PLLAR GIL VDA. DE MURCIANO, REPRESENTED IN THIS CASE BY HER ATTORNEY-IN-FACT, CARLOS RODRIGUEZ, PETITIONER, VS. THE AUDITOR GENERAL, ET AL., RESPONDENTS.

This is a petition to review a decision of the Auditor General denying
payment of petitioner Pilar Gil Vda. de Murciano’s claim for the balance of back
rentals on her property in Porac and Floridablanca, Pampanga, which was used aa
impact area by the Armed Forces of the Philippines from May 1, 1948 to October
8, 1949.

The property in question was originally occupied by the United States Army
after liberation, and the United States Government paid for it a monthly rental
of P6.00 per hectare. After the withdrawal of the United States Army from the
premises, a portion thereof was occupied and utilized from May 1, 1949 to
October 8, 1949, by the Artillery Firing Group of the Philippine Ground Force,
Armed Forces of the Philippines, as impact area. To indemnify petitioner for
this occupancy and use of her property, the Office of the Chief of Engineers,
Philippine Service Command, Armed Forces of the Philippines, at Camp Murphy,
through Lt. Col. Rigoberto J. Atienza, on July 27, 1950 forwarded to petitioner
for her signature a quitclaim agreement whereby she was to be paid the amount of
P15,067.31 representing “complete payment of rentals for the entire period of
occupancy from 1 May 1948 to 8 October 1949 at the rate of P6.00 per hectare per
month”, “the same rate the U. S. Army was paying before for similar lot within
the area”, with the understanding that upon payment of said amount, “the Armed
Forces of the Philippines is released from all claims which you may have against
it for the occupancy of the land upon payment of the above-mentioned rentals”.
(Annexes “C” and “D”, Petition)

The above quitclaim agreement was signed by petitioner, through her
attorney-in-fact, on August 14, 1950, but for some reason or another was not
received by the Office of the Chief of Engineers of the Armed Forces of the
Philippines; so that on February 5, 1951, Lt. Col. Atienza sent petitioner
another letter asking for the return of the signed quitclaim agreement in order
that payment thereof may be made upon availability of funds. A new quitclaim
agreement of exactly the same tenor as the first was, therefore, on April 4,
1951, prepared and signed by petitioner, through her attorney-in-fact, and again
returned to the Office of the Chief of Engineers of the Armed Forces, of the
Philippines at Camp Murphy, but before it could be signed by Lt. Col. Littaua of
the Philippine Service Command in representation of the Republic of the
Philippines, the Armed Forces of the Philippines was reorganized and the
Philippine Service Command abolished. Whereupon, Col. Antonio P. Chanco, Deputy
and Ex-O, Office of the Chief of Engineers, sent petitioner another copy of the
quitclaim agreement similar to the first, informing petitioner that due to the
reorganization of the Armed Forces and the abolition of the Philippine Service
Command, it was the Acting Chief of Staff who had been authorized to sign
contracts of lease in behalf of the Republic of the Philippines, and asking
petitioner to sign said agreement and forward the same to his Office. The
agreement was signed by petitioner’s attorney-in-fact and returned to the Armed
Forces of the Philippines.

Before signing the agreement in behalf of the Republic, however, the Chief of
Staff of the Armed Forces appointed a survey party to ascertain the amount of
damage to petitioner’s property, and the survey party found that no substantial
damage was caused thereto to justify the payment of P15,067.31 to petitioner.
Wherefore, petitioner was offered the amount of P3,386.40 in full satisfaction
of her claim, which she refused to accept. Protracted negotiations followed,
resulting in the payment by the Armed Forces of the Philippines to petitioner of
the sum of P7,000, without prejudice to “further claims on the balance” (Annex
E).

On June 26, 1956, petitioner sent a letter to the Auditor General requesting
payment of her claim of P15,067.31, plus interests at the rate of 6% per annum
from May 1, 1948 until full payment, minus the sum of P7,000 already received by
her from the Armed Forces of the Philippines. This letter was endorsed by the
Auditor General to the Chief of Staff of the Armed Forces, who returned the
claim with the recommendation that it be denied, for the reason that the use of
petitioner’s land by the Armed Forces was only intermittent; that the Armed
Forces did not have any contract, express or implied, with petitioner for the
payment of rentals on her property; that its payment to petitioner of the sum of
P7,000 was based on the principle of “quantum meruit” that petitioner had not
submitted satisfactory proof that the damage to her property warranted the
payment of her additional claim; and that although petitioner had reserved her
right to make further claims upon the government, such reservation did not bind
the government to accept the same, totally or partially. In view of the
explanations and recommendation of the Chief of Staff, the Deputy Auditor
General denied petitioner’s claim, hence the present petition for review.

On the basis of the above facts, we believe the Deputy Auditor General erred
in denying petitioner’s claim.

It appears that it was the Armed Forces of the Philippines, through the
Office of the Chief of Engineers, which, on July 27, 1950, offered to pay the
petitioner the total amount of P15,067.31 as rentals for its use of her property
from May 1, 1948 to October 8, 1949, even enclosing in its offer a quitclaim
agreement prepared by the Army for petitioner’s signature. The authority of the
representatives of the Armed Forces who made this offer to petitioner is not
denied; therefore, the offer was binding and effective on the Armed Forces of
the Philippines. Said offer was accepted by petitioner and the quitclaim
agreement, duly signed by petitioner’s attorney-in-fact, was returned to the
offeror. Receipt of petitioner’s acceptance is, again, admitted by the Armed
Forces of the Philippines. From the time the Armed Forces received petitioner’s
acceptance, therefore, a contract for the payment of P15,067.31 to petitioner in
full satisfaction of rentals on her property during its use and occupancy by the
Philippine Army was perfected between the parties (Art. 1319, New Civil
Code).

Even after the reorganization of the Armed Forces of the Philippines and the
transfer of authority to sign contracts of lease in behalf of the Republic of
the Philippines to the Chief of Staff, the Armed Forces had recognized the
existence of a perfected contract to pay petitioner the sum of P15,067.31, as
shown by the letter of Col. Antonio P. Chanco of the Office of the Chief of
Engineers, Camp Murphy, advising petitioner of said reorganization and transfer
of authority to sign the quitclaim agreement to the Chief of Staff, and asking
her to sign anew the same agreement (Orig. Recs., p. 14).

The Armed Forces claim that after the signed agreement was returned by
petitioner, the Chief of Staff refused to sign it in behalf of the Republic
because it was found that the damage to petitioner’s property did not warrant
the payment to her of the sum of P15,067.31. But that as it may, this
circumstance does not in the least affect petitioner’s right to ask for the
fulfillment of her perfected agreement with the Armed Forces of the Philippines
for the payment to her of the amount of P15,067.31. It is elementary that a
contract, once perfected, is binding on both parties and its validity or
compliance cannot be left to the will of one of them (Art. 1308, Civil Code).
The absence of a writing does not preclude the binding effect of the contract
duly perfected by a meeting of the minds, the contract not being of the class
called “formal” or “solemn” in which the writing is essential to their binding
effect. Nor may contracts deliberately entered into be overturned by reason of
mistake of one of the parties to which the other in no way has contributed (De
Gonzales Mondragon vs. Santos, 48 Off. Gaz., (2), 560, 87 Phil., 471; also Tanda
vs. Aldaya, 89 Phil., 497).

The Armed Forces of the Philippines claim that when it had refused to pay
petitioner her claim of P15,067.31, her attorney-in-fact submitted a
counteroffer of P7,000.00 allegedly in full satisfaction of her claim. Granting
the truth of this allegation, the Armed Forces admit, however, that said
counteroffer was not considered by its Headquarters “due, among other things, to
lack of funds”. In fact, what appears is that the Armed Forces insisted in
paying petitioner no more than P3,386.40. Assuming therefore, that petitioner
did offer to novate her original contract with the Army by reducing her claim to
P7.000.00, such offer was not accepted by the latter; hence, no novation took
place and the parties are still bound by their original agreement.

The Solicitor General asserts that petitioner had waived whatever rights she
had to make further claims on the Armed Forces when she finally accepted the sum
of P7,000.00 and signed with the Republic of the Philippines an agreement (Orig.
Recs., pp. 20-21) providing, among other things, that she accepted said amount
of P7,000.00 “in the complete payment and full satisfaction” of all her claims
against the Republic, and that “both parties agree to release each other from
all claims whatsoever”. We find the argument untenable, for in the same
agreement that petitioner signed with the Republic, she made the following
reservation:

“Notwithstanding the stipulation in this contract, the Party of the First
Part hereby reserves her rights in accordance with the letter of her counsel
dated April 12, 1956, to the Chief of Staff, AFP.”

In fact, it appears that the amount of P7,000.00 was paid to petitioner
“without prejudice of further claim on the balance” (Orig. Recs., p. 19) ; and
this is confirmed by the endorsement of the chief of Staff returning
petitioner’s claim to the Auditor General, stating that “after protracted ,
negotiations, the Armed Forces of the Philippines paid the claimant the
compromise sum of P7,000.00 which the latter accepted without prejudice to her
right to make further claims” (supra, p. 25). It is thus clear that petitioner
had never waived, but had always insisted on, her right to make further claims
upon the Armed Forces of the Philippines, even as she had accepted the amount of
P7,000.00, which she merely considered as partial payment of her claim.

The Solicitor General also argues that petitioner’s claim is not one for
rentals but for damages to her property; and that the extent of damages to which
petitioner is entitled is only the reasonable compensation for the use of the
premises, which the Office of the Chief of Staff later found to be only
P3,386.40. Whether petitioner’s claim be for rentals or damages, however, the
fact remains that from the very beginning the Armed Forces of the Philippines
had itself fixed the reasonable compensation or indemnity due to petitioner at
the amount of P15,067.31, even justifying its reasonableness on the ground that
“this is the same rate the U.S. Army was paying before for similar lots within
the area” (Orig. Recs., p. 17). A3 this offer was, as already stated, legally
accepted by petitioner, the Armed Forces can not, by unilateral act and without
petitioner’s consent or approval, modify or alter its previous perfected
contract with her by reducing the amount payable.

For the above reasons, we hold that petitioner is entitled to, and should be
paid, the balance of her claim against the Republic of the Philippines in the
amount of P8,067.31. She can not, however, recover interests on this amount from
May 1, 1948, as prayed for by her. The rule is that a debtor is considered to
incur in delay only from the time the obligee judicially or extrajudicially
demands the fulfillment of the obligation (Art. 1169, New Civil Code), and it is
only from the time of delay that interest is recoverable (Art. 2209, supra).
There being no evidence showing that petitioner made demands upon the Armed
Forces of the Philippines for the payment of the balance of her claim prior to
her filing thereof with the Auditor General on June 26, 1956, she must be
considered to have made demand for its payment only on this date. Therefore,
petitioner is entitled to the payment of interests only from June 26, 1956.

The decision appealed from is reversed, and the Auditor General is ordered to
approve payment for petitioner the amount of P8,067.31, with legal interests
thereon from June 26, 1956 until full payment. Cost de oficio. So ordered.

Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador,
Concepcion, Endencia, and Felix, JJ., concur.