G.R. No.

L-27289 April 15, 1985

JUAN AGUINALDO, Substituted by MARINA and PRIMITIVO AGUINALDO, plaintiffs-appellants,
vs.
JOSE ESTEBAN and FRANCISCA SARMIENTO, defendants-appellees.
Crisostomo M. Diokno for plaintiff-appellants.
Andres Franco for defendants-appellees.
RELOVA, J .:
In Civil Case No. 6977, the Court of First Instance of Rizal declared the contract, entitled: "Sanglaan ng Isang Lupa na Patuluyan
Ipaaari," valid and binding contract of sale and dismissed the complaint as well as the counterclaim with costs against the plaintiff. From
said judgment of the lower court, appeal was taken to this Court, "the same involving, as it does, a question of law." (p. 25, Rollo)
Plaintiff Juan Aguinaldo in his complaint alleged, among others, that on June 23, 1958, defendants, through fraud, deceit and
misrepresentations and exercising undue pressure, influence and advantage, procured the thumbmark of Jose Aguinaldo, father of
plaintiff, to be affixed on subject contract; that defendants caused the cancellation of Tax Declaration No. 4004, Rizal (1948) in the
name of Jose Aguinaldo and the issuance in lieu thereof of Tax Declaration No. 10725-Rizal in the names of defendant spouses; that
the document in question on which Jose Aguinaldo affixed his thumbmark is not true and genuine, as the thumbmark appearing thereon
is a forgery; that it contains terms and conditions which partake the nature of "pacto comisario" which render same null and void; that it
does not fix a period for the payment of the loan nor does it state the duration of the mortgage; that plaintiff is the sole successor-in-
interest and legal heir of Jose Aguinaldo who died intestate in October 1960; that defendants having no right to win and possess the
property in question are withholding the possession thereof from plaintiff and consequently deprived plaintiff of the fruits of said
property; and that by reason of the willfull and malevolent acts of defendants, plaintiff suffered moral and actual damages i n the amount
of P4,000.00.
In their answer, defendants claim absolute ownership of subject property upon the death of Jose Aguinaldo in October 1960 on the
theory that the document in controversy is one of sale and not one of mortgage.
The parties, through their respective counsels, agreed to submit the case for decision solely on whether the contract in question, Annex
"A" of the complaint, is one of mortgage or of sale.
When plaintiff Juan Aguinaldo died intestate on August 6, 1965, his heirs, namely: Marina and Primitivo, both surnamed Aguinaldo,
petitioned the trial court that they be substituted as party plaintiffs in lieu of their deceased father.
It is the position of plaintiffs-appellants that the document in question, Annex "A" of the complaint, is null and void because it contains
stipulations which partake of the nature of "pacto comisario." On the other hand, the defendants contend that the contract is a valid sale
and, as such, it passed the title to them.
Hereunder is the contract in question:
SANGLAAN NG ISANG LUPA-CANAVERAL NA PATULOYAN IPAAARI
HAYAG SA SINO MAN MAKAKABASA:
Na, ako JOSE AGUINALDO, Pilipino, balo, may karampatan gulang, tubo at naninirahan sa Bo. Bambang, Tagig,
Rizal, Kapuluan Pilipinas, sa pamamagitan nito ay
ISINASAYSAY KO AT PINAGTITIBAY:
1. Na, sarili at tunay kong pagaari dahil sa ipinagkaloob sa akin ng aking amain Martin Concepcion (patay) ang isang
parcelang lupa-canaveral, at ang lupang ito ay napagkikilala at nauligiran ng mga pagaaring lupa ng mga
kahangganan kagaya ng mga sumusunod:
Isang parcelang lupa-canaveral na nasa pook ng Bo. Bambang, Tagig, Rizal, at siyang lupang
nakatala sa Tax Declaration No. 4004-Rizal (1948), sa Tanggapan ng Tasador ng lupa sa
lalawigan ng RizaL Pasig, RizaL at valor ameliarado ng P70.00 at napaloob sa mga pagaaring lupa
ng mga kahangganan kagaya ng mga sumusunod: Sa Norte, Antonio Silvestre at Pedro Sarmiento;
sa Este, Don-lingo Luga; sa Sur, Dionisio Dionisio at Pedro Sarmiento, at sa Weste, Tomas Cruz
2. Na, alang-alang sa halagang LIMANG DAAN AT APATNAPUNG PISO (P540.00), salaping Pilipino na sa
kasalukuyan ay ating ginagamit, ay natanggap ko na, sa hindi biglaan kung hindi LIMANGPUNG SENTIMOS (P0.50)
lamang araw-araw magbuhat pa nuong Marzo 26, 1955, at ang kabuuang halaga ng halagang nabanggit sa itaas
nito, sa oras na ito, ay kusang loob kong tinanggap sa magasawang JOSE ESTEBAN at FRANCISCA SARMIENTO,
mga Pilipino, may karampatan gulang, naninirahan at may padalahan sulat sa Bo. Bambang, Tagig, Rizal, ay
ISINASANGLA AT PATULOYAN IPAARI KO sa nasabing magasawa ang lupang nobanggit ko sa itaas, sa aming
mga kasunduan kagaya ng mga sumusunod:
NA AKO, JOSE AGUINALDO AY PAKAKANIN HABANG NABUBUHAY NG MAGASAWANG
JOSE ESTEBAN AT FRANCISCA SARMIENTO, 0 NG KANILANG KAHALILI AT
TAGAPAGMANA, AT BILANG KABAYARAN NAMAN SA HALAGANG LIMANG DAAN AT
APATNAPUNG PISO (P540.00) AT PAGPAPAKAIN SA AKIN NG MAGASAWANG JOSE
ESTEBAN AT FRANCISCA SARMIENTO, ORAS NA AKO AY MAMATAY SILA (JOSE ESTEBAN
AT FRANCISCA SARMIENTO) NA ANG LUBOSAN MAGMAMAYARI NG AKING LUPANG
ISINANGLANG ITO SA KANILA, SAPAGKAT ANG LAHAT NG AKING KARAPATAN SA LUPA,
NGAYON PA AY IPINAGKAKALOOB KO SA KANILA SA ILALIM NG KASUNDUAN.
3. Na, ang lupa-canaveral na isinasangla ko sa pamamagitan ng kasulatan ito na ipaaring patuluyan ay
pinamomosiyonan ng mag-asawang Jose Esteban at Francisco Sarmiento, nuong pang Marzo 26, 1955.
4. Na, ang lupang akin binabanggit sa kasulatan ito, ay hindi ko ipinagkakautang sa kanino man tao, na maliban sa
magasawang Jose Esteban at Francisca Samiento.
5. Na, ang lupa kong ito na siyang nakatala sa Tax Declaration No. 4004-Rizal (1948), ay hindi nakatala sa bisa ng
Batas Blg. 496 o maging sa Hipotecaria Espanola, at napagkasunduan ang kasulatan ito, ay nais ipatala sa bisa ng
Batas Blg. 3344, at sinusugan.
SA KATUNAYAN NG LAHAT KONG IPINAHAYAG SA DOKUMENTONG ITO, ay inilagda ko ang aking pangalan at
apelyedo dito sa Lunsod ng Maynila, Pilipinas, ngayong ika ______ ng Hunyo 1958, sa harap ng dalawang saksi.
(Thumbmark)
JOSE AGUINALDO
Nagsangla
SUMASANGAYON SA MGA ALITUNTUNIN:
(Sgd.) JOSE ESTEBAN
Pinagsanglaan
(Sgd.) FRANCISCA SARMIENTO
Pinagsanglaan
MGA SAKSI:
(Sgd.) Illegible (Sgd.) Eugenia S. Relon
ACKNOWLEDGMENT
(pp. 7-1 0, Record on Appeal)
There is merit in the appeal.
On the issue as to whether or not the subject contract is one of sale or of mortgage, an inquiry into the surrounding facts would disclose
the intention of the parties and thereby determine the truth of plaintiff-appellant's allegation that his father, Jose Aguinaldo, was misled
into affixing his thumbmark on the said contract.
Plaintiff-appellant, Juan Aguinaldo, is the son of Jose and it is indeed intriguing why defendants-appellees, who are not related at all to
the old man, would give him fifty centavos (P0.50) everyday beginning May 26, 1955. The contract in question was executed in June
1958, or after three (3) years from the time the daffy amount of half-a-peso was given the old man. Thereafter, the defendants-
appellees' saw to it that the recipient of the money would execute the contract, entitled: ."Sanglaan ng isang lupang-canaveral na
Patuluyang Ipaaari. "
It is significant to note that herein plaintiff-appellant was not even a witness in the document when his father who is of low intelligence,
illiterate and could not even sign his name, affixed his thumbmark in the document in question. It would appear that the execution of the
contract was made behind his back and/or without giving notice to him. Stated differently, if the transaction was on the level, why was
not plaintiff-appellant asked to sign as a witness to the document. It may be true that the contract was read to the old man but it is
doubtful if he understood the meaning of its contents. The contract was so written that anyone could believe he was only givi ng his
property by way of mortgage, not as a sale. For instance, in paragraph 2 thereof, it reads "... ay isinasangla at patuloyan ipaaari ko sa
nasabing magasawa ang lupang nabanggit ko sa itaas, ... ." In some Tagalog provinces the word "Sangla" means "Bilihan Mabibil ing
Muli" or "Pacto de Retro." By this contract, the vendee-a-retro takes possession of the property as owner until the same is repurchased
or redeemed. On the other hand, mortgage is understood as "Prenda."
In the case at bar, defendants-appellees took possession of the property on March 26, 1955 when they started giving Jose Aguinaldo
the fifty centavos (P0.50) a day. It would appear then that the money which he has been receiving from the Estebans come from his
own property. In effect, there was no consideration for the transfer of the property-be it sale, mortgage or Pacto Comisario.
WHEREFORE, the decision of the trial court, dated August 16, 1966, is REVERSED and the contract "Sanglaan ng Isang Lupa-
Canaveral na Patuluyan Ipaaari" is declared null and void, and the deceased plaintiff Juan Aguinaldo is declared as the true and lawful
owner of subject property.
Further, defendants-appellees are hereby ordered to transfer and deliver the possession of subject property to the said deceased
plaintiff Juan Aguinaldo's heirs, Marina Aguinaldo and Primitive Aguinaldo, who substituted him as plaintiffs in this case and/or their
respective heirs and successors; and the Provincial Assessor of Rizal is directed to cancel Tax Declaration No. 10725 (Rizal) in the
name of defendants-appellees, Jose Esteban and Francisco Sarmiento, and in lieu thereof issue another in the name of the deceased
plaintiff Juan Aguinaldo's heirs, Marina Aguinaldo and Primitivo Aguinaldo.
SO ORDERED.
Teehankee (Chairman), Plana, Gutierrez, Jr., De la Fuente and Alampay, JJ., concur.
G.R. No. L-41847 December 12, 1986
CATALINO LEABRES, petitioner,
vs.
COURT OF APPEALS and MANOTOK REALTY, INC., respondents.
Magtanggol C. Gunigundo for petitioner.
Marcelo de Guzman for respondents.

PARAS, J .:
Before Us is a Petition for certiorari to review the decision of the Court of Appeals which is quoted hereunder:
In Civil Case No. 64434, the Court of First Instance of Manila made the following quoted decision:
(1) Upon defendant's counterclaim, ordering plaintiff Catalino Leabres to vacate and/or surrender possession to defendant
Manotok Realty, Inc. the parcel of land subject matter of the complaint described in paragraph 3 thereof and described in the
Bill of Particulars dated March 4, 1966;
(2) To pay defendant the sum of P81.00 per month from March 20, 1959, up to the time he actually vacates and/or surrenders
possession of the said parcel of land to the defendant Manotok Realty, Inc., and
(3) To pay attorney's fees to the defendant in the amount of P700.00 and pay the costs. (Decision, R.A., pp. 54-55).
The facts of this case may be briefly stated as follows:
Clara Tambunting de Legarda died testate on April 22, 1950. Among the properties left by the deceased is the "Legarda Tambunting
Subdivision" located on Rizal Avenue Extension, City of Manila, containing an area of 80,238.90 sq. m., covered by Transfer
Certificates of Title No. 62042; 45142; 45149; 49578; 40957 and 59585. Shortly after the death of said deceased, plaintiff Catalino
Leabres bought, on a partial payment of Pl,000.00 a portion (No. VIII, Lot No. 1) of the Subdivision from surviving husband Vicente J.
Legarda who acted as special administrator, the deed or receipt of said sale appearing to be dated May 2, 1950 (Annex "A"). Upon
petition of Vicente L. Legarda, who later was appointed a regular administrator together with Pacifica Price and Augusto Tambunting on
August 28, 1950, the Probate Court of Manila in the Special Proceedings No. 10808) over the testate estate of said Clara Tambunting,
authorized through its order of November 21, 1951 the sale of the property.
In the meantime, Vicente L. Legarda was relieved as a regular Administrator and the Philippine Trust Co. which took over as such
administrator advertised the sale of the subdivision which includes the lot subject matter herein, in the issues of August 26 and 27,
September 2 and 3, and 15 and 17, 1956 of the Manila Times and Daily Mirror. In the aforesaid Special Proceedings No. 10808, no
adverse claim or interest over the subdivision or any portion thereof was ever presented by any person, and in the sale that followed,
the Manotok Realty, Inc. emerged the successful bidder at the price of P840,000.00. By order of the Probate Court, the Philippine Trust
Co. executed the Deed of Absolute Sale of the subdivision dated January 7, 1959 in favor of the Manotok Realty, Inc. which deed was
judicially approved on March 20, 1959, and recorded immediately in the proper Register of Deeds which issued the corresponding
Certificates of Title to the Manotok Realty, Inc., the defendant appellee herein.
A complaint dated February 8, 1966, was filed by herein plaintiff, which seeks, among other things, for the quieting of title over the lot
subject matter herein, for continuing possession thereof, and for damages. In the scheduled hearing of the case, plaintiff Catalino
Leabres failed to appear although he was duly notified, and so the trial Court, in its order dated September 14, 1967, dismissed the
complaint (Annex "E").<re||an1w> In another order of dismissal was amended as to make the same refer only to plaintiff's complaint
and the counter claim of the defendant was reinstated and as the evidence thereof was already adduced when defendant presented its
evidence in three other cases pending in the same Court, said counterclaim was also considered submitted for resolution. The motion
for reconsideration dated January 22, 1968 (Annex " I "), was filed by plaintiff, and an opposition thereto dated January 25, 1968, was
likewise filed by defendant but the Court a quo dismissed said motion in its order dated January 12, 1970 (Annex "K"), "for lack of
merits" (pp. 71-72, Record on Appeal).
Appealing the decision of the lower Court, plaintiff-appellant advances the following assignment of errors:
I
THE LOWER COURT ERRED IN DENYING THE MOTION FOR RECONSIDERATION, DATED OCTOBER 9, 1967, THUS
DEPRIVING THE PLAINTIFF-APPELLANT HIS DAY IN COURT.
II
THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT CATALINO LEABRES TO VACATE AND/OR
SURRENDER THE POSSESSION OF THE LOT SUBJECT MATTER OF THE COMPLAINT TO DEFENDANT-APPELLEE.
III
THE LOWER COURT ERRED IN ORDERING THE PLAINTIFF-APPELLANT TO PAY DEFENDANT-APPELLEE THE SUM
OF P 81.00 PER MONTH FROM MARCH 20, 1969, UP TO THE TIME HE ACTUALLY VACATE THE PARCEL OF LAND.
(Appellant's Brief, p. 7)
In the First Assigned Error, it is contended that the denial of his Motion for Reconsideration dated October 9, 1967, the plai ntiff-
appellant was not accorded his day in Court.
The rule governing dismissal of actions for failure to prosecute is provided for in Section 3, Rule 17 of the Rules of Court, as follows:
If the plaintiff fails to appear at the time of the trial, or to prosecute his action for an unreasonable length of time, or to comply with these
rules or any order of the Court, the action may be dismissed upon motion of the defendant or upon the Court's own motion. This
dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by the Court.
Under the afore-cited section, it is discretionary on the part of the Court to dismiss an action for failure to prosecute, and its action will
not be reversed upon appeal in the absence of abuse. The burden of showing abuse of this discretion is upon the appellant since every
presumption is toward the correctness of the Court's action (Smith, Bell & Co., et al vs. American Pres. Lines, Ltd., and Manila Terminal
Co., No. L-5304, April 30, 1954; Adorable vs. Bonifacio, G. R. No. L-0698, April 22, 1959); Flores vs. Phil. Alien Property
Administration, G.R. No. L-12741, April 27, 1960). By the doctrine laid down in these cases, and by the provisions of Section 5, Rules
131 of the Rules of Court, particularly paragraphs (m) and (o) which respectively presume the regularity of official performance and the
passing upon by the Court over all issues within a case, it matters not if the Court dismissing the action for failure to prosecute assigns
any special reason for its action or not. We take note of the fact that the Order declaring appellant in default was handed down on
September 14, 1967. Appellant took no steps to have this Order set aside. It was only on January 22, 1968, after he was furnished a
copy of the Court's decision dated December 9, 1967 or about four months later that he attached this Order and the decision of the
Court. Appellant slept on his rights-if he had any. He had a chance to have his day in Court but he passed it off. Four months later he
alleges that sudden illness had prevented him. We feel appellant took a long time too-long in fact-to inform the Court of his sudden
illness. This sudden illness that according to him prevented him from coming to Court, and the time it took him to tell the Court about it,
is familiar to the forum as an oft repeated excuse to justify indifference on the part of litigants or outright negligence of those who
represent them which subserves the interests of justice. In the instant case, not only did the appellant wantonly pass off his chance to
have a day in Court but he has also failed to give a convincing, just and valid reason for the new hearing he seeks. The trial court found
it so; We find it so. The trial Court in refusing to give appellant a new trial does not appear to have abused his discretion as to justify our
intervention.
The Second and Third Assignments of Error are hereby jointly treated in our discussion since the third is but a consequence of the
second.
It is argued that had the trial Court reconsidered its order dated September 14, 1967 dismissing the complaint for failure to prosecute,
plaintiff-appellant might have proved that he owns the lot subjectmatter of the case, citing the receipt (Annex A) in his favor; that he has
introduced improvements and erected a house thereon made of strong materials; that appellee's adverse interest over the property was
secured in bad faith since he had prior knowledge and notice of appellant's physical possession or acquisition of the same; that due to
said bad faith appellant has suffered damages, and that for all the foregoing, the judgment should be reversed and equitable relief be
given in his favor.
As above stated, the Legarda-Tambunting Subdivision which includes the lot subject matter of the instant case, is covered by Torrens
Certificates of Title. Appellant anchors his claim on the receipt (Annex "A") dated May 2, 1950, which he claims as evidence of the sale
of said lot in his favor. Admittedly, however, Catalino Leabres has not registered his supposed interest over the lot in the records of the
Register of Deeds, nor did he present his claim for probate in the testate proceedings over the estate of the owner of said subdivision,
in spite of the notices advertised in the papers. (Saldana vs. Phil. Trust Co., et al.; Manotok Realty, Inc., supra).
On the other hand, defendant-appellee, Manotok Realty, Inc., bought the whole subdivision which includes the subject matter herein by
order and with approval of the Probate Court and upon said approval, the Deed of Absolute Sale in favor of appellee was immediately
registered with the proper Register of Deeds. Manotok Realty, Inc. has therefore the better right over the lot in question because in
cases of lands registered under the Torrens Law, adverse interests not therein annotated which are without the previous knowl edge by
third parties do not bind the latter. As to the improvement which appellant claims to have introduced on the lot, purchase of registered
lands for value and in good faith hold the same free from all liens and encumbrances except those noted on the titles of said land and
those burdens imposed by law. (Sec. 39, Act. 496).<re||an1w> An occupant of a land, or a purchaser thereof from a person other
than the registered owner, cannot claim good faith so as to be entitled to retention of the parcels occupied by him until reimbursement
of the value of the improvements he introduced thereon, because he is charged with notice of the existence of the owner's certificate of
title (J.M. Tuason & Co. vs. Lecardo, et al., CA-G.R. No. 25477-R, July 24, 1962; J.M. Tuason & Co., Inc. vs. Manuel Abundo, CA-G.R.
No. 29701-R, November 18, 1968).
Appellant has not convinced the trial Court that appellee acted in bad faith in the acquisition of the property due to the latter's
knowledge of a previous acquisition by the former, and neither are we impressed by the claim. The purchaser of a registered land has
to rely on the certificate of title thereof. The good faith of appellee coming from the knowledge that the certificate of title covering the
entire subdivision contain no notation as to appellant's interest, and the fact that the records of these eases like Probate Proceedings
Case No. 10808, do not show the existence of appellant's claim, strongly support the correctness of the lower Court's decision
WHEREFORE, in view of the foregoing, we find no reason to amend or set aside the decision appealed from, as regards to plaintiff-
appellant Catalino Leabres. We therefore affirm the same, with costs against appellant. (pp. 33-38, Rollo)
Petitioner now comes to us with the following issues:
(1) Whether or not the petitioner was denied his day in court and deprived of due process of law.
(2) Whether or not the petitioner had to submit his receipt to the probate court in order that his right over the parcel of land in
dispute could be recognized valid and binding and conclusive against the Manotok Realty, Inc.
(3) Whether or not the petitioner could be considered as a possessor in good faith and in the concept of owner. (p. 11, Rollo)
Petitioner's contention that he was denied his day in court holds no water. Petitioner does not deny the fact that he failed to appear on
the date set for hearing on September 14, 1967 and as a consequence of his non-appearance, the order of dismissal was issued, as
provided for by Section 3, Rule 17 of the Revised Rules of Court.
Moreover, as pointed out by private respondent in its brief, the hearing on June 11, 1967 was not ex parte. Petitioner was represented
by his counsel on said date, and therefore, petitioner was given his day in Court.
The main objection of the petition in the lower court's proceeding is the reception of respondent's evidence without declaring petitioner
in default. We find that there was no necessity to declare petitioner in default since he had filed his answer to the counterclaim of
respondent.
Petitioner anchors his main arguments on the receipt (Exh. 1) dated May 2, 1950, as a basis of a valid sale. An examination of the
receipt reveals that the same can neither be regarded as a contract of sale or a promise to sell. There was merely an acknowl edgment
of the sum of One Thousand Pesos (P1,000.00). There was no agreement as to the total purchase price of the land nor to the monthly
installment to be paid by the petitioner. The requisites of a valid Contract of Sale namely 1) consent or meeting of the minds of the
parties; 2) determinate subject matter; 3) price certain in money or its equivalent-are lacking in said receipt and therefore the "sale" is
not valid nor enforceable. Furthermore, it is a fact that Dona Clara Tambunting died on April 22, 1950. Her estate was thereafter
under custodia legis of the Probate Court which appointed Don Vicente Legarda as Special Administrator on August 28, 1950. Don
Vicente Legarda entered into said sale in his own personal-capacity and without court approval, consequently, said sale cannot bind the
estate of Clara Tambunting. Petitioner should have submitted the receipt of alleged sale to the Probate Court for its approval of the
transactions. Thus, the respondent Court did not err in holding that the petitioner should have submitted his receipt to the probate court
in order that his right over the subject land could be recognized-assuming of course that the receipt could be regarded as sufficient
proof.
Anent his possession of the land, petitioner cannot be deemed a possessor in good faith in view of the registration of the ownership of
the land. To consider petitioner in good faith would be to put a premium on his own gross negligence. The Court resolved to DENY the
petition for lack of merit and to AFFIRM the assailed judgment.
Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.

G.R. No. L-54070 February 28, 1983
HEIRS OF ENRIQUE ZAMBALES and JOAQUINA ZAMBALES, petitioners,
vs.
COURT OF APPEALS, NIN BAY MINING CORPORATION, ANGELA C. PREYSLER and JOAQUIN B. PREYSLER, respondents.

MELENCIO-HERRERA, J .:
The Decision of respondent Court of Appeals in the case entitled "Enrique Zambales and Joaquina Zambales, Plaintiffs-appellees vs.
Atty. Perfecto de los Reyes, Nin Bay Mining Corporation and Joaquin B. Preysler, Defendants-appellants" (CA-G.R. No. 59386-R),
setting aside the judgment of the Court of First Instance of Palawan in Civil Case No. 678 for Annulment of a Deed of Sale wi th
Recovery of Possession and Ownership with Damages", is the subject of this Petition for Review on Certiorari.
Joaquin B. Preysler is now deceased and was substituted by Angela C. Preysler, his widow.
Atty. Perfecto de los Reyes was originally a defendant in Civil Case No. 678 but he did not appeal from the Decision of the l ower Court.
The Zambales spouses (Zambaleses, for brevity) were the homestead patentees of a parcel of land with an area of 17,8474 hectares
situated in the Municipality of Del Pilar, Roxas, Palawan, covered by Original Certificate of Title No. G 1193 of the Registry of Deeds for
the Province of Palawan, issued pursuant to Homestead Patent No. V-59502 dated September 6, 1955.
Claiming that the Nin Bay Mining Corporation (Corporation, for short) had removed silica sand from their land and destroyed the plants
and others improvements thereon, the Zambaleses instituted, on November 10, 1958, Civil Case No. 316 before the Court of First
Instance of Palawan claiming damages in the total sum of P48,000.00.
The Corporation denied having caused any damages and claimed that it had excavated and extracted silica sand only from its own
mining claims and on which it had mining lease contracts with the Philippine Government.
On October 29, 1959, the Zambaleses, duly assisted by their counsel, Atty. Perfecto de los Reyes, and the Corporation, entered into a
Compromise Agreement, the portions of which, pertinent to this case, read:
1. DEFENDANT shall pay the PLAINTIFFS a rental of TWENTY (P20.00) PESOS per hectare per year from
September 9, 1955 to September 30, 1960, or a total rental price of ONE THOUSAND SEVEN HUNDRED EIGHTY-
FOUR PESOS AND SEVENTY- FOUR CENTAVOS (P1,784.74), Philippine currency, in lieu of all damages...
2. The payment to the PLAINTIFFS of the above-mentioned rental price shall be considered full, absolute and final
payment and indemnity for all the alleged damages to PLAINTIFFS' property and its improvements, or any other
actual, moral, exemplary or other damages that PLAINTIFFS may have suffered or will suffer in connection with the
mining operations of DEFENDANT on the property in question, which property, by virtue of the terms of this
Agreement shall be used by DEFENDANT as occupant thereof until September 30, 1960.
3. PLAINTIFFS hereby agree and bind themselves to sell, transfer and convey, and DEFENDANT or its assigns,
qualified to acquire or hold lands of the public domain, hereby agrees to purchase and pay for, the aforesaid property
of the PLAINTIFFS, containing an area of 17.8474 hectares, situated in the Municipality of Del Pilar, Roxas, Palawan,
and covered by Original Certificate of Title No. G1193 of the Registry of Deeds of Palawan, at the fixed selling price
of FIVE HUNDRED (P500.00) PESOS per hectare or a total purchase price of EIGHT THOUSAND NINE HUNDRED
TWENTY THREE PESOS and SEVENTY CENTAVOS (P8,923.70), Philippine currency. The contract to purchase
and sell herein provided for, shall be reciprocally demandable and enforceable by the parties hereto on September
10, 1960. PLAINTIFFS hereby irrevocably constitute and appoint DEFENDANT, its successors and/or assigns their
true and lawful attorney-in-fact with full power and authority to sell, transfer and convey on September 10, 1960 or at
any time thereafter the whole or any part of PLAINTIFFS' property hereinabove mentioned to the DEFENDANT, its
successors and/or assigns, or to any third party, and to execute and deliver all instruments and documents
whatsoever necessary for the purpose, and all acts done and to be done by DEFENDANT, its successors and/or
assigns in conformity with the powers herein granted are hereby ratified and confirmed by the PLAINTIFFS. ...
4. In consideration of the payment of the amount of P1,784.74 by DEFENDANT, and of other good and valuable
consideration, PLAINTIFFS, jointly and severally, hereby forever release, fully and completely, said DEFENDANT, its
successors and/or assigns in interest, from any and all liabilities, whether arising from past, present or future
excavation or removal of silica sand from the property in question or otherwise, and from all the other claims against
the DEFENDANT contained in their Complaint in Civil Case No. 316 of the Court of First Instance of Palawan.
1

The Trial Court rendered judgment on October 29, 1959 based on the Compromise Agreement. The document was duly annotated an
OCT No. G - 1193 (Exhibit " A ") the day after, or on October 30, 1959 (Exhibit " 10 A ").
On September 10, 1960, the Corporation, as attorney-in-fact for the Zambaleses, as Vendors, sold the disputed property to Joaquin B.
Preysler for the sum of P8,923.70 fixed in the Compromise Agreement (Exhibit " 11 "). Transfer Certificate of Title No. T-970 was
issued in the vendee's name on December 19, 1960 (Exhibit " 2 ").
The Deed of Sale to Preysler contained the following proviso:
The VENDORS hereby represent and warrant that the five-year restrictive period on alienation of lands acquired
under the homestead provisions of Commonwealth Act No. 141, as amended, otherwise known as the Public Land
Act, has already expired, the date of issuance of the herein homestead patent to the VENDORS as aforesaid being
September 6, 1955 as shown in Original Certificate of Title No. G-1193.
On October 18, 1960, the Secretary of Agriculture and Natural Resources approved the sale to Preysler of the subject property (Exhibit
"13 ").
On. December 6, 1969, or ten (10) years after the Trial Court's Decision based on the Compromise Agreement, and nine (9) years after
the sale to Preysler, the Zambaleses filed Civil Case No. 678 before the Court of First Instance of Palawan for "Annulment of a Deed of
Sale with Recovery of Possession and Ownership with Damages". They contended that it was their lawyer who prevailed upon them to
sign the Compromise Agreement; that they are unschooled and did not understand the contents thereof; that they were made to
understand that they would receive the sum of P10,700.00, only as payment for damages sustained by the land from 1955 to 1960; that
through fraud, deceit and manipulation by their lawyer and the Corporation, they were made to agree to appoint the Corporation as their
attorney-in-fact with full power and authority to sell; that it was never their intention to sell the land; that in September 1969, they were
surprised to learn that the land was already titled in the name of Joaquin B. Preysler; that the land was acquired and registered in the
latter's name through fraud and deceit. The Zambaleses then prayed that the deed of sale and the title in Preysler's name be annulled
on the ground of fraud and that the property be reconveyed to them.
In their Answer, the Corporation denied all allegations that the Zambaleses had signed the Compromise Agreement without
understanding the contents thereof, the truth being that it was read to them by their counsel, Atty. Perfecto de los Reyes, who explained
thoroughly the full implication and legal consequence of each and every provision, which was then submitted and approved by then
Presiding Judge Juan L. Bocar; and that the Corporation had sold the property to Preysler as a duly constituted attorney-in-fact
pursuant to the Compromise Agreement.
After trial, the lower Court rendered judgment in favor of the Zambaleses, the dispositive part of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants as follows:
1) That the deed of sale executed by Nin Bay Mining Corporation through its president, to Joaquin B. Preysler is
hereby declared null and void;
2) That the defendant Joaquin B. Preysler is hereby ordered to reconvey the land subject matter of this litigation to
the plaintiffs;
3) That the defendants Nin Bay Mining Corporation and Joaquin B. Preysler shall pay the plaintiffs the sum of
P85,000.00 as actual damages plus the legal rate of interest from September 30, 1960 up to the time the amount is
fully paid;
4) That the defendants to pay the sum of FIVE THOUSAND (P5,000.00) PESOS as attorneys fees; and
5) The defendants to pay the costs.
On appeal by the Corporation, the Court of Appeals reversed the Trial Court, after finding that the alleged fraud or misrepresentation in
the execution of the Compromise Agreement had not been substantiated by evidence.
The case is now before us on review.
The controversy revolves around the issue of due execution and validity of the Compromise Agreement (Exhibit "8") dated October 29;
1959, and of the subsequent Deed of Sale (Exhibit "11 "), dated 10 September 1960.
I
The general rule is that whoever alleges fraud or mistake must substantiate his allegation, since the presumption is that a person takes
ordinary care of his concerns and that private transactions have been fair and regular. The rule admits of an exception in Article 1332 of
the Civil Code which provides:
When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or
fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the
former.
For the proper application of said provision, it has first to be established convincingly that the illiterate or the party at a disadvantage
could not read or understand the language in which the contract was written.
2
The evidence discloses that the spouses Zambales are
unschooled. They cannot read, speak, much less understand English or write, except to sign their names.
3
The Zambaleses alleged in
their Complaint that the Compromise Agreement (Exhibit "8") was executed through fraud by the Corporation and by their counsel Atty.
Perfecto de los Reyes, whom they included as a defendant. The burden of proof, therefore, shifted to the Corporation to show that the
compromise agreement had been fully explained to the plaintiffs.
In refuting the allegation that plaintiffs were misled into signing the compromise agreement, their former counsel, Atty. Perfecto de los
Reyes, and the notary, Atty. Salomon Reyes, a lawyer for Nin Bay Mining Corporation, established that the terms and conditions of the
Compromise Agreement were thoroughly explained and fully understood by the spouses Zambales in accordance with their proposal to
sell the land at P500.00 a hectare; that before the signing of the Compromise Agreement, the notary requested Atty. de los Reyes to
read and explain each and every provision to the spouses, and with the help of Ricardo Nunala, Atty. de los Reyes did so in their dialect
(Cuyuno). Thereafter, the parties went to Judge Juan Bocar, who was assured that the spouses Zambales understood and signed the
Compromise Agreement.
4

We sustain the finding of the Court of Appeals that fraud and misrepresentation did not vitiate petitioners' consent to the Agreement
when it observed:
Taking into account the foregoing observations, this Court is not convinced that indeed appellees were victims of a
fraudulent scheme employed upon them by their former counsel by reason of their alleged illiteracy and ignorance.
The evidence discloses that appellees, although unschooled, are intelligent, well-informed and intelligent people.
They are not the kind of persons who could easily be fooled of their rights and interests. Even as commented by the
court a quo, which had a chance to observe the demeanor of the witness, it had no observation that the witness,
Joaquina Zambales, is ignorant. As correctly observed by appellants, appellees 'are political leaders and chief
campaigners; they speak in the platform during political rallies; and they are widely travelled' (p. 28, Appellants' Brief).
As a matter of fact they are knowledgeable of the right connections in the government. They had approached former
Sen. Rogelio de la Rosa, no less, the congressman and the governor. Even the lawyers they have retained previous
to their present counsel are the Padilla Law Office and the Diokno Law Office, It is common knowledge that these law
offices are among the established law offices in Manila. It is far convincing that an ignorant couple would have
knowledge of these law firms. All these are obvious manifestations of their being well-informed and the way they have
conducted their way of living apparently is inconsistent with the plea of being illiterate and/or ignorant. They cannot
capitalize on the fact that they are uneducated only because they had no formal schooling inasmuch as one's
knowledge of the facts of life is not dependent on whether one had formal schooling or not and it does not necessarily
follow always that if one is unschooled he is ignorant.
Furthermore, when plaintiffs-appellees signed the questioned compromise agreement they were duly assisted and
represented by their counsel, Atty. de los Reyes. When Atty. de los Reyes testified in court he categorically declared
that it was to the best interest of his clients that they compromise Civil Case No. 316. This declaration finds support in
Joaquina Zambales' testimony wherein she stated thus:
ATTY. SEMBRANO:
Q. Except for this present case, would you say to the Court that Atty. de los Reyes extended to you
legal assistance to your satisfaction?
A. Yes, sir, he is good to us.
xxx xxx xxx
Q. So these people never gave their services to you?
A. Nobody was able to help us except Atty. de los Reyes. (Tsn., pp. 29, 31 & 32, June 19, 1974)
... Thus, it having been established that appellees could not have been misled by their former counsel into signing the
compromise agreement and taking into account the acts of the appellees and their children subsequent to the
execution of the compromise agreement perforce the court a quo erred in not giving credence to the clear and
convincing testimonies of Atty. Perfecto de los Reyes and Atty. Salomon Reyes anent the execution of the
compromise agreement.
5

However, although we find that the Zambaleses were not misled into signing the Compromise Agreement, we hold that there has been
violation of the Public Land Act. The evidence on record shows that the land in question was awarded t the Zambaleses as a
homestead on September 6, 1955 (Exhibit "A"). Before us, the Zambaleses now argue that the Compromise Agreement executed on
October 29, 1959 is in violation of the Public Land Act, which prohibits alienation and encumbrance of a homestead lot within five years
from the issuance of the patent.
6

We sustain that contention. The fact that the issue was not raised in the Courts below is not a deterrent factor considering that the
question affects the validity of the agreement between the parties. The Supreme Court has the authority to review matters even if they
are not assigned as errors in the appeal, if it is found that their consideration is necessary in arriving at a just decision of the
case.
7
Moreover, a party may change his legal theory on appeal only when the factual bases thereof would not require presentation of
any further evidence by the adverse party in order to enable it to properly meet the issue raised in the new theory.
8
In the case at bar it
is indisputable that Homestead Patent No. V-59502 was issued on September 6, 1955 as shown in Original Certificate of Title No. 1193
(Exhibit "A ").
The sale of a homestead lot within the five-year prohibitory period is illegal and void. The law does not distinguish between executory
and consummated sales.
The law prohibiting any transfer or alienation of homestead land within five years from the issuance of the patent
does not distinguish between executory and consummated sales; and it would hardly be in keeping with the
primordial aim of this prohibition to preserve and keep in the family of the homesteader the piece of land that the state
had gratuitously given to them, to hold valid a homestead sale actually perfected during the period of prohibition but
with the execution of the formal deed of conveyance and the delivery of possession of the land sold to the buyer
deferred until after the expiration of the prohibitory period, purposely to circumvent the very law that prohibits and
declares invalid such transaction to protect the homesteader and his family.
9

In the compromise agreement executed between the parties, (1) the Zambaleses promised to sell and the Corporation agreed to buy
the disputed lot at P500.00 per hectare, the contract to be reciprocally demandable and enforceable on September 10, 1960; and as a
substitute procedure, (2) an irrevocable agency was constituted in favor of the Corporation as attorney- in-fact to sell the land to any
third person on September 10, 1960 or any time thereafter.
Clearly, the bilateral promise to buy and sell the homestead lot at a price certain, which was reciprocally demandable
10
, was entered
into within the five-year prohibitory period and is therefore, illegal and void. Further, the agency to sell the homestead lot to a third party
was coupled with an interest inasmuch as a bilateral contract was dependent on it and was not revocable at will by any of the
parties.
11
To all intents and purposes, therefore, there was an actual executory sale perfected during the period of prohibition except
that it was reciprocally demandable thereafter and the agency to sell to any third party was deferred until after the expiration of the
prohibitory period. That "rentals" were ostensibly to be paid during the five-year prohibitory period, and the agency to sell made
effective only after the lapse of the said period, was merely a devise to circumvent the prohibition.
To hold valid such an arrangement would be to throw the door wide open to all possible subterfuges that persons interested in
homesteads may devise to defeat the legal prohibition against alienation within five years from the issuance of the patent.
We hold, therefore, that the bilateral promise to buy and sell, and the agency to sell, entered into within five years from the date of the
homestead patent, was in violation of section 118 of the Public Land Law, although the executed sale was deferred until after the
expiration of the five-year- prohibitory period.
As the contract is void from the beginning, for being expressly prohibited by law
12
the action for the declaration of its inexistence does
not prescribe.
13
Being absolutely void, it is entitled to no authority or respect, the sale may be impeached in a collateral proceeding by
any one with whose rights and interest it conflicts. There is no presumption of its validity.
14
The approval of the sale by the Secretary of
Agriculture and Natural Resources after the lapse of five years from the date of the patent would neither legalize the sale.
15

The homestead in question should be returned to the Zambaleses, petitioners herein, who are, in turn, bound to restore to the
Corporation the sum of P8,923.70 as the price thereof. The actual damages awarded by the Trial Court of P85,000.00 have not been
adequately substantiated. Moreover, under the agreement, the total rental price of P1,784.74 was intended to be "in lieu of all
damages, or any other actual, moral, exemplary or other damages.
This is without prejudice to the corresponding action on the part of the State for reversion of the property and its improvements, if any,
under Section 124 of the Public Land Act.
16

WHEREFORE, the judgment under review is hereby REVERSED, and another one entered (1) declaring null and void a) the bilateral
promise to buy and sell entered into between Enrique Zambales and Joaquina Zambales, on the one hand, and the Nin Bay Mining
Corporation on the other, and b) the sale executed by Nin Bay Mining Corporation in favor of Joaquin B. Preysler; (2) ordering Angela
C. Preysler to reconvey the land subject matter of this litigation to petitioners upon refund by the latter to the Nin Bay Mining
Corporation of the sum of P8,923.70, all expenses for the reconveyance to be borne by private respondents; (3) ordering Nin Bay
Mining Corporation to pay rentals to petitioners at the price of P20.00 per hectare per year from December 6, 1969, the date of the
institution of the Complaint, till the date that possession is turned over to petitioners; and (4) ordering the Register of Deeds for the
Province of Palawan to cancel Transfer Certificate of Title No. T-970 of his Registry, and reissue to the Heirs of Enrique Zambales and
Joaquina Zambales the title to the homestead in question.
Let a copy of this Decision be served on the Solicitor General.
No costs.
SO ORDERED.

G.R. No. 132305 December 4, 2001
IDA C. LABAGALA, petitioner,
vs.
NICOLASA T. SANTIAGO, AMANDA T. SANTIAGO and HON. COURT OF APPEALS, respondents.
QUISUMBING, J .:
This petition for review on certiorari seeks to annul the decision dated March 4, 1997,
1
of the Court of Appeals in CA-G.R. CV No.
32817, which reversed and set aside the judgment dated October 17, 1990,
2
of the Regional Trial Court of Manila, Branch 54, in Civil
Case No.87-41515, finding herein petitioner to be the owner of 1/3 pro indiviso share in a parcel of land. 1wphi1.nt
The pertinent facts of the case, as borne by the records, are as follows:
Jose T. Santiago owned a parcel of land covered by TCT No. 64729, located in Rizal Avenue Extension, Sta. Cruz, Manila. Alleging
that Jose had fraudulently registered it in his name alone, his sisters Nicolasa and Amanda (now respondents herein) sued Jose for
recovery of 2/3 share of the property.
3
On April 20, 1981, the trial court in that case decided in favor of the sisters, recognizing their right
of ownership over portions of the property covered by TCT No. 64729. The Register of Deeds of Manila was required to include the
names of Nicolasa and Amanda in the certificate of title to said property.
4

Jose died intestate on February 6, 1984. On August 5, 1987, respondents filed a complaint for recovery of title, ownership, and
possession against herein petitioner, Ida C. Labagala, before the Regional Trial Court of Manila, to, recover from her the 1/3 portion of
said property pertaining to Jose but which came into petitioner's sole possession upon Jose's death.
Respondents alleged that Jose's share in the property belongs to them by operation of law, because they are the only legal heirs of
their brother, who died intestate and without issue. They claimed that the purported sale of the property made by their brother to
petitioner sometime in March 1979
5
was executed through petitioner's machinations and with malicious intent, to enable her to secure
the corresponding transfer certificate of title (TCT No. 172334
6
) in petitioner's name alone.
7

Respondents insisted that the deed of sale was a forgery .The deed showed that Jose affixed his thumbmark thereon but respondents
averred that, having been able to graduate from college, Jose never put his thumb mark on documents he executed but always si gned
his name in full. They claimed that Jose could not have sold the property belonging to his "poor and unschooled sisters who. ..sacrificed
for his studies and personal welfare."
8
Respondents also pointed out that it is highly improbable for petitioner to have paid the supposed
consideration of P150,000 for the sale of the subject property because petitioner was unemployed and without any visible means of
livelihood at the time of the alleged sale. They also stressed that it was quite unusual and questionable that petitioner registered the
deed of sale only on January 26, 1987, or almost eight years after the execution of the sale.
9

On the other hand, petitioner claimed that her true name is not Ida C. Labagala as claimed by respondent but Ida C. Santiago. She
claimed not to know any person by the name of Ida C. Labagala. She claimed to be the daughter of Jose and thus entitled to his share
in the subject property. She maintained that she had always stayed on the property, ever since she was a child. She argued that the
purported sale of the property was in fact a donation to her, and that nothing could have precluded Jose from putting his thumbmark on
the deed of sale instead of his signature. She pointed out that during his lifetime, Jose never acknowledged respondents' claim over the
property such that respondents had to sue to claim portions thereof. She lamented that respondents had to disclaim her in their desire
to obtain ownership of the whole property.
Petitioner revealed that respondents had in 1985 filed two ejectment cases against her and other occupants of the property. The first
was decided in her and the other defendants' favor, while the second was dismissed. Yet respondents persisted and resorted to the
present action.
Petitioner recognized respondents' ownership of 2/3 of the property as decreed by the RTC. But she averred that she caused the
issuance of a title in her name alone, allegedly after respondents refused to take steps that would prevent the property from being sold
by public auction for their failure to pay realty taxes thereon. She added that with a title issued in her name she could avail of a realty
tax amnesty.
On October 17, 1990, the trial court ruled in favor of petitioner, decreeing thus:
WHEREFORE, judgment is hereby rendered recognizing the plaintiffs [herein respondents] as being entitled to the ownership
and possession each of one-third (1/3) pro indiviso share of the property originally covered by Transfer Certificate of Title No.
64729, in the name of Jose T. Santiago and presently covered by Transfer Certificate of Title No. 172334, in the name of
herein defendant [herein petitioner] and which is located at No. 3075-A Rizal Avenue Extension, Sta. Cruz, Manila, as per
complaint, and the adjudication to plaintiffs per decision in Civil Case No. 56226 of this Court, Branch VI, and the remaining
one-third (1/3) proindiviso share adjudicated in said decision to defendant Jose T. Santiago in said case, is hereby adjudged
and adjudicated to herein defendant as owner and entitled to possession of said share. The Court does not see fit to adjudge
damages, attorney's fees and costs. Upon finality of this judgment, Transfer Certificate of Title No. 172334 is ordered
cancelled and a new title issued in the names of the two (2) plaintiffs and the defendant as owners in equal shares, and the
Register of Deeds of Manila is so directed to effect the same upon payment of the proper fees by the parties herein.
SO ORDERED.
10

According to the trial court, while there was indeed no consideration for the deed of sale executed by Jose in favor of petitioner, said
deed constitutes a valid donation. Even if it were not, petitioner would still be entitled to Jose's 1/3 portion of the property as Jose's
daughter. The trial court ruled that the following evidence shows petitioner to be the daughter of Jose: (1) the decisions in the two
ejectment cases filed by respondents which stated that petitioner is Jose's daughter, and (2) Jose's income tax return which listed
petitioner as his daughter. It further said that respondents knew of petitioner's existence and her being the daughter of Jose, per
records of the earlier ejectment cases they filed against petitioner. According to the court, respondents were not candid with the court in
refusing to recognize petitioner as Ida C. Santiago and insisting that she was Ida C. Labagala, thus affecting their credibility.
Respondents appealed to the Court of Appeals, which reversed the decision of the trial court.
WHEREFORE, the appealed decision is REVERSED and one is entered declaring the appellants Nicolasa and Amanda
Santiago the co-owners in equal shares of the one-third (1/3) pro indiviso share of the late Jose Santiago in the land and
building covered by TCT No. 172334. Accordingly, the Register of Deeds of Manila is directed to cancel said title and issue in
its place a new one reflecting this decision.
SO ORDERED.
Apart from respondents' testimonies, the appellate court noted that the birth certificate of Ida Labagala presented by respondents
showed that Ida was born of different parents, not Jose and his wife. It also took into account the statement made by Jose in Civil Case
No. 56226 that he did not have any child.
Hence, the present petition wherein the following issues are raised for consideration:
1. Whether or not petitioner has adduced preponderant evidence to prove that she is the daughter of the late Jose T. Santiago, and
2. Whether or not respondents could still impugn the filiation of the petitioner as the daughter of the late Jose T. Santiago.
Petitioner contends that the trial court was correct in ruling that she had adduced sufficient evidence to prove her filiation by Jose
Santiago, making her his sole heir and thus entitled to inherit his 1/3 portion. She points out that respondents had, before the filing of
the instant case, previously "considered"
11
her as the daughter of Jose who, during his lifetime, openly regarded her as his legitimate
daughter. She asserts that her identification as Jose's daughter in his ITR outweighs the "strange" answers he gave when he testified in
Civil Case No. 56226.
Petitioner asserts further that respondents cannot impugn her filiation collaterally, citing the case of Sayson v. Court of Appeals
12
in
which we held that "(t)he legitimacy of (a) child can be impugned only in a direct action brought for that purpose, by the proper parties
and within the period limited by law."
13
Petitioner also cites Article 263 of the Civil Code in support of this contention.
14

For their part, respondents contend that petitioner is not the daughter of Jose, per her birth certificate that indicates her parents as Leo
Labagala and Cornelia Cabrigas, instead of Jose Santiago and Esperanza Cabrigas.
15
They argue that the provisions of Article 263 of
the Civil Code do not apply to the present case since this is not an action impugning a child's legitimacy but one for recovery of title,
ownership, and possession of property .
The issues for resolution in this case, to our mind, are (1) whether or not respondents may impugn petitioner's filiation in this action for
recovery of title and possession; and (2) whether or not petitioner is entitled to Jose's 1/3 portion of the property he co-owned with
respondents, through succession, sale, or donation.
On the first issue, we find petitioner's reliance on Article 263 of the Civil Code to be misplaced. Said article provides:
.Art. 263. The action to impugn the legitimacy of the child shall be brought within one year from the recording of the birth in the
Civil Register, if the husband should be in the same place, or in a proper case, any of his heirs.
If he or his heirs are absent, the period shall be eighteen months if they should reside in the Philippines; and two years if
abroad. If the birth of the child has been concealed, the term shall be counted from the discovery of the fraud.
This article should be read in conjunction with the other articles in the same chapter on paternity and filiation in the Civi l Code. A careful
reading of said chapter would reveal that it contemplates situations where a doubt exists that a child is indeed a man's child by his wife,
and the husband (or, in proper cases, his heirs) denies the child's filiation. It does not refer to situations where a child is alleged not to
be the child at all of a particular couple.
16

Article 263 refers to an action to impugn the legitimacy of a child, to assert and prove that a person is not a man's child by his wife.
However, the present case is not one impugning petitioner's legitimacy. Respondents are asserting not merely that petitioner is not a
legitimate child of Jose, but that she is not a child of Jose at all.
17
Moreover, the present action is one for recovery of title and
possession, and thus outside the scope of Article 263 on prescriptive periods.
Petitioner's reliance on Sayson is likewise improper. The factual milieu present in Sayson does not obtain in the instant case. What was
being challenged by petitioners in Sayson was (1) the validity of the adoption of Delia and Edmundo by the deceased Teodoro and
Isabel Sayson, and (2) the legitimate status of Doribel Sayson. While asserting that Delia and Edmundo could not have been validly
adopted since Doribel had already been born to the Sayson couple at the time, petitioners at the same time made the conflicti ng claim
that Doribel was not the child of the couple. The Court ruled in that case that it was too late to question the decree of adoption that
became final years before. Besides, such a challenge to the validity of the adoption cannot be made collaterally but in a direct
proceeding.
18

In this case, respondents are not assailing petitioner's legitimate status but are, instead, asserting that she is not at all their brother's
child. The birth certificate presented by respondents support this allegation.
We agree with the Court of Appeals that:
The Certificate. of Record of Birth (Exhibit H)
19
plainly states that... Ida was the child of the spouses Leon Labagala and
[Cornelia] Cabrigas. This document states that it was Leon Labagala who made the report to the Local Civil Registrar and
therefore the supplier of the entries in said Certificate. Therefore, this certificate is proof of the filiation of Ida. Appellee
however denies that Exhibit H is her Birth Certificate. She insists that she is not Ida Labagala but Ida Santiago. If Exhibit H is
not her birth certificate, then where is hers? She did not present any though it would have been the easiest thing to do
considering that according to her baptismal certificate she was born in Manila in 1969. This court rejects such denials and
holds that Exhibit H is the certificate of the record of birth of appellee Ida...
Against such evidence, the appellee Ida could only present her testimony and a baptismal certificate (Exhibit 12) stating that
appellee's parents were Jose Santiago and Esperanza Cabrigas. But then, a decisional rule in evidence states that a
baptismal certificate is not a proof of the parentage of the baptized person. This document can only prove the identity of the
baptized, the date and place of her baptism, the identities of the baptismal sponsors and the priest who administered the
sacrament -- nothing more.
20
(Citations omitted.)
At the pre-trial conducted on August 11, 1988, petitioner's counsel admitted that petitioner did not have a birth certificate indicating that
she is Ida Santiago, though she had been using this name all her life.
21

Petitioner opted not to present her birth certificate to prove her relationship with Jose and instead offered in evidence her baptismal
certificate.
22
However, as we held in Heirs of Pedro Cabais v. Court of Appeals :
...a baptismal certificate is evidence only to prove the administration of the sacrament on the dates therein specified, but not
the veracity of the declarations therein stated with respect to [a person's] kinsfolk. The same is conclusive only of the baptism
administered, according to the rites of the Catholic Church, by the priest who baptized subject child, but it does not prove the
veracity of the declarations and statements contained in the certificate concerning the relationship of the person baptized.
23

A baptismal certificate, a private document, is not conclusive proof of filiation.
24
More so are the entries made in an income tax return,
which only shows that income tax has been paid and the amount thereof.
25

We note that the trial court had asked petitioner to secure a copy of her birth certificate but petitioner, without advancing any reason
therefor, failed to do so. Neither did petitioner obtain a certification that no record of her birth could be found in the ci vil registry, if such
were the case. We find petitioner's silence concerning the absence of her birth certificate telling. It raises doubt as to the existence of a
birth certificate that would show petitioner to be the daughter of Jose Santiago and Esperanza Cabrigas. Her failure to show her birth
certificate would raise the presumption that if such evidence were presented, it would be adverse to her claim. Petitioner's counsel
argued that petitioner had been using Santiago all her life. However, use of a family name certainly does not establish pedigree.
Further, we note that petitioner, who claims to be Ida Santiago, has the same birthdate as Ida Labagala.
26
The similarity is too uncanny
to be a mere coincidence.
During her testimony before the trial court, petitioner denied knowing Cornelia Cabrigas, who was listed as the mother in the birth
certificate of Ida Labagala. In her petition before this Court, however, she stated that Cornelia is the sister of her mother, Esperanza. It
appears that petitioner made conflicting statements that affect her credibility and could cast along shadow of doubt on her claims of
filiation.
Thus, we are constrained to agree with the factual finding of the Court of Appeals that petitioner is in reality the child of Leon Labagala
and Cornelia Cabrigas, and contrary to her averment, not of Jose Santiago and Esperanza Cabrigas. Not being a child of Jose, it
follows that petitioner can not inherit from him through intestate succession. It now remains to be seen whether the property in dispute
was validly transferred to petitioner through sale or donation.
On the validity of the purported deed of sale, however, we agree with the Court of Appeals that:
...This deed is shot through and through with so many intrinsic defects that a reasonable mind is inevitably led to the
conclusion that it is fake. The intrinsic defects are extractable from the following questions: a) If Jose Santiago intended to
donate the properties in question to Ida, what was the big idea of hiding the nature of the contract in the facade of the sale? b)
If the deed is a genuine document, how could it have happened that Jose Santiago who was of course fully aware that he
owned only 1/3 pro indiviso of the properties covered by his title sold or donated the whole properties to Ida? c) Why in
heaven's name did Jose Santiago, a college graduate, who always signed his name in documents requiring his signature
(citation omitted) [affix] his thumbmark on this deed of sale? d) If Ida was [the] child of Jose Santiago, what was the sense of
the latter donating his properties to her when she would inherit them anyway upon his death? e) Why did Jose Santiago affix
his thumbmark to a deed which falsely stated that: he was single (for he was earlier married to Esperanza Cabrigas ); Ida was
of legal age (for [ s ]he was then just 15 years old); and the subject properties were free from liens and encumbrances (for
Entry No. 27261, Notice of Adverse Claim and Entry No. 6388, Notice of Lis Pendens were already annotated in the title of
said properties). If the deed was executed in 1979, how come it surfaced only in 1984 after the death of Jose Santiago and of
all people, the one in possession was the baptismal sponsor of Ida?
27

Clearly, there is no valid sale in this case. Jose did not have the right to transfer ownership of the entire property to petitioner since 2/3
thereof belonged to his sisters.
28
Petitioner could not have given her consent to the contract, being a minor at the time.
29
Consent of the
contracting parties is among the essential requisites of a contract,
30
including one of sale, absent which there can be no valid contract.
Moreover, petitioner admittedly did not pay any centavo for the property,
31
which makes the sale void. Article 1471 of the Civil Code
provides:
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.
Neither may the purported deed of sale be a valid deed of donation. Again, as explained by the Court of Appeals:
...Even assuming that the deed is genuine, it cannot be a valid donation. It lacks the acceptance of the donee required by Art.
725 of the Civil Code. Being a minor in 1979, the acceptance of the donation should have been made by her father, Leon
Labagala or [her] mother Cornelia Cabrigas or her legal representative pursuant to Art. 741 of the same Code. No one of those
mentioned in the law - in fact no one at all - accepted the "donation" for Ida.
32

In sum, we find no reversible error attributable to the assailed decision of the Court of Appeals, hence it must be upheld. 1wphi1.nt
WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals in CA-G.R. CY No. 32817 isAFFIRMED.
Costs against petitioner.SO ORDERED.
G.R.NO. L-36249 March 29, 1985
ANIANO OBAA, petitioner,
vs.
THE COURT OF APPEALS AND ANICETO SANDOVAL, respondents.
MELENCIO-HERRERA, J .:

Petitioner seeks a review of the Decision of respondent Appellate Court (in CA-G.R. No. 44345-R) ordering him in an action for
Replevin to return to Aniceto SANDOVAL, private respondent herein, 170 cavans of rice or to pay its value in the amount of P37.25 per
cavan, with legal interest from the filing of the Complaint until fully paid.
SANDOVAL is the owner and manager of the "Sandoval and Sons Rice Mill" located in Rosales, Pangasinan. He is engaged in the
buying and selling of palay.
On November 21, 1964, SANDOVAL was approached by a certain Chan Lin who offered to purchase from him 170 cavans of clean rice
(wagwag variety) at the price of P37.26 per cavan, delivery to be made the following day at petitioner's store in San Fernando, La
Union, with payment to be made thereat by Chan Lin to SANDOVAL's representative. SANDOVAL accepted the offer as he knew
petitioner and had had previous transactions with him.
As agreed, the 170 cavans of rice were transported the following day on a truck belonging to SANDOVAL to petitioner's store in San
Fernando, La Union. Chan Lin accompanied the shipment. Upon arrival thereat, the goods were unloaded but when the truck driver
attempted to collect the purchase price from Chan Lin, the latter was nowhere to be found. The driver tried to collect from petitioner, but
the latter refused stating that he had purchase the goods from Chan Lin at P33.00 per cavan and that the price therefore had already
been paid to Chan Lin.
Further demands having been met with refusal, SANDOVAL, as plaintiff, filed suit for replevin against petitioner, then the defendant,
before the Municipal Court of San Fernando, La Union, which ordered petitioner-defendant to pay to SANDOVAL one-half () of the
cost of the rice or P2,805.00.
On appeal by petitioner-defendant to the then Court of First Instance of La Union, the parties agreed to adopt SANDOVAL's testimony
before the Municipal Court. After trial de novo, judgment was rendered dismissing the complaint against petitioner-defendant.
On appeal to respondent Appellate Court, SANDOVAL obtained a reversal in his favor, as follows:
WHEREFORE, the appealed decision is hereby set aside and another one entered ordering defendant-appellee to
return the one hundred and seventy cavans of rice to plaintiff- appellant or to pay its value in the amount of P 37.25
per cavan, with legal interest from the filing of the complaint until fully paid and with costs against the appellee.
1

Before us, petitioner-defendant takes issue with the following Appellate Court findings:
From the evidence presented by the parties, it is evident that this is a simple case of swindling perpetuated by Chan
Lin at the expense of the plaintiff and the defendant. The act of Chan Lin in purchasing plaintiff's rice at the price of P
37.25 per cavan and thereafter offering the same goods to defendant at a much lower price is an indication that it was
never his intention to comply with his obligation to plaintiff. It is clear that Chan Lin's only purpose in entering into said
contract with plaintiff was to acquire the physical possession of the goods and then to pass them on to defendant on
the pretext that he is the owner thereof. Premises considered, therefore, Chan Lin cannot be considered as the owner
of the goods at the time the same was said to have been sold to the defendant-appellee. Considering that defendant
acquired the 170 cavans of rice from a person who is not the owner thereof, it is therefore clear that he acquired no
greater right than his predecessor-in-interest.
Finally, on principle of equity, it is but proper that plaintiff-appellant be allowed to recover the one-hundred and
seventy cavans of rice or its value. Being the undisputed owner of the above mentioned goods, the appellant cannot
be deprived of its ownership without the corresponding payment.
2

We agree with petitioner-defendant that there was a perfected sale. Article 1475 of the Civil Code lays down the general rule that there
is perfection when there is consent upon the subject matter and price, even if neither is delivered.
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.
xxx xxx xxx
Ownership of the rice, too, was transferred to the vendee, Chan Lin, upon its delivery to him at San Fernando, La Union, the place
stipulated
3
and pursuant to Articles 1477 and 1496 of the same Code:
Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery
thereof.
Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of
the ways specified in Articles 1497 to 1501, or in any manner signifying an agreement that the possession is
transferred from the vendor to the vendee.
At the very least, Chan Lin had a rescissible title to the goods for the non-payment of the purchase price, but which had not been
rescinded at the time of the sale to petitioner.
However, from petitioner-defendant's own testimony before the Court of First Instance, he admits that three days after
the delivery, he was repaid the sum of P5,600.00 by Chan Lin, who was then accompanied by SANDOVAL's driver,
and that he had delivered the rice back to them. On rebuttal, however, the driver denied that the rice had ever been
returned.
4
The driver's version is the more credible, for, as SANDOVAL's counsel had manifested in open Court, if
return of the rice had been effected, they would have withdrawn the complaint.
5
Following is the admission made by
petitioner-defendant:
Q After the third day ... when that request for you to hold the rice was already overdue, what
happened?
A This is what happened. Chan Lin and the driver with the same truck that they used to unload the
rice, came to me.
Q What day was that?
A That was I think, Thursday, about 4:30 P.M.
Q Do you know the date?
A November 26, I think.
Q What did they do when this driver and Mr. Chan Lin came back?
A They told me that they wanted the rice back and give my money back.
Q Did they give you your money back?
A Yes.
Q How much?
A They gave me P5.600.
COURT:
Q They gave you that amount?
A Yes, sir.
ATTY. GUALBERTO:
Q Did they tell you why they were getting back the rice and giving you back your money?
A Yes. The complete rice, and Vallo (SANDOVAL's driver) told me, he wanted to return the rice to
the ricemill, that is what Vallo and the Chinese agreed with Aniceto Sandoval.
Q Did the Chinese tell you that he made agreement with Sandoval to get back the rice?
A Yes.
COURT:
Q Did you receive the money?
A Yes , sir
6

Having been repaid the purchases price by Chan Lin , the sale, as between them, had been voluntarily rescinded, and petitioner-
defendant was thereby divested of any claim to the rice. Technically, therefore, he should return the rice to Chan Lin, but since even the
latter, again from petitioner-defendant's own testimony above-quoted, was ready to return the rice to SANDOVAL, and the latter's driver
denies that the rice had been returned by petitioner-defendant cannot be allowed to unjustly enrich himself at the expense of another by
holding on to property no longer belonging to him.
7
In law and in equity, therefore, SANDOVAL is entitled to recover the rice, or the
value theref since hewas not paid the price therefor.
WHEREFORE, albeit on a different premise, the judgment under review is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
Plana, Relova, Gutierrez, Jr., De la Fuente and Alampay, JJ., concur.
Teehankee, J., took no part.
G.R. No. L-32811 March 31, 1980
FELIPE C. ROQUE, petitioner,
vs.
NICANOR LAPUZ and THE COURT OF APPEALS, respondents.
Taada, Sanchez, Taada, Taada for petitioner.
N.M. Lapuz for respondent.

GUERRERO, J .:
Appeal by certiorari from the Resolution of the respondent court
1
dated October 12, 1970 in CA-G.R. No. L-33998-R entitled "Felipe C.
Roque, plaintiff-appellee, versus Nicanor Lapuz, defendant-appellant" amending its original decision of April 23, 1970 which affirmed
the decision of the Court of First Instance of Rizal (Quezon City Branch) in Civil Case No. Q-4922 in favor of petitioner, and the
Resolution of the respondent court denying petitioner's motion for reconsideration.
The facts of this case are as recited in the decision of the Trial Court which was adopted and affirmed by the Court of Appeals:
Sometime in 1964, prior to the approval by the National Planning Commission of the consolidation and subdivision
plan of plaintiff's property known as the Rockville Subdivision, situated in Balintawak, Quezon City, plaintiff and
defendant entered into an agreement of sale covering Lots 1, 2 and 9, Block 1, of said property, with an aggregate
area of 1,200 square meters, payable in 120 equal monthly installments at the rate of P16.00, P15.00 per square
meter, respectively. In accordance with said agreement, defendant paid to plaintiff the sum of P150.00 as deposit and
the further sum of P740.56 to complete the payment of four monthly installments covering the months of July, August,
September, and October, 1954. (Exhs. A and B). When the document Exhibit "A" was executed on June 25, 1954,
the plan covering plaintiff's property was merely tentative, and the plaintiff referred to the proposed lots appearing in
the tentative plan.
After the approval of the subdivision plan by the Bureau of Lands on January 24, 1955, defendant requested plaintiff
that he be allowed to abandon and substitute Lots 1, 2 and 9, the subject matter of their previous agreement, with
Lots 4 and 12, Block 2 of the approved subdivision plan, of the Rockville Subdivision, with a total area of 725 square
meters, which are corner lots, to which request plaintiff graciously acceded.
The evidence discloses that defendant proposed to plaintiff modification of their previous contract to sell because he
found it quite difficult to pay the monthly installments on the three lots, and besides the two lots he had chosen were
better lots, being corner lots. In addition, it was agreed that the purchase price of these two lots would be at the
uniform rate of P17.00 per square (meter) payable in 120 equal monthly installments, with interest at 8% annually on
the balance unpaid. Pursuant to this new agreement, defendant occupied and possessed Lots 4 and 12, Block 2 of
the approved subdivision plan, and enclosed them, including the portion where his house now stands, with barbed
wires and adobe walls.
However, aside from the deposit of P150.00 and the amount of P740.56 which were paid under their previous
agreement, defendant failed to make any further payment on account of the agreed monthly installments for the two
lots in dispute, under the new contract to sell. Plaintiff demanded upon defendant not only to pay the stipulated
monthly installments in arrears, but also to make up-to-date his payments, but defendant, instead of complying with
the demands, kept on asking for extensions, promising at first that he would pay not only the installments in arrears
but also make up-to-date his payment, but later on refused altogether to comply with plaintiff's demands.
Defendant was likewise requested by the plaintiff to sign the corresponding contract to sell in accordance with his
previous commitment. Again, defendant promised that he would sign the required contract to sell when he shall have
made up-to-date the stipulated monthly installments on the lots in question, but subsequently backed out of his
promise and refused to sign any contract in noncompliance with what he had represented on several occasions. And
plaintiff relied on the good faith of defendant to make good his promise because defendant is a professional and had
been rather good to him (plaintiff).
On or about November 3, 1957, in a formal letter, plaintiff demanded upon defendant to vacate the lots in question
and to pay the reasonable rentals thereon at the rate of P60.00 per month from August, 1955. (Exh. "B").
Notwithstanding the receipt of said letter, defendant did not deem it wise nor proper to answer the same.
In reference to the mode of payment, the Honorable Court of Appeals found
Both parties are agreed that the period within which to pay the lots in question is ten years. They however, disagree
on the mode of payment. While the appellant claims that he could pay the purchase price at any time within a period
of ten years with a gradual proportionate discount on the price, the appellee maintains that the appellant was bound
to pay monthly installments.
On this point, the trial court correctly held that
It is further argued by defendant that under the agreement to sell in question, he has the right or option to pay the
purchase price at anytime within a period of ten years from 1954, he being entitled, at the same time, to a graduated
reduction of the price. The Court is constrained to reject this version not only because it is contradicted by the weight
of evidence but also because it is not consistent with what is reasonable, plausible and credible. It is highly
improbable to expect plaintiff, or any real estate subdivision owner for that matter, to agree to a sale of his land which
would be payable anytime in ten years at the exclusive option of the purchaser. There is no showing that defendant is
a friend, a relative, or someone to whom plaintiff had to be grateful, as would justify an assumption that he would
have agreed to extend to defendant such an extra- ordinary concession. Furthermore, the context of the document,
Exhibit "B", not to mention the other evidences on records is indicative that the real intention of the parties is for the
payment of the purchase price of the lot in question on an equal monthly installment basis for a period of ten years
(Exhibits "A", "II", "J" and "K").
On January 22, 1960, petitioner Felipe C, Roque (plaintiff below) filed the complaint against defendant Nicanor Lapuz (private
respondent herein) with the Court of First Instance of Rizal, Quezon City Branch, for rescission and cancellation of the agreement of
sale between them involving the two lots in question and prayed that judgment be rendered ordering the rescission and cancellation of
the agreement of sale, the defendant to vacate the two parcels of land and remove his house therefrom and to pay to the plaintiff the
reasonable rental thereof at the rate of P60.00 a month from August 1955 until such time as he shall have vacated the premises, and to
pay the sum of P2,000.00 as attorney's fees, costs of the suit and award such other relief or remedy as may be deemed just and
equitable in the premises.
Defendant filed a Motion to Dismiss on the ground that the complaint states no cause of action, which motion was denied by the court.
Thereafter, defendant filed his Answer alleging that he bought three lots from the plaintiff containing an aggregate area of 1,200 sq.
meters and previously known as Lots 1, 2 and 9 of Block 1 of Rockville Subdivision at P16.00, P15.00 and P15.00, respectively,
payable at any time within ten years. Defendant admits having occupied the lots in question.
As affirmative and special defenses, defendant alleges that the complaint states no cause of action; that the present action for
rescission has prescribed; that no demand for payment of the balance was ever made; and that the action being based on reciprocal
obligations, before one party may compel performance, he must first comply what is incumbent upon him.
As counterclaim, defendant alleges that because of the acts of the plaintiff, he lost two lots containing an area of 800 sq. meters and as
a consequence, he suffered moral damages in the amount of P200.000.00; that due to the filing of the present action, he suffered moral
damages amounting to P100,000.00 and incurred expenses for attorney's fees in the sum of P5,000.00.
Plaintiff filed his Answer to the Counterclaim and denied the material averments thereof.
After due hearing, the trial court rendered judgment, the dispositive portion of which reads:
WHEREFORE, the Court renders judgment in favor of plain. plaintiff and against the defendant, as follows:
(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question (Lots 4 and 12,
Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded, resolved and cancelled;
(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay plaintiff the
reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he shall have actually vacated the
premises; and
(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the costs of the suit.
(Record on Appeal, p. 118)
(a) Declaring the agreement of sale between plaintiff and defendant involving the lots in question (Lots 4 and 12,
Block 2 of the approved subdivision plan of the Rockville Subdivision) rescinded, resolved and cancelled;
(b) Ordering defendant to vacate the said lots and to remove his house therefrom and also to pay plaintiff the
reasonable rental thereof at the rate of P60.00 per month from August, 1955 until he shall have actually vacated
premises; and
(c) Condemning defendant to pay plaintiff the sum of P2,000.00 as attorney's fees, as well as the costs of the suit.
(Record on Appeal. p. 118)
Not satisfied with the decision of the trial court, defendant appealed to the Court of Appeals. The latter court, finding the judgment
appealed from being in accordance with law and evidence, affirmed the same.
In its decision, the appellate court, after holding that the findings of fact of the trial court are fully supported by the evidence, found and
held that the real intention of the parties is for the payment of the purchase price of the lots in question on an equal monthly installment
basis for the period of ten years; that there was modification of the original agreement when defendant actually occupied Lots Nos. 4
and 12 of Block 2 which were corner lots that commanded a better price instead of the original Lots Nos. 1, 2 and 9, Block I of the
Rockville Subdivision; that appellant's bare assertion that the agreement is not rescindable because the appellee did not comply with
his obligation to put up the requisite facilities in the subdivision was insufficient to overcome the presumption that the law has been
obeyed by the appellee; that the present action has not prescribed since Article 1191 of the New Civil Code authorizing resci ssion in
reciprocal obligations upon noncompliance by one of the obligors is the applicable provision in relation to Article 1149 of the New Civi l
Code; and that the present action was filed within five years from the time the right of action accrued.
Defendant filed a Motion for Reconsideration of the appellate court's decision on the following grounds:
First Neither the pleadings nor the evidence, testimonial, documentary or circumstantial, justify the conclusion as
to the existence of an alleged subsequent agreement novatory of the original contract admittedly entered into
between the parties:
Second There is nothing so unusual or extraordinary, as would render improbable the fixing of ten ears as the
period within which payment of the stipulated price was to be payable by appellant;
Third Appellee has no right, under the circumstances on the case at bar, to demand and be entitled to the
rescission of the contract had with appellant;
Fourth Assuming that any action for rescission is availability to appellee, the same, contrary to the findings of the
decision herein, has prescribed;
Fifth Assumming further that appellee's action for rescission, if any, has not yet prescribed, the same is at least
barred by laches;
Sixth Assuming furthermore that a cause of action for rescission exists, appellant should nevertheless be entitled
to tile fixing of a period within which to comply with his obligation; and
Seventh At all events, the affirmance of the judgment for the payment of rentals on the premises from August,
1955 and he taxing of attorney's fees against appellant are not warranted b the circumstances at bar. (Rollo, pp. 87-
88)
Acting on the Motion for Reconsideration, the Court of Appeals sustained the sixth ground raised by the appellant, that assuming that a
cause of action for rescission exists, he should nevertheless be entitled to the fixing of a period within which to comply with his
obligation. The Court of Appeals, therefore, amended its original decision in the following wise and manner:
WHEREFORE, our decision dated April 23, 1970 is hereby amended in the sense that the defendant Nicanor Lapuz
is hereby granted a period of ninety (90) days from entry hereof within which to pay the balance of the purchase price
in the amount of P11,434,44 with interest thereon at the rate of 8% per annum from August 17, 1955 until fully paid.
In the event that the defendant fails to comply with his obligation as above stated within the period fixed herein, our
original judgment stands.
Petitioner Roque, as plaintiff-appellee below, filed a Motion for Reconsideration; the Court of Appeals denied it. He now comes and
appeals to this Court on a writ of certiorari.
The respondent Court of Appeals rationalizes its amending decision by considering that the house presently erected on the land subject
of the contract is worth P45,000.00, which improvements introduced by defendant on the lots subject of the contract are very
substantial, and thus being the case, "as a matter of justice and equity, considering that the removal of defendant's house would
amount to a virtual forfeiture of the value of the house, the defendant should be granted a period within which to fulfill hi s obligations
under the agreement." Cited as authorities are the cases of Kapisanan Banahaw vs. Dejarme and Alvero, 55 Phil. 338, 344, where it is
held that the discretionary power of the court to allow a period within which a person in default may be permitted to perform the
stipulation upon which the claim for resolution of the contract is based should be exercised without hesitation in a case where a virtual
forfeiture of valuable rights is sought to be enforced as an act of mere reprisal for a refusal of the debtor to submit to a usurious charge,
and the case of Puerto vs. Go Ye Pin, 47 O.G. 264, holding that to oust the defendant from the lots without giving him a chance to
recover what his father and he himself had spent may amount to a virtual forfeiture of valuable rights.
As further reasons for allowing a period within which defendant could fulfill his obligation, the respondent court held that there exists
good reasons therefor, having in mind that which affords greater reciprocity of rights (Ramos vs. Blas, 51 O.G. 1920); that after
appellant had testified that plaintiff failed to comply with his part of the contract to put up the requisite facilities in the subdivision, plaintiff
did not introduce any evidence to rebut defendant's testimony but simply relied. upon the presumption that the law has been obeyed,
thus said presumption had been successfully rebutted as Exhibit "5-D" shows that the road therein shown is not paved The Court,
however, concedes that plaintiff's failure to comply with his obligation to put up the necessary facilities in the subdivision will not deter
him from asking fr the rescission of the agreement since this obligation is not correlative with defendant's obligation to buy the
property.
Petitioner assails the decision of the Court of Appeals for the following alleged errors:
I. The Honorable Court of Appeals erred in applying paragraph 3, Article 1191 of the Civil Code which refers to
reciprocal obligations in general and, pursuant thereto, in granting respondent Lapuz a period of ninety (90) days
from entry of judgment within which to pay the balance of the purchase price.
II. The Honorable Court of Appeals erred in not holding that Article 1592 of the same Code, which specifically covers
sales of immovable property and which constitutes an exception to the third paragraph of Article 1191 of said Code, is
applicable to the present case.
III. The Honorable Court of Appeals erred in not holding that respondent Lapuz cannot avail of the provisions of
Article 1191, paragraph 3 of the Civil Code aforesaid because he did not raise in his answer or in any of the pleadings
he filed in the trial court the question of whether or not he is entitled, by reason of a just cause, to a fixing of a new
period.
IV. Assuming arguendo that the agreement entered into by and between petitioner and respondent Lapuz was a
mere promise to sell or contract to sell, under which title to the lots in question did not pass from petitioner to
respondent, still the Honorable Court of Appeals erred in not holding that aforesaid respondent is not entitled to a new
period within which to pay petitioner the balance of P11,434.44 interest due on the purchase price of P12.325.00 of
the lots.
V. Assuming arguendo that paragraph 3, Article 1191 of the Civil Code is applicable and may be availed of by
respondent, the Honorable Court of Appeals nonetheless erred in not declaring that aid respondent has not shown
the existence of a just cause which would authorize said Court to fix a new period within which to pay the balance
aforesaid.
VI. The Honorable Court of Appeals erred in reconsidering its original decision promulgated on April 23, 1970 which
affirmed the decision of the trial court.
The above errors may, however, be synthesized into one issue and that is, whether private respondent is entitled to the Benefits of the
third paragraph of Article 1191, New Civil Code, for the fixing of period within which he should comply with what is incumbent upon him,
and that is to pay the balance of P11,434,44 with interest thereon at the rate of 8% 1et annum from August 17, 1955 until ful ly paid
since private respondent had paid only P150.00 as deposit and 4 months intallments amounting to P740.46, or a total of P890.46, the
total price of the two lots agreed upon being P12,325.00.
For his part, petitioner maintains that respondent is not entitled to the Benefits of paragraph 3, Article 1191, NCC and that instead,
Article 1592 of the New Civil Code which specifically covers sales of immovable property and which constitute an exception to the third
paragraph of Art. 1191 of aid Code, is the applicable law to the case at bar.
In resolving petitioner's assignment of errors, it is well that We lay clown the oda provisions and pertinent rulings of the Supreme Court
bearing on the crucial issue of whether Art. 1191, paragraph 3 of the New Civil Code applies to the case at Bar as held by the appellate
court and supported by the private respondent, or Art. 1592 of the same Code which petitioner strongly argues in view of the peculiar
facts and circumstances attending this case. Article 1191, New Civil Code, provides:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one at the obligors should not
comply with hat is incumbent upon him
The injured partner may choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should
become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance
with articles 1385 and 1388 and the Mortgage Law.
Article 1592 also provides:
Art. 1592. In the sale of immovable property, even though it may have been stipulated that upon failure to pay the
price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even after
the expiration of the period, as long as no demand for rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court may not grant him a new term.
The controlling and latest jurisprudence is established and settled in the celebrated case of Luzon Brokerage Co., Inc. vs. Maritime
Building Co., Inc. and Myers Building Co., G.R. No. L-25885, January 31, 1972, 43 SCRA 93, originally decided in 1972, reiterated in
the Resolution on Motion to Reconsider dated August 18, 1972, 46 SCRA 381 and emphatically repeated in the Resolution on Second
Motion for Reconsideration promulgated November 16, 1978, 86 SCRA 309, which once more denied Maritimes Second Motion for
Reconsideration of October 7, 1972. In the original decision, the Supreme Court speaking thru Justice J.B.L. Reyes said:
Under the circumstances, the action of Maritime in suspending payments to Myers Corporation was a breach of
contract tainted with fraud or malice (dolo), as distinguished from mere negligence (culpa), "dolo" being succinctly
defined as a "conscious and intention design to evade the normal fulfillment of existing obligations" (Capistrano, Civil
Code of the Philippines, Vol. 3, page 38), and therefore incompatible with good faith (Castan, Derecho Civil, 7th Ed.,
Vol. 3, page 129; Diaz Pairo, Teoria de Obligaciones, Vol. 1, page 116).
Maritime having acted in bad faith, it was not entitled to ask the court to give it further time to make payment and
thereby erase the default or breach that it had deliberately incurred. Thus the lower court committed no error in
refusing to extend the periods for payment. To do otherwise would be to sanction a deliberate and reiterated
infringement of the contractual obligations incurred by Maritime, an attitude repugnant to the stability and obligatory
force of contracts.
The decision reiterated the rule pointed out by the Supreme Court in Manuel vs. Rodriguez, 109 Phil. 1, p. 10, that:
In contracts to sell, where ownership is retained by the seller and is not to pass until the fun payment of the price,
such payment, as we said is a positive suspensive condition, the 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 i force in
accordance with Article 1117 of the Old Civil Code. To argue that there was only a casual breach is to proceed from
the assumption that the contract is one of absolute sale, where non-payment is a resolutory condition, which is not
the case." Continuing, the Supreme Court declared:
... appellant overlooks that its contract with appellee Myers s not the ordinary sale envisaged by Article 1592,
transferring ownership simultaneously with the delivery of the real property sold, but one in which the vendor retained
ownership of the immovable object of the sale, merely undertaking to convey it provided the buyer strictly complied
with the terms of the contract (see paragraph [d], ante page 5). In suing to recover possession of the building from
Maritime appellee Myers is not after the resolution or setting aside of the contract and the restoration of the parties to
the status quo ante as contemplated by Article 1592, but precisely enforcing the Provisions of the agreement that it is
no longer obligated to part with the ownership or possession of the property because Maritime failed to comply with
the specific condition precedent, which is to pay the installments as they fell due.
The distinction between contracts of sale and contracts to sell with reserved title has been recognized by this Court in
repeated decisions upholding the power of promisors under contracts to sell in case of failure of the other party to
complete payment, to extrajudicially terminate the operation of the contract, refuse conveyance and retain the sums
or installments already received, where such rights are expressly provided for, as in the case at bar.
In the Resolution denying the first Motion for Reconsideration, 46 SCRA 381, the Court again speaking thru Justice J.B.L. Reyes,
reiterated the rule that in a contract to sell, the full payment of the price through the punctual performance of the monthly payments is a
condition precedent to the execution of the final sale 4nd to the transfer of the property from the owner to the proposed buyer; so that
there will be no actual sale until and unless full payment is made.
The Court further ruled that in seeking to oust Maritime for failure to pay the price as agreed upon, Myers was not rescinding (or more
properly, resolving) the contract but precisely enforcing it according to its expressed terms. In its suit, Myers was not seeking restitution
to it of the ownership of the thing sold (since it was never disposed of), such restoration being the logical consequence of the fulfillment
of a resolutory condition, expressed or implied (Art. 1190); neither was it seeking a declaration that its obligation to sell was
extinguished. What is sought was a judicial declaration that because the suspensive condition (full and punctual payment) had not been
fulfilled, its obligation to sell to Maritime never arose or never became effective and, therefore, it (Myers) was entitled to repossess the
property object of the contract, possession being a mere incident to its right of ownership.
The decision also stressed that "there can be no rescission or resolution of an obligation as yet non-existent, because the suspensive
condition did not happen. Article 1592 of the New Civil Code (Art. 1504 of Old Civil Code) requiring demand by suit or notari al act in
case the vendor of realty wants to rescind does not apply to a contract to sell or promise to sell, where title remains with the vendor until
fulfillment to a positive condition, such as full payment of the price." (Manuel vs, Rodriguez, 109 Phil. 9)
Maritime's Second Motion for Reconsideration was denied in the Resolution of the Court dated November 16, 1978, 86 SCRA 305,
where the governing law and precedents were briefly summarized in the strong and emphatic language of Justice Teehankee, thus:
(a) The contract between the parties was a contract to sell or conditional sale with title expressly reserved in the
vendor Myers Building Co., Inc. Myers until the suspensive condition of full and punctual payment of the full price
shall have been met on pain of automatic cancellation of the contract upon failure to pay any of the monthly
installments when due and retention of the sums theretofore paid as rentals. When the vendee, appellant Maritime,
willfully and in bad faith failed since March, 1961 to pay the P5,000. monthly installments notwithstanding that it
was punctually collecting P10,000. monthly rentals from the lessee Luzon Brokerage Co., Myers was entitled, as it
did in law and fact, to enforce the terms of the contract to sell and to declare the same terminated and cancelled.
(b) Article 1592 (formerly Article 1504) of the new Civil Code is not applicable to such contracts to self or conditional
sales and no error was committed by the trial court in refusing to extend the periods for payment.
(c) As stressed in the Court's decision, "it is irrelevant whether appellant Maritime's infringement of its contract was
casual or serious" for as pointed out in Manuel vs. Rodriguez, '(I)n contracts to self. whether ownership is retained by
the seller and is not to pass until the full payment of the price, such payment, as we said, is a positive suspensive
condition, the 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 ...
(d) It should be noted, however, that Maritimes breach was far from casual but a most serious breach of contract ...
(e) Even if the contract were considered an unconditional sale so that Article 1592 of the Civil Code could be deemed
applicable, Myers' answer to the complaint for interpleaded in the court below constituted a judicial demand for
rescission of the contract and by the very provision of the cited codal article, 'after the demand, the court may not
grant him a new term for payment; and
(f) Assumming further that Article 1191 of the new Civil Code governing rescission of reciprocal obligations could be
applied (although Article 1592 of the same Code is controlling since it deals specifically with sales of real property),
said article provides that '(T)he court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period' and there exists to "just cause" as shown above for the fixing of a further period. ...
Under the first and second assignments of error which petitioner jointly discusses, he argues that the agreement entered into between
him and the respondent is a perfected contract of purchase and sale within the meaning of Article 1475 of the New Civil Code which
provides that "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. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contract."
Petitioner contends that "(n)othing in the decision of the courts below would show that ownership of the property remained with plaintiff
for so long as the installments have not been fully paid. Which yields the conclusion that, by the delivery of the lots to defendant,
ownership likewise was transferred to the latter." (Brief for the Petitioner, p. 15) And he concludes that the sale was consummated by
the delivery of the two lots, the subject thereof, by him to the respondent.
Under the findings of facts by the appellate court, it appears that the two lots subject of the agreement between the parties herein were
delivered by the petitioner to the private respondent who took possession thereof and occupied the same and thereafter built his house
thereon, enclosing the lots with adobe stone walls and barbed wires. But the property being registered under the Land Registration Act,
it is the act of registration of the Deed of Sale which could legally effect the transfer of title of ownership to the transferee, pursuant to
Section 50 of Act 496. (Manuel vs. Rodriguez, et al., 109 Phil. 1; Buzon vs. Lichauco, 13 Phil. 354; Tuazon vs. Raymundo, 28 Phil. 635:
Worcestor vs. Ocampo, 34 Phil. 646). 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.
In the case at bar, there is no writing or document evidencing the agreement originally entered into between petitioner and private
respondent except the receipt showing the initial deposit of P150.00 as shown in Exh. "A" and the payment of the 4- months installment
made by respondent corresponding to July, 1954 to October, 1954 in the sum of P740.56 as shown in Exh. "B". Neither is there any
writing or document evidencing the modified agreement when the 3 lots were changed to Lots 4 and 12 with a reduced area of 725 sq.
meters, which are corner lots. This absence of a formal deed of conveyance is a very strong indication that the parties did not intend
immediate transfer of ownership and title, but only a transfer after full payment of the price. Parenthetically, We must say that the
standard printed contracts for the sale of the lots in the Rockville Subdivision on a monthly installment basis showing the terms and
conditions thereof are immaterial to the case at bar since they have not been signed by either of the parties to this case.
Upon the law and jurisprudence hereinabove cited and considering the nature of the transaction or agreement between petitioner and
respondent which We affirm and sustain to be a contract to sell, the following resolutions of petitioner's assignment of errors necessarily
arise, and so We hold that:
1. The first and second assignments of errors are without merit.
The overwhelming weight of authority culminating in the Luzon Brokerage vs. Maritime cases has laid down the rule that Article 1592 of
the New Civil Code does not apply to a contract to sell where title remains with the vendor until full payment of the price as in the case
at bar. This is the ruling in Caridad Estates vs. Santero, 71 Phil. 120; Aldea vs. Inquimboy 86 Phil. 1601; Jocon vs. Capitol Subdivision,
Inc., L-6573, Feb. 28, 1955; Miranda vs. Caridad Estates, L-2077 and Aspuria vs. Caridad Estates, L-2121 Oct. 3, 1950, all reiterated
in Manuel vs. Rodriguez, et al. 109 Phil. 1, L-13435, July 27, 1960. We agree with the respondent Court of Appeals that Art, 1191 of the
New Civil Code is the applicable provision where the obligee, like petitioner herein, elects to rescind or cancel his obligation to deliver
the ownership of the two lots in question for failure of the respondent to pay in fun the purchase price on the basis of 120 monthly equal
installments, promptly and punctually for a period of 10 years.
2. We hold that respondent as obligor is not entitled to the benefits of paragraph 3 of Art. 1191, NCC Having been in default, he is not
entitled to the new period of 90 days from entry of judgment within which to pay petitioner the balance of P11,434.44 with interest due
on the purchase price of P12,325.00 for the two lots.
Respondent a paid P150.00 as deposit under Exh. "A" and P740.56 for the 4-months installments corresponding to the months of July
to October, 1954. The judgment of the lower court and the Court of Appeals held that respondent was under the obligation to pay the
purchase price of the lots m question on an equal monthly installment basis for a period of ten years, or 120 equal monthly installments.
Beginning November, 1954, respondent began to default in complying with his obligation and continued to do so for the remaini ng 116
monthly interest. His refusal to pay further installments on the purchase price, his insistence that he had the option to pay the purchase
price any time in ten years inspire of the clearness and certainty of his agreement with the petitioner as evidenced further by the receipt,
Exh. "B", his dilatory tactic of refusing to sign the necessary contract of sale on the pretext that he will sign later when he shall have
updated his monthly payments in arrears but which he never attempted to update, and his failure to deposit or make available any
amount since the execution of Exh "B" on June 28, 1954 up to the present or a period of 26 years, are all unreasonable and unjustified
which altogether manifest clear bad faith and malice on the part of respondent puzzle making inapplicable and unwarranted the benefits
of paragraph 3, Art. 1191, N.C.C. To allow and grant respondent an additional period for him to pay the balance of the purchase price,
which balance is about 92% of the agreed price, would be tantamount to excusing his bad faith and sanctioning the deliberate
infringement of a contractual obligation that is repugnant and contrary to the stability, security and obligatory force of contracts.
Moreover, respondent's failure to pay the succeeding 116 monthly installments after paying only 4 monthly installments is a substantial
and material breach on his part, not merely casual, which takes the case out of the application of the benefits of pa paragraph 3, Art.
1191, N.C.C.
At any rate, the fact that respondent failed to comply with the suspensive condition which is the full payment of the price through the
punctual performance of the monthly payments rendered petitioner's obligation to sell ineffective and, therefore, petitioner was entitled
to repossess the property object of the contract, possession being a mere incident to his right of ownership (Luzon Brokerage Co., Inc.
vs. Maritime Building Co., Inc., et al. 46 SCRA 381).
3. We further rule that there exists no just cause authorizing the fixing of a new period within which private respondent may pay the
balance of the purchase price. The equitable grounds or considerations which are the basis of the respondent court in the fixing of an
additional period because respondent had constructed valuable improvements on the land, that he has built his house on the property
worth P45,000.00 and placed adobe stone walls with barbed wires around, do not warrant the fixing of an additional period. We cannot
sanction this claim for equity of the respondent for to grant the same would place the vendor at the mercy of the vendee who can easily
construct substantial improvements on the land but beyond the capacity of the vendor to reimburse in case he elects to rescind the
contract by reason of the vendee's default or deliberate refusal to pay or continue paying the purchase price of the land. Under this
design, strategem or scheme, the vendee can cleverly and easily "improve out" the vendor of his land.
More than that, respondent has not been honest, fair and reciprocal with the petitioner, hence it would not be fair and reasonable to the
petitioner to apply a solution that affords greater reciprocity of rights which the appealed decision tried to effect between the parties. As
matters stand, respondent has been enjoying the possession and occupancy of the land without paying the other 116 monthly
installments as they fall due. The scales of justice are already tipped in respondent,s favor under the amended decision of the
respondent court. It is only right that We strive and search for the application of the law whereby every person must, in the exercise of
his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith (Art. 19,
New Civil Code)
In the case at bar, respondent has not acted in good faith. With malice and deliberate intent, he has twisted the clear import of his
agreement with the petitioner in order to suit his ends and delay the fulfillment of his obligation to pay the land he had enjoyed for the
last 26 years, more than twice the period of ten years that he obliged himself to complete payment of the price.
4. Respondent's contention that petitioner has not complied with his obligation to put up the necessary facilities in the Rockville
Subdivision is not sufficient nor does it constitute good reason to justify the grant of an additional period of 90 days from entry of
judgment within which respondent may pay the balance of the purchase price agreed upon. The Judgment of the appellate court
concedes that petitioner's failure to comply with his obligation to put up the necessary facilities in the subdivision will not deter him from
asking for the rescission of the agreement since his obligation is not correlative with respondent's obligation to buy the property. Since
this is so conceded, then the right of the petitioner to rescind the agreement upon the happening or in the event that respondent fails or
defaults in any of the monthly installments would be rendered nugatory and ineffective. The right of rescission would then depend upon
an extraneous consideration which the law does not contemplate.
Besides, at the rate the two lots were sold to respondent with a combined area of 725 sq. meters at the uniform price of P17.00 per sq.
meter making a total price of P12,325.00, it is highly doubtful if not improbable that aside from his obligation to deliver title and transfer
ownership to the respondent as a reciprocal obligation to that of the respondent in paying the price in full and promptly as the
installments fall due, petitioner would have assumed the additional obligation "to provide the subdivision with streets ... provide said
streets with street pavements concrete curbs and gutters, fillings as required by regulations, adequate drainage facilities, tree plantings,
adequate water facilities" as required under Ordinance No. 2969 of Quezon City approved on May 11, 1956 (Answer of Defendant,
Record on Appeal, pp. 35-36) which was two years after the agreement in question was entered into June, 1y54.
The fact remains, however, that respondent has not protested to the petitioner nor to the authorities concerned the alleged failure of
petitioner to put up and provide such facilities in the subdivision because he knew too well that he has paid only the aggregate sum of
P890.56 which represents more or less 7% of the agreed price of P12,325.00 and that he has not paid the real estate taxes assessed
by the government on his house erected on the property under litigation. Neither has respondent made any allegation in his Answer and
in all his pleadings before the court up to the promulgation of the Resolution dated October 12, 1970 by the Court of Appeals, to the
effect that he was entitled to a new period within which to comply with his obligation, hence the Court could not proceed to do so unless
the Answer is first amended. (Gregorio Araneta, Inc. vs. Philippine Sugar Estates Development Co., Ltd., G.R. No. L-22558, May 31,
1967, 20 SCRA 330, 335). It is quite clear that it is already too late in the day for respondent to claim an additional period within which
to comply with his obligation.
Precedents there are in Philippine jurisprudence where the Supreme Court granted the buyer of real property additional period within
which to complete payment of the purchase price on grounds of equity and justice as in (1)J.M. Tuazon Co., Inc. vs. Javier, 31 SCRA
829 where the vendee religiously satisfied the monthly installments for eight years and paid a total of P4,134.08 including i nterests on
the principal obligation of only P3,691.20, the price of the land; after default, the vendee was willing to pay all arrears, in fact offered the
same to the vendor; the court granted an additional period of 60 days -from receipt of judgment for the vendee to make all installment in
arrears plus interest; (2) in Legarda Hermanos vs. Saldaa, 55 SCRA 324, the Court ruled that where one purchase, from a subdivision
owner two lots and has paid more than the value of one lot, the former is entitled to a certificate of title to one lot in case of default.
On the other hand there are also cases where rescission was not granted and no new or additional period was authorized. Thus,
in Caridad Estates vs. Santero, 71 Phil. 114, the vendee paid, totalling P7,590.00 or about 25% of the purchase price of P30,000.00 for
the three lots involved and when the vendor demanded revocation upon the vendee's default two years after, the vendee offered to pay
the arears in check which the vendor refused; and the Court sustained the revocation and ordered the vendee ousted from the
possession of the land. In Ayala y Cia vs. Arcache, 98 Phil. 273, the total price of the land was P457,404.00 payable in installments; the
buyer initially paid P100,000.00 or about 25% of the agreed price; the Court ordered rescission in view of the substantial breach and
granted no extension to the vendee to comply with his obligation.
The doctrinal rulings that "a slight or casual breach of contract is not a ground for rescission. It must be so substantial and fundamental
to defeat the object of the parties" (Gregorio Araneta Inc. vs. Tuazon de Paterno, L-2886, August 22, 1962; Villanueva vs. Yulo, L-
12985, Dec. 29,1959); that "where time is not of the essence of t agreement, a slight delay on the part of one party in the performance
of his obligation is not a sufficient ground for the rescission of the agreement"( Biando vs. Embestro L-11919, July 27, 1959; cases cited
in Notes appended to Universal Foods Corporation vs. Court of Appeals, 33 SCRA 1), convince and persuade Us that in the case at bar
where the breach, delay or default was committed as early as in the payment of the fifth monthly installment for November, 1954, that
such failure continued and persisted the next month and every month thereafter in 1955, 1956, 1957 and year after year to the end of
the ten-year period in 1964 (10 years is respondent's contention) and even to this time, now more than twice as long a time as the
original period without respondent adding, or even offering to add a single centavo to the sum he had ori ginally paid in 1954 which
represents a mere 7% of the total price agreed upon, equity and justice may not be invoked and applied. One who seeks equity and
justice must come to court with clean hands, which can hardly be said of the private respondent.
One final point, on the supposed substantial improvements erected on the land, respondent's house. To grant the period to the
respondent because of the substantial value of his house is to make the land an accessory to the house. This is unjust and
unconscionable since it is a rule in Our Law that buildings and constructions are regarded as mere accessories to the land which is the
principal, following the Roman maxim "omne quod solo inadeficatur solo cedit" (Everything that is built on the soil yields to the soil).
Pursuant to Art. 1191, New Civil Code, petitioner is entitled to rescission with payment of damages which the trial court and the
appellate court, in the latter's original decision, granted in the form of rental at the rate of P60.00 per month from August, 1955 until
respondent shall have actually vacated the premises, plus P2,000.00 as attorney's fees. We affirm the same to be fair and reasonable.
We also sustain the right of the petitioner to the possession of the land, ordering thereby respondent to vacate the same and remove
his house therefrom.
WHEREFORE, IN VIEW OF THE FOREGOING, the Resolution appealed from dated October 12, 1970 is hereby REVERSED. The
decision of the respondent court dated April 23, 1970 is hereby REINSTATED and AFFIRMED, with costs against private respondent.
SO ORDERED.
Teehankee, Makasiar, Fernandez, De Castro and Melencio-Herrera, JJ., concur.

[G.R. No. 61043. September 2, 1992.]

DELTA MOTOR SALES CORPORATION, Plaintiff-Appellee, v. NIU KIM DUAN and CHAN FUE
ENG, Defendants-Appellants.

Francisco C. Bonoan for Plaintiff-Appellee.

Agapito M. Joaquin, for Defendants-Appellants.


SYLLABUS


1. CIVIL LAW; SALES; TREATMENT OF THE INSTALLMENT PAYMENTS AS RENTALS; STIPULATION IN A CONTRACT
THAT THE INSTALLMENTS PAID SHALL NOT BE RETURNED TO THE VENDEE HELD VALID PROVIDED IT IS NOT
UNCONSCIONABLE. Defendants-appellants cannot complain that their downpayment of P774.00 and installment
payments of P5,655.92 were treated as rentals even though the total amount of P6,429,92 which they had paid,
approximates one-third (1/3) of the cost of the three (3) air-conditioners. A stipulation in a contract that the
installments paid shall not be returned to the vendee is valid insofar as the same may not be unconscionable under
the circumstances is sanctioned by Article 1486 of the New Civil Code. The monthly installment payable by
defendants-appellants was P774.00. The P5,655.92 installment payments correspond only to seven (7) monthly
installments. Since they admit having used the air-conditioners for twenty-two (22) months, this means that they did
not pay fifteen (15) monthly installments on the said air-conditioners and were thus using the same FREE for said
period to the prejudice of plaintiff-appellee. Under the circumstances, the treatment of the installment payments as
rentals cannot be said to be unconscionable.

2. REMEDIES OF THE VENDOR IN A SALE OF PERSONAL PROPERTY PAYABLE IN INSTALLMENTS; REMEDIES ARE
ALTERNATIVE AND NOT CUMULATIVE. The vendor in a sale of personal property payable in installments may
exercise one of three remedies, namely, (1) exact the fulfillment of the obligation, should the vendee fail to pay; (2)
cancel the sale upon the vendees failure to pay two or more installments; (3) foreclose the chattel mortgage, if one
has been constituted on the property sold, upon the vendees failure to pay two or more installments. The third option
or remedy, however, is subject to the limitation that the vendor cannot recover any unpaid balance of the price and
any agreement to the contrary is void (Art. 1484) The three (3) remedies are alternative and NOT cumulative. If the
creditor chooses one remedy, he cannot avail himself of the other two.


D E C I S I O N


NOCON, J.:


Elevated to this Court by the Court of Appeals, in its Resolution of May 20, 1982, on a pure question of law, 1 is the
appeal therein by defendants-appellants, Niu Kim Duan and Chan Fue Eng assailing the trial courts decision
promulgated on October 11, 1977, 2 which ordered them to pay plaintiff-appellee, Delta Motor Sales Corporation, the
amount of P6,188.29 with a 14% per annum interest which was due on the three (3) "Daikin" air-conditioners
defendants-appellants purchased from plaintiff-appellee under a Deed of Conditional Sale, after the same was
declared rescinded by the trial court. They were likewise ordered to pay plaintiff-appellee P1,000.00 for and as
attorneys fees.chanrobles virtual lawlibrary

The events which led to the filing of the case in the lower court were summarized by the Court of Appeals, as
follows:jgc:chanrobles.com.ph

"On July 5, 1975, the defendants purchased from the plaintiff three (3) units of DAIKIN air-conditioner all valued at
P19,350.00 as evidenced by the Deed of Conditional Sale, Exhibit A; that the aforesaid deed of sale had the following
terms and conditions:chanrob1es virtual 1aw library

(a) the defendants shall pay a down payment of P774.00 and the balance of P18,576.00 shall [be] paid by them in
twenty four (24) installments; (b) the title to the properties purchased shall remain with the plaintiff until the
purchase price thereof is fully paid; (c) if any two installments are not paid by the defendants on their due dates, the
whole of the principal sum remaining unpaid shall become due, with interest at the rate of 14% per annum: and (d) in
case of a suit, the defendants shall pay an amount equivalent to 25% of the remaining unpaid obligation as damages,
penalty and attorneys fees; that to secure the payment of the balance of P18,576.00 the defendants jointly and
severally executed in favor of the plaintiff a promissory note, Exhibit C; that the three (3) air-conditioners were
delivered to and received by the defendants as shown by the delivery receipt, Exhibit B; that after paying the amount
of P6,966.00, the defendants failed to pay at least two (2) monthly installments; that as of January 6, 1977, the
remaining unpaid obligation of the defendants amounted to P12,920.08; that statements of accounts were sent to the
defendants and the plaintiffs collectors personally went to the former to effect collections but they failed to do so;
that because of the unjustified refusal of the defendants to pay their outstanding account and their wrongful detention
of the properties in question, the plaintiff tried to recover the said properties extra-judicially but it failed to do so; that
the matter was later referred by the plaintiff to its legal counsel for legal action; that in its verified complaint dated
January 28, 1977, the plaintiff prayed for the issuance of a writ of replevin, which the Court granted in its Order dated
February 28, 1977, after the plaintiff posted the requisite bond; that on April 11, 1977, the plaintiff, by virtue of the
aforesaid writ, succeeded in retrieving the properties in question: that as of October 3, 1977, the outstanding account
of the defendants is only in the amount of P6,188.29 as shown by the computation, Exhibit F, after deducting the
interests in arrears, cover charges, replevin bond premiums, the value of the units repossessed and the like; and, that
in view of the failure of the defendants to pay their obligations, the amount of P6,966.00 which had been paid by way
of installments were treated as rentals for the units in question for two (2) years pursuant to the provisions of
paragraph 5 of the Deed of Conditional Sale, Exhibit A. (pp. 5-7, Record; pp. 4-6, Appellants Brief)." chanrobles law
library

As above-stated, the trial court ruled in favor of Plaintiff-Appellee.

Defendants-appellants assail the Deed of Conditional Sale under which they purchased the three (3) Daikin air-
conditioners from plaintiff-appellee as being contrary to law, morals, good custom, public order or public policy. In
particular, they point to the contracts paragraphs 5 and 7 as iniquitous, which paragraphs state
that:jgc:chanrobles.com.ph

"5. Should BUYER fail to pay any of the monthly installments when due, or otherwise fail to comply with any of the
terms and conditions herein stipulated, this contract shall automatically become null and void and all sums so paid by
BUYER by reason thereof shall be considered as rental and the SELLER shall then and there be free to take possession
thereof without liability for trespass or responsibility for any article left in or attached to the PROPERTY:chanrob1es
virtual 1aw library
x x x


"7. Should SELLER rescind this contract for any of the reasons stipulated in the preceding paragraph, the BUYER, by
these presents obligates himself to peacefully deliver the PROPERTY to the SELLER in case of rescission, and should a
suit be brought in court by the SELLER to seek judicial declaration of rescission and take possession of the PROPERTY,
the BUYER hereby obligates himself to pay all the expenses to be incurred by reason of such suit and in addition to
pay the sum equivalent to 25% of the remaining unpaid obligation as damages, penalty and attorneys fees;" 3

Defendants-appellants claim that for the use of the plaintiff-appellees three air-conditioners, from July 5, 1975 4 to
April 11, 1977, 5 or for a period of about 22 months, they, in effect, paid rentals in the amount of P6,429,92, 6 or
roughly one-third (1/3) of the entire price of said air-conditioners which was P19,350.00. They also complain that for
the said period the trial court is ordering them to pay P6,188.29 as the balance due for the three air-conditioners
repossessed. Defendants-appellants were likewise ordered to pay P1,000.00 as attorneys fees when plaintiff-appellee
never sought for attorneys fees in its complaint. They satirically pointed out that by putting "a few touches here and
there, the same units can be sold again to the next imprudent customer" 7 by plaintiff-appellee. Thus, enforcement of
the Deed of Conditional Sale will unjustly enrich plaintiff-appellee at the expense of defendants-appellants.chanrobles
law library : red
I


Defendants-appellants cannot complain that their downpayment of P774.00 and installment payments of P5,655.92 8
were treated as rentals even though the total amount of P6,429,92 which they had paid, approximates one-third
(1/3) of the cost of the three (3) air-conditioners. A stipulation in a contract that the installments paid shall not be
returned to the vendee is valid insofar as the same may not be unconscionable under the circumstances is sanctioned
by Article 1486 of the New Civil Code. 9 The monthly installment payable by defendants-appellants was P774.00. 10
The P5,655.92 installment payments correspond only to seven (7) monthly installments. Since they admit having
used the air-conditioners for twenty-two (22) months, this means that they did not pay fifteen (15) monthly
installments on the said air-conditioners and were thus using the same FREE for said period to the prejudice of
plaintiff-appellee. Under the circumstances, the treatment of the installment payments as rentals cannot be said to be
unconscionable.
II


The vendor in a sale of personal property payable in installments may exercise one of three remedies, namely, (1)
exact the fulfillment of the obligation, should the vendee fail to pay; (2) cancel the sale upon the vendees failure to
pay two or more installments; (3) foreclose the chattel mortgage, if one has been constituted on the property sold,
upon the vendees failure to pay two or more installments. The third option or remedy, however, is subject to the
limitation that the vendor cannot recover any unpaid balance of the price and any agreement to the contrary is void
(Art. 1484) 11

The three (3) remedies are alternative and NOT cumulative. If the creditor chooses one remedy, he cannot avail
himself of the other two.chanrobles lawlibrary : rednad

It is not disputed that the plaintiff-appellee had taken possession of the three air-conditioners, through a writ of
replevin when defendants-appellants refused to extra-judicially surrender the same. This was done pursuant to
paragraphs 5 and 7 of its Deed of Conditional Sale when defendants-appellants failed to pay at least two (2) monthly
installments, so much so that as of January 6, 1977, the total amount they owed plaintiff-appellee, inclusive of
interest, was P12,920.08. 12 The case plaintiff-appellee filed was to seek a judicial declaration that it had validly
rescinded the Deed of Conditional Sale. 13

Clearly, plaintiff-appellee chose the second remedy of Article 1484 in seeking enforcement of its contract with
defendants-appellants. This is shown from the fact that its Exhibit "F" which showed the computation of the
outstanding account of defendants-appellants as of October 3, 1977 took into account "the value of the units
repossessed." 14 Having done so, it is barred from exacting payment from defendants-appellants of the balance of the
price of the three air-conditioning units which it had already repossessed. It cannot have its cake and eat it too. 15

WHEREFORE, the judgment of the trial court in Civil Case No. 25578 is hereby SET ASIDE and the complaint filed by
plaintiff-appellee Delta Motor Sales Corporation is hereby DISMISSED. No costs.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Melo, JJ., concur.
G.R. No. L-36731 January 27, 1983
VICENTE GODINEZ, ET AL., plaintiffs-appellants,
vs.
FONG PAK LUEN ET AL., defendants, TRINIDAD S. NAVATA, defendant-appellee.
Dominador Sobrevinas for plaintiffs-appellants.
Muss S. Inquerto for defendant-appellee

GUTIERREZ, JR., J .:
The plaintiffs filed this case to recover a parcel of land sold by their father, now deceased, to Fong Pak Luen, an alien, on the ground
that the sale was null and void ab initio since it violates applicable provisions of the Constitution and the Civil Code.
The order of the Court of First Instance of Sulu dismissing the complaint was appealed to the Court of Appeals but the latter court
certified the appeal to us since only pure questions of law were raised by the appellants.
The facts of the case were summarized by the Court of Appeals as follows:
On September 30, 1966, the plaintiffs filed a complaint in the Court of First Instance of Sulu alleging among others
that they are the heirs of Jose Godinez who was married to Martina Alvarez Godinez sometime in 1910; that during
the marriage of their parents the said parents acquired a parcel of land lot No. 94 of Jolo townsite with an area of
3,665 square meters as evidenced by Original Certificate of Title No. 179 (D -155) in the name of Jose Godinez; that
their mother died sometime in 1938 leaving the plaintiffs as their sole surviving heirs; that on November 27, 1941,
without the knowledge of the plaintiffs, the said Jose Godinez, for valuable consideration, sold the aforesaid parcel of
land to the defendant Fong Pak Luen, a Chinese citizen, which transaction is contrary to law and in violation of the
Civil Code because the latter being an alien who is inhibited by law to purchase real property; that Transfer Certificate
Title No. 884 was then issued by the Register of Deeds to the said defendant, which is null and void ab initio since
the transaction constituted a non-existent contract; that on January 11, 1963, said defendant Fong Pak Luen
executed a power of attorney in favor of his co-defendant Kwan Pun Ming, also an alien, who conveyed and sold the
above described parcel of land to co-defendant Trinidad S. Navata, who is aware of and with full knowledge that
Fong Pak Luen is a Chinese citizen as well as Kwan Pun Ming, who under the law are prohibited and disqualified to
acquire real property in this jurisdiction; that defendant Fong Pak Luen has not acquired any title or interest in said
parcel of land as the purported contract of sale executed by Jose Godinez alone was contrary to law and considered
non- existent, so much so that the alleged attorney-in-fact, defendant Kwan Pun Ming had not conveyed any title or
interest over said property and defendant Navata had not acquired anything from said grantor and as a consequence
Transfer Certificate of Title No. 1322, which was issued by the Register of Deeds in favor of the latter is null and
void ab initio,- that since one-half of the said property is conjugal property inherited by the plaintiffs from their mother,
Jose Godinez could -not have legally conveyed the entire property; that notwithstanding repeated demands on said
defendant to surrender to plaintiffs the said property she refused and still refuses to do so to the great damage and
prejudice of the plaintiffs; and that they were constrained to engage the services of counsel in the sum of
P2,000.00.1wph1.t The plaintiffs thus pray that they be adjudged as the owners of the parcel of land in question
and that Transfer Certificate of Title RT-90 (T-884) issued in the name of defendant Fong Pak Luen be declared null
and void ab initio; and that the power of attorney issued in the name of Kwan Pun Ming, as well as Transfer
Certificate of Title No. 'L322 issued in the name of defendant Navata be likewise declared null and void, with costs
against defendants.
On August 18, 1966, the defendant Register of Deeds filed an answer claiming that he was not yet the register of
deeds then; that it was only the ministerial duty of his office to issue the title in favor of the defendant Navata once he
was determined the registerability of the documents presented to his office.
On October 20, 1966, the defendant Navata filed her answer with the affirmative defenses and counterclaim alleging
among others that the complaint does not state a cause of action since it appears from the allegation that the
property is registered in the name of Jose Godinez so that as his sole property he may dispose of the same; that the
cause of action has been barred by the statute of limitations as the alleged document of sale executed by Jose
Godinez on November 27, 1941, conveyed the property to defendant Fong Pak Luen as a result of which a title was
issued to said defendant; that under Article 1144 (1) of the Civil Code, an action based upon a written contract must
be brought within 10 years from the time the right of action accrues; that the right of action accrued on November 27,
1941 but the complaint was filed only on September 30, 1966, beyond the 10 year period provided for by law; that the
torrens title in the name of defendant Navata is indefeasible who acquired the property from defendant Fong Pak
Luen who had been in possession of the property since 1941 and thereafter defendant Navata had possessed the
same for the last 25 years including the possession of Fong Pak Luen; that the complaint is intended to harass the
defendant as a civic leader and respectable member of the community as a result of which she suffered moral
damages of P100,000.00, P2,500.00 for attorney's fees and P500.00 expenses of litigation, hence, said defendant
prays that the complaint be dismissed and that her counterclaim be granted, with costs against the plaintiffs. On
November 24, 1967, the plaintiffs filed an answer to the affirmative defenses and counter-claim. As the defendants
Fong Pak Luen and Kwan Pun Ming are residing outside the Philippines, the trial court upon motion issued an order
of April 17, 1967, for the service of summons on said defendants by publication. No answer has been filed by said
defendants.
On December 2, 196 7, the court issued an order as follows:
Both parties having agreed to the suggestion of the Court that they submit their supplemental
pleadings to support both motion and opposition and after submittal of the same the said motion to
dismiss which is an affirmative defense alleged in the complaint is deemed submitted. Failure of
both parties or either party to submit their supplemental pleadings on or about December 9, the
Court will resolve the case.
On November 29, 1968, the trial court issued an order missing the complaint without pronouncement as to costs.
(Record on Appeal, pp. 31- 37). A motion for reconsideration of this order was filed by the plaintiffs on December 12,
196F, which was denied by the trial court in an order of July 11, 1969, (Rec. on Appeal, pp. 38, 43, 45, 47). The
plaintiffs now interpose this appeal with the following assignments of errors:
I. The trial court erred in dismissing plaintiffs-appellants' complaint on the ground of prescription of
action, applying Art. 1144 (1) New Civil Code on the basis of defendant Trinidad S. Navata's
affirmative defense of prescription in her answer treated as a motion to dismiss.
II. The trial court erred in denying plaintiffs-appellants' motion for reconsideration of the order of
dismissal.
III. The trial court erred in not ordering this case to be tried on the merits."
The appellants contend that the lower court erred in dismissing the complaint on the ground that their cause of action has prescribed.
While the issue raised appears to be only the applicability of the law governing prescription, the real question before us is whether or
not the heirs of a person who sold a parcel of land to an alien in violation of a constitutional prohibition may recover the property if it
had, in the meantime, been conveyed to a Filipino citizen qualified to own and possess it.
The question is not a novel one. Judicial precedents indicate fairly clearly how the question should be resolved.
There can be no dispute that the sale in 1941 by Jose Godinez of his residential lot acquired from the Bureau of Lands as part of the
Jolo townsite to Fong Pak Luen, a Chinese citizen residing in Hongkong, was violative of Section 5, Article XIII of the 1935 Constitution
which provided:
Sec. 5. Save in cases of hereditary succession, no private agricultural land will be transferred or assigned except to
individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines.
The meaning of the above provision was fully discussed in Krivenko v. Register of Deeds of Manila (79 Phil. 461) which also detailed
the evolution of the provision in the public land laws, Act No. 2874 and Commonwealth Act No. 141. The Krivenko ruling that "under the
Constitution aliens may not acquire private or agricultural lands, including residential lands" is a declaration of an imperative
constitutional policy. Consequently, prescription may never be invoked to defend that which the Constitution prohibits. However, we see
no necessity from the facts of this case to pass upon the nature of the contract of sale executed by Jose Godinez and Fong Pak Luen
whether void ab initio,illegal per se or merely pro-exhibited.** It is enough to stress that insofar as the vendee is concerned, prescription
is unavailing. But neither can the vendor or his heirs rely on an argument based on imprescriptibility because the land sold in 1941 is
now in the hands of a Filipino citizen against whom the constitutional prescription was never intended to apply. The lower court erred in
treating the case as one involving simply the application of the statute of limitations.
From the fact that prescription may not be used to defend a contract which the Constitution prohibits, it does not necessaril y follow that
the appellants may be allowed to recover the property sold to an alien. As earlier mentioned, Fong Pak Luen, the disqualified alien
vendee later sold the same property to Trinidad S. Navata, a Filipino citizen qualified to acquire real property.
In Vasquez v. Li Seng Giap and Li Seng Giap & Sons (96 Phil. 447), where the alien vendee later sold the property to a Filipino
corporation, this Court, in affirming a judgment dismissing the complaint to rescind the sale of real property to the defendant Li Seng
Giap on January 22, 1940, on the ground that the vendee was an alien and under the Constitution incapable to own and hold title to
lands, held:
In Caoile vs. Yu Chiao 49 Qff Gaz., 4321; Talento vs. Makiki 49 Off. Gaz., 4331; Bautista vs. Uy 49 Off. Gaz.,
4336; Rellosa vs. Gaw Chee 49 Off. Gaz., 4345 and Mercado vs. Go Bio, 49 Off. Gaz., 5360, the majority of this
Court has ruled that in sales of real estate to aliens incapable of holding title thereto by virtue of the provisions of the
Constitution (Section 5, Article XIII Krivenko vs. Register of Deeds, 44 Off. Gaz., 471) both the vendor and the
vendee are deemed to have committed the constitutional violation and being thus in pari delicto the courts will not
afford protection to either party. (Article 1305, old Civil Code; Article 1411, new Civil Code) From this ruling three
Justices dissented. (Mr. Justice Pablo, Mr. Justice Alex. Reyes and the writer. See Caoile vs. Yu Chiao Talento vs.
Makiki Bautista us. Uy, Rellosa vs. Gaw Chee and Mercado vs. Go Bio). supra.
The action is not of rescission because it is not postulated upon any of the grounds provided for in Article 1291 of the
old Civil Code and because the action of rescission involves lesion or damage and seeks to repair it. It is an action for
annulment under Chapter VI, Title II, Book 11, on nullity of contracts, based on a defect in the contract which
invalidates it independently of such lesion or damages. (Manresa, Commentarios al Codigo Civil Espanol Vol. VIII, p.
698, 4th ed.) It is very likely that the majority of this Court proceeded upon that theory when it applied the in pari
delicto rule referred to above.
In the United States the rule is that in a sale of real estate to an alien disqualified to hold title thereto the vendor
divests himself of the title to such real estate and has no recourse against the vendee despite the latter's disability on
account of alienage to hold title to such real estate and the vendee may hold it against the whole world except as
against the State. It is only the State that is entitled by proceedings in the nature of office found to have a forfeiture or
escheat declared against the vendee who is incapable of holding title to the real estate sold and conveyed to him.
Abrams vs. State, 88 Pac. 327; Craig vs. Leslie et al., 4 Law, Ed. 460; 3 Wheat, 563, 589590; Cross vs. Del Valle, 1
Wall, [U.S.] 513; 17 Law. Ed., 515; Governeur vs. Robertson, 11 Wheat, 332, 6 Law. Ed., 488.)
However, if the State does not commence such proceedings and in the meantime the alien becomes naturalized
citizen, the State is deemed to have waived its right to escheat the real property and the title of the alien thereto
becomes lawful and valid as of the date of its conveyance or transfer to him. (Osterman vs. Baldwin, 6 Wall, 116, 18
Law. ed. 730; Manuel vs. Wulff, 152 U.S. 505, 38 Law. ed. 532; Pembroke vs. Houston, 79, SW 470; Fioerella vs.
Jones, 259 SW 782. The rule in the United States that in a sale of real estate to an alien disqualified to hold title
thereto, the vendor divests himself of the title to such real estate and is not permitted to sue for the annulment Of his
Contract, is also the rule under the Civil Code. ... Article 1302 of the old Civil Code provides: ... Persons sui
juriscannot, however, avail themselves of the incapacity of those with whom they contracted; ...
xxx xxx xxx
. . . (I)f the ban on aliens from acquiring not only agricultural but, also urban lands, as construed by this Court in the
Krivenko case, is to preserve the nation's land for future generations of Filipinos, that aim or purpose would not be
thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by
naturalization. The title to the parcel of land of the vendee, a naturalized Filipino citizen, being valid that of the
domestic corporation to which the parcel of land has been transferred, must also be valid, 96.67 per cent of its capital
stock being owned by Filipinos.
Herrera v. Luy Kim Guan (SCRA 406) reiterated the above ruling by declaring that where land is sold to a Chinese citizen, who later
sold it to a Filipino, the sale to the latter cannot be impugned.
The appellants cannot find solace from Philippine Banking Corporation v. Lui She (21 SCRA 52) which relaxed the pari delicto doctrine
to allow the heirs or successors-in-interest, in appropriate cases, to recover that which their predecessors sold to aliens.
Only recently, in Sarsosa vda. de Barsobia v. Cuenco (113 SCRA 547) we had occasion to pass upon a factual situation substantially
similar to the one in the instant case. We ruled:
But the factual set-up has changed. The litigated property is now in the hands of a naturalized Filipino. It is no longer
owned by a disqualified vendee. Respondent, as a naturalized citizen, was constitutionally qualified to own the
subject property. There would be no more public policy to be served in allowing petitioner Epifania to recover the land
as it is already in the hands of a qualified person. Applying by analogy the ruling of this Court in Vasquez vs. Giap &
Sons: (.96 Phil. 447 [1955])
... if the ban on aliens from acquiring not only agricultural but also urban lands, as construed by this Court in the
Krivenko case, is to preserve the nation's lands for future generations of Filipinos, that aim or purpose would not be
thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by
naturalization.
While, strictly speaking, Ong King Po, private respondent's vendor, had no rights of ownership to transmit, it is
likewise in escapable that petitioner Epifania had slept on her rights for 26 years from 1936 to 1962. By her long
inaction or inexcusable neglect, she should be held barred from asserting her claim to the litigated property (Sotto vs.
Teves, 86 SCRA 157 [1978])
Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of time, to do that
which by exercising due diligence could or should have been done earlier; it is negligence or ommission to assert a
right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or
declined to assert it. (Tijam, et al. vs. Sibonghanoy, et al., No. L-21450, April 15, 1968, 23 SCRA 29, 35).' (Cited in
Sotto vs. Teves, 86 SCRA 154 [1978]).
Respondent, therefore, must be declared to be the rightful owner of the property.
In the light of the above considerations, we find the second and third assignments of errors without merit. Respondent Navata, the titled
owner of the property is declared the rightful owner.
WHEREFORE, the instant appeal is hereby denied. The orders dismissing the complaint and denying the motion for reconsideration
are affirmed.
SO ORDERED.

G.R.No. L-72306 January 24, 1989
DAVID P. FORNILDA, JUAN P. FORNILDA, EMILIA P. FORNILDA OLILI, LEOCADIA P. FORNILDA LABAYEN and ANGELA P.
FORNILDA GUTIERREZ, petitioners,
vs.
THE BRANCH 164, REGIONAL TRIAL COURT IVTH JUDICIAL REGION, PASIG, JOAQUIN C. ANTONIA Deputy Sheriff, RTC,
4JR Tanay, Rizal and ATTY. SERGIO AMONOY, respondents.
Irene C. Ishiwata for petitioner A. Gutierrez.
R E S O L U T I O N

MELENCIO-HERRERA, J .:
On 5 October 1988, this Court rendered a Decision, the dispositive portion of which reads:
WHEREFORE, certiorari is granted; the Order of respondent Trial Court, dated 25 July 1985, granting a Writ of
Possession, as well as its orders, dated 25 April 1986 and 16 May 1986, directing and authorizing respondent Sheriff
to demolish the houses of petitioners Angela and Leocadia Fornilda are hereby set aside, and the Temporary
Restraining Order heretofore issued, is made permanent. The six (6) parcels of land herein controverted are hereby
ordered returned to petitioner unless some of them have been conveyed to innocent third persons.
With respect to petitioners' prayer for disbarment by reason of malpractice of Respondent Amonoy embodied in their
pleading entitled "Mahigpit na Musiyun para Papanagutin Kaugnay ng Paglalapastangan" and "Masasamang Gawain
(Mal-Practices)" and "Paninindigan (Memorandum)" both filed on 16 June 1988, Respondent Sergio 1. Amonoy is
hereby required, within fifteen (15) days from notice hereof, to submit an answer thereto. After receipt of the same, a
new docket number will be assigned to the case.
Costs against respondent, Sergio I. Amonoy. (pp. 497-498, Rollo)
The case for disbarment is dealt with in a separate Resolution of even date in AC No. 3277.
On 25 October 1988 respondent Amonoy filed his Motion for Reconsideration, followed by his "Supplemental Arguments in Support of
Motion for Reconsideration" dated 8 November 1988. In essence, he advances the following points:
1) The transaction involved herein being a mortgage, Article 1491[51 of the Civil Code does not apply. Consequently,
the mortgage contract executed in favor of respondent Amonoy is valid;
2) Article 1491[5] does not apply to foreclosure sales in favor of judgment creditors;
3) The instant petition is barred by res judicata;
4) The jurisdiction of the foreclosing court does not depend on the alleged invalidity of the mortgage being foreclosed.
Thus, the lower court had jurisdiction over the foreclosure case, the alleged invalidity of the contract merely serving
as a ground for the dismissal of the petition due to lack of cause of action;
5) Under BP 129, only the Court of Appeals has original and exclusive jurisdiction over actions for annulment of
judgment.
We find the foregoing submissions without merit.
Respondent Amonoy avers that at the time of the execution of the mortgage on 20 January 1965, subject properties were no longer
"properties in litigation" since the Project of Partition (as signed by the intestate heirs) covering said properties was approved by the
lower Court as early as 12 January 1965.
This argument must fail for the reason that while the Project of Partition was approved on 12 January 1965, it was only on 6 August
1969, and after all charges against the estate had been paid, that the estate was declared closed and terminated. In fact, by his own
admission, he had acted as counsel from 1959 until 1968 (Comment, p. 145, Rollo). Thus, at the time of the execution of the mortgage
contract, the Controverted Parcels were still in litigation and a fiduciary relationship of lawyer and client, which Article 1491[5] precisely
seeks to protect, still existed between the parties. To state that mortgages are not included within the prohibition is to open the door to
an indirect circumvention of that statutory injunction, acquisition of the property being merely postponed till eventual foreclosure.
Respondent asserts further that Article 1491[5] does not apply to judgment creditors of which, he claims, he was one. Under ordinary
circumstances, the argument of respondent could be considered plausible. Unfortunately, however, as heretofore explained, the
mortgage was executed in violation of Article 1491[5] so that this Article has a direct bearing on this case and respondent can not
escape its provision. Having violated the same, he cannot be considered in the general run of a judgment creditor.
Respondent likewise stresses that res judicata should apply herein since it was a little more than four (4) years from the 22 July 1981
Decision of the Court of Appeals in the Annulment Case (CA-G.R. No. 63214-R) when this Petition was filed. Consequently, he
contends that this Petition should be dismissed since it merely raises the same issues brought up and already resolved in the earlier
case.
The question of res judicata and jurisdiction of the lower Court over the subject matter of the Foreclosure Case had been amply
discussed in the Decision sought to be reconsidered, citing the case of Municipality of Antipolo vs. Zapanta (133 SCRA 822 [1984]),
and we find no need to dwell on them again.
Neither of the cases cited by respondent to support his contention that the lower Court had jurisdiction over the Foreclosure Case
notwithstanding the invalidity of the mortgage contract, viz., Florentino vs. Galera (5 SCRA 500 [1962] and Talosig vs. Vda. de
Nieba (43 SCRA 472 [1972]), refers to a void subject matter over which the Courts involved could not acquire jurisdiction.
Finally, respondent movant submits that only the Court of Appeals has original and exclusive jurisdiction over actions for annulment of
judgments of the lower Court under BP Blg. 129 so that the Supreme Court should not take cognizance of the instant case. The focal
issue raised herein, however, i.e., whether or not the acquisition by respondent of the property in litigation is valid or not, is a pure
question of law. As such, this Court is vested with jurisdiction to take cognizance of this case.
ACCORDINGLY, private respondent's Motion for Reconsideration is hereby DENIED and this denial is FINAL.
SO ORDERED.

[G.R. No. 94828. September 18, 1992.]

SPOUSES ROMULO DE LA CRUZ and DELIA DE LA CRUZ, and DANIEL FAJARDO, Petitioners, v. ASIAN
CONSUMER AND INDUSTRIAL FINANCE CORPORATION and the HONORABLE COURT OF
APPEALS, Respondents.


SYLLABUS


1. CIVIL LAW; SPECIAL CONTRACTS; SALE; REMEDIES OF UNPAID SELLER OF PERSONAL PROPERTY PAYABLE IN
INSTALLMENT; RULE. The instant case is covered by the so-called "Recto Law", now Art. 1484 of the New Civil
Code, which provides: "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) Exact fulfillment of the obligation, should the vendee fail to
pay; (2) Cancel the sale, should the vendees failure to pay cover two or more installments; (3) Foreclose the chattel
mortgage on the thing sold, if one has been constituted, should the vendees 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." In this jurisdiction, the three (3) remedies provided for in the
"Recto Law" are alternative and not cumulative; the exercise of one would preclude the other remedies. Consequently,
should the vendee-mortgagor default in the payment of two or more of the agreed installments, the vendor-
mortgagee has the option to avail of any of these three (3) remedies: either to exact fulfillment of the obligation, to
cancel the sale, or to foreclose the mortgage on the purchased chattel, if one was constituted. (Pacific Commercial Co.
v. De la Rama, 72 Phil. 380 (1941); Manila Motor, Inc. v. Fernandez, 99 Phil. 782 (1956); Radiowealth v. Lavin, L-
18563, April 27, 1963, 7 SCRA 804).

2. ID.; ID.; ID.; ID.; EFFECT OF FAILURE OF VENDOR TO FORECLOSE THE MORTGAGED PROPERTY. It is thus clear
that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue the
foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted. As we ruled
in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. (G.R. No. 50449, January 1982, 111 SCRA 421) "Under the law,
the delivery of possession of the mortgaged property to the mortgagee, the herein appellee, can only operate to
extinguish appellants liability if the appellee had actually caused the foreclosure sale of the mortgaged property when
it recovered possession thereof (Northern Motors, Inc. v. Sapinoso, 33 SCRA 356 [1970]; Universal Motors Corp. v.
Dy Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]). It is worth noting that
it is the fact of foreclosure and actual sale of the mortgaged chattel that bar recovery by the vendor of any balance of
the purchasers outstanding obligation not satisfied by the sale (New Civil Code, par. 3, Article 1484). As held by this
Court, if the vendor desisted, on his own initiative, from consummating the auction sale, such desistance was a timely
disavowal of the remedy of foreclosure, and the vendor can still sue for specific performance" (Industrial Finance
Corp. v. Tobias, 78 SCRA 28 [1977]; Radiowealth, Inc. v. Lavin, L-18563, April 27, 1963, 7 SCRA 804; Pacific
Commercial Co. v. dela Rama, 72 Phil. 380 [1941]). Consequently, in the case before Us, there being no actual
foreclosure of the mortgaged property, ASIAN is correct in resorting to an ordinary action for collection of the unpaid
balance of the purchase price.

3. ID.; ID.; ID.; ID.; ID.; POSSESSION OF MORTGAGED PROPERTY SHOULD BE RETURNED TO MORTGAGEE-VENDEE
UPON PAYMENT OF UNPAID BALANCE; CASE AT BAR. We note however that the trial court, as well as the Court of
Appeals failed to consider that the vehicle was already in the possession of ASIAN when it directed petitioners herein
to pay P184,466.67 representing the balance of the purchase price of the mortgaged property. Law and equity will not
permit ASIAN to have its cake and eat it too, so to speak. By allowing ASIAN to retain possession of the vehicle and
then directing petitioners to pay the unpaid balance would certainly result in unjust enrichment of the former.
Accordingly, the ownership and possession of the vehicle should be returned to petitioners by ASIAN in the condition
that it was when delivered to it, and if this be no longer feasible, to deduct from the adjudged liability of petitioners
the amount of P60,000.00, its corresponding appraised value.


D E C I S I O N


BELLOSILLO, J.:


The pivotal point before Us is whether a chattel mortgagee, after opting to foreclose the mortgage but failing
afterwards to sell the property at public auction, may still sue to recover the unpaid balance of the purchase price.

On 22 September 1982, the spouses Romulo de la Cruz and Delia de la Cruz, and one Daniel Fajardo, petitioners
herein, purchased on installment basis one (1) unit Hino truck from Benter Motor Sales Corporation (BENTER for
brevity). To secure payment, they executed in favor of BENTER a chattel mortgage over the vehicle 1 and a
promissory note for P282,360.00 payable in thirty (30) monthly installments of P9,412.00. 2 On the same date,
BENTER assigned its rights and interest over the vehicle in favor of private respondent Asian Consumer and Industrial
Finance Corporation (ASIAN for brevity). 3 Although petitioners initially paid some installments they subsequently
defaulted on more than two (2) installments. Thereafter, notwithstanding the demand letter of ASIAN, 4 petitioners
failed to settle their obligation.

On 26 September 1984, by virtue of a petition for extrajudicial foreclosure of chattel mortgage, the sheriff attempted
to repossess the vehicle but was unsuccessful because of the refusal of the son of petitioner, Rolando de la Cruz to
surrender the same. Hence, the return of the sheriff that the service was not satisfied.chanrobles law library : red

On 10 October 1984, petitioner Romulo de la Cruz brought the vehicle to the office of ASIAN and left it there where it
was inventoried and inspected. 5

On 27 November 1984, ASIAN filed an ordinary action with the court a quo for collection of the balance of
P196,152.99 of the purchase price, plus liquidated damages and attorneys fees. 6

After trial, the court below rendered judgment in favor of ASIAN.

On appeal, the Court of Appeals affirmed the judgment and held that

". . . no extrajudicial foreclosure of chattel mortgage ever transpired in the case at bar. Undoubtedly, plaintiff had first
chosen to extrajudically foreclose the mortgage, but this did not materialize through no fault of plaintiff, as defendant
refused to surrender the Hino truck. The mere fact that the writ in now in possession of plaintiff and a Technical and
Inspection Report was made in connection therewith is not conclusive of the extrajudicial foreclosure, for in this kind
of foreclosure, possession of the chattel by the sheriff is necessary, aside from the sale at public auction."cralaw
virtua1aw library

"Though the remedy of foreclosure was first chosen, this remedy however proved ineffectual due to no fault of
plaintiff. Therefore, plaintiff may exercise other remedies such as exact fulfillment of the obligation and thereafter
recover the deficiency. This is the essence of the rule of alternative remedies under Article 1484." cralawnad

Petitioners take exception. While they do not dispute that where the mortgagee elects the remedy of foreclosure
which, according to them, includes the option to sell in a public or private sale, commences and pursues it, and in
consideration of which he also performs everything that is incumbent upon him to do to implement the foreclosure
they nevertheless insist that he should not later be allowed to change course midway in the process, abandon the
foreclosure and shift to other remedies such as collection of the balance, especially after having recovered the
mortgaged chattel from them and while retaining possession thereof.

We do not agree with petitioners.

It is not disputed that the instant case is covered by the so-called "Recto Law", now Art. 1484 of the New Civil Code,
which provides:jgc:chanrobles.com.ph

"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) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale,
should the vendees failure to pay cover two or more installments; (3) Foreclose the chattel mortgage on the thing
sold, if one has been constituted, should the vendees 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."cralaw virtua1aw library

In this jurisdiction, the three (3) remedies provided for in the "Recto Law" are alternative and not cumulative; the
exercise of one would preclude the other remedies. Consequently, should the vendee-mortgagor default in the
payment of two or more of the agreed installments, the vendor-mortgagee has the option to avail of any of these
three (3) remedies: either to exact fulfillment of the obligation, to cancel the sale, or to foreclose the mortgage on the
purchased chattel, if one was constituted. 7

The records show that on 14 September 1984 ASIAN initiated a petition for extrajudicial foreclosure of the chattel
mortgage. But the sheriff failed to recover the motor vehicle from petitioners due to the refusal of the son of
petitioners Romulo and Delia de la Cruz to surrender it. It was not until 10 October 1984, or almost a month later that
petitioners delivered the unit to ASIAN. The action to recover the balance of the purchase price was instituted on 27
November 1984.chanrobles virtual lawlibrary

It is thus clear that while ASIAN eventually succeeded in taking possession of the mortgaged vehicle, it did not pursue
the foreclosure of the mortgage as shown by the fact that no auction sale of the vehicle was ever conducted. As we
ruled in Filinvest Credit Corp. v. Phil. Acetylene Co., Inc. 8

"Under the law, the delivery of possession of the mortgaged property to the mortgagee, the herein appellee, can only
operate to extinguish appellants liability if the appellee had actually caused the foreclosure sale of the mortgaged
property when it recovered possession thereof (Northern Motors, Inc. v. Sapinoso, 33 SCRA 356 [1970]; Universal
Motors Corp. v. Dy Hian Tat, 28 SCRA 161 [1969]; Manila Motors Co., Inc. v. Fernandez, 99 Phil. 782 [1956]). It is
worth noting that it is the fact of foreclosure and actual sale of the mortgaged chattel that bar recovery by the vendor
of any balance of the purchasers outstanding obligation not satisfied by the sale (New Civil Code, par. 3, Article
1484). As held by this Court, if the vendor desisted, on his own initiative, from consummating the auction sale, such
desistance was a timely disavowal of the remedy of foreclosure, and the vendor can still sue for specific performance"
(Industrial Finance Corp. v. Tobias, 78 SCRA 28 [1977]; Radiowealth, Inc. v. Lavin, L-18563, April 27, 1963, 7 SCRA
804; Pacific Commercial Co. v. dela Rama, 72 Phil. 380 [1941]).

Consequently, in the case before Us, there being no actual foreclosure of the mortgaged property, ASIAN is correct in
resorting to an ordinary action for collection of the unpaid balance of the purchase price.

We note however that the trial court, as well as the Court of Appeals failed to consider that the vehicle was already in
the possession of ASIAN when it directed petitioners herein to pay P184,466.67 representing the balance of the
purchase price of the mortgaged property. Law and equity will not permit ASIAN to have its cake and eat it too, so to
speak. By allowing ASIAN to retain possession of the vehicle and then directing petitioners to pay the unpaid balance
would certainly result in unjust enrichment of the former. Accordingly, the ownership and possession of the vehicle
should be returned to petitioners by ASIAN in the condition that it was when delivered to it, and if this be no longer
feasible, to deduct from the adjudged liability of petitioners the amount of P60,000.00, its corresponding appraised
value. 9

WHEREFORE, the assailed decision is AFFIRMED, with the MODIFICATION that the subject vehicle be returned to
petitioners or, at their option, they be allowed to deduct P60,000.00 from their adjudged liability. No costs.