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DELFIN TAN VS ERLINDA BENOLIRAO

Is an annotation made pursuant to Section 4, Rule 74 of the Rules of Court ( Rules) on a certificate of title covering real property considered an encumbrance on the property? We resolve this question in the petition for review on certiorari[1] filed by Delfin Tan (Tan) to assail the decision of the Court of Appeals (CA) in CA-G.R. CV No. 52033[2] and the decision of the Regional Trial Court (RTC)[3] that commonly declared the forfeiture of his P200,000.00 down payment as proper, pursuant to the terms of his contract with the respondents. THE ANTECEDENTS The facts are not disputed. Spouses Lamberto and Erlinda Benolirao and the Spouses Reynaldo and Norma Taningco were the co-owners of a 689-square meter parcel of land (property) located in Tagaytay City and covered by Transfer Certificate of Title (TCT) No. 26423. On October 6, 1992, the co-owners executed a Deed of Conditional Sale over the property in favor of Tan for the price of P1,378,000.00. The deed stated: a) An initial down-payment of TWO HUNDRED (P200,000.00) THOUSAND PESOS, Philippine Currency, upon signing of this contract; then the remaining balance of ONE MILLION ONE HUNDRED SEVENTY EIGHT THOUSAND (P1,178,000.00) PESOS, shall be payable within a period of one hundred fifty (150) days from date hereof without interest; That for any reason, BUYER fails to pay the remaining balance within above mentioned period, the BUYER shall have a grace period of sixty (60) days within which to make the payment, provided that there shall be an interest of 15% per annum on the balance amount due from the SELLERS; That should in case (sic) the BUYER fails to comply with the terms and conditions within the above stated grace period, then the SELLERS shall have the right to forfeit the down payment, and to rescind this conditional sale without need of judicial action; That in case, BUYER have complied with the terms and conditions of this contract, then the SELLERS shall execute and deliver to the BUYER the appropriate Deed of Absolute Sale;

b)

c)

d)

Pursuant to the Deed of Conditional Sale, Tan issued and delivered to the co-owners/vendors Metrobank Check No. 904407 for P200,000.00 as down payment for the property, for which the vendors issued a corresponding receipt. On November 6, 1992, Lamberto Benolirao died intestate. Erlinda Benolirao (his widow and one of the vendors of the property) and her children, as heirs of the deceased, executed an extrajudicial settlement of Lambertos estate on January 20, 1993. On the basis of the extrajudicial settlement, a new certificate of title over the property, TCT No. 27335, was issued on March 26, 1993 in the names of the Spouses Reynaldo and Norma Taningco and Erlinda Benolirao and her children. Pursuant to Section 4, Rule 74 of the Rules, the following annotation was made on TCT No. 27335: x x x any liability to credirots (sic), excluded heirs and other persons having right to the property, for a period of two (2) years, with respect only to the share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao

As stated in the Deed of Conditional Sale, Tan had until March 15, 1993 to pay the balance of the purchase price. By agreement of the parties, this period was extended by two months, so Tan had until May 15, 1993 to pay the balance. Tan failed to pay and asked for another extension, which the vendors again granted. Notwithstanding this

second extension, Tan still failed to pay the remaining balance due on May 21, 1993. The vendors thus wrote him a letter demanding payment of the balance of the purchase price within five (5) days from notice; otherwise, they would declare the rescission of the conditional sale and the forfeiture of his down payment based on the terms of the contract. Tan refused to comply with the vendors demand and instead wrote them a letter (dated May 28, 1993) claiming that the annotation on the title, made pursuant to Section 4, Rule 74 of the Rules, constituted an encumbrance on the property that would prevent the vendors from delivering a clean title to him. Thus, he alleged that he could no longer be required to pay the balance of the purchase price and demanded the return of his down payment. When the vendors refused to refund the down payment, Tan, through counsel, sent another demand letter to the vendors on June 18, 1993. The vendors still refused to heed Tans demand, prompting Tan to file on June 19, 1993 a complaint with the RTC of Pasay City for specific performance against the vendors, including Andrew Benolirao, Romano Benolirao, Dion Benolirao as heirs of Lamberto Benolirao, together with Evelyn Monreal and Ann Karina Taningco (collectively, the respondents). In his complaint, Tan alleged that there was a novation of the Deed of Conditional Sale done without his consent since the annotation on the title created an encumbrance over the property. Tan prayed for the refund of the down payment and the rescission of the contract. On August 9, 1993, Tan amended his Complaint, contending that if the respondents insist on forfeiting the down payment, he would be willing to pay the balance of the purchase price provided there is reformation of the Deed of Conditional Sale. In the meantime, Tan caused the annotation on the title of a notice of lis pendens. On August 21, 1993, the respondents executed a Deed of Absolute Sale over the property in favor of Hector de Guzman (de Guzman) for the price of P689,000.00. Thereafter, the respondents moved for the cancellation of the notice of lis pendens on the ground that it was inappropriate since the case that Tan filed was a personal action which did not involve either title to, or possession of, real property. The RTC issued an order dated October 22, 1993 granting the respondents motion to cancel the lis pendensannotation on the title. Meanwhile, based on the Deed of Absolute Sale in his favor, de Guzman registered the property and TCT No. 28104 was issued in his name. Tan then filed a motion to carry over the lis pendens annotation to TCT No. 28104 registered in de Guzmans name, but the RTC denied the motion. On September 8, 1995, after due proceedings, the RTC rendered judgment ruling that the respondents forfeiture of Tans down payment was proper in accordance with the terms and conditions of the contract between the parties.[4] The RTC ordered Tan to pay the respondents the amount of P30,000.00, plus P1,000.00 per court appearance, as attorneys fees, and to pay the cost of suit. On appeal, the CA dismissed the petition and affirmed the ruling of the trial court in toto. Hence, the present petition. THE ISSUES Tan argues that the CA erred in affirming the RTCs ruling to cancel the lis pendens annotation on TCT No. 27335. Due to the unauthorized novation of the agreement, Tan presented before the trial court two alternative remedies in his complaint either the rescission of the contract and the return of the down payment, or the reformation of the contract to adjust the payment period, so that Tan will pay the remaining balance of the purchase price only after

the lapse of the required two-year encumbrance on the title. Tan posits that the CA erroneously disregarded the alternative remedy of reformation of contract when it affirmed the removal of the lis pendens annotation on the title. Tan further contends that the CA erred when it recognized the validity of the forfeiture of the down payment in favor of the vendors. While admitting that the Deed of Conditional Sale contained a forfeiture clause, he insists that this clause applies only if the failure to pay the balance of the purchase price was through his own fault or negligence. In the present case, Tan claims that he was justified in refusing to pay the balance price since the vendors would not have been able to comply with their obligation to deliver a clean title covering the property. Lastly, Tan maintains that the CA erred in ordering him to pay the respondents P30,000.00, plus P1,000.00 per court appearance as attorneys fees, since he filed the foregoing action in good faith, believing that he is in the right. The respondents, on the other hand, assert that the petition should be dismissed for raising pure questions of fact, in contravention of the provisions of Rule 45 of the Rules which provides that only questions of law can be raised in petitions for review on certiorari. THE COURTS RULING The petition is granted. No new issues can be raised in the Memorandum

At the onset, we note that Tan raised the following additional assignment of errors in his Memorandum: (a) the CA erred in holding that the petitioner could seek reformation of the Deed of Conditional Sale only if he paid the balance of the purchase price and if the vendors refused to execute the deed of absolute sale; and (b) the CA erred in holding that the petitioner was estopped from asking for the reformation of the contract or for specific performance. The Courts September 27, 2004 Resolution expressly stated that No new issues may be raised by a party in his/its Memorandum. Explaining the reason for this rule, we said that: The raising of additional issues in a memorandum before the Supreme Court is irregular, because said memorandum is supposed to be in support merely of the position taken by the party concerned in his petition, and the raising of new issues amounts to the filing of a petition beyond the reglementary period. The purpose of this rule is to provide all parties to a case a fair opportunity to be heard. No new points of law, theories, issues or arguments may be raised by a party in the Memorandum for the reason that to permit these would be offensive to the basic rules of fair play, justice and due process.[5]

Tan contravened the Courts explicit instructions by raising these additional errors. Hence, we disregard them and focus instead on the issues previously raised in the petition and properly included in the Memorandum. Petition raises a question of law Contrary to the respondents claim, the issue raised in the present petition defined in the opening paragraph of this Decision is a pure question of law. Hence, the petition and the issue it presents are properly cognizable by this Court.

Lis pendens annotation not proper in personal actions Section 14, Rule 13 of the Rules enumerates the instances when a notice of lis pendens can be validly annotated on the title to real property: Sec. 14. Notice of lis pendens. In an action affecting the title or the right of possession of real property, the plaintiff and the defendant, when affirmative relief is claimed in his answer, may record in the office of the registry of deeds of the province in which the property is situated a notice of the pendency of the action. Said notice shall contain the names of the parties and the object of the action or defense, and a description of the property in that province affected thereby. Only from the time of filing such notice for record shall a purchaser, or encumbrancer of the property affected thereby, be deemed to have constructive notice of the pendency of the action, and only of its pendency against the parties designated by their real names. The notice of lis pendens hereinabove mentioned may be cancelled only upon order of the court, after proper showing that the notice is for the purpose of molesting the adverse party, or that it is not necessary to protect the rights of the party who caused it to be recorded. The litigation subject of the notice of lis pendens must directly involve a specific property which is necessarily affected by the judgment.[6] Tans complaint prayed for either the rescission or the reformation of the Deed of Conditional Sale . While the Deed does have real property for its object, we find that Tans complaint is an in personam action, as Tan asked the court to compel the respondents to do something either to rescind the contract and return the down payment, or to reform the contract by extending the period given to pay the remaining balance of the purchase price. Either way, Tan wants to enforce his personal rights against the respondents, not against the property subject of the Deed. As we explained in Domagas v. Jensen:[7] The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on the jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property, or seek to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a proceeding in personam is to impose, through the judgment of a court, some responsibility or liability directly upon the person of the defendant. Of this character are suits to compel a defendant to specifically perform some act or actions to fasten a pecuniary liability on him.

Furthermore, as will be explained in detail below, the contract between the parties was merely a contract to sell where the vendors retained title and ownership to the property until Tan had fully paid the purchase price. Since Tan had no claim of ownership or title to the property yet, he obviously had no right to ask for the annotation of a lis pendens notice on the title of the property. Contract is a mere contract to sell A contract is what the law defines it to be, taking into consideration its essential elements, and not what the contracting parties call it.[8] Article 1485 of the Civil Code defines a contract of sale as follows:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. The very essence of a contract of sale is the transfer of ownership in exchange for a price paid or promised.[9] In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed, i.e., full payment of the purchase price.[10] A contract to sell may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur.[11] In the present case, the true nature of the contract is revealed by paragraph D thereof, which states: x x x d) That in case, BUYER has complied with the terms and conditions of this contract, then the SELLERS shall execute and deliver to the BUYER the appropriate Deed of Absolute Sale; x x x

Jurisprudence has established that where the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract to sell.[12] Thus, while the contract is denominated as a Deed of Conditional Sale, the presence of the above-quoted provision identifies the contract as being a mere contract to sell. A Section 4, Rule 74 annotation is an encumbrance on the property While Tan admits that he refused to pay the balance of the purchase price, he claims that he had valid reason to do so the sudden appearance of an annotation on the title pursuant to Section 4, Rule 74 of the Rules, which Tan considered an encumbrance on the property. We find Tans argument meritorious. The annotation placed on TCT No. 27335, the new title issued to reflect the extrajudicial partition of Lamberto Benoliraos estate among his heirs, states: x x x any liability to credirots (sic), excluded heirs and other persons having right to the property, for a period of two (2) years, with respect only to the share of Erlinda, Andrew, Romano and Dion, all surnamed Benolirao [Emphasis supplied.] This annotation was placed on the title pursuant to Section 4, Rule 74 of the Rules, which reads: Sec. 4. Liability of distributees and estate. - If it shall appear at any time within two (2) years after the settlement and distribution of an estate in accordance with the provisions of either of the first two sections of this rule, that an heir or

other person has been unduly deprived of his lawful participation in the estate, such heir or such other person may compel the settlement of the estate in the courts in the manner hereinafter provided for the purpose of satisfying such lawful participation. And if within the same time of two (2) years, it shall appear that there are debts outstanding against the estate which have not been paid, or that an heir or other person has been unduly deprived of his lawful participation payable in money, the court having jurisdiction of the estate may , by order for that purpose, after hearing, settle the amount of such debts or lawful participation and order how much and in what manner each distributee shall contribute in the payment thereof, and may issue execution, if circumstances require, against the bond provided in the preceding section or against the real estate belonging to the deceased, or both. Such bond and such real estate shall remain charged with a liability to creditors, heirs, or other persons for the full period of two (2) years after such distribution, notwithstanding any transfers of real estate that may have been made. [Emphasis supplied.]

Senator Vicente Francisco discusses this provision in his book The Revised Rules of Court in the Philippines,[13] where he states: The provision of Section 4, Rule 74 prescribes the procedure to be followed if within two years after an extrajudicial partition or summary distribution is made, an heir or other person appears to have been deprived of his lawful participation in the estate, or some outstanding debts which have not been paid are discovered. When the lawful participation of the heir is not payable in money, because, for instance, he is entitled to a part of the real property that has been partitioned, there can be no other procedure than to cancel the partition so made and make a new division,unless, of course, the heir agrees to be paid the value of his participation with interest . But in case the lawful participation of the heir consists in his share in personal property of money left by the decedent, or in case unpaid debts are discovered within the said period of two years, the procedure is not to cancel the partition, nor to appoint an administrator to re-assemble the assets, as was allowed under the old Code, but the court, after hearing, shall fix the amount of such debts or lawful participation in proportion to or to the extent of the assets they have respectively received and, if circumstances require, it may issue execution against the real estate belonging to the decedent, or both. The present procedure is more expedient and less expensive in that it dispenses with the appointment of an administrator and does not disturb the possession enjoyed by the distributees.[14] [Emphasis supplied.]

An annotation is placed on new certificates of title issued pursuant to the distribution and partition of a decedents real properties to warn third persons on the possible interests of excluded heirs or unpaid creditors in these properties. The annotation, therefore, creates a legal encumbrance or lien on the real property in favor of the excluded heirs or creditors. Where a buyer purchases the real property despite the annotation, he must be ready for the possibility that the title could be subject to the rights of excluded parties. The cancellation of the sale would be the logical consequence where: (a) the annotation clearly appears on the title, warning all would-be buyers; (b) the sale unlawfully interferes with the rights of heirs; and (c) the rightful heirs bring an action to question the transfer within the two-year period provided by law. As we held in Vda. de Francisco v. Carreon:[15] And Section 4, Rule 74 xxx expressly authorizes the court to give to every heir his lawful participation in the real estate notwithstanding any transfers of such real estate and to issue execution thereon. All this im plies that, when within the amendatory period the realty has been alienated, the court in re-dividing it among the heirs has the authority to direct cancellation of such alienation in the same estate proceedings, whenever it becomes necessary to do so. To require the institution of a separate action for such annulment would run counter to the letter of the above rule and the spirit of these summary settlements. [Emphasis supplied.]

Similarly, in Sps. Domingo v. Roces,[16] we said: The foregoing rule clearly covers transfers of real property to any person, as long as the deprived heir or creditor vindicates his rights within two years from the date of the settlement and distribution of estate. Contrary to petitioners contention, the effects of this provision are not limited to the heirs or original distributees of the estate properties, but shall affect any transferee of the properties. [Emphasis supplied.] Indeed, in David v. Malay,[17] although the title of the property had already been registered in the name of the third party buyers, we cancelled the sale and ordered the reconveyance of the property to the estate of the deceased for proper disposal among his rightful heirs. By the time Tans obligation to pay the balance of the purchase price arose on May 21, 1993 (on account of the extensions granted by the respondents), a new certificate of title covering the property had already been issued on March 26, 1993, which contained the encumbrance on the property; the encumbrance would remain so attached until the expiration of the two-year period. Clearly, at this time, the vendors could no longer compel Tan to pay the balance of the purchase since considering they themselves could not fulfill their obligation to transfer a clean title over the property to Tan. Contract to sell is not rescinded but terminated What then happens to the contract? We have held in numerous cases[18] that the remedy of rescission under Article 1191 cannot apply to mere contracts to sell. We explained the reason for this in Santos v. Court of Appeals,[19] where we said: [I]n a contract to sell, title remains with the vendor and does not pass on to the vendee until the purchase price is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual or serious, but a situation that prevents the obligation of the vendor to convey title from acquiring an obligatory force. This is entirely different from the situation in a contract of sale, where non-payment of the price is a negative resolutory condition. The effects in law are not identical. In a contract of sale, the vendor has lost ownership of the thing sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a contract to sell, however, the vendor remains the owner for as long as the vendee has not complied fully with the condition of paying the purchase price. If the vendor should eject the vendee for failure to meet the condition precedent, he is enforcing the contract and not rescinding it. x x x Article 1592 speaks of non-payment of the purchase price as a resolutory condition. It does not apply to a contract to sell. As to Article 1191, it is subordinated to the provisions of Article 1592 when applied to sales of immovable property. Neither provision is applicable [to a contract to sell]. [Emphasis supplied.]

We, therefore, hold that the contract to sell was terminated when the vendors could no longer legally compel Tan to pay the balance of the purchase price as a result of the legal encumbrance which attached to the title of the property. Since Tans refusal to pay was due to the supervening event of a legal encumbrance on the property and not through his own fault or negligence, we find and so hold that the forfeiture of Tans down payment was clearly unwarranted.

Award of Attorneys fees

As evident from our previous discussion, Tan had a valid reason for refusing to pay the balance of the purchase price for the property. Consequently, there is no basis for the award of attorneys fees in favor of the respondents. On the other hand, we award attorneys fees in favor of Tan, since he was compelled to litigate due to the respondents refusal to return his down payment despite the fact that they could no longer comply with their obligation under the contract to sell, i.e., to convey a clean title. Given the facts of this case, we find the award of P50,000.00 as attorneys fees proper. Monetary award is subject to legal interest Undoubtedly, Tan made a clear and unequivocal demand on the vendors to return his down payment as early as May 28, 1993. Pursuant to our definitive ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,[20] we hold that the vendors should return the P200,000.00 down payment to Tan, subject to the legal interest of 6% per annum computed from May 28, 1993, the date of the first demand letter.

Furthermore, after a judgment has become final and executory, the rate of legal interest, whether the obligation was in the form of a loan or forbearance of money or otherwise, shall be 12% per annum from such finality until its satisfaction. Accordingly, the principal obligation of P200,000.00 shall bear 6% interest from the date of first demand or from May 28, 1993. From the date the liability for the principal obligation and attorneys fees has become final and executory, an annual interest of 12% shall be imposed on these obligations until their final satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

WHEREFORE, premises considered, we hereby GRANT the petition and, accordingly, ANNUL and SET ASIDE the May 30, 2002 decision of the Court of Appeals in CA-G.R. CV No. 52033. Another judgment is rendered declaring the Deed of Conditional Sale terminated and ordering the respondents to return the P200,000.00 down payment to petitioner Delfin Tan, subject to legal interest of 6% per annum, computed from May 28, 1993. The respondents are also ordered to pay, jointly and severally, petitioner Delfin Tan the amount of P50,000.00 as and by way of attorneys fees. Once this decision becomes final and executory, respondents are ordered to pay interest at 12% per annum on the principal obligation as well as the attorneys fees, until full payment of these amounts. Costs against the respondents. SO ORDERED.

SECOND DIVISION

[G.R. No. 133749. August 23, 2001]

HERNANDO R. PEALOSA alias HENRY PEALOSA, petitioner, vs. SEVERINO C. SANTOS (deceased), Substituted by his heirs: OLIVER SANTOS and ADYLL M. SANTOS, and ADELA DURAN MENDEZ SANTOS, respondents. DECISION QUISUMBING, J.: Petitioner appeals by certiorari from the decision of the Court of Appeals, which affirmed the judgment of the Regional Trial Court of Quezon City, Branch 78, in Civil Case No. Q-92-13531, declaring the deed of absolute sale entered into between petitioner and respondents as void and inexistent and ordering petitioner to vacate the subject property and to pay reasonable compensation for its use. The facts, as revealed by the records, are as follows: Respondents Severino C. Santos (deceased) and Adela Mendez Santos are registered owners of a residential house and lot located at No. 113 Scout Rallos Street, Quezon City under TCT No. PT-23458 (54434).[1] In 1988, Severino and Adela decided to sell their property and for this purpose, negotiated with petitioner Hernando (or Henry) Pealosa. The property was then occupied by a lessee, Eleuterio Perez, who was given preference to buy it under the same terms offered by the buyer.[2] Perez proposed less favorable terms[3] and expectedly, Severino rejected his offer. On August 1, 1988, petitioner Henry Pealosa and respondent Severino Santos attempted to enter into an agreement whereby the latter, for a consideration of P1,800,000.00, would sell to the former the property subject of the instant case. The deed of absolute sale[4] (first deed) evidencing this transaction was signed by Henry but not by Severino, because according to the latter, Henry took time to decide on the matter.[5] On August 15, 1988, Henry signed a document[6] stating that the first deed was executed between him and Severino, for the sole purpose of helping the latter eject Perez, the occupant of the property. Henry acknowledged in said document that although Severino had agreed to sell the property to him, he had not paid the consideration stated in the first deed. Thereafter, Henry and Severino executed another deed of absolute sale[7] (second deed) for a higher consideration of P2,000,000.00. Although the second deed was originally dated August 1988, superimposed upon the same was the date September 12, 1988. This second deed was signed by both parties and duly notarized. It states that Severino sells and transfers the house and lot to Henry, who had paid the full price of P2,000.000.00 therefor. Severino explained that his initial asking price for the property was only P1,800,000.00 as shown in the first deed. But he later asked for a higher price because Henry could not give the money as soon as expected. However, Severino claimed that he made it clear to Henry that he agreed to sell the property under the second deed for P2,000,000.00, provided that payment be immediately effected. Severino said that he wanted to use the money to invest in another property located in Alabang and told Henry that if payment was made at a later date, the price would be the current market value at the time of payment.

Henry then gave Severino P300,000.00 as earnest money, purportedly with the understanding that t he former was to pay the balance within 60 days. Otherwise, said amount would be forfeited in favor of Severino. [8] The latter also maintained that he signed the second deed only for the purpose of facilitating Henrys acquisition of a bank loan to finance payment of the balance of the purchase price[9] and added that execution of the second deed was necessary to enable Henry to file a court action for ejectment of the tenant.[10] After execution of the second deed, Henry filed a loan application with the Philippine American Life Insurance Company (Philam Life) for the amount of P2,500,000.00.[11] According to Henry, he had agreed with Severino during the signing of the second deed, that the balance of P1,700,000.00 would be paid by means of a loan, with the property itself given as collateral.[12] Meanwhile, on the strength of the first deed and as new owner of the property, Henry wrote a letter [13] dated August 8, 1988 to the lessee, Eleuterio Perez, demanding that the latter vacate the premises within 10 days. Failing in this effort, Henry brought a complaint for ejectment[14] against Perez before the Office of the Barangay Captain. On September 1, 1988, a Certification To File Action[15] was issued by the barangay lupon. This led to the subsequent filing of Civil Case No. 88-0439 for unlawful detainer, before the Metropolitan Trial Court of Quezon City, Branch 43, entitled Henry Pealosa, Plaintiff vs. Eleuterio Perez, Defendant. Claiming that he still had a subsisting contract of lease over the property, Perez countersued and brought Civil Case No. Q-88-1062 before the Regional Trial Court of Quezon City, Branch 96, entitled Eleuterio Perez, Plaintiff vs. Severino Santos, et. al, Defendants. In this latter case, Perez assailed the validity of the sale transaction between Henry and Severino and impleaded the former as codefendant of Severino. While the aforesaid court cases were pending resolution, Philam Life informed Severino through a letter,[16] that Henrys loan application had been approved by the company on January 18, 1989. Philam Life stated in the letter that of the total purchase price of P2,500,000.00, the amount of P1,700,000.00 would be paid directly to Severino by Philam Life, while P800,000.00 would be paid by Henry. The release of the loan proceeds was made subject to the submission of certain documents in Severinos possession, one of which is the owners duplicate of the Transfer Certificate of Title (TCT) pertaining to the property. However, when Henry and Severino met with officials of Philam Life to finalize the loan/mortgage contract, Severino refused to surrender the owners duplicate title and insisted on being paid immediately in cash.[17] As a consequence, the loan/mortgage contract with Philam Life did not materialize. Subsequently, on April 28, 1989, judgment[18] was rendered by the MTC-QC, Branch 43, in Civil Case No. 0439, ordering the tenant Perez to vacate and surrender possession of the property to Henry. In said judgment, Henry was explicitly recognized as the new owner of the property by virtue of the contract of sale dated September 12, 1988, after full payment of the purchase price of P2,000,000.00, receipt of which was duly acknowledged by Severino. Upon finality of said judgment, Henry and his family moved into the disputed house and lot on August 1989, after making repairs and improvements.[19] Henry spent a total of P700,000.00 for the renovation, as evidenced by receipts.[20] On July 27, 1992, Severino sent a letter[21] to Henry, through counsel, demanding that Henry vacate the house and lot, on the ground that Henry did not conclusively offer nor tender a price certain for the purchase of the property. The letter also stated that Henrys alleged offer and promise to buy the property has since been rejected by Severino. When Henry refused to vacate the property, Severino brought this action for quieting of title, recovery of possession and damages before the Regional Trial Court of Quezon City, Branch 78, on September 28, 1992. Severino alleged in his complaint[22] that there was a cloud over the title to the property, brought about by the existence of the second deed of sale.

Essentially, Severino averred that the second deed was void and inexistent because: a) there was no cause or consideration therefor, since he did not receive the P2,000,000.00 stated in the deed; b) his wife, Adela, in whose name the property was titled, did not consent to the sale nor sign the deed; c) the deed was not registered with the Register of Deeds; d) he did not acknowledge the deed personally before the notary public; e) his residence certificate, as appearing in the deed, was falsified; and f) the deed is fictitious and simulated because it was executed only for the purpose of placing Henry in possession of the property because he tendered earnest money. Severino also claimed that there was no meeting of minds with respect to the cause or consideration, since Henrys varied offers of P1,800,000.00, P2,000,000.00, and P2,500,000.00, were all rejected by him. For his part, Henry asserted that he was already the owner of the property being claimed by Severino, by virtue of a final agreement reached with the latter. Contrary to Severinos claim, the price of the property was pegged at P2,000,000.00, as agreed upon by the parties under the second deed. Prior to the filing of the action, his possession of the property remained undisturbed for three (3) years. Nevertheless, he admitted that since the signing of the second deed, he has not paid Severino the balance of the purchase price. He, however, faulted the latter for the non-payment, since according to him, Severino refused to deliver the owners duplicate title to the financing company. On Aug. 20, 1993, the trial court rendered judgment in favor of Severino and disposed: WHEREFORE, judgment is rendered as follows: 1) DECLARING the Deed of Absolute Sale which was signed by the plaintiff Severino C. Santos as vendor and the defendant as vendee and which was entered in the notarial register of notary public Dionilo Marfil of Quezon City as Doc. No. 474, Page No. 95, Book No. 173, Series of 1988, as inexistent and void from the beginning; and consequently, plaintiffs title to the property under T.C.T. No. PT-23458 (54434) issued by the Register of Deeds of Quezon City is quieted, sustained and maintained; 2) ORDERING the defendant to pay plaintiffs the amount of P 15, 000.00 a month as reasonable compensation for the use of the House and Lot located at No. 113 Scout Rallos St., Quezon City, beginning on the month of August, 1993, until the premises is fully vacated, (the compensation for the use thereof from the time the defendant had occupied the premises up to July, 1993, is recompensed for the repairs made by him); and 3) ORDERING the plaintiffs to reimburse the defendant the amount of P300,000.00 after defendant had vacated the premises in question, and the reasonable compensation for the use thereof had been paid. All other claims and counterclaims are DENIED for lack of legal and factual bases. No pronouncement as to costs. SO ORDERED.[23] Both Henry and Severino appealed the above decision to the Court of Appeals. Before the appellate court could decide the same, Severino passed away and was substituted by his wife and children as respondents. Henry filed a motion for leave to be allowed to deposit P1,700,000.00 in escrow with the Landbank of the Philippines to answer for the money portion of the decision.[24] This motion was granted. On December 29, 1997, the appellate court affirmed[25] the judgment of the trial court and thereafter, denied Henrys motion for reconsideration.[26] Thus, Henry brought this petition, citing the following as alleged errors: I. THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN CONCLUDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE BETWEEN SEVERINO C. SANTOS AND PETITIONER HENRY R. PEALOSA.

II. THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN CONSIDERING NON-PAYMENT OF THE FULL PURCHASE PRICE AS CAUSE FOR DECLARING A PERFECTED CONTRACT OF SALE AS NULL AND VOID. III. THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN REFUSING TO RECOGNIZE THAT OWNERSHIP OF THE SUBJECT PROPERTY HAD BEEN EFFECTIVELY VESTED UPON PETITIONER HENRY R. PEALOSA WHEN ACTUAL POSSESSION THEREOF HAD LAWFULLY TRANSFERRED TO PETITIONER HENRY R. PEALOSA BY VIRTUE OF THE COURT JUDGMENT IN THE EJECTMENT SUIT AGAINST THE FORMER LESSEE.[27] The pivotal issue presented before us is whether or not the second deed is valid and constitutes evidence of the final agreement between the parties regarding the sale transaction entered into by them. Petitioner maintains that the existence of a perfected contract of sale in this case is beyond doubt, since there clearly was a meeting of minds between the parties as to the object and consideration of the contract. According to petitioner, the agreement of the parties is evidenced by provisions contained in the second deed, which cannot possibly be simulated or fictitious. Subsequent and contemporaneous acts indubitably point to the fact that the parties truly intended to be bound by the second deed. Accordingly, the P2,000,000.00 stated therein was the actual price agreed upon by the parties as consideration for the sale. On the other hand, in their memorandum, respondents insist that the second deed is a complete nullity because, as found by both the appellate and trial court: a) the consideration stated in the deed was not paid; b) Severinos passport showed that he was in the U.S. when said deed was notarized; c) Severino did not surrender a copy of the title at the time of the alleged sale; d) petitioner did not pay real estate taxes on the property; e) it was executed only for the purpose of helping Severino eject the tenant; f) Severinos wife, Adela, did not sign the deed; and g) the various documentary exhibits proved that there was no price certain accepted or paid. Respondents additionally argue that petitioner merely seeks a review of the aforesaid factual findings of the lower court and that consequently, we should deny the petition on the ground that it raises only factual questions. Considering the pivotal issue presented after close scrutiny of the assigned errors as well as the arguments of the parties, we are unable to agree with respondents and we must give due course to the petition. First of all, the petition filed before this Court explicitly questions the legal significance and consequences of the established facts[28] and not the findings of fact themselves. As pointed out by petitioner, he submits to the factual findings of the lower court, but maintains that its legal conclusions are irreconcilable and inconsistent therewith. He also states that the grounds relied upon in this petition do not call for the weighing of conflicting evidence submitted by the parties. Rather, he merely asks the Court to give due significance to certain undisputed and admitted facts spread throughout the record, which, if properly appreciated, would justify a different conclusion. At any rate, in Baricuatro, Jr. vs. Court of Appeals, 325 SCRA 137, 145 (2000), we reiterated the doctrine that findings of fact of the Court of Appeals are binding and conclusive upon this Court, subject to certain exceptions, one of which is when the judgment is based on a misapprehension of facts. In this case, after carefully poring over the records, we are convinced that the lower courts misappreciated the evidence presented by the parties and that, indeed, a reversal of the assailed judgment is in order. It should have been readily apparent to the trial court that the circumstances it cited in its decision are not proper grounds for holding that the second deed is simulated. Simulation is a declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for purposes of deception, the appearance of a juridical act which does not exist or is different from that which was really executed. Its requisites are: a) an outward declaration of will different

from the will of the parties; b) the false appearance must have been intended by mutual agreement; and c) the purpose is to deceive third persons.[29] None of these requisites is present in this case. The basic characteristic of an absolutely simulated or fictitious contract is that the apparent contract is not really desired or intended to produce legal effects or alter the juridical situation of the parties in any way.[30]However, in this case, the parties already undertook certain acts which were directed towards fulfillment of their respective covenants under the second deed, indicating that they intended to give effect to their agreement. In particular, as early as August 8, 1988, after execution of the first deed, Severino authorized petitioner to bring an action for ejectment against the overstaying tenant and allowed petitioner to pursue the ejectment case to its final conclusion, presumably to secure possession of the property in petitioners favor. Petitioner also applied for a loan, which was approved by Philam Life, to complete payment of the stipulated price. After making extensive repairs with the knowledge of Severino, petitioner moved into the premises and actually occupied the same for three years before this action was brought. Moreover, simultaneous with the execution of the second deed, petitioner gave Severino P300,000.00 in earnest money, which under Article 1482[31] of the New Civil Code, is part of the purchase price and proof of perfection of the contract. What may have led the lower courts into incorrectly believing that the second deed was simulated is Exhibit D - a document in which petitioner declared that the deed was executed only for the purpose of helping Severino eject the tenant. However, a perusal of this document reveals that it made reference to the first deed and not the second deed, which was executed only after Exhibit D. So that while the first deed was qualified by stipulations contained in Exhibit D, the same cannot be said of the second deed which was signed by both parties. Further, the fact that Severino executed the two deeds in question, primarily so that petitioner could eject the tenant and enter into a loan/mortgage contract with Philam Life, is to our mind, a strong indication that he intended to transfer ownership of the property to petitioner. For why else would he authorize the latter to sue the tenant for ejectment under a claim of ownership, if he truly did not intend to sell the property to petitioner in the first place? Needless to state, it does not make sense for Severino to allow petitioner to pursue the ejectment case, in petitioners own name, with petitioner arguing that he had bought the property from Severino and thus entitled to possession thereof, if petitioner did not have any right to the property. Also worth noting is the fact that in the case filed by Severinos tenant against Severino and petitioner in 1989, assailing the validity of the sale made to petitioner, Severino explicitly asserted in his sworn answer to the complaint that the sale was a legitimate transaction. He further alleged that the ejectment case filed by petitioner against the tenant was a legitimate action by an owner against one who refuses to turn over possession of his property.[32] Our attention is also drawn to the fact that the genuineness and due execution of the second deed was not denied by Severino. Except to allege that he was not physically present when the second deed was notarized before the notary public, Severino did not assail the truth of its contents nor deny that he ever signed the same. As a matter of fact, he even admitted that he affixed his signature on the second deed to help petitioner acquire a loan. This can only signify that he consented to the manner proposed by petitioner for payment of the balance and that he accepted the stipulated price of P2,000,000.00 as consideration for the sale. Since the genuineness and due execution of the second deed was not seriously put in issue, it should be upheld as the best evidence of the intent and true agreement of the parties. Oral testimony, depending as it does exclusively on human memory, is not as reliable as written or documentary evidence.[33] It should be emphasized that the non-appearance of the parties before the notary public who notarized the deed does not necessarily nullify nor render the parties transaction void ab initio. We have held previously that the provision of Article 1358[34] of the New Civil Code on the necessity of a public document is only for convenience, not for validity or enforceability. Failure to follow the proper form does not invalidate a contract. Where a contract is not in the form

prescribed by law, the parties can merely compel each other to observe that form, once the contract has been perfected.[35] This is consistent with the basic principle that contracts are obligatory in whatever form they may have been entered into, provided all essential requisites are present.[36] The elements of a valid contract of sale under Art. 1458 of the Civil Code are: (1) consent or meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent.[37] In the instant case, the second deed reflects the presence of all these elements and as such, there is already a perfected contract of sale. Respondents contention that the second deed was correctly nullified by the lower court because Severinos wife, Adela, in whose name the property was titled, did not sign the same, is unavailing. The records are replete with admissions made by Adela that she had agreed with her husband to sell the property[38] which is conjugal in nature[39] and that she was aware of this particular transaction with petitioner. She also said that it was Severino who actually administered their properties with her consent, because she did not consider this as her responsibility.[40] We also observe that Severinos testimony in court contained (1) admissions that he indeed agreed to sell the property and (2) references to petitioners failure to pay the purchase price.[41] He did not mention that he did not intend at all to sell the property to petitioner and instead, stressed the fact that the purchase price had not yet been paid. Why would Severino stress non-payment if there was no sale at all? However, it is well-settled that non-payment of the purchase price is not among the instances where the law declares a contract to be null and void. It should be pointed out that the second deed specifically provides: That for and in consideration of the sum of TWO MILLION PESOS (P2,000,000.00), Philippine Currency paid in full by HENRY R. PEALOSA, receipt of which is hereby acknowledged by me to my full satisfaction, I hereby by these presents, sells (sic), cede, convey and otherwise dispose of the above described parcel of land, unto HENRY R. PEALOSA, his heirs, successors and assigns, free from all liens and encumbrances. xxx (SGD.) SEVERINO VENDOR x x x[42] As can be seen from above, the contract in this case is absolute in nature and is devoid of any proviso that title to the property is reserved in the seller until full payment of the purchase price. Neither does the second deed give Severino a unilateral right to resolve the contract the moment the buyer fails to pay within a fixed period. [43] At most, the non-payment of the contract price merely results in a breach of contract for non-performance and warrants an action for rescission or specific performance under Article 1191 of the Civil Code.[44] Be that as it may, we agree with petitioner that although the law allows rescission as a remedy for breach of contract, the same may not be availed of by respondents in this case. To begin with, it was Severino who prevented full payment of the stipulated price when he refused to deliver the owners original duplicate title to Philam Life. His refusal to cooperate was unjustified, because as Severino himself admitted, he signed the deed precisely to enable petitioner to acquire the loan. He also knew that the property was to be given as security therefor. Thus, it cannot be said that petitioner breached his obligation towards Severino since the former has always been willing to and could comply with what was incumbent upon him. In sum, the only conclusion which can be deduced from the aforesaid circumstances is that ownership of the property has been transferred to petitioner. Article 1477 of the Civil Code states that ownership of the thing sold shall

C.

SANTOS

be transferred to the vendee upon the actual or constructive delivery thereof. It is undisputed that the property was placed in the control and possession of petitioner[45] when he came into material possession thereof after judgment in the ejectment case. Not only was the contract of sale perfected, but also actual delivery of the property effectively consummated the sale. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated December 29, 1997 and its resolution dated April 15, 1998 in CA-G.R. CV No. 45206 which had affirmed the judgment of the Regional Trial Court of Quezon City, Branch 78, are REVERSED and SET ASIDE. A new judgment is hereby rendered UPHOLDING the validity of Exhibit B, the Deed of Absolute Sale dated September 12, 1988, entered into between the parties. The Landbank of the Philippines is further ordered to RELEASE to respondents the amount of P1,700,000.00 held in escrow, representing the balance of the purchase price agreed upon by the parties under the deed of absolute sale. Finally, the respondents are ordered to DELIVER to petitioner the owners duplicate copy of TCT No. PT-23458 after said release, with the corresponding payment of taxes due. Costs against respondents. SO ORDERED. Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

HEIRS OF ARTURO REYES VS ELENA SOCCO-BELTRAN

CHICO-NAZARIO, J. This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision[1] dated 31 January 2006 rendered by the Court of Appeals in CA-G.R. SP No. 87066, which affirmed the Decision[2] dated 30 June 2003 of the Office of the President, in O.P. Case No. 02-A-007, approving the application of respondent ElenaSoccoBeltran to purchase the subject property. The subject property in this case is a parcel of land originally identified as Lot No. 6-B, situated in Zamora Street, Dinalupihan, Bataan, with a total area of 360 square meters. It was originally part of a larger parcel of land, measuring 1,022 square meters, allocated to the Spouses Marcelo Laquian and Constancia Socco (Spouses Laquian), who paid for the same with Japanese money. When Marcelo died, the property was left to his wife Constancia. Upon Constancias subsequent death, she left the original parcel of land, along with her other property, with her heirs her siblings, namely: Filomena Eliza Socco, Isabel Socco de Hipolito, Miguel R. Socco, and Elena Socco-Beltran.[3] Pursuant to an unnotarized document entitled Extrajudicial Settlement of the Estate of the Deceased Constancia R. Socco, executed by Constancias heirs sometime in 1965, the parcel of land was partitioned into three lotsLot No. 6-A, Lot No. 6-B, and Lot No. 6-C.[4] The subject property, Lot No. 6-B, was adjudicated to respondent, but no title had been issued in her name. On 25 June 1998, respondent Elena Socco-Beltran filed an application for the purchase of Lot No. 6-B before the Department of Agrarian Reform (DAR), alleging that it was adjudicated in her favor in the extra-judicial settlement of Constancia Soccos estate.[5] Petitioners herein, the heirs of the late Arturo Reyes, filed their protest to respondents petition before the DAR on the ground that the subject property was sold by respondents brother, Miguel R. Socco, in favor of their father, Arturo Reyes, as evidenced by the Contract to Sell, dated 5 September 1954, stipulating that:[6] That I am one of the co-heirs of the Estate of the deceased Constancia Socco; and that I am to inherit as such a portion of her lot consisting of Four Hundred Square Meters (400) more or less located on the (sic) Zamora St., Municipality of Dinalupihan, Province of Bataan, bounded as follows: xxxx That for or in consideration of the sum of FIVE PESOS (P5.00) per square meter, hereby sell, convey and transfer by way of this conditional sale the said 400 sq.m. more or less unto Atty. Arturo C. Reyes, his heirs, administrator and assigns x x x. (Emphasis supplied.) Petitioners averred that they took physical possession of the subject property in 1954 and had been uninterrupted in their possession of the said property since then. Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office conducted an investigation, the results of which were contained in her Report/ Recommendation dated 15 April 1999. Other than recounting the aforementioned facts, Legal Officer Pinlac also made the following findings in her Report/Recommendation:[7]

Further investigation was conducted by the undersigned and based on the documentary evidence presented by both parties, the following facts were gathered: that the house of [the] Reyes family is adjacent to the landholding in question and portion of the subject property consisting of about 15 meters [were] occupied by the heirs of Arturo Reyes were a kitchen and bathroom [were] constructed therein; on the remaining portion a skeletal form made of hollow block[s] is erected and according to the heirs of late Arturo Reyes, this was constructed since the year (sic) 70s at their expense; that construction of the said skeletal building was not continued and left unfinished which according to the affidavit of Patricia Hipolito the Reyes family where (sic) prevented by Elena Socco in their attempt of occupancy of the subject landholding; (affidavit of Patricia Hipolito is hereto attached as Annex F); that Elena Socco cannot physically and personally occupy the subject property because of the skeletal building made by the Reyes family who have been requesting that they be paid for the cost of the construction and the same be demolished at the expense of Elena Socco; that according to Elena Socco, [she] is willing to waive her right on the portion where [the] kitchen and bathroom is (sic) constructed but not the whole of Lot [No.] 6-B adjudicated to her; that the Reyes family included the subject property to the sworn statement of value of real properties filed before the municipality of Dinalupihan, Bataan, copies of the documents are hereto attached as Annexes G and H; that likewise ElenaSocco has been continuously and religiously paying the realty tax due on the said property. In the end, Legal Officer Pinlac recommended the approval of respondents petition for issuance of title over the subject property, ruling that respondent was qualified to own the subject property pursuant to Article 1091 of the New Civil Code.[8] Provincial Agrarian Reform Officer (PARO) Raynor Taroy concurred in the said recommendation in his Indorsement dated 22 April 1999.[9] In an Order dated 15 September 1999, DAR Regional Director Nestor R. Acosta, however, dismissed respondents petition for issuance of title over the subject property on the ground that respondent was not an actual tiller and had abandoned the said property for 40 years; hence, she had already renounced her right to recover the same.[10] Thedispositive part of the Order reads: 1. DISMISSING the claims of Elena Socco-Beltran, duly represented by Myrna Socco for lack of merit 2. ALLOCATING Lot No. 6-B under Psd-003-008565 with an area of 360 square meters, more or less, situated Zamora Street, Dinalupihan, Bataan, in favor of the heirs of Arturo Reyes. 3. ORDERING the complainant to refrain from any act tending to disturb the peaceful possession of herein respondents. 4. DIRECTING the MARO of Dinalupihan, Bataan to process the pertinent documents for the issuance of CLOA in favor of the heirs of Arturo Reyes.[11] Respondent filed a Motion for Reconsideration of the foregoing Order, which was denied by DAR Regional Director Acosta in another Order dated 15 September 1999.[12] Respondent then appealed to the Office of the DAR Secretary. In an Order, dated 9 November 2001, the DAR Secretary reversed the Decision of DAR Regional Director Acosta after finding that neither petitioners predecessor-ininterest, Arturo Reyes, nor respondent was an actual occupant of the subject property. However, since it was respondent who applied to purchase the subject property, she was better qualified to own said property as opposed to petitioners, who did not at all apply to purchase the same. Petitioners were further disqualified from purchasing the subject property because they were not landless. Finally, during the investigation of Legal Officer Pinlac, petitioners requested that respondent pay them the cost of the construction of the skeletal house they built on the subject

property. This was construed by the DAR Secretary as a waiver by petitioners of their right over the subject property.[13] In the said Order, the DAR Secretary ordered that: WHEREFORE, premises considered, the September 15, 1999 Order is hereby SET ASIDE and a new Order is hereby issued APPROVING the application to purchase Lot [No.] 6-B of ElenaSocco-Beltran.[14] Petitioners sought remedy from the Office of the President by appealing the 9 November 2001 Decision of the DAR Secretary. Their appeal was docketed as O.P. Case No. 02-A-007. On 30 June 2003, the Office of the President rendered its Decision denying petitioners appeal and affirming the DAR Secretarys Decision.[15] The fallo of the Decision reads: WHEREFORE, premises considered, judgment appealed from is AFFIRMED and the instant appeal DISMISSED.[16] Petitioners Motion for Reconsideration was likewise denied by the Office of the President in a Resolution dated 30 September 2004.[17] In the said Resolution, the Office of the President noted that petitioners failed to allege in their motion the date when they received the Decision dated 30 June 2003. Such date was material considering that the petitioners Motion for Reconsideration was filed only on 14 April 2004, or almost nine months after the promulgation of the decision sought to be reconsidered. Thus, it ruled that petitioners Motion for Reconsideration, filed beyond fifteen days from receipt of the decision to be reconsidered, rendered the said decision final and executory Consequently, petitioners filed an appeal before the Court of Appeals, docketed as CA-G.R. SP No. 87066. Pending the resolution of this case, the DAR already issued on8 July 2005 a Certificate of Land Ownership Award (CLOA) over the subject property in favor of the respondents niece and representative, Myrna SoccoBeltran.[18] Respondent passed away on 21 March 2001,[19] but the records do not ascertain the identity of her legal heirs and her legatees. Acting on CA-G.R. SP No. 87066, the Court of Appeals subsequently promulgated its Decision, dated 31 January 2006, affirming the Decision dated 30 June 2003 of the Office of the President. It held that petitioners could not have been actual occupants of the subject property, since actual occupancy requires the positive act of occupying and tilling the land, not just the introduction of an unfinished skeletal structure thereon. The Contract to Sell on which petitioners based their claim over the subject property was executed by Miguel Socco, who was not the owner of the said property and, therefore, had no right to transfer the same. Accordingly, the Court of Appeals affirmed respondents right over the subject property, which was derived form the original allocatees thereof.[20] The fallo of the said Decision reads WHEREFORE, premises considered, the instant PETITION FOR REVIEW is DISMISSED. Accordingly, the Decision dated 30 June 2003 and the Resolution dated 30 December 2004 both issued by the Office of the President are hereby AFFIRMED in toto.[21] The Court of Appeals denied petitioners Motion for Reconsideration of its Decision in a Resolution dated 16 August 2006.[22] Hence, the present Petition, wherein petitioners raise the following issues: I WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE OFFICE OF THE PRESIDENT THAT THE SUBJECT LOT IS VACANT AND THAT PETITIONERS ARE NOT ACTUAL OCCUPANTS THEREOF BY DENYING THE LATTERS CLAIM THAT THEY HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE,NOTORIOUS AND AVDERSE POSSESSION THEREOF SINCE 1954 OR FOR MORE THAN THIRTY (30) YEARS.

II WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT PETITIONERS CANNOT LEGALLY ACQUIRE THE SUBJECT PROPERTY AS THEY ARE NOT CONSIDERED LANDLESS AS EVIDENCED BY A TAX DECLARATION. III WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT WHATEVER RESERVATION WE HAVE OVER THE RIGHT OF MYRNA SOCCO TO SUCCEED WAS ALREADY SETTLED WHEN NO LESS THAN MIGUEL SOCCO (PREDECESSOR-IN INTEREST OF HEREIN PETITIONERS) EXECUTED HIS WAIVER OF RIGHT DATED APRIL 19, 2005 OVER THE SUBJECT PROPERTY IN FAVOR OF MYRNA SOCCO. IV WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DENIED PETITIONERS MOTION FOR NEW TRIAL THEREBY BRUSHING ASIDE THE FACT THAT MYRNA V. SOCCO-ARIZO GROSSLY MISREPRESENTED IN HER INFORMATION SHEET OF BENEFICIARIES AND APPLICATION TO PURCHASE LOT IN LANDED ESTATES THAT SHE IS A FILIPINO CITIZEN, WHEN IN TRUTH AND IN FACT, SHE IS ALREADY AN AMERICAN NATIONAL.[23]

The main issue in this case is whether or not petitioners have a better right to the subject property over the respondent. Petitioners claim over the subject property is anchored on the Contract to Sell executed between Miguel Socco and Arturo Reyes on 5 September 1954. Petitioners additionally allege that they and their predecessor-ininterest, Arturo Reyes, have been in possession of the subject lot since 1954 for an uninterrupted period of more than 40 years. The Court is unconvinced. Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was unmistakably stated in the Contract and made clear to both parties thereto that the vendor, Miguel R. Socco, was not yet the owner of the subject property and was merely expecting to inherit the same as his share as a co-heir of Constancias estate.[24] It was also declared in the Contract itself that Miguel R. Soccos conveyance of the subject to the buyer, Arturo Reyes, was a conditional sale. It is, therefore, apparent that the sale of the subject property in favor of Arturo Reyes was conditioned upon the event that Miguel Socco would actually inherit and become the owner of the said property. Absent such occurrence, Miguel R. Socco never acquired ownership of the subject property which he could validly transfer to Arturo Reyes. Under Article 1459 of the Civil Code on contracts of sale, The thing must be licit and the vendor must have a right to transfer ownership thereof at the time it is delivered. The law specifically requires that the vendor must have ownership of the property at the time it is delivered. Petitioners claim that the property was constructively delivered to them in 1954 by virtue of the Contract to Sell. However, as already pointed out by this Court, it was explicit in the Contract itself that, at the time it was executed, Miguel R. Socco was not yet the owner of the property and was only expecting to inherit it. Hence, there was no valid sale from which ownership of the subject property could have transferred from Miguel Socco to Arturo Reyes. Without acquiring ownership of the subject property, Arturo Reyes also could not have conveyed the same to his heirs, herein petitioners.

Petitioners, nevertheless, insist that they physically occupied the subject lot for more than 30 years and, thus, they gained ownership of the property through acquisitive prescription, citing Sandoval v. Insular Government [25] and San Miguel Corporation v. Court of Appeals. [26] In Sandoval, petitioners therein sought the enforcement of Section 54, paragraph 6 of Act No. 926, otherwise known as the Land Registration Act, which required -- for the issuance of a certificate of title to agricultural public lands - the open, continuous, exclusive, and notorious possession and occupation of the same in good faith and under claim of ownership for more than ten years. After evaluating the evidence presented, consisting of the testimonies of several witnesses and proof that fences were constructed around the property, the Court in the afore-stated case denied the petition on the ground that petitioners failed to prove that they exercised acts of ownership or were in open, continuous, and peaceful possession of the whole land, and had caused it to be enclosed to the exclusion of other persons. It further decreed that whoever claims such possession shall exercise acts of dominion and ownership which cannot be mistaken for the momentary and accidental enjoyment of the property. [27] In San Miguel Corporation, the Court reiterated the rule that the open, exclusive, and undisputed possession of alienable public land for the period prescribed by law creates the legal fiction whereby land ceases to be public land and is, therefore, private property. It stressed, however, that the occupation of the land for 30 years must beconclusively established. Thus, the evidence offered by petitioner therein tax declarations, receipts, and the sole testimony of the applicant for registration, petitioners predecessor-in-interest who claimed to have occupied the land before selling it to the petitioner were considered insufficient to satisfy the quantum of proof required to establish the claim of possession required for acquiring alienable public land.[28] As in the two aforecited cases, petitioners herein were unable to prove actual possession of the subject property for the period required by law. It was underscored in San Miguel Corporation that the open, continuous, exclusive, and notorious occupation of property for more than 30 years must be no less than conclusive, such quantum of proof being necessary to avoid the erroneous validation of actual fictitious claims of possession over the property that is being claimed.[29] In the present case, the evidence presented by the petitioners falls short of being conclusive. Apart from their self-serving statement that they took possession of the subject property, the only proof offered to support their claim was a general statement made in the letter[30] dated 4 February 2002 of Barangay Captain Carlos Gapero, certifying that Arturo Reyes was the occupant of the subject property since peace time and at present. The statement is rendered doubtful by the fact that as early as 1997, when respondent filed her petition for issuance of title before the DAR, Arturo Reyes had already died and was already represented by his heirs, petitioners herein. Moreover, the certification given by Barangay Captain Gapero that Arturo Reyes occupied the premises for an unspecified period of time, i.e., since peace time until the present, cannot prevail over Legal Officer Pinlacs more particular findings in her Report/Recommendation. Legal Officer Pinlac reported that petitioners admitted that it was only in the 1970s that they built the skeletal structure found on the subject property. She also referred to the averments made by Patricia Hipolito in an Affidavit,[31] dated 26 February 1999, that the structure was left unfinished because respondent prevented petitioners from occupying the subject property. Such findings disprove petitioners claims that their predecessor-in-interest, Arturo Reyes, had been in open, exclusive, and continuous possession of the property since 1954. The adverted findings were the result of Legal OfficerPinlacs investigation in the course of her official duties, of matters within her expertise which were later affirmed by the DAR Secretary, the Office of the President, and the Court of Appeals. The factual findings of such administrative officer, if supported by evidence, are entitled to great respect.[32]

In contrast, respondents claim over the subject property is backed by sufficient evidence. Her predecessors-ininterest, the spouses Laquian, have been identified as the original allocatees who have fully paid for the subject property. The subject property was allocated to respondent in the extrajudicial settlement by the heirs of Constanciasestate. The document entitled Extra-judicial Settlement of the Estate of the Deceased Constancia Socco was not notarized and, as a private document, can only bind the parties thereto. However, its authenticity was never put into question, nor was its legality impugned. Moreover, executed in 1965 by the heirs of Constancia Socco, or more than 30 years ago, it is an ancient document which appears to be genuine on its face and therefore its authenticity must be upheld.[33] Respondent has continuously paid for the realty tax due on the subject property, a fact which, though not conclusive, served to strengthen her claim over the property.[34] From the foregoing, it is only proper that respondents claim over the subject property be upheld. This Court must, however, note that the Order of the DAR Secretary, dated 9 November 2001, which granted the petitioners right to purchase the property, is flawed and may be assailed in the proper proceedings. Records show that the DAR affirmed that respondents predecessors-in-interest, Marcelo Laquian and Constancia Socco, having been identified as the original allocatee, have fully paid for the subject property as provided under an agreement to sell. By the nature of a contract or agreement to sell, the title over the subject property is transferred to the vendee upon the full payment of the stipulated consideration. Upon the full payment of the purchase price, and absent any showing that the allocatee violated the conditions of the agreement, ownership of the subject land should be conferred upon the allocatee.[35] Since the extrajudicial partition transferring Constancia Soccos interest in the subject land to the respondent is valid, there is clearly no need for the respondent to purchase the subject property, despite the application for the purchase of the property erroneously filed by respondent. The only act which remains to be performed is the issuance of a title in the name of her legal heirs, now that she is deceased. Moreover, the Court notes that the records have not clearly established the right of respondents representative, Myrna Socco-Arizo, over the subject property. Thus, it is not clear to this Court why the DAR issued on 8 July 2005 a CLOA[36] over the subject property in favor of Myrna Socco-Arizo. Respondents death does not automatically transmit her rights to the property to Myrna Socco-Beltran. Respondent only authorized Myrna SoccoArizo, through a Special Power of Attorney[37] dated 10 March 1999, to represent her in the present case and to administer the subject property for her benefit. There is nothing in the Special Power of Attorney to the effect that Myrna Socco-Arizo can take over the subject property as owner thereof upon respondents death. That Miguel V. Socco, respondents only nephew, the son of the late Miguel R. Socco, and MyrnaSocco-Arizos brother, executed a waiver of his right to inherit from respondent, does not automatically mean that the subject property will go to Myrna SoccoArizo, absent any proof that there is no other qualified heir to respondents estate. Thus, this Decision does not in any way confirm the issuance of the CLOA in favor of Myrna Socco-Arizo, which may be assailed in appropriate proceedings. IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 87066, promulgated on 31 January 2006, is AFFIRMED with MODIFICATION. This Court withholds the confirmation of the validity of title over the subject property in the name of Myrna Socco-Arizo pending determination of respondents legal heirs in appropriate proceedings. No costs. SO ORDERED.

Republic of the Philippines Supreme Court Manila THIRD DIVISION ROGELIA DACLAG and ADELINO DACLAG (deceased) Substituted by RODEL M. DACLAG and ADRIAN M. DACLAG, Petitioners, - versus G.R. No. 159578

Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ.

ELINO MACAHILIG, ADELA MACAHILIG CONRADO MACAHILIG, LORENZA HABER and BENITA DEL ROSARIO, Promulgated: Respondents. July 28, 2008 x----------------------------------------------------------x DECISION AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Decision[1] dated October 17, 2001 and the Resolution[2] dated August 7, 2003 of the Court of Appeals (CA) in CA G.R. CV No. 48498. The antecedent facts: During their lifetime, the spouses Candido and Gregoria Macahilig were the owners of seven parcels of land, all located in Numancia, Aklan. They had seven children, namely: Dionesio, Emeliano, Mario, Ignacio, Eusebio, Tarcela and Maxima. On March 18, 1982, Maxima, a daughter of Candido and Gregoria entered into a Deed of Extra-judicial Partition[3] with the heirs of her deceased brothers, Mario andEusebio Macahilig, over the seven parcels of land. The same deed stated that Dionesio was already deceased but was survived by his daughter, Susana Briones; Emeliano was out of the country; Ignacio and Tarcela were also both deceased but were survived by three children each. One of the properties partitioned in the Deed was a parcel of irrigated riceland located at Poblacion, Numancia, Aklan, with an area of 1,896 square meters declared in the name of Maxima under Tax Declaration No. 644 which was denominated as Parcel One. This Parcel One was divided between Vicenta Macahilig Galvez for the heirs of MarioMacahilig, who was given the one half southern portion of the land; and Adela Macahilig for the heirs of Eusebio Macahilig, who got the one half northern portion. The Deed was notarized by Municipal Judge Francisco M. Ureta in his capacity as ex-officio notary public. The heirs of Eusebio Macahilig are the herein respondents.

On March 19, 1982, Maxima executed a Statement of Conformity[4] in which she confirmed the execution of the Deed of Extra-judicial Partition and conformed to the manner of partition and adjudication made therein. She also attested that five parcels of land in the deed were declared in her name for taxation purposes, although said lands were actually the property of her deceased parents Candido and Gregoria Macahilig; that she waived, renounced and relinquished all her rights to the land adjudicated to all her co-heirs in the deed; and that she had already sold one parcel before the deed was executed, which was considered as her advance share. Pedro Divison, Maxima's husband, also affixed his signature to the Statement of Conformity. On May 23, 1984, Maxima sold Parcel One to spouses Adelino and Rogelia Daclag (petitioners) as evidenced by a Deed of Sale[5]. On July 17, 1984, OCT No. P-13873[6] was issued in the name of petitioner Rogelia M. Daclag by virtue of her free patent application. On December 16, 1991, Elino Macahilig, Adela Macahilig, Conrado Macahilig, Lorenza Haber and Benita del Rosario (respondents) filed with the Regional Trial Court (RTC) of Kalibo, Aklan a complaint for recovery of possession and ownership, cancellation of documents and damages against Maxima and petitioners, docketed as Civil Case No. 4334. Respondents alleged that they were the lawful owners and previous possessors of the one half northern portion of Parcel One by virtue of a Deed of Extra-judicial Partition; that since they were all residents of Caloocan City, their land was possessed by their first cousin, Penicula Divison Quijano, Maxima's daughter, as tenant thereon, as she was also in possession of the one half southern portion as tenant of the heirs of Mario Macahilig; that sometime in 1983, upon request of Maxima and out of pity for her as she had no share in the produce of the land, Penicula allowed Maxima to farm the land; that without their knowledge, Maxima illegally sold on May 23, 1984, the entire riceland to petitioners, who are now in possession of the land, depriving respondents of its annual produce valued at P4,800.00. In their Answer with Cross-Claim, petitioners contended that: petitioner Rogelia had been the registered owner of the entire riceland since 1984 as evidenced by OCT No. P-13873; her title had become incontrovertible after one year from its issuance; they purchased the subject land in good faith and for value from co-defendant Maxima who was in actual physical possession of the property and who delivered and conveyed the same to them; they were now in possession and usufruct of the land since then up to the present; respondents were barred by laches for the unreasonable delay in filing the case. They also filed a cross-claim against Maxima for whatever charges, penalties and damages that respondents may demand from them; and they prayed that Maxima be ordered to pay them damages for the fraud and misrepresentation committed against them. Respondents subsequently filed an Amended Complaint, upon learning that petitioners were issued OCT No. 13873 by virtue of their free patent application, and asked for the reconveyence of the one half northern portion of the land covered by such title. The land in question was delimited in the Commissioner's Report and sketch submitted by Bernardo G. Sualog as the one half northern portion, which had an area of 1178 sq. meters. The Report and the sketch were approved by the RTC on June 22, 1991. For failure of Maxima to file an answer, the RTC declared her in default both in the complaint and cross-claim against her. After trial, the RTC rendered its Decision[7] dated November 18, 1994, the dispositive portion of which reads: WHEREFORE, finding preponderance of evidence in favor of plaintiffs [respondents], judgment is hereby rendered as follows: 1. The deed of sale dated May 23, 1984, executed by Maxima Divison in favor of Adelino Daclag and Rogelia Daclag before Notary Public Edgar R. Peralta and docketed in his notarial register as Doc. No. 137, Page No. 30, Book No. VII, Series of 1984 is declared NULL and VOID;

2.

The plaintiffs are hereby declared the true and lawful owners and entitled to the possession of the northern one-half (1/2) portion of the land described under paragraph 2 of the amended complaint and designated as Exhibit F-1 in the commissioners sketch with an area of 1,178 square meters; The defendants-spouses Adelino and Rogelia Daclag [petitioners] are hereby ordered and directed to vacate the land described in the preceding paragraph and restore and deliver the possession thereof to the plaintiffs; The defendants are ordered to execute a deed of reconveyance in favor of the plaintiffs over the land described in paragraph 2 hereof; The defendants are ordered, jointly and severally, to pay the plaintiffs ten (10) cavans of palay per annum beginning the second cropping of 1984 until the time the possession of the land in question is restored to the plaintiffs; and The defendants are ordered, jointly and severally, to pay the plaintiffs reasonable attorneys fees in the amount of P3,000.00 plus cost of the suit.[8] The RTC found that respondents were able to establish that Parcel One was divided between the heirs of Mario and the heirs of Eusebio, with the former getting the one half southern portion and the latter the one half northern portion embodied in a Deed of Extra-judicial partition, which bore Maxima's thumbmarks; that nobody questioned the Deed's validity, and no evidence was presented to prove that the document was not validly and regularly executed; that Maxima also executed a duly notarized Statement of Conformity dated March 19, 1982 with the conformity of her husband, Pedro. The RTC concluded that when Maxima executed the Deed of Sale in favor of petitioners on May 23, 1984, Maxima had no right to sell that land as it did not belong to her; that she conveyed nothing to petitioners; and that the deed of sale should be declared null and void. In disposing the issue of whether petitioners could be considered innocent purchasers for value, the RTC ruled that petitioners could not even be considered purchasers, as they never acquired ownership of the land since the sale to them by Maxima was void; and that petitioners' act of reflecting only the price of P5,000.00 in the Deed of Sale to avoid paying taxes to the BIR should be condemned for defrauding the government and thus should not be given protection from the courts. The RTC further ruled that since petitioners were able to obtain a free patent on the whole land in petitioner Rogelia's name, reconveyance to respondents of the 1,178 sq. meter northern portion of the land was just and proper; that the respondents were entitled to a share in the harvest at two croppings per year after deducting the share of the tenant; that since Maxima died in October 1993, whatever charges and claims petitioners may recover from her expired with her. Aggrieved, petitioners filed their appeal with the CA. On October 17, 2001, the CA dismissed the appeal and affirmed the RTC decision. The CA ruled that since Maxima had no right to sell the land as she was not the rightful owner thereof, nothing was conveyed to petitioners; that a person who acquired property from one who was not the owner and had no right to dispose of the same, obtained the property without right of title, and the real owner may recover the same from him. The CA found that since respondents were unaware of the sale, it was not a surprise that they did not question petitioners' application for a free patent on the subject land; that the possession by Maxima of the subject land did not vest ownership in her, as her possession was not in the concept of an owner; and that petitioners were not purchasers in good faith. It also found that the right to enjoy included the right to receive the produce of the thing; that respondents as true owners of the subject land were deprived of their property when Maxima illegally sold it to petitioners; and thus, equity demanded that respondents be given what rightfully belonged to them under the principle that a person cannot enrich himself at the expense of another.

3.

4.

5.

6.

Hence, herein petition on the following grounds: A. THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR WHEN IT DECLARED THAT HEREIN PETITIONERS HAD NO VALID TITLE OVER THE LAND IN QUESTION. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONERS ARE NOT PURCHASERS OR BUYERS IN GOOD FAITH. THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT AFFIRMED THE DECISION OF THE LOWER COURT IN ORDERING THE DEFENDANTS-PETITIONERS JOINTLY AND SEVERALLY TO PAY PER ANNUM BEGINNING THE SECOND CROPPING OF 1984 UNTIL THE TIME THE POSSESSION OF THE LAND IN QUESTION IS RESTORED TO THE PLAINTIFFS [respondents].[9] The issues for resolution are (1) whether Maxima was the previous owner of Parcel One, which included respondents' one half northern portion, now covered by OCT No.P-13873; 2) whether petitioners could validly invoke the defense of purchasers in good faith; and (3) whether reconveyance is the proper remedy. Preliminarily, we would like to state the inescapable fact that the Extra-judicial partition of the estate of Candido Macahilig involving the seven parcels of land was made only between Maxima and the heirs of her two deceased brothers Mario and Eusebio. Section 1 of Rule 74 of the Rules of Court provides: Section 1. Extrajudicial settlement by agreement between heirs. - If the decedent left no will and no debts and the heirs are all of age, or the minors are represented by their judicial or legal representatives duly authorized for the purpose, the parties may, without securing letters of administration, divide the estate among themselves as they see fit by means of a public instrument filed in the office of the register of deeds, and should they disagree, they may do so in an ordinary action for partition. x x x The fact of the extrajudicial settlement or administration shall be published in a newspaper of general circulation in the manner provided in the next succeeding section; but no extrajudicial settlement shall be binding upon any person who has not participated therein or had no notice thereof. Records do not show that there has been any case filed by the other heirs who had not participated in the Deed of Extrajudicial Partition and were questioning the validity of such partition. Thus, the resolution of the present case concerns only the issues between the parties before us and will not in any way affect the rights of the other heirs who have not participated in the partition. The first two issues raised for resolution are factual. It is a settled rule that in the exercise of the Supreme Court's power of review, the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case, considering that the findings of facts of the CA are conclusive and binding on the Court.[10] While jurisprudence has recognized several exceptions in which factual issues may be resolved by this Court, namely: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, could justify a different conclusion,[11] none

B.

C.

of these exceptions has been shown to apply to the present case and, hence, this Court may not review the findings of fact made by the lower courts. We find no cogent reason to depart from the findings of both the trial court and the CA that Maxima was not the owner of the land she sold to petitioners, and that the one half northern portion of such land was owned by the respondents; that Maxima had no right to dispose of the land and, thus, she had no right to convey the same. To repeat, records show that Maxima entered into a Deed of Extra-judicial Partition with the heirs of her two deceased brothers, namely: Mario and Eusebio, over seven parcels of land owned by Candido and Gregoria Macahilig. One of these lands was the irrigated riceland with an area of 1,896 sq. meters which, per the Deed of Partition, was divided between the heirs of Mario and Eusebio; and the former got the one half southern portion, while the latter got the one half northern portion. Maxima affixed her thumbmarkto the Deed. This parcel of riceland was sold by Maxima to petitioners. However, Maxima, at the time of the execution of the Deed of Sale over this parcel of land in favor of petitioner on May 23, 1984, had no right to sell the same as she was not the owner thereof. In fact, Maxima, with the conformity of her husband Pedro, had even executed a Statement of Conformity, in which she affirmed the execution of the Deed of Extra-judicial Partition and conformed to the manner of the partition of shares therein. She attested to the fact that the five parcels of land subject of the Deed of Extra-judicial Partition, which were declared in her name under different tax declarations, were actually properties of her deceased parents; and that she waived all her rights over the lands or portions thereof adjudicated to all her co-heirs. Neither Maxima nor any of her heirs ever questioned the validity of these two above-mentioned documents to which she affixed her thumbmarks. Notably, when the instant complaint was filed by respondents against Maxima and petitioners in 1991, in which respondents claimed as basis of their ownership of the one half northern portion of thericeland was the Deed of Extra-judicial Partition, Maxima, while still living at that time, as she died in 1993, never denied the same. As already stated, she failed to file an answer and was declared in default. In a contract of sale, it is essential that the seller is the owner of the property he is selling.[12] Under Article 1458 of the Civil Code, the principal obligation of a seller is to transfer the ownership of the property sold.[13] Also, Article 1459 of the Civil Code provides that the thing must be licit and the vendor must have a right to transfer the ownership thereof at the time it is delivered. Maxima's execution of the Deed of Sale selling Parcel One, part of which is respondents' one half northern portion, was not valid and did not transfer ownership of the land to petitioners, as Maxima had no title or interest to transfer. It is an established principle that no one can give what one does not have --nemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally.[14] Petitioners insist that Maxima owned the subject land as shown by her actual and continuous possession of the same; that it was declared in her name for taxation purposes; that throughout the time that Maxima and her children were in possession of the property, she never gave any share of the produce to respondents; and that Maxima even mortgaged the land to a bank. We are not persuaded. Maxima's possession of the subject land was by reason of her request to her daughter Penicula, who was installed by respondents as tenant after the execution of the Deed of Extra-judicial Partition, as Maxima wanted to farm the land so that she could have a share in the produce, to which Penicula acceded out of pity.[15] It was also established that after the execution of the Deed of Extra-judicial Partition, Penicula as tenant was able to farm the subject land for one cropping year before she allowed her mother Maxima to farm the land thereafter; and, at that time, Penicula gave the corresponding share of the produce of that one crop year to Adela,[16] one of herein respondents, thus establishing respondents' ownership of the subject land. Evidently, Maxima's possession of the land was not in the concept of an owner.

While the land was declared in Maxima's name for taxation purposes, it did not establish Maxima's ownership of the same. We have held that a tax declaration, by itself, is not considered conclusive evidence of ownership.[17] It is merely an indicium of a claim of ownership.[18] Because it does not by itself give title, it is of little value in proving one's ownership.[19] Petitioners' reliance on Maxima's tax declaration in assuming that she owned Parcel One is an erroneous assumption that should not prejudice the rights of the real owners. The fact that a mortgage was constituted on the land while the same was in Maxima's name would not make Maxima the owner thereof. Maxima's non-ownership of Parcel One was clearly established by the Deed of Extra-judicial Partition and the Statement of Conformity, wherein she categorically declared that the land was actually owned by her deceased parents, to which she separately affixed her thumbmarks. Both documents showed declarations against her interest in the land. A declaration against interest is the best evidence which affords the greatest certainty of the facts in dispute.[20] While petitioners were able to secure a certificate of title covering Parcel One in petitioner Rogelia's name, their possession of a certificate of title alone does not necessarily make them the true owners of the property described therein. Our land registration laws do not give the holder any better title than what he actually has.[21] In Naval v. Court of Appeals,[22] we held: Registration of a piece of land under the Torrens System does not create or vest title, because it is not a mode of acquiring ownership. A certificate of title is merely an evidence of ownership or title over the particular property described therein. It cannot be used to protect a usurper from the true owner; nor can it be used as a shield for the commission of fraud; neither does it permit one to enrichhimself at the expense of others. Its issuance in favor of a particular person does not foreclose the possibility that the real property may be co-owned with persons not named in the certificate, or that it may be held in trust for another person by the registered owner. x x x notwithstanding the indefeasibility of the Torrens title, the registered owner may still be compelled to reconvey the registered property to its true owners. The rationale for the rule is thatreconveyance does not set aside or re-subject to review the findings of fact of the Bureau of Lands. In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or erroneously registered in another person's name, to its rightful or legal owner, or to the one with a better right.[23] We find that reconveyance of the subject land to respondents is proper. The essence of an action for reconveyance is that the free patent and certificate of title are respected as incontrovertible. What is sought is the transfer of the property, which has been wrongfully or erroneously registered in another person's name, to its rightful owner or to one with a better right.[24] Respondents have specifically prayed that petitioners be ordered to restore and reconvey to them the subject land. In an action for reconveyance, the issue involved is one of ownership; and for this purpose, evidence of title may be introduced. Respondents had sufficiently established that Parcel One, covered by OCT No. P-13873, of which respondents' northern one half portion formed a part, was not owned by Maxima at the time she sold the land to petitioners. We have earlier discussed the evidence presented by respondents establishing that Maxima had no claim of ownership over the land sold by her to petitioners. An action for reconveyance prescribes in 10 years, the point of reference being the date of registration of the deed or the date of issuance of the certificate of title over the property.[25] Records show that while the land was registered in the name of petitioner Rogelia in 1984, the instant complaint for reconveyance was filed by the respondents in 1991, and was thus still within the ten-year prescriptive period. Petitioners claim that they were innocent buyers in good faith and for value; that there was no evidence showing that they were in bad faith when they purchased the subject land; that Article 526 of the Civil Code provides that he is deemed a possessor in good

faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it; and that good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof. Notably, petitioners bought the property when it was still an unregistered land. The defense of having purchased the property in good faith may be availed of only where registered land is involved and the buyer had relied in good faith on the clear title of the registered owner.[26] In Ong v. Olasiman[27] in which a claim of good faith was raised by petitioner who bought an unregistered land, we held: Finally, petitioners' claim of good faith does not lie too as it is irrelevant: [T]he issue of good faith or bad faith of the buyer is relevant only where the subject of the sale is registered land and the purchaser is buying the same from the registered owner whose title to the land is clean x x x in such case the purchaser who relies on the clean title of the registered owner is protected if he is a purchaser in good faith for value. Since the properties in question are unregistered lands, petitioners as subsequent buyers thereof did so at their peril. Their claim of having bought the land in good faith, i.e., without notice that some other person has a right to or interest in the property, would not protect them if it turns out, as it actually did in this case, that their seller did not own the property at the time of the sale. [28] Petitioners claim that the subject land is a public land, and that petitioners were issued title over this land in 1984; that respondents did not present any evidence to prove that the subject land was already a private land prior to their acquisition and the issuance of a free patent title to them; that the presumption that the subject land was formerly part of the mass of alienable lands of public domain under the Regalian doctrine, and was regularly granted to petitioners by way of free patent and certificate of title, remains incontrovertible in favor of petitioner. This issue was only raised for the first time in petitioners' Memorandum filed with us. Well-settled is the rule that issues not raised and/or ventilated in the trial court cannot be raised for the first time on appeal and cannot be considered for review to consider questions belatedly raised tramples on the basic principles of fair play, justice and due process.[29] Finally, we find no error committed by the CA in affirming the RTC's order for petitioners to pay respondents their corresponding share in the produce of the subject land from the time they were deprived thereof until the possession is restored to them. As aptly stated by the CA, thus: It is said that one of the attributes of ownership is the right to enjoy and dispose of the the thing owned, The right to enjoy included the right to receive the produce of the thing. The plaintiffs-appellees, as true owners of the subject land were deprived of their property when Maxima Divison illegally sold it to spouses Daclags. As such, equtiy demands that the plaintiff-appeellees be given what rightfully belonged to them under the time honored principle that a person cannot enrich himself at the expense of another. WHEREFORE, the petition for review is DENIED. The Decision dated October 17, 2001 and Resolution dated August 7, 2003 of the Court of Appeals areAFFIRMED. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-46892 September 30, 1981 HEIRS OF AMPARO DEL ROSARIO, plaintiffs-appellees, vs. AURORA O. SANTOS, JOVITA SANTOS GONZALES, ARNULFO O. SANTOS, ARCHIMEDES O. SANTOS, ERMELINA SANTOS RAVIDA, and ANDRES O. SANTOS, JR., defendants-appellants.

GUERRERO, J.: The Court of Appeals, 1 in accordance with Section 31 of the Judiciary Act of 1948, as amended, certified to Us the appeal docketed as CA-G.R. No. 56674-R entitled "Amparo del Rosario, plaintiff-appellee, vs. Spouses Andres Santos and Aurora Santos, defendants-appellants," as only questions of law are involved. On January 14, 1974, Amparo del Rosario filed a complaint against the spouses Andres F. Santos and Aurora O. Santos, for specific performance and damages allegedly for failure of the latter to execute the Deed of Confirmation of Sale of an undivided 20,000 square meters of land, part of Lot 1, Psu-206650, located at Barrio Sampaloc, Tanay, Rizal, in malicious breach of a Deed of Sale (Exhibit A or 1) dated September 28, 1964. Amparo del Rosario died on Sept. 21, 1980 so that she is now substituted by the heirs named in her will still undergoing probate proceedings. Andres F. Santos also died, on Sept. 5, 1980, and he is substituted by the following heirs: Jovita Santos Gonzales, Arnulfo O. Santos, Archimedes O. Santos, Germelina Santos Ravida, and Andres O. Santos, Jr. The Deed of Sale (Exh. A or 1) is herein reproduced below: DEED OF SALE KNOW ALL MEN BY THESE PRESENTS: I, ANDRES F. SANTOS, of legal age, married to Aurora 0. Santos, Filipino and resident cf San Dionisio, Paranaque, Rizal, Philippines, for and in consideration of the sum of TWO THOUSAND (P 2,000.00) PESOS, Philippine Currency, the receipt whereof is hereby acknowledged, do hereby SELLS, CONVEYS, and TRANSFERS (sic) unto Amparo del Rosario, of legal age, married to Fidel del Rosario but with legal separation, Filipino and resident of San Dionisio, Paranaque, Rizal, Philippines that certain 20,000 square meters to be segregated from Lot 1 of plan Psu-206650 along the southeastern portion of said lot, which property is more particularly described as follows: A parcel of land (Lot 1 as shown on plan Psu-206650, situated in the Barrio of Sampaloc, Municipality of Tanay, Province of Rizal. Bounded on the SW., along lines 1-2-3, by Lot 80 of Tanay Public Land Subdivision, Pls-39; on the NW., along

lines 3-4-5, by Lot 2; and along lines 5-6-7-8-9-10-11, by Lot 6; on the NE., along lines 11-12-13, by Lot 3: and along lines 13-1415, by Lot 4, all of plan Psu-206650; and on the SE., along line 15-1, by Lot 5 of plan Psu- 206650 ... ; containing an area of ONE HUNDRED EIGHTY ONE THOUSAND FOUR HUNDRED TWENTY (181,420) SQUARE METERS. All points referred to are indicated on the plan and are marked on the ground as follows: ... of which above-described property, I own one-half (1/2) interest thereof being my attorney's fee, and the said 20,000 square meters will be transferred unto the VENDEE as soon as the title thereof has been released by the proper authority or authorities concerned: That the parties hereto hereby agree that the VENDOR shall execute a Deed of Confirmation of Deed of Sale in favor of the herein VENDEE as soon as the title has been released and the subdivision plan of said Lot 1 has been approved by the Land Registration Commissioner. IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of September, 1964, in the City of Manila, Philippines. s/ ANDRES F. SANTOS t/ ANDRES F. SANTOS With My Marital Consent: s/ Aurora O. Santos (Wife) t/ Aurora O. Santos (Wife) SIGNED IN THE PRESENCE OF: s/ Felicitas C. Moro s/ Corona C. Venal REPUBLIC OF THE PHILIPPINES) ) SS. BEFORE ME, a Notary Public for and in Rizal, Philippines, personally appeared Andres F. Santos, with Res. Cert. No. 4500027 issued at Paranaque, Rizal, on Jan. 9, 1964, B-0935184 issued at Paranaque, Rizal on April 15, 1964, and Aurora 0. Santos, with Res. Cert. No. A-4500028 issued at Paranaque, Rizal, on Jan. 9, 1964, giving her marital consent to this instrument, both of whom are known to me and to me known to be the same persons who executed the foregoing instruments and they acknowledged to me that the same is their free act and voluntary deed. IN WITNESS WHEREOF, I have hereunto signed this instrument and affixed my notarial seal this lst day of October, 1964, in Pasig, Rizal, Philippines. Doc. No. 1792; Page No. 85; Book No. 19; Series of 1964. s/ FLORENCIO LANDRITO t/ FLORENCIO LANDRITO NOTARY PUBLIC Until December 31, 1965 2 Plaintiff claimed fulfillment of the conditions for the execution of the Deed of Confirmation of Sale, namely: the release of the title of the lot and the approval of the subdivision plan of said lot by the Land Registration Commission. She even enumerated the titles with their corresponding land areas derived by defendants from the aforesaid lot, to wit: (a) TCT 203580 30,205 sq. meters (b) TCT 203581 19, 790 sq. meters

(c) TCT 167568 40,775 sq. meters In a motion to dismiss, defendants pleaded, inter alia, the defenses of lack of jurisdiction of the court a quo over the subject of the action and lack of cause of action allegedly because there was no allegation as to the date of the approval of the subdivision plan, no specific statement that the titles therein mentioned were curved out of Lot I and no clear showing when the demands were made on the defendants. They likewise set up the defense of prescription allegedly because the deed of sale was dated September 28, 1964 and supposedly ratified October 1, 1964 but the complaint was filed only on January 14, 1974, a lapse of more than nine years when it should have been filed within five years from 1964 in accordance with Article 1149, New Civil Code. Defendant also claimed that the demand set forth in the complaint has been waived, abandoned or otherwise extinguished. It is alleged that the deed of sale was "only an accommodation graciously extended, out of close friendship between the defendants and the plaintiff and her casual business partner in the buy and sell of real estate, one Erlinda Cortez;" 3 that in order to allay the fears of plaintiff over the non-collection of the debt of Erlinda Cortez to plaintiff in various sums exceeding P 2,000.00, defendants, who were in turn indebted to Erlinda Cortez in the amount of P 2,000.00, voluntarily offered to transfer to plaintiff their inexistent but expectant right over the lot in question, the same to be considered as part payment of Erlinda Cortez' indebtedness; that as Erlinda Cortez later on paid her creditor what was then due, the deed of sale had in effect been extinguished. Defendants thereby characterized the said deed of sale as a mere tentative agreement which was never intended nor meant to be ratified by and acknowledged before a notary public. In fact, they claimed that they never appeared before Notary Public Florencio Landrito. Finally, defendants alleged that the claim on which the action or suit is founded is unenforceable under the statute of frauds and that the cause or object of the contract did not exist at the time of the transaction. After an opposition and a reply were filed by the respective parties, the Court a quo resolved to deny the motion to dismiss of defendants. Defendants filed their answer with counterclaim interposing more or less the same defenses but expounding on them further. In addition, they claimed that the titles allegedly derived by them from Lot 1 of Annex A or I were cancelled and/or different from said Lot I and that the deed of sale was simulated and fictitious, plaintiff having paid no amount to defendants; and that the deed was entrusted to plaintiff's care and custody on the condition that the latter; (a) would secure the written consent of Erlinda Cortez to Annex A or I as part payment of what she owed to plaintiff; (b) would render to defendants true accounting of collections made from Erlinda showing in particular the consideration of 2,000.00 of Annex A or I duly credited to Erlinda's account.4 Plaintiff filed a reply and answer to counterclaim and thereafter a motion for summary judgment and/or judgment on the pleadings on the ground that the defenses of defendants fail to tender an issue or the same do not present issues that are serious enough to deserve a trial on the merits, 5 submitting on a later date the affidavit of merits. Defendants filed their corresponding opposition to the motion for summary judgment and/or judgment on the pleadings. Not content with the pleadings already submitted to the Court, plaintiff filed a reply while defendants filed a supplemental opposition. With all these pleadings filed by the parties in support of their respective positions, the Court a quo still held in abeyance plaintiff's motion for summary judgment or judgment on the pleadings pending the pre-trial of the case. At the pre-trial, defendants offered by way of compromise to pay plaintiff the sum of P2,000.00, the consideration stated in the deed of sale. But the latter rejected the bid and insisted on the delivery of the land to her. Thus, the pre-trial proceeded with the presentation by plaintiff of Exhibits A to Q which defendants practically admitted, adopted as their own and marked as Exhibits 1 to 17. In addition, the latter offered Exhibit 18, which was their reply to plaintiff's letter of demand dated December 21, 1973.

From the various pleadings filed in this case by plaintiff, together with the annexes and affidavits as well as the exhibits offered in evidence at the pre-trial, the Court a quo found the following facts as having been duly established since defendant failed to meet them with countervailing evidence: In February, 1964, Teofilo Custodia owner of a parcel of unregistered land with an area of approximately 220,000 square meters in Barrio Sampaloc, Tanay, Rizal, hired Attorney Andres F. Santos "to cause the survey of the above-mentioned property, to file registration proceedings in court, to appear and represent him in all government office relative thereto, to advance all expenses for surveys, taxes to the government, court fees, registration fees ... up to the issuance of title in the name" of Custodia. They agreed that after the registration of the title in Custodio's name, and "after deducting all expenses from the total area of the property," Custodio would assign and deliver to Santos "one-half (1/2) share of the whole property as appearing in the certificate of title so issued." Exh. B or 2). On March 22, 1964, Custodio's land was surveyed under plan Psu-226650 (Exh. D or 4). It was divided into six (6) lots, one of which was a road lot. The total area of the property as surveyed was 211,083 square meters. The respective areas of the lots were as follows: Lot 1 Lot 2 Lot 3 Lot 4 Lot 5 Road Lot 6 TOTAL xxx xxx xxx On December 27, 1965, a decree of registration No. N-108022 was issued in Land Registration Case No. N-5023, of the Court of First Instance of Rizal, LRC Record No. N-27513, in favor of Teofilo Custodia married to Miguela Perrando resident of Tanay, Rizal. On March 23, 1966, Original Certificate of Title No. 5134 (Exh. Q or 17) was issued to Custodio for Lots 1, 2, 3, 4 and 5, Psu- 206650, with a total area of 206,853 square meters. The areas of the five (5) lots were as follows: Lot 1 Lot 2 Lot 3 Lot 4 Lot 5 181,420 square meters 7,238 square meters 7,305 square meters 5,655 square meters 5,235 square meters 181,420 square meters 7,238 square meters 7,305 square meters 5,655 square meters 5,235 square meters 4,230 square meters 211,083 square meters

In April to May, 1966, a consolidation-subdivision survey (LRC) Pcs-5273 (Exh. E or 5) was made on the above lots converting them into six (6) new lots as follows: xxx xxx xxx Lot 1 Lot 2 Lot 3 Lot 4 Lot 5 Road Lot 6 TOTAL 20,000 square meters 40,775 square meters 50,000 square meters 40,775 square meters 50,000 square meters 5,303 square meters 206,853 square meters

On June 22, 1966, the consolidation-subdivision plan (LRC) Pcs-5273 (Exh. E or 5) was approved by the Land Registration Commission and by the Court of First Instance of Rizal in an order dated July 2, 1966 (Entry No. 61037 T-167561, Exh. Q). Upon its registration, Custodio's O.C.T. No. 5134 (Exh. Q) was cancelled and TCT Nos. 167561, 167562, 167563, 167564 (Exh. G), 167565 (Exh. H and 167566 were issued for the six lots in the name of Custodio (Entry No. 61035, Exh. Q). On June 23, 1966, Custodio conveyed to Santos Lots 4 and 5, Pcs-5273 with a total area of 90,775 square meters (Exh. B or 2) described in Custodio's TCT No. 167564 (Exh. G or 7) and TCT No. 167565 (Exh. H or 8), plus a one-half interest in the Road Lot No. 6, as payment of Santos' attorney's fees and advances for the registration of Custodio's land. Upon registration of the deed of conveyance on July 5, 1966, Custodio's TCT Nos. 167564 and 167565 (Exhs. G and H) were cancelled. TCT No. 167568 (Exh. I or 9) for Lot 4 and TCT No. 167585 (Exh. J or 10) for Lot 5 were issued to Santos. On September 2, 1967, Santos' Lot 5, with an area of 50,000 square meters was subdivided into two (2) lots, designated as Lots 5-A and 5-B in the plan Psd-78008 (Exh. F or 6), with the following areas: Lot 5-A Lot 5-B TOTAL 30,205 square meters 19,795square meters 50,000 square meters

Upon registration of Psd-78008 on October 3, 1967, Santos' TCT No. 167585 (Exh. J) was cancelled and TCT No. 203578 for Lot 5- A and TCT No. 203579 for Lot 5-B were supposed to have been issued to Santos (See Entry 6311 in Exh. J or 10). Actually, TCT No. 203580 was issued for Lot 5-A (Exh. K or 1 1), and TCT No. 203581 for Lot 5-B (Exh. L or 12), both in the name of Andres F. Santos. Out of Custodio's original Lot 1, Psu-206650, with an area of 181,420 square meters, Santos was given a total of 90,775 square meters, registered in his name as of October 3, 1967 under three (3) titles, namely:

TCT No. 167585 for Lot 4 Pcs-5273 (Exh. J or 10) TCT No. 203580 for Lot 5-A Psd-78008 (Exh. K or 11) TCT No. 203581 for Lot 5-B Psd-78008 (Exh. L or 12) 90,775 sq.m. plus one-half of the road lot, Lot 6, PCS-5273, with an area of 5,303 square meters, which is registered jointly in the name of Santos and Custodio (Exh. B & E) 6 The court a quo thereupon concluded that there are no serious factual issues involved so the motion for summary judgment may be properly granted. Thereafter, it proceeded to dispose of the legal issues raised by defendants and rendered judgment in favor of plaintiff. The dispositive portion of the decision states as follows: WHEREFORE, defendants Andres F. Santos and Aurora Santos are ordered to execute and convey to plaintiff Amparo del Rosario, within ten (10) days from the finality of this decision, 20,000 square meters of land to be taken from the southeastern portion of either Lot 4, Pcs-5273, which has an area of 40,775 square meters, described in TCT No. 167568 (Exh. I or 9) of from their LOL 5-A. with an area of 30,205 square meters, described in TCI No. 203; O (Exh. K or 11). The expenses of segregating the 20,000 square meters portion shall be borne fqually by the parties. rhe expenses for the execution and registration of the sale shall be borne by the defendants (Art. 1487, Civil Code). Since the defendants compelled the plaintiff to litigate and they failed to heed plainliff's just demand, they are further ordered to pay the plaintiff the sum of P2,000.00 as attorney's fees and the costs of this action. SO ORDERED. 7 Aggrieved by the aforesaid decision, the defendant's filed all appeal to the Court of Appeals submitting for resolution seven assignments of errors, to wit: I. The lower court erred in depriving the appellants of their right to the procedural due process. II. The lower court erred in holding that the appellee's claim has not been extinguished. 19,795 sq. m. 30,205 sq. m. 40,775 sq. m.

III. The lower court erred in sustaining appellee's contention that there are no other unwritten conditions between the appellants and the appellee except those express in Exh. "1" or "A", and that Erlinda Cortez' conformity is not required to validate the appellants' obligation. IV. The lower court erred in holding that Exh. "l" or "A" is not infirmed and expressed the true intent of the parties. V. The lower court erred in declaring that the appellants are co-owners of the lone registered owner Teofilo Custodia. VI. The lower court erred in ordering the appellants to execute and convey to the appellee 20,000 sq. m. of land to be taken from the southeastern portion of either their lot 4, Pcs-5273, which has an area of 40,775 sq.m., described in T.C.T. No. 167568 (Exh. 9 or 1), or from their lot No. 5-A, with an area of 30,205 sq.m. described in T.C.T. No. 203580 (Exh. 11 or K), the expenses of segregation to be borne equally by the appellants and the appellee and the expenses of execution and registration to be borne by the appellants. VII. Thelowercourterredinorderingtheappellantstopayto the appellee the sum of P2,000. 00 as attorney's fee and costs. 8 The first four revolve on the issue of the propriety of the rendition of summary judgment by the court a quo, which concededly is a question of law. The last three assail the summary judgment itself. Accordingly, the Court of Appeals, with whom the appeal was filed, certified the records of the case to this Court for final determination. For appellants herein, the rendition of summary judgment has deprived them of their right to procedural due process. They claim that a trial on the merits is indispensable in this case inasmuch as they have denied under oath all the material allegations in appellee's complaint which is based on a written instrument entitled "Deed of Sale", thereby putting in issue the due execution of said deed. Appellants in their opposition to the motion for summary judgment and/or judgment on the pleadings, however, do not deny the genuineness of their signatures on the deed of sale. (Par. 3 of said Motion, p. 101, Record on Appeal). They do not contest the words and figures in said deed except in the acknowledgment portion thereof where certain words were allegedly cancelled and changed without their knowledge and consent and where, apparently, they appeared before Notary Public Florencio Landrito when, in fact, they claimed that they did not. In effect, there is an admission of the due execution and genuineness of the document because by the admission of the due execution of a document is meant that the party whose signature it bears admits that voluntarily he signed it or that it was signed by another for him and with his authority; and the admission of the genuineness of the document is meant that the party whose signature it bears admits that at the time it was signed it was in the words and figures exactly as set out in the pleading of the party relying upon it; and that any formal requisites required by law, such as swearing and acknowledgment or revenue stamps which it requires, are waived by him. 9 As correctly pointed out by the court a quo, the alleged false notarization of the deed of sale is of no consequence. For a sale of real property or of an interest therein to be enforceable under the Statute of Frauds, it is enough that it be in writing. 10 It need not be notarized. But the vendee may avail of the right under Article 1357 of the New Civil Code to compel the vendor to observe the form required by law in order that the instrument may be registered in the Registry of Deeds. 11 Hence, the due execution and genuineness of the deed of sale are not really in issue in this case. Accordingly, assigned error I is without merit. What appellants really intended to prove through the alleged false notarization of the deed of sale is the true import of the matter, which according to them, is a mere tentative agreement with appellee. As such, it was not intended to be

notarized and was merely entrusted to appellee's care and custody in order that: first, the latter may secure the approval of one Erlinda Cortez to their (appellants') offer to pay a debt owing to her in the amount of P2,000.00 to appellee instead of paying directly to her as she was indebted to appellee in various amounts exceeding P2,000.00; and second once the approval is secured, appellee would render an accounting of collections made from Erlinda showing in particular the consideration of P2,000.00 of the deed of sale duly credited to Erlinda's account. According to appellants, they intended to prove at a full dress trial the material facts: (1) that the aforesaid conditions were not fulfilled; (2) that Erlinda Cortez paid her total indebtedness to appellee in the amount of P14,160.00, the P2,000.00 intended to be paid by appellant included; and (3) that said Erlinda decided to forego, renounce and refrain from collecting the P2,000.00 the appellants owed her as a countervance reciprocity of the countless favors she also owes them. Being conditions which alter and vary the terms of the deed of sale, such conditions cannot, however, be proved by parol evidence in view of the provision of Section 7, Rule 130 of the Rules of Court which states as follows: Sec. 7. Evidence of written agreements when the terms of an agreement have been reduced to writing, it is to be considered as containing all such terms, and, therefore, there can be, between the parties and their successors in interest, no evidence of the terms of the agreement other than the contents of the writing, except in the following cases: (a) Where a mistake or imperfection of the writing, or its failure to express the true intent and agreement of the parties, or the validity of the agreement is put in issue by the pleadings; (b) When there is an intrinsic ambiguity in the writing. The term "agreement" includes wills." The parol evidence rule forbids any addition to or contradiction of the terms of a written instrument by testimony purporting to show that, at or before the signing of the document, other or different terms were orally agreed upon by the parties. 12 While it is true, as appellants argue, that Article 1306 of the New Civil Code provides that "the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided that they are not contrary to law, morals, good customs, public order, or public policy" and that consequently, appellants and appellee could freely enter into an agreement imposing as conditions thereof the following: that appellee secure the written conformity of Erlinda Cortez and that she render an accounting of all collections from her, said conditions may not be proved as they are not embodied in the deed of sale. The only conditions imposed for the execution of the Deed of Confirmation of Sale by appellants in favor of appellee are the release of the title and the approval of the subdivision plan. Thus, appellants may not now introduce other conditions allegedly agreed upon by them because when they reduced their agreement to writing, it is presumed that "they have made the writing the only repository and memorial of truth, and whatever is not found in the writing must be understood to have been waived and abandoned." 13 Neither can appellants invoke any of the exceptions to the parol evidence rule, more particularly, the alleged failure of the writing to express the true intent and agreement of the parties. Such an exception obtains where the written contract is so ambiguous or obscure in terms that the contractual intention of the parties cannot be understood from a mere reading of the instrument. In such a case, extrinsic evidence of the subject matter of the contract, of the relations of the parties to each other, and of the facts and circumstances surrounding them when they entered into the. contract

may be received to enable the court to make a proper interpretation of the instrumental. 14 In the case at bar, the Deed of Sale (Exh. A or 1) is clear, without any ambiguity, mistake or imperfection, much less obscurity or doubt in the terms thereof. We, therefore, hold and rule that assigned errors III and IV are untenable. According to the court a quo, "(s)ince Santos, in his Opposition to the Motion for Summary Judgment failed to meet the plaintiff's evidence with countervailing evidence, a circumstance indicating that there are no serious factual issues involved, the motion for summary judgment may properly be granted." We affirm and sustain the action of the trial court. Indeed, where a motion for summary judgment and/or judgment on the pleadings has been filed, as in this case, supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as may be admissible in evidence, and shall show affirmatively that the affiant is competent to testify as to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in the affidavitshalibeattachedtheretoorservedtherewith. 15 Examining the pleadings, affidavits and exhibits in the records, We find that appellants have not submitted any categorical proof that Erlinda Cortez had paid the P2,000.00 to appellee, hence, appellants failed to substantiate the claim that the cause of action of appellee has been extinguished. And while it is true that appellants submitted a receipt for P14,160.00 signed by appellee, appellants, however, have stated in their answer with counterclaim that the P2,000.00 value of the property covered by the Deed of Sale, instead of being credited to Erlinda Cortez, was conspicuously excluded from the accounting or receipt signed by appellee totalling P14,160.00. The aforesaid receipt is no proof that Erlinda Cortez subsequently paid her P2,000.00 debt to appellee. As correctly observed by the court a quo, it is improbable that Cortez would still pay her debt to appellee since Santos had already paid it. Appellants' claim that their P2,000.00 debt to Erlinda Cortez had been waived or abandoned is not also supported by any affidavit, document or writing submitted to the court. As to their allegation that the appellee's claim is barred by prescription, the ruling of the trial court that only seven years and six months of the ten-year prescription period provided under Arts. 1144 and 155 in cases of actions for specific performance of the written contract of sale had elapsed and that the action had not yet prescribed, is in accordance with law and, therefore, We affirm the same. The action of the court a quo in rendering a summary judgment has been taken in faithful compliance and conformity with Rule 34, Section 3, Rules of Court, which provides that "the judgment sought shall be rendered forthwith if the pleadings, depositions, and admissions on file together with the affidavits, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. " Resolving assignments of errors, V, VI, and VII which directly assail the summary judgment, not the propriety of the rendition thereof which We have already resolved to be proper and correct, it is Our considered opinion that the judgment of the court a quo is but a logical consequence of the failure of appellants to present any bona fidedefense to appellee's claim. Said judgment is simply the application of the law to the undisputed facts of the case, one of which is the finding of the court a quo, to which We agree, that appellants are owners of one-half (1/2) interest of Lot I and, therefore, the fifth assignment of error of appellants is without merit. By the terms of the Deed of Sale itself, which We find genuine and not infirmed, appellants declared themselves to be owners of one-half (1/2) interest thereof. But in order to avoid appellee's claim, they now contend that Plan Psu-206650 where said Lot I appears is in the exclusive name of Teofilo Custodio as the sole and exclusive owner thereof and that the deed of assignment of one-half (1/2) interest thereof executed by said Teofilo Custodio in their favor is strictly personal between them. Notwithstanding the lack of any title to the said lot by appellants at the time of the execution

of the deed of sale in favor of appellee, the said sale may be valid as there can be a sale of an expected thing, in accordance with Art. 1461, New Civil Code, which states: Art. 1461. Things having a potential existence may be the object of the contract of sale.

The efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. The sale of a vain hope or expectancy is void. In the case at bar, the expectant right came into existence or materialized for the appellants actually derived titles from Lot I . We further reject the contention of the appellants that the lower court erred in ordering the appellants to execute and convey to the appellee 20,000 sq.m. of land to be taken from the southeastern portion of either their Lot 4, Pcs-5273, which has an area of 40,775 sq.m., described in T.C.T. No. 167568 (Exh. 9 or 1), or from their Lot No. 5-A, with an area of 30,205 sq.m. described in T.C.T. No. 203580 (Exh. 11 or K), the expenses of segregation to be borne equally by the appellants and the appellee and the expenses of execution and registration to be borne by the appellants. Their argument that the southeastern portion of Lot 4 or Lot 5-A is no longer the southeastern portion of the bigger Lot 1, the latter portion belonging to the lone registered owner, Teofilo Custodia is not impressed with merit. The subdivision of Lot I between the appellants and Teofilo Custodio was made between themselves alone, without the intervention, knowledge and consent of the appellee, and therefore, not binding upon the latter. Appellants may not violate nor escape their obligation under the Deed of Sale they have agreed and signed with the appellee b3 simply subdividing Lot 1, bisecting the same and segregating portions to change their sides in relation to the original Lot 1. Finally, considering the trial court's finding that the appellants compelled the appellee to litigate and they failed to heed appellee's just demand, the order of the court awarding the sum of P2,000.00 as attorney's fees is just and lawful, and We affirm the same. WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby AFFIRMED in toto, with costs against the appellants. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-48194 March 15, 1990 JOSE M. JAVIER and ESTRELLA F. JAVIER, petitioners, vs. COURT OF APPEALS and LEONARDO TIRO, respondents. Eddie Tamondong for petitioners. Lope Adriano and Emmanuel Pelaez, Jr. for private respondent.

REGALADO, J.: Petitioners pray for the reversal of the decision of respondent Court of Appeals in CA-G.R. No. 52296-R, dated March 6, 1978, 1 the dispositive portion whereof decrees: WHEREFORE, the judgment appealed from is hereby set aside and another one entered ordering the defendantsappellees, jointly and solidarily, to pay plaintiff-appellant the sum of P79,338.15 with legal interest thereon from the filing of the complaint, plus attorney's fees in the amount of P8,000.00. Costs against defendants-appellees. 2 As found by respondent court or disclosed by the records, 3 this case was generated by the following antecedent facts. Private respondent is a holder of an ordinary timber license issued by the Bureau of Forestry covering 2,535 hectares in the town of Medina, Misamis Oriental. On February 15, 1966 he executed a "Deed of Assignment" 4 in favor of herein petitioners the material parts of which read as follows: xxx xxx xxx I, LEONARDO A. TIRO, of legal age, married and a resident of Medina, Misamis Oriental, for and in consideration of the sum of ONE HUNDRED TWENTY THOUSAND PESOS (P120,000.00), Philippine Currency, do by these presents, ASSIGN, TRANSFER AND CONVEY, absolutely and forever unto JOSE M. JAVIER and ESTRELLA F. JAVIER, spouses, of legal age and a resident (sic) of 2897 F.B. Harrison, Pasay City, my shares of stocks in the TIMBERWEALTH CORPORATION in the total amount of P120,000.00, payment of which shall be made in the following manner: 1. Twenty thousand (P20,000.00) Pesos upon signing of this contract; 2. The balance of P100,000.00 shall be paid P10,000.00 every shipment of export logs actually produced from the forest concession of Timberwealth Corporation.

That I hereby agree to sign and endorse the stock certificate in favor of Mr. & Mrs. Jose M. Javier, as soon as stock certificates are issued. xxx xxx xxx At the time the said deed of assignment was executed, private respondent had a pending application, dated October 21, 1965, for an additional forest concession covering an area of 2,000 hectares southwest of and adjoining the area of the concession subject of the deed of assignment. Hence, on February 28, 1966, private respondent and petitioners entered into another "Agreement" 5 with the following stipulations: xxx xxx xxx 1. That LEONARDO TIRO hereby agrees and binds himself to transfer, cede and convey whatever rights he may acquire, absolutely and forever, to TIMBERWEALTH CORPORATION, a corporation duly organized and existing under the laws of the Philippines, over a forest concession which is now pending application and approval as additional area to his existing licensed area under O.T. License No. 391-103166, situated at Medina, Misamis Oriental; 2. That for and in consideration of the aforementioned transfer of rights over said additional area to TIMBERWEALTH CORPORATION, ESTRELLA F. JAVIER and JOSE M. JAVIER, both directors and stockholders of said corporation, do hereby undertake to pay LEONARDO TIRO, as soon as said additional area is approved and transferred to TIMBERWEALTH CORPORATION the sum of THIRTY THOUSAND PESOS (P30,000.00), which amount of money shall form part of their paid up capital stock in TIMBERWEALTH CORPORATION; 3. That this Agreement is subject to the approval of the members of the Board of Directors of the TIMBERWEALTH CORPORATION. xxx xxx xxx On November 18, 1966, the Acting Director of Forestry wrote private respondent that his forest concession was renewed up to May 12, 1967 under O.T.L. No. 391-51267, but since the concession consisted of only 2,535 hectares, he was therein informed that: In pursuance of the Presidential directive of May 13, 1966, you are hereby given until May 12, 1967 to form an organization such as a cooperative, partnership or corporation with other adjoining licensees so as to have a total holding area of not less than 20,000 hectares of contiguous and compact territory and an aggregate allowable annual cut of not less than 25,000 cubic meters, otherwise, your license will not be further renewed.6 Consequently, petitioners, now acting as timber license holders by virtue of the deed of assignment executed by private respondent in their favor, entered into a Forest Consolidation Agreement 7 on April 10, 1967 with other ordinary timber license holders in Misamis Oriental, namely, Vicente L. De Lara, Jr., Salustiano R. Oca and Sanggaya Logging Company. Under this consolidation agreement, they all agreed to pool together and merge their respective forest concessions into a working unit, as envisioned by the aforementioned directives. This consolidation agreement was approved by the Director of Forestry on May 10, 1967. 8 The working unit was subsequently incorporated as the North Mindanao Timber Corporation, with the petitioners and the other signatories of the aforesaid Forest Consolidation Agreement as incorporators. 9

On July 16, 1968, for failure of petitioners to pay the balance due under the two deeds of assignment, private respondent filed an action against petitioners, based on the said contracts, for the payment of the amount of P83,138.15 with interest at 6% per annum from April 10, 1967 until full payment, plus P12,000.00 for attorney's fees and costs. On September 23, 1968, petitioners filed their answer admitting the due execution of the contracts but interposing the special defense of nullity thereof since private respondent failed to comply with his contractual obligations and, further, that the conditions for the enforceability of the obligations of the parties failed to materialize. As a counterclaim, petitioners sought the return of P55,586.00 which private respondent had received from them pursuant to an alleged management agreement, plus attorney's fees and costs. On October 7, 1968, private respondent filed his reply refuting the defense of nullity of the contracts in this wise: What were actually transferred and assigned to the defendants were plaintiff's rights and interest in a logging concession described in the deed of assignment, attached to the complaint and marked as Annex A, and agreement Annex E; that the "shares of stocks" referred to in paragraph II of the complaint are terms used therein merely to designate or identify those rights and interests in said logging concession. The defendants actually made use of or enjoyed not the "shares of stocks" but the logging concession itself; that since the proposed Timberwealth Corporation was owned solely and entirely by defendants, the personalities of the former and the latter are one and the same. Besides, before the logging concession of the plaintiff or the latter's rights and interests therein were assigned or transferred to defendants, they never became the property or assets of the Timberwealth Corporation which is at most only an association of persons composed of the defendants. 10 and contending that the counterclaim of petitioners in the amount of P55,586.39 is actually only a part of the sum of P69,661.85 paid by the latter to the former in partial satisfaction of the latter's claim. 11 After trial, the lower court rendered judgment dismissing private respondent's complaint and ordering him to pay petitioners the sum of P33,161.85 with legal interest at six percent per annum from the date of the filing of the answer until complete payment. 12 As earlier stated, an appeal was interposed by private respondent to the Court of Appeals which reversed the decision of the court of a quo. On March 28, 1978, petitioners filed a motion in respondent court for extension of time to file a motion for reconsideration, for the reason that they needed to change counsel. 13 Respondent court, in its resolution dated March 31, 1978, gave petitioners fifteen (15) days from March 28, 1978 within which to file said motion for reconsideration, provided that the subject motion for extension was filed on time. 14 On April 11, 1978, petitioners filed their motion for reconsideration in the Court of Appeals. 15 On April 21, 1978, private respondent filed a consolidated opposition to said motion for reconsideration on the ground that the decision of respondent court had become final on March 27, 1978, hence the motion for extension filed on March 28, 1978 was filed out of time and there was no more period to extend. However, this was not acted upon by the Court of Appeals for the reason that on April 20, 1978, prior to its receipt of said opposition, a resolution was issued denying petitioners' motion for reconsideration, thus: The motion for reconsideration filed on April 11, 1978 by counsel for defendants-appellees is denied. They did not file any brief in this case. As a matter of fact this case was submitted for decision without appellees' brief. In their said motion, they merely tried to refute the rationale of the Court in deciding to reverse the appealed judgment. 16

Petitioners then sought relief in this Court in the present petition for review on certiorari. Private respondent filed his comment, reiterating his stand that the decision of the Court of Appeals under review is already final and executory. Petitioners countered in their reply that their petition for review presents substantive and fundamental questions of law that fully merit judicial determination, instead of being suppressed on technical and insubstantial reasons. Moreover, the aforesaid one (1) day delay in the filing of their motion for extension is excusable, considering that petitioners had to change their former counsel who failed to file their brief in the appellate court, which substitution of counsel took place at a time when there were many successive intervening holidays. On July 26, 1978, we resolved to give due course to the petition. The one (1) day delay in the filing of the said motion for extension can justifiably be excused, considering that aside from the change of counsel, the last day for filing the said motion fell on a holiday following another holiday, hence, under such circumstances, an outright dismissal of the petition would be too harsh. Litigations should, as much as possible, be decided on their merits and not on technicalities. In a number of cases, this Court, in the exercise of equity jurisdiction, has relaxed the stringent application of technical rules in order to resolve the case on its merits. 17 Rules of procedure are intended to promote, not to defeat, substantial justice and, therefore, they should not be applied in a very rigid and technical sense. We now proceed to the resolution of this case on the merits. The assignment of errors of petitioners hinges on the central issue of whether the deed of assignment dated February 15, 1966 and the agreement of February 28, 1966 are null and void, the former for total absence of consideration and the latter for non-fulfillment of the conditions stated therein. Petitioners contend that the deed of assignment conveyed to them the shares of stocks of private respondent in Timberwealth Corporation, as stated in the deed itself. Since said corporation never came into existence, no share of stocks was ever transferred to them, hence the said deed is null and void for lack of cause or consideration. We do not agree. As found by the Court of Appeals, the true cause or consideration of said deed was the transfer of the forest concession of private respondent to petitioners for P120,000.00. This finding is supported by the following considerations, viz: 1. Both parties, at the time of the execution of the deed of assignment knew that the Timberwealth Corporation stated therein was non-existent. 18 2. In their subsequent agreement, private respondent conveyed to petitioners his inchoate right over a forest concession covering an additional area for his existing forest concession, which area he had applied for, and his application was then pending in the Bureau of Forestry for approval. 3. Petitioners, after the execution of the deed of assignment, assumed the operation of the logging concessions of private respondent. 19 4. The statement of advances to respondent prepared by petitioners stated: "P55,186.39 advances to L.A. Tiro be applied to succeeding shipments. Based on the agreement, we pay P10,000.00 every after (sic) shipment. We had only 2 shipments" 20

5. Petitioners entered into a Forest Consolidation Agreement with other holders of forest concessions on the strength of the questioned deed of assignment. 21 The aforesaid contemporaneous and subsequent acts of petitioners and private respondent reveal that the cause stated in the questioned deed of assignment is false. It is settled that the previous and simultaneous and subsequent acts of the parties are properly cognizable indica of their true intention. 22 Where the parties to a contract have given it a practical construction by their conduct as by acts in partial performance, such construction may be considered by the court in construing the contract, determining its meaning and ascertaining the mutual intention of the parties at the time of contracting. 23 The parties' practical construction of their contract has been characterized as a clue or index to, or as evidence of, their intention or meaning and as an important, significant, convincing, persuasive, or influential factor in determining the proper construction of the agreement. 24 The deed of assignment of February 15, 1966 is a relatively simulated contract which states a false cause or consideration, or one where the parties conceal their true agreement. 25 A contract with a false consideration is not null and void per se. 26 Under Article 1346 of the Civil Code, a relatively simulated contract, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. The Court of Appeals, therefore, did not err in holding petitioners liable under the said deed and in ruling that . . . In view of the analysis of the first and second assignment of errors, the defendants-appellees are liable to the plaintiff-appellant for the sale and transfer in their favor of the latter's forest concessions. Under the terms of the contract, the parties agreed on a consideration of P120,000.00. P20,000.00 of which was paid, upon the signing of the contract and the balance of P100,000.00 to be paid at the rate of P10,000.00 for every shipment of export logs actually produced from the forest concessions of the appellant sold to the appellees. Since plaintiff-appellant's forest concessions were consolidated or merged with those of the other timber license holders by appellees' voluntary act under the Forest Consolidation Agreement (Exhibit D), approved by the Bureau of Forestry (Exhibit D-3), then the unpaid balance of P49,338.15 (the amount of P70,661.85 having been received by the plaintiff-appellant from the defendantsappellees) became due and demandable. 27 As to the alleged nullity of the agreement dated February 28, 1966, we agree with petitioners that they cannot be held liable thereon. The efficacy of said deed of assignment is subject to the condition that the application of private respondent for an additional area for forest concession be approved by the Bureau of Forestry. Since private respondent did not obtain that approval, said deed produces no effect. When a contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the event which constitutes the condition happens or is fulfilled. 28 If the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. 29 The said agreement is a bilateral contract which gave rise to reciprocal obligations, that is, the obligation of private respondent to transfer his rights in the forest concession over the additional area and, on the other hand, the obligation of petitioners to pay P30,000.00. The demandability of the obligation of one party depends upon the fulfillment of the obligation of the other. In this case, the failure of private respondent to comply with his obligation negates his right to demand performance from petitioners. Delivery and payment in a contract of sale, are so interrelated and intertwined with each other that without delivery of the goods there is no corresponding obligation to pay. The two complement each other. 30 Moreover, under the second paragraph of Article 1461 of the Civil Code, the efficacy of the sale of a mere hope or expectancy is deemed subject to the condition that the thing will come into existence. In this case, since private

respondent never acquired any right over the additional area for failure to secure the approval of the Bureau of Forestry, the agreement executed therefor, which had for its object the transfer of said right to petitioners, never became effective or enforceable. WHEREFORE, the decision of respondent Court of Appeals is hereby MODIFIED. The agreement of the parties dated February 28, 1966 is declared without force and effect and the amount of P30,000.00 is hereby ordered to be deducted from the sum awarded by respondent court to private respondent. In all other respects, said decision of respondent court is affirmed. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-69970 November 28, 1988 FELIX DANGUILAN, petitioner, vs. INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted by her husband, JOSE TAGACAY,respondents. Pedro R. Perez, Jr. for petitioner. Teodoro B. Mallonga for private respondent.

CRUZ, J.: The subject of this dispute is the two lots owned by Domingo Melad which is claimed by both the petitioner and the respondent. The trial court believed the petitioner but the respondent court, on appeal, upheld the respondent. The case is now before us for a resolution of the issues once and for all. On January 29, 1962, the respondent filed a complaint against the petitioner in the then Court of First Instance of Cagayan for recovery of a farm lot and a residential lot which she claimed she had purchased from Domingo Melad in 1943 and were now being unlawfully withheld by the defendant. 1 In his answer, the petitioner denied the allegation and averred that he was the owner of the said lots of which he had been in open, continuous and adverse possession, having acquired them from Domingo Melad in 1941 and 1943. 2 The case was dismissed for failure to prosecute but was refiled in 1967. 3 At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly signed by Domingo Melad and duly notarized, which conveyed the said properties to her for the sum of P80.00. 4 She said the amount was earned by her mother as a worker at the Tabacalera factory. She claimed to be the illegitimate daughter of Domingo Melad, with whom she and her mother were living when he died in 1945. She moved out of the farm only when in 1946 Felix Danguilan approached her and asked permission to cultivate the land and to stay therein. She had agreed on condition that he would deliver part of the harvest from the farm to her, which he did from that year to 1958. The deliveries having stopped, she then consulted the municipal judge who advised her to file the complaint against Danguilan. The plaintiff 's mother, her only other witness, corroborated this testimony. 5 For his part, the defendant testified that he was the husband of Isidra Melad, Domingo's niece, whom he and his wife Juana Malupang had taken into their home as their ward as they had no children of their own. He and his wife lived with the couple in their house on the residential lot and helped Domingo with the cultivation of the farm. Domingo Melad signed in 1941 a private instrument in which he gave the defendant the farm and in 1943 another private instrument in which he also gave him the residential lot, on the understanding that the latter would take care of the grantor and

would bury him upon his death. 6 Danguilan presented three other witnesses 7 to corroborate his statements and to prove that he had been living in the land since his marriage to Isidra and had remained in possession thereof after Domingo Melad's death in 1945. Two of said witnesses declared that neither the plaintiff nor her mother lived in the land with Domingo Melad. 8 The decision of the trial court was based mainly on the issue of possession. Weighing the evidence presented by the parties, the judge 9 held that the defendant was more believable and that the plaintiff's evidence was "unpersuasive and unconvincing." It was held that the plaintiff's own declaration that she moved out of the property in 1946 and left it in the possession of the defendant was contradictory to her claim of ownership. She was also inconsistent when she testified first that the defendant was her tenant and later in rebuttal that he was her administrator. The decision concluded that where there was doubt as to the ownership of the property, the presumption was in favor of the one actually occupying the same, which in this case was the defendant. 10 The review by the respondent court 11 of this decision was manifestly less than thorough. For the most part it merely affirmed the factual findings of the trial court except for an irrelevant modification, and it was only toward the end that it went to and resolved what it considered the lone decisive issue. The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad had conveyed the two parcels of land to the petitioner, were null and void. The reason was that they were donations of real property and as such should have been effected through a public instrument. It then set aside the appealed decision and declared the respondents the true and lawful owners of the disputed property. The said exhibits read as follows: EXHIBIT 2-b is quoted as follows: 12 I, DOMINGO MELAD, of legal age, married, do hereby declare in this receipt the truth of my giving to Felix Danguilan, my agricultural land located at Barrio Fugu-Macusi, Penablanca, Province of Cagayan, Philippine Islands; that this land is registered under my name; that I hereby declare and bind myself that there is no one to whom I will deliver this land except to him as he will be the one responsible for me in the event that I will die and also for all other things needed and necessary for me, he will be responsible because of this land I am giving to him; that it is true that I have nieces and nephews but they are not living with us and there is no one to whom I will give my land except to Felix Danguilan for he lives with me and this is the length175 m. and the width is 150 m. IN WITNESS WHEREOF, I hereby sign my name below and also those present in the execution of this receipt this 14th day of September 1941. Penablanca Cagayan, September 14, 1941. (SGD.) DOMINGO MELAD WITNESSES: 1. 2. 3. (T.M.) ILLEGIBLE

(T.M.) (SGD.)

ISIDRO FELIX

MELAD DANGUILAN

EXHIBIT 3-a is quoted as follows: 13

I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of Cagayan, do hereby swear and declare the truth that I have delivered my residential lot at Centro, Penablanca, Cagayan, to Felix Danguilan, my son-in-law because I have no child; that I have thought of giving him my land because he will be the one to take care of SHELTERING me or bury me when I die and this is why I have thought of executing this document; that the boundaries of this lot ison the east, Cresencio Danguilan; on the north, Arellano Street; on the south by Pastor Lagundi and on the west, Pablo Pelagio and the area of this lot is 35 meters going south; width and length beginning west to east is 40 meters. IN WITNESS HEREOF, I hereby sign this receipt this 18th day of December 1943. (SGD.) DOMINGO MELAD WITNESSES: (SGD.) (SGD.) DANIEL ARAO ILLEGIBLE

It is our view, considering the language of the two instruments, that Domingo Melad did intend to donate the properties to the petitioner, as the private respondent contends. We do not think, however, that the donee was moved by pure liberality. While truly donations, the conveyances were onerous donations as the properties were given to the petitioner in exchange for his obligation to take care of the donee for the rest of his life and provide for his burial. Hence, it was not covered by the rule in Article 749 of the Civil Code requiring donations of real properties to be effected through a public instrument. The case at bar comes squarely under the doctrine laid down in Manalo v. De Mesa, 14 where the Court held: There can be no doubt that the donation in question was made for a valuable consideration, since the donors made it conditional upon the donees' bearing the expenses that might be occasioned by the death and burial of the donor Placida Manalo, a condition and obligation which the donee Gregorio de Mesa carried out in his own behalf and for his wife Leoncia Manalo; therefore, in order to determine whether or not said donation is valid and effective it should be sufficient to demonstrate that, as a contract, it embraces the conditions the law requires and is valid and effective, although not recorded in a public instrument. The private respondent argues that as there was no equivalence between the value of the lands donated and the services for which they were being exchanged, the two transactions should be considered pure or gratuitous donations of real rights, hence, they should have been effected through a public instrument and not mere private writings. However, no evidence has been adduced to support her contention that the values exchanged were disproportionate or unequal. On the other hand, both the trial court and the respondent court have affirmed the factual allegation that the petitioner did take care of Domingo Melad and later arranged for his burial in accordance with the condition imposed by the donor. It is alleged and not denied that he died when he was almost one hundred years old, 15which would mean that the petitioner farmed the land practically by himself and so provided for the donee (and his wife) during the latter part of Domingo Melad's life. We may assume that there was a fair exchange between the donor and the donee that made the transaction an onerous donation. Regarding the private respondent's claim that she had purchased the properties by virtue of a deed of sale, the respondent court had only the following to say: "Exhibit 'E' taken together with the documentary and oral evidence shows that the preponderance of evidence is in favor of the appellants." This was, we think, a rather superficial way of resolving such a basic and important issue.

The deed of sale was allegedly executed when the respondent was only three years old and the consideration was supposedly paid by her mother, Maria Yedan from her earnings as a wage worker in a factory. 16 This was itself a suspicious circumstance, one may well wonder why the transfer was not made to the mother herself, who was after all the one paying for the lands. The sale was made out in favor of Apolonia Melad although she had been using the surname Yedan her mother's surname, before that instrument was signed and in fact even after she got married. 17 The averment was also made that the contract was simulated and prepared after Domingo Melad's death in 1945. 18 It was also alleged that even after the supposed execution of the said contract, the respondent considered Domingo Melad the owner of the properties and that she had never occupied the same. 19 Considering these serious challenges, the appellate court could have devoted a little more time to examining Exhibit "E" and the circumstances surrounding its execution before pronouncing its validity in the manner described above. While it is true that the due execution of a public instrument is presumed, the presumption is disputable and will yield to contradictory evidence, which in this case was not refuted. At any rate, even assuming the validity of the deed of sale, the record shows that the private respondent did not take possession of the disputed properties and indeed waited until 1962 to file this action for recovery of the lands from the petitioner. If she did have possession, she transferred the same to the petitioner in 1946, by her own sworn admission, and moved out to another lot belonging to her step-brother. 20 Her claim that the petitioner was her tenant (later changed to administrator) was disbelieved by the trial court, and properly so, for its inconsistency. In short, she failed to show that she consummated the contract of sale by actual delivery of the properties to her and her actual possession thereof in concept of purchaser-owner. As was held in Garchitorena v. Almeda: 21 Since in this jurisdiction it is a fundamental and elementary principle that ownership does not pass by mere stipulation but only by delivery (Civil Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the execution of a public document does not constitute sufficient delivery where the property involved is in the actual and adverse possession of third persons (Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil. 134), it becomes incontestable that even if included in the contract, the ownership of the property in dispute did not pass thereby to Mariano Garchitorena. Not having become the owner for lack of delivery, Mariano Garchitorena cannot presume to recover the property from its present possessors. His action, therefore, is not one of revindicacion, but one against his vendor for specific performance of the sale to him. In the aforecited case of Fidelity and Deposit Co. v. Wilson, 22 Justice Mapa declared for the Court: Therefore, in our Civil Code it is a fundamental principle in all matters of contracts and a well- known doctrine of law that "non mudis pactis sed traditione dominia rerum transferuntur". In conformity with said doctrine as established in paragraph 2 of article 609 of said code, that "the ownership and other property rights are acquired and transmitted by law, by gift, by testate or intestate succession, and, in consequence of certain contracts, by tradition". And as the logical application of this disposition article 1095 prescribes the following: "A creditor has the rights to the fruits of a thing from the time the obligation to deliver it arises. However, he shall not acquire a real right" (and the ownership is surely such) "until the property has been delivered to him." In accordance with such disposition and provisions the delivery of a thing constitutes a necessary and indispensable requisite for the purpose of acquiring the ownership of the same by virtue of a contract. As Manresa states in his Commentaries on the Civil Code, volume 10, pages 339 and 340: "Our law does not admit the doctrine of the transfer of

property by mere consent but limits the effect of the agreement to the due execution of the contract. ... The ownership, the property right, is only derived from the delivery of a thing ... " As for the argument that symbolic delivery was effected through the deed of sale, which was a public instrument, the Court has held: The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is considered to be delivered when it is placed "in the hands and possession of the vendee." (Civil Code, art. 1462). It is true that the same article declares that the execution of a public instrument is equivalent to the delivery of the thing which is the object of the contract, but, in order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had such control over the thing sold that, at the moment of the sale, its material delivery could have been made. It is not enough to confer upon the purchaser the ownership and theright of possession. The thing sold must be placed in his control. When there is no impediment whatever to prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy and enjoyment are opposed by the interposition of another will, then fiction yields to realitythe delivery has not been effected. 23 There is no dispute that it is the petitioner and not the private respondent who is in actual possession of the litigated properties. Even if the respective claims of the parties were both to be discarded as being inherently weak, the decision should still incline in favor of the petitioner pursuant to the doctrine announced in Santos & Espinosa v. Estejada 24 where the Court announced: If the claim of both the plaintiff and the defendant are weak, judgment must be for the defendant, for the latter being in possession is presumed to be the owner, and cannot be obliged to show or prove a better right. WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court REINSTATED, with costs against the private respondent. It is so ordered.

FIRST DIVISION

[G.R. No. 126376. November 20, 2003]

SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO ANGELES, SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES TELESFORO CARREON and FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ and FE JOAQUIN, and SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents. DECISION CARPIO, J.:

The Case This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of Appeals in CAG.R. CV No. 41996. The Court of Appeals affirmed the Decision[3] dated18 February 1993 rendered by Branch 65 of the Regional Trial Court of Makati (trial court) in Civil Case No. 89-5174. The trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid consideration and that the plaintiffs did not have a cause of action against the defendants.

The Facts The Court of Appeals summarized the facts of the case as follows: Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion, Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this action by their respective spouses. Sought to be declared null and void ab initio are certain deeds of sale of real property executed by defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the corresponding certificates of title issued in their names, to wit: 1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00 (Exh. C), pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. C-1);

2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on 7 June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh. D), pursuant to which TCT No. S-109772 was issued in her name (Exh. D-1); 3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a consideration of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was issued to them (Exh. E-1); 4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on 12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a consideration of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was issued to them (Exh. F-1); and 5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395 executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00 (Exh. G), pursuant to which TCT No. 157203 was issued in her name (Exh. G-1). [6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed on 7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. K), pursuant to which TCT No. 157779 was issued in his name (Exh. K-1).] In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their complaint, aver: - XXThe deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL AND VOID AB INITIO because a) b) Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in litis; Secondly, assuming that there was consideration in the sums reflected in the questioned deeds, the properties are more than three-fold times more valuable than the measly sums appearing therein; Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and vendees); and Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. - XXI Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-109772, 155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties in litis xxx are NULL AND VOID AB INITIO. Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as the requisite standing and interest to assail their titles over the properties in litis; (2) that the sales were with sufficient considerations and made by defendants parents voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale; and (3) that the certificates of title were issued with sufficient factual and legal basis.[4] (Emphasis in the original)

c) d)

The Ruling of the Trial Court Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis filed a Motion to Dismiss.[6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted that compulsory heirs have the right to a legitime but such right is contingent since said right commences only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the Philippines.[7] After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court stated: In the first place, the testimony of the defendants, particularly that of the xxx father will show that the Deeds of Sale were all executed for valuable consideration. This assertion must prevail over the negative allegation of plaintiffs. And then there is the argument that plaintiffs do not have a valid cause of action against defendants since there can be no legitime to speak of prior to the death of their parents. The court finds this contention tenable. In determining the legitime, the value of the property left at the death of the testator shall be considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live. All the foregoing considered, this case is DISMISSED. In order to preserve whatever is left of the ties that should bind families together, the counterclaim is likewise DISMISSED. No costs. SO ORDERED.[8]

The Ruling of the Court of Appeals The Court of Appeals affirmed the decision of the trial court. The appellate court ruled: To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether xxx they have a cause of action against appellees. Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their parents. However, their right to the properties of their defendant parents, as compulsory heirs, is merely inchoate and vests only upon the latters death. While still alive, defendant parents are free to dispose of their properties, provided that such dispositions are not made in fraud of creditors. Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be creditors of their defendant parents. Consequently, they cannot be considered as real parties in interest to assail the validity of said deeds either for gross inadequacy or lack of consideration or for failure to express the true intent of the parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al., 101 SCRA 376, thus:

The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound thereby; hence, they have no legal capacity to challenge their validity. Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions made by their defendant parents in favor of their defendant brothers and sisters. But, as correctly held by the court a quo, the legitime of a compulsory heir is computed as of the time of the death of the decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live. With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is inconsequential. WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants. SO ORDERED.[9] Hence, the instant petition.

Issues Petitioners assign the following as errors of the Court of Appeals: 1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN QUESTION HAD NO VALID CONSIDERATION. 2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE. 3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT EXPRESS THE TRUE INTENT OF THE PARTIES. 4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO OF THEIR INTEREST OVER THE SUBJECT PROPERTIES. 5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD, SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS.[10]

The Ruling of the Court We find the petition without merit. We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the Deeds of Sale.

Whether Petitioners have a legal interest over the properties subject of the Deeds of Sale

Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted that the purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. Petitioners strategy was to have the Deeds of Sale declared void so that ownership of the lots would eventually revert to their respondent parents. If their parents die still owning the lots, petitioners and their respondent siblings will then co-own their parents estate by hereditary succession.[11] It is evident from the records that petitioners are interested in the properties subject of the Deeds of Sale, but they have failed to show any legal right to the properties. The trial and appellate courts should have dismissed the action for this reason alone. An action must be prosecuted in the name of the real party-in-interest.[12] [T]he question as to real party-in-interest is whether he is the party who would be benefitted or injured by the judgment, or the party entitled to the avails of the suit. xxx In actions for the annulment of contracts, such as this action, the real parties are those who are parties to the agreement or are bound either principally or subsidiarily or are prejudiced in their rights with respect to one of the contracting parties and can show the detriment which would positively result to them from the contract even though they did not intervene in it (Ibaez v. Hongkong & Shanghai Bank, 22 Phil. 572 [1912]) xxx. These are parties with a present substantial interest, as distinguished from a mere expectancy or future, contingent, subordinate, or consequential interest. The phrase present substantial interest more concretely is meant such interest of a party in the subject matter of the action as will entitle him, under the substantive law, to recover if the evidence is sufficient, or that he has the legal title to demand and the defendant will be protected in a payment to or recovery by him.[13] Petitioners do not have any legal interest over the properties subject of the Deeds of Sale. As the appellate court stated, petitioners right to their parents properties is merely inchoate and vests only upon their parents death. While still living, the parents of petitioners are free to dispose of their properties. In their overzealousness to safeguard their future legitime, petitioners forget that theoretically, the sale of the lots to their siblings does not affect the value of their parents estate. While the sale of the lots reduced the estate, cash of equivalent value replaced the lots taken from the estate.

Whether the Deeds of Sale are void for lack of consideration Petitioners assert that their respondent siblings did not actually pay the prices stated in the Deeds of Sale to their respondent father. Thus, petitioners ask the court to declare the Deeds of Sale void. A contract of sale is not a real contract, but a consensual contract. As a consensual contract, a contract of sale becomes a binding and valid contract upon the meeting of the minds as to price. If there is a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to the price, because the price stipulated in the contract is simulated, then the contract is void.[14] Article 1471 of the Civil Code states that if the price in a contract of sale is simulated, the sale is void.

It is not the act of payment of price that determines the validity of a contract of sale. Payment of the price has nothing to do with the perfection of the contract. Payment of the price goes into the performance of the contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract.[15] Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father, respondent Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her payment of the purchase price.[16] The trial court did not find the allegation of absolute simulation of price credible. Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of their respondent siblings financial capacity to buy the questioned lots.[17] On the other hand, the Deeds of Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did respondents minds meet as to the purchase price, but the real price was also stated in the Deeds of Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent father.[18]

Whether the Deeds of Sale are void for gross inadequacy of price Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to invalidate the Deeds of Sale. Articles 1355 of the Civil Code states: Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied) Article 1470 of the Civil Code further provides: Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a defect in the consent, or that the parties really intended a donation or some other act or contract. (Emphasis supplied) Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code which would invalidate, or even affect, the Deeds of Sale. Indeed, there is no requirement that the price be equal to the exact value of the subject matter of sale. All the respondents believed that they received the commutative value of what they gave. As we stated in Vales v. Villa:[19] Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot constitute themselves guardians of persons who are not legally incompetent. Courts operate not because one person has been defeated or overcome by another, but because he has been defeated or overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose money by them indeed, all they have in the world; but not for that alone can the law intervene and restore. There must be, in addition, aviolation of the law, the commission of what the law knows as an actionable wrong, before the courts are authorized to lay hold of the situation and remedy it. (Emphasis in the original)

Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater weight when they coincide with the factual findings of the trial court. This Court will not weigh the evidence all over again unless there has been a showing that the findings of the lower court are totally devoid of support or are clearly erroneous so as to constitute serious abuse of discretion.[20] In the instant case, the trial court found that the lots were sold for a valid consideration, and that the defendant children actually paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the purchase price by the buyer to the seller is a factual finding that is now conclusive upon us. WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto. SO ORDERED. Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

Republic Supreme Manila

of

the Philippines Court

FIRST DIVISION

FELIX TING HO, JR., MERLA TING HO BRADEN, JUANA TING HO & LYDIA TING HO BELENZO, Petitioners,

G.R. No. 130115

Present: PUNO, C.J., Chairperson, CARPIO, CORONA, AZCUNA, and LEONARDO-DE CASTRO, JJ.

- versus -

Promulgated: VICENTE TENG GUI, Respondent. July 16, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DECISION PUNO, C.J.: This is a Petition for Review on Certiorari[1] assailing the Decision[2] of the Court of Appeals (CA) in CA-G.R. CV No. 42993 which reversed and set aside the Decision of the Regional Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 558-0-88. The instant case traces its origin to an action for partition filed by petitioners Felix Ting Ho, Jr., Merla Ting Ho Braden, Juana Ting Ho and Lydia Ting Ho Belenzo against their brother, respondent Vicente Teng Gui, before the RTC, Branch 74 of Olongapo City. The controversy revolves around a parcel of land, and the improvements established thereon, which, according to petitioners, should form part of the estate of their deceased father, Felix Ting Ho, and should be partitioned equally among each of the siblings.

In their complaint before the RTC, petitioners alleged that their father Felix Ting Ho died intestate on June 26, 1970, and left upon his death an estate consisting of the following: a) A commercial land consisting of 774 square meters, more or less, located at Nos. 16 and 18 Afable St., East Bajac-Bajac, Olongapo City, covered by Original Certificate of Title No. P-1064 and Tax Declaration No. 002-2451; b) A two-storey residential house on the aforesaid lot; c) A two-storey commercial building, the first floor rented to different persons and the second floor, Bonanza Hotel, operated by the defendant also located on the above described lot; and d) A sari-sari store (formerly a bakery) also located on the above described lot.[3] According to petitioners, the said lot and properties were titled and tax declared under trust in the name of respondent Vicente Teng Gui for the benefit of the deceased Felix Ting Ho who, being a Chinese citizen, was then disqualified to own public lands in the Philippines; and that upon the death of Felix Ting Ho, the respondent took possession of the same for his own exclusive use and benefit to their exclusion and prejudice.[4] In his answer, the respondent countered that on October 11, 1958, Felix Ting Ho sold the commercial and residential buildings to his sister-in-law, Victoria Cabasal, and the bakery to his brother-in-law, Gregorio Fontela.[5] He alleged that he acquired said properties from the respective buyers on October 28, 1961 and has since then been in possession of subject properties in the concept of an owner; and that on January 24, 1978, Original Certificate of Title No. P-1064 covering the subject lot was issued to him pursuant to a miscellaneous sales patent granted to him on January 3, 1978.[6] The undisputed facts as found by the trial court (RTC), and affirmed by the appellate court (CA), are as follows: [T]he plaintiffs and the defendant are all brothers and sisters, the defendant being the oldest. They are the only legitimate children of the deceased Spouses Felix Ting Ho and Leonila Cabasal. Felix Ting Ho died on June 26, 1970 while the wife Leonila Cabasal died on December 7, 1978. The defendant Vicente Teng Gui is the oldest among the children as he was born on April 5, 1943. The father of the plaintiffs and the defendant was a Chinese citizen although their mother was Filipino. That sometime in 1947, the father of the plaintiffs and defendant, Felix Ting Ho, who was already then married to their mother Leonila Cabasal, occupied a parcel of land identified to (sic) as Lot No. 18 Brill which was thereafter identified as Lot No. 16 situated at Afable Street, East Bajac-Bajac, Olongapo City, by virtue of the permission granted him by the then U.S. Naval Reservation Office, Olongapo, Zambales. The couple thereafter introduced improvements on the land. They built a house of strong material at 16 Afable Street which is a commercial and residential house and another building of strong material at 18 Afable Street which was a residential house and a bakery. The couple, as well as their children, lived and resided in the said properties until their death. The father, Felix Ting Ho had managed the bakery while the mother managed the sari-sari store. Long before the death of Felix Ting Ho, who died onJune 26, 1970, he executed on October 11, 1958 a Deed of Absolute Sale of a house of strong material located at 16 Afable Street, Olongapo, Zambales, specifically described in Tax Dec. No. 5432, in favor of Victoria Cabasal his sister-in-law (Exh. C). This Deed of Sale cancelled the Tax Dec. of Felix Ting Ho over the said building (Exh. C1) and the building was registered in the name of the buyer Victoria Cabasal, as per Tax Dec. No. 7579 (Exh. C-2). On the same date, October 11, 1958 the said Felix Ting Ho also sold a building of strong material located at 18 Afable Street, described in Tax Dec. No. 5982, in favor of Gregorio Fontela, of legal age, an American citizen, married (Exh. D). This Deed of Sale, in effect, cancelled Tax Dec. No. 5982 and the same was registered in the name of the buyer Gregorio Fontela, as per Tax Dec. No. 7580 (Exh. D-2). In turn Victoria Cabasal and her husband Gregorio Fontela sold to Vicente Teng Gui on October 28, 1961 the buildings which were bought by them from Felix Ting Ho and their tax declarations for the building they bought (Exhs. C-2 and D-2) were accordingly cancelled and the said buildings were registered in the name of the defendant Vicente Teng Gui (Exhs. C-3 and D-3). On October 25, 1966 the father of the parties Felix Ting Ho executed an Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interest including

Improvements on Land in favor of his eldest son the defendant Vicente Teng Gui. On the basis of the said document the defendant who then chose Filipino citizenship filed a miscellaneous sales application with the Bureau of Lands. Miscellaneous Sales Patent No. 7457 of the land which was then identified to be Lot No. 418, Ts-308 consisting of 774 square meters was issued to the applicant Vicente Teng Gui and accordingly on the 24 th of January, 1978 Original Certificate of Title No. P-1064 covering the lot in question was issued to the defendant Vicente Teng Gui. Although the buildings and improvements on the land in question were sold by Felix Ting Ho to Victoria Cabasal and Gregorio Fontela in 1958 and who in turn sold the buildings to the defendant in 1961 the said Felix Ting Ho and his wife remained in possession of the properties as Felix Ting Ho continued to manage the bakery while the wife Leonila Cabasal continued to manage the sari-sari store. During all the time that the alleged buildings were sold to the spouses Victoria Cabasal and Gregorio Fontela in 1958 and the subsequent sale of the same to the defendant Vicente Teng Gui in October of 1961 the plaintiffs and the defendant continued to live and were under the custody of their parents until their father Felix Ting Ho died in 1970 and their mother Leonila Cabasal died in 1978.[7] (Emphasis supplied) In light of these factual findings, the RTC found that Felix Ting Ho, being a Chinese citizen and the father of the petitioners and respondent, resorted to a series of simulated transactions in order to preserve the right to the lot and the properties thereon in the hands of the family. As stated by the trial court: After a serious consideration of the testimonies given by both one of the plaintiffs and the defendant as well as the documentary exhibits presented in the case, the Court is inclined to believe that Felix Ting Ho, the father of the plaintiffs and the defendant, and the husband of Leonila Cabasal thought of preserving the properties in question by transferring the said properties to his eldest son as he thought that he cannot acquire the properties as he was a Chinese citizen. To transfer the improvements on the land to his eldest son the defendant Vicente Teng Gui, he first executed simulated Deeds of Sales in favor of the sister and brother-in-law of his wife in 1958 and after three (3) years it was made to appear that these vendees had sold the improvements to the defendant Vicente Teng Gui who was then 18 years old. The Court finds that these transaction (sic) were simulated and that no consideration was ever paid by the vendees. xxx xxx xxx

With regards (sic) to the transfer and relinquishment of Felix Ting Hos right to the land in question in favor of the defendant, the Court believes, that although from the face of the document it is stated in absolute terms that without any consideration Felix Ting Ho was transferring and renouncing his right in favor of his son, the defendant Vicente Teng Gui, still the Court believes that the transaction was one of implied trust executed by Felix Ting Ho for the benefit of his family[8] Notwithstanding such findings, the RTC considered the Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interests over the land as a donation which was accepted by the donee, the herein respondent. With respect to the properties in the lot, the trial court held that although the sales were simulated, pursuant to Article 1471 of the New Civil Code[9] it can be assumed that the intention of Felix Ting Ho in such transaction was to give and donate such properties to the respondent. As a result, it awarded the entire conjugal share of Felix Ting Ho in the subject lot and properties to the respondent and divided only the conjugal share of his wife among the siblings. The dispositive portion of the RTC decision decreed: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant as the Court orders the partition and the adjudication of the subject properties, Lot 418, Ts-308, specifically described in original Certificate of Title No. P-1064 and the residential and commercial houses standing on the lot specifically described in Tax Decs. Nos. 9179 and 9180 in the name of Vicente Teng Gui in the following manner, to wit: To the defendant Vicente Teng Gui is adjudicated an undivided six-tenth (6/10) of the aforementioned properties and to each of the plaintiffs Felix

Ting Ho, Jr., Merla Ting-Ho Braden, Juana Ting and Lydia Ting Ho-Belenzo each an undivided one-tenth (1/10) of the properties[10] From this decision, both parties interposed their respective appeals. The petitioners claimed that the RTC erred in awarding respondent the entire conjugal share of their deceased father in the lot and properties in question contrary to its own finding that an implied trust existed between the parties. The respondent, on the other hand, asserted that the RTC erred in not ruling that the lot and properties do not form part of the estate of Felix Ting Ho and are owned entirely by him. On appeal, the CA reversed and set aside the decision of the RTC. The appellate court held that the deceased Felix Ting Ho was never the owner and never claimed ownership of the subject lot since he is disqualified under Philippine laws from owning public lands, and that respondent Vicente Teng Gui was the rightful owner over said lot by virtue of Miscellaneous Sales Patent No. 7457 issued in his favor, viz: The deceased Felix Ting Ho, plaintiffs and defendants late father, was never the owner of the subject lot, now identified as Lot No. 418, Ts-308 covered by OCT No. P-1064 (Exh. A; Record, p. 104). As stated by Felix Ting Ho no less in the Affidavit of Transfer, Relinquishment and Renouncement of Rights and Interest etc. (Exh. B: Record, p . 107), executed on October 25, 1966 he, the late Felix Ting Ho, was merely a possessor or occupant of the subject lot by virtue of a permission granted by the then U.S. Naval Reservation Office, Olongapo, Zambales. The late Felix Ting Ho was never the owner and never claimed ownership of the land. (Emphasis supplied) The affidavit, Exhibit B, was subscribed and sworn to before a Land Investigator of the Bureau of Lands and in the said affidavit, the late Felix Ting Ho expressly acknowledged that because he is a Chinese citizen he is not qualified to purchase public lands under Philippine laws for which reason he thereby transfers, relinquishes and renounces all his rights and interests in the subject land, including all the improvements thereon to his son, the defendant Vicente Teng Gui, who is of legal age, single, Filipino citizen and qualified under the public land law to acquire lands. xxx xxx xxx

Defendant Vicente Teng Gui acquired the subject land by sales patent or purchase from the government and not from his father, the late Felix Ting Ho. It cannot be said that he acquired or bought the land in trust for his father because on December 5, 1977 when the subject land was sold to him by the government and on January 3, 1978 when Miscellaneous Sales Patent No. 7457 was issued, the late Felix Ting Ho was already dead, having died on June 6, 1970 (TSN, January 10, 1990, p. 4).[11] Regarding the properties erected over the said lot, the CA held that the finding that the sales of the two-storey commercial and residential buildings and sari-sari store to Victoria Cabasal and Gregorio Fontela and subsequently to respondent were without consideration and simulated is supported by evidence, which clearly establishes that these properties should form part of the estate of the late spouses Felix Ting Ho and Leonila Cabasal. Thus, while the appellate court dismissed the complaint for partition with respect to the lot in question, it awarded the petitioners a four-fifths (4/5) share of the subject properties erected on the said lot. The dispositive portion of the CA ruling reads as follows: WHEREFORE, premises considered, the decision appealed from is REVERSED and SET ASIDE and NEW JUDGMENT rendered:

1. DISMISSING plaintiff-appellants complaint with respect to the subject parcel of land, identified as Lot No. 418, Ts-308, covered by OCT No. P-1064, in the name of plaintiff-appellants [should be defendant-appellant]; 2. DECLARING that the two-storey commercial building, the two-storey residential building and sari-sari store (formerly a bakery), all erected on the subject lot No. 418, Ts-308, form part of the estate of the deceased spouses Felix Ting Ho and Leonila Cabasal, and that plaintiff-appellants are entitled to four-fifths (4/5) thereof, the remaining one-fifth (1/5) being the share of the defendant-appellant; 3. DIRECTING the court a quo to partition the said two-storey commercial building, two-storey residential building and sari-sari store (formerly a bakery) in accordance with Rule 69 of the Revised Rules of Court and pertinent provisions of the Civil Code; 4. Let the records of this case be remanded to the court of origin for further proceedings; 5. Let a copy of this decision be furnished the Office of the Solicitor General; and 6. There is no pronouncement as to costs. SO ORDERED.[12] Both petitioners and respondent filed their respective motions for reconsideration from this ruling, which were summarily denied by the CA in its Resolution[13] dated August 5, 1997. Hence, this petition. According to the petitioners, the CA erred in declaring that Lot No. 418, Ts-308 does not form part of the estate of the deceased Felix Ting Ho and is owned alone by respondent. Respondent, on the other hand, contends that he should be declared the sole owner not only of Lot No. 418, Ts-308 but also of the properties erected thereon and that the CA erred in not dismissing the complaint for partition with respect to the said properties. The primary issue for consideration is whether both Lot No. 418, Ts-308 and the properties erected thereon should be included in the estate of the deceased Felix Ting Ho. We affirm the CA ruling. With regard to Lot No. 418, Ts-308, Article XIII, Section 1 of the 1935 Constitution states: Section 1. All agricultural timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution (Emphasis supplied) Our fundamental law cannot be any clearer. The right to acquire lands of the public domain is reserved for Filipino citizens or corporations at least sixty percent of the capital of which is owned by Filipinos. Thus, in Krivenko v. Register of Deeds,[14] the Court enunciated that: Perhaps the effect of our construction is to preclude aliens, admitted freely into the Philippines from owning sites where they may build their homes. But if this is the solemn mandate of the Constitution, we will not attempt to

compromise it even in the name of amity or equity. We are satisfied, however, that aliens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire.[15] In the present case, the father of petitioners and respondent was a Chinese citizen; therefore, he was disqualified from acquiring and owning real property in the Philippines. In fact, he was only occupying the subject lot by virtue of the permission granted him by the then U.S. Naval Reservation Office of Olongapo, Zambales. As correctly found by the CA, the deceased Felix Ting Ho was never the owner of the subject lot in light of the constitutional proscription and the respondent did not at any instance act as the dummy of his father. On the other hand, the respondent became the owner of Lot No. 418, Ts-308 when he was granted Miscellaneous Sales Patent No. 7457 on January 3, 1978, by the Secretary of Natural Resources By Authority of the President of the Philippines, and when Original Certificate of Title No. P-1064 was correspondingly issued in his name. The grant of the miscellaneous sales patent by the Secretary of Natural Resources, and the corresponding issuance of the original certificate of title in his name, show that the respondent possesses all the qualifications and none of the disqualifications to acquire alienable and disposable lands of the public domain. These issuances bear the presumption of regularity in their performance in the absence of evidence to the contrary. Registration of grants and patents involving public lands is governed by Section 122 of Act No. 496, which was subsequently amended by Section 103 of Presidential Decree No. 1529, viz: Sec. 103. Certificate of title pursuant to patents.Whenever public land is by the Government alienated, granted or conveyed to any person, the same shall be brought forthwith under the operation of this Decree. It shall be the duty of the official issuing the instrument of alienation, grant, patent or conveyance in behalf of the Government to cause such instrument to be filed with the Register of Deeds of the province or city where the land lies, and to be there registered like other deeds and conveyance, whereupon a certificate of title shall be entered as in other cases of registered land, and an owners duplicate issued to the grantee. The deeds, grant, patent or instrument of conveyance from the Government to the grantee shall not take effect as a conveyance or bind the land, but shall operate only as a contract between the Government and the grantee and as evidence of authority to the Register of Deeds to make registration. It is the act of registration that shall be the operative act to affect and convey the land, and in all cases under this Decree registration shall be made in the office of the Register of Deeds of the province or city where the land lies. The fees for registration shall be paid by the grantee. After due registration and issuance of the certificate of title, such land shall be deemed to be registered land to all intents and purposes under this Decree. [16] (Emphasis supplied)

Under the law, a certificate of title issued pursuant to any grant or patent involving public land is as conclusive and indefeasible as any other certificate of title issued to private lands in the ordinary or cadastral registration proceeding. The effect of the registration of a patent and the issuance of a certificate of title to the patentee is to vest in him an incontestable title to the land, in the same manner as if ownership had been determined by final decree of the court, and the title so issued is absolutely conclusive and indisputable, and is not subject to collateral attack.[17] Nonetheless, petitioners invoke equity considerations and claim that the ruling of the RTC that an implied trust was created between respondent and their father with respect to the subject lot should be upheld. This contention must fail because the prohibition against an alien from owning lands of the public domain is absolute and not even an implied trust can be permitted to arise on equity considerations.

In the case of Muller v. Muller,[18] wherein the respondent, a German national, was seeking reimbursement of funds claimed by him to be given in trust to his petitioner wife, a Philippine citizen, for the purchase of a property in Antipolo, the Court, in rejecting the claim, ruled that: Respondent was aware of the constitutional prohibition and expressly admitted his knowledge thereof to this Court. He declared that he had the Antipolo property titled in the name of the petitioner because of the said prohibition. His attempt at subsequently asserting or claiming a right on the said property cannot be sustained. The Court of Appeals erred in holding that an implied trust was created and resulted by operation of law in view of petitioner's marriage to respondent. Save for the exception provided in cases of hereditary succession, respondent's disqualification from owning lands in the Philippines is absolute. Not even an ownership in trust is allowed. Besides, where the purchase is made in violation of an existing statute and in evasion of its express provision, no trust can result in favor of the party who is guilty of the fraud. To hold otherwise would allow circumvention of the constitutional prohibition. Invoking the principle that a court is not only a court of law but also a court of equity, is likewise misplaced. It has been held that equity as a rule will follow the law and will not permit that to be done indirectly which, because of public policy, cannot be done directly...[19] Coming now to the issue of ownership of the properties erected on the subject lot, the Court agrees with the finding of the trial court, as affirmed by the appellate court, that the series of transactions resorted to by the deceased were simulated in order to preserve the properties in the hands of the family. The records show that during all the time that the properties were allegedly sold to the spouses Victoria Cabasal and Gregorio Fontela in 1958 and the subsequent sale of the same to respondent in 1961, the petitioners and respondent, along with their parents, remained in possession and continued to live in said properties. However, the trial court concluded that: In fairness to the defendant, although the Deeds of Sale executed by Felix Ting Ho regarding the improvements in favor of Victoria Cabasal and Gregorio Fontela and the subsequent transfer of the same by Gregorio Fontela and Victoria Cabasal to the defendant are all simulated, yet, pursuant to Article 1471 of the New Civil Code it can be assumed that the intention of Felix Ting Ho in such transaction was to give and donate the improvements to his eldest son the defendant Vicente Teng Gui [20] Its finding was based on Article 1471 of the Civil Code, which provides that: Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have been in reality a donation, or some other act or contract.[21] The Court holds that the reliance of the trial court on the provisions of Article 1471 of the Civil Code to conclude that the simulated sales were a valid donation to the respondent is misplaced because its finding was based on a mere assumption when the law requires positive proof. The respondent was unable to show, and the records are bereft of any evidence, that the simulated sales of the properties were intended by the deceased to be a donation to him. Thus, the Court holds that the two-storey residential house, two-storey residential building and sari-sari store form part of the estate of the late spouses Felix Ting Ho and Leonila Cabasal, entitling the petitioners to a four-fifths (4/5) share thereof.

IN VIEW WHEREOF, the petition is DENIED. The assailed Decision dated December 27, 1996 of the Court of Appeals in CA-G.R. CV No. 42993 is herebyAFFIRMED. SO ORDERED.

Republic of the Philippines Supreme Court Manila SECOND DIVISION HYATT CORPORATION, Petitioner, ELEVATORS and G.R. ESCALATORS No. 173881 Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ.

- versus -

Promulgated: CATHEDRAL HEIGHTS BUILDING COMPLEX ASSOCIATION, INC., Respondent. December 1, 2010

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DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari,[1] under Rule 45 of the Rules of Court, seeking to set aside the April 20, 2006 Decision[2] and July 31, 2006 Resolution[3] of the Court of Appeals (CA), in CA-G.R. CV No. 80427. The facts of the case are as follows: On October 1, 1994, petitioner Hyatt Elevators and Escalators Corporation entered into an Agreement to Service Elevators (Service Agreement)[4] with respondent Cathedral Heights Building Complex Association, Inc., where petitioner was contracted to maintain four passenger elevators installed in respondent's building. Under the Service Agreement, the duties and obligations of petitioner included monthly inspection, adjustment and lubrication of machinery, motors, control parts and accessory equipments, including switches and electrical wirings.[5] Section D (2) of the Service Agreement provides that respondent shall pay for the additional charges incurred in connection with the repair and supply of parts.

Petitioner claims that during the period of April 1997 to July 1998 it had incurred expenses amounting to Php 1,161,933.47 in the maintenance and repair of the four elevators as itemized in a statement of account.[6] Petitioner demanded from respondent the payment of the aforesaid amount allegedly through a series of demand letters, the last one sent on July 18, 2000.[7] Respondent, however, refused to pay the amount. Petitioner filed with the Regional Trial Court (RTC), Branch 100, Quezon City, a Complaint for sum of money against respondent. Said complaint was docketed as Civil Case No. Q-01-43055. On March 5, 2003, the RTC rendered Judgment[8] ruling in favor of petitioner, the dispositive portion of which reads: WHEREFORE, premises considered, JUDGMENT IS HEREBY RENDERED IN FAVOR OF THE PLAINTIFF AND AGAINST THE DEFENDANT ordering the latter to pay Plaintiff as follows:

1.

The sum of P1,161,933.27 representing the costs of the elevator parts used, and for services and maintenance, with legal rate of interest from the filing of the complaint; 2. The sum of P50,000.00 as attorney's fees; 3. The costs of suit. SO ORDERED.[9]

The RTC held that based on the sales invoices presented by petitioner, a contract of sale of goods was entered into between the parties. Since petitioner was able to fulfill its obligation, the RTC ruled that it was incumbent on respondent to pay for the services rendered. The RTC did not give credence to respondent's claim that the elevator parts were never delivered and that the repairs were questionable, holding that such defense was a mere afterthought and was never raised by respondent against petitioner at an earlier time. Respondent filed a Motion for Reconsideration.[10] On August 17, 2003, the RTC issued a Resolution[11] denying respondent's motion. Respondent then filed a Notice of Appeal.[12] On April 20, 2006, the CA rendered a Decision finding merit in respondent's appeal, the dispositive portion of which reads: WHEREFORE, premises considered, the instant appeal is GRANTED. The Judgment of the Regional Trial Court, Branch 100, Quezon City, dated March 5, 2003, is hereby REVERSED and SET ASIDE. The complaint below is dismissed. SO ORDERED.[13]

In reversing the RTC, the CA ruled that respondent did not give its consent to the purchase of the spare parts allegedly installed in the defective elevators. Aside from the absence of consent, the CA also held that there was no perfected contract of sale because there was no meeting of minds upon the price. On this note, the CA ruled that the Service Agreement did not give petitioner the unbridled license to purchase and install any spare parts and demand, after the lapse of a considerable length of time, payment of these prices from respondent according to its own dictated price.

Aggrieved, petitioner filed a Motion for Reconsideration,[14] which was, however, denied by the CA in a Resolution dated July 31, 2006. Hence, herein petition, with petitioner raising a lone issue for this Court's resolution, to wit: WHETHER OR NOT THERE IS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND RESPONDENT WITH REGARDS TO THE SPARE PARTS DELIVERED AND INSTALLED BY PETITIONER ON THE FOUR ELEVATORS OF RESPONDENT AT ITS HOSPITAL UNDER THE AGREEMENT TO SERVICE ELEVATORS AS TO RENDER RESPONDENT LIABLE FOR THEIR PRICES?[15] Before anything else, this Court shall address a procedural issue raised by respondent in its Comment [16] that the petition should be denied due course for raising questions of fact. The determination of whether there exists a perfected contract of sale is essentially a question of fact. It is already a well-settled rule that the jurisdiction of this Court in cases brought before it from the CA by virtue of Rule 45 of the Revised Rules of Court is limited to reviewing errors of law. Findings of fact of the CA are conclusive upon this Court. There are, however, recognized exceptions to the foregoing rule, namely: (1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when, in making its findings, the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition, as well as in the petitioners main and reply briefs, are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record.[17] The present case falls under the 7th exception, as the RTC and the CA arrived at conflicting findings of fact. Having resolved the procedural aspect, this Court shall now address the substantive issue raised by petitioner. Petitioner contends that the CA erred when it ruled that there was no perfected contract of sale between petitioner and respondent with regard to the spare parts delivered and installed. It is undisputed that a Service Agreement was entered into by petitioner and respondent where petitioner was commissioned to maintain respondent's four elevators. Embodied in the Service Agreement is a stipulation relating to expenses incurred on top of regular maintenance of the elevators, to wit: SERVICE AND INSPECTION FEE: xxxx (2) In addition to the service fee mentioned in the preceding paragraph under this article, the Customer shall pay whatever additional charges in connection with the repair, supply of parts other than those specifically mentioned in ARTICLE A.2., or servicing of the elevator/s subject of this contract.[18] Petitioner claims that during the period of April 1997 to July 1998, it had used parts in the maintenance and repair of the four elevators in the total amount of P1,161,933.47 as itemized in a statement of account[19] and supported by sales invoices, delivery receipts, trouble call reports and maintenance and checking reports. Respondent, however, refuses to pay the said amount arguing that petitioner had not complied with the Standard Operating Procedure (SOP) following a breakdown of an elevator.

As testified to by respondent's witness Celestino Aguilar, the SOP following an elevator breakdown is as follows: (a) they (respondent) will notify petitioner's technician; (b) the technician will evaluate the problem and if the problem is manageable the repair was done right there and then; (c) if some parts have to be replaced, petitioner will present the defective parts to the building administrator and a quotation is made; (d) the quotation is then indorsed to respondent's Finance Department; and (e) a purchase order is then prepared and submitted to the Board of Directors for approval.[20] Based on the foregoing procedure, respondent contends that petitioner had failed to follow the SOP since no purchase orders from respondent's Finance Manager, or Board of Directors relating to the supposed parts used were secured prior to the repairs. Consequently, since the repairs were not authorized, respondent claims that it has no way of verifying whether the parts were actually delivered and installed as alleged by petitioner. At the outset, this Court observes that the SOP is not embodied in the Service Agreement nor was a document evidencing the same presented in the RTC. The SOP appears, however, to be the industry practice and as such was not contested by petitioner. Nevertheless, petitioner offers an excuse for non-compliance with the SOP on its claim that the SOP was not followed upon the behest and request of respondent. A perusal of petitioner's petition and evidence in the RTC shows that the main thrust of its case is premised on the following claims: first, that the nature and operations of a hospital necessarily dictate that the elevators are in good running condition at all times; and, second, that there was a verbal agreement between petitioner's service manager and respondent's building engineer that the elevators should be running in good condition at all times and breakdowns should only last one day. In order to prove its allegations, petitioner presented Wilson Sua, its finance manager, as its sole witness. Sua testified to the procedure followed by petitioner in servicing respondent's elevators, to wit: Q: A: Can you tell us Mr. witness, what is the procedure actually followed whenever there is a need for trouble call maintenance or repair? The St. Lukes Cathedrals personnel, which includes the administrative officers, the guard on duty, or the receptionist, will call us through the phone if their elevators brake (sic) down. Then, what happened? Immediately, we dispatched our technicians to check the trouble. And who were these technicians whom you normally or regularly dispatched to attend to the trouble of the elevators of the defendant? With regard to this St. Lukes, we dispatched Sunny Jones and Gilbert Cinamin. And what happened after dispatching these technicians? They come back immediately to the office to request the parts needed for the troubleshooting of the elevators. Then what happened? A part will be brought to the project cite and they will install it and note it in the trouble call report and have it received properly by the building guard or the receptionist or by the building engineers, and they will test it for a couple of weeks to determine if the parts are the correct part needed for that elevator and we will secure their approval, thereafter we will issue our invoices and delivery receipts. This trouble call reports, are these in writing?

Q: A: Q: A: Q: A: Q: A:

Q:

A:

Yes, sir. These are in writing and these are being written within that day.

Q: A: Q: A: Q: A: Q: A: Q: A: Q: A: Q: A: Q: A:

Within the day of? Of the trouble. And have it received by the duly personnel of St. Lukes Cathedral. And who prepared this trouble call reports? The technician who actually checked the elevator. When do the parts being installed? On the same date they brought the parts on the project cite. You mentioned sales invoice and delivery receipts. Who prepared these invoice? Those were prepared by our inventory clerk under my supervision? How about the delivery receipts? Just the same. When would the sales invoice be prepared? After the approval of the building engineer. But at the time that the sales invoice and delivery receipts were being prepared after the approval of the building engineer, what happened to the parts? Were they already installed or what? They were already installed. Now, why would the parts be installed before the preparation of the sales invoice and the delivery receipts? There was an agreement between the building engineer and our service manager that the elevator should be running in good condition at all times, breakdown should be at least one day only. It cannot stop for more than a day.[21]

On cross examination, Sua testified that the procedure was followed on the authority of a verbal agreement between petitioner's service manager and respondent's engineer, thus: Q: So, you mean to say that despite the fact that material are expensive equipments without the prior approval of the board? A: There is no need for the approval of the board since there is a verbal engineer and the Hyatt service manager to have the elevator run. Q: A: you immediately installed these

agreement between the building

Aside from the building engineer, there is a building administrator? No, ma'am. He is already the building administrator and the building engineer. That is engineer Tisor.

Q: A:

And with regard to the fact that the delivery receipts were Yes, ma'am.

acknowledged by the engineer, is that true?

Q: You also mentioned earlier that aside from the building engineer, the receptionist and guards are also authorized. Are you sure that they are authorized to receive the delivery receipts? A: Yes, ma'am. It was an instruction given by Engineer Tisor, the building engineer and also the building administrator to have it received. Q: A: So, all these agreements are only verbally, it is not in writing? Yes, ma'am.[22]

In its petition, petitioner claims that because of the special circumstances of the building being a hospital, the procedure actually followed since October 1, 1994 was as follows: 1. Whenever any of the four elevators broke down, the administrative officers, security guard or the receptionist of respondent called petitioner by telephone; 2. Petitioner dispatched immediately a technician to the St. Lukes Cathedral Heights Building to check the trouble; 3. If the breakdown could be repaired without installation of parts, repair was done on the spot; 4. If the repair needed replacement of damaged parts, the technician went back to petitioners office to get the necessary replacement parts; 5. The technician then returned to the St. Lukes Cathedral Heights Building and installed the replacement parts and finished the repair; 6. The placement parts, which were installed in the presence of the security guard, building engineers or receptionist of respondents whoever was available, were indicated in the trouble call report or sometimes in the delivery receipt and copy of the said trouble call report or delivery receipt was then given to the blue security guard, building engineers or receptionist, who duly acknowledged the same; 7. Based on the trouble call report or the delivery receipts, which already indicated the replacement parts installed and the services rendered, respondent should prepare the purchase order, but this step was never followed by respondent for whatever reason; 8. In the meantime, the elevator was tested for a couple of weeks to see if the replacement parts were correct and the approval of the building engineers was secured; 9. After the building engineers gave their approval that the replacement parts were correct or after the lapse of two weeks and nothing was heard or no complaint was lodged, then the corresponding sales invoices and delivery receipts, if nothing had been issued yet, were prepared by petitioner and given to respondent, thru its receptionists or security guards; 10. For its purposes, respondent should compare the trouble call reports or delivery receipts which indicated the replacement parts installed or with the sales invoices and delivery receipts to confirm the correctness of the transaction; 11. If respondent had any complaint that the parts were not actually installed or delivered or did not agree with the price of the parts indicated in the sales invoices, then it should bring its complaint or disagreement to the attention of petitioner. In this regard, no complaint or disagreement as to the prices of the spare parts has been lodged by respondent.[23]

In varying language, our Rules of Court, in speaking of burden of proof in civil cases, states that each party must prove his own affirmative allegations and that the burden of proof lies on the party who would be defeated if no evidence were given on either side. Thus, in civil cases, the burden of proof is generally on the plaintiff, with respect to his complaint.[24] In the case at bar, it is petitioner's burden to prove that it is entitled to its claims during the period in dispute. After an extensive review of the records and evidence on hand, this Court rules that petitioner has failed to discharge its burden. This Court finds that the testimony of Sua alone is insufficient to prove the existence of the verbal agreement, especially in view of the fact that respondent insists that the SOP should have been followed. It is an age-old rule in civil cases that one who alleges a fact has the burden of proving it and a mere allegation is not evidence.[25] The testimony of Sua, at best, only alleges but does not prove the existence of the verbal agreement. It may even be hearsay. It bears stressing, that the agreement was supposedly entered into by petitioner's service manager and respondent's building engineer. It behooves this Court as to why petitioner did not present their service manager and Engineer Tisor, respondent's building engineer, the two individuals who were privy to the transactions and who could ultimately lay the basis for the existence of the alleged verbal agreement. It should have occurred to petitioner during the course of the trial that said testimonies would have proved vital and crucial to its cause. Therefore, absent such testimonies, the existence of the verbal agreement cannot be sustained by this Court. Moreover, even assuming arguendo, that this Court were to believe the procedure outlined by Sua, his testimony[26] clearly mentions that prior to the preparation of the sales invoices and delivery receipts, the parts delivered and installed must have been accepted by respondent's engineer or building administrator. However, again, petitioner offered no evidence of such acceptance by respondents engineer prior to the preparation of the sales invoices and delivery receipts. This Court is not unmindful of the fact that petitioner also alleges in its petition that the non-observance of the SOP was the practice way back in 1994 when petitioner started servicing respondent's elevators. On this note, petitioner argued in the following manner: And most importantly, the Court of Appeals failed to appreciate that the parts being sought to be paid by petitioner in the Complaint were delivered and installed during the period from April 1997 to July 1998, which followed the same actual procedure adopted since October 1, 1994. Based on the same procedure adopted because of the special circumstances of St. Luke's Cathedral Heights Building being a hospital, respondent has paid the replacement parts installed from October 1994 to March 1997. Never did respondent question the adopted actual procedure from October 1994 to March 1997. x x x[27]

Was the procedure claimed by petitioner the adopted practice since 1994? This Court rules that other than the foregoing allegation, petitioner has failed to prove the same. A perusal of petitioner's Formal Offer of Evidence[28] would show that the only documents presented by it are sales invoices, trouble call reports and delivery receipts, all relating to the alleged transactions between 1997 to 1998. It is unfortunate that petitioner had failed to present in the RTC the documents from 1994 to 1996 for it may have proven that the non-observance of the SOP was the practice since 1994. Such documents could have shown that respondent had paid petitioner in the past without objection on similar transactions under similar billing procedures. The same would have also validated petitioner's claim that the secretary

and security guards were all authorized to sign the documents. Unfortunately, for petitioner's cause, this Court has no basis to validate its claim, because other than its bare allegation in the petition, petitioner offers no proof to substantiate the same. By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.[29] The absence of any of the essential elements will negate the existence of a perfected contract of sale. In the case at bar, the CA ruled that there was no perfected contract of sale between petitioner and respondent, to wit:

Aside from the absence of consent, there was no perfected contract of sale because there was no meeting of minds upon the price. As the law provides, the fixing of the price can never be left to the discretion of one of the contracting parties. In this case, the absence of agreement as to the price is evidenced by the lack of purchase orders issued by CHBCAI where the quantity, quality and price of the spare parts needed for the repair of the elevators are stated. In these purchase orders, it would show that the quotation of the cost of the spare parts earlier informed by Hyatt is acceptable to CHBCAI. However, as revealed by the records, it was only Hyatt who determined the price, without the acceptance or conformity of CHBCAI. From the moment the determination of the price is left to the judgment of one of the contracting parties, it cannot be said that there has been an arrangement on the price since it is not possible for the other contracting party to agree on something of which he does not know beforehand.[30]

Based on the evidence presented in the RTC, it is clear to this Court that petitioner had failed to secure the necessary purchase orders from respondent's Board of Directors, or Finance Manager, to signify their assent to the price of the parts to be used in the repair of the elevators. In Boston Bank of the Philippines v. Manalo,[31] this Court explained that the fixing of the price can never be left to the decision of one of the contracting parties, to wit: A definite agreement as to the price is an essential element of a binding agreement to sell personal or real property because it seriously affects the rights and obligations of the parties. Price is an essential element in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if accepted by the other, gives rise to a perfected sale.[32]

There would have been a perfected contract of sale had respondent accepted the price dictated by petitioner even if such assent was given after the services were rendered. There is, however, no proof of such acceptance on the part of respondent. This Court shares the observation of the CA that the signatures of receipt by the information clerk or the guard on duty on the sales invoices and delivery receipts merely pertain to the physical receipt of the papers. It does not indicate that the parts stated were actually delivered and installed. Moreover, because petitioner failed to prove the existence of the verbal agreement which allegedly authorized the aforementioned individuals to sign in respondents behalf, such signatures cannot be tantamount to an approval or acceptance by respondent of the parts allegedly used and the price quoted by petitioner. Furthermore, what makes the claims doubtful and questionable is that the date of the sales invoice and the date stated in the corresponding delivery receipt are too far apart as aptly found by the CA, to wit: Further, We note that the date stated in the sales invoice vis-a-vis the date stated in the corresponding delivery receipt is too far apart. For instance, Delivery Receipt No. 3492 dated February 13, 1998 has a corresponding Sales Invoice No. 7147 dated June 30, 1998. What puts doubt to this transaction is the fact that the sales invoice was prepared

only after four (4) months from the delivery. The considerable length of time that has lapsed from the delivery to the issuance of the sales invoice is questionable. Further the delivery receipts were received months after its preparation. In the case of Delivery Receipt No. 3850 dated November 26, 1997, Gumisad received this only on July 20, 1998, or after a lapse of eight (8) months. Such kind of procedure followed by Hyatt is certainly contrary to usual business practice, especially since in this case, it involves considerable amount of money.[33]

Based on the foregoing, the CA was thus correct when it concluded that the Service Agreement did not give petitioner the unbridled license to purchase and install any spare parts and demand, after the lapse of a considerable length of time, payment of these prices from respondent according to its own dictated price.[34] Withal, this Court rules that petitioner's claim must fail for the following reasons: first, petitioner failed to prove the existence of the verbal agreement that would authorize non-observance of the SOP; second, petitioner failed to prove that such procedure was the practice since 1994; and, third, there was no perfected contract of sale between the parties as there was no meeting of minds upon the price. To stress, the burden of proof is on the plaintiff. He must rely on the strength of his case and not on the weakness of respondent's defense. Based on the manner by which petitioner had presented its claim, this Court is of the opinion that petitioner's case leaves too much to be desired. WHERFORE, premises considered, the petition is DENIED. The April 20, 2006 Decision and July 31, 2006 Resolution of the Court of Appeals, in CA-G.R. CV No. 80427, are AFFIRMED. SO ORDERED.

SECOND DIVISION
[G.R. No. 135634. May 31, 2000] HEIRS OF JUAN SAN RODRIGUEZ, respondent. DECISION MENDOZA, J.: This is a petition for review on certiorari of the decision of the Court of Appeals[1] reversing the decision of the Regional Trial Court, Naga City, Branch 19, in Civil Case No. 87-1335, as well as the appellate courts resolution denying reconsideration. Slxsc The antecedent facts are as follows: Juan San Andres was the registered owner of Lot No. 1914-B-2 situated in Liboton, Naga City. On September 28, 1964, he sold a portion thereof, consisting of 345 square meters, to respondent Vicente S. Rodriguez for P2,415.00. The sale is evidenced by a Deed of Sale.[2] Upon the death of Juan San Andres on May 5, 1965, Ramon San Andres was appointed judicial administrator of the decedents estate in Special Proceedings No. R-21, RTC, Branch 19, Naga City. Ramon San Andres engaged the services of a geodetic engineer, Jose Peero, to prepare a consolidated plan (Exh. A) of the estate. Engineer Peero also prepared a sketch plan of the 345-square meter lot sold to respondent. From the result of the survey, it was found that respondent had enlarged the area which he purchased from the late Juan San Andres by 509 square meters.[3] Accordingly, the judicial administrator sent a letter,[4] dated July 27, 1987, to respondent demanding that the latter vacate the portion allegedly encroached by him. However, respondent refused to do so, claiming he had purchased the same from the late Juan San Andres. Thereafter, on November 24, 1987, the judicial administrator brought an action, in behalf of the estate of Juan San Andres, for recovery of possession of the 509-square meter lot. Slxmis In his Re-amended Answer filed on February 6, 1989, respondent alleged that apart from the 345-square meter lot which had been sold to him by Juan San Andres on September 28, 1964, the latter likewise sold to him the following day the remaining portion of the lot consisting of 509 square meters, with both parties treating the two lots as one whole parcel with a total area of 854 square meters. Respondent alleged that the full payment of the 509-square meter lot would be effected within five (5) years from the execution of a formal deed of sale after a survey is conducted over said property. He further alleged that with the consent of the former owner, Juan San Andres, he took possession of the same and introduced improvements thereon as early as 1964. As proof of the sale to him of 509 square meters, respondent attached to his answer a receipt (Exh. 2)[5] signed by the late Juan San Andres, which reads in full as follows: Missdaa Received from Vicente Rodriguez the sum of Five Hundred (P500.00) Pesos representing an advance payment for a residential lot adjoining his previously paid lot on three sides excepting on the frontage with the agreed price of Fifteen (15.00) Pesos per square meter and the payment of the full consideration based on a survey shall be due and payable in ANDRES (VICTOR S. ZIGA) and SALVACION S. TRIA, petitioners, vs. VICENTE

five (5) years period from the execution of the formal deed of sale; and it is agreed that the expenses of survey and its approval by the Bureau of Lands shall be borne by Mr. Rodriguez. Naga City, September 29, 1964. (Sgd.) JUAN R. SAN ANDRES Vendor Noted: (Sgd.) VICENTE RODRIGUEZ Vendee Respondent also attached to his answer a letter of judicial administrator Ramon San Andres (Exh. 3),[6] asking payment of the balance of the purchase price. The letter reads: Dear Inting, Please accommodate my request for Three Hundred (P300.00) Pesos as I am in need of funds as I intimated to you the other day. We will just adjust it with whatever balance you have payable to the subdivision. Thanks. Sincerely, (Sgd.) RAMON SAN ANDRES Vicente Rodriguez Penafrancia Subdivision, Naga City P.S. You can let bearer Enrique del Castillo sign for the amount. Received One Hundred Only

(Sgd.) RAMON SAN ANDRES 3/30/66 Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid 509-square meter lot. Sdaadsc While the proceedings were pending, judicial administrator Ramon San Andres died and was substituted by his son Ricardo San Andres. On the other hand, respondent Vicente Rodriguez died on August 15, 1989 and was substituted by his heirs.[7] Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose Peero,[8] testified that based on his survey conducted sometime between 1982 and 1985, respondent had enlarged the area which he purchased from the late Juan San Andres by 509 square meters belonging to the latters estate. According to Peero, the titled property (Exh. A-5) of respondent was enclosed with a fence with metal holes and barbed wire, while the expanded area was fenced with barbed wire and bamboo and light materials. Rtcspped The second witness, Ricardo San Andres,[9] administrator of the estate, testified that respondent had not filed any claim before Special Proceedings No. R-21 and denied knowledge of Exhibits 2 and 3. However, he recognized the signature in Exhibit 3 as similar to that of the former administrator, Ramon San Andres. Finally, he declared that the expanded portion occupied by the family of respondent is now enclosed with barbed wire fence unlike before where it was found without fence. On the other hand, Bibiana B. Rodriguez,[10] widow of respondent Vicente Rodriguez, testified that they had purchased the subject lot from Juan San Andres, who was their compadre, on September 29, 1964, at P15.00 per square meter. According to her, they gave P500.00 to the late Juan San Andres who later affixed his signature to Exhibit 2. She added that on March 30, 1966, Ramon San Andres wrote them a letter asking for P300.00 as partial payment for the subject lot, but they were able to give him only P100.00. She added that they had paid the total purchase price of P7,035.00 on November 21, 1988 by depositing it in court. Bibiana B. Rodriquez stated that they had been in possession of the 509square meter lot since 1964 when the late Juan San Andres signed the receipt. (Exh. 2) Lastly, she testified that they did not know at that time the exact area sold to them because they were told that the same would be known after the survey of the subject lot. Korte On September 20, 1994, the trial court[11] rendered judgment in favor of petitioner. It ruled that there was no contract of sale to speak of for lack of a valid object because there was no sufficient indication in Exhibit 2 to identify the property subject of the sale, hence, the need to execute a new contract. Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the decision of the trial court. The appellate court held that the object of the contract was determinable, and that there was a conditional sale with the balance of the purchase price payable within five years from the execution of the deed of sale. The dispositive portion of its decisions reads: IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby REVERSED and SET ASIDE and a new one entered DISMISSING the complaint and rendering judgment against the plaintiff-appellee:

1. to accept the P7,035.00 representing the balance of the purchase price of the portion and which is deposited in court under Official Receipt No. 105754 (page 122, Records); 2. to execute the formal deed of sale over the said 509 square meter portion of Lot 1914-B-2 in favor of appellant Vicente Rodriguez; 3. to pay the defendant-appellant the amount of P50,000.00 as damages and P10,000.00 attorneys fees as stipulated by them during the trial of this case; and 4. to pay the costs of the suit. SO ORDERED. Hence, this petition. Petitioner assigns the following errors as having been allegedly committed by the trial court: Sclaw I.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT THE DOCUMENT (EXHIBIT "2") IS A CONTRACT TO SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN AND SUFFICIENTLY DESCRIBED. II.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS OBLIGED TO HONOR THE PURPORTED CONTRACT TO SELL DESPITE NON-FULFILLMENT BY RESPONDENT OF THE CONDITION THEREIN OF PAYMENT OF THE BALANCE OF THE PURCHASE PRICE. III.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT CONSIGNATION WAS VALID DESPITE NON-COMPLIANCE WITH THE MANDATORY REQUIREMENTS THEREOF. IV.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT LACHES AND PRESCRIPTION DO NOT APPLY TO RESPONDENT WHO SOUGHT INDIRECTLY TO ENFORCE THE PURPORTED CONTRACT AFTER THE LAPSE OF 24 YEARS. The petition has no merit. First. Art. 1458 of the Civil Code provides: By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. As thus defined, the essential elements of sale are the following: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and, c) Price certain in money or its equivalent.[12]

As shown in the receipt, dated September 29, 1964, the late Juan San Andres received P500.00 from respondent as "advance payment for the residential lot adjoining his previously paid lot on three sides excepting on the frontage;" the agreed purchase price was P15.00 per square meter; and the full amount of the purchase price was to be based on the results of a survey and would be due and payable in five (5) years from the execution of a deed of sale. Petitioner contends, however, that the "property subject of the sale was not described with sufficient certainty such that there is a necessity of another agreement between the parties to finally ascertain the identity, size and purchase price of the property which is the object of the alleged sale."[13] He argues that the "quantity of the object is not determinate as in fact a survey is needed to determine its exact size and the full purchase price therefor." [14] In support of his contention, petitioner cites the following provisions of the Civil Code: Sclex Art. 1349. The object of every contract must be determinate as to its kind. The fact that the quantity is not determinable shall not be an obstacle to the existence of a contract, provided it is possible to determine the same without the need of a new contract between the parties. Art. 1460 . . . The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new and further agreement between the parties. Petitioners contention is without merit. There is no dispute that respondent purchased a portion of Lot 1914 -B-2 consisting of 345 square meters. This portion is located in the middle of Lot 1914-B-2, which has a total area of 854 square meters, and is clearly what was referred to in the receipt as the "previously paid lot." Since the lot subsequently sold to respondent is said to adjoin the "previously paid lot" on three sides thereof, the subject lot is capable of being determined without the need of any new contract. The fact that the exact area of these adjoining residential lots is subject to the result of a survey does not detract from the fact that they are determinate or determinable. As the Court of Appeals explained:[15] Concomitantly, the object of the sale is certain and determinate. Under Article 1460 of the New Civil Code, a thing sold is determinate if at the time the contract is entered into, the thing is capable of being determinate without necessity of a new or further agreement between the parties. Here, this definition finds realization. Appellees Exhibit "A" (page 4, Records) affirmingly shows that the original 345 sq. m. portion earlier sold lies at the middle of Lot 1914-B-2 surrounded by the remaining portion of the said Lot 1914-B-2 on three (3) sides, in the east, in the west and in the north. The northern boundary is a 12 meter road. Conclusively, therefore, this is the only remaining 509 sq. m. portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially purchased by Rodriguez. It is quite defined, determinate and certain. Withal, this is the same portion adjunctively occupied and possessed by Rodriguez since September 29, 1964, unperturbed by anyone for over twenty (20) years until appellee instituted this suit. Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of and to deliver a determinate thing for a price certain in money. As Art. 1475 of the Civil Code provides: Xlaw The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. . . . That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the subject lot. As the Court of Appeals observed:

Without any doubt, the receipt profoundly speaks of a meeting of the mind between San Andres and Rodriguez for the sale of the property adjoining the 345 square meter portion previously sold to Rodriguez on its three (3) sides excepting the frontage. The price is certain, which is P15.00 per square meter. Evidently, this is a perfected contract of sale on a deferred payment of the purchase price. All the pre-requisite elements for a valid purchase transaction are present. Sale does not require any formal document for its existence and validity. And delivery of possession of land sold is a consummation of the sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed of sale is a valid contract between the parties (Carbonell v. CA, 69 SCRA 99 [1976]). Xsc In the same vein, after the late Juan R. San Andres received the P500.00 downpayment on March 30, 1966, Ramon R. San Andres wrote a letter to Rodriguez and received from Rodriguez the amount of P100.00 (although P300.00 was being requested) deductible from the purchase price of the subject portion. Enrique del Castillo, Ramons authorized agent, correspondingly signed the receipt for the P100.00. Surely, this is explicitly a veritable proof of the sale over the remaining portion of Lot 1914-B-2 and a confirmation by Ramon San Andres of the existence thereof.[16] There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale. Apparently, the appellate court considered as a "condition" the stipulation of the parties that the full consideration, based on a survey of the lot, would be due and payable within five (5) years from the execution of a formal deed of sale. It is evident from the stipulations in the receipt that the vendor Juan San Andres sold the residential lot in question to respondent and undertook to transfer the ownership thereof to respondent without any qualification, reservation or condition. In Ang Yu Asuncion v. Court of Appeals,[17] we held: Sc In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a "Deed of Conditional Sale," a sale is still absolute where the contract is devoid of anyproviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or unless the price is paid. Ownership will then be transferred to the buyer upon actual or constructive delivery (e.g., by the execution of a public document) of the property sold. Where the condition is imposed upon the perfection of the contract itself, the failure of the condition would prevent such perfection. If the condition is imposed on the obligation of a party which is not fulfilled, the other party may either waive the condition or refuse to proceed with the sale. (Art. 1545, Civil Code) Thus, in one case, when the sellers declared in a "Receipt of Down Payment" that they received an amount as purchase price for a house and lot without any reservation of title until full payment of the entire purchase price, the implication was that they sold their property.[18] In Peoples Industrial and Commercial Corporation v. Court of Appeals,[19] it was stated: A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Scmis Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent.[20] Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. The stipulation that the "payment of the full consideration based on a survey shall be due and payable in five (5) years from the execution of a formal deed of sale" is not a condition which affects the efficacy of the contract of sale. It merely provides the manner by which the full consideration is to be computed and the time within which the same is to be paid.

But it does not affect in any manner the effectivity of the contract. Consequently, the contention that the absence of a formal deed of sale stipulated in the receipt prevents the happening of a sale has no merit. Missc Second. With respect to the contention that the Court of Appeals erred in upholding the validity of a consignation of P7,035.00 representing the balance of the purchase price of the lot, nowhere in the decision of the appellate court is there any mention of consignation. Under Art. 1257 of this Civil Code, consignation is proper only in cases where an existing obligation is due. In this case, however, the contracting parties agreed that full payment of purchase price shall be due and payable within five (5) years from the execution of a formal deed of sale. At the time respondent deposited the amount of P7,035.00 in the court, no formal deed of sale had yet been executed by the parties, and, therefore, the five-year period during which the purchase price should be paid had not commenced. In short, the purchase price was not yet due and payable. This is not to say, however, that the deposit of the purchase price in the court is erroneous. The Court of Appeals correctly ordered the execution of a deed of sale and petitioners to accept the amount deposited by respondent. Third. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based on the agreement of the parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the rule that a contract is the law between the parties, and courts have no choice but to enforce such contract so long as they are not contrary to law, morals, good customs or public policy. Otherwise, courts would be interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties nor amend the latters agreement, for to do so would be to alter the real intentions of the contracting parties when the contrary function of courts is to give force and effect to the intentions of the parties. Misspped Fourth. Finally, petitioners argue that respondent is barred by prescription and laches from enforcing the contract. This contention is likewise untenable. The contract of sale in this case is perfected, and the delivery of the subject lot to respondent effectively transferred ownership to him. For this reason, respondent seeks to comply with his obligation to pay the full purchase price, but because the deed of sale is yet to be executed, he deemed it appropriate to deposit the balance of the purchase price in court. Accordingly, Art. 1144 of the Civil Code has no application to the instant case.[21] Considering that a survey of the lot has already been conducted and approved by the Bureau of Lands, respondents heirs, assigns or successors-in-interest should reimburse the expenses incurred by herein petitioners, pursuant to the provisions of the contract. Spped WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that respondent is ORDERED to reimburse petitioners for the expenses of the survey. Jospped SO ORDERED.

[G.R. No. 125088. April 14, 2004]

LAGRIMAS A. BOY, petitioner, vs. COURT OF APPEALS, ISAGANI P. RAMOS and ERLINDA GASINGAN RAMOS, respondents. DECISION AZCUNA, J.: Before us is a petition for review on certiorari of the decision of the Court of Appeals in an ejectment case, docketed as CA-G.R. SP No. 38716, which reversed and set aside the decision[1]of the Regional Trial Court of Manila, Branch 54,[2] and reinstated the decision[3] of the Metropolitan Trial Court of Manila, Branch 14,[4] ordering petitioner to vacate the disputed premises and to pay rent until the premises are vacated and possession is turned over to private respondents. The facts, as stated by the Court of Appeals, are as follows: On September 24, 1993, the spouses Isagani P. Ramos and Erlinda Gasingan Ramos, private respondents herein, filed an action for ejectment against Lagrimas A. Boy (Lagrimas), petitioner herein, with the Metropolitan Trial Court of Manila. In their Complaint, the spouses Ramos alleged that they are the owners of a parcel of land with an area of 55.75 square meters, and the house existing thereon, situated at 1151 Florentino Torres St., Singalong, Manila. They acquired the said properties from Lagrimas who sold the same to them by virtue of a Deed of Absolute Sale,[5] which was executed on June 4, 1986. However, Lagrimas requested for time to vacate the premises, and they agreed thereto, because they were not in immediate need of the premises. Time came when they needed the said house as they were only renting their own residence. They then demanded that Lagrimas vacate the subject premises, but she refused to do so. Hence, they initiated this action for ejectment against Lagrimas.[6] In her Answer, Lagrimas alleged that sometime in September 1984, in order to accommodate her brothers need for a placement fee to work abroad, she borrowed P15,000 from the spouses Ramos, who asked for the subject property as collateral. On June 4, 1986, the spouses Ramos caused her to sign a Deed of Absolute Sale purporting to show that she sold the property in question to them for the sum of P31,000. The balance of P16,000 was promised to be paid on that date, but the promise was never fulfilled. Sometime in May 1988, Erlinda Ramos and Lagrimas executed an agreement (Kasunduan)[7] acknowledging that the subject parcel of land, together with the upper portion of the house thereon, had been sold by Lagrimas to the spouses Ramos for P31,000; that of the said price, the sum of P22,500 (representing P15,000 cash loan plus P7,500 as interest from September 1984 to May 1988) had been paid; that the balance ofP8,500 would be paid on the last week of August 1988; and that possession of the property would be transferred to the spouses Ramos only upon full payment of the purchase price.[8] Lagrimas admitted that the counsel of the spouses Ramos sent her a letter demanding that she vacate the premises. Lagrimas alleged that the demand for her to pay the sum of P6,000 per month has no legal basis. Lagrimas was summoned by the Punong Barangay for conciliation, but no settlement was reached.[9] The Metropolitan Trial Court (MeTC) noted the existence of a Deed of Absolute Sale executed by the spouses Ramos and Lagrimas on June 4, 1986. The Deed was duly acknowledged before a Notary Public and the parties therein did not deny its due execution. The MeTC observed that Lagrimas defense that the spouses Ramos still had to pay the

amount of P16,000 to complete the full consideration of P31,000 was nowhere to be found in the Deed of Absolute Sale.[10] The MeTC held that the Kasunduan, which Lagrimas attached to her Answer, cannot be given binding effect. The MeTC stated that while Erlinda Ramos admitted the existence of said document, she thought that Lagrimas was only asking for an additional amount. Erlinda Ramos claimed that after signing and reading the document, she realized that it did not contain the true facts of the situation since they had already purchased the subject property and were, therefore, the owners thereof. Erlinda Ramos, thereafter, refused to give her residence certificate and asked the notary public not to notarize the document. Said incident was attested to by way of affidavit by Lutgarda Reyes, the friend and companion of Lagrimas.[11] Moreover, the MeTC ruled that the continued occupation by Lagrimas of said property after the sale, without payment of rent, was by mere tolerance. It held that since the spouses Ramos, who were staying in a rented place, were asked to vacate the same, they were in need to take possession of their own property.[12] The MeTC thus rendered judgment in favor of private respondents, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs [herein private respondents] and against the defendant [herein petitioner], ordering the latter and the persons claiming rights under her to vacate the premises known as 1151 Florentino [Torres] Street, Singalong, Manila. The defendant is likewise ordered to pay plaintiffs the sum of P1,000.00 per month as reasonable compensation for the use and occupation of the premises from the filing of this complaint until the premises is vacated and possession is turned over to the plaintiffs; the further sum of P5,000.00 as attorneys fees plus the costs of the suit. Defendants counterclaim is hereby dismissed for lack of merit. SO ORDERED.[13] Petitioner appealed said decision to the Regional Trial Court, which rendered judgment in her favor, thus: In view of the foregoing, this Court hereby reverses the assailed Decision and dismisses the complaint. Costs against the appellee. The order previously issued granting execution pending appeal is accordingly recalled. SO ORDERED.[14] The Regional Trial Court (RTC) held that the Kasunduan was binding between the parties and was the true agreement between them. It ruled that pending the determination of the question of ownership, it cannot deprive the party in actual possession of the right to continue peacefully with said possession. Since the question of ownership was inextricably woven with that of possession, the RTC held that the MeTC should have dismissed the case because jurisdiction pertains to another tribunal.[15] Private respondents filed a petition for review of the decision of the RTC with the Court of Appeals. They faulted the respondent Judge for giving credence to the Kasunduan and holding that it prevailed over the Deed of Absolute Sale. The Court of Appeals ruled in favor of private respondents, thus: WHEREFORE, the decision of the respondent Judge herein appealed from is hereby REVERSED and SET ASIDE, and the decision of the Metropolitan Trial Court is hereby REINSTATED.

SO ORDERED.[16] The Court of Appeals found, thus: A review of the records discloses that the private respondent [herein petitioner Lagrimas] acquired the subject property from one Marianita C. Valera by virtue of two instruments. The first one is a Deed of Sale datedSeptember 27, 1984, in which the vendor Marianita C. Valera sold a house of light wooden materials and her rights as a bonafide tenant of the land on which it stands, to the vendee Lagrimas A. Boy for P31,000.00 (Annex 1 to the Affidavit of Lagrimas A. Boy, p. 67, Record). The second one is a deed of absolute sale and assignment of rights dated March 18, 1985, in which the vendor Ma. Nita C. Valera sold a residential house and her rights and interests over a parcel of land in which it is located, to vendee Lagrimas A. Boy, for the price of P31,000.00 (Annex 2, Affidavit of Lagrimas A. Boy, pp. 68-69, Record). It appears from the foregoing that Marianita C. Valera was originally one of the tenants/residents of 669 square meters of land owned by the PNB. She constructed a house on a 55.75 square meter portion of the said land. In 1984, she sold the house and only her rights as tenant of the land to private respondent, because the PNB had not yet sold the land to the residents. In 1985, the sale of the land to the residents had already been accomplished. Hence, she sold the house and her rights and interests to the land to the private respondent. Significantly, these contracts coincide with certain events in the relationship between the petitioners [herein private respondents spouses Ramos] and private respondent. According to the Answer of private respondent, sometime in September, 1984, she borrowed the sum of P15,000.00 from the petitioners to accommodate her brothers placement fee to work abroad (par. 7, Answer, p. 19, Record). And on March 19, 1985, the private respondent executed a deed of real estate mortgage (Annex a to the Affidavit of Erlinda C. Ramos, pp. 54-55, Record), in which she mortgaged the properties she has acquired from Marianita C. Valera to the petitioners, to secure a loan in the amount of P26,200.00, payable within three months. One year later, on June 4, 1986, the private respondent executed a deed of absolute sale in which she sold the same property acquired from Marianita C. Valera to the petitioners, for the price of P31,000.00. [17] Considering that petitioner borrowed P26,200 from private respondents, which loan was covered by a real estate mortgage of the subject house and lot, and the subsequent sale of the property to private respondents for P31,000 after non-payment of the loan, the Court of Appeals did not give credence to the statement in the Kasunduan that private respondents paid onlyP22,500 to petitioner since her indebtedness already reached P26,200. The Court of Appeals gave weight to the argument of private respondents that Erlinda Ramos was merely tricked into signing the Kasunduan. It gave credence to the version of private respondents on how the Kasunduan came to be executed but not notarized, thus: x x x Erlinda G. Ramos alleged in her affidavit that sometime in May, 1988, the exact date of which she cannot recall, Lagrimas Boy went to their residence and pleaded that even if they have already fully paid the subject house and lot, she was asking for an additional amount because she needed the money and there was no one for her to approach (walang ibang matatakbuhan). She [Erlinda Ramos] claimed she committed a mistake because she agreed to give an additional amount and went with [Lagrimas] to Atty. Estacio at the City Hall. [Lagrimas] arrive[d] ahead [of] Atty. Estacio in company with her friend Lutgarda Bayas. Atty. Estacio told her [Erlinda Ramos] that she will give an additional amount and she agreed without the knowledge of her husband. Atty. Estacio handed to her a piece of paper and she was made to sign and she acceded and signed it without reading. After [Lagrimas] and her witnesses including her companion Lutgarda Bayas signed the paper, she [Erlinda Ramos] go[t] it and read it. It was at that point that she discovered that what were written thereon were not in accordance with the true and real fact and situation that the subject house and

lot already belongs to them because they have purchased it already and {Lagrimas} only requested for an addition. She [Erlinda Ramos] told Atty. Estacio to change (baguhin) the statement because she was not agreeable and she did not give her residence certificate (Cedula). Notary Public Estacio said that he cannot notarize the document (purportedKasunduan) because she [Erlinda Ramos] refused saying she was Pumapalag. He said that Erlinda Ramos and [Lagrimas] should talk to each other again. She [Erlinda Ramos] committed another mistake because she left the place leaving the piece of paper -- purported Kasunduan without knowing that [Lagrimas] kept it. Erlinda Ramos innocently failed to demand the said piece of paper which [Lagrimas] is now using. She returned to Atty. Estacio to get the piece of paper but he answered her saying naibasura na and she trusted him but this time, it turned out that [Lagrimas] kept it which she is using now in this case.[18] The Court of Appeals stated that the fact that petitioner has remained in possession of the property sold, and paid its real estate taxes, would have made out a case for equitable mortgage. However, it noted that petitioner did not raise this defense, but admitted having sold the property to private respondents, alleging only that they have not paid the purchase price in full. It, therefore, ruled that the preponderance of evidence is against petitioner. Hence, this petition, with the following assigned errors: I THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS DISCRETION IN NOT INTERPRETING THAT THE KASUNDUAN EXECUTED BY AND BETWEEN PETITIONER (DEFENDANT) AND PRIVATE RESPONDENT (PLAINTIFF) SUPERSEDES THE DEED OF SALE WHICH HAS NOT BEEN CONSUMMATED. II THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS DISCRETION IN MISINTERPRETING AND DISREGARDING THE KASUNDUAN AS NOT APPLICABLE IN THE CASE AT BAR. III THE RESPONDENT COURT ERRED AND ABUSED ITS DISCRETION IN REVERSING AND DISMISSING THE DECISION OF THE REGIONAL TRIAL COURT AND [IN REINSTATING] THE DECISION OF THE COURT A QUO.[19] Petitioner contends that, as ruled by the RTC, since the question of ownership in this case is interwoven with that of possession, the MeTC should have dismissed the case because jurisdiction pertains to another tribunal. The contention is without merit. The only issue for resolution in an unlawful detainer case is physical or material possession of the property involved, independent of any claim of ownership by any of the party litigants.[20] Prior to the effectivity of Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980), the jurisdiction of inferior courts was confined to receiving evidence of ownership in order to determine only the nature and extent of possession, by reason of which such jurisdiction was lost the moment it became apparent that the issue of possession was interwoven with that of ownership.[21] With the enactment of Batas Pambansa Blg. 129, inferior courts were granted jurisdiction to resolve questions of ownership provisionally in order to determine the issue of possession, thus:

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Civil Cases.Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise: xxx Exclusive original jurisdiction over cases of forcible entry and unlawful detainer: Provided, That when in such cases, the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession. Section 16, Rule 70 (Forcible Entry and Unlawful Detainer) of the Rules of Court, as amended, similarly provides: Sec.16. Resolving defense of ownership.- When the defendant raises the defense of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession. Thus, in forcible entry and unlawful detainer cases, if the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the inferior courts have the undoubted competence provisionally to resolve the issue of ownership for the sole purpose of determining the issue of possession.[22] The MeTC, therefore, did not err in taking cognizance of the instant case. Petitioner also contends that the Court of Appeals erred by misinterpreting and disregarding the Kasunduan, which is binding between the parties and expressed their true intent. Petitioner asserts that the Kasunduan supersedes the Deed of Absolute Sale, which is actually a contract to sell. In effect, petitioner is asking this Court to review the factual finding of Court of Appeals on the true nature of the Kasunduan. As a rule, the findings of the fact of the Court of Appeals are final and cannot be reviewed on appeal by this Court, provided they are borne out by the record or are based on substantial evidence.[23] After reviewing the records herein, this Court finds no ground to change the factual finding of the Court of Appeals on the Kasunduan, with the resulting holding that it is not binding on the parties. The remaining issue is whether the Court of Appeals correctly ruled that private respondents have a right of material possession over the disputed property. It has been established that petitioner sold the subject property to private respondents for the price of P31,000, as evidenced by the Deed of Absolute Sale,[24] the due execution of which was not controverted by petitioner. The contract is absolute in nature, without any provision that title to the property is reserved in the vendor until full payment of the purchase price.[25] By the contract of sale,[26] petitioner (as vendor), obligated herself to transfer the ownership of, and to deliver, the subject property to private respondents (as vendees) after they paid the price of P31,000. Under Article 1477 of the Civil Code, the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. In addition, Article 1498 of the Civil Code provides that when the sale is made through a public instrument, as in this case, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. In this case, the Deed of Absolute Sale does not contain any stipulation against the constructive delivery of the property to private respondents. In the absence of stipulation to the contrary, the ownership of the property sold passes to the vendee upon the actual or constructive delivery thereof.[27] The Deed of Absolute Sale, therefore, supports private respondents right of material possession over the subject property. The finding of the MeTC, sustained by the Court of Appeals, is that the continued occupation by petitioner of said property after the sale, without payment of rent, was by mere tolerance. Private respondents claimed that petitioner requested for time to vacate the premises and they agreed thereto because they did not need the property at that

2)

time. However, when private respondents were asked to vacate their rented residence, they demanded that petitioner vacate the subject property, but petitioner refused to do so. A person who occupies the land of another at the latters tolerance or permission, without any contract between them, is bound by an implied promise that he will vacate the same upon demand, failing which a summary action for ejectment is the proper remedy against him.[28] WHEREFORE, the assailed decision of the Court of Appeals, in CA-G.R. SP No. 38716, which reversed and set aside the decision of the Regional Trial Court, and reinstated the decision of the Metropolitan Trial Court, is hereby AFFIRMED. No costs. SO ORDERED. Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Carpio, JJ., concur.

SPOUSES RAMON AND EMMA REYES VS DOMINADOR SALVADOR


The two Petitions for Review on Certiorari[1] now before this Court seek to challenge, under Rule 45 of the Rules of Court, the Decision[2] dated 17 June 1999 of the Court of Appeals in CA-G.R. CV No. 35688, which reversed and set aside the Decision[3] dated 25 November 1991 of the Regional Trial Court (RTC) of Pasay City, Branch 119, in the consolidated cases of LRC Case No. LP-553-P (an application for registration of title to real property) and Civil Case No. 6914-P (an action to declare ownership over real property, formerly numbered Pq-8557-P). The Court of Appeals upheld the title of Rosario Bondoc to the disputed property, thus, overturning the finding of the RTC of Pasay City that Maria Q. Cristobal and Dulos Realty & Development Corporation have a registrable title to the same property. The Contracts At the core of the controversy in the Petitions at bar is a parcel of unregistered land located in Tungtong, Las Pias, formerly of the Province of Rizal, now a part of Metro Manila, designated as Lot 1 of Plan Psu-205035, with an area of 19,545 square meters (subject property). It previously formed part of a bigger parcel of agricultural land[4] first declared in the name of Domingo Lozada (Domingo) in the year 1916 under Tax Declaration No. 2932.[5] During the lifetime of Domingo, he was married twice. From his first marriage to Hisberta Guevarra in the year 1873, he fathered two children, namely Bernardo and Anatalia. After the death of Hisberta, Domingo married Graciana San Jose in the year 1887[7] and their marriage produced two children, namely Nicomedes and Pablo.
[6]

Domingo and Graciana died on 27 February 1930 and 12 August 1941, respectively. On 18 March 1965, Nicomedes and the heirs of his brother Pablo entered into anExtrajudicial Settlement of the Estate[8] of their parents Domingo and Graciana. According to the settlement, the entire parcel of agricultural land declared in the name of Domingo[9] was divided into two, Lot 1 and Lot 2, in accordance with the approved subdivision plan Psu-205035. The subject property, i.e., Lot 1, was adjudicated to Nicomedes; while Lot 2 was given to the heirs of Pablo. Nicomedes then declared the subject property in his name in 1965 under Tax Declaration No. 2050.[10] On 23 June 1965, Nicomedes executed a Deed of Conditional Sale[11] over the subject property in favor of Emma Ver Reyes (Emma), which provided: That the Vendor [Nicomedes] is the true and lawful owner of a parcel of land situated at Tungtong, Las Pinas, Rizal, more particularly described as follows: A parcel of land (Lot 1 of plan Psu-205035), x x x; containing an area of NINETEEN THOUSAND FIVE HUNDRED FOURTY FIVE (19,545) SQUARE METERS, more or less, and still a portion of the land covered by Tax Declaration No. 2304 of Las Pinas, Rizal, in the name of Domingo Lozada, and with a total assessed value of P1,860.00. That the [subject property] is a paraphernal property of the Vendor [Nicomedes], the same having been inherited by him from his deceased mother, Graciana San Jose, but was declared for taxation in the name of his deceased father, Domingo Lozada; That for and in consideration of the sum of FOUR PESOS AND FIFTY CENTAVOS (P4.50), Philippine Currency, per square meter to be paid by the Vendee to the Vendor, the said Vendor by these presents hereby SELLS, CEDES, TRANSFERS and CONVEYS by way of CONDITIONAL SALE the above-described parcel of land together with all the

improvements thereon to the said Vendee [Emma], her heirs, assigns and successors, free from all liens and encumbrances, under the following terms and conditions, to wit: 1. That the Vendee [Emma] will pay the Vendor [Nicomedes] as follows:

(a). TWENTY FIVE PERCENT (25%) of the total price on the date of the signing of this contract; (b). The next TWENTY FIVE PERCENT (25%) of the total price upon the issuance of the title for the land described above; and (c). The balance of FIFTY PERCENT (50%) of the total price within one (1) year from the issuance of the said title; 2. That if the Vendee [Emma] fails to pay the Vendor [Nicomedes] the sums stated in paragraphs 1(b) and 1(c) above within the period stipulated and after the grace period of one (1) month for each payment, this contract shall automatically be null and void and of no effect without the necessity of any demand, notice or filing the necessary action in court, andthe Vendor [Nicomedes] shall have the full and exclusive right to sell, transfer and convey absolutely the above-described property to any person, but the said Vendor [Nicomedes] shall return to the Vendee [Emma] all the amount paid to him by reason of this contract without any interest upon the sale of the said property to another person; 3. That the total price shall be subject to adjustment in accordance with the total area of the above-described property that will be finally decreed by the court in favor of the herein Vendor [Nicomedes]; and 4. That the Vendor [Nicomedes] will execute a final deed of absolute sale covering the said property in favor of the Vendee [Emma] upon the full payment of the total consideration in accordance with the stipulations above. (Emphases ours.)

The Deed of Conditional Sale was registered in the Registry of Property for Unregistered Lands in August 1965.[12] It would appear from the records of the case that Emma was only able to pay the first installment of the total purchase price agreed upon by the parties. Furthermore, as will be discussed later on, Nicomedes did not succeed in his attempt to have any title to the subject property issued in his name. On 14 June 1968, Nicomedes entered into another contract involving the subject property with Rosario D. Bondoc (Rosario). Designated as an Agreement of Purchase and Sale,[13] the significant portions thereof states: NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of ONE HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED FIVE PESOS (P175,905.00) Philippine Currency, which the BUYER [Rosario] shall pay to the SELLER [Nicomedes] in the manner and form hereinafter specified, the SELLER [Nicomedes] by these presents hereby agreed and contracted to sell all his rights, interests, title and ownership over the parcel of land x x x unto the BUYER [Rosario], who hereby agrees and binds herself to purchase from the former, the aforesaid parcel of land, subject to the following terms and conditions: 1. Upon the execution of this Agreement, the BUYER [Rosario] shall pay the SELLER [Nicomedes], the sum of FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency.

2. [That] upon the delivery by the SELLER [Nicomedes] to the BUYER [Rosario] of a valid title of the aforesaid parcel of land, free from any and all liens and encumbrances, and the execution of the final Deed of Sale, the BUYER [Rosario] shall pay to the SELLER [Nicomedes], the sum of THIRTY SEVEN THOUSAND SEVEN HUNDRED FIVE PESOS (P37,705.00) Philippine Currency, and the final balance of ONE HUNDRED TWENTY THREE THOUSAND AND TWO HUNDRED PESOS (P123,200.00) Philippine Currency, one year from the date of execution of the final deed of sale, all without interest. 3. That in the event the BUYER [Rosario] fails to pay any amount as specified in Section 2, Paragraph II, then this contract, shall, by the mere fact of non-payment expire itself and shall be considered automatically cancelled, of no value and effect, and immediately thereafter the SELLER [Nicomedes] shall return to the BUYER [Rosario] the sums of money he had received from the BUYER [Rosario] without any interests and whatever improvement or improvements made or introduced by the BUYER [Rosario] on the lot being sold shall accrue to the ownership and possession of the SELLER [Nicomedes]. xxxx 6. The SELLER [Nicomedes] hereby warrants the useful and peaceful possession and occupation of the lot subject matter of this agreement by the BUYER [Rosario]. (Emphasis ours.) On 7 March 1969, Nicomedes and Rosario executed a Joint Affidavit,[14] whereby they confirmed the sale of the subject property by Nicomedes to Rosario through the Agreement of Purchase and Sale dated 14 June 1968. They likewise agreed to have the said Agreement registered with the Registry of Deeds in accordance with the provisions of Section 194 of the Revised Administrative Code, as amended by Act No. 3344. The Agreement of Purchase and Sale was thus registered on 10 March 1969.[15] The records of this case show that, of the entire consideration stipulated upon in the Agreement, only the first installment was paid by Rosario. No title to the subject property was ever delivered to her since, at the time of the execution of the above contract, Nicomedess application for the registration of the subject property was still pending. Five months thereafter, Nicomedes executed on 10 August 1969 a third contract, a Deed of Absolute Sale of Unregistered Land,[16] involving a portion of the subject property measuring 2,000 square meters, in favor of Maria Q. Cristobal (Maria).[17] The relevant terms of the Deed recite: THAT I, NICOMEDES J. LOZADA, of legal age, Filipino citizen, married and a resident of Las Pias, Rizal, Philippines, for and in consideration of the sum of TWENTY FIVE THOUSAND (P25,000.00) PESOS, Philippine currency, receipt of which is hereby acknowledged to my full and entire satisfaction, do hereby sell, transfer and convey to MARIA Q. CRISTOBAL, likewise of legal age, Filipino citizen, married to Juan [Dulos], and a resident of 114 Real Street, Las Pias, Rizal, Philippines, her heirs, executors, administrators and assigns, TWO THOUSAND SQUARE METERS (2,000) for an easement of way of a parcel of unregistered land situated in the Barrio of Tungtong, Municipality of Las Pias, Province of Rizal, Philippines, exclusively belonging to and possessed by me, and more particularly described as follows: A parcel of land described under Tax Declaration No. 9575 (Lot No. 1, Psu 205035), situated in the Barrio of Tuntong, Municipality of Las Pias, Province of Rizal, Philippines. xxx [C]ontaining an area of 1.9545 hectares, more or less. (Emphasis ours.)

Nicomedes passed away on 29 June 1972. The Deed of Absolute Sale of Unregistered Land between Nicomedes and Maria was registered only on 8 February 1973,[18] or more than seven months after the formers death. On 10 August 1979, Nicomedess heirs, namely, the four children from his first marriage,[19] the six children from his second marriage,[20] and his surviving second spouse Genoveva Pallera Vda. De Lozada, executed a Deed of Extrajudicial Settlement of the Estate of the Late Nicomedes J. Lozada with Ratification of a Certain Deed of Absolute Sale of Unregistered Land.[21] The heirs declared in said Deed of Extrajudicial Settlement that the only property left by Nicomedes upon his death was the subject property. They also ratified therein the prior sale of a portion of the subject property made by Nicomedes in favor of Maria, but they clarified that the actual area of the portion sold as presented in the plan was 2,287 square meters, not 2,000 square meters. After excluding the portion sold to Maria, the heirs claimed equal pro indiviso shares in the remaining 17,258 square meters of the subject property. On 30 July 1980, Nicomedess heirs[22] collectively sold, for the sum of P414,192.00, their shares in the subject property in favor of Dulos Realty and Development Corporation (Dulos Realty), as represented by its President Juan B. Dulos, via a Deed of Absolute Sale of an Unregistered Land.[23] The said Deed of Absolute Sale dated 30 July 1980, however, was not registered. The Cases On 11 April 1966, after executing the Deed of Conditional Sale in favor of Emma on 23 June 1965, Nicomedes filed an application for the registration of the subject property with the then Court of First Instance (CFI) of Pasig, docketed as LRC Case No. N-6577. The grandchildren of Domingo by his former marriage[24] opposed the application for registration and Emma and her husband Ramon filed their intervention. Sometime in 1973, following the execution in her favor of the Agreement of Purchase and Sale dated 14 June 1968 and Joint Affidavit dated 7 March 1969, Rosario filed a motion to intervene in LRC Case No. N-6577 then pending before the CFI of Pasig; however, her motion was denied by the CFI of Pasig, in an Order dated 2 June 1973.[25] Rosario no longer appealed from the order denying her motion to intervene in said case. In view of the conflicting claims over the subject property, the CFI of Pasig dismissed without prejudice LRC Case No. N-6577 on 21 November 1975 and ordered the parties therein, namely, the applicant Nicomedes and the oppositors/intervenors, to litigate first the issues of ownership and possession.[26] Five years later, on 27 June 1980, Domingos grandchildren from his first marriage, Dominador, et al.,[27] filed an Application for Registration[28] of title to the subject property with the CFI of Rizal, docketed as LRC Case No. LP-553P. In their Application, Dominador, et al., alleged, inter alia, that they were the owners of the subject property by virtue of inheritance; they were the actual occupants of the said property; and, other than Emma, they had no knowledge of any encumbrance or claim of title affecting the same. On 6 November 1980, Rosario, assisted by her husband Mariano Bondoc, invoking the Agreement of Purchase and Sale executed in her favor by Nicomedes on 14 June 1968, filed a Complaint [29] before the CFI of Rizal for the declaration in her favor of ownership over the subject property, with an application for a temporary restraining order or preliminary injunction, against Trinidad Lozada (one of Domingos heirs from his first marriage who applied for registration of the subject property in LRC Case No. LP-553-P)and two other persons, who allegedly trespassed into the subject property. Rosarios complaint was docketed as Civil Case No. Pq-8557-P. On 4 August 1981, the parties agreed to have LRC Case No. LP-553-P (the application for land registration of Dominador, et al.) consolidated with Civil Case No. Pq-8557-P (the action for declaration of ownership of Rosario).[30]

By subsequent events,[31] and in consideration of the location of the subject property in Las Pias, LRC Case No. LP553-P and Civil Case No. Pq-8557-P, reinstated asCivil Case No. 6914-P, were finally transferred to and decided by the RTC of Pasay City. In its Decision dated 25 November 1991, the RTC of Pasay City, Branch 119, disposed of the cases thus: WHEREFORE, considering all the foregoing, the court denies the application of Dominador Salvador, Sr. et al, having no more right over the land applied for, dismisses Civil Case No. Pq-8557-P now 6914 for lack of merit, and hereby declares Maria Cristobal Dulos and Dulos Realty and Development Corporation to have a registrable title, confirming title and decreeing the registration of Lot 1 PSU-205035 containing a total area of 19,545 square meters, 2,287 square meters of which appertains to Maria Cristobal Dulos married to Juan Dulos and the remaining portion, in favor of Dulos Realty and Development Corporation, without pronouncement as to costs.[32] (Emphasis ours.)

In so ruling, the RTC rationalized that the subject property constituted Domingos share in the conjugal properties of his second marriage to Graciana San Jose and, therefore, properly pertained to Nicomedes as one of his sons in said marriage. Being Domingos heirs from his first marriage, Dominador, et al., were not entitled to the subject property. The lower court also found that neither Emma nor Rosario acquired a better title to the subject property as against Maria and Dulos Realty. No final deed of sale over the subject property was executed in favor of Emma or Rosario, while the sales of portions of the same property in favor of Maria and of the rest to Dulos Realty were fully consummated as evidenced by the absolute deeds of sale dated 10 August 1969 and 30 July 1980, respectively. Dominador, et al., Emma and her spouse Ramon Reyes (Ramon), and Rosario separately appealed to the Court of Appeals the foregoing Decision dated 25 November 1991 of the RTC of Pasay City.[33] Their consolidated appeals were docketed as CA-G.R. CV No. 35688. Dominador, et al., however, moved to withdraw their appeal in light of the amicable settlement they entered into with Maria and Dulos Realty.[34] In a Resolution dated 24 September 1992,[35] the Court of Appeals granted their Motion to Withdraw Appeal. Dominador, et al., later filed a motion to withdraw their earlier Motion to Withdraw Appeal, but this was denied by the Court of Appeals in a Resolution dated 15 January 1993.[36] In their respective Briefs before the appellate court,[37] Emma and Rosario both faulted the RTC of Pasay City for awarding the subject property to Maria and Dulos Realty. They each claimed entitlement to the subject property and asserted the superiority of their respective contracts as against those of the others. On 17 June 1999, the Court of Appeals rendered its assailed Decision, ruling as follows: As gathered above, both contracts [entered into with Emma and Rosario] gave Nicomedes, as vendor, the right to unilaterally rescind the contract the moment the buyer failed to pay within a fixed period (Pingol v. CA, 226 SCRA 118), after which he, as vendor, was obliged to return without interest the sums of money he had received from the buyer (under the Deed of Conditional Sale [to Emma], upon the sale of the property to another). Additionally, under the Agreement of Purchase and Sale [with Rosario], the vendor, in case of rescission, would become the owner and entitled to the possession of whatever improvements introduced by the buyer. Under the Deed of Conditional Sale [to Emma], there was no provision that possession would be, in case of rescission, returned to the vendor, thereby implying that possession remained with him (vendor). Such being the case, it appears to be a contract to sell. Whereas under the Agreement of Purchase and Sale [with Rosario], the provision that

in case of rescission, any improvements introduced by the vendee would become the vendors implies that possession was transferred to the vendee and, therefore, it appears to be a contract of sale. That the Agreement of Purchase and Sale [with Rosario] was a contract of sale gains light from the Joint Affidavit subsequently executed by Rosario and Nicomedes stating that an Agreement of Purchase and Sale wherein the former (Nicomedes J. Lozada) sold to the latter (Rosario D. Bondoc) a parcel of land had been executed but that the lot not having been registered under Act No. 496 nor under the Spanish Mortgage Law, the parties hereto have agreed to register the Agreement of Purchase and Sale ... under the provision of Section 194 of the Revised Administrative Code, as amended by Act No. 3344. Rosario registered the Agreement of Purchase and Sale alright on March 10, 1969. She paid taxes on the lot from 1980 1985. She fenced the lot with concrete and hollow blocks. And apart from opposing the land registration case, she filed a complaint against Trinidad, et al., for declaration ownership. Article 1371 of the Civil Code provides: Art. 1371. In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered.

From the provisions of the Agreement of Purchase and Sale [to Rosario] and the subsequent acts of the parties then including the execution of the Joint Affidavit by Rosario and Nicomedes stating that an Agreement of Purchase and Sale wherein the former (Nicomedes...) sold to the latter (Rosario...) a parcel of land, had been executed, there is no mistaking that the lot was sold to Rosario xxx. Anent the effect of Rosarios registration of the Agreement of Purchase and Sale on Emmas contract involving the same lot, Act No. 3344 (Amending Sec. 194 of the Administrative Code [Recording of instruments or deeds relating to real estate not registered under Act No. 496 or under the Spanish Mortgage Law]) provides that any registration made under Sec. 194 of the Administrative Code shall be understood to be without prejudice to a third party who has a better right. Better right, however, was not defined by law. But author Narciso Pea is inclined to concur that better right should refer to a right which must have been acquired by a third party independently of the unregistered deed, such as, for instance, title by prescription, and that it has no reference to rights acquired under that unregistered deed itself, he citing Nisce v. Milo, G.R. No. 425016, January 17, 1936 Unrep. 62 Phil. 976 x x x. Given the fact that the contract in Emmas favor is a mere contract to sell, as against Rosarios contract which, as demonstrated above is one of sale and, in any event, independently of Emmas contract to sell, she has no claim of a better right unlike Rosario who has, not to mention the fact that she (Rosario) registered her contract earlier than Emmas, Rosario must prevail. The lot having been previously sold to Rosario, there was no lot or portion thereof to be later sold to Maria and to Dulos Realty in 1979 and 1980, respectively. WHEREFORE, the appealed Joint Decision is hereby REVERSED and SET ASIDE and another is rendered confirming the title of Rosario D. Bondoc over subject lot, Lot 1, PSU-205035 containing an area of 19,545 sq.m., ordering its

registration in her name, and dismissing the claims of ownership of all other claimants. Appellees Maria Cristobal and Dulos Realty and Development Corporation and all other claimants to subject land including all persons claiming under them are hereby ordered to vacate and restore possession to appellant Rosario D. Bondoc. Upon issuance of title to subject lot, appellant Rosario D. Bondoc is ordered to pay the balance of the purchase price to the heirs of Nicomedes Lozada in accordance with the Agreement of Purchase and Sale executed by the latter in her favor. This judgment is without prejudice to the rights which Emma Ver Reyes and Maria Cristobal and Dulos Realty and Development Corporation might have against the estate or surviving heirs of Nicomedes Lozada to the extent that the latter was/were benefited.[38] (Emphasis ours.) Aggrieved, Emma and her husband Ramon,[39] as well as Maria and Dulos Realty,[40] without seeking reconsideration of the appellate courts decision, filed directly before this Court separate Petitions for Review on Certiorari under Rule 45 of the Rules of Court, docketed as G.R. No. 139047 and G.R. No. 139365, respectively, assailing the17 June 1999 Decision of the appellate court. Upon the manifestation and motion of Maria and Dulos Realty,[41] the two Petitions were ordered consolidated by this Court in a Resolution[42] dated 13 December 1999. In their Petition, Emma and her husband Ramon raise the following issues: I. WHETHER OR NOT OWNERSHIP OF THE DISPUTED LOT WAS VALIDLY AND LEGALLY TRANSFERRED TO EMMA VER REYES. II. WHETHER OR NOT MARIA CRISTOBAL DULOS AND DULOS REALTY AND DEVELOPMENT CORPORATION ARE PURCHASERS IN BAD FAITH. III. WHETHER OR NOT EMMA VER REYES AND RAMON REYES ARE BARRED BY PRESCRIPTION OR LACHES. IV. WHETHER OR NOT THE COURT OF APPEALS PATENTLY AND GRAVELY ERRED IN CONFIRMING THE TITLE OF ROSARIO BONDOC OVER THE DISPUTED LOT, ORDERING ITS REGISTRATION IN HER NAME AND DISMISSING THE CLAIM OF EMMA VER REYES AND RAMON REYES.[43]

Maria and Dulos Realty, on the other hand, submitted in their Petition the following issues for consideration of this Court:

I.

WHETHER OR NOT BONDOCS AGREEMENT OF PURCHASE AND SALE AND SPOUSES REYES DEED OF CONDITIONAL SALE ARE REGISTRABLE ABSOLUTE CONVEYANCES IN FEE SIMPLE TO SERVE AS BASIS FOR AN AWARD AND REGISTRATION OF THE SUBJECT LOT IN THEIR FAVOR. II. WHETHER OR NOT RESPONDENTS BONDOC AND THE REYESES ARE BARRED BY LACHES AND/OR PRESCRIPTION. III. WHETHER OR NOT RESPONDENT BONDOC IS BARRED BY RES JUDICATA.[44]

The fundamental issue that the Court is called upon to resolve is, in consideration of all the contracts executed by Nicomedes and/or his heirs involving the subject property, which party acquired valid and registrable title to the same. Emma and Ramon contend that although the subject property was conditionally sold to them by Nicomedes, the conditionality of the sale did not suspend the transfer of ownership over the subject property from Nicomedes to Emma. Even though Nicomedes may automatically rescind the contract in case of non-payment by Emma of the balance of the purchase price, it did not bar the transfer of title to the subject property to Emma in the meantime. Emma and Reyes likewise claim that there was constructive delivery of the subject property to Emma, inasmuch as the Deed of Conditional Sale in her favor was a public instrument. Furthermore, Emma was in possession of the subject property in the concept of owner since she had been paying realty taxes for the same, albeit in the name of Nicomedes (in whose name it was declared), from the time of the sale in 1965 until 1972. Emma and Ramon also assert that Maria and Dulos Realty were in bad faith as the sales of the subject property in their favor, on 10 August 1969 and 30 July 1980, respectively, occurred only after the filing of the cases involving the property[45] and the registration of the sale to Emma. Finally, Emma and Ramon maintain that the Court of Appeals erred in ruling that the contract in favor of Rosario was a contract of sale for the sole reason that actual possession of the property was already transferred to the latter. For their part, Maria and Dulos Realty point out that Emma and Rosario are not holders of absolute deeds of conveyances over the subject property, which would have entitled them to register the same in their respective names. They further buttress their alleged superior right to the subject property based on the execution of two notarized documents of sale in their favor, which constituted symbolic and constructive delivery of the subject property to them. Maria and Dulos Realty likewise assert that the claims of Emma and Rosario are already barred by laches and prescription because they only decided to enforce their respective rights over the subject property after Domingos heirs filed with the CFI of Rizal on 27 June 1980 an application for registration of the subject property, docketed as LRC Case No. LP-553-P, notwithstanding their knowledge of Nicomedess death on 29 June 1972. Lastly, Maria and Dulos Realty aver that Rosario is already barred by res judicata since her motion to intervene in LRC Case No. 6577, the case instituted by Nicomedes to register the subject property, was denied by the CFI of Pasig. The dismissal of Rosarios motion to intervene in the case for registration of the subject property already became final and executory, thus, barring Rosario from pursuing her claim over the same.

This Courts Ruling After a conscientious review of the arguments and evidence presented by the parties, the Court finds that the Deed of Conditional Sale between Nicomedes and Emma and the Agreement of Purchase and Sale between Nicomedes

and Rosario were both mere contracts to sell and did not transfer ownership or title to either of the buyers in light of their failure to fully pay for the purchase price of the subject property. In Coronel v. Court of Appeals,[46] this Court effectively provided the guidelines for differentiating between a contract to sell and a contract of sale, to wit: The Civil Code defines a contract of sale, thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential elements of a contract of sale are the following: a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; b) Determinate subject matter; and c) Price certain in money or its equivalent. Under this definition, a Contract to Sell may not be considered as a Contract of Sale because the first essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer ownership of the property subject of the contract to sell until the happening of an event, which for present purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition, the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule: Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where the ownership or title is retained by the seller and is not to pass until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but simply an event that prevented the obligation of the vendor to convey title from acquiring binding force. Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which states: Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full payment of the purchase price.

A contract to sell as defined hereinabove, may not even be considered as a conditional contract of sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the first element of consent is present, although it is conditioned upon the happening of a contingent event which may or may not occur. If the suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is fulfilled, the contract of sale is thereby perfected , such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the purchase price, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale. (Emphases ours.)

Also in Coronel v. Court of Appeals, the Court highlighted the importance of making the distinction between a contract to sell and a contract of sale: It is essential to distinguish between a contract to sell and a conditional contract of sale specially in cases where the subject property is sold by the owner not to the party the seller contracted with, but to a third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a third person buying such property despite the fulfillment of the suspensive condition such as the full payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in such case. Title to the property will transfer to the buyer after registration because there is no defect in the owner-sellers title per se, but the latter, of course, may be sued for damages by the intending buyer. In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous delivery of the subject property, the sellers ownership or title to the property is automatically transferred to the buyer such that, the seller will no longer have any title to transfer to any third person. Applying Article 1544 of the Civil Code, such second buyer of the property who may have had actual or constructive knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the sale.[47] Even in the absence of an express stipulation to such effect, the intention of the parties to execute a contract to sell may be implied from the provisions of the contract. While Article 1478[48] of the Civil Code recognizes the right of the parties to agree that the ownership of the thing shall not pass to the purchaser until he has fully paid the price therefore, the same statutory provision does not require that such be expressly stipulated in the contract. In Adelfa Properties, Inc. v. Court of Appeals,[49] the Court ruled that since the contract between the parties therein did not contain a stipulation on reversion or reconveyance of the property to the seller in the event that the buyer did not comply with its obligation, it may legally be inferred that the parties never intended to transfer ownership to the buyer prior to the completion of the payment of the purchase price. Consequently, the contract involved in the aforementioned case was a mere contract to sell. An agreement is also considered a contract to sell if there is a stipulation therein giving the vendor the rights to unilaterally rescind the contract the moment the vendee fails to pay within a fixed period and to consequently open the

subject property anew to purchase offers.[50] In the same vein, where the seller promises to execute a deed of absolute sale upon the completion by the buyer of the payment of the price, the contract is only a contract to sell.[51] Viewed in light of the foregoing pronouncements, the Deed of Conditional Sale executed by Nicomedes in favor of Emma on 23 June 1965 is unmistakably a mere contract to sell. The Court looks beyond the title of said document, since the denomination or title given by the parties in their contract is not conclusive of the nature of its contents. [52] In the construction or interpretation of an instrument, the intention of the parties is primordial and is to be pursued.[53] If the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.[54] A simple reading of the terms of the 23 June 1965 Deed of Conditional Sale readily discloses that it contains stipulations characteristic of a contract to sell. It provides for the automatic cancellation of the contract should Emma fail to pay the purchase price as required therein; and, in such an event, it grants Nicomedes the exclusive right to thereafter sell the subject property to a third person. As in Adelfa Properties, the contract between Nicomedes and Emma does not provide for reversion or reconveyance of the subject property to Nicomedes in the event of nonpayment by Emma of the purchase price. More importantly, the Deed in question clearly states that Nicomedes will issue a final deed of absolute sale only upon the full payment of the purchase price for the subject property. Taken together, the terms of the Deeds reveal the evident intention of the parties to reserve ownership over the subject property to Nicomedes pending payment by Emma of the full purchase price for the same. While the Deed of Conditional Sale dated 23 June 1965 was indeed contained in a public instrument, it did not constitute constructive delivery of the subject property to Emma in view of the contrary inference in the Deed itself that the ownership over the subject property was reserved by Nicomedes.[55] Moreover, other than her claim that she paid the realty taxes on the subject property, Emma did not present any evidence that she took actual and physical possession of the subject property at any given time. This Court also finds that, contrary to the ruling of the Court of Appeals, the Agreement of Purchase and Sale executed by Nicomedes in favor of Rosario on 14 June 1968 is likewise a mere contract to sell. The Agreement itself categorically states that Nicomedes only undertakes to sell the subject property to Rosario upon the payment of the stipulated purchase price and that an absolute deed of sale is yet to be executed between the parties. Thus: NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of ONE HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED FIVE PESOS (P175,905.00) Philippine Currency, which the BUYER shall pay to the SELLER in the manner and form hereinafter specified, the SELLER by these presents hereby agreed and contracted to sell all his rights, interests, title and ownership over the parcel of land xxx unto the BUYER, who hereby agrees and binds herself to purchase from the former, the aforesaid parcel of land, subject to the following terms and conditions: 1. Upon the execution of this Agreement, the BUYER shall pay the SELLER, the sum of FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency. 2. That upon the delivery by the SELLER to the BUYER of a valid title of the aforesaid parcel of land, free from any and all liens and encumbrances, and the execution of the final Deed of Sale, the BUYER shall pay to the SELLER, the sum of THIRTY SEVEN THOUSAND SEVEN HUNDRED FIVE PESOS (P37,705.00) Philippine Currency, and the final balance

of ONE HUNDRED TWENTY THREE THOUSAND AND TWO HUNDRED PESOS (P123,200.00) Philippine Currency, one year from the date of the execution of the final deed of sale, all without interest.[56] (Emphases ours.)

The Agreement additionally grants Nicomedes the right to automatically cancel the same in the event of nonpayment by Rosario of any of the specified sums therein and any improvement introduced in the subject property shall thereby accrue to Nicomedes, viz: 3. That in the event the BUYER fails to pay any amount as specified in Section 2, Paragraph II, then this contract, shall, by the mere fact of non-payment expire itself and shall be considered automatically cancelled, of no value and effect, and immediately thereafter the SELLER shall return to the buyer the sums of money he had received from the BUYER without any interests and whatever improvement or improvements made or introduced by the BUYER on the lot being sold shall accrue to the ownership and possession of the SELLER.[57]

As can be clearly read above, only the rights to possess the property and construct improvements thereon have been evidently given to Rosario. The provisions of the Agreement do not in any way indicate that the ownership of the subject property has likewise been transferred to Rosario. That Nicomedes shall appropriate the improvements as his own should Rosario default in her payment of the purchase price only further supports the conclusion that title to the subject property itself still remained with Nicomedes. The Court concludes that the Deed of Conditional Sale in favor of Emma and the Agreement of Purchase and Sale in favor of Rosario were mere contracts to sell. As both contracts remained unperfected by reason of the noncompliance with conditions thereof by all of the parties thereto, Nicomedes can still validly convey the subject property to another buyer. This fact, however, is without prejudice to the rights of Emma and Rosario to seek relief by way of damages against the estate and heirs of Nicomedes to the extent that the latter were benefited by the sale to succeeding buyers.[58] Thus, the Deeds of Absolute Sale in favor of Maria and Dulos Realty were the only conveyances of the subject property in this case that can be the source of a valid and registrable title. Both contracts were designated as absolute sales and the provisions thereof leave no doubt that the same were true contracts of sale. The total considerations for the respective portions of the subject property were fully paid by the buyers and no conditions whatsoever were stipulated upon by the parties as regards the transmission of the ownership of the said property to the said buyers. The fact that Rosario was the first among the parties to register her contract in the Registry of Property for Unregistered Lands on 10 March 1969 is of no moment. Act No. 3344,[59] which amended Section 194 of the Administrative Code, enunciates that any registration made under Section 194 of the Administrative Code shall be understood to be without prejudice to a third party who has a better right. In this case, Maria and Dulos Realty acquired their title to the property in separate deeds of absolute sale executed in their favor by Nicomedes and his heirs. Upon the execution of these deeds, the ownership of the subject property was vested unto the said buyers instantly, unlike the contracts to sell executed in favor of Emma and Rosario. Consequently, the rights to the subject property of Maria and Dulos Realty, acquired through the contracts of sale in their favor, are undeniably better or superior to those of Emma or Rosario, and can thus be confirmed by registration.

In sum, this Court recognizes the valid and registrable rights of Maria and Dulos Realty to the subject property, but without prejudice to the rights of Emma and Rosario to seek damages against the estate and heirs of Nicomedes. WHEREFORE, premises considered, the Petition in G.R. No. 139047 is DENIED, while the Petition in G.R. No. 139365 is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 35688 dated 17 June 1999 is SET ASIDE and the Decision dated 25 November 1991 of the Regional Trial Court of Pasay City, Branch 119, is REINSTATED. No costs. SO ORDERED.

Republic of the Philippines Supreme Court Manila FIRST DIVISION ROBERTO D. TUAZON, Petitioner, - versus Present: LOURDES Q. DEL ROSARIO-SUAREZ, CATALINA R. SUAREZ-DE LEON, WILFREDO DE LEON, MIGUEL LUIS S. DE LEON, ROMMEL LEE CORONA, S. DE C. J., Chairperson, LEON, and GUILLERMA L. SANDICO-SILVA, as attorney-in-factLEONARDO-DE of the CASTRO, defendants, except Lourdes Q. Del Rosario-Suarez, DEL CASTILLO, Respondents. ABAD, and PEREZ, JJ. G.R. No. 168325

Promulgated: December 8, 2010 x-------------------------------------------------------------------x

DECISION

DEL CASTILLO, J.: In a situation where the lessor makes an offer to sell to the lessee a certain property at a fixed price within a certain period, and the lessee fails to accept the offer or to purchase on time, then the lessee loses his right to buy the property and the owner can validly offer it to another. This Petition for Review on Certiorari[1] assails the Decision[2] dated May 30, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 78870, which affirmed the Decision[3] dated November 18, 2002 of the Regional Trial Court (RTC), Branch 101, Quezon City in Civil Case No. Q-00-42338. Factual Antecedents Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a parcel of land, containing more or less an area of 1,211 square meters located along Tandang Sora Street, Barangay Old Balara, Quezon City and previously covered by Transfer Certificate of Title (TCT) No. RT-56118[4] issued by the Registry of Deeds of Quezon City.

On June 24, 1994, petitioner Roberto D. Tuazon (Roberto) and Lourdes executed a Contract of Lease[5] over the abovementioned parcel of land for a period of three years. The lease commenced in March 1994 and ended in February 1997. During the effectivity of the lease, Lourdes sent a letter[6] dated January 2, 1995 to Roberto where she offered to sell to the latter subject parcel of land. She pegged the price at P37,541,000.00 and gave him two years from January 2, 1995 to decide on the said offer. On June 19, 1997, or more than four months after the expiration of the Contract of Lease, Lourdes sold subject parcel of land to her only child, Catalina Suarez-De Leon, her son-in-law Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and Rommel S. De Leon (the De Leons), for a total consideration of only P2,750,000.00 as evidenced by a Deed of Absolute Sale[7] executed by the parties. TCT No. 177986[8] was then issued by the Registry of Deeds of Quezon City in the name of the De Leons. The new owners through their attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate the premises. Roberto refused hence, the De Leons filed a complaint for Unlawful Detainer before the Metropolitan Trial Court (MeTC) of Quezon City against him. On August 30, 2000, the MeTC rendered a Decision[9] ordering Roberto to vacate the property for non-payment of rentals and expiration of the contract. Ruling of the Regional Trial Court On November 8, 2000, while the ejectment case was on appeal, Roberto filed with the RTC of Quezon City a Complaint[10] for Annulment of Deed of Absolute Sale, Reconveyance, Damages and Application for Preliminary Injunction against Lourdes and the De Leons. On November 13, 2000, Roberto filed a Notice of Lis Pendens[11] with the Registry of Deeds of Quezon City. On January 8, 2001, respondents filed An Answer with Counterclaim[12] praying that the Complaint be dismissed for lack of cause of action. They claimed that the filing of such case was a mere leverage of Roberto against them because of the favorable Decision issued by the MeTC in the ejectment case. On September 17, 2001, the RTC issued an Order[13] declaring Lourdes and the De Leons in default for their failure to appear before the court for the second time despite notice. Upon a Motion for Reconsideration,[14] the trial court in an Order[15] dated October 19, 2001 set aside its Order of default. After trial, the court a quo rendered a Decision declaring the Deed of Absolute Sale made by Lourdes in favor of the De Leons as valid and binding. The offer made byLourdes to Roberto did not ripen into a contract to sell because the price offered by the former was not acceptable to the latter. The offer made by Lourdes is no longer binding and effective at the time she decided to sell the subject lot to the De Leons because the same was not accepted by Roberto. Thus, in a Decision dated November 18, 2002, the trial court dismissed the complaint. Its dispositive portion reads: WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled Complaint for lack of merit, and ordering the Plaintiff to pay the Defendants, the following: 1. 2. 3. 4. the amount of P30,000.00 as moral damages; the amount of P30,000.00 as exemplary damages; the amount of P30,000.00 as attorneys fees; and cost of the litigation. SO ORDERED.[16]

Ruling of the Court of Appeals On May 30, 2005, the CA issued its Decision dismissing Robertos appeal and affirming the Decision of the RTC. Hence, this Petition for Review on Certiorari filed by Roberto advancing the following arguments: I. THE TRIAL COURT AND THE COURT OF APPEALS HAD DECIDED THAT THE RIGHT OF FIRST REFUSAL EXISTS ONLY WITHIN THE PARAMETERS OF AN OPTION TO BUY, AND DID NOT EXIST WHEN THE PROPERTY WAS SOLD LATER TO A THIRD PERSON, UNDER FAVORABLE TERMS AND CONDITIONS WHICH THE FORMER BUYER CAN MEET. II. WHAT IS THE STATUS OR SANCTIONS OF AN APPELLEE IN THE COURT OF APPEALS WHO HAS NOT FILED OR FAILED TO FILE AN APPELLEES BRIEF?[17]

Petitioners Arguments

Roberto claims that Lourdes violated his right to buy subject property under the principle of right of first refusal by not giving him notice and the opportunity to buy the property under the same terms and conditions or specifically based on the much lower price paid by the De Leons. Roberto further contends that he is enforcing his right of first refusal based on Equatorial Realty Development, Inc. v. Mayfair Theater, Inc.[18] which is the leading case on the right of first refusal. Respondents Arguments On the other hand, respondents posit that this case is not covered by the principle of right of first refusal but an unaccepted unilateral promise to sell or, at best, a contract of option which was not perfected. The letter of Lourdes to Roberto clearly embodies an option contract as it grants the latter only two years to exercise the option to buy the subject property at a price certain of P37,541,000.00. As an option contract, the said letter would have been binding upon Lourdes without need of any consideration, had Roberto accepted the offer. But in this case there was no acceptance made neither was there a distinct consideration for the option contract. Our Ruling The petition is without merit. This case involves an option contract and not a contract of a right of first refusal In Beaumont v. Prieto,[19] the nature of an option contract is explained thus: In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language:

A contract by virtue of which A, in consideration of the payment of a certain sum to B, acquires the privilege of buying from, or selling to, B certain securities or properties within a limited time at a specified price. (Story vs. Salamon, 71 N. Y., 420.) From Vol. 6, page 5001, of the work Words and Phrases, citing the case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17) the following quotation has been taken: An agreement in writing to give a person the option to purchase lands within a given time at a named price is neither a sale nor an agreement to sell. It is simply a contract by which the owner of property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his land; he does not then agree to sell it; but he does sell something; that is, the right or privilege to buy at the election or option of the other party. The second party gets in praesenti, not lands, nor an agreement that he shall have lands, but he does get something of value; that is, the right to call for and receive lands if he elects. The owner parts with his right to sell his lands, except to the second party, for a limited period. The second party receives this right, or rather, from his point of view, he receives the right to elect to buy. But the two definitions above cited refer to the contract of option, or, what amounts to the same thing, to the case where there was cause or consideration for the obligation x x x. (Emphasis supplied.) On the other hand, in Ang Yu Asuncion v. Court of Appeals,[20] an elucidation on the right of first refusal was made thus: In the law on sales, the so-called right of first refusal is an innovative juridical relation. Needless to point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code. Neither can the right of first refusal, understood in its normal concept, per se be brought within the purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an offer under Article 1319 of the same Code. An option or an offer would require, among other things, a clear certainty on both the object and the cause or consideration of the envisioned contract. In a right of first refusal, while the object might be made determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual intention to enter into a binding juridical relation with another but also on terms, including the price, that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely belonging to a class of preparatory juridical relations governed not by contracts (since the essential elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other laws of general application, the pertinent scattered provisions of the Civil Code on human conduct. Even on the premise that such right of first refusal has been decreed under a final judgment, like here, its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that merely recognizes its existence, nor would it sanction an action for specific performance without thereby negating the indispensable element of consensuality in the perfection of contracts. It is not to say, however, that the right of first refusal would be inconsequential for, such as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 19 of the Civil Code, can warrant a recovery for damages. (Emphasis supplied.)

From the foregoing, it is thus clear that an option contract is entirely different and distinct from a right of first refusal in that in the former, the option granted to the offeree is for a fixed period and at a determined price. Lacking these two essential requisites, what is involved is only a right of first refusal. In this case, the controversy is whether the letter of Lourdes to Roberto dated January 2, 1995 involved an option contract or a contract of a right of first refusal. In its entirety, the said letter-offer reads: 206 Valdes Street Josefa Subd. Balibago Angeles City 2009

January 2, 1995 Tuazon Const. Co. 986 Tandang Sora Quezon City Dear Mr. Tuazon, I received with great joy and happiness the big box of sweet grapes and ham, fit for a kings party. Thanks very much. I am getting very old (79 going 80 yrs. old) and wish to live in the U.S.A. with my only family. I need money to buy a house and lot and a farm with a little cash to start. I am offering you to buy my 1211 square meter at P37,541,000.00 you can pay me in dollars in the name of my daughter. I never offered it to anyone. Please shoulder the expenses for the transfer. I wish the Lord God will help you buy my lot easily and you will be very lucky forever in this place. You have all the time to decide when you can, but not for 2 years or more. I wish you long life, happiness, health, wealth and great fortune always! I hope the Lord God will help you be the recipient of multi-billion projects aid from other countries. Thank you, Lourdes Q. del Rosario vda de Suarez

It is clear that the above letter embodies an option contract as it grants Roberto a fixed period of only two years to buy the subject property at a price certain ofP37,541,000.00. It being an option contract, the rules applicable are found in Articles 1324 and 1479 of the Civil Code which provide: Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised. Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price.

It is clear from the provision of Article 1324 that there is a great difference between the effect of an option which is without a consideration from one which is founded upon a consideration. If the option is without any consideration, the offeror may withdraw his offer by communicating such withdrawal to the offeree at anytime before acceptance; if it is founded upon a consideration, the offeror cannot withdraw his offer before the lapse of the period agreed upon. The second paragraph of Article 1479 declares that an accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the price. Sanchez v. Rigos[21] provided an interpretation of the said second paragraph of Article 1479 in relation to Article 1324. Thus: There is no question that under Article 1479 of the new Civil Code "an option to sell," or "a promise to buy or to sell," as used in said article, to be valid must be "supported by a consideration distinct from the price." This is clearly inferred from the

context of said article that a unilateral promise to buy or to sell, even if accepted, is only binding if supported by consideration. In other words, "an accepted unilateral promise can only have a binding effect if supported by a consideration, which means that the option can still be withdrawn, even if accepted, if the same is not supported by any consideration. Hence, it is not disputed that the option is without consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by appellee. It is true that under Article 1324 of the new Civil Code, the general rule regarding offer and acceptance is that, when the offerer gives to the offeree a certain period to accept, "the offer may be withdrawn at any time before acceptance" except when the option is founded upon consideration, but this general rule must be interpreted as modified by the provision of Article 1479 above referred to, which applies to "a promise to buy and sell" specifically. As already stated, this rule requires that a promise to sell to be valid must be supported by a consideration distinct from the price. In Diamante v. Court of Appeals,[22] this Court further declared that:

A unilateral promise to buy or sell is a mere offer, which is not converted into a contract except at the moment it is accepted. Acceptance is the act that gives life to a juridical obligation, because, before the promise is accepted, the promissor may withdraw it at any time. Upon acceptance, however, a bilateral contract to sell and to buy is created, and the offeree ipso facto assumes the obligations of a purchaser; the offeror, on the other hand, would be liable for damages if he fails to deliver the thing he had offered for sale. xxxx Even if the promise was accepted, private respondent was not bound thereby in the absence of a distinct consideration. (Emphasis ours.)

In this case, it is undisputed that Roberto did not accept the terms stated in the letter of Lourdes as he negotiated for a much lower price. Robertos act of negotiating for a much lower price was a counter-offer and is therefore not an acceptance of the offer of Lourdes. Article 1319 of the Civil Code provides: Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer. (Emphasis supplied.) The counter-offer of Roberto for a much lower price was not accepted by Lourdes. There is therefore no contract that was perfected between them with regard to the sale of subject property. Roberto, thus, does not have any right to demand that the property be sold to him at the price for which it was sold to the De Leons neither does he have the right to demand that said sale to the De Leons be annulled. Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. is not applicable here

It is the position of Roberto that the facts of this case and that of Equatorial are similar in nearly all aspects. Roberto is a lessee of the property like Mayfair Theater inEquatorial. There was an offer made to Roberto by Lourdes during the effectivity of the contract of lease which was also the case in Equatorial. There were negotiations as to the price which did not bear fruit because Lourdes sold the property to the De Leons which was also the case in Equatorial wherein Carmelo and Bauermann sold the property to Equatorial. The existence of the lease of the property is known to the De Leons as they are related to Lourdes while

in Equatorial, the lawyers of Equatorial studied the lease contract of Mayfair over the property. The property in this case was sold by Lourdes to the De Leons at a much lower price which is also the case in Equatorial where Carmelo and Bauerman sold to Equatorial at a lesser price. It is Robertos conclusion that as in the case of Equatorial, there was a violation of his right of first refusal and hence annulment or rescission of the Deed of Absolute Sale is the proper remedy. Robertos reliance in Equatorial is misplaced. Despite his claims, the facts in Equatorial radically differ from the facts of this case. Roberto overlooked the fact that inEquatorial, there was an express provision in the Contract of Lease that (i)f the LESSOR should desire to sell the leased properties, the LESSEE shall be given 30-days exclusive option to purchase the same.

There is no such similar provision in the Contract of Lease between Roberto and Lourdes. What is involved here is a separate and distinct offer made by Lourdes through a letter dated January 2, 1995 wherein she is selling the leased property to Roberto for a definite price and which gave the latter a definite period for acceptance. Roberto was not given a right of first refusal. The letter-offer of Lourdes did not form part of the Lease Contract because it was made more than six months after the commencement of the lease. It is also very clear that in Equatorial, the property was sold within the lease period. In this case, the subject property was sold not only after the expiration of the period provided in the letter-offer of Lourdes but also after the effectivity of the Contract of Lease. Moreover, even if the offer of Lourdes was accepted by Roberto, still the former is not bound thereby because of the absence of a consideration distinct and separate from the price. The argument of Roberto that the separate consideration was the liberality on the part of Lourdes cannot stand. A perusal of the letter-offer of Lourdes would show that what drove her to offer the property to Roberto was her immediate need for funds as she was already very old. Offering the property to Roberto was not an act of liberality on the part of Lourdes but was a simple matter of convenience and practicality as he was the one most likely to buy the property at that time as he was then leasing the same. All told, the facts of the case, as found by the RTC and the CA, do not support Robertos claims that the letter of Lourdes gave him a right of first refusal which is similar to the one given to Mayfair Theater in the case of Equatorial. Therefore, there is no justification to annul the deed of sale validly entered into by Lourdes with the De Leons. What is the effect of the failure of Lourdes to file her appellees brief at the CA?

Lastly, Roberto argues that Lourdes should be sanctioned for her failure to file her appellees brief before the CA. Certainly, the appellees failure to file her brief would not mean that the case would be automatically decided against her. Under the circumstances, the prudent action on the part of the CA would be to deem Lourdes to have waived her right to file her appellees brief. De Leon v. Court of Appeals,[23] is instructive when this Court decreed: On the second issue, we hold that the Court of Appeals did not commit grave abuse of discretion in considering the appeal submitted for decision. The proper remedy in case of denial of the motion to dismiss is to file the appellees brief and proceed with the appeal. Instead, petitioner opted to file a motion for reconsideration which, unfortunately, was pro forma. All the grounds raised therein have been discussed in the first resolution of the respondent Court of Appeals. There is no new ground raised that might warrant reversal of the resolution. A cursory perusal of the motion would readily show that it was a near verbatim repetition of the grounds stated in the motion to dismiss; hence, the filing of the motion for reconsideration did not suspend the period for filing the appellees brief. Petitioner was therefore properly deemed to have waived his right to file appellees brief. (Emphasis supplied.)

In the above cited case, De Leon was the plaintiff in a Complaint for a sum of money in the RTC. He obtained a favorable judgment and so defendant went to the CA. The appeal of defendant-appellant was taken cognizance of by the CA but De Leon filed a Motion to Dismiss the Appeal with Motion to Suspend Period to file Appellees Brief. The CA denied the Motion to Dismiss. De Leon filed a Motion for Reconsideration which actually did not suspend the period to file the appellees brief. De Leon therefore failed to file his brief within the period specified by the rules and hence he was deemed by the CA to have waived his right to file appellees brief. The failure of the appellee to file his brief would not result to the rendition of a decision favorable to the appellant. The former is considered only to have waived his right to file the Appellees Brief. The CA has the jurisdiction to resolve the case based on the Appellants Brief and the records of the case forwarded by the RTC. The appeal is therefore considered submitted for decision and the CA properly acted on it. WHEREFORE, the instant petition for review on certiorari is DENIED. The assailed Decision of the Court of Appeals in CAG.R. CV No. 78870, which affirmed the Decision dated November 18, 2002 of the Regional Trial Court, Branch 101, Quezon City in Civil Case No. Q-00-42338 is AFFIRMED. SO ORDERED.

FIRST DIVISION

SPOUSES ONNIE SERRANO AND AMPARO HERRERA G.R., No. 139173 Petitioners, Present: PUNO, C.J., Chairperson, SANDOVAL-GUTIERREZ, CORONA, * AZCUNA, and GARCIA, JJ.

- versus -

GODOFREDO CAGUIAT, Respondent.

Promulgated:

February 28, 2007 x------------------------------------------------------------------------------------------------------x D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision[1] of the Court of Appeals dated January 29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824. Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905. Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners agreed to sell it at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial payment. In turn, petitioners gave respondent the corresponding receipt stating that respondent promised to pay the balance of the purchase price on or before March 23, 1990, thus: Las Pias, Metro Manila March 19, 1990 RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT NO. T-9905, LAS PIAS, METRO MANILA RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.

SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M. (SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2] On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote petitioners informing them of his readiness to pay the balance of the contract price and requesting them to prepare the final deed of sale.[3] On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter[4] to respondent stating that petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the transaction. Petitioners also informed respondent that he can recover the earnest money of P100,000.00 anytime. Again, on April 6, 1990,[5] petitioners wrote respondent stating that they delivered to his counsel Philippine National Bank Managers Check No. 790537 datedApril 6, 1990 in the amount of P100,000.00 payable to him.

In view of the cancellation of the contract by petitioners, respondent filed with the Regional Trial Court, Branch 63, Makati City a complaint against them for specific performance and damages, docketed as Civil Case No. 90-1067.[6] On June 27, 1994, after hearing, the trial court rendered its Decision[7] finding there was a perfected contract of sale between the parties and ordering petitioners to execute a final deed of sale in favor of respondent. The trial court held: xxx In the evaluation of the evidence presented by the parties as to the issue as to who was ready to comply with his obligation on the verbal agreement to sell on March 23, 1990, shows that plaintiffs position deserves more weight and credibility. First, the P100,000.00 that plaintiff paid whether as downpayment or earnest money showed that there was already a perfected contract. Art. 1482 of the Civil Code of the Philippines, reads as follows, to wit: Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract. Second, plaintiff was the first to react to show his eagerness to push through with the sale by sending defendants the letter dated March 25, 1990. (Exh. D) and reiterated the same intent to pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the balance of the purchase price ready for payment (Exh. C). Defendants mere allegation that it was plaintiff who did not appear onMarch 23, 1990 is unavailing. Defendants letters (Exhs. 2 and 5) appear to be mere afterthought.

On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed the trial courts judgment. Forthwith, petitioners filed their motion for reconsideration but it was denied by the appellate court in its Resolution[8] dated July 14, 1999. Hence, the present recourse.

The basic issue to be resolved is whether the document entitled Receipt for Partial Payment signed by both parties earlier mentioned is a contract to sell or a contract of sale. Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article 1458 [9] in relation to Article 1475[10] of the Civil Code. The delivery to them of P100,000.00 as down payment cannot be considered as proof of the perfection of a contract of sale under Article 1482[11] of the same Code sincethere was no clear agreement between the parties as to the amount of consideration. Generally, the findings of fact of the lower courts are entitled to great weight and should not be disturbed except for cogent reasons.14 Indeed, they should not be changed on appeal in the absence of a clear showing that the trial court overlooked, disregarded, or misinterpreted some facts of weight and significance, which if considered would have altered the result of the case.[12] In the present case, we find that both the trial court and the Court of Appeals interpreted some significant facts resulting in an erroneous resolution of the issue involved. In holding that there is a perfected contract of sale, both courts mainly relied on the earnest money given by respondent to petitioners. They invoked Article 1482 of the Civil Code which provides that "Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract."

We are not convinced.

In San Miguel Properties Philippines, Inc. v. Spouses Huang,[13] we held that the stages of a contract of sale are: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale, which is the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof. With the above postulates as guidelines, we now proceed to determine the real nature of the contract entered into by the parties.

It is a canon in the interpretation of contracts that the words used therein should be given their natural and ordinary meaning unless a technical meaning was intended.[14] Thus, when petitioners declared in the said Receipt for Partial Payment that they

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE HUNDRED THOUSAND PESOS (P100,000.00) AS PARTIAL PAYMENT OF OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE METERS. MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON THIS DATE.

there can be no other interpretation than that they agreed to a conditional contract of sale, consummation of which is subject only to the full payment of the purchase price.

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase price.[15] The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951, in Sing Yee v. Santos,[16] we held that: x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the thing sold and a contract to sell x x x where by agreement the ownership is reserved in the seller and is not to pass until the full payment, of the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the condition precedent of making payment at the time specified in the contract.

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment of the price.[17]

In this case, the Receipt for Partial Payment shows that the true agreement between the parties is a contract to sell.

First, ownership over the property was retained by petitioners and was not to pass to respondent until full payment of the purchase price. Thus, petitioners need not push through with the sale should respondent fail to remit the balance of the purchase price before the deadline on March 23, 1990. In effect, petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay within the fixed period.[18]

Second, the agreement between the parties was not embodied in a deed of sale. The absence of a formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of ownership, but only a transfer after full payment of the purchase price.[19]

Third, petitioners retained possession of the certificate of title of the lot. This is an additional indication that the agreement did not transfer to respondent, either by actual or constructive delivery, ownership of the property.[20]

It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract. However, this article speaks of earnest money given in a contract of sale. In this case, the earnest money was given in a contract to sell. The earnest money forms part of the consideration only if the sale is consummated upon full payment of the purchase

price.[21] Now, since the earnest money was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply. As previously discussed, the suspensive condition (payment of the balance by respondent) did not take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.

WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the Court of Appeals is REVERSED and respondents complaint isDISMISSED.

SO ORDERED.

SECOND DIVISION [G.R. No. 137290. July 31, 2000] SAN MIGUEL PROPERTIES HUANG, respondents. DECISION MENDOZA, J.: This is a petition for review of the decision,[1] dated April 8, 1997, of the Court of Appeals which reversed the decision of the Regional Trial Court, Branch 153, Pasig City dismissing the complaint brought by respondents against petitioner for enforcement of a contract of sale. The facts are not in dispute. Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in the purchase and sale of real properties. Part of its inventory are two parcels of land totalling 1, 738 square meters at the corner of Meralco Avenue and General Capinpin Street, Barrio Oranbo, Pasig City, which are covered by TCT Nos. PT-82395 and PT-82396 of the Register of Deeds of Pasig City. On February 21, 1994, the properties were offered for sale for P52,140,000.00 in cash. The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as undisclosed principals. In a letter[2] dated March 24, 1994, Atty. Dauz signified her clients interest in purchasing the properties for the amount for which they were offered by petitioner, under the following terms: the sum of P500,000.00 would be given as earnest money and the balance would be paid in eight equal monthly installments from May to December, 1994. However, petitioner refused the counteroffer. On March 29, 1994, Atty. Dauz wrote another letter[3] proposing the following terms for the purchase of the properties, viz: This is to express our interest to buy your-above-mentioned property with an area of 1, 738 sq. meters. For this purpose, we are enclosing herewith the sum of P1,000,000.00 representing earnest-deposit money, subject to the following conditions. 1. We will be given the exclusive option to purchase the property within the 30 days from date of your acceptance of this offer. 2. During said period, we will negotiate on the terms and conditions of the purchase; SMPPI will secure the necessary Management and Board approvals; and we initiate the documentation if there is mutual agreement between us. PHILIPPINES, INC., petitioner, vs. SPOUSES ALFREDO HUANG and GRACE

3. In the event that we do not come to an agreement on this transaction, the said amount of P1,000,000.00 shall be refundable to us in full upon demand. . . . Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate real estate, indicated his conformity to the offer by affixing his signature to the letter and accepted the "earnest-deposit" of P1 million. Upon request of respondent spouses, Sobrecarey ordered the removal of the "FOR SALE" sign from the properties. Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on April 8, 1994, Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject properties on a 90-day term. Atty. Dauz countered with an offer of six months within which to pay. On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz that petitioner had not yet acted on her counter-offer. This prompted Atty. Dauz to propose a four-month period of amortization. On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to June 13, 1994 within which to exercise her option to purchase the property, adding that within that period, "[we] hope to finalize [our] agreement on the matter."[4] Her request was granted. On July 7, 1994, petitioner, through its president and chief executive officer, Federico Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the terms and conditions of the sale despite the extension granted by petitioner, the latter was returning the amount of P1 million given as "earnest-deposit."[5] On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the execution within five days of a deed of sale covering the properties. Respondents attempted to return the "earnest-deposit" but petitioner refused on the ground that respondents option to purchase had already expired. On August 16, 1994, respondent spouses filed a complaint for specific performance against petitioner before the Regional Trial Court, Branch 133, Pasig City where it was docketed as Civil Case No. 64660. Within the period for filing a responsive pleading, petitioner filed a motion to dismiss the complaint alleging that (1) the alleged "exclusive option" of respondent spouses lacked a consideration separate and distinct from the purchase price and was thus unenforceable and (2) the complaint did not allege a cause of action because there was no "meeting of the minds" between the parties and, therefore, no perfected contract of sale. The motion was opposed by respondents. On December 12, 1994, the trial court granted petitioners motion and dismissed the action. Respondents filed a motion for reconsideration, but it was denied by the trial court. They then appealed to the Court of Appeals which, on April 8, 1997, rendered a decision[6] reversing the judgment of the trial court. The appellate court held that all the requisites of a perfected contract of sale had been complied with as the offer made on March 29, 1994, in connection with which the earnest money in the amount of P1 million was tendered by respondents, had already been accepted by petitioner. The court cited Art. 1482 of the Civil Code which provides that "[w]henever earnest money is given in a contract of sale, it shall be considered as part of the price and as proof of the perfection of the contract." The fact the parties had not agreed on the mode of payment did not affect the contract as such is not an essential element for its validity. In addition, the court found that Sobrecarey had authority to act in behalf of petitioner for the sale of the properties.[7] Petitioner moved for reconsideration of the trial courts decision, but its motion was denied. Hence, this petition.

Petitioner contends that the Court of Appeals erred in finding that there was a perfected contract of sale between the parties because the March 29, 1994 letter of respondents, which petitioner accepted, merely resulted in an option contract, albeit it was unenforceable for lack of a distinct consideration. Petitioner argues that the absence of agreement as to the mode of payment was fatal to the perfection of the contract of sale. Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had authority to sell the subject real properties.[8] Respondents were required to comment within ten (10) days from notice. However, despite 13 extensions totalling 142 days which the Court had given to them, respondents failed to file their comment. They were thus considered to have waived the filing of a comment. The petition is meritorious. In holding that there is a perfected contract of sale, the Court of Appeals relied on the following findings: (1) earnest money was allegedly given by respondents and accepted by petitioner through its vice-president and operations manager, Isidro A. Sobrecarey; and (2) the documentary evidence in the records show that there was a perfected contract of sale. With regard to the alleged payment and acceptance of earnest money, the Court holds that respondents did not give the P1 million as "earnest money" as provided by Art. 1482 of the Civil Code. They presented the amount merely as a deposit of what would eventually become the earnest money or downpayment should a contract of sale be made by them. The amount was thus given not as a part of the purchase price and as proof of the perfection of the contract of sale but only as a guarantee that respondents would not back out of the sale. Respondents in fact described the amount as an "earnest-deposit." In Spouses Doromal, Sr. v. Court of Appeals,[9] it was held: . . . While the P5,000 might have indeed been paid to Carlos in October, 1967, there is nothing to show that the same was in the concept of the earnest money contemplated in Art. 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the sale. Viewed in the backdrop of the factual milieu thereof extant in the record, We are more inclined to believe that the said P5,000.00 were paid in the concept of earnest money as the term was understood under the Old Civil Code, that is, as a guarantee that the buyer would not back out, considering that it is not clear that there was already a definite agreement as to the price then and that petitioners were decided to buy 6/7 only of the property should respondent Javellana refuse to agree to part with her 1/7 share.[10] In the present case, the P1 million "earnest-deposit" could not have been given as earnest money as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondents offer of March 29, 1994, their contract had not yet been perfected. This is evident from the following conditions attached by respondents to their letter, to wit: (1) that they be given the exclusive option to purchase the property within 30 days from acceptance of the offer; (2) that during the option period, the parties would negotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessary approvals while respondents would handle the documentation. The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. As petitioner correctly points out, acceptance of this condition did not give rise to a perfected sale but merely to an option or an accepted unilateral promise on the part of respondents to buy the subject properties within 30 days from the date of acceptance of the offer. Such option giving respondents the exclusive right to buy the properties within the period agreed upon is separate and distinct from the contract of sale which the parties may enter.[11] All that respondents had was just the option to buy the properties which privilege was not, however, exercised by them because there was a failure to agree on the terms of payment. No contract of sale may thus be enforced by respondents.

Furthermore, even the option secured by respondents from petitioner was fatally defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a distinct consideration. Consideration in an option contract may be anything of value, unlike in sale where it must be the price certain in money or its equivalent. There is no showing here of any consideration for the option. Lacking any proof of such consideration, the option is unenforceable. Equally compelling as proof of the absence of a perfected sale is the second condition that, during the option period, the parties would negotiate the terms and conditions of the purchase. The stages of a contract of sale are as follows: (1) negotiation, covering the period from the time the prospective contracting parties indicate interest in the contract to the time the contract is perfected; (2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the meeting of the minds of the parties as to the object of the contract and upon the price; and (3) consummation, which begins when the parties perform their respective undertakings under the contract of sale, culminating in the extinguishment thereof.[12] In the present case, the parties never got past the negotiation stage. The alleged "indubitable evidence"[13] of a perfected sale cited by the appellate court was nothing more than offers and counter-offers which did not amount to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner. The appellate court opined that the failure to agree on the terms of payment was no bar to the perfection of the sale because Art. 1475 only requires agreement by the parties as to the price of the object. This is error. In Navarro v. Sugar Producers Cooperative Marketing Association, Inc.,[14] we laid down the rule that the manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals,[15] agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price.[16] In Velasco v. Court of Appeals,[17] the parties to a proposed sale had already agreed on the object of sale and on the purchase price. By the buyers own admission, however, the parties still had to agree on how and when the downpayment and the installments were to be paid. It was held: . . . Such being the situation, it can not, therefore, be said that a definite and firm sales agreement between the parties had been perfected over the lot in question. Indeed, this Court has already ruled before that a definite agreement on the manner of payment of the purchase price is an essential element in the formation of a binding and enforceable contract of sale. The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000 as part of the down-payment that they had to pay cannot be considered as sufficient proof of the perfection of any purchase and sale agreement between the parties herein under Art. 1482 of the new Civil Code, as the petitioners themselves admit that some essential matter - the terms of the payment - still had to be mutually covenanted.[18] Thus, it is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. In the absence of a perfected contract of sale, it is immaterial whether Isidro A. Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This issue, therefore, needs no further discussion. WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents complaint is DISMISSED. SO ORDERED.

FIRST DIVISION

PCI LEASING AND FINANCE, INC., Petitioner,

G.R. No. 142618 Present:

PUNO, C.J., Chairperson, - versus *

SANDOVAL-GUTIERREZ, CORONA, AZCUNA, and GARCIA, JJ.

GIRAFFE-X CREATIVE IMAGING, INC., Respondent.

Promulgated:

July 12, 2007 x------------------------------------------------------------------------------------x

DECISION

GARCIA, J.:

On a pure question of law involving the application of Republic Act (R.A.) No. 5980, as amended by R.A. No. 8556 in relation to Articles 1484 and 1485 of the Civil Code, petitioner PCI Leasing and Finance, Inc. (PCI LEASING, for short) has directly come to this Court via this petition for review under Rule 45 of the Rules of Court to nullify and set aside the Decision and Resolution dated December 28, 1998 and February 15, 2000, respectively, of the Regional Trial Court (RTC) of Quezon City, Branch 227, in its Civil Case No. Q-98-34266, a suit for a sum of money and/or personal property with prayer for a writ of replevin, thereat instituted by the petitioner against the herein respondent, Giraffe-X Creative Imaging, Inc. (GIRAFFE, for brevity).

The facts: On December 4, 1996, petitioner PCI LEASING and respondent GIRAFFE entered into a Lease Agreement,[1] whereby the former leased out to the latter one (1) set ofSilicon High Impact Graphics and accessories worth P3,900,00.00 and one (1) unit of Oxberry Cinescan 6400-10 worth P6,500,000.00. In connection with this agreement, the parties subsequently signed two (2) separate documents, each denominated as Lease Schedule.[2] Likewise forming parts of the basic lease agreement were two (2) separate documents denominated Disclosure Statements of Loan/Credit Transaction (Single Payment or Installment Plan)[3] that GIRAFFE also executed for each of the leased equipment. These disclosure statements inter alia described GIRAFFE, vis--vis the two aforementioned equipment, as the borrower who acknowledged the net proceeds of the loan, the net amount to be financed, the financial charges, the total installment payments that it must pay monthly for thirty-six (36) months, exclusive of the 36%per annum late payment charges. Thus, for the Silicon High Impact Graphics, GIRAFFE agreed to pay P116,878.21 monthly, and for Oxberry Cinescan, P181.362.00 monthly. Hence, the total amount GIRAFFE has to pay PCI LEASING for 36 months of the lease, exclusive of monetary penalties imposable, if proper, is as indicated below: P116,878.21 @ month (for the Silicon High Impact Graphics) x 36 months -- PLUS-P181,362.00 @ month (for the Oxberry Cinescan) x 36 months Total Amount to be paid by GIRAFFE (or the NET CONTRACT AMOUNT)

= P 4,207,615.56

= P 6,529,032.00 P 10,736,647.56

By the terms, too, of the Lease Agreement, GIRAFFE undertook to remit the amount of P3,120,000.00 by way of guaranty deposit, a sort of performance and compliance bond for the two equipment. Furthermore, the same agreement embodied a standard acceleration clause, operative in the event GIRAFFE fails to pay any rental and/or other accounts due. A year into the life of the Lease Agreement, GIRAFFE defaulted in its monthly rental-payment obligations. And following a three-month default, PCI LEASING, through one Atty. Florecita R. Gonzales, addressed a formal pay-orsurrender-equipment type of demand letter[4] dated February 24, 1998 to GIRAFFE.

The demand went unheeded. Hence, on May 4, 1998, in the RTC of Quezon City, PCI LEASING instituted the instant case against GIRAFFE. In its complaint,[5] docketed in said court as Civil Case No. 98-34266 and raffled to Branch 227[6] thereof, PCI LEASING prayed for the issuance of a writ of replevin for the recovery of the leased property, in addition to the following relief: 2. as follows: a. After trial, judgment be rendered in favor of plaintiff [PCI LEASING] and against the defendant [GIRAFFE],

Declaring the plaintiff entitled to the possession of the subject properties;

b.

Ordering the defendant to pay the balance of rental/obligation in the total amount of P8,248,657.47 inclusive of interest and charges thereon; Ordering defendant to pay plaintiff the expenses of litigation and cost of suit. (Words in bracket added.)

c.

Upon PCI LEASINGs posting of a replevin bond, the trial court issued a writ of replevin, paving the way for PCI LEASING to secure the seizure and delivery of the equipment covered by the basic lease agreement. Instead of an answer, GIRAFFE, as defendant a quo, filed a Motion to Dismiss, therein arguing that the seizure of the two (2) leased equipment stripped PCI LEASING of its cause of action. Expounding on the point, GIRAFFE argues that, pursuant to Article 1484 of the Civil Code on installment sales of personal property, PCI LEASING is barred from further pursuing any claim arising from the lease agreement and the companion contract documents, adding that the agreement between the parties is in reality a lease of movables with option to buy. The given situation, GIRAFFE continues, squarely brings into applicable play Articles 1484 and 1485 of the Civil Code, commonly referred to as the Recto Law. The cited articles respectively provide: ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: (1) (2) Exact fulfillment of the obligation, should the vendee fail to pay; Cancel the sale, should the vendee's failure to pay cover two or more installments;

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. (Emphasis added.) ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing.

It is thus GIRAFFEs posture that the aforequoted Article 1484 of the Civil Code applies to its contractual relation with PCI LEASING because the lease agreement in question, as supplemented by the schedules documents, is really a lease with option to buy under the companion article, Article 1485. Consequently, so GIRAFFE argues, upon the seizure of the leased equipment pursuant to the writ of replevin, which seizure is equivalent to foreclosure, PCI LEASING has no further recourse against it. In brief, GIRAFFE asserts in its Motion to Dismiss that the civil complaint filed by PCI LEASING is proscribed by the application to the case of Articles 1484 and 1485, supra, of the Civil Code. In its Opposition to the motion to dismiss, PCI LEASING maintains that its contract with GIRAFFE is a straight lease without an option to buy. Prescinding therefrom, PCI LEASING rejects the applicability to the suit of Article 1484 in relation to Article 1485 of the Civil Code, claiming that, under the terms and conditions of the basic agreement, the relationship between the parties is one between an ordinary lessor and an ordinary lessee. In a decision[7] dated December 28, 1998, the trial court granted GIRAFFEs motion to dismiss mainly on the interplay of the following premises: 1) the lease agreement package, as memorialized in the contract documents, is akin

to the contract contemplated in Article 1485 of the Civil Code, and 2) GIRAFFEs loss of possession of the leased equipment consequent to the enforcement of the writ of replevin is akin to foreclosure, the condition precedent for application of Articles 1484 and 1485 [of the Civil Code]. Accordingly, the trial court dismissed Civil Case No. Q-9834266, disposing as follows: WHEREFORE, premises considered, the defendant [GIRAFFE] having relinquished any claim to the personal properties subject of replevin which are now in the possession of the plaintiff [PCI LEASING], plaintiff is DEEMED fully satisfied pursuant to the provisions of Articles 1484 and 1485 of the New Civil Code. By virtue of said provisions, plaintiff is DEEMED estopped from further action against the defendant, the plaintiff having recovered thru (replevin) the personal property sought to be payable/leased on installments, defendants being under protection of said RECTO LAW. In view thereof, this case is hereby DISMISSED. With its motion for reconsideration having been denied by the trial court in its resolution of February 15, 2000, petitioner has directly come to this Court via this petition for review raising the sole legal issue of whether or not the underlying Lease Agreement, Lease Schedules and the Disclosure Statements that embody the financial leasing arrangement between the parties are covered by and subject to the consequences of Articles 1484 and 1485 of the New Civil Code.
[8]

As in the court below, petitioner contends that the financial leasing arrangement it concluded with the respondent represents a straight lease covered by R.A. No. 5980, theFinancing Company Act, as last amended by R.A. No. 8556, otherwise known as Financing Company Act of 1998, and is outside the application and coverage of the Recto Law. To the petitioner, R.A. No. 5980 defines and authorizes its existence and business. The recourse is without merit. R.A. No. 5980, in its original shape and as amended, partakes of a supervisory or regulatory legislation, merely providing a regulatory framework for the organization, registration, and regulation of the operations of financing companies. As couched, it does not specifically define the rights and obligations of parties to a financial leasing arrangement. In fact, it does not go beyond defining commercial or transactional financial leasing and other financial leasing concepts. Thus, the relevancy of Article 18 of the Civil Code which reads: Article 18. - In matters which are governed by special laws, their deficiency shall be supplied by the provisions of this [Civil] Code.

Petitioner foists the argument that the Recto Law, i.e., the Civil Code provisions on installment sales of movable property, does not apply to a financial leasing agreement because such agreement, by definition, does not confer on the lessee the option to buy the property subject of the financial lease. To the petitioner, the absence of an option-to-buy stipulation in a financial leasing agreement, as understood under R.A. No. 8556, prevents the application thereto of Articles 1484 and 1485 of the Civil Code. We are not persuaded. The Court can allow that the underlying lease agreement has the earmarks or made to appear as a financial leasing, a term defined in Section 3(d) of R.A. No. 8556 as [9]

a mode of extending credit through a non-cancelable lease contract under which the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, office machines, and other movable or immovable

property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two (2) years during which the lessee has the right to hold and use the leased property but with no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract.

In its previous holdings, however, the Court, taking into account the following mix: the imperatives of equity, the contractual stipulations in question and the actuations of parties vis--vis their contract, treated disguised transactions technically tagged as financing lease, like here, as creating a different contractual relationship. Notable among the Courts decisions because of its parallelism with this case is BA Finance Corporation v. Court of Appeals[10] which involved a motor vehicle. Thereat, the Court has treated a purported financial lease as actually a sale of a movable property on installments and prevented recovery beyond the buyers arrearages. Wrote the Court in BA Finance: The transaction involved is one of a "financial lease" or "financial leasing," where a financing company would, in effect, initially purchase a mobile equipment and turn around to lease it to a client who gets, in addition, an option to purchase the property at the expiry of the lease period. xxx. xxx xxx xxx

The pertinent provisions of [RA] 5980, thus implemented, read: "'Financing companies,' are primarily organized for the purpose of extending credit facilities to consumers either by leasing of motor vehicles, and office machines and equipment, and other movable property." "'Credit' shall mean any loan, any contract to sell, or sale or contract of sale of property or service, under which part or all of the price is payable subsequent to the making of such sale or contract; any rental-purchase contract; .;" The foregoing provisions indicate no less than a mere financing scheme extended by a financing company to a client in acquiring a motor vehicle and allowing the latter to obtain the immediate possession and use thereof pending full payment of the financial accommodation that is given. In the case at bench, xxx. [T]he term of the contract [over a motor vehicle] was for thirty six (36) months at a "monthly rental" (P1,689.40), or for a total amount of P60,821.28. The contract also contained [a] clause [requiring the Lessee to give a guaranty deposit in the amount of P20,800.00] xxx After the private respondent had paid the sum of P41,670.59, excluding the guaranty deposit of P20,800.00, he stopped further payments. Putting the two sums together, the financing company had in its hands the amount of P62,470.59 as against the total agreed "rentals" of P60,821.28 or an excess of P1,649.31. The respondent appellate court considered it only just and equitable for the guaranty deposit made by the private respondent to be applied to his arrearages and thereafter to hold the contract terminated. Adopting the ratiocination of the court a quo, the appellate court said: xxx In view thereof, the guaranty deposit of P20,800.00 made by the defendant should and must be credited in his favor, in the interest of fairness, justice and equity. The plaintiff should not be allowed to unduly enrich itself at the expense of the defendant. xxx This is even more compelling in this case where although the transaction, on its face,

appear ostensibly, to be a contract of lease, it is actually a financing agreement, with the plaintiff financing the purchase of defendant's automobile . The Court is constrained, in the interest of truth and justice, to go into this aspect of the transaction between the plaintiff and the defendant with all the facts and circumstances existing in this case, and which the court must consider in deciding the case, if it is to decide the case according to all the facts. xxx. xxx xxx xxx

Considering the factual findings of both the court a quo and the appellate court, the only logical conclusion is that the private respondent did opt, as he has claimed, to acquire the motor vehicle, justifying then the application of the guarantee deposit to the balance still due and obligating the petitioner to recognize it as an exercise of the option by the private respondent. The result would thereby entitle said respondent to the ownership and possession of the vehicle as the buyer thereof. We, therefore, see no reversible error in the ultimate judgment of the appellate court.[11] (Italics in the original; underscoring supplied and words in bracket added.) In Cebu Contractors Consortium Co. v. Court of Appeals,[12] the Court viewed and thus declared a financial lease agreement as having been simulated to disguise a simple loan with security, it appearing that the financing company purchased equipment already owned by a capital-strapped client, with the intention of leasing it back to the latter.

In the present case, petitioner acquired the office equipment in question for their subsequent lease to the respondent, with the latter undertaking to pay a monthly fixed rental therefor in the total amount of P292,531.00, or a total of P10,531,116.00 for the whole 36 months. As a measure of good faith, respondent made an up-front guarantee deposit in the amount of P3,120,000.00. The basic agreement provides that in the event the respondent fails to pay any rental due or is in a default situation, then the petitioner shall have cumulative remedies, such as, but not limited to, the following:[13] 1. 2. Obtain possession of the property/equipment; Retain all amounts paid to it. In addition, the guaranty deposit may be applied towards the payment of liquidated damages; Recover all accrued and unpaid rentals; Recover all rentals for the remaining term of the lease had it not been cancelled, as additional penalty ; Recovery of any and all amounts advanced by PCI LEASING for GIRAFFEs account xxx; Recover all expenses incurred in repossessing, removing, repairing and storing the property; and, Recover all damages suffered by PCI LEASING by reason of the default. In addition, Sec. 6.1 of the Lease Agreement states that the guaranty deposit shall be forfeited in the event the respondent, for any reason, returns the equipment before the expiration of the lease. At bottom, respondent had paid the equivalent of about a years lease rentals, or a total of P3,510,372.00, more or less. Throw in the guaranty deposit (P3,120,000.00) and the respondent had made a total cash outlay of P6,630,372.00 in favor of the petitioner. The replevin-seized leased equipment had, as alleged in the complaint, an estimatedresidual value of P6,900.000.00 at the time Civil Case No. Q-98-34266 was instituted on May 4, 1998. Adding

3. 4. 5. 6. 7.

all cash advances thus made to the residual value of the equipment, the total value which the petitioner had actually obtained by virtue of its lease agreement with the respondent amounts to P13,530,372.00 (P3,510,372.00 +P3,120,000.00 + P6,900.000.00 = P13,530,372.00). The acquisition cost for both the Silicon High Impact Graphics equipment and the Oxberry Cinescan was, as stated in no less than the petitioners letter to the respondent dated November 11, 1996[14] approving in the latters favor a lease facility, was P8,100,000.00. Subtracting the acquisition cost of P8,100,000.00 from the total amount, i.e.,P13,530,372.00, creditable to the respondent, it would clearly appear that petitioner realized a gross income of P5,430,372.00 from its lease transaction with the respondent. The amount of P5,430,372.00 is not yet a final figure as it does not include the rentals in arrears, penalties thereon, and interest earned by the guaranty deposit. As may be noted, petitioners demand letter[15] fixed the amount of P8,248,657.47 as representing the respondents rental balance which became due and demandable consequent to the application of the acceleration and other clauses of the lease agreement. Assuming, then, that the respondent may be compelled to pay P8,248,657.47, then it would end up paying a total of P21,779,029.47 (P13,530,372.00 + P8,248,657.47 = P21,779,029.47) for its use - for a year and two months at the most - of the equipment. All in all, for an investment of P8,100,000.00, the petitioner stands to make in a years time, out of the transaction, a total of P21,779,029.47, or a net of P13,679,029.47, if we are to believe its outlandish legal submission that the PCI LEASING-GIRAFFE Lease Agreement was an honest-to-goodness straight lease. A financing arrangement has a purpose which is at once practical and salutary. R.A. No. 8556 was, in fact, precisely enacted to regulate financing companies operations with the end in view of strengthening their critical role in providing credit and services to small and medium enterprises and to curtail acts and practices prejudicial to the public interest, in general, and to their clienteles, in particular.[16] As a regulated activity, financing arrangements are not meant to quench only the thirst for profit. They serve a higher purpose, and R.A. No. 8556 has made that abundantly clear. We stress, however, that there is nothing in R.A. No. 8556 which defines the rights and obligations, as between each other, of the financial lessor and the lessee. In determining the respective responsibilities of the parties to the agreement, courts, therefore, must train a keen eye on the attendant facts and circumstances of the case in order to ascertain the intention of the parties, in relation to the law and the written agreement. Likewise, the public interest and policy involved should be considered. It may not be amiss to state that, normally, financing contracts come in a standard prepared form, unilaterally thought up and written by the financing companies requiring only the personal circumstances and signature of the borrower or lessee; the rates and other important covenants in these agreements are still largely imposed unilaterally by the financing companies. In other words, these agreements are usually one-sided in favor of such companies. A perusal of the lease agreement in question exposes the many remedies available to the petitioner, while there are only the standard contractual prohibitions against the respondent. This is characteristic of standard printed form contracts. There is more. In the adverted February 24, 1998 demand letter[17] sent to the respondent, petitioner fashioned its claim in the alternative: payment of the full amount ofP8,248,657.47, representing the unpaid balance for the entire 36-month lease period or the surrender of the financed asset under pain of legal action. To quote the letter: Demand is hereby made upon you to pay in full your outstanding balance in the amount of P8,248,657.47 on or before March 04, 1998 OR to surrender to us the one (1) set Silicon High Impact Graphics and one (1) unit Oxberry Cinescan 6400-10 We trust you will give this matter your serious and preferential attention. (Emphasis added).

Evidently, the letter did not make a demand for the payment of the P8,248,657.47 AND the return of the equipment; only either one of the two was required. The demand letter was prepared and signed by Atty. Florecita R. Gonzales, presumably petitioners counsel. As such, the use of or instead of and in the letter could hardly be treated as a simple typographical error, bearing in mind the nature of the demand, the amount involved, and the fact that it was made by a lawyer. Certainly Atty. Gonzales would have known that a world of difference exists between and and or in the manner that the word was employed in the letter. A rule in statutory construction is that the word "or" is a disjunctive term signifying dissociation and independence of one thing from other things enumerated unless the context requires a different interpretation.[18] In its elementary sense, "or", as used in a statute, is a disjunctive article indicating an alternative. It often connects a series of words or propositions indicating a choice of either. When "or" is used, the various members of the enumeration are to be taken separately.[19] The word "or" is a disjunctive term signifying disassociation and independence of one thing from each of the other things enumerated.[20]

The demand could only be that the respondent need not return the equipment if it paid the P8,248,657.47 outstanding balance, ineluctably suggesting that the respondent can keep possession of the equipment if it exercises its option to acquire the same by paying the unpaid balance of the purchase price. Stated otherwise, if the respondent was not minded to exercise its option of acquiring the equipment by returning them, then it need not pay the outstanding balance. This is the logical import of the letter: that the transaction in this case is a lease in name only. The so-called monthly rentals are in truth monthly amortizations of the price of the leased office equipment. On the whole, then, we rule, as did the trial court, that the PCI LEASING- GIRAFFE lease agreement is in reality a lease with an option to purchase the equipment. This has been made manifest by the actions of the petitioner itself, foremost of which is the declarations made in its demand letter to the respondent. There could be no other explanation than that if the respondent paid the balance, then it could keep the equipment for its own; if not, then it should return them. This is clearly an option to purchase given to the respondent. Being so, Article 1485 of the Civil Code should apply. The present case reflects a situation where the financing company can withhold and conceal - up to the last moment - its intention to sell the property subject of the finance lease, in order that the provisions of the Recto Law may be circumvented. It may be, as petitioner pointed out, that the basic lease agreement does not contain a purchase option clause. The absence, however, does not necessarily argue against the idea that what the parties are into is not a straight lease, but a lease with option to purchase. This Court has, to be sure, long been aware of the practice of vendors of personal property of denominating a contract of sale on installment as one of lease to prevent the ownership of the object of the sale from passing to the vendee until and unless the price is fully paid. As this Court noted in Vda. de Jose v. Barrueco:[21] Sellers desirous of making conditional sales of their goods, but who do not wish openly to make a bargain in that form, for one reason or another, have frequently resorted to the device of making contracts in the form of leases either with options to the buyer to purchase for a small consideration at the end of term, provided the so-called rent has been duly paid, or with stipulations that if the rent throughout the term is paid, title shall thereupon vest in the lessee. It is obvious that such transactions are leases only in name. The so-called rent must necessarily be regarded as payment of the price in installments since the due payment of the agreed amount results, by the terms of the bargain, in the transfer of title to the lessee.

In another old but still relevant case of U.S. Commercial v. Halili,[22] a lease agreement was declared to be in fact a sale of personal property by installments. Said the Court:

. . . There can hardly be any question that the so-called contracts of lease on which the present action is based were veritable leases of personal property with option to purchase, and as such come within the purview of the above article [Art. 1454-A of the old Civil Code on sale of personal property by installment]. xxx Being leases of personal property with option to purchase as contemplated in the above article, the contracts in question are subject to the provision that when the lessor in such case has chosen to deprive the lessee of the enjoyment of such personal property, he shall have no further action against the lessee for the recovery of any unpaid balance owing by the latter, agreement to the contrary being null and void.

In choosing, through replevin, to deprive the respondent of possession of the leased equipment, the petitioner waived its right to bring an action to recover unpaid rentals on the said leased items. Paragraph (3), Article 1484 in relation to Article 1485 of the Civil Code, which we are hereunder re-reproducing, cannot be any clearer.

ART. 1484. In a contract of sale of personal property the price of which is payable in installments, the vendor may exercise any of the following remedies: xxx xxx xxx

(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. ART. 1485. The preceding article shall be applied to contracts purporting to be leases of personal property with option to buy, when the lessor has deprived the lessee of the possession or enjoyment of the thing. As we articulated in Elisco Tool Manufacturing Corp. v. Court of Appeals,[23] the remedies provided for in Article 1484 of the Civil Code are alternative, not cumulative. The exercise of one bars the exercise of the others. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of the same Article 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose of applying Article 1485 was fulfilled in this case by the filing by petitioner of the complaint for a sum of money with prayer for replevin to recover possession of the office equipment.[24] By virtue of the writ of seizure issued by the trial court, the petitioner has effectively deprived respondent of their use, a situation which, by force of the Recto Law, in turn precludes the former from maintaining an action for recovery of accrued rentals or the recovery of the balance of the purchase price plus interest. [25] The imperatives of honest dealings given prominence in the Civil Code under the heading: Human Relations, provide another reason why we must hold the petitioner to its word as embodied in its demand letter. Else, we would witness a situation where even if the respondent surrendered the equipment voluntarily, the petitioner can still sue upon its claim. This would be most unfair for the respondent. We cannot allow the petitioner to renege on its word. Yet more than that, the very word or as used in the letter conveys distinctly its intention not to claim both the

unpaid balance and the equipment. It is not difficult to discern why: if we add up the amounts paid by the respondent, the residual value of the property recovered, and the amount claimed by the petitioner as sued upon herein (for a total of P21,779,029.47), then it would end up making an instant killing out of the transaction at the expense of its client, the respondent. The Recto Law was precisely enacted to prevent this kind of aberration. Moreover, due to considerations of equity, public policy and justice, we cannot allow this to happen. Not only to the respondent, but those similarly situated who may fall prey to a similar scheme. WHEREFORE, the instant petition is DENIED and the trial courts decision is AFFIRMED. Costs against petitioner. SO ORDERED.

THIRD DIVISION

[G.R. No. 112733. October 24, 1997]

PEOPLES INDUSTRIAL AND COMMERCIAL CORPORATION, petitioner, vs. COURT OF APPEALS AND MAR-ICK INVESTMENT CORPORATION,respondents. DECISION ROMERO, J.: This petition for review on certiorari of the Decision[1] of the Court of Appeals arose from the complaint for accion publiacana de posesion over several subdivision lots that was premised on the automatic cancellation of the contracts to sell those lots. Private respondents Mar-ick Investment Corporation is the exclusive and registered owner of Mar-ick Subdivision in Barrio Buli, Cainta, Rizal. On May 29, 1961, private respondents entered into six (6) agreements with petitioner Peoples Industrial and Commercial Corporation whereby it agreed to sell to petitioner six (6) subdivision lots.[2] Except for Lot No. 8 that has an area of 253 square meters, all the lots measure 240 square meters each. Five of the agreements, involving Lots. Nos. 3, 4, 5, 6 and 7, similarly stipulate that the petitioner agreed to pay private respondents for each lot, the amount of P 7,333.20 with a down payment of P 480.00. The balance of P 6,853.20 shall be payable in 120 equal monthly installments of P 57.11 every 30th of the month, for a period of ten years. With respect to Lot No. 8, the parties agreed to the purchase price of P7,730.00. With a down payment of P506.00 and equal monthly installments of P60.20. All the agreements have the following provisions: 9. Should the PURCHASER fail to make the payment of any of the monthly installments as agreed herein, within One Hundred Twenty (120) days from its due date, this contract shall, by the mere fact of nonpayment, expire by it self and become null and void without necessity of notice to the PURCHASER or of any judicial declaration to the effect, and any and all sums of money paid under this contract shall be considered and become rentals on the property, and in this event, the PURCHASER should he/she be in possession of the property shall become a mere intruder or unlawful detainer of the same and may be ejected therefrom by means provided by law for trespassers or unlawful detainers. Immediately after the expiration of the 120 days provided for in this clause, the OWNER shall be at liberty to dispose of and sell said parcel of land to any other person in the same manner as if this contract had never been executed or entered into. The breach by the PURCHASER of any of the conditions considered herein shall have the same effect as non-payment of the installments of the purchase price. In any of the above cases the PURCHASER authorizes the OWNER or her representative to enter into the property to take possession of the same and take whatever action is necessary or advisable to protect its rights and interest in the property , and nothing that may be done or made by the PURCHASER shall be considered as revoking this authority or a denial thereof.[3]

After the lapse of ten years, however, petitioner still had not fully paid for the six lots; It had paid only the down payment and eight (8) installments, even after private respondents had given petitioner a grace period of four months to pay the arrears.[4] As of May 1, 1980, the total amount due to private respondents under the contract was P214,418.00.[5] In this letter of March 30, 1980 to Mr. Tomas Siatianum (Siatianun) who signed the agreements for petitioner, private respondents counsel protested petitioners encroachment upon a portion of its subdivision particularly Lots Nos. 2, 3, 4, 5, 6, 7, and 8. A portion of the letter reads: Examinations conducted on the records of said lots revealed that you once contracted to purchase said lots but your contracts were cancelled for non-payment of the stipulated installments. Desirous of maintaining good and neighborly relations with you, we caused to send you this formal demand for you to remove your said wall within fifteen (15) days from your receipt hereof, otherwise, much to our regret, we shall be constrained to seek redress before the courts and at the same time charge you with reasonable rentals for the use said lots at the rate of One (P1.00) Peso per square meter per month until you shall have finally removed said wall.[6] Private respondent reiterated its protest against the encroachment in a letter dated February 16, 1981. [7] It added that petitioner had failed to abide by its promise to remove the encroachment, or to purchase the lots involved at the current price or pay the rentals on the basis of the total area occupied, all within a short period of time. It also demanded the removal of the illegal constructions on the property that had prejudiced the subdivision and its neighbors. After a series of negotiations between the parties, they agreed to enter into a new contract to sell [8] involving seven (7) lots, namely, Lots Nos. 2, 3, 4, 5, 6, 7 and 8, with a total area of 1,693 square meters. The contract stipulates that the previous contracts involving the same lots (actually minus Lot No.2) have been cancelled due to the failure of the PURCHASER to pay the stipulated installments. It states further that the new contract was entered into to avoid litigation, considering that the PURCHASER has already made use of the premises since 1981 to the present without paying the stipulated installments. The parties agreed that the contract price would be P423,250.00 with a down payment of P42,325.00 payable upon the signing of the contract and the balance of P380,925.00 payable in forty-eight (48) equal monthly amortization payments of P7,935.94. The new contract bears the date of October 11, 1983 but neither of the parties signed it. Thereafter, Tomas Siatianum issued the following checks in the total amount of P37,642.72 to private respondent: (a) dated March 4, 1984 for P10,000.00; (b) dated March 31, 1984 for P10,000.00; (c) dated April 30, 1984 for P 10,000.00 ; (d) dated May 31, 1984 for P 7,079.00, and (e) dated May 31, 1984 for P563.72.[9] Private respondent received but did not encash those checks. Instead, on July 12, 1984 it filed in the Regional Trial Court of Antipolo, Rizal, a complaint for accion publicianan de posesionagainst petitioner and Tomas Siatianum, as president and majority stockholder of petitioner.[10] It prayed that petitioner be ordered to removed the wall on the premises and to surrender in possession of lots Nos. 2 to 8 of Block 11 of the Mar-ick subdivision, and that petitioner and Tomas Siatianum be ordered to pay: (a) P259,074.00 as reasonable rentals for the use of the lots from 1961, plus P1,680,074.00 per month from July 1, 1984 up to and until the premises shall have been vacated and the wall demolished; (b) P10,000.00 as attorneys fees; (c) moral and exemplary damages, and (d)costs of suit. In the alternative , the complaint prayed that should the agreements be deemed not automatically cancelled, the same agreements should be declared null and void. In due course, the lower court[11] rendered a decision finding that the original agreements of the parties were validly cancelled in accordance with provision No.9 of each agreement. The parties did not enter into a new contract in accordance with Art. 1403 (2) of the Civil Code as the parties did not sign the draft contract. Receipt by private

respondent of the five checks could not amount to perfection of the contract because private respondent never encash and benefited from those checks. Furthermore, there was no meeting of the minds between the parties because Art 1475 of the Civil Code should be read with the Statute of Frauds that requires the embodiment of the contract in a note or memorandum. The lower court opined that the checks represented the deposit under the new contract because petitioner failed to prove that those were monthly installments that private respondent refused to accept. What petitioner prove instead was the fact that it was not able to pay the rest of the installments because of a strike, fire and storm that affected its operations. Be that is as it may, what was clearly proven was that both parties negotiated a new contract after the termination of the first. Thus, the fact that the parties tried to negotiate a new contract indicated that they considered that first contract as already cancelled. With respect to petitioners allegation on a "free right-of-way constituted on Lot No. 2, the lower court found that the agreement thereon was oral and not in writing. As such, it was not in accordance with Art. 749 of the Civil Code requiring that, to be valid, a donation must be in a public document. Consequently, because of the principle against unjust enrichment, petitioner must pay rentals for the occupancy of the property. The lower court disposed of the case as follows: IN VIEW OF ALL THE FOREGOING, Defendant Corporation is hereby directed to return subjects Nos. 2, 3, 4, 5, 6, 7, and 8 to Plaintiff Corporation, and to pay the latter the following amounts: 1. reasonable rental of P1.00 per square meter per month from May 29,1961, for Lots Nos. 3, 4, 5, 6, 7, and 8, and from July 21, 1984, for lot No. 2, up to the date they will vacate said lots. The amount ofP4,735.21 (Exhibit R) already paid by defendant corporation to plaintiff corporation for the six (6) lots under the original contracts shall be deducted from the said rental; 2. attorneys fees in the amount of P10,000.00; and 3. costs of the suit. SO ORDERED." Petitioner elevated the case to the Court of Appeals. However, or October 16, 1992, the Court of Appeals affirmed in toto the lower courts decision. Petitioners motion for reconsideration having been denied, it instituted the instant petition for review on certiorari raising the following issues for resolution: (1) whether or not the lower court had jurisdiction over the subject matter of the case in view of the provisions of Republic Act No. 6552 and Presidential Decree No. 1344; (2) whether or not there was a perfected and enforceable contract of sale (sic) on October 11, 1983 which modified the earlier contracts to sell which had not been validly rescinded; (3) whether or not there was a valid grant of right of way involving Lot No. 2 in favor of petitioner; and (4) whether or not there was justification for the grant of rentals and the award of attorneys fees in favor of private respondent.[12] The issue of jurisdiction has been precluded by the principle of estoppel. It is settled that lack of jurisdiction may be assailed at any stage of the proceedings. However, a partys participation therein the issue.[13] Petitioner undoubtedly has actively participated in the proceedings from its inception to date. In its answer to the complaint, petitioner did not assail the lower court jurisdiction ; instead, it prayed for affirmative relief.[14] Even after the lower court had decided

against it, petitioner continued to affirm the lower courts jurisdiction by elevating the decision to the appellate court,[15] hoping to obtain a favorable decision but the Court Of Appeals affirmed the court a quos ruling. Then and only then did petitioner raise the issue of jurisdiction-in its motion for reconsideration of the appellate courts decision. Such a practice, according to Tijam v. Sibonghanoy,[16] cannot be countenanced for reasons of public policy. Granting, however, that the issue was raised seasonably at the first opportunity, still, petitioner has incorrectly considered as legal bases for its position on the issue of jurisdiction the provisions of P.D. Nos. 957 and 1344 and Republic Act No. 6552 P.D. No. 957, the Subdivision and Condominium Buyers Protective Decree which took effect upon its approval on July 12, 1976, vest upon the National Housing Authority (NHA) exclusive jurisdiction to regulate the real estate trade and business in accordance with the provisions of the same decree.[17] P.D. No. 1344, issued on April 2, 1978, empowered the National Housing Authority to issue a writ of execution in the enforcement of its decisions under P.D. No. 957. These decrees, however, were not yet in existence when private respondents invoked provision No. 9 of the agreements of contracts to sell and cancelled these in October 1971.[18] Article 4 of the Civil Code provides that laws shall have no retroactive effect unless the contrary is provided. Thus, it is necessary that an express provision for its retroactive application must be made in law.[19] There being no such provision in both P.D. Nos. 957 and 1344, these decrees cannot be applied to a situation that occurred years before their promulgation. Moreover, granting that said decreed indeed provide for a retroactive application, still, these may not applied in this case. The contracts to sell of 1961 were cancelled in virtue of provision No. 9 thereof to which the parties voluntarily bound themselves. In Manila Bay Club Corp. v. Court of Appeals,[20] this Court interpreted as requiring mandatory compliance by the parties, a provision in a lease contract that failure or neglect to perform or comply with any of the covenants, conditions, agreements or restrictions stipulated shall result in the automatic termination and cancellation of the lease. The Court added: x x x . Certainly, there is nothing wrong if the parties to the lease contract agreed on certain mandatory provisions concerning their respective rights and obligations, such as the procurement of insurance and the rescission clause. For it is well to recall that contracts are respected as thelaw between the contracting parties, and they may establish such stipulations, clauses, terms and conditions as they may want to include. As long as such agreements are not contrary to law, moral, good customs, public policy or public order they shall have the force of law between them. Consequently, when petitioner failed to abide by its obligation to pay the installments in accordance with the contracts to sell, provision No. 9 automatically took effect. That private respondent failed to observe Section 4 of Republic Act No. 6552, the Realty installment Buyer Protection Act, is if no moment. That section provides that (I)f the buyers fails to pay the installment due at the expiration of the grace period, the seller may cancel the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for rescission of the contract by a notarial act. Private respondents cancellation of the agreements without a duly notarized demand for rescission did not mean that it violated said provision of law. Republic Act No. 6552 was approved on August 26, 1972, long after provision No.9 of the contracts to sell had become automatically operational. As with P.D. Nos. 957 and 1344, Republic act No. 6552 does not expressly provide for its retroactive application and, therefore, it could not have encompassed the cancellation of the contracts to sell in this case. At this juncture, it is apropos to stress that the 1961 agreements are contracts to sell and not contracts of sale. The distinction between these contracts is graphically depicted in Adelfa Properties, Inc. v. Court of Appeals,[21] as follows: x x x . The distinction between the two is important for in a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not to pass until the full payment of the price. In a contract of sale, the vendor is not to pass until the full payment of the

price. In a contract of sale, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas, in a contract to sell, title is retained by the vendor until the full payment of the price , such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. Thus, a deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to the property sold is reserved in the seller until the full payment of the price, nor one giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. That the agreements of 1961 are contracts to sell is clear from the following provisions thereof: 3. Title to said parcel of land shall remain in the name of the OWNER until complete payment by the PURCHASER of all obligations herein stipulated, at which time the OWNER agrees to execute a final deed of sale in favor of the PURCHASER and cause the issuance of a certificate of title in the name of the latter, free from liens and encumbrances except those provided in the Land Registration Act, those imposed by the authorities, and those contained in Clauses Nos. Five (5) and Six (6) of this agreement. xxx xxx x x x.

4. The PURCHASER shall be deemed for all purpose to take possession of the parcel of land upon payment of the down or first payment; provided, however, that his/her possession under this section shall be only of the that of a tenant or lessee and subject to ejectment proceeding during all the period of this agreement. 5.The parcel of land subject of this agreement shall be used by the PURCHASER exclusively for legal purposes, and he shall not be entitled to take or remove soil, stones, or gravel from it or any other lots belonging to the owner. Hence, being contracts to sell, article 592 of the Civil Code which requires rescission either by judicial action or notarial act is not applicable.[22] Neither may petitioner claim ignorance of the cancellation of the contracts. Aside from his letters of March 30, 1980 and February 16, 1981, private respondents counsel. Atty. Manuel Villamor, had sent peti tioner other formal protest and demands.[23] These letters adequately satisfied the notice requirement stipulated in provision No.9 of the contracts to sell. If petitioner had not agreed to the automatic and extrajudicial cancellation of the contracts, it could have gone to court to impugn the same but it did not. Instead, it sought to enter into a new contract to sell, thereby confirming its veracity and validity of the extrajudicial rescission.[24] Had not private respondent filed the accion publiciana de posesion, petitioner would have remained silent about the whole situation. It is now estopped from questioning the validity of the cancellation of the contracts. An unopposed rescission of a contract has a legal effects.[25] Petitioners reliance on the portion of the Court of Appeals Decision stating that private respondent had not made known to petitioner its supposed rescission of the contract,[26] is misplaced. Moreover, it quoted only the portion that appears favorable to its case. To be sure, the Court of Appeals quoted provision No. 9 which requires that actual cancellation shall take place thirty days from receipt by the buyer of the notice of cancellation or demand for rescission of the contract by a notarial act and upon full payment of the cash surrender value, and added that R.A. 6552 even more underscored the indispensability of such notice to the defaulting buyer. However, the same appellate court continued: The absence of the aforesaid notice in the case at bar in the forms respectively deemed efficacious before and after the passage of R.A. 6552 does not, however, necessarily impress merit in the appellants position. Extrajudicial rescission, after all, has legal effect where the other party does not oppose it (Zulueta vs. Mariano, 111 SCRA 206; Nera vs. Vacante,

3 SCRA 505; Magdalena Estate vs. Myrick, 71 Phil.344). Where it is objected to, a judicial determination of the issue is still necessary. In other words resolutions of reciprocal contracts maybe made extrajudicially unlesssuccess fully impugned in court. If the debtor impugns the declaration it shall be subject to judicial determination (Jison vs. court of Appeals,164 SCRA 339, citing Palay Inc. vs. Clave, supra; Univ. of the Philippines vs. Angeles , supra). In its July 5, 1984 complaint, the appellee had, in fact, significantly prayed for the cancellation of the said sales agreement in the alternative (p. 4, orig. rec.)[27] (Italics supplied.) Moreover, private respondents act of cancelling the contracts to sell was not done arbitrarily. The record shows that private respondent dealt with petitioner with admirable patience, probably in view of the strike, the fire in 1968 that burned petitioners factory, and the typhoon in 1970.[28] It exercised its contractual authority to cancel the agreements only after petitioner had reneged in its obligation after paying only eight (8) installments. When the contracts matured, it still gave petitioner a grace period of four (4) months within which to comply with its obligations. It considered the contracts cancelled only as of October 1971 or several years after petitioners last installment payment[29] and definitely more than ten years after the agreements were entered into. Because the contracts to sell had long been cancelled when private respondents filed the accion publiciana de posesion on July 12, 1984, it was the proper Regional Trial Court that had jurisdiction over the case. By then, there was no more installment buyer and seller relationship to speak of. It had been recuded to a mere case of an owner claiming possession of its property that had long been illegally withheld from it by another. Petitioner alleges that there was a new perfected and enforceable contract of sale" between the parties in October 1983 for two reasons. First, it paid private respondent the down payment or deposit of Contract[30] through the five checks. Second, the receipt signed by private respondents representatives satisfies the requirement of a note or memorandum under Article 1403 (2) of the Civil Code because it states the object of the contract (six lots of Mar -Ick Subdivision measuring 1,453 square meters), the price (P250.00 per square meter with a down payment of 10% or P 37,542.72), and the receipt itself opens with a statement referring to the purchase of the six lots of Mar-Ick Subdivision.[31] The contract of October 1983 which respondents offered in evidence as Exhibit S, is entitled CONTRACT TO SELL. While the title of a contract is not controlling, its stipulations confirm the nature of that contract. Thus, it provides: 5. Title to said parcels of land shall remain in the name of the OWNER until complete payment by the PURCHASER of all obligations herein stipulated, at which time, the OWNER agrees to execute a final deed of sale in favor of the PURCHASER and cause the issuance of certificates of title in the name of the latter, free from all liens and encumbrances except those provided in the Land Registration Act, those imposed by the authorities, and those contained in the stipulation that follow. Under the law, there is a binding contract between the parties whose minds met on a certain matter notwithstanding that they did not affix their signature to its written form. In the case at the bar, it was private respondents company lawyer and sole witness, Atty. Manuel Villamayor, who volunteered that after the cancellation of the 1961 agreements, the parties should negotiate and enter into a new agreement based on the current price or at P400.00 per square meter. However, there was a hitch in the negotiations because after he had drafted the contract and sent it to the petitioner, the latter deposited a check for down payment but its representative refused to sign the prepared contract.[32] Private respondent even offered the contract to sell as its Exhibit S.[33] In the absence of proof to the contrary, this draft contract may be deemed to embody the agreement of the parties. Moreover, when Tomas Siatianun, petitioner president, testified, private respondent cross-examined him as regards to the October 1983 contract.[34] Private respondents did not and has not denied the existence of that contract.

Under these facts, therefore, the parties may ideally be considered as having perfected the contract of October 1983. Again in Adelfa Properties, Inc. v. Court of Appeals, the Court said that x x x a contract, like a contract to sell, involves a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Contracts, in general, are perfected by mere consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute.[35] Moreover, private respondents offer to sell and petitioners acceptance thereof are manifest in the documentary evidence presented the (5) checks[36] that, through Atty. Villamayor, it admitted as the down payment under the October 1983 contract. Private respondents intentional non- encashment of the check cannot serve to belie the fact of its tender as down payment. For its part, petitioner presented Exhibit 10, a receipt dated February 28, 1984, showing that private respondents authorized representative received the total amount of P37,642.72 represented by said five checks as deposit of Contract (sic). As this Court also held in the Adelfa Properties case, acceptance may be evidenced by some acts or conduct communicated to the offeror, either in a formal or an informal manner, that clearly manifest the intention of determination to accept the offer to buy or sell.[37] Justice and equity, however, will not be served by a positive ruling on the perfection and performance of the contract to sell. There are facts on record proving that, after all, the parties had not arrived at a definite agreement. By Atty. Villamayors admission, the checks were not encashed because Tomas Siatianun did not sign the draft contract that he had prepared.[38] On his part, Tomac Siatianun explained that he did not sign the contract because it covered seven (7) lots while their agreement was only for six (6) lots. According to him, private respondent had conceded that Lot No. 2 was meant for petitioners right of way[39] and, therefore, it could not have been part of the properties it wanted to buy. It is on record, moreover, that the only agreement that the parties arrived at in a conference at the Silahis Hotel was the price indicated in the draft contract.[40] The number of lots to be sold is a material component of the contract to sell. Without an agreement on the matter, the parties may not in any way be considered as having arrived at a contract under the law. The parties failure to agree on a fundamental provision of the contract was aggravated by petitioners failure to deposit the installments agreed upon. Neither did it attempt to make a consignation of installments. This Courts disquisition on the matter in the Adelfa Properties case is relevant. Thus: The mere sending of a letter by the vendee expressing the intention to pay, without the accompanying payment, is not considered a valid tender of payment. Besides, a mere tender of payment is not sufficient to compel private respondents to deliver the property and execute the deed of absolute sale. It is consignation which is essential in order to extinguish petitioners obligation to pay the balance of the purchase price. The rule is different in case of an option contract or in legal redemption or in a sale with right to repurchase, wherein consignation is not necessary because this cases involves an exercise of a right privilege (to buy, redeem, or repurchase) rather than the discharge of the obligation, hence tender of payment would be sufficient to preserve the right or privilege. This is because the provision on consignation are not applicable when there is no obligation to pay. A contract to sell, as in the case before us, involves the performance of an obligation, not merely the exercise of the privilege or a right. Consequently, performance or payment may be effected not by tender of payment alone but by both tender and consignation.[41] (Underscoring supplied.) As earlier noted, petitioner did not lift a finger towards the performance of the contract other than the tender of down payment. There is no record that it even bothered to tender payment of the installments or to amend the contract to reflect the true intention of the parties as regards the number of lots to be sold. Indeed, by petitioners inaction, private respondents may not be judicially enjoined to validate a contract that the former appeared to have

taken for granted. As in the earlier agreements, petitioner ignored opportunities to resuscitate a contract to sell that was rendered moribund and inoperative by its inaction. In view of the foregoing, there is no need to discuss the issue of whether or not there was a valid grant of right of way in favor of the petitioners. Suffice it to say that the documentary evidence offered by the petitioner on the matter manifest that the right of way on an unidentified property was granted in April 1961 by private respondents board of directors to W. Ick & Sons, Inc. and Julian Martinez.[42] On May 12, 1961, Fritz Ick, the president of W. Ick & Sons, Inc., in turn indorsed the unidentified property to petitioner.[43] What needs stressing is that the installment paid by the petitioner on the land should be deemed rentals in accordance with provision No.9, as well as by law. Article 1486 of the Civil Code provides that a stipulation that the installments or rents paid shall not be returned to the vendee or lessee shall be valid insofar as the same may not be unconscionable under the circumstances.[44]The down payment and the eight (8) installments paid by the petitioner on the six lots under the 1961 agreements amount to P5,672.00. The lots, including Lot No. 2, adjoins petitioners Vetsin and oil factories constructed on a 20,111-square-meter land that petitioner likewise bought from private respondent. Obviously, petitioner made use of the lots not only the construction of the factories but also during its operations as an oil factory. Petitioner enclosed the area with a fence and made construction thereon. It is, therefore, not unconscionable to allow respondents rentals on the lots are correctly decreed by the lower court. As to attorneys fees, Article 2208 of the Civil Code allows the award of such fees when its claimants is compelled to litigate with third persons or to incur expenses to protect its just and valid claim. In view of petitioners rejection of private respondents demands for rentals[45] and its unjustified refusal to settle private respondents claims,[46] the award of attorneys fees of P10,000.00 is more than just and reasonable.[47] WHEREFORE, the instant petition for review on certiorari is hereby denied and the questioned Decision of the Court of Appeals is AFFIRMED. This Decision is immediately executory. Cost against petitioner. SO ORDERED. Melo, Francisco, and Panganiban, JJ., concur. Narvasa, C.J., (Chairman), on leave.

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