JACOBO ZOBEL ET AL., PLAINTIFFS AND APPELLANTS, VS. THE CITY OF MANILA, DEFENDANT AND APPELLANT.

This
action was instituted in the Court of First Instance of the City of
Manila on May 24, 1923, by the minors Jacobo Zobel, Alfonso Zobel, and
Mercedes Zobel, under the guardianship of Fernando Zobel, to recover of
the City of Manila the amount of the first two instalments of the
purchase price of a tract of land located in the Province of Rizal near
the corporate limits of the City of Manila, which has been conveyed by
the guardian of the minor-plaintiffs by deed (Exhibit E) dated 21st of
February, 1922, said instalments amounting respectively to P41,666.66
and with interest upon the first instalment from May 21, 1922, and upon
the second from the date of the making of the contract. Upon hearing
the cause the trial judge gave judgment in favor of the plaintiffs to
recover both the principal sums claimed, amounting to P83,333.32, with
interest upon only one installment at the rate of five per centum per
annum. From this judgment the plaintiffs appealed from so much of the
decision as failed to allow interest on both instalments at the rate
claimed in the complaint, while the defendant appealed from so much of
the judgment as was favorable to the plaintiffs. For convenience in the
disposition of the controverted points, the appeal of the defendant
will first be considered.

It appears that for several years the responsible officials
of the City of Manila have appreciated the necessity for
the establishment of a cemetery near the city and on the
south side of the Pasig River. Admittedly the only tract
of land available for this purpose consists of a part of the
Hacienda San Pedro Macati, belonging to the plaintiffs,
who are minors. This estate lies in the Province of Rizal,
beyond the corporate limits of the city, but one of its corners
juts into the southern, or southeastern suburbs of the city,
in such manner as to bring the desired tract close in populous centres. The hacienda, it may be stated, has never
been built upon or improved for city purposes and forms
a solid block, practically untraversed by public streets or
roads. Owing to the character of the subsoil the land has
little value for agricultural purposes, which is the only use
to which it has heretofore been put; and it is taxed in the
Province of Rizal on the low basis of agricultural land.

In February, 1920, the Municipal Board of the City of
Manila passed an ordinance (No. 726) appropriating the
sum of P703,750 to be used for “the establishment of a
cemetery in the south district of Manila and the acquisition
of the land necessary therefor.”

In consequence of the passage of this resolution the
Honorable Ramon J. Fernandez, at that time the Mayor
of the City, entered into negotiations with the guardian
of the appellees, the result of which was a letter, written
July 1, 1920, in which the appellees offered to sell to the
city upon the terms therein set forth twenty-five hectares
of the San Pedro Macati Estate for cemetery purposes
(Exhibit A).

Upon receipt of this letter the Mayor endorsed it for
recommendation and comment to the city engineer, and
made request in writing of the Honorable Francis Burton
Harrison, then Governor-General, that he designate some
one to continue negotiations for the purchase of the land.

On July 10, 1920, the city engineer returned the papers
to the Mayor, stating that in his opinion the site selected
was “the best location available and the only one suitable
for cemetery purposes on the south side of the city.”

On July 23, 1920, Governor-General Harrison appointed
the city engineer, Mr. Artiaga, a committee of one to negotiate for the purchase of a tract of land to be used for
the proposed south cemetery, whereupon the city engineer
referred the communication of the Mayor to the Director
of Health, requesting his concurrence. On August 18, 1920,
the Director of Health returned the papers to the Mayor,
concurring in the recommendation that the tract of land in
question be purchased. Thereafter the city engineer reported to the Mayor that the proposed site was desirable
and recommended its purchase at the rate of one peso per
square meter. On August 26, 1920, the city engineer sent
to the Governor-General a copy of his report to the Mayor.

Two or three days after the receipt of Mr. Artiaga’s
report, the Mayor referred the letter of offer and the other
papers connected with the case, including the report of the
city engineer, to the Municipal Board, requesting that the
Board concur in his selection of the San Pedro Macati site
for the location of the proposed south cemetery. On August 31, 1920, the Municipal Board, at a meeting at which
all the members were present, adopted unanimously a resolution which reads as follows:

“Endorsement by the Mayor requesting concurrence of
the Board regarding the land selected by his office for the
proposed south cemetery, namely, a parcel of land of the
San Pedro Macati Estate belonging to Mr. Enrique Zobel,
who is willing to sell it at the rate of one peso per square
gratuitously to give access to the cemetery from Calle Vito
Cruz, referred to the committee on cemeteries for comment
and recommendation.”

In accordance with this resolution, the matter was referred to the committee on cemeteries of the Municipal
Board of the City of Manila. Under date of September 10,
1920, that committee returned the papers to the Municipal
Board “recommending the approval of the construction of
the south cemetery on the site here indicated as the conditions of the said site are appropriate for the purpose.”

On September 10, 1920, the report of the committee was
received by the Municipal Board and a resolution of the
following tenor was adopted:

“Endorsement of the committee on cemeteries recommending the approval of the site selected by the Mayor
for the south cemetery situated at the San Pedro Macati
Estate, containing approximately twenty-five hectares.
The recommendation is approved and it is ordered that the
matter be returned to the Mayor inviting his attention to
this approval.”

After the adoption of this resolution, on September 23,
1920, the Honorable Ramon J. Fernandez, at that time
Mayor of the City of Manila, and acting on its behalf, and
Mr. Enrique Zobel, as guardian of the appellees, acting on
their behalf, entered into a preliminary contract in writing,
prepared by the city fiscal of the City of Manila, embodying therein the terms of the agreement under which the
City of Manila was to buy and the appellees were to sell
the tract of land in question. (Exhibit C.)

On December 10, 1920, the Municipal Board of Manila
adopted a resolution requesting authority pursuant to Act
No, 2894 to issue bonds for the construction of works and
permanent improvements in the amount of P5,500,000.
This resolution was duly approved, the bonds mentioned
were issued and sold, and on February 21, 1922, there was
an unexpended balance from the proceeds of these bonds,
amounting to P1,341,994.35, which was available to defray
the cost of the south cemetery project.

The preliminary contract bears date of September 23,
1920; but on account of delay in the preparation of the
plans and technical description of the property necessary
to make possible its transfer under the Land Registration
Act, it was not until February, 1922, that the final deed of
conveyance (Exhibit E) was executed.

On February 20, 1922, the Municipal Board of Manila
adopted a resolution (Resolution No. 31, series of 1922)
making an appropriation in the amount of P180,000 from
the public works and permanent improvements bond issue
fund of the city for the purpose of the south cemetery.
This resolution was approved by the Secretary of the Interior in accordance with the provisions of section 1 of
Act No. 2894.

The day after Resolution No. 31 was adopted, the appellees’ guardian, acting on their behalf, with the approval
of the Court of First Instance of the City of Manila, and
the Honorable Ramon J. Fernandez, acting on behalf of
the City of Manila, executed a final deed of sale of the
land in question. (Exhibit E.) This deed was drafted
under the direction of the city fiscal of the City of Manila.
On February 24, 1922, said deed was filed for record with
the register of deeds of the Province of Rizal, together
with appellees’ certificates of title. Thereupon transfer
certificates of title were duly issued to the City of Manila
as owner.

After the execution and delivery to it of the deed of
sale to the land in question, and the issuance to it of the
certificates of title thereto under the Land Registration Act,
the City of Manila took possession of the property and
placed boundary monuments on the corners of the land
conveyed to it to mark the limits thereof.

By the terms of the conveyance the purchase price of
P250,000 was to be paid in six instalments of P41,666.66
each, the first to be made three months after the date of
the execution of the deed, and the remainder in yearly instalments thereafter. The first instalment was not to bear
interest but the remaining instalments were to bear interest at the rate of five per centum per annum. On the
date of the execution of the deed of sale, ample funds were
available to meet the payments, as appears from a statement in the record signed by the chief of the department of
finance of the City of Manila.

In anticipation of the falling due of the first instalment of the
purchase price, the city treasurer, on March 24, 1924, prepared and
signed a warrant on the city depository for a sum sufficient to cover
said instalment. This warrant was then sent to the district auditor,
one Crisanto Ticman, to be countersigned by him. Upon looking into the
matter the fact came to Ticman’s attention that the land which was
being acquired by the city was assessed on the tax books of the
Province of Rizal as uncultivated agricultural land, at a valuation of
about sixty pesos per hectare. Observing the disparity between this
valuation and the price which the city had contracted to pay, Ticman
refused to countersign the warrant and addressed a letter to the
Insular Auditor, E. M. Fullington, suggesting that the sale should not
be permitted to go through and observing that if the city would
institute condemnation proceedings it would surely get the land for
very much less than the stipulated price of P250,000. The Insular
Auditor approved the course taken by his subordinate and reported the
matter to Governor-General Wood, who, through his secretary, appointed
a committee of three, composed of Colonel C. E. Nathorst, of the
Philippine Constabulary, Mr. M. del Rosario, district auditor for
Rizal, and the city engineer, Mr. Artiaga, to investigate the matter
and report to him. The result of the inquiry was that the majority of
the committee expressed the view that not more than fifty centavos per
square meter should be paid for the land, while Artiaga maintained his
former position that the price of one peso per square meter represented
a reasonable valuation.

The Nathorst report was forwarded to the Mayor by
the secretary to the Governor-General, through the office
of the Insular Auditor, with the indorsement, by authority
of the Governor-General, that the action of the Auditor
in refusing to countersign the warrant in any amount in
excess of fifty centavos per square meter was approved.

Meanwhile on May 21, 1922, the first instalment of the
purchase price of the land had fallen due, and on June
7, 1922, Mr. Zobel, guardian of the appellees’, addressed a
letter to the Mayor, reminding him that payment had not
been made. On August 7, 1922, the Mayor replied to Mr.
Zobel’s letter, stating that while he recognized the obligation of the city to carry out its contract, nevertheless, in
view of the intervention of the Governor-General in the
matter, he would take no further action. The result was
that payment of the instalment then due was not effected,
and a similar default occurred later with respect to the
second instalment.

This cause was tried in the lower court upon an agreed statements of
fact, necessarily somewhat elaborate in its details. After the cause
had been decided an error was discovered in the transcription of
Resolution No. 31, series of 1922, into the agreed statements of fact,
which was this: In the authentic resolution there appears a paragraph
cancelling Resolution No. 276, series of 1921, but in the transcription
of said resolution into the agreed statements the first two figures of
the cancelled resolution were so transposed as to make it appear that
Ordinance No. 726 was cancelled. It so happened that both Ordinance No.
726 and Resolution No. 276 related in part to the same subject, namely,
the south cemetery; with the result that no one concerned in the
litigation discovered the error, and the cause was tried in the lower
court on the erroneous supposition that Ordinance No. 726 had been
repealed in so far as relates to south cemetery by said Resolution No.
31, series of 1922. This error appears to have been first discovered by
the attorneys for the appellees after the cause was brought to this
court upon appeal, and investigations were conducted by them which
revealed the further fact that on May 10, 1921, the Municipal Board had
passed an ordinance (No. 966) reverting to the general funds the
unexpended balance of the amount theretofore appropriated for the south
cemetery in Ordinance No. 726.

In view of the discovery of the error above-mentioned
the appellees, on July 12, 1924, filed a motion in this court,
asking to be relieved from the erroneous stipulation upon
the point mentioned and that the court should admit as
evidence the affidavits showing the facts to be as stated in
the motion. The motion was opposed by the appellant,
and this court deferred decision on the motion until the
case should be considered on the merits. As it now becomes proper to pass upon the matter, we will say that
while it is not clear that the error alluded to affects the
fundamentals of the case, yet the mistake is obvious and
the situation is one where the appellees are entitled to be
relieved from any prejudicial results. Furthermore, it is
desirable for the court to be able to state the facts with
truthfulness. We shall therefore assume that the records
stand corrected, with leave to the appellant’s attorneys to
show that the facts stated in the motion are erroneous, in
the contingency that they desire to contest the same.

In dismissing this matter we may observe that, the general situation
with reference to the appropriations available for the south cemetery
may be summed up in the statement that at the time the preliminary
contract (Exhibit C) was executed on September 23, 1920, there existed
an appropriation of the general funds of the city under Ordinance No.
726, of the sum of P703,750 available for the purpose of establishing
the south cemetery; while at the time the definitive contract of sale
(Exhibit E) was made, on February 21, 1922, there existed an
appropriation from the public works and permanent improvements bond
issue fund in the amount of P180,000 for the same purpose, though the
appropriation from the general funds was then no longer available.

The opposition of the auditing department to the carrying
of this contract into effect undoubtedly had its origin in
a desire on the part of the district auditor to protect the
interests of the city, based on the conviction that if the
contract could be nullified and condemnation proceedings
instituted the amount to be paid by the city would be considerably less than that named in the contract. Conceding
the propriety of this point of view, the consideration is
one that in no wise affects the legal aspects of the case; and
it is but fair to say that the terms of purchase were apparently as favorable to the city as could be arranged by
negotiation with the representative of the owners. At any
rate the good faith of the city officials concerned in the
deal is not called in question. We observe furthermore
that in the Nathorst report the principal reason assigned
for estimating the price that should be paid by the city
at fifty centavos per square meter, instead of one peso
per square meter as agreed, is that the construction by the
city of the road to the cemetery will considerably increase
the commercial value of the remainder of the estate.

Considered as a basis for the proposed reduction in the
price of the land to be taken, this suggestion is only
partially sound. Even in condemnation proceedings the
law does not unqualifiedly permit the offsetting of incidental
benefits against the actual value of the property taken.
The rule, we take it, is that incidental benefits may be set
off against incidental damage but not against the basic
value of the property. Otherwise an owner could be deprived of his property without any compensation at all,
as where, for instance, only a small part of an entire
parcel is taken for certain uses, with incidental benefit to
the remainder. It follows that, even upon the face of the
report itself, the fact that the agreed price is excessive is
not demonstrated; and it is to be remembered that by the
deed conveying the cemetery site to the city the plaintiffs
have gratuitously transferred many thousands of square
meters to the city for the construction of a road to the
cemetery, with the result that if this land be included in
the estimate the price of the whole is less than eighty centavos per square meter. The circumstance that the land
in question is assessed on the tax books of the Province
of Rizal at sixty pesos per hectare is of little moment when
we come to consider the value of the land in relation with
its propinquity to the City of Manila and its utility for
the purpose for which it is inevitably destined to be used.

The brief of the defendant as appellant raises several
questions of a purely legal nature, which will be discussed
in the order of their logical sequence; and we shall first
consider that which relates to the antecedent appropriation
necessary before a binding contract can be made requiring
the expenditure of public funds. The provision of law here
applicable is found in section 606 of the Administrative
Code, wherein it is declared that no contract involving the
expenditure of public funds shall be made until there is
an appropriation therefor, the unexpended balance of
which, free from other obligations, is sufficient to cover
the proposed expenditure. As we have already seen, at
the time the preliminary contract was made, Ordinance No.
726, appropriating the sum of P703,750 for the proposed
cemetery was in force. This in our opinion is a sufficient
compliance with the legal requirement; and the circumstance that before
the definitive contract was made this
money was reverted to the general funds of the city did
not have the effect of nullifying said contract. The question whether
the contract is valid depends upon the situation existing at the time
the first agreement was made.

The second question to be considered has reference to the applicability
of section 607 of the Administrative Code to contracts’ made by the
City of Manila. In the second paragraph of said section it is declared
that no contract involving the expenditure by any province,
municipality, township, or settlement of two thousand pesos or more
shall be entered into or authorized until the treasurer of the
political division concerned shall have certified to the officer
entering into such contract that funds have been duly appropriated for
such purpose and that the amount necessary to cover the proposed
contract is available for expenditure on account thereof. It is
admitted that no such certificate was made by the treasurer of Manila
at the time the contract now in question was made. We are of the
opinion that the provision cited has no application to contracts of a
chartered city, such as the City of Manila. Upon examining said
provision (sec. 607) it will be found that the term chartered city, or
other similar expression, such as would include the City of Manila, is
not used; and it is quite manifest from the careful use of terms in
said section that chartered cities were intended to be excluded. In
this connection the definitions of “province,” “municipality” and
“chartered city,” given in section 2 of the Administrative Code are
instructive. The circumstance that for certain purposes the City of
Manila has the status both of a province and a municipality (as is true
in the distribution of revenue) is not inconsistent with this
conclusion.

The next contention is that the contract in question is
void because the approval of the city council was not expressed in the form of an ordinance. The provisions of
law applicable upon this point are found partly in section
2434, subsection (t), as amended by section 4 of Act No.
2774 of the Philippine Legislature, and partly in section
2443 of the Administrative Code. Subsection (i) of section 2434, as it originally stood in the Administrative Code,
among other things declared that the Mayor shall represent
the city in all its business matters and sign on its behalf all
its bonds, contracts and obligations made in accordance with
law or lawful ordinance or resolution. The corresponding provision in the amendatory Act (No. 2774) makes it
his duty to represent the city in all its business matters
and sign on its behalf all its bonds, contracts and obligations made in accordance with the laws or ordinances. Section 2443 of the Administrative Code, as it now and at all
times has stood, clearly recognizes the power of the board to
adopt resolutions creating liability, and in the same section
the Mayor is given authority to veto such resolutions.

Now, from the omission of the word “resolution” from
the amendment of subsection (i) of section 2434, it is
argued that it was the intention of the Legislature to suppress the power of the Municipal Board to authorize the
making of contracts by resolution. The validity of this
contention cannot be admitted; for even supposing that the
Legislature may have entertained the purpose attributed
to it in amending subsection (i) of section 2434, this intention was not fully accomplished by said amendment
alone, the other provision (sec. 2443) having remained
without alteration. But we incline to the view that the
expression “laws or ordinances,” found in the amendment
of subsection (i) of section 2434, is there used in a sense
broad enough to include resolutions. The reason for this
is that we find the same verbal change in two other paragraphs of the same section, in respect to which there can
be no doubt that resolution was intended to be included in
the broader expression. Thus, in subsection (a) of section
2434 of the Administrative Code, it was made the duty of
the Mayor to see that the “laws, ordinances and resolutions” should be faithfully executed and enforced. In sub-section (m) of the same section it was made the duty of
the Mayor “to perform such other executive duties as may
be prescribed by law or be required of him by ordinance
or resolution of the board.” In the two corresponding
provisions of the amendatory Act (No. 2774) the word
“resolution,” or “resolutions,” is omitted and the inclusive
expression “laws and ordinances” or “law or ordinance” is used. Can it be maintained that the intention of the
Legislature in making these changes was to relieve the
Mayor of all executive responsibility as to the enforcement
of resolutions? Certainly not: he has the same duty to
enforce lawful resolutions as to enforce any law or ordinance. Yet if the argument relied upon by the appellant
is valid as to the effect of the omission of the word resolution in subsection (i), it would necessarily follow that the
Mayor has no administrative responsibility whatever as to
the enforcement of resolutions.

It is next insisted that the resolution of the Board dated
September 10, 1920, approving the Mayor’s action with
respect to the cemetery site, was intended merely as an
expression by the Board of its approval of the location of
the land chosen for the site, without any commitment as
to the terms upon which the property was to be acquired.
We are of the opinion that this is not a fair interpretation
of the resolution. At the time the resolution was adopted,
the Board had before it the offer made by the guardian of
the plaintiffs, stating the terms upon which the sale would
be made. This offer was accompanied by the favorable
report and recommendation of the city engineer, the approval of the proposed site by the Director of Health, and
the recommendation of the committee on cemeteries of the
Board that the cemetery be constructed on the site indicated. The indorsement by which the Board, with all
members present, referred the matter to this committee
expressly recites that the price to be paid for the land was
at the rate of one peso per square meter, apart from the
tract to be ceded gratuitously to give access to the cemetery. In the light of these facts it is impossible to suppose
that any member of the Board was unaware of the conditions upon which the land was to be acquired. Again, it
is obvious that the matter before the Board was not the
mere question of a choice between one or more available
tracts of land then at the disposal of the city. It had reference to the only tract available for cemetery purposes.
There was no possible choice as between competitive lots,
and the sole question was whether this lot was acceptable
under the terms stated in the offer.

Considered as a mere expression of the preference of
the Board as to the location of the cemetery, the resolution
was wholly without efficacy and could not advance the negotiations in the slightest degree. We are of the opinion that
the intention was to approve the construction of the cemetery on the site chosen and on the terms expressed in the
offer. As a consequence the Mayor was clothed with authority to execute the contract which he subsequently made.

The attorneys for the appellant further insist that, even
supposing the resolution to have constituted a sufficient
approval of the contract in the terms expressed in the
offer, nevertheless the efficacy of the resolution was destroyed by the subsequent introduction of material changes
into the agreement. In this connection reference is made
to a portion of clause V of the deed, in which it is declared
that the land shall be used exclusively for a cemetery to
be known as South Cemetery. The insertion of this term
in the contract is supposed to constitute a material variance
from the offer. We are unable to agree with this contention, as the clause to which exception is taken seems to be
a mere unfolding of what was implicit, if not actually expressed in the offer. The letter of offer (Exhibit A) used
the name South Cemetery to identify the proposed burial
ground, and the fact that the land was intended solely for
cemetery purposes was patent throughout the negotiations.
It will be borne in mind that the city has no authority to
acquire land for speculative or commercial uses, and as no
other purpose for this acquisition has been suggested than
for the establishment of a cemetery, we think that no material mistake was committed by the city fiscal in stating in
the deed that the property should be used exclusively for
that purpose.

Another reason advanced for supposing the contract for
the purchase of this property to be invalid, or at least unenforcible, is that the Insular Auditor has refused to
countersign the warrant for the first instalment of the
purchase price; and it is insisted for the defendant that
this action on his part is conclusive against the plaintiffs.
Their sole recourse, so it is claimed, is, or rather was, by
way of administrative appeal from the action of the Auditor
to the Governor-General. The suggestion is in our opinion
without merit. The general provisions of law denning the
jurisdiction and powers of the Auditor and which, if literally construed, would seem to make him absolute arbiter
of all claims of any sort against all branches of the Government must be considered to be qualified as regards
the contract rights of persons dealing with the city by the
more specific provisions declaring how and by whom contracts can be made which will be binding on it. It was
not intended that the Auditor should possess a general veto
power over all city contracts, and his refusal to countersign the warrant referred to is of no moment in this action
to enforce the legal liability of the city.

Finally, exception is taken to the refusal of the trial
court to require the Insular Auditor to be brought in as
a party defendant. The course pursued by the court was
in our opinion correct. The action is based exclusively
upon the legal liability of the city, and no relief is sought
against the Auditor. He was therefore not a necessary or
even a proper party to the action. Of course if the claim
had been based upon an obligation of the Insular Government, no action
would have lain directly against the debtor,
in the absence of its consent to be sued. In such case the
plaintiffs’ only remedy would have been by the writ of
mandamus to compel the Auditor to countersign a warrant
for the amount due. But the debtor in this case is a municipal
corporation, which does not enjoy the State’s immunity from suit, and
the action can be maintained directly
against it without the intervention of the Auditor.

What has been said suffices to dispose of the contentions
made in behalf of the defendant as appellant, and we accordingly pass to the errors assigned in behalf of the
plaintiffs as appellants with respect to the matter of interest. The facts here pertinent are these: By the final
deed of sale, dated February 21, 1922, the city undertook
to pay the total purchase price of P250,000 in six instalments. The first was in the amount of P41,666.70 payable
on May 21, 1922. The other five were in the amount of
P41,666.66 each, successively falling due on May 21, 1923,
and on the same date in each succeeding year until all
should be paid.

The following stipulation with respect to interest is
found in clause III of this contract:

“Of the instalments above stipulated, the first (which
will fall due three months after the execution of this
writing) shall draw no interest; but the five later instalments shall draw interest at the rate of five per centum
(5%) per annum, payable to the creditors upon the date
when they shall respectively fall due.”

From this it will be seen that the agreement as to interest differs in case of the two instalments here sued on;
and the situation with respect to each will therefore be dealt
with separately.

As to the first instalment, which was to fall due at three
months, it was stipulated that it should bear no interest.
The trial judge appears to have considered that this stipulation deprived the plaintiffs of the right to interest after
default, and no interest whatever was allowed by him
upon this instalment. This was error. The stipulation
that this instalment should draw no interest was made in
the expectation that the obligation would be paid upon the
date stipulated. After default occurred the defendant became liable for interest as damages regardless of the absence
of any express stipulation for interest and regardless of
the statement that this instalment should draw no interest.
This statement in the contract was evidently intended
merely to govern the rights of the parties with respect to
interest for the three-month period between the making of
the contract and the date when the instalment was to become due. With respect to the plaintiffs’ right to interest
after default the situation is to be treated precisely as if
nothing had been said about interest at all.

As already stated, the first instalment fell due on May
21, 1922, and extrajudicial demand for payment appears
to have been made in a letter dated June 7, 1922, from the
guardian of the plaintiffs addressed to the Mayor. Under
the first paragraph of article 1100 of the Civil Code and
under article 1108 of the same Code, interest should be
allowed upon this instalment at the rate of six per centum
per annum. Under section 510 of the Code of Civil Procedure, the interest thus accruing must be consolidated with
the principal as of the date of the judgment of the lower
court; after which interest upon the whole shall be computed at the same rate.

With respect to the second instalment interest must be allowed at the
contract rate of five per centum per annum from the date of the
execution of the final deed of sale, or February 21, 1922; and under
article 1109 of the Civil Code the interest that had accrued up to the
date of the filing of the complaint (May 24, 1923) must be consolidated
as of that date with the capital, after which the whole shall bear
interest at the contract rate of five per centum per annum until paid.
Where interest is contracted for at a given rate the contract
obligation to pay interest is not merged in the judgment but remains in
full force until the debt is paid. The circumstance that the rate here
stipulated was less than the lawful rate does not alter the case.

In connection with liability for
interest it may be well to point out that section 510 of the Code of
Civil Procedure is applicable only to debts and claims with respect to
which no stipulation for interest has been made, and article 1109 of
the Civil Code, providing for interest upon interest, is applicable
only to obligations containing a stipulation for interest. Furthermore,
it will be noted that, though section 510 of the Code of Civil
Procedure provides that interest shall be added “until the date of the
final judgment,” this is not to be understood, as inhibiting the
collection of interest thereafter accruing until the judgment is paid.
A demand established by judgment must be understood as bearing interest
whether expressly so stated or not. Finally, it hardly needs be said, a
municipal corporation does not enjoy immunity from liability for
interest, when assessed as damages for the nonpayment of a debt, to the
same extent as the general government.

Our conclusion is that no error was committed by the
trial court in giving judgment in favor of the plaintiffs
upon both causes of action, but the amount awarded must
be modified to conform to the rules above stated with respect to the computation of interest, with the result that
the plaintiffs shall recover of the defendant, upon the first
cause of action, the sum of P45,652.84, as of the date of
January 11, 1924, with interest thereafter at the rate of
six per centum per annum until the judgment shall be paid;
and upon the second cause of action the sum of P44,283.04,
as of the date of May 24, 1923, with interest thereafter
at the rate of five per centum per annum until the judgment shall be paid. The plaintiffs will also recover costs
of both instances. As thus modified, the judgment is affirmed. So ordered.

Malcolm, Villamor, and Ostrand, JJ., concur.

Johns, J., concurring: It may be that the land is not worth the price which
the city agreed to pay, but there is no evidence of any
fraud. In the absence of fraud, the contract is valid and
should be enforced. For such reasons, I concur in the
result.

Romualdez, J., with whom concur Johnson and Avanceña, JJ., dissenting:

With due respect, I dissent from the opinion of the
majority. I think that the price of the land was never
acted upon by the Municipal Board either by resolution
or ordinance, and consequently the contract of purchase
and sale here in question cannot be held to have been
perfected.