Title
Tufexis vs. Olaguera
Case
G.R. No. 9865
Decision Date
Dec 24, 1915
Plaintiff sought possession of land and damages after acquiring a public market concession via auction, but the Supreme Court ruled the concession was non-transferable and tied to the destroyed building, dismissing the case.
attachment
sale
public market building
A

Case Summary (G.R. No. 9865)

Factual Background

The complaint alleged that on September 30, 1911, Tufexis acquired at a public sale held in execution of a judgment against Ricardo Pardo y Pujol a frame building of strong materials with a galvanized-iron roof erected on municipal land in Guinobatan and intended for a public market. The acquisition was alleged to include all right, interest, title, and participation that pertained to, or might appertain to, Pardo y Pujol. The building, according to the complaint, had been constructed pursuant to a concession granted by the former Spanish Government to Pardo y Cabanas, the father of the judgment debtor, and Pardo y Cabanas was said to have renounced his right to redeem and conveyed his rights to Tufexis by a public instrument of July 31, 1912, with the concession instrument attached as Exhibit A.

The complaint further alleged that on January 2, 1912, the market building was totally destroyed by accidental fire. After the destruction, the municipal council allegedly engaged in negotiations with Tufexis to purchase his rights under the concession, but those negotiations were alleged to have been pursued deceitfully and in bad faith to prevent him from reconstructing and using the market building in accordance with the concession. The complaint alleged that Olaguera, without consent and in connivance with the municipal council, took possession of the land beginning March 1, 1912, installing booths for sale of groceries and merchandise and billiard tables, and thereby deriving revenues and rents. Tufexis asserted entitlement to possession under the concession, proposed to construct another public market building on the same land, and alleged that defendants had prevented him from using the land and refused to vacate.

Demurrer and Trial Court Proceedings

The defendants answered and raised procedural and substantive objections. The provincial fiscal, acting for the municipality of Guinobatan, alleged as grounds for demurrer that Tufexis lacked personality to institute the action and that the complaint did not state sufficient facts to constitute a cause of action. The fiscal argued that Exhibit A did not show that the privilege granted to Ricardo Pardo y Cabanas was granted likewise to successors or assignees. It was further argued that if the right to possession was conditioned on the existence of the market building, the right ended when the building was destroyed by fire and the land reverted to the control of the municipal owner. The fiscal also contended that the concession, being personal, extinguished at the death of the grantee absent a contrary provision, and that the complaint contained no allegation that Tufexis legally purchased or acquired the concession right itself.

By order of August 25, 1913, the court of first instance sustained the demurrer filed by the defendant municipality of Guinobatan and allowed Tufexis ten days to amend the complaint, warning that failure to amend would lead to dismissal. Tufexis, by writing dated August 27, 1913, objected to the ruling and stated that he did not desire to amend, invoking section 101 of the Code of Civil Procedure and requesting judgment as the law might warrant with the exception noted. On September 1, 1913, the court overruled the motion made by Olaguera and dismissed the complaint against the municipal council of Guinobatan on the ground that Tufexis had not amended his complaint. Tufexis moved for rehearing and new trial, which the court denied, and then perfected a bill of exceptions.

Principal Legal Issue

The Court framed the controlling question as whether the market building constructed by Pardo y Cabanas on municipal land, under a Spanish concession granted on August 4, 1884, could be attached and sold for the payment of a debt owed by Ricardo Pardo y Pujol to a third person who had obtained a final judgment. The resolution required determining the character and limits of the rights acquired by Pardo y Cabanas under the concession, and whether those rights, or any rights connected to them, could be treated as ordinary attachable property of Pardo y Pujol for satisfaction of a private debt.

The Concession and Its Terms

The concession’s provisions described: the grant to Ricardo Pardo y Cabanas of a parcel of land in the pueblo of Guinobatan for a market project; an obligation to construct a public market building with a galvanized-iron roof according to an approved plan; a right to enjoy the revenue derived from the floor space of the market for forty years, with “floor space” defined as shelter or the right to retail merchandise in the market belonging to the grantee; and, on expiration, the transfer of both the land and the building to the Government, with the building delivered in good condition. The concession also required that authority be given to place the grantee in possession, and that construction and completion be inspected and accepted by public works officials.

The Court emphasized that the land upon which the building was erected belonged to the municipality of Guinobatan. Although the building was erected at the expense and with the money of the grantee, the Court held that the building remained property of the State or of the municipality, and that it was temporarily transferred to the grantee solely to allow him to enjoy the usufruct of the floor space for forty years. After the period, the usufruct right would cease and the building would belong finally and absolutely to the State or the municipality.

Substantive Rulings on Attachment and Sale

The Court ruled that because the building and the land did not belong to Pardo y Pujol, they could not be attached or sold to satisfy his debt. It reasoned that the concession was personal and transferable only by inheritance. The Court stated that the concession could not be conveyed as a special personal privilege to a third person unless the person was an hereditary successor of the grantee and unless administrative authorities allowed the substitution and continuation of the usufruct right under the governmental framework that controlled a public market service.

The Court then considered the creditor’s general right to collect from the debtor’s property but clarified that the usufruct right tied to a public service had a special character. According to the Court, attaching such right would result in a substitution of the public-service operator without the administrative authorities’ knowledge and consent. That substitution, the Court held, would disturb the regular course of a public service and prejudice State and public interests. The Court acknowledged that while the debtor’s heirs and debts required payment, the special usufruct privilege could not be attached as an ordinary right like other property.

In further support, the Court cited its own prior rulings, including Lopez vs. Alvarez (9 Phil. Rep., 28) and Alvaran vs. Marquez (11 Phil. Rep., 263), for the principle that an attachment requires that the thing attached be the debtor’s property. Because the market building and the municipal land were not the debtor’s property, and because the concession was not freely transferable beyond the concession’s personal terms, the attachment and sale of what were, in substance, governmental or municipal properties were held illegal and void.

The Court also addressed the proper remedy. It held that although the creditor could not attach and sell the public-service operating right itself, the creditor could petition the courts to allow collection through proper legal proceedings from the profits or revenues obtained under the usufruct right. The Court reasoned that attaching and selling the operator’s concession-related privilege would permit a creditor or purchaser to exercise the right in place of the grantee, contrary to the administrative concession’s public nature.

Nature of the Concession as Contract, and Inapplicability of Franchise Statutes

The Court characterized the concession as a true contract executed between the former sovereign government and the grantee, Pardo y Cabanas, and thus governed by principles of civil law protecting the contracting parties’ rights and obligations. While the Court observed that the concession was “somewhat” of the nature of a franchise, it concluded that sections 56 to 61 of Act No. 1459 were not applicable. The Court explained that those sections referred to franchises granted to corporations, while the concession here was granted to a private individual, not to a corporation or judicial entity.

The Court further rejected the idea that the franchise-attachment framework could authorize the attachment and sale of the concession right as conducted. It stated that substitution of a third person for the grantee required explicit authorization by the proper administrative official. It held that the creditor, to secure payment, should have sought attachment of the market revenues or proceeds, not the market building or the concession right to operate it as a public service.

Analogy and Comparative Authorities Cited

In elaborating the public-service limitation on attachment, the Court offered an analogy to railroa

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