the subject matter of the contract. Because the
contract says that upon the expiration[,] this
building will go to the lessor. There are two causes
of action here, Your Honor, which is payment of
rental and damages, Your Honor.

COURT : But the claim for damages is based on the non[-]

performance of the contract not on the criminal act
of Arson.

ATTY. ACAIN : Yes, Your Honor, but I would like to make it of

record, Your Honor, that he still ha[s] a pending

13
Id. at 100.
Decision 5 G.R. No. 178317

case of Arson against the defendants, Your Honor,

and it is in that case that we are claiming damages
for the building that [was] destroyed, Your Honor,
We are claiming damages as far as this building is
concerned, Your Honor.14

Respondent also testified on the damages he was claiming in the

amount of P100,000.00 for petitioners failure to comply with the agreement
that after four (4) years the building will be delivered to [him].15

When it was petitioners turn to present their evidence, the trial court
likewise prohibited them from proving that Ricardo was not responsible for
the burning of the subject building. The relevant portion of Ricardos
testimony reads:
ATTY. R. ALOOT Q : Now I am confronting you with a certain
receipt from the [F]aith Hospital which is
dated May 23, 1992, will you please
examine this document which is merely a
xerox copy and tell the court what is this
having a relation to stay in your house? (sic)

ATTY. A. ACAIN : We beg[,] Your Honor[,] incompetent, the

witness Your Honor (sic) . . . . .

ATTY. R. ALOOT : Because at the time Your Honor there was I

think an incident which cause for the
attention of the witness to the fact that he
should stay in the house. (sic)

ATTY. A. ACAIN : Already answered[,] Your Honor.

COURT : What has this to do with the cause of

action[?] [T]he cause of action is collection
of the rental. It is admitted facts that there
was a rented premises (sic) no payment was
made and the house that was supposed to be
made as payment of the rental got burned.

ATTY. R. ALOOT : Your Honor[,] please[.] [T]here was a

claimed (sic) that the defendant[,] Ricardo
Golez[,] was responsible [for] the fire on
May 23, 1992.

ATTY. A. ACAIN : He [denied] that already.

ATTY. R. ALOOT : Yes[,] that is denied but .

COURT : That [has] nothing to do with the cause of

action[.] [T]he cause of action is not the
burning of the house[.] [T]he cause of action
is collection of the rental. Now, if the parties
was (sic) to establish that the defendant is

14
TSN, September 15, 1995, pp. 31-33.
15
Id. at 42.
Decision 6 G.R. No. 178317

responsible for damages for the burning of

the house[,] you can file another case.

ATTY. R. ALOOT : If the plaintiff agrees[,] Your Honor[,] that

there is no claim for the burning of the
house . . .

COURT : The complaint will bear that out[.] [T]here is

no claim[.] You point to any claim of the
alleged burning of the house, the court did
not notice anything.16

Ricardo also testified on his counterclaim referring to an indebtedness

of respondent amounting to P11,000.00 as evidenced by a promissory note
dated January 1, 1990 signed by the latter. According to him, the loan
remained unpaid and ballooned to P368,362.50 as of December 1995
because of the 5% monthly interest.17 Petitioners likewise presented two
handwritten letters of respondent, one dated May 8, 199118 and another
dated January 12, 1992,19 to supposedly prove that said loan remains
outstanding.

On rebuttal, respondent took again the witness stand to refute

petitioners allegation that his debt was still unpaid. He presented the
supposed original of the January 1, 1990 promissory note that was in his
possession since July 26, 1990, the date when he claimed to have paid his
debt. He also testified that he wrote the May 8, 1991 and January 12, 1992
letters to demand from petitioners the previous promissory notes which were
consolidated in the January 1, 1990 promissory note.20

While the trial was ongoing, the Department of Justice (DOJ) through
Undersecretary Ramon S. Esguerra, denied the motion for reconsideration
filed by respondent on February 10, 1994 and upheld the dismissal of the
criminal complaint for arson against Ricardo.21

In a Decision dated March 16, 1998, the trial court ruled in favor of
respondent. The fallo reads:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff and against the defendants

1. Ordering the defendants jointly and severally to pay the

plaintiff the contract amount of P143,823.00, to bear interest at 12% a year
from the filing of this action up to the time the same is fully paid.

2. Ordering the defendants jointly and severally to pay the

plaintiff the following sums:

16
TSN, April 22, 1996, pp. 8-9.
17
Id. at 10-11.
18
Records (Vol. II), pp. 353 and 408.
19
Id. at 355 and 411.
20
TSN, January 20, 1998, pp. 2-15.
21
Rollo, p. 195.
Decision 7 G.R. No. 178317

a) Moral damages in the sum of P150,000.00;

b) Temperate or compensatory damage in the sum of

P100,000.00;

c) Exemplary damage in the sum [of] P50,000.00;

d) Litigation expenses in the sum of P15,000.00;

e) Attorneys fees in the sum of P25,000.00;

3. Ordering the issuance of a writ of attachment against the

properties of the defendants to secure the payment of the above judgment
amounts.

4. Ordering the defendants to pay triple of the cost of this action.

5. Ordering the dismissal of all counterclaims of defendants

against the plaintiff.

SO ORDERED.22

The trial court ruled that respondent did not become the co-owner of
the subject building before it was burned down. It held that ownership will
only pertain to him as soon as the amount agreed upon under the contract
shall have been fully paid. It further held that under the law, it would still
be necessary for petitioners to deliver the building to respondent in order
that acquisition of the real right of ownership can take place. It noted that
not only was the amount agreed upon under the contract not yet fully paid,
there was no delivery of the building at all to respondent. It ruled that the
building was still wholly owned by petitioners at the time the same was
gutted by fire and thus, they should be the only ones to suffer the loss.

The trial court likewise noted that petitioners have never paid
respondent rent for the leased premises. Since they can no longer deliver
the building which the contract obliged them to deliver, the trial court ruled
that they are legally obliged to pay the rentals for their use and enjoyment of
the leased premises to prevent unjust enrichment on the part of petitioners.

The trial court likewise found that Ricardo is indeed the author of the
burning. It took into consideration the insurance proceeds petitioners would
get from the burning of the building in question.

With regard to the respondents debt to petitioners, the trial court

ruled that since the promissory note is in the possession of respondent, the
debtor, it can be presumed that it has already been paid. It also found no
evidence that respondent consented to the raising of the interest rate from
3% to 5% which was handwritten on the note by Ricardo.

22
Id. at 136.
Decision 8 G.R. No. 178317

The trial court likewise found that petitioners have acted in wanton,
fraudulent, malicious, felonious, oppressive and malevolent manner in the
performance of their contractual obligations towards respondent justifying
the award of damages.

Aggrieved, petitioners appealed the trial courts decision to the CA

raising the following arguments:
I
THE LOWER COURT ERRED IN FINDING THAT DEFENDANTS-
APPELLANTS ARE LIABLE WHEN THE TERMS OF THE
CONTRACT THAT THE PARTIES ENTERED INTO CLEARLY
SHOW OTHERWISE.
II
THIS CASE BEING PRIMARILY FOR COLLECTION AND
PAYMENT OF RENTALS, THE LOWER COURT ERRED IN
FINDING DEFENDANTS-APPELLANTS LIABLE FOR THE
BURNING OF THE BUILDING IN QUESTION.
III
THE LOWER COURT ERRED IN ISSUING THE QUESTIONED WRIT
OF ATTACHMENT WITHOUT COMPLYING WITH THE
PROCEDURAL AS WELL AS SUBSTANTIVE REQUIREMENTS
THEREFOR.
IV
THE LOWER COURT ERRED IN DENYING HEREIN
DEFENDANTS-APPELLANTS COUNTERCLAIM.

THE LOWER COURT ERRED IN AWARDING EXCESSIVE

DAMAGES IN FAVOR OF PLAINTIFF-APPELLEE.23

The CA, in the assailed decision, set aside the writ of attachment and
notices of garnishment issued in favor of respondent. It, however, affirmed
the decision of the trial court in all other respects. It held that the ownership
of the subject building still pertains to petitioners and therefore, they must
solely bear the loss. The CA also ruled that the fact that the building was
destroyed before it was delivered to respondent does not free petitioners
from paying back rentals. It held that petitioners cannot use respondents
land and deprive him of rents due him, otherwise, it would be a case of
unjust enrichment at the expense of respondent.

The CA likewise agreed with the trial courts finding that petitioner
Ricardo is liable for the burning of the building. It took note of respondents
testimony that he saw Ricardo entering the subject building an hour and a half
before the fire; Ricardos alleged indifference regarding the fire; the
23
CA rollo, p. 97.
Decision 9 G.R. No. 178317

investigating judges finding of probable cause to indict Ricardo for arson;

and the fact that the latter insured the subject building for more than its actual
value. The appellate court also upheld the award of damages upon this
finding of liability on the part of Ricardo.

The appellate court also upheld the trial courts dismissal of

petitioners counterclaim on the ground that the possession of respondent of
the promissory note evidencing his debt is prima facie evidence of payment.
It ruled that the letters presented by Ricardo did not suffice to overturn said
presumption as they do not conclusively show that the obligation of
respondent remains outstanding.

Hence this petition anchored on the following grounds:

I. THE HONORABLE COURT OF APPEALS AND THE TRIAL
COURT GROSSLY VIOLATED PETITIONERS RIGHT TO
DUE PROCESS OF LAW WHEN THE CASE WAS DECIDED
ON THE BASIS OF ISSUES AND EVIDENCE EXPRESSLY
EXCLUDED BY THE COURT DURING TRIAL PROPER.

II. THE HONORABLE COURT OF APPEALS AND THE TRIAL

COURT FAILED TO APPLY ART. 1262 OF THE CIVIL CODE
WHEN THE SAME IS CLEARLY AND SQUARELY
APPLICABLE IN THE INSTANT CASE.

III. THE HONORABLE COURT OF APPEALS AND THE TRIAL

COURT FAILED TO CONSIDER THE FACT THAT THERE
ARE NO LEGAL AND FACTUAL BASES FOR THE GRANT
OF DAMAGES IN FAVOR OF RESPONDENT IN THAT HE
HAS NOT PRESENTED A SINGLE PROOF OR EVIDENCE
AND THE LOWER COURTS HAVE NOT CITED ANY LAW
REMOTELY SERVING AS JURAL FOUNDATION FOR THE
UNWARRANTED AWARD OF DAMAGES.

IV. THE HONORABLE COURT OF APPEALS AND THE TRIAL

COURT ERRED IN FAILING TO GRANT PETITIONERS
COUNTERCLAIM AND IN FAILING TO CONSIDER A
GLARING EVIDENCE OF ADMISSION OF INDEBTEDNESS
BY RESPONDENT CONSISTING OF TWO HANDWRITTEN
LETTERS WRITTEN IN RESPONDENTS OWN LANGUAGE
ADMITTING LOAN OBLIGATION WITH PETITIONERS.
INSTEAD, THE TRIAL AND APPELLATE COURTS RELIED
ON MERE DISPUTABLE PRESUMPTION OF LAW WHICH
DOES NOT EVEN FIND APPLICATION IN THE CASE, ALL
OF WHICH COMBINED TO RESULT IN A LOPSIDED
DECISION WARRANTING REVERSAL BY THE
24
HONORABLE SUPREME COURT.

Petitioners argue that the trial court itself made it clear to all concerned
that the suit is not based on any alleged arson. They contend that despite said
declaration by the trial court, the latter heavily relied on the result of the

24
Rollo, p. 13.
Decision 10 G.R. No. 178317

preliminary investigation finding petitioner Ricardo chargeable for arson when

the same preliminary investigation was reversed with finality by the DOJ.

They also fault the trial court for its heavy reliance on the presumption
of arson found in Section 625 of Presidential Decree No. 1613, Amending the
Law on Arson, contending that it is not applicable to the case at bar since
first, the issue of arson has been excluded and second, there was no
admission of over-insurance on their part.

Petitioners also felt that they were intentionally misled because they
were made to believe that the issue of arson will not be taken up and yet the
trial court made a finding that petitioner Ricardo had a hand in the burning
of the subject building. Petitioners contend that the transcript of
stenographic notes will reveal that they were stopped by the trial court from
presenting evidence to disprove that there was arson.

Petitioners likewise asseverate that they are not liable to pay back
rentals insisting the applicability of Article 126226 to the case at bar. They
contend that the rentals are supposed to be refund to petitioners for the
cost of the subject building and thus, no rental is due. Petitioners also
submit that based on the contract, they had an obligation to deliver a
determinate thing, i.e., the subject building, but applying Article 1262, the
total loss thereof extinguished their obligation. They likewise point out that
there was no stipulation in the contract making them liable even for fortuitous
events or that the nature of the obligation requires the assumption of risk.

Petitioners further contend that there were no legal nor factual bases
for the grant of damages in favor of respondent. They argue that respondent
immediately took possession of the lot after the fire so at most, the trial court
should have awarded back rentals from 1989 to 1992. They contend that
there was no basis to award the sum of P143,823.00 as it was not a loan or
forbearance for the use of money. They further submit that there was no
explanation on the award of moral and temperate damages.

Petitioners also argue that the presumption in Section 3(h) of Rule 131
of the Rules of Court is not applicable to the instant case. They cite the
letters sent by respondent to them allegedly acknowledging the obligation
and offering payment. They contend that if the debt has already been paid as
ruled by the trial and appellate courts, why would respondent still offer
payment in said letters.

25
Section 6. Prima Facie evidence of Arson. Any of the following circumstances shall constitute prima
facie evidence of arson:
xxxx
4. If the building or property is insured for substantially more than its actual value at the
time of the issuance of the policy.
26
ART. 1262. An obligation which consists in the delivery of a determinate thing shall be extinguished if
it should be lost or destroyed without the fault of the debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even for fortuitous events, the loss of the
thing does not extinguish the obligation, and he shall be responsible for damages. The same rule
applies when the nature of the obligation requires the assumption of risk.
Decision 11 G.R. No. 178317

Thus, the main issues for this Courts resolution are: (1) Are
petitioners liable to pay respondent for back rentals?; (2) Are petitioners
liable for damages; and (3) Are petitioners entitled to their counterclaim?

The petition is partly granted.

This Court finds no reason to depart from the ruling of the courts a
quo that petitioners should pay respondent for back rentals. There is no
dispute that the contract entered into by the parties is one of lease. True, it
had some modifications such that instead of paying the rent in the form of
money, petitioners will withhold such payment and will apply the
accumulated rent to the cost of the building they built on the leased property.
Thereafter, at the end of the lease period or until such time the cost of the
building has been fully covered by the rent accumulated, petitioners, as
lessees will transfer the ownership of said building to respondent.
Unfortunately, the subject building was gutted down by fire. However, the
destruction of the building should not in any way be made a basis to exempt
petitioners from paying rent for the period they made use of the leased
property. Otherwise, this will be a clear case of unjust enrichment. As
held in P.C. Javier & Sons, Inc. v. Court of Appeals:27
x x x The fundamental doctrine of unjust enrichment is the transfer
of value without just cause or consideration. The elements of this doctrine
are: enrichment on the part of the defendant; impoverishment on the part
of the plaintiff; and lack of cause. The main objective is to prevent one to
enrich himself at the expense of another. It is commonly accepted that this
doctrine simply means that a person shall not be allowed to profit or
enrich himself inequitably at anothers expense.

In the instant case, there is no dispute that petitioners used the

property for several years for their own benefit having operated a restaurant
thereon. Therefore, it would be the height of injustice to deprive respondent
of compensation due him on the use of his property by petitioners. The fact
that the parties agreed to a different mode of payment in this case, a
building does not in any way exempt petitioners from paying
compensation due to respondent for the use of the latters property because
the building was destroyed.

While we sustain the award of back rentals in favor of respondent, we

do not agree with the amount imposed by the courts a quo. Petitioners
should only be liable for rent during the period within which they were in
possession of the leased property. Respondent himself testified that
petitioner Ricardo stayed in the building on the leased premises just before it
was burned down.28 There was no evidence submitted to prove that
petitioners were in possession of the leased property after the fire.
Therefore, petitioners should be made to pay rent until that time only. To
order petitioners to pay for back rentals equivalent to the cost of the building

27
500 Phil. 419, 433 (2005).
28
TSN, September 15, 1995, p. 22.
Decision 12 G.R. No. 178317

is in the same way, unjust enrichment this time on the part of respondent
considering that the rent due for the period petitioners occupied the leased
premises is way below the cost of the building.

This Court further finds the awards for moral,

temperate/compensatory and exemplary damages lacking in factual and
legal bases. As correctly argued by petitioners, these damages were not
pleaded in respondents complaint nor proven during trial. A perusal of the
complaint, as amended, reveals that respondent was praying for
P100,000.00 as damages for the violation.29 He did not specifically pray
that it was for moral, temperate or exemplary damages. It is well-settled that
in order that moral damages may be awarded, there must be pleading and
proof of moral suffering, mental anguish, fright and the like.30 And even if
the moral damages were specifically pleaded in his complaint, nothing on
the records would show that respondent testified on said damages.

Even the trial courts finding that petitioner Ricardo was the author of
the fire will not make respondent entitled to moral damages and exemplary
damages. As correctly pointed out by petitioners, both parties were
prevented from presenting evidence to prove or disprove that there was
arson. Thus, there cannot be a finding on petitioners liability of willful
injury as basis of moral damages as provided in Article 222031 and
exemplary damages as provided in Article 223232 of the Civil Code. It is
also worthy to note that the criminal complaint for arson filed against
petitioner Ricardo was dismissed with finality by the DOJ thus precluding
any criminal liability on his part regarding the burning of the subject
building. There was no evidence presented by respondent that the dismissal
of the criminal complaint was reversed.

As to the award of litigation expenses, we find the same to be

justified. As provided under Article 2208 of the Civil Code, they may be
recovered when the defendants act or omission has compelled the plaintiff
to litigate with third persons or to incur expenses to protect his interest.
However, we find no basis for a separate award of attorneys fees since they
were not prayed for in both the original and amended complaints.33

As to the order of the courts a quo for petitioners to pay triple of the
cost of the action, this Court also finds the same without basis. Nowhere in
the decision can its factual or legal justification be found.

29
Records (Vol. I), p. 193.
30
Mahinay v. Velasquez, Jr., 464 Phil. 146, 149 (2004), citing San Miguel Brewery, Inc. v. Magno, 128
Phil. 328, 336 (1967).
31
ART. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad faith.
32
ART. 2232. In contracts and quasi-contracts, the court may award exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner.
33
See Abrogar v. Intermediate Appellate Court, 241 Phil. 69, 73 (1988).
Decision 13 G.R. No. 178317

This Court likewise affirms the dismissal of petitioners

counterclaims. As correctly ruled by the trial and appellate courts, the
possession of respondent of the promissory note evidencing his debt to
petitioners is prima facie evidence of the payment of the same as provided in
Section 3(h) of Rule 131 of the Rules of Court which reads:
SEC. 3. Disputable presumptions. The following presumptions
are satisfactory if uncontradicted, but may be contradicted and overcome
by other evidence:
xxxx
(h) That an obligation delivered up to the debtor has been paid;
xxxx

Unfortunately for petitioners, the evidence they presented failed to

contradict the above presumption as they did not conclusively show that
respondents obligation to them remains outstanding. The two letters written
by respondent to petitioner Ricardo which were relied on by petitioners to
refute the presumption are quoted hereunder verbatim:
[First Letter dated May 8, 1991:]
Dear Compadre,
Please return to me now the three (3) receipts or promissory notes
with the total amount of P10,900.00 because we have already consolidated
my indebtedness to you by making it to P11,000.00. You were even the
one that personally made/drafted the consolidated amount which I signed
and you made me pay interest as appearing in the consolidated receipt that
you made on January 1, 1990.
Up to now that you still have in your possession the three (3)
receipts or promissory notes which were consolidated into one and you
only made [promises] to return, although you furnished me xerox copies
from those originals.
It is painful on my part by not returning those originals and I now
entertained suspicion that you have ill design against me but please
Compadre do not do it to me because I am poor as compared to you.
You know theres God that is looking on to all of us.

Your brother in Christ,

(SGD.) MELING D. NEMENO, SR.34

[Second letter dated January 12, 1992:]

Dear Compadre,

How are you together with the members of your family? Its already
a long time that we have not met each other. Accordingly, you must have
been occupied by your Pawnshop business at Molave and at Ipil.

34
Records (Vol. II), p. 409.
Decision 14 G.R. No. 178317

How's your plan to run for Vice Mayor? You seemed to be silent.
Please let me know whether or not you will proceed because I might be
committed for another whom we do not know its background or ability to
perform the duties of the office.

Compadre, how's the receipts which show an obligation of

Pl 1,000.00 to you? If you find them, please bring them to the house
because these receipts appear having already lapsed, nonetheless, if they
cannot be located, that's not hard between us.

I shall be waiting.

Your brother in Christ,

(SGD.) COMPADRE MELING NEMEN035

To the Court's mind, the letters of respondent were written to demand

the surrender of the three previous promissory notes he executed before they
were consolidated into one promissory note with the amount of P 11,000.00.
Thus, they cannot prove that respondent acknowledges that his obligation
remains outstanding. This being the case, the presumption still stands.

WHEREFORE, the petition is PARTLY GRANTED. The January

20, 2006 Decision of the Court of Appeals in CA-G.R. CV No. 60638 is
AFFIRMED with MODIFICATIONS. As modified, petitioners Spouses
Ricardo and Elena C. Golez are ORDERED to pay respondent Meliton
Nemefio:

I) Back rentals with a monthly rate of P2,000.00 for the period

commencing June I, 1989 to May 23, 1992 and shall earn a
corresponding interest of six percent (6%) per annum, to be
computed from May 29, 1992 until full satisfaction;

2) Litigation expenses amounting to P15,000.00.

All other awards are DELETED.

No pronouncement as to costs.

SO ORDERED.

35
Id.at413.
Decision 15 G.R. No. 178317

WE CONCUR:

PRESBITERO J/VELASCO, JR.

Associte Justice

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the)pinion of the
Court's Division.

J. VELASCO, JR.
Asfociate Justice
Chairp/rson, Third Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the 1987 Constitution and the
Division Chairperson's Attestation, 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.

MARIA LOURDES P.A. SERENO

Chief Justice