[No. 22201.

January 12, 1925]

JACOBO ZOBEL ET AL., plaintiffs and appellants, vs.
THE CITY OF MANILA, defendant and appellant
1, CONTRACTS;
MUNICIPAL
CORPORATIONS;
APPROPRlATION; REVERSION OF APPROPRIATION TO
GENERAL FUNDS.If an appropriation by the Municipal
Board of the City of Manila fulfilling the requirements of
section 606 of the Administrative Code is in existence at the
time a duly authorized contract is signed by the Mayor, the
obligation of the contract is not impaired by the
circumstance that the money so appropriated is reverted to
the general funds of the city before the contract is carried
into effect.
2. ID. ; ID. ;. ID. ; CERTIFICATE OF TREASURER NOT
REQUIRED FOR CHARTERED CITY.The certificate of
the treasurer required by section 607 of the Administrative
Code, showing that funds have been duly appropriated to
meet a contemplated expenditure, is not necessary in case of
the contracts of a chartered city.
3. MUNICIPAL
CORPORATIONS;
CONTRACT
FOR
PURCHASE OF LAND; RESOLUTION OF MUNICIPAL
BOARD SUFFICIENT TO AUTHORIZE PURCHASE.
Authority for the purchase of land by the City of Manila
may be expressed either by resolution or by ordinance.
4. ID.; ID.; FAILURE OF AUDITOR TO COUNTERSIGN
WARRANT.The fact that the Auditor refuses to
countersign a warrant drawn upon the funds of the City of
Manila does not impair the obligation lawfully contracted by
the city with respect to which the warrant is drawn. The
Auditor does not possess veto power over city contracts.

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Zobel vs. City of Manila
5. PLEADING AND PRACTICE; ACTION ON CONTRACT
OF CITY OF MANILA; PARTIES; AUDITOR.The Insular
Auditor is not a necessary party to an action brought by a
vendor of land against the City of Manila to recover the
purchase price agreed to be paid for the land by the city.
6. INTEREST; STIPULATION THAT CONTRACT SHALL
NOT BEAR INTEREST; How INTERPRETED.A
stipulation in a contract for the payment of money at a
certain fixed date to the effect that the contract shall not
bear interest must be understood as applicable only to the
period which is to elapse prior to maturity. It does not have
the effect of depriving the obligee of the right to recover
interest as damages in case of default in the payment of the
obligation at the due date.
7. ID. ; LIQUIDATED CLAIM ; INTEREST AS DAMAGES IN
ABSENCE
OF
STIPULATION;
PROVISIONS
APPLICABLE.Where there is no stipulation as to the rate
of interest, the obligation to pay interest as damages for the
nonpayment of a liquidated claim is governed by article
1108, in relation with article 1100 of the Civil Code and
section 510 of the Code of Civil Procedure. Under these
provisions interest begins to accrue at the rate of six per
centum per annum upon extrajudicial or judicial demand,
and interest accruing prior to the date when judgment is
rendered in the Court of First Instance should be capitalized
and consolidated with the principal as of that date, after
which interest is computed upon the judgment at the same
lawful rate until the judgment is satisfied.
8. ID.; JUDGMENTS; SECTION 510, CODE OF CIVIL
PROCEDURE.Section 510 of the Code of Civil Procedure,
relative to interest upon judgments, is applicable only to
judgments upon debts and claims with respect to which no
stipulation for interest has been made by the parties to the
obligations which supply the basis of judgment.
9. ID.; STIPULATION AS TO RATE OF INTEREST;
ACCUMULATION OF INTEREST DUE AT DATE OF
INSTITUTION OF ACTION.Where a stipulation
governing the rate of interest is inserted in a contract for

the payment of money, this rate, if lawful, remains in force

until the obligation is satisfied; and under article 1109 of
the Civil Code the interest that accrues prior to the date of
the filing of the complaint should be capitalized and
consolidated as of that date with the capital, after which the
whole bears interest at the contract rate until the amount
due is paid. The contract obligation is not merged in the
judgment but remains in full force until the debt is paid.

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10. ID.; ID.; ARTICLE 1109 OF THE CIVIL CODE.Article
1109 of the Civil Code, providing for interest upon interest,
is applicable only to obligations containing a stipulation for
interest.
11. MUNICIPAL
CORPORATIONS;
LlABILITY
FOR
INTEREST.A municipal corporation does not enjoy
immunity from liability for interest when assessed as
damages for the nonpayment of a debt and is liable therefor
to the same extent and under the same considerations as a
natural person.

APPEAL from a judgment of the Court of First Instance of

Manila. Del Rosario, J.
The facts are stated in the opinion of the court.
Fisher, DeWitt, Perkins & Brady for plaintiffs-appellants.
City Fiscal Guevara and Araneta & Zaragoza for
defendant-appellant.
STREET, J.:
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 minorplaintiffs
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 instalment 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
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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 f or 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 to 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 f or 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
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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 ref erred 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 folows:
"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
meter, apart from a tract of land which he offers to cede
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Zobel vs. City of Manila

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 f
ollowing 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,

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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
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Zobel vs. City of Manila

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 ref used 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 GovernorGeneral 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
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177

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
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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
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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
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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 ref erence 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,
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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 (i), 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
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Zobel vs. City of Manila

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 subsection (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
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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 f air 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.
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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
185

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185

Zobel vs. City of Manila

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 defining 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 f
rom 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
186

186

PHILIPPINE REPORTS ANNOTATED

Zobel vs. City of Manila

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 f
ound 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 f or 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
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187

Zobel vs. City of Manila

come 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 f or 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 in188

188

PHILIPPINE REPORTS ANNOTATED

Zobel vs. City of Manila

terest 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
AVANCEA, 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
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189

Ingenohl vs. Walter E. Olsen & Co.

or ordinance, and consequently the contract of purchase
and sale here in question cannot be held to have been
perfected.
Judgment modified.
___________

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