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THIRD DIVISION

PILIPINAS MAKRO, INC., G.R. No. 196419

Petitioner,
Present:

VELASCO, JR., J.,

Chairperson,
- versus - BERSAMIN,
LEONEN,
MARTIRES, and
GESMUNDO, JJ
COCO CHARCOAL
PHILIPPINES, INC. and Promulgated:
LIM KIM SAN,
Respondents. October 4, 2017

x------------------ - - - - - - - - - - - - ~- - - ..,,(- - ---~

~~'>L~x
DECISION

MARTIRES, J.:

This Petition for Review on Certiorari seeks to reverse and set aside
the 30 December 2010 Decision 1 and 7 April 2011 Resolution 2 of the Court
of Appeals (CA) in CA-G.R. CV No. 83836 which reversed the 16 August
2004 Decision3 of the Regional Trial Court, Branch 276, Muntinlupa City
{RTC).

Petitioner Pilipinas Makro, Inc. (Makro) is a duly registered domestic

corporation. In 1999, it was in need of acquiring real properties in Davao
City to build on and operate a store to establish its business presence in the PRf
Rollo, pp. 36-49. Penned by Associate Justice Rosmari D. Carandang and concurred in by Associate
Justices Ramon R. Garcia and Manuel M. Barrios.
Id. at 33-34.
Id. at 301-308. Penned by Presiding Judge N.C. Perello.
 DECISION 2 G.R. No. 196419

city. After conferring with authorized real estate agents, Makro found two
4
parcels ofland suitable for its purpose.

On 26 November 1999, Makro and respondent Coco Charcoal Phils.,

Inc. (Coco Charcoal/ executed a notarized Deed of Absolute Sale 6 wherein
the latter would sell its parcel of land, with a total area of 1,000 square
meters and covered by Transfer Certificate of Title (TCT) No. 208776, to the
former for the amount of P.8,500,000.00. On the same date, Makro entered
into another notarized Deed of Absolute Sale 7 with respondent Lim Kim San
(Lim) for the sale of the latter's land, with a total area of 1,000 square meters
and covered by TCT No. 282650, for the same consideration of
P8,500,000.00.

Coco Charcoal and Lim's parcels of land are contiguous and parallel
to each other. Aside from the technical descriptions of the properties in
question, both deeds of sale contained identical provisions, similar terms,
conditions, and warranties. 8

In December 1999, Makro engaged the services of Engineer Josefina

M. Vedua (Engr. Vedua), a geodetic engineer, to conduct a resurvey and
relocation of the two adjacent lots. As a result of the resurvey, it was
discovered that 131 square meters of the lot purchased from Coco Charcoal
had been encroached upon by the Department of Public Works and
Highways (DPWH) for its road widening project and construction of a
drainage canal to develop and expand the Davao-Cotabato National
Highway. On the other hand, 130 square meters of the land bought from Lim
had been encroached upon by the same DPWH project. Meanwhile, TCT
Nos. T-321199 and T-321049 were issued in January 2000 in favor of
Makro after the deeds of sale were registered and the titles of the previous
owners were cancelled. 9

Makro informed the representatives of Coco Charcoal and Lim about

the supposed encroachment on the parcels of land due to the DPWH project.
Initially, Makro offered a compromise agreement in consideration of a
refund of 75% of the value of the encroached portions. Thereafter, Makro
sent a final demand letter to collect the refund of the purchase price
corresponding to the area encroached upon by the road widening project,
seeking to recover P 1, 113 ,500. 00 from Coco Charcoal and P 1, I 05, 000. 00 fo1
Id. at 37.
Spelled out as "Coco-Charcoal" in some parts of the records.
6
Id. at 88-92.
Id. at 193-197.
Id. at 38.
9
Id. at 40-41.
DECISION 3 G.R. No. 196419

from Lim. Failing to recover such, Makro filed separate complaints against
Coco Charcoal and Lim to collect the refund sought.

The RTC Decision

In its 16 August 2004 Decision, the RTC granted Makro's complaint

and ordered respondents to refund the amount corresponding to the value of
the encroached area. The trial court ruled that the DPWH project encroached
upon the purchased properties, such that Makro had to adjust its perimeter
fences. It noted that Makro was constrained to bring legal action after its
demand for refund remained unheeded. The trial court expounded that the
road right of way includes not only the paved road, but also the shoulders
and gutters. It highlighted that the unpaved portion of the right of way was
well within the area Makro had purchased.

The RTC also found respondents in bad faith because they had
concealed from Makro the fact that the DPWH had already taken possession
of a portion of the lands they had sold, respectively, considering that
drainage pipes had already been installed prior to the sale. It noted that
DPWH could not have undertaken the diggings and subsequent installation
of drainage pipes without Coco Charcoal and Lim' s consent, being the
previous owners of the lots in question. The dispositive portion reads:

PREMISES CONSIDERED, judgment is rendered for the plaintiff

and defendants LIM KIM SAN directed to return and reimburse to
plaintiff the sum of ONE MILLION FIVE HUNDRED THOUSAND
(Phpl,500,000.00) PESOS, Philippine Currency, with interest at 12% per
annum, attorney's fees of Php200,000.00, exemplary damages of
Php200,000.00 to deter anybody similarly prone;

Coco Charcoal Philippines, Inc. is likewise directed to pay a refund

and return to plaintiff corporation the value of ONE MILLION FIVE
HUNDRED THOUSAND (Phpl,500,000.00) PESOS, Philippine
Currency, with interest at 12% per annum, representing the 131 square
meters parcel of land it cannot occupy and to pay attorney's fees in the
sum of Php200,000.00 and exemplary damages of Php200,000.00 to deter
anybody similarly inclined;

Both Defendants are directed to pay the cost of this litigation.

It is SO ORDERED.'~

10
Id. at 308.
DECISION 4 G.R. No. 196419

Aggrieved, Coco Charcoal and Lim appealed before the CA.

The CA Ruling

In its 30 December 2010 Decision, the CA reversed the RTC decision.

While the appellate court agreed that the DPWH project encroached upon
the frontal portions of the properties, it ruled that Makro was not entitled to a
refund. It explained that the warranty expressed in Section 4(i) 11 of the deeds
of sale is similar to the warranty against eviction set forth under Article 1548
of the Civil Code. As such, the CA posited that only a buyer in good faith
may sue to a breach of warranty against eviction. It averred that Makro
could not feign ignorance of the ongoing road widening project. The
appellate court noted Makro's actual knowledge of the encroachment before
the execution of the sale constitutes its recognition that Coco Charcoal and
Lim's warranty against liens, easements, and encumbrances does not include
the respective 131 and 130 square meters affected by the DPWH project, but
covers only the remainder of the property. It ruled:

WHEREFORE, premises considered, the instant appeal is

GRANTED. Accordingly, the herein assailed August 16, 2004 Decision of
the trial court is REVERSED and SET ASIDE, and the action instituted by
appellee MAKRO against appellants Coco Charcoal and Lim Kim San for
collection of sum of money by way of refund is hereby DISMISSED for
lack of cause of action.

SO ORDERED. 12

Makro moved for reconsideration, but the same was denied by the CA
in its assailed 7 April 2011 Resolution.

Hence, this present petition raising the following:

ISSUES

WHETHER THE COURT OF APPEALS ERRED IN DENYING

MAKRO'S MOTION FOR EXTENSION TO FILE A MOTION
FOR RECONSIDERATION; AND P4f
II
The property is and shall continue to be free and clear of all easements, liens and encumbrances of any
nature whatsoever, and is, and shall continue to be, not subject to any claim set-off or defense which
will prevent the BUYER from obtaining full and absolute ownership and possession over the Property
or from developing or using it as a site for its store building.
12
Id. at 48-49.
DECISION 5 G.R. No. 196419

II

WHETHER THE COURT OF APPEALS ERRED IN DENYING

MAKRO A REFUND ON THE GROUND OF BAD FAITH.

THE COURT'S RULING

The petition is meritorious.

Non-extendible period to
file motion for
reconsideration;
exceptions

Makro filed two motions for extension to file a motion for

reconsideration. On the first motion, it sought an extension after its former
lawyer, Atty. Edwin Lacierda, withdrew as a counsel in view of his
appointment as press secretary for former President Benigno Aquino III.
Makro again asked for an extension after its present counsel was confined
for dengue and typhoid fever. Eventually, it filed its motion for
reconsideration on 7 March 2011.

In its 7 April 2011 Resolution, the CA denied Makro' s motions for

extension to file a motion for reconsideration, explaining that the 15-day
period for the filing of such is non-extendible and that a motion for
extension is prohibited.

It must be remembered that procedural rules are set not to frustrate the
ends of substantial justice, but are tools to expedite the resolution of cases on
their merits. The Court reminds us in Gonzales v. Serrano 13 that the
prohibition on motion for extension to file a motion for reconsideration is
not absolute, to wit:

The Court shall first delve on the procedural issue of the case. In
Imperial v. Court ofAppeals, 14 the Court ruled:

In a long line of cases starting with Habaluyas Enterprises

v. Japson, 15 we have laid down the following guideline:~

13
755 Phil. 513, 526 (2015).
14
606 Phil. 391 (2009).
15
226 Phil. 144 (1986).
DECISION 6 G.R. No. 196419

Beginning one month after the promulgation of this

Resolution, the rule shall be strictly enforced that no
motion for extension of time to file a motion for new trial
or reconsideration may be filed with the Metropolitan or
Municipal Trial Courts, the Regional Trial Courts, and the
Intermediate Appellate Court. Such a motion may be filed
only in cases pending with the Supreme Court as the court
of last resort, which may in its sound discretion either grant
or deny the extension requested.

Thus, the general rule is that no motion for extension of

time to file a motion for reconsideration is allowed. This
rule is consistent with the rule in the 2002 Internal Rules of
the Court of Appeals that unless an appeal or a motion for
reconsideration or new trial is filed within the 15-day
reglementary period, the CA's decision becomes final.
Thus, a motion for extension of time to file a motion for
reconsideration does not stop the running of the 15-day
period for the computation of a decision's finality. At the
end of the period, a CA judgment becomes final,
immutable and beyond our power to review.

This rule, however, admits of exceptions based on a liberal

reading of the rule, so long as the petitioner is able to prove the
existence of cogent reasons to excuse its non-observance. xxx

While the CA was correct in denying his Urgent Motion for

Extension to File Motion for Reconsideration for being a prohibited
motion, the Court, in the interest of justice, looked into the merits of the
case, and opted to suspend the prohibition against such motion for
extension after it found that a modification of the CA Decision is
warranted by the law and the jurisprudence on administrative cases
involving sexual harassment. The emerging trend of jurisprudence,
after all, is more inclined to the liberal and flexible application of
procedural rules. Rules of procedure exist to ensure the orderly, just
and speedy dispensation of cases; to this end, inflexibility or liberality
must be weighed. Thus, the relaxation or suspension of procedural rules,
or exemption of a case from their operation is warranted only by
compelling reasons or when the purpose of justice requires it. (emphases
and underscoring supplied)

The Court finds that cogent reason exists to justify the relaxation of
the rules regarding the filing of motions for extension to file a motion for
reconsideration. The explanation put forth by Makro in filing its motions for
extension clearly were not intended to delay the proceedings but were
caused by reasons beyond its control, which cannot be avoided even with the
exercise of appropriate care or prudence. Its former counsel had to withdraw
in the light of his appointment as a cabinet secretary and its new lawyer was
unfortunately afflicted with a serious illness. Thus, it would have been more /'11
DECISION 7 G.R. No. 196419

prudent for the CA to relax the procedural rules so that the substantive issues
would be thoroughly ventilated.

More importantly, the liberal application of the rules becomes more

imperative considering that Makro's position is meritorious.

Express Warranty vis-a vis

Implied Warranty

In addressing the issues of the present case, the following provisions

of the deeds of sale between Makro and respondents are pertinent:

Section 2. General Investigation and Relocation

Upon the execution of this Deed, the BUYER shall undertake at its
own expense a general investigation and relocation of their lots which
shall be conducted by a surveyor mutually acceptable to both parties.
Should there be any discrepancy between the actual areas of the lots as re-
surveyed and the areas as indicated in their Transfer Certificates of Title,
the Purchase Price shall be adjusted correspondingly at the rate of PESOS:
EIGHT THOUSAND FIVE HUNDRED (Php8,500.000) per square meter.
In the event that the actual area of a lot is found to be in excess of the area
specified in the Titles, the Purchase Price shall be increased on the basis of
the rate specified herein. Conversely, in the event that the actual area of a
lot is found to be less than the area specified in the Titles, the BUYER
shall deduct a portion of the Purchase Price corresponding to the
deficiency in the area on the basis of the rate specified herein. In any case
of discrepancy, be it more or less than the actual area of the Property as
specified in the Titles, the SELLER agrees to make the necessary
correction of the title covering the lots before the same is transferred to the
BUYER. 16

Section 4. Representations and Warranties

The SELLER hereby represents and warrants to the BUYER that:

1. The Property is and shall continue to be free and clear of all

easements, liens and encumbrances of any nature whatsoever, and is, and
shall continue to be, not subject to any claim set-off or defense which will
prevent the BUYER from obtaining full and absolute ownership and
possession over the Property or from developing or using it as a site for its
store building. ~
1

16
Rollo, pp. 89-90 and 194.
17
Id. at 90 and 195.
DECISION 8 G.R. No. 196419

Pursuant to Section 2 of the deeds of sale, Makro engaged the services

of a surveyor which found that the DPWH project had encroached upon the
properties purchased. After demands for a refund had failed, it opted to file
the necessary judicial action for redress.

The courts a quo agree that the DPWH project encroached upon the
properties Makro had purchased from respondents. Nevertheless, the CA
opined that Makro was not entitled to a refund because it had actual
knowledge of the ongoing road widening project. The appellate court
likened Section 4(i) of the deeds of sale as a warranty against eviction,
which necessitates that the buyer be in good faith for it to be enforced.

A warranty is a collateral undertaking in a sale of either real or

personal property, express or implied; that if the property sold does not
possess certain incidents or qualities, the purchaser may either consider the
sale void or claim damages for breach of warranty. 18 Thus, a warranty may
either be express or implied.

An express warranty pertains to any affirmation of fact or any promise

by the seller relating to the thing, the natural tendency of which is to induce
the buyer to purchase the same. 19 It includes all warranties derived from the
language of the contract, so long as the language is express-it may take the
form of an affirmation, a promise or a representation. 20 On the other hand, an
implied warranty is one which the law derives by application or inference
from the nature of transaction or the relative situation or circumstances of
21
the parties, irrespective of any intention of the seller to create it. In other
words, an express warranty is different from an implied warranty in that the
former is found within the very language of the contract while the latter is by
operation of law.

Thus, the CA erred in treating Section 4(i) of the deeds of sale as akin
to an implied warranty against eviction. First, the deeds of sale categorically
state that the sellers assure that the properties sold were free from any
encumbrances which may prevent Makro from fully and absolutely
possessing the properties in question. Second, in order for the implied
warranty against eviction to be enforceable, the following requisites must
concur: (a) there must be a final judgment; (b) the purchaser has been
deprived of the whole or part of the thing sold; (c) said deprivation was by
virtue of a prior right to the sale made by the vendor; and (d) the vendor has /1
18
Pineda, Sales and other Special Contracts (2010), p. 250.
19
Article 1546 of the Civil Code.
20
Paras, Civil Code of the Philippines Annotated (2016), p. 211.
21
Ang v. Court ofAppeals, 588 Phil. 366, 373 (2008).
 DECISION 9 G.R. No. 196419

been summoned and made co-defendant in the suit for eviction at the
instance of the vendee. 22 Evidently, there was no final judgment and no
opportunity for the vendors to have been summoned precisely because no
judicial action was instituted.

Further, even if Section 4(i) of the deeds of sale was to be deemed

similar to an implied warranty against eviction, the CA erred in concluding
that Makro acted in bad faith. It is true that the warranty against eviction
cannot be enforced if the buyer knew of the risks or danger of eviction and
still assumed its consequences. 23 The CA highlights that Makro was aware
of the encroachments even before the sale because the ongoing road
widening project was visible enough to inform the buyer of the diminution
of the land area of the property purchased.

The Court disagrees.

It is undisputed that Makro' s legal counsel conducted an ocular

inspection on the properties in question before the execution of the deeds of
sale and that there were noticeable works and constructions going on near
them. Nonetheless, these are insufficient to charge Makro with actual
knowledge that the DPWH project had encroached upon respondents'
properties. The dimensions of the properties in relation to the DPWH project
could have not been accurately ascertained through the naked eye. A mere
ocular inspection could not have possibly determined the exact extent of the
encroachment. It is for this reason that only upon a relocation survey
performed by a geodetic engineer, was it discovered that 131 square meters
and 130 square meters of the lots purchased from Coco Charcoal and Lim,
respectively, had been adversely affected by the DPWH project.

To reiterate, the fact of encroachment is settled as even the CA found

that the DPWH project had disturbed a portion of the properties Makro had
purchased. The only reason the appellate court denied Makro recompense
was because of its purported actual knowledge of the intrusion which is not
reason enough to deny Makro a refund of the proportionate amount pursuant
to Section 2 of the deeds of sale.

Nevertheless, the RTC errs in ordering respondents to pay

Pl,500,00.00 each to Makro. Under Section 2 of the deeds of sale, the
purchase price shall be adjusted in case of increase or decrease in the land
area at the rate of P8,500.00 per square meter. In the case at bar, 131 square
meters and 130 square meters of the properties of Coco Charcoal and Lim,
respectively, were encroached upon by the DPWH project. Applying the 1'41
22
scaler et. al. v. Court ofAppeals, 222 Phil. 320, 326 ( 1985).
23
Luzon Development Bankv. Enriquez, 654 Phil. 315, 337 (2011).
DECISION IO G.R. No. 196419

formula set under the deeds of sale, Makro should be entitled to receive
:Pl,113,500.00 from Coco Charcoal and :Pl,105,000.00 from Lim. It is
noteworthy that Makro' s complaint against respondents also prayed for the
same amounts. The RTC awarded :Pl,500,00.00 without sufficient factual
basis or justifiable reasons.

Exemplary damages and

attorney's fees may be
awarded only for cause
provided for by law.

In finding for Makro, the RTC also awarded attorney's fees and
exemplary damages in its favor. The trial court ruled that Makro was entitled
to attorney's fees because it was forced to bring the matter before the court
assisted by counsel. It found the grant of exemplary damages in order
because respondents were in bad faith for concealing from Makro the fact
that the DPWH had already dispossessed a portion of the lots purchased.

24
In ABS-CBN Broadcasting Corporation v. Court of Appeals, the
Court cautioned that the fact that a party was compelled to litigate his cause
does not necessarily warrant the award of attorney's fees, to wit:

As regards attorney's fees, the law is clear that in the absence of

stipulation, attorney's fees may be recovered as actual or compensatory
damages under any of the circumstances provided for in Article 2208 of
the Civil Code.

The general rule is that attorney's fees cannot be recovered as part

of damages because of the policy that no premium should be placed on the
right to litigate. They are not to be awarded every time a party wins a suit.
The power of the court to award attorney's fees under Article 2208
demands factual, legal, and equitable justification. Even when a claimant
is compelled to litigate with third persons or to incur expenses to
protect his rights, still attorney's fees may not be awarded where no
sufficient showing of bad faith could be reflected in a party's
persistence in a case other than an erroneous conviction of the
righteousness of his cause. (emphasis supplied)

Other than the bare fact that Makro was compelled to hire the services
of counsel to prosecute its case, the RTC did not provide compelling reasons
to justify the award of attorney's fees. Thus, it is but right to delete the
award especially since there is no showing that respondents had acted in badfo4

24
361 Phil. 499 (1999).
DECISION 11 G.R. No. 196419

faith in refusing Makro's demand for refund. It is in consonance with the

25
policy that there is no premium on the right to litigate.

On the other hand, exemplary damages may be awarded if the

defendant had acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner. 26 The RTC found the award of exemplary damages
warranted because respondents allegedly concealed the fact the DPWH had
already taken possession of a portion of the land they had sold to Makro.
Bad faith, however, involves a state of mind dominated by ill will or motive
implying a conscious and intentional design to do a wrongful act for a
dishonest purpose or moral obliquity. 27 Here, there is insufficient evidence
to definitively ascertain that respondents' omission to mention the ongoing
DPWH projects was impelled by a conscious desire to defraud Makro. This
is especially true since the road widening project was already in progress
even before the time of the sale, and which would have been noticeable
when Makro conducted its ocular inspection.

WHEREFORE, the petition is GRANTED. The 30 December 2010

Decision and 7 April 2011 Resolution of the Court of Appeals in CA-G.R.
CV No. 83836 are REVERSED and SET ASIDE. Petitioner Pilipinas
Makro, Inc. is entitled to recover Pl,113,500.00 from respondent Coco
Charcoal Phils., Inc. and Pl,105,000.00 from respondent Lim Kim San.

SO ORDERED.

25
Philippine National Construction Corporation v. APAC Marketing Corporation, 710 Phil. 389, 395
(2013).
26
Article 2232 of the Civil Code.
27
Gatmaitan v. Gonzales, 525 Phil. 658, 671 (2006).
DECISION 12 G.R. No. 196419

WE CONCUR:

J. VELASCO, JR.
sociate Justice
Chairperson

)1ARVIQ"M.V.F. LEONE
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 opinion of the
Court's Division.

J. VELASCO, JR.
ciate Justice
Chairn/rson, Third Division
DECISION 13 G.R. No. 196419

CERTIFICATION

Pursuant to Section 13, Article VIII of the 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.

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MARIA LOURDES P.A. SERENO
T h i rd D ; d :o; '. :>.1 Chief Justice
OCT 2 3 2017