SALES CASES JULY 12, 2014

1. Yu Tek v. Gonzales
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-9935 February 1, 1915
YU TEK and CO., plaintiff-appellant,
vs.
BASILIO GONZALES, defendant-appellant.
Beaumont, Tenney and Ferrier for plaintiff.
Buencamino and Lontok for defendant.
TRENT, J .:
The basis of this action is a written contract, Exhibit A, the
pertinent paragraphs of which follow:
1. That Mr. Basilio Gonzalez hereby acknowledges receipt of
the sum of P3,000 Philippine currency from Messrs. Yu Tek
and Co., and that in consideration of said sum be obligates
himself to deliver to the said Yu Tek and Co., 600 piculs of
sugar of the first and second grade, according to the result of
the polarization, within the period of three months, beginning
on the 1st day of January, 1912, and ending on the 31st day of
March of the same year, 1912.
2. That the said Mr. Basilio Gonzales obligates himself to
deliver to the said Messrs. Yu Tek and Co., of this city the said
600 piculs of sugar at any place within the said municipality of
Santa Rosa which the said Messrs. Yu Tek and Co., or a
representative of the same may designate.
3. That in case the said Mr. Basilio Gonzales does not deliver
to Messrs. Yu Tek and Co. the 600 piculs of sugar within the
period of three months, referred to in the second paragraph of
this document, this contract will be rescinded and the said Mr.
Basilio Gonzales will then be obligated to return to Messrs. Yu
Tek and Co. the P3,000 received and also the sum of P1,200
by way of indemnity for loss and damages.
Plaintiff proved that no sugar had been delivered to it under
this contract nor had it been able to recover the P3,000.
Plaintiff prayed for judgment for the P3,000 and, in addition, for
P1,200 under paragraph 4, supra. Judgment was rendered for
P3,000 only, and from this judgment both parties appealed.
The points raised by the defendant will be considered first. He
alleges that the court erred in refusing to permit parol evidence
showing that the parties intended that the sugar was to be
secured from the crop which the defendant raised on his
plantation, and that he was unable to fulfill the contract by
reason of the almost total failure of his crop. This case appears
to be one to which the rule which excludes parol evidence to
add to or vary the terms of a written contract is decidedly
applicable. There is not the slightest intimation in the contract
that the sugar was to be raised by the defendant. Parties are
presumed to have reduced to writing all the essential
conditions of their contract. While parol evidence is admissible
in a variety of ways to explain the meaning of written contracts,
it cannot serve the purpose of incorporating into the contract
additional contemporaneous conditions which are not
mentioned at all in the writing, unless there has been fraud or
mistake. In an early case this court declined to allow parol
evidence showing that a party to a written contract was to
become a partner in a firm instead of a creditor of the firm.
(Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in
Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract
of employment provided that the plaintiff should receive from
the defendant a stipulated salary and expenses. The defendant
sought to interpose as a defense to recovery that the payment
of the salary was contingent upon the plaintiff's employment
redounding to the benefit of the defendant company. The
contract contained no such condition and the court declined to
receive parol evidence thereof.
In the case at bar, it is sought to show that the sugar was to be
obtained exclusively from the crop raised by the defendant.
There is no clause in the written contract which even remotely
suggests such a condition. The defendant undertook to deliver
a specified quantity of sugar within a specified time. The
contract placed no restriction upon the defendant in the matter
of obtaining the sugar. He was equally at liberty to purchase it
on the market or raise it himself. It may be true that defendant
owned a plantation and expected to raise the sugar himself,
but he did not limit his obligation to his own crop of sugar. Our
conclusion is that the condition which the defendant seeks to
add to the contract by parol evidence cannot be considered.
The rights of the parties must be determined by the writing
itself.
The second contention of the defendant arises from the first.
He assumes that the contract was limited to the sugar he might
raise upon his own plantation; that the contract represented a
perfected sale; and that by failure of his crop he was relieved
from complying with his undertaking by loss of the thing due.
(Arts. 1452, 1096, and 1182, Civil Code.) This argument is
faulty in assuming that there was a perfected sale. Article 1450
defines a perfected sale as follows:
The sale shall be perfected between vendor and vendee and
shall be binding on both of them, if they have agreed upon the
thing which is the object of the contract and upon the price,
even when neither has been delivered.
Article 1452 reads: "The injury to or the profit of the thing sold
shall, after the contract has been perfected, be governed by
the provisions of articles 1096 and 1182."
This court has consistently held that there is a perfected sale
with regard to the "thing" whenever the article of sale has been
physically segregated from all other articles Thus, a particular
tobacco factory with its contents was held sold under a
contract which did not provide for either delivery of the price or
of the thing until a future time. McCullough vs. Aenlle and Co.
(3 Phil. Rep., 295). Quite similar was the recent case
of Barretto vs. Santa Marina(26 Phil. Rep., 200) where
specified shares of stock in a tobacco factory were held sold by
a contract which deferred delivery of both the price and the
stock until the latter had been appraised by an inventory of the
entire assets of the company. In Borromeo vs. Franco (5 Phil.
Rep., 49) a sale of a specific house was held perfected
between the vendor and vendee, although the delivery of the
price was withheld until the necessary documents of ownership
were prepared by the vendee. In Tan Leonco vs. Go Inqui (8
Phil. Rep., 531) the plaintiff had delivered a quantity of hemp
into the warehouse of the defendant. The defendant drew a bill
of exchange in the sum of P800, representing the price which
had been agreed upon for the hemp thus delivered. Prior to the
presentation of the bill for payment, the hemp was destroyed.
Whereupon, the defendant suspended payment of the bill. It
was held that the hemp having been already delivered, the title
had passed and the loss was the vendee's. It is our purpose to
distinguish the case at bar from all these cases.
In the case at bar the undertaking of the defendant was to sell
to the plaintiff 600 piculs of sugar of the first and second
classes. Was this an agreement upon the "thing" which was
the object of the contract within the meaning of article
1450, supra? Sugar is one of the staple commodities of this
country. For the purpose of sale its bulk is weighed, the
customary unit of weight being denominated a "picul." There
was no delivery under the contract. Now, if called upon to
designate the article sold, it is clear that the defendant could
only say that it was "sugar." He could only use this generic
name for the thing sold. There was no "appropriation" of any
particular lot of sugar. Neither party could point to any specific
quantity of sugar and say: "This is the article which was the
subject of our contract." How different is this from the contracts
discussed in the cases referred to above! In the McCullough
case, for instance, the tobacco factory which the parties dealt
with was specifically pointed out and distinguished from all
other tobacco factories. So, in the Barretto case, the particular
shares of stock which the parties desired to transfer were
capable of designation. In the Tan Leonco case, where a
quantity of hemp was the subject of the contract, it was shown
that that quantity had been deposited in a specific warehouse,
and thus set apart and distinguished from all other hemp.
A number of cases have been decided in the State of
Louisiana, where the civil law prevails, which confirm our
position. Perhaps the latest is Witt Shoe Co. vs. Seegars and
Co. (122 La., 145; 47 Sou., 444). In this case a contract was
entered into by a traveling salesman for a quantity of shoes,
the sales having been made by sample. The court said of this
contract:
But it is wholly immaterial, for the purpose of the main
question, whether Mitchell was authorized to make a definite
contract of sale or not, since the only contract that he was in a
position to make was an agreement to sell or an executory
contract of sale. He says that plaintiff sends out 375 samples
of shoes, and as he was offering to sell by sample shoes, part
of which had not been manufactured and the rest of which
were incorporated in plaintiff's stock in Lynchburg, Va., it was
impossible that he and Seegars and Co. should at that time
have agreed upon the specific objects, the title to which was to
pass, and hence there could have been no sale. He and
Seegars and Co. might have agreed, and did (in effect ) agree,
that the identification of the objects and their appropriation to
the contract necessary to make a sale should thereafter be
made by the plaintiff, acting for itself and for Seegars and Co.,
and the legend printed in red ink on plaintiff's billheads ("Our
responsibility ceases when we take transportation Co's. receipt
`In good order'" indicates plaintiff's idea of the moment at which
such identification and appropriation would become effective.
The question presented was carefully considered in the case of
State vs. Shields, et al. (110 La., 547, 34 Sou., 673) (in which it
was absolutely necessary that it should be decided), and it was
there held that in receiving an order for a quantity of goods, of
a kind and at a price agreed on, to be supplied from a general
stock, warehoused at another place, the agent receiving the
order merely enters into an executory contract for the sale of
the goods, which does not divest or transfer the title of any
determinate object, and which becomes effective for that
purpose only when specific goods are thereafter appropriated
to the contract; and, in the absence of a more specific
agreement on the subject, that such appropriated takes place
only when the goods as ordered are delivered to the public
carriers at the place from which they are to be shipped,
consigned to the person by whom the order is given, at which
time and place, therefore, the sale is perfected and the title
passes.
This case and State vs. Shields, referred to in the above
quotation are amply illustrative of the position taken by the
Louisiana court on the question before us. But we cannot
refrain from referring to the case of Larue and
Prevost vs. Rugely, Blair and Co. (10 La. Ann., 242) which is
summarized by the court itself in the Shields case as follows:
. . . It appears that the defendants had made a contract for the
sale, by weight, of a lot of cotton, had received $3,000 on
account of the price, and had given an order for its delivery,
which had been presented to the purchaser, and recognized by
the press in which the cotton was stored, but that the cotton
had been destroyed by fire before it was weighed. It was held
that it was still at the risk of the seller, and that the buyer was
entitled to recover the $3,000 paid on account of the price.
We conclude that the contract in the case at bar was merely an
executory agreement; a promise of sale and not a sale. At
there was no perfected sale, it is clear that articles 1452, 1096,
and 1182 are not applicable. The defendant having defaulted
in his engagement, the plaintiff is entitled to recover the P3,000
which it advanced to the defendant, and this portion of the
judgment appealed from must therefore be affirmed.
The plaintiff has appealed from the judgment of the trial court
on the ground that it is entitled to recover the additional sum of
P1,200 under paragraph 4 of the contract. The court below
held that this paragraph was simply a limitation upon the
amount of damages which could be recovered and not
liquidated damages as contemplated by the law. "It also
appears," said the lower court, "that in any event the defendant
was prevented from fulfilling the contract by the delivery of the
sugar by condition over which he had no control, but these
conditions were not sufficient to absolve him from the
obligation of returning the money which he received."
The above quoted portion of the trial court's opinion appears to
be based upon the proposition that the sugar which was to be
delivered by the defendant was that which he expected to
obtain from his own hacienda and, as the dry weather
destroyed his growing cane, he could not comply with his part
of the contract. As we have indicated, this view is erroneous,
as, under the contract, the defendant was not limited to his
growth crop in order to make the delivery. He agreed to deliver
the sugar and nothing is said in the contract about where he
was to get it.
We think is a clear case of liquidated damages. The contract
plainly states that if the defendant fails to deliver the 600 piculs
of sugar within the time agreed on, the contract will be
rescinded and he will be obliged to return the P3,000 and pay
the sum of P1,200 by way of indemnity for loss and damages.
There cannot be the slightest doubt about the meaning of this
language or the intention of the parties. There is no room for
either interpretation or construction. Under the provisions of
article 1255 of the Civil Code contracting parties are free to
execute the contracts that they may consider suitable, provided
they are not in contravention of law, morals, or public order. In
our opinion there is nothing in the contract under consideration
which is opposed to any of these principles.
For the foregoing reasons the judgment appealed from is
modified by allowing the recovery of P1,200 under paragraph 4
of the contract. As thus modified, the judgment appealed from
is affirmed, without costs in this instance.
Arellano, C.J., Torres, Carson and Araullo, JJ., concur.
Johnson, J., dissents.

2. Compania General v. CA

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-59534 May 10, 1990
COMPAIA GENERAL DE TABACOS DE
FILIPINAS, petitioner,
vs.
COURT OF APPEALS, PHILIPPINE NATIONAL BANK and
DEVELOPMENT BANK OF THE PHILIPPINES,respondents.
Siguion Reyna, Montecillo & Ongsiako for petitioner.
Pelaez, Adriano & Gregorio for respondents San Carlos
Planters' Association & Theo Davis & Co., Far East Ltd. et al.

NARVASA, J .:
The conflicting claims of the mortgagees of a sugar quota or
production allowance, on the one hand, and the mortgagors'
subsequent vendees of the same, on the other, are the subject
of the petition for review on certiorariat bar.
It appears that an unregistered partnership known as Gomez &
Torres composed of Francisco M. Gomez and Hector
Torres was the "principal and majority stockholder of the
Philippine Milling Company, a domestic corporation which
owns and operates in the Mindoro Mill District a sugar mill
where all the sugar cane planters of that mill district mill their
sugar cane."
1
"Gomez & Torres" was also "registered in the
Sugar Quota Administration as the owner and holder of the
entire production allowance or quota appertaining to Plantation
No. 30-15 of the Mindoro Mill District."
2

As security for a loan of P2,000,000.00 obtained from the
Rehabilitation Finance Corporation (RFC), said Philippine
Milling Company (thru its president, Hector A. Torres), and the
above mentioned Hector A. Torres and Francisco Gomez,
executed on August 7, 1950, a deed of mortgage
hypothecating to the RFC, particularly described real and
personal property, "together with all the buildings and
improvements now existing or which may hereafter be
constructed on the mortgaged property, all easements, sugar
quotas, agricultural or land indemnities, aids or subsidies and
all other rights or benefits annexed to or inherent therein, now
existing or which may hereafter exist."
3

The mortgagors above named also assigned to the RFC on
August 16, 1950, in a public instrument,
4
the sugar quota of
the mill district aggregating no less than 148,000 piculs and
sugar warehouse receipts covering, the first 29,500 piculs of
sugar milled by the sugar central annually and such additional
sugar as may be necessary to cover the annual amortization of
the loan, taking into consideration the fluctuating sugar prices,
which assignments shall remain in full force and effect as long
as . . . (their) aforementioned loan has not been settled in full."
Some fifteen months later, or on November 2, 1951, the same
mortgagors executed in favor of the same mortgagee (the
R.F.C) a second mortgage, this time as security for another
loan of P1,860,000.00. The mortgage covered real and/or
personal properties listed in the deed, "together with all the
buildings and improvements now existing or which may
hereafter be constructed on the mortgaged property, all
easements, sugar quotas, agricultural or land indemnities, aids
or subsidies, and all other rights or benefits annexed to or
inherent therein, now existing or which may hereafter exist . . .
and also other assets acquired with the proceeds of such loan .
. . "
5

The mortgagors also executed on November 2, 1951 an
assignment in favor of the RFC, like that of August 16,
1950, supra, respecting "its rights and interests on all the sugar
quota of the Mindoro Mill District aggregating no less than
148,000 piculs and additional sugar warehouse receipts
covering the first 27,350 piculs of sugar milled by the sugar
central annually, and such additional sugar may be necessary
to cover the annual amortization on the loan, until the full
amount of the additional loan has been fully paid."
6

Both deeds of (real estate and chattel) mortgages were
registered in the Register of Deeds of Occidental Mindoro on
August 20, 1950 and November 9, 1951, respectively.
7

Earlier, or on or about January 13, 1951, the real estate and
personal property subject of the two (2) mortgages just
described, were again mortgaged by Philippine Milling Co.,
Francisco M. Gomez and Hector A. Torres, this time in favor of
the Philippine National Bank as collateral for a loan of
P235,000.00. This real estate and chattel mortgage was
amended on April 6, 1951 by increasing its consideration from
P235,000.00 to P335,000.00, and still later, on January 18,
1952, by further increasing the consideration to
P1,405,0,00.00.
8
The original deed and its two (2)
amendments were all registered with the Register of Deeds of
Occidental Mindoro.
In July, 1957, two (2) letters-agreements were executed
between Gomez & Torres (represented by Francisco M.
Gomez) on the one hand, and Theo H. Davies & Co., Ltd. ("for
itself and representing [or as authorized representative of) San
Carlos Planters' Association"]), on the other, by virtue of which
the former sold to the latter a total of 18,000 piculs of the
production allowance (or sugar quota) of Plantation No. 30-15,
to wit:
1) On July 3, 1957: 8,250 piculs of "our ''A" quota and 1,750.00
piculs of our "B" quota corresponding to Plantation No. 30-15
of the Mindoro Mill District which is duly registered in our
name;"
9
and
2) on July 11, 1957: 6,600.00 piculs of "our "A" quota and
1,400.00 piculs of our "B" quota . . ."
In the later agreement, Gomez & Torres guaranteed "that said
8,000.00 piculs of quotas as well as the 10,000.00 piculs sold
to you on July 3, 1957, belong to us and are free from any lien
or incumbrance whatsoever."
10

The transferees presented the two (2) agreements for
recording in the District Office of the Sugar Quota
Administration, on July 12, 1957. But the Sugar Quota
Administration declined to give due course to the transfer until
"necessary corrections" were made in the registration
documents (known as DTRs: "district transfer registries"), and
"the written conformity of the PNB," secured.
11

In a letter to the Philippine Mining Company dated September
10, 1957, the Administrator cited several reasons for his
refusal:
12

1. There is no signature nor initial of the Permit Agent assigned
to your District.
2. There is no distribution of coefficients in Columns F, I, and J
in both of your DTR's.
3. This Office received a letter from the Philippine National
Bank advising this Office that the allotments of Plantations
Nos. 30-4, 30-8c, 30-9c, 30-14, 30-15 and 30-16a are
mortgaged to the PNB and to advise the PNB of any sale,
transfer or conveyance affecting the quota of the Philippine
Milling Company, Hector A. Torres and Francisco M. Gomez
and to withhold the registration without the consent of the PNB.
The letter of the PNB above referred to (par. 3) was that written
by its Vice President, J.V. Buenaventura, dated September 4,
1957.
13

On October 2, 1957, San Carlos Planters' Association and
Theo H. Davies Co. Ltd. submitted "two copies of the mill
district coefficients and allowances of the 1957-1958 crop of
the San Carlos Mill District." In response, the Sugar Quota
Administrator sent them a letter dated October 3, 1957
advising that it was inappropriate for them to include "in said
list, sugar allotments rights in the quantity of 14,850 piculs for
'A' and 3,150 for 'B' purchased by San Carlos Milling Co., Ltd.
from Mindoro Mill District," because "this purchase has not
been given due course by this office in view of the defects . . .
(which) have not yet been corrected."
14

The Governor of the RFC also wrote to the SQA, under date of
October 9, 1957, informing it of the mortgage to it of the sugar
quota in question "aggregating no less than 148,000 piculs,"
and requesting "that no transfer or conveyance affecting the
said sugar quota rights of the Philippine Milling Co. and
Messrs. Hector A. Torres and Francisco Gomez that may have
been presented or . . . may be presented . . . be given due
course without the written consent of this Corporation."
15

On October 17, 1957, the San Carlos Milling Co. Ltd. and Theo
H. Davies & Co. Far East Ltd. wrote to the SQA, in reply to the
latter's communication of October 3, 1957. Adverting to a letter
of the Philippine Milling Co. "of Sept. 15th, 1957 and . . .
memorandum enclosure of the same date addressed to the
Phil. Milling Co., the transferor central, by Torres and Gomez,
owners and sellers of the quota rights in question, " they
demanded "that the transfer of said quotas be given effect
immediately from Mindoro Plantation Audit 30-15 of Torres and
Gomez to Plantation Audit No. 38-E-24 of the San Carlos Mill
District for account of the San Carlos Planters
Association."
16

The matter of registration remained in a state of flux until about
a year later, or more precisely, August 5, 1958, when the
Administrator ultimately authorized the transfer.
17

On January 6 and 7, 1959, the San Carlos Planters'
Association in turn executed sales of portions of the sugar
quota of 18,000 piculs acquired by it in favor of various
individual sugar planters, all of which sales were recorded in
the San Carlos District Transfer Registry.
18
Then on January
16, 1959, San Carlos effected a change in the Plantation
Number of its remaining portion of the sugar quota purchased
by it (57.06 piculs of "A" quota and 12.12, piculs of "B" quota)
from No. 38-E-24 to No. 38-343.
19

Eventually, the Development Bank of the Philippines (formerly
RFC) caused the extrajudicial foreclosure of its mortgages of
August 7, 1950 and November 2, 1951 by the Provincial Sheriff
of Occidental Mindoro. The foreclosure sale was held on
November 28, 1958. The DBP was the highest bidder. A
certificate of sale was accordingly drawn up in its favor by the
Sheriff on January 19, 1959.
20
As might be expected, among
the properties specified in the certificate of sale, as having
been sold to DBP, were.
21

All sugar quota rights of the Philippine Milling Company
including those of Spouses, Francisco M. Gomez and
Francisca Villanueva and the Spouses, Hector A. Torres and
Galinica Romano, as well as those of Gomez and Torres
partnership in the Mindoro Mill District aggregating to no less
than 148,000 piculs of sugar, which are attached to any and or
all parcels of land described above and mortgaged to the
Rehabilitation Finance Corporation now Development Bank, of
the Philippines as well as the said sugar central's share in the
above sugar and quota rights.
On June 17, 1960 the one-year redemption period granted
by law to the mortgagors, having expired without a redemption
having been attempted, and the DBP having consolidated its
ownership over the real and personal property subject of the
mortgage sale the DBP executed a deed of sale in favor of
the PNB covering all the foreclosed property, for
P5,147,309.07 and other valuable consideration.
22

Now, as regards the sugar quota in question, said deed
stipulated inter alia that:
1) The "sugar quota rights pertaining to the Philippine Milling
Company shall not be covered-by this agreement until after the
expiration of the 1959-1960 crop year, but in no case earlier
than June 30, 1960;"
23
and
2) ". . . while the l8,000 piculs of "A" and "B" sugar
are expressly excluded in this Deed of Sale because of certain
circumstances, the Vendee may, however, take such action as
it may deem proper in order to recover the said 18,000 piculs
of "A" and "B" sugar quotaand Vendor agrees to join such
action whenever requested by the Vendee, it being
understood, however, that Vendor shall not in any way be
responsible for said 18,000 piculs nor be liable for the outcome
of such action . . .
24

After about two (2) years, in March, 1962, PNB wrote to the
San Carlos Planters' Association and the planters to whom the
latter had sold portions of the 18,000 piculs of the sugar quota
in question, supra, demanding the restoration and delivery to it
(the PNB) of their respective portions of said quota. As already
mentioned,
25
the 18,000 piculs consisted of 14,850 piculs of
'A' quota and 3,150 piculs of 'B' quota.
When the latter failed to do so, the PNB together with the DBP
brought suit in the Court of First Instance of Occidental
Mindoro against Francisco M. Gomez and Hector A. Torres
and their spouses; the partnership of Gomez & Torres; the
Philippine Planters' Association; all the sugar planters to whom
as aforementioned had been sold parts of the 18,000 piculs of
the sugar quota in question; and the Sugar Quota
Administration.
26
It set out three (3) causes of action in its
complaint and prayed for judgment as follows:
ON THE FIRST CAUSE OF ACTION
a. Declare the plaintiff PNB owner of the sugar quota in
question in the quantity equal to 14,850 piculs of "A" quota and
3,150 piculs of "B" quota presently registered in the Sugar
Quota Administration in the names of the defendants
PLANTERS and defendant San Carlos Planters' Ass'n in the
quantity and under the plantation numbers indicated in par. 3
of the First Cause of Action of this Complaint;
b. Order the defendants PLANTERS of the San Carlos Mill
District and the defendant San Carlos Planters' Ass'n to return
and restore to the plaintiff PNB the sugar quota in question;
c. Order the cancellation of the District Transfer Registry . . .
(regarding the transfers to the defendants) and declare same
of no force and effect.
ON THE SECOND AND ALTERNATIVE CAUSE OF ACTION
a. Declare the plaintiff PNB owner of the sugar quota in
question in the quantity equal to 14,850 piculs of "A" quota and
3,150 piculs of "B" quota presently registered in the Sugar
Quota Administration in the names of the defendants
PLANTERS and defendant San Carlos Planters' Assn. in the
quantity and under the plantation numbers indicated in par. 3
of the First Cause of Action of this Complaint;
b. Declare the sale of the sugar quota in question made by
defendant TORRES & GOMEZ on July 3, 1957 and July 11,
1957 null and void;
c. Declare the transfer of the sugar quota in question from the
Mindoro Mill District to the San Carlos Mill District null and
void;
d. Declare the subsequent transfer of the sugar quota in
question made by defendant San Carlos Planters' Assn. to the
defendant PLANTERS of the San Carlos Mill District null and
void;
e. Order the said defendants PLANTERS and the defendant
San Carlos Planters' Assn. to return and restore to the plaintiff
PNB the sugar quota in question; and
f. Order the cancellation of the. District Transfer Registry,
Annexes "F", "G", "H", "I" and "J" and declare same of no force
and effect.
ON THE THIRD CAUSE OF ACTION
a. Order the defendants TORRES & GOMEZ, Francisco
Gomez, Hector A. Torres, Conrado Manalansan, as Sugar
Quota Administrator, Theo H. Davies & Co. Ltd. and the San
Carlos Planters' Assn. to pay jointly and severally the plaintiff
PNB the sum of P50,400.00 as lost and/or unrealized rental of
the sugar quota in question for the 1958-1959 crop year;
b. Order the defendants TORRES & GOMEZ, Francisco
Gomez, Hector A. Torres, Conrado Manalansan, as Sugar
Quota Administrator, Theo H. Davies & Co. Ltd. and the San
Carlos Planters' Assn. to pay jointly and severally the plaintiff
PNB the sum of P93,465.00 as unrealized profits on the sugar
quota in question in connection with the agreement for
conversion for 1959-1960 crop year;
c. Order the defendants TORRES & GOMEZ, Francisco
Gomez, Hector A. Torres, Conrado Manalansan, as Sugar
Quota Administrator, Theo H. Davies & Co. Ltd. and the San
Carlos Planters' Assn. to pay jointly and severally the plaintiff
PNB the sum of P93,465.00 as unrealized profits on the sugar
quota in question in connection with the agreement for
conversion entered with the BISCOM for the 1960-1961 crop
year;
d. Order the defendants TORRES & GOMEZ, Francisco
Gomez, Hector A. Torres, Conrado Manalansan, as Sugar
Quota Administrator, Theo H. Davies & Co. Ltd., San Carlos
Planters' Assn. and the defendants PLANTERS to pay jointly
and severally the Plaintiff PNB the sum of P9,000.00 annually
for three crop years beginning with the 1961-1962 as lost
and/or unrealized rental of the sugar quota in question.
Plaintiff further pray for such other relief which this Honorable
Court may deem just and proper to grant in the premises, with
costs against the defendants.
Answers were in due course filed by the several defendants. At
the pre-trial, the parties entered into a partial stipulation of facts
which contained, in substance:
1) an admission of all the relevant documents appended to the
complaint, as well as other documents, already above
specified;
2) an acknowledgment that the consideration fixed in the two
(2) letters-contracts between Gomez & Torres and Theo H.
Davies & Co., Ltd. and the San Carlos Planters' Association,
dated July 3 and 11, 1957,
27
had been paid;
3) a statement that the transfer of a part of the sugar quota to
Cia. General de Tabacos de Filipinos (TABACALERA) was for
valid consideration, and was accompanied by the usual
warranty of the vendor's full right of disposition thereof and of
absence of any lien or encumbrance thereon; and
4) a request that the court "take judicial notices of all executive
orders, circulars and regulations which are pertinent to sugar
quotas or which are otherwise in implementation of, or
connected with, legislation on sugar trade and industry."
28

Trial ensued after which judgment was rendered. The Trial
Court's judgment, rendered on April 8, 1968,
29
went against
the plaintiffs.
30
It made the following explicit findings:
1. That while the defendants, Philippine Milling Company and
Gomez and Torres assigned the rights over the Sugar Quota to
the R.F.C., said assignment of rights, not having been duly
registered in accordance with the rules and regulations of the
Sugar Quota Administration, did not effect third parties who
acquired said sugar quota in good faith and for value;
2. That the San Carlos Planters Association, the Theo H.
Davies, the TABACALERA and all the transferees had
acquired the sugar quota in question legally and in good faith,
hence, the plaintiff has no cause of action against them; (and)
3. That nevertheless, a valid cause of action exists as against
defendants Francisco M. Gomez and Hector Torres on the
basis of the mortgage and assignment executed by them in
favor of the Development Bank of the Philippines and the
Philippine National Bank.
And on said findings, the Court:
1) dismissed the case "as against the San Carlos (Planters')
Association, Theo H. Davies Co., Ltd., TABACALERA, the
Sugar Quota Administrator and all the other private defendants
who are the transferees;" but
2) ordered defendants 'Francisco M. Gomez and Hector Torres
. . . to pay the value of the 18,000 piculs of 'A' and 'B' sugar
quota allowance in the amount of P270,000.00 to the
Philippine National Bank, plus interest at the legal rate from
1958 up to the actual payment thereof and to pay the costs."
PNB and Francisco Gomez appealed to the Court of
Appeals.
31
The PNB ascribed to the Trial Court the following
errors to wit:
1) not finding that a valid mortgage was duly constituted also
on the sugar quota allowances in question with binding effect
against third persons including the defendants-appellees;
2) not finding that the defendants-appellees had both actual
and constructive notice of the mortgage in favor of the
Philippine National Bank and the Development Bank of the
Philippines which covered the sugar quota allowances;
3) not finding that the PNB is the owner of the sugar quota
allowance and in not ordering the defendants-appellees to
return or reconvey the said sugar quota allowances to the
PNB.
The decision of the Court of Appeals
32
was rendered on
October 30, 1980.
33
It modified the Trial Court's judgment as
follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the
judgment appealed from is hereby modified, in these aspects:
1. declaring the Philippine National Bank the owner of the
sugar quota or production allowances in question;
2. ordering the defendants-appellees (excepting the defendant-
appellee Administrator of the Sugar Quota Office) to reconvey
to plaintiff-appellant PNB, the said sugar quota or production
allowance in question registered in their names, or if the same
can not now be legally done, directing the defendants-
appellees (excepting appellee Administrator of the Sugar
Quota Office) to jointly and severally pay to PNB the value of
the sugar quota or production allowance in question.
The appealed judgment is hereby affirmed in all other respects.
From this judgment, the Compaia General de Tabacos
(TABACALERA) has appealed to this Court. Here it submits
that said judgment should be reversed on the basis of the
following considerations, to wit:
1) that sugar quotas are not "ordinary property . . . which may
be appropriated, transferred, conveyed and/or encumbered by
the private grantee at his whim and discretion without the
intervention of the State," it being "regulated property, the
disposal or encumbrance of which is made subject to certain
restrictions and regulations provided for by law;" hence, "any
form of alienation thereof should be made subject to
governmental regulations and should be processed and
approved by the implementing arm of the government, the
Sugar Quota Administration;" and the mortgage constituted
over the sugar quota in this case by the parties to whom the
same had originally been awarded the partnership of
Gomez and Torres or the Philippine Milling Company was
void, "(a)pproval or sanction of the Sugar Quota Administration
. . . (being) sorely and fatally lacking;"
a) moreover, "the very terms of the deed of sale executed by
the DBP in favor of PNB on June 17, 1966 specifically and
expressly excluded the 18,000 piculs in question;
2) even if the mortgage be accorded validity, it was "binding
only as between the mortgagors and the mortgagees and did
not have any effect in third persons who subsequently acquired
the same," because the mortgages had not yet been "duly
registered with the Sugar Quota Administration" when
TABACALERA and others purchased parts of the quota in
question from the Philippine Planters' Association; indeed, the
transferees from the latter had "received the sanction and
approval of the Sugar Quota Administrator;"
3) the direction by the Court of Appeals for TABACALERA
among others, to reconvey the quota to the PNB is vague and
indefinite since it does not state the point of time to be
considered in computing the value thereof; furthermore, since it
"benefited only to the extent of the . . . (precise quantity
purchased by it, out of the 18,000 piculs), it would be "clearly
contrary to law and grossly iniquitous" for it to be made
solidarily liable for the value of the entire sugar quota in
question; and
4) if TABACALERA reconveys or pays the value of the sugar
quota acquired from San Carlos Planters' Association, the
latter should, upon its implied and express warranty against
eviction, reimburse it therefor.
The argument that Theo H. Davies & Co., Ltd., San Carlos
Planters' Association, and their privies and successors in
interest like TABACALERA, are purchasers in good faith of the
sugar quota in question because they could not he deemed to
have prior knowledge of the encumbrances thereon, is
untenable.
For one thing, as the Court of Appeals has pointed out, the
intangible property that is the sugar quota in question should
be considered as real property by destination, "an
improvement attaching to the land entitled
thereto."
34
Moreover, as is axiomatic, the recording in the
Registry of Deeds of a mortgage over lands and other
immovables operates to charge "the whole world" with notice
thereof.
35
The registration therefore of the mortgages
executed by the Philippine Milling Company, Hector A. Torres
and Francisco Gomez in favor of the RFC and later of the
PNB, thus had the effect of charging all persons, including
Theo H. Davies & Co., Ltd., San Carlos Planters' Association,
and their privies and successors in interest, with notice of the
encumbrance, not only over the lands belonging to the
mortgagors but also of the sugar quotas as well as "all the
buildings and improvements . . . existing or which may
hereafter be constructed on the mortgaged property, all;
elements,
. . . agricultural or land indemnities, aids or subsidies and all
other rights or benefits annexed to or inherent therein, now
existing or which may hereafter exist." So, none of the parties
in this case can plead lack of knowledge of the mortgage lien
over the sugar quota or production allowance.
Even if the sugar quota is assumed to be personal, not raid
property, and hence not embraced in the mortgage of the
immovables created by the corresponding deeds, it would
nevertheless still be covered by the chattel mortgage created
in and by the same deeds. Since, like the recording of a real
estate mortgage, registration of a chattel mortgage also puts all
persons on notice of its existence, the legal situation would be
exactly the same: the registration of the above described
deeds of chattel (and real estate) mortgage over the sugar
quota, among other things, would also have charged all
persons with notice thereof from the time of such
registration.
36

Again, being themselves engaged and possessed of no little
experience in the sugar industry, said Theo H. Davies & Co.,
Ltd., San Carlos Planters' Association (and their own
transferees) could not but have known, when negotiations for
their respective purchases of the sugar quota in question
commenced, that the sugar quota they were dealing with had
perforce to pertain to some specific sugar plantation or
farm, i.e., Plantation 30-15 of the Mindoro Mill District. Sugar
quota allocations do not have existence independently of any
particular tract of land. They are essentially ancillary, not
principal, assets, necessarily annexed to a specific sugar
plantation or land, improvements "attaching to the land entitled
thereto."
37
Hence, the very first inquiry in any negotiation
affecting sugar quotas necessarily would have to do with the
identification of the district, plantation or land to which the
quotas appertain. No transaction can be had of sugar quotas in
the abstract, without reference whatsoever to any particular
land. Indeed, any deed of conveyance of sugar quota would
unavoidably have to describe the sugar plantation and district
to which it refers or relates. There can be no sale simply of
sugar quota of a certain number of piculs without specification
of the land to which it relates. Such a sale would be
inconsistent with established usage, and would be void for
want of a determinate subject matter.
38
Theo H. Davies & Co.,
Ltd. and San Carlos Planters' Association can not therefore
plead ignorance of the fact that the quota they were buying
pertained to land belonging to the sellers, Plantation No. 30-15
of the Mindoro Mill District.
Furthermore, Theo H. Davies & Co., Ltd. and San Carlos
Planters' Association were obviously of the belief that a
mortgage or sale of a sugar quota is void if "(a)pproval or
sanction of the Sugar Quota Administration . . . (is) lacking,"
this being in fact a proposition TABACALERA lays before this
Court, although it cites no particular authority for it and has
thus failed to convince this Court of its validity. Be this as it
may, it was with this proposition in mind that Theo H. Davies &
Co. Ltd. and San Carlos Planters' Association submitted the
deed of conveyance in their favor of the sugar quota in
question, to the SQA, precisely to obtain the latter's approval of
that transaction. That approval, as already stated, was not
given until a year later. But long before that approval, they
were clearly and categorically informed that the sugar quota,
subject of the sale to them for which they were seeking
approval by the SQA was already mortgaged to the RFC and
then to the PNB. Since good faith is obviously a state of the
mind, and since prior to the approval of the conveyance to
them of the sugar quota by the SQA which approval they
thought to be essential for the validity of said conveyance-they
came to know of the earlier encum brance thereof to other
parties, it is not possible for them without, contradicting
themselves, to claim good faith in the transaction.
Turning now to TABACALERA and the other vendees of Theo
H. Davies & Co. Ltd. and San Carlos Planters' Association, it is
self-evident that they are also quite familiar with sugar quotas,
including the nature and process of transferring the same,
these being an important factor in their operations and
transactions. They therefore had to know that the sugar quotas
they were purchasing had originally to be part and parcel of
some sugar plantation. Hence, apart from being charged with
knowledge, as above discussed, of the mortgage of the land to
which the sugar quota in question was an integrated adjunct
and that the mortgage extended to said sugar quotas like the
buildings and improvements thereon standing it may
reasonably be assumed as a fact, too, that they inquired about
and were duly informed of the origin of, and immediately
preceding transactions involving, the sugar quotas they were
acquiring.
They should therefore all be regarded as buyers in bad faith
the original vendees of Gomez and Torres and the Philippine
Milling Company (i.e., the Philippine Planters Association and
Theo H. Davies & Co. Ltd.) as well as the latter's own vendees
(TABACALERA, et al.). The Court of Appeals was thus quite
correct in "ordering the defendants-appellees (excepting the
defendant-appellee Administrator of the Sugar Quota Office) to
reconvey to plaintiff-appellant PNB, the said sugar quota or
production allowance in question registered in their names, or
if the same can not now be legally done, directing the
defendants-appellees (excepting appellee Administrator of the
Sugar Quota Office) to jointly and severally pay to PNB the
value of the sugar quota or production allowance in question."
The fact that "the very terms of the deed of sale executed by
the DBP in favor of PNB on June 17, 1966 specifically and
expressly excluded the 18,000 piculs in question," of which
TABACALERA would make capital, is of no moment. As also
held by the Court of Appeals, the exclusion is more apparent
than real. It is true that the deed of June 17, 1966 does provide
that "the 18,000 piculs of 'A' and 'B' sugar are expressly
excluded . . . because of certain circumstances." It is however
pointed out that "the Vendee may . . . take such action as it
may deem proper in order to recover the said 18, 000 piculs of
'A' and 'B' sugar quota and Vendor agrees to join such action
whenever requested by the Vendee." The clear implication is
that notwithstanding those "certain circumstances" causing the
exclusion of the 18,000 piculs, there was an express assertion
that a right to recover the same existed in favor of the vendor
and/or its vendee; a declaration, in other words, that the sugar
quota of 18,000 piculs rightfully belonged to the vendor and, by
the sale, to the vendee. The ambivalent stipulation, in the mind
of the Court of Appeals, merely evidenced the DBP's intention
not be rendered liable to PNB on any warranty of legal title
considering that the quota had in point of fact already been
sold to third persons before foreclosure; the ostensible
exclusion of the 18,000 piculs was a mere cautionary proviso.
This Court agrees, after undertaking a review and analysis of
the relevant facts.
However, TABACALERA's argument that it should not be
made solidarily liable for the value of the entire sugar quota in
question, because it benefited only to the extent of the precise
quantity purchased by it, out of the 18,000 piculs is well taken.
It does not appear that it acted in concert with the other
vendees in the acquisition of all the 18,000 piculs comprising
the sugar quota in question. For aught that appears on the
record, it dealt separately and individually with its vendor. Its
liability should indeed be limited to a return of the exact
quantity and quality of the sugar quota separately purchased
by it, as indubitably appears on record, or the payment of the
value thereof computed as of the time that its obligation to
return that quota was adjudged by the Court of Appeals.
One final question remains to be resolved, that posed by
TABACALERA, to wit: if it reconveys the sugar quota acquired
from San Carlos Planters' Association, or pays its value,
should not it be reimbursed therefor by the latter, upon its
implied and express warranty against eviction? The answer
win have to be in the negative. They, vendor and vendee, are
in pari delicto. At the time of the transaction between them they
were well aware of the encumbrance on the property dealt
with, they had the common intention of negating the rights that
they knew had earlier and properly been acquired by the
mortgagee of the property they were treating of; they were both
consequently acting in bad faith. The object or purpose of their
contract was "contrary to law, morals, good customs, public
order or public policy."
39
The law says that in such a case,
where "the unlawful or forbidden cause consists does not
constitute a criminal offense, . . . and the fault is on the part of
both contracting parties, neither may recover what he has
given by virtue of the contract, or demand the performance of
the other's undertaking."
40
No relief can be granted to either
party; the law will leave them where they are.
41

WHEREFORE, the challenged judgment of the Court of
Appeals is hereby AFFIRMED, with the modification that the
liability of petitioner Compaia General de Tabacos de
Filipinas (TABACALERA) is limited to the return to the
Philippine National Bank of the exact quantity and quality of the
sugar quota purchased by it from the Philippine Planters
Association and/or Theo H. Davies & Co., Ltd., as indubitably
appears on record, or the payment of the value thereof to said
Philippine National Bank computed as of the time that its
obligation to return that quota was adjudged by the Court of
Appeals.
IT IS SO ORDERED.
Grio-Aquino and Medialdea, JJ., concur.
Cruz, J., took no part.
Gancayno, J., is on leave.

3. Heirs of San Andres v. Rodriguez

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 135634 May 31, 2000
HEIRS OF JUAN SAN ANDRES (VICTOR S. ZIGA) and
SALVACION S. TRIA, petitioners,
vs.
VICENTE RODRIGUEZ, respondent.

MENDOZA, J .:
This is a petition for review on certiorari of the decision of the
Court of Appeals
1
reversing the decision of the Regional Trial
Court, Naga City, Branch 19, in Civil Case No. 87-1335, as
well as the appellate court's resolution denying
reconsideration.
The antecedent facts are as follows:
Juan San Andres was the registered owner of Lot No. 1914-B-
2 situated in Liboton, Naga City. On September 28, 1964, he
sold a portion thereof, consisting of 345 square meters, to
respondent Vicente S. Rodriguez for P2,415.00. The sale is
evidenced by a Deed of Sale.
2

Upon the death of Juan San Andres on May 5, 1965, Ramon
San Andres was appointed judicial administrator of the
decedent's estate in Special Proceedings No. R-21, RTC,
Branch 19, Naga City. Ramon San Andres engaged the
services of a geodetic engineer, Jose Peero, to prepare a
consolidated plan (Exh. A) of the estate. Engineer Peero also
prepared a sketch plan of the 345-square meter lot sold to
respondent. From the result of the survey, it was found that
respondent had enlarged the area which he purchased from
the late Juan San Andres by 509 square meters.
3

Accordingly, the judicial administrator sent a letter,
4
dated July
27, 1987, to respondent demanding that the latter vacate the
portion allegedly encroached by him. However, respondent
refused to do so, claiming he had purchased the same from
the late Juan San Andres. Thereafter, on November 24, 1987,
the judicial administrator brought an action, in behalf of the
estate of Juan San Andres, for recovery of possession of the
509-square meter lot.
In his Re-amended Answer filed on February 6, 1989,
respondent alleged that apart from the 345-square meter lot
which had been sold to him by Juan San Andres on September
28, 1964, the latter likewise sold to him the following day the
remaining portion of the lot consisting of 509 square meters,
with both parties treating the two lots as one whole parcel with
a total area of 854 square meters. Respondent alleged that the
full payment of the 509-square meter lot would be effected
within five (5) years from the execution of a formal deed of sale
after a survey is conducted over said property. He further
alleged that with the consent of the former owner, Juan San
Andres, he took possession of the same and introduced
improvements thereon as early as 1964.
As proof of the sale to him of 509 square meters, respondent
attached to his answer a receipt (Exh. 2)
5
signed by the late
Juan San Andres, which reads in full as follows:
Received from Vicente Rodriguez the sum of Five Hundred
(P500.00) Pesos representing an advance payment for a
residential lot adjoining his previously paid lot on three sides
excepting on the frontage with the agreed price of Fifteen
(15.00) Pesos per square meter and the payment of the full
consideration based on a survey shall be due and payable in
five (5) years period from the execution of the formal deed of
sale; and it is agreed that the expenses of survey and its
approval by the Bureau of Lands shall be borne by Mr.
Rodriguez.
Naga City, September 29, 1964.
(Sgd.)
JUAN R. SAN ANDRES
Vendor
Noted:
(Sgd.)
VICENTE RODRIGUEZ
Vendee
Respondent also attached to his answer a letter of judicial
administrator Ramon San Andres (Exh. 3),
6
asking payment of
the balance of the purchase price. The letter reads:
Dear Inting,
Please accommodate my request for Three Hundred (P300.00)
Pesos as I am in need of funds as I intimated to you the other
day.
We will just adjust it with whatever balance you have payable
to the subdivision.
Thanks.
Sincerely,
(Sgd.)
RAMON SAN ANDRES
Vicente Rodriguez
Penafrancia Subdivision, Naga City
P.S.
You can let bearer Enrique del Castillo sign for the amount.
Received One Hundred Only
(Sgd.)
RAMON SAN ANDRES
3/30/66
Respondent deposited in court the balance of the purchase
price amounting to P7,035.00 for the aforesaid 509-square
meter lot.
While the proceedings were pending, judicial administrator
Ramon San Andres died and was substituted by his son
Ricardo San Andres. On the other band, respondent Vicente
Rodriguez died on August 15, 1989 and was substituted by his
heirs.
7

Petitioner, as plaintiff, presented two witnesses. The first
witness, Engr. Jose Peero,
8
testified that based on his survey
conducted sometime between 1982 and 1985, respondent had
enlarged the area which he purchased from the late Juan San
Andres by 509 square meters belonging to the latter's estate.
According to Peero, the titled property (Exh. A-5) of
respondent was enclosed with a fence with metal holes and
barbed wire, while the expanded area was fenced with barbed
wire and bamboo and light materials.
The second witness, Ricardo San Andres,
9
administrator of
the estate, testified that respondent had not filed any claim
before Special Proceedings No. R-21 and denied knowledge of
Exhibits 2 and 3. However, he recognized the signature in
Exhibit 3 as similar to that of the former administrator, Ramon
San Andres. Finally, he declared that the expanded portion
occupied by the family of respondent is now enclosed with
barbed wire fence unlike before where it was found without
fence.
On the other hand, Bibiana B. Rodriguez,
10
widow of
respondent Vicente Rodriguez, testified that they had
purchased the subject lot from Juan San Andres, who was
their compadre, on September 29, 1964, at P15.00 per square
meter. According to her, they gave P500.00 to the late Juan
San Andres who later affixed his signature to Exhibit 2. She
added that on March 30, 1966; Ramon San Andres wrote them
a letter asking for P300.00 as partial payment for the subject
lot, but they were able to give him only P100.00. She added
that they had paid the total purchase price of P7,035.00 on
November 21, 1988 by depositing it in court. Bibiana B.
Rodriquez stated that they had been in possession of the 509-
square meter lot since 1964 when the late Juan San Andres
signed the receipt. (Exh. 2) Lastly, she testified that they did
not know at that time the exact area sold to them because they
were told that the same would be known after the survey of the
subject lot.
On September 20, 1994, the trial court
11
rendered judgment in
favor of petitioner. It ruled that there was no contract of sale to
speak of for lack of a valid object because there was no
sufficient indication in Exhibit 2 to identify the property subject
of the sale, hence, the need to execute a new contract.
Respondent appealed to the Court of Appeals, which on April
21, 1998 rendered a decision reversing the decision of the trial
court. The appellate court held that the object of the contract
was determinable, and that there was a conditional sale with
the balance of the purchase price payable within five years
from the execution of the deed of sale. The dispositive portion
of its decision's reads:
IN VIEW OF ALL THE FOREGOING, the judgment appealed
from is hereby REVERSED and SET ASIDE and a new one
entered DISMISSING the complaint and rendering judgment
against the plaintiff-appellee:
1. to accept the P7,035.00 representing the balance of the
purchase price of the portion and which is deposited in court
under Official Receipt No. 105754 (page 122, Records);
2. to execute the formal deed of sale over the said 509 square
meter portion of Lot 1914-B-2 in favor of appellant Vicente
Rodriguez;
3. to pay the defendant-appellant the amount of P50,000.00 as
damages and P10,000.00 attorney's fees as stipulated by them
during the trial of this case; and
4. to pay the costs of the suit.
SO ORDERED.
Hence, this petition. Petitioner assigns the following errors as
having been allegedly committed by the trial court:
I. THE HON. COURT OF APPEALS ERRED IN HOLDING
THAT THE DOCUMENT (EXHIBIT "2") IS A CONTRACT TO
SELL DESPITE ITS LACKING ONE OF THE ESSENTIAL
ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN
AND SUFFICIENTLY DESCRIBED.
II. THE HON. COURT OF APPEALS ERRED IN HOLDING
THAT PETITIONER IS OBLIGED TO HONOR THE
PURPORTED CONTRACT TO SELL DESPITE NON-
FULFILLMENT BY RESPONDENT OF THE CONDITION
THEREIN OF PAYMENT OF THE BALANCE OF THE
PURCHASE PRICE.
III. THE HON. COURT OF APPEALS ERRED IN HOLDING
THAT CONSIGNATION WAS VALID DESPITE NON-
COMPLIANCE WITH THE MANDATORY REQUIREMENTS
THEREOF.
IV. THE HON. COURT OF APPEALS ERRED IN HOLDING
THAT LACHES AND PRESCRIPTION DO NOT APPLY TO
RESPONDENT WHO SOUGHT INDIRECTLY TO ENFORCE
THE PURPORTED CONTRACT AFTER THE LAPSE OF 24
YEARS.
The petition has no merit.
First. Art. 1458 of the Civil Code provides:
By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain
in money or its equivalent.
A contract of sale may be absolute or conditional.
As thus defined, the essential elements of sale are the
following:
a) Consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price;
b) Determinate subject matter; and,
c) Price certain in money or its equivalent.
12

As shown in the receipt, dated September 29, 1964, the late
Juan San Andres received P500.00 from respondent as
"advance payment for the residential lot adjoining his
previously paid lot on three sides excepting on the frontage;
the agreed purchase price was P15.00 per square meter; and
the full amount of the purchase price was to be based on the
results of a survey and would be due and payable in five (5)
years from the execution of a deed of sale.
Petitioner contends, however, that the "property subject of the
sale was not described with sufficient certainty such that there
is a necessity of another agreement between the parties to
finally ascertain the identity; size and purchase price of the
property which is the object of the alleged sale."
1
He argues
that the "quantity of the object is not determinate as in fact a
survey is needed to determine its exact size and the full
purchase price therefor"
14
In support of his contention,
petitioner cites the following provisions of the Civil Code:
Art. 1349. The object of every contract must be determinate as
to its kind. The fact that the quantity is not determinable shall
not be an obstacle to the existence of a contract, provided it is
possible to determine the same without the need of a new
contract between the parties.
Art. 1460. . . . The requisite that a thing be determinate is
satisfied if at the time the contract is entered into, the thing is
capable of being made determinate without the necessity of a
new and further agreement between the parties.
Petitioner's contention is without merit. There is no dispute that
respondent purchased a portion of Lot 1914-B-2 consisting of
345 square meters. This portion is located in the middle of Lot
1914-B-2, which has a total area of 854 square meters, and is
clearly what was referred to in the receipt as the "previously
paid lot." Since the lot subsequently sold to respondent is said
to adjoin the "previously paid lot" on three sides thereof, the
subject lot is capable of being determined without the need of
any new contract. The fact that the exact area of these
adjoining residential lots is subject to the result of a survey
does not detract from the fact that they are determinate or
determinable. As the Court of Appeals explained:
15

Concomitantly, the object of the sale is certain and
determinate. Under Article 1460 of the New Civil Code, a thing
sold is determinate if at the time the contract is entered into,
the thing is capable of being determinate without necessity of a
new or further agreement between the parties. Here, this
definition finds realization.
Appellee's Exhibit "A" (page 4, Records) affirmingly shows that
the original 345 sq. m. portion earlier sold lies at the middle of
Lot 1914-B-2 surrounded by the remaining portion of the said
Lot 1914-B-2 on three (3) sides, in the east, in the west and in
the north. The northern boundary is a 12 meter road.
Conclusively, therefore, this is the only remaining 509 sq. m.
portion of Lot 1914-B-2 surrounding the 345 sq. m. lot initially
purchased by Rodriguez. It is quite difined, determinate and
certain. Withal, this is the same portion adjunctively occupied
and possessed by Rodriguez since September 29, 1964,
unperturbed by anyone for over twenty (20) years until
appellee instituted this suit.
Thus, all of the essential elements of a contract of sale are
present, i.e., that there was a meeting of the minds between
the parties, by virtue of which the late Juan San Andres
undertook to transfer ownership of and to deliver a determinate
thing for a price certain in money. As Art. 1475 of the Civil
Code provides:
The contract of sale is perfected at the moment there is a
meeting of minds upon the thing which is the object of the
contract and upon the price. . . .
That the contract of sale is perfected was confirmed by the
former administrator of the estates, Ramon San Andres, who
wrote a letter to respondent on March 30, 1966 asking for
P300.00 as partial payment for the subject lot. As the Court of
Appeals observed:
Without any doubt, the receipt profoundly speaks of a meeting
of the mind between San Andres and Rodriguez for the sale of
the property adjoining the 345 square meter portion previously
sold to Rodriguez on its three (3) sides excepting the frontage.
The price is certain, which is P15.00 per square meter.
Evidently, this is a perfected contract of sale on a deferred
payment of the purchase price. All the pre-requisite elements
for a valid purchase transaction are present. Sale does not
require any formal document for its existence and validity. And
delivery of possession of land sold is a consummation of the
sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed
of sale is a valid contract between the parties (Carbonell v. CA,
69 SCRA 99 [1976]).
In the same vein, after the late Juan R. San Andres received
the P500.00 downpayment on March 30, 1966, Ramon R. San
Andres wrote a letter to Rodriguez and received from
Rodriguez the amount of P100.00 (although P300.00 was
being requested) deductible from the purchase price of the
subject portion. Enrique del Castillo, Ramon's authorized
agent, correspondingly signed the receipt for the P100.00.
Surely, this is explicitly a veritable proof of he sale over the
remaining portion of Lot 1914-B-2 and a confirmation by
Ramon San Andres of the existence thereof.
16

There is a need, however, to clarify what the Court of Appeals
said is a conditional contract of sale. Apparently, the appellate
court considered as a "condition" the stipulation of the parties
that the full consideration, based on a survey of the lot, would
be due and payable within five (5) years from the execution of
a formal deed of sale. It is evident from the stipulations in the
receipt that the vendor Juan San Andres sold the residential lot
in question to respondent and undertook to transfer the
ownership thereof to respondent without any qualification,
reservation or condition. In Ang Yu Asuncion v. Court of
Appeals,
17
we held:
In Dignos v. Court of Appeals (158 SCRA 375), we have said
that, although denominated a "Deed of Conditional Sale," a
sale is still absolute where the contract is devoid of
any proviso that title is reserved or the right to unilaterally
rescind is stipulated, e.g., until or unless the price is paid.
Ownership will then be transferred to the buyer upon actual or
constructive delivery (e.g., by the execution of a public
document) of the property sold. Where the condition is
imposed upon the perfection of the contract itself, the failure of
the condition would prevent such perfection. If the condition is
imposed on the obligation of a party which is not fulfilled, the
other party may either waive the condition or refuse to proceed
with the sale. (Art. 1545, Civil Code).
Thus, in. one case, when the sellers declared in a "Receipt of
Down Payment" that they received an amount as purchase
price for a house and lot without any reservation of title until full
payment of the entire purchase price, the implication was that
they sold their property.
18
In People's Industrial Commercial
Corporation v. Court of Appeals,
19
it was stated:
A deed of sale is considered absolute in nature where there is
neither a stipulation in the deed that title to the property sold is
reserved in the seller until full payment of the price, nor one
giving the vendor the right to unilaterally resolve the contract
the moment the buyer fails to pay within a fixed period.
Applying these principles to this case, it cannot be gainsaid
that the contract of sale between the parties is absolute, not
conditional. There is no reservation of ownership nor a
stipulation providing for a unilateral rescission by either party.
In fact, the sale was consummated upon the delivery of the lot
to respondent.
20
Thus, Art. 1477 provides that the ownership
of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.
The stipulation that the "payment of the full consideration
based on a survey shall be due and payable in five (5) years
from the execution of a formal deed of sale" is not a condition
which affects the efficacy of the contract of sale. It merely
provides the manner by which the full consideration is to be
computed and the time within which the same is to be paid. But
it does not affect in any manner the effectivity of the contract.
Consequently, the contention that the absence of a formal
deed of sale stipulated in the receipt prevents the happening of
a sale has no merit.
Second. With respect to the contention that the Court of
Appeals erred in upholding the validity of a consignation of
P7,035.00 representing the balance of the purchase price of
the lot, nowhere in the decision of the appellate court is there
any mention of consignation. Under Art. 1257 of this Civil
Code, consignation is proper only in cases where an existing
obligation is due. In this case, however, the contracting parties
agreed that full payment of purchase price shall be due and
payable within five (5) years from the execution of a formal
deed of sale. At the time respondent deposited the amount of
P7,035.00 in the court, no formal deed of sale had yet been
executed by the parties, and, therefore, the five-year period
during which the purchase price should be paid had not
commenced. In short, the purchase price was not yet due and
payable.
This is not to say, however, that the deposit of the purchase
price in the court is erroneous. The Court of Appeals correctly
ordered the execution of a deed of sale and petitioners to
accept the amount deposited by respondent.
Third. The claim of petitioners that the price of P7,035.00 is
iniquitous is untenable. The amount is based on the agreement
of the parties as evidenced by the receipt (Exh. 2). Time and
again, we have stressed the rule that a contract is the law
between the parties, and courts have no choice but to enforce
such contract so long as they are not contrary to law, morals,
good customs or public policy. Otherwise, court would be
interfering with the freedom of contract of the parties. Simply
put, courts cannot stipulate for the parties nor amend the
latter's agreement, for to do so would be to alter the real
intentions of the contracting parties when the contrary function
of courts is to give force and effect to the intentions of the
parties.
Fourth. Finally, petitioners argue that respondent is barred by
prescription and laches from enforcing the contract. This
contention is likewise untenable. The contract of sale in this
case is perfected, and the delivery of the subject lot to
respondent effectively transferred ownership to him. For this
reason, respondent seeks to comply with his obligation to pay
the full purchase price, but because the deed of sale is yet to
be executed, he deemed it appropriate to deposit the balance
of the purchase price in court. Accordingly, Art. 1144 of the
Civil Code has no application to the instant
case.
21
Considering that a survey of the lot has already been
conducted and approved by the Bureau of Lands, respondent's
heirs, assign or successors-in-interest should reimburse the
expenses incurred by herein petitioners, pursuant to the
provisions of the contract.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with the modification that respondent is ORDERED
to reimburse petitioners for the expenses of the survey.
SO ORDERED.
Bellosillo and Buena, JJ., concur.
Quisumbing and De Leon, Jr., JJ., are on leave.
4. Pichel v. Alonzo

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-36902 January 30, 1982
LUIS PICHEL, petitioner,
vs.
PRUDENCIO ALONZO, respondent.

GUERRERO, J .:
This is a petition to review on certiorari the decision of the
Court of First Instance of Basilan City dated January 5, 1973 in
Civil Case No. 820 entitled "Prudencio Alonzo, plaintiff, vs. Luis
Pichel, defendant."
This case originated in the lower Court as an action for the
annulment of a "Deed of Sale" dated August 14, 1968 and
executed by Prudencio Alonzo, as vendor, in favor of Luis
Pichel, as vendee, involving property awarded to the former by
the Philippine Government under Republic Act No. 477.
Pertinent portions of the document sued upon read as follows:
That the VENDOR for and in consideration of the sum of
FOUR THOUSAND TWO HUNDRED PESOS (P4,200.00),
Philippine Currency, in hand paid by the VENDEE to the entire
satisfaction of the VENDOR, the VENDOR hereby sells
transfers, and conveys, by way of absolute sale, all the
coconut fruits of his coconut land, designated as Lot No. 21 -
Subdivision Plan No. Psd- 32465, situated at Balactasan
Plantation, Lamitan, Basilan City, Philippines;
That for the herein sale of the coconut fruits are for all the fruits
on the aforementioned parcel of land presently found therein
as well as for future fruits to be produced on the said parcel of
land during the years period; which shag commence to run as
of SEPTEMBER 15,1968; up to JANUARY 1, 1976 (sic);
That the delivery of the subject matter of the Deed of Sale shall
be from time to time and at the expense of the VENDEE who
shall do the harvesting and gathering of the fruits;
That the Vendor's right, title, interest and participation herein
conveyed is of his own exclusive and absolute property, free
from any liens and encumbrances and he warrants to the
Vendee good title thereto and to defend the same against any
and all claims of all persons whomsoever.
1

After the pre-trial conference, the Court a quo issued an Order
dated November 9, 1972 which in part read thus:
The following facts are admitted by the parties:
Plaintiff Prudencio Alonzo was awarded by the Government
that parcel of land designated as Lot No. 21 of Subdivision
Plan Psd 32465 of Balactasan, Lamitan, Basilan City in
accordance with Republic Act No. 477. The award was
cancelled by the Board of Liquidators on January 27, 1965 on
the ground that, previous thereto, plaintiff was proved to have
alienated the land to another, in violation of law. In 197 2,
plaintiff's rights to the land were reinstated.
On August 14, 1968, plaintiff and his wife sold to defendant an
the fruits of the coconut trees which may be harvested in the
land in question for the period, September 15, 1968 to January
1, 1976, in consideration of P4,200.00. Even as of the date of
sale, however, the land was still under lease to one, Ramon
Sua, and it was the agreement that part of the consideration of
the sale, in the sum of P3,650.00, was to be paid by defendant
directly to Ramon Sua so as to release the land from the
clutches of the latter. Pending said payment plaintiff refused to
snow the defendant to make any harvest.
In July 1972, defendant for the first time since the execution of
the deed of sale in his favor, caused the harvest of the fruit of
the coconut trees in the land.
xxx xxx xxx
Considering the foregoing, two issues appear posed by the
complaint and the answer which must needs be tested in the
crucible of a trial on the merits, and they are:
First. Whether or nor defendant actually paid to plaintiff the
full sum of P4,200.00 upon execution of the deed of sale.
Second. Is the deed of sale, Exhibit 'A', the prohibited
encumbrance contemplated in Section 8 of Republic Act No.
477?
2

Anent the first issue, counsel for plaintiff Alonzo subsequently
'stipulated and agreed that his client ... admits fun payment
thereof by defendant.
3
The remaining issue being one of law,
the Court below considered the case submitted for summary
judgment on the basis of the pleadings of the parties, and the
admission of facts and documentary evidence presented at the
pre-trial conference.
The lower court rendered its decision now under review,
holding that although the agreement in question is
denominated by the parties as a deed of sale of fruits of the
coconut trees found in the vendor's land, it actually is, for all
legal intents and purposes, a contract of lease of the land itself.
According to the Court:
... the sale aforestated has given defendant complete control
and enjoyment of the improvements of the land. That the
contract is consensual; that its purpose is to allow the
enjoyment or use of a thing; that it is onerous because rent or
price certain is stipulated; and that the enjoyment or use of the
thing certain is stipulated to be for a certain and definite period
of time, are characteristics which admit of no other conclusion.
... The provisions of the contract itself and its characteristics
govern its nature.
4

The Court, therefore, concluded that the deed of sale in
question is an encumbrance prohibited by Republic Act No.
477 which provides thus:
Sec. 8. Except in favor of the Government or any of its
branches, units, or institutions, land acquired under the
provisions of this Act or any permanent improvements thereon
shall not be thereon and for a term of ten years from and after
the date of issuance of the certificate of title, nor shall they
become liable to the satisfaction of any debt contracted prior to
the expiration of such period.
Any occupant or applicant of lands under this Act who transfers
whatever rights he has acquired on said lands and/or on the
improvements thereon before the date of the award or
signature of the contract of sale, shall not be entitled to apply
for another piece of agricultural land or urban, homesite or
residential lot, as the case may be, from the National Abaca
and Other Fibers Corporation; and such transfer shall be
considered null and void.
5

The dispositive portion of the lower Court's decision states:
WHEREFORE, it is the judgment of this Court that the deed of
sale, Exhibit 'A', should be, as it is, hereby declared nun and
void; that plaintiff be, as he is, ordered to pay back to
defendant the consideration of the sale in the sum of
P4,200.00 the same to bear legal interest from the date of the
filing of the complaint until paid; that defendant shall pay to the
plaintiff the sum of P500.00 as attorney's fees.
Costs against the defendant.
6

Before going into the issues raised by the instant Petition, the
matter of whether, under the admitted facts of this case, the
respondent had the right or authority to execute the "Deed of
Sale" in 1968, his award over Lot No. 21 having been
cancelled previously by the Board of Liquidators on January
27, 1965, must be clarified. The case in point is Ras vs.
Sua
7
wherein it was categorically stated by this Court that a
cancellation of an award granted pursuant to the provisions of
Republic Act No. 477 does not automatically divest the
awardee of his rights to the land. Such cancellation does not
result in the immediate reversion of the property subject of the
award, to the State. Speaking through Mr. Justice J.B.L.
Reyes, this Court ruled that "until and unless an appropriate
proceeding for reversion is instituted by the State, and its
reacquisition of the ownership and possession of the land
decreed by a competent court, the grantee cannot be said to
have been divested of whatever right that he may have over
the same property."
8

There is nothing in the record to show that at any time after the
supposed cancellation of herein respondent's award on
January 27, 1965, reversion proceedings against Lot No. 21
were instituted by the State. Instead, the admitted fact is that
the award was reinstated in 1972. Applying the doctrine
announced in the above-cited Ras case, therefore, herein
respondent is not deemed to have lost any of his rights as
grantee of Lot No. 21 under Republic Act No. 477 during the
period material to the case at bar, i.e., from the cancellation of
the award in 1965 to its reinstatement in 1972. Within said
period, respondent could exercise all the rights pertaining to a
grantee with respect to Lot No. 21.
This brings Us to the issues raised by the instant Petition. In
his Brief, petitioner contends that the lower Court erred:
1. In resorting to construction and interpretation of the deed of
sale in question where the terms thereof are clear and
unambiguous and leave no doubt as to the intention of the
parties;
2. In declaring granting without admitting that an
interpretation is necessary the deed of sale in question to be
a contract of lease over the land itself where the respondent
himself waived and abandoned his claim that said deed did not
express the true agreement of the parties, and on the contrary,
respondent admitted at the pre-trial that his agreement with
petitioner was one of sale of the fruits of the coconut trees on
the land;
3. In deciding a question which was not in issue when it
declared the deed of sale in question to be a contract of lease
over Lot 21;
4. In declaring furthermore the deed of sale in question to be a
contract of lease over the land itself on the basis of facts which
were not proved in evidence;
5. In not holding that the deed of sale, Exhibit "A" and "2",
expresses a valid contract of sale;
6. In not deciding squarely and to the point the issue as to
whether or not the deed of sale in question is an encumbrance
on the land and its improvements prohibited by Section 8 of
Republic Act 477; and
7. In awarding respondent attorney's fees even granting,
without admitting, that the deed of sale in question is violative
of Section 8 of Republic Act 477.
The first five assigned errors are interrelated, hence, We shall
consider them together. To begin with, We agree with
petitioner that construction or interpretation of the document in
question is not called for. A perusal of the deed fails to disclose
any ambiguity or obscurity in its provisions, nor is there doubt
as to the real intention of the contracting parties. The terms of
the agreement are clear and unequivocal, hence the literal and
plain meaning thereof should be observed. Such is the
mandate of the Civil Code of the Philippines which provides
that:
Art. 1370. If the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal
meaning of its stipulation shall control ... .
Pursuant to the afore-quoted legal provision, the first and
fundamental duty of the courts is the application of the contract
according to its express terms, interpretation being resorted to
only when such literal application is impossible.
9

Simply and directly stated, the "Deed of Sale dated August 14,
1968 is precisely what it purports to be. It is a document
evidencing the agreement of herein parties for the sale of
coconut fruits of Lot No. 21, and not for thelease of the land
itself as found by the lower Court. In clear and express terms,
the document defines the object of the contract thus: "the
herein sale of the coconut fruits are for an the fruits on the
aforementioned parcel of land during the years ...(from)
SEPTEMBER 15, 1968; up to JANUARY 1, 1976." Moreover,
as petitioner correctly asserts, the document in question
expresses a valid contract of sale. It has the essential
elements of a contract of sale as defined under Article 1485 of
the New Civil Code which provides thus:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain
in money or its equivalent.
A contract of sale may be absolute or conditional.
The subject matter of the contract of sale in question are the
fruits of the coconut trees on the land during the years from
September 15, 1968 up to January 1, 1976, which subject
matter is a determinate thing. Under Article 1461 of the New
Civil Code, things having a potential existence may be the
object of the contract of sale. And inSibal vs. Valdez, 50 Phil.
512, pending crops which have potential existence may be the
subject matter of the sale. Here, the Supreme Court, citing
Mechem on Sales and American cases said which have
potential existence may be the subject matter of sale. Here, the
Supreme Court, citing Mechem on Sales and American cases
said:
Mr. Mechem says that a valid sale may be made of a thing,
which though not yet actually in existence, is reasonably
certain to come into existence as the natural increment or
usual incident of something already in existence, and then
belonging to the vendor, and the title will vest in the buyer the
moment the thing comes into existence. (Emerson vs.
European Railway Co., 67 Me., 387; Cutting vs. Packers
Exchange, 21 Am. St. Rep. 63) Things of this nature are said
to have a potential existence. A man may sell property of which
he is potentially and not actually possess. He may make a
valid sale of the wine that a vineyard is expected to produce; or
the grain a field may grow in a given time; or the milk a cow
may yield during the coming year; or the wool that shall
thereafter grow upon sheep; or what may be taken at the next
case of a fisherman's net; or fruits to grow; or young animals
not yet in existence; or the goodwill of a trade and the like. The
thing sold, however, must be specific and Identified. They must
be also owned at the time by the vendor. (Hull vs. Hull 48
Conn. 250 (40 Am. Rep., 165) (pp. 522-523).
We do not agree with the trial court that the contract executed
by and between the parties is "actually a contract of lease of
the land and the coconut trees there." (CFI Decision, p. 62,
Records). The Court's holding that the contract in question fits
the definition of a lease of things wherein one of the parties
binds himself to give to another the enjoyment or use of a thing
for a price certain and for a period which may be definite or
indefinite (Art. 1643, Civil Code of the Philippines) is
erroneous. The essential difference between a contract of sale
and a lease of things is that the delivery of the thing sold
transfers ownership, while in lease no such transfer of
ownership results as the rights of the lessee are limited to the
use and enjoyment of the thing leased.
In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme
Court held:
Since according to article 1543 of the same Code the contract
of lease is defined as the giving or the concession of the
enjoyment or use of a thing for a specified time and fixed price,
and since such contract is a form of enjoyment of the property,
it is evident that it must be regarded as one of the means of
enjoyment referred to in said article 398, inasmuch as the
terms enjoyment, use, and benefit involve the same and
analogous meaning relative to the general utility of which a
given thing is capable. (104 Jurisprudencia Civil, 443)
In concluding that the possession and enjoyment of the
coconut trees can therefore be said to be the possession and
enjoyment of the land itself because the defendant-lessee in
order to enjoy his right under the contract, he actually takes
possession of the land, at least during harvest time, gather all
of the fruits of the coconut trees in the land, and gain exclusive
use thereof without the interference or intervention of the
plaintiff-lessor such that said plaintiff-lessor is excluded in fact
from the land during the period aforesaid, the trial court erred.
The contract was clearly a "sale of the coconut fruits." The
vendor sold, transferred and conveyed "by way of absolute
sale, all the coconut fruits of his land," thereby divesting
himself of all ownership or dominion over the fruits during the
seven-year period. The possession and enjoyment of the
coconut trees cannot be said to be the possession and
enjoyment of the land itself because these rights are distinct
and separate from each other, the first pertaining to the
accessory or improvements (coconut trees) while the second,
to the principal (the land). A transfer of the accessory or
improvement is not a transfer of the principal. It is the other
way around, the accessory follows the principal. Hence, the
sale of the nuts cannot be interpreted nor construed to be a
lease of the trees, much less extended further to include the
lease of the land itself.
The real and pivotal issue of this case which is taken up in
petitioner's sixth assignment of error and as already stated
above, refers to the validity of the "Deed of Sale", as such
contract of sale, vis-a-vis the provisions of Sec. 8, R.A. No.
477. The lower Court did not rule on this question, having
reached the conclusion that the contract at bar was one of
lease. It was from the context of a lease contract that the Court
below determined the applicability of Sec. 8, R.A. No. 477, to
the instant case.
Resolving now this principal issue, We find after a close and
careful examination of the terms of the first paragraph of
Section 8 hereinabove quoted, that the grantee of a parcel of
land under R.A. No. 477 is not prohibited from alienating or
disposing of the natural and/or industrial fruits of the land
awarded to him. What the law expressly disallows is the
encumbrance or alienation of the land itself or any of the
permanent improvements thereon. Permanent improvements
on a parcel of land are things incorporated or attached to the
property in a fixed manner, naturally or artificially. They include
whatever is built, planted or sown on the land which is
characterized by fixity, immutability or immovability. Houses,
buildings, machinery, animal houses, trees and plants would
fall under the category of permanent improvements, the
alienation or encumbrance of which is prohibited by R.A. No.
477. While coconut trees are permanent improvements of a
land, their nuts are natural or industrial fruits which are meant
to be gathered or severed from the trees, to be used, enjoyed,
sold or otherwise disposed of by the owner of the land. Herein
respondents, as the grantee of Lot No. 21 from the
Government, had the right and prerogative to sell the coconut
fruits of the trees growing on the property.
By virtue of R.A. No. 477, bona fide occupants, veterans,
members of guerilla organizations and other qualified persons
were given the opportunity to acquire government lands by
purchase, taking into account their limited means. It was
intended for these persons to make good and productive use
of the lands awarded to them, not only to enable them to
improve their standard of living, but likewise to help provide for
the annual payments to the Government of the purchase price
of the lots awarded to them. Section 8 was included, as stated
by the Court a quo, to protect the grantees from themselves
and the incursions of opportunists who prey on their misery
and poverty." It is there to insure that the grantees themselves
benefit from their respective lots, to the exclusion of other
persons.
The purpose of the law is not violated when a grantee sells the
produce or fruits of his land. On the contrary, the aim of the law
is thereby achieved, for the grantee is encouraged and induced
to be more industrious and productive, thus making it possible
for him and his family to be economically self-sufficient and to
lead a respectable life. At the same time, the Government is
assured of payment on the annual installments on the land. We
agree with herein petitioner that it could not have been the
intention of the legislature to prohibit the grantee from selling
the natural and industrial fruits of his land, for otherwise, it
would lead to an absurd situation wherein the grantee would
not be able to receive and enjoy the fruits of the property in the
real and complete sense.
Respondent through counsel, in his Answer to the Petition
contends that even granting arguendo that he executed a deed
of sale of the coconut fruits, he has the "privilege to change his
mind and claim it as (an) implied lease," and he has the
"legitimate right" to file an action for annulment "which no law
can stop." He claims it is his "sole construction of the meaning
of the transaction that should prevail and not petitioner.
(sic).
10
Respondent's counsel either misapplies the law or is
trying too hard and going too far to defend his client's hopeless
cause. Suffice it to say that respondent-grantee, after having
received the consideration for the sale of his coconut fruits,
cannot be allowed to impugn the validity of the contracts he
entered into, to the prejudice of petitioner who contracted in
good faith and for a consideration.
The issue raised by the seventh assignment of error as to the
propriety of the award of attorney's fees made by the lower
Court need not be passed upon, such award having been
apparently based on the erroneous finding and conclusion that
the contract at bar is one of lease. We shall limit Ourselves to
the question of whether or not in accordance with Our ruling in
this case, respondent is entitled to an award of attorney's fees.
The Civil Code provides that:
Art. 2208. In the absence of stipulation, attorney's fees and
expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to
protect his interest;
(3) In criminal cases of malicious prosecution against the
plaintiff;
(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiff's plainly valid, just and
demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers,
laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation
and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from
a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and
equitable that attorney's fees and expenses of litigation should
be recovered.
In all cases, the attorney's fees and expenses of litigation must
be reasonable.
We find that none of the legal grounds enumerated above
exists to justify or warrant the grant of attorney's fees to herein
respondent.
IN VIEW OF THE FOREGOING, the judgment of the lower
Court is hereby set aside and another one is entered
dismissing the Complaint. Without costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, Melencio-
Herrera and Plana, JJ., concur.
5. Tan Tiah v. Yu
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-45969 May 4, 1939
TAN TIAH (alias T. SUYA), petitioner,
vs.
YU JOSE (alias JOSE Y. NAVARRO), respondent.
Pastor Salazar and Vamenta and Vamenta for petitioner.
Norberto Romualdez for respondent.
VILLA-REAL, J .:
This is an appeal by way of certiorari taken by Tan Tiah
(alias T. Suya), wherein he prays, on the grounds alleged
therein, for the review of the decision rendered in the case by
the Court of Appeals reversing that of the Court of First
Instance of Leyte, for the reversal thereof, and for the
affirmance of the decision of said Court of First Instance.
As grounds for the allowance of the appeal, petitioner assigns
the following alleged errors of law committed by said Court of
Appeals in its decision, to wit:
1. The Court of Appeals erred in finding in its decision, subject
of the present petition for certiorari, that the 5th paragraph of
the contract of lease Exhibit A establishes rights for the
petitioner and for the respondent, which are antagonistic and,
therefore, unenforceable by action.
2. The Court of Appeals likewise erred in finding in its decision
that the promise, if any, made by respondent to sell to
petitioner the land in question is not enforceable by action for
lack of a price.
3. The Court of Appeals also erred in finding in its decision that
the 5th paragraph of the contract of lease entered into by
petitioner and respondent does not state two promises to buy
and to sell which are mutually demandable.
4. Lastly, the Court of Appeals erred in holding that the herein
petitioner has no cause of action against defendant-
respondent.
5. On May 14, 1923 petitioner and respondent entered into a
contract of lease in the fifth clause of which, pertinent to the
question at issue, provides:
5th. That upon termination of the period of this contract,
namely, ten years, the lessor shall have the option to buy the
building or improvement which the lessee may have built upon
the lots, reimbursing the latter ninety per cent (90%) of the
original net cost of the construction; but should the lessor be
unable or unwilling to buy said building or improvement, the
income or rent derived therefrom shall be equally divided
between said lessor and lessee, and the latter shall no longer
have the obligation to pay the rent agreed upon for the lots in
the second paragraph of this contract; provided, however, that
the present contract, with the modification just mentioned, with
respect to the income from the building and the rent from the
lot, shall continue in force until the lessor buys the building or
improvement or the lessee buys the land.
The judgment rendered by the Court of First Instance of Leyte
and reversed by the Court of Appeals, which absolved the
defendant is as follows:
Wherefore, judgment is rendered sentencing defendant to buy
the house of plaintiff or to sell to plaintiff the land on which the
latter's house is built. Each of the parties must submit the
name of a person to be appointed commissioner for the
assessment and appraisal of the land on which plaintiff's house
is built.
Defendant is sentenced to pay the costs of the suit.
The main question to be decided in this appeal is whether
plaintiff, as lessee, has a right, by virtue of the aforecited fifth
clause of the contract of lease, to compel defendant as lessor,
to sell to him the land on which he built his house in
accordance with said contract.
It will be seen that the lessor is given the preference of buying
the building erected on the leased land at a price equivalent to
90 per cent of the original net cost of the construction upon the
termination of the ten years fixed in the contract as the duration
of the lease. As ten years have elapsed and the lessor has not
exercised his right to buy the building, and has no intention to
do so, may the lessee compel the lessor to sell to him the
leased land? The lessee is not given the option to buy the land.
The grant of said right may not be inferred from the conditional
clause of paragraph 5 and from paragraph 4 of the contract
since neither in the conditional clause aforecited nor in the
fourth paragraph of the contract is the lessor bound to sell the
questioned land to the lessee. Furthermore, in the said
conditional clause the price which the lessee would have to
pay should he decide to buy the land is not fixed. Article 1445
of the Civil Code provides that "By the contract of purchase
and sale one of the contracting parties binds himself to deliver
a determinate thing and the other to pay a certain price
therefor in money or in something representing the same."
According to article 1451, "a promise to sell or buy, when there
is an agreement as to the thing and the price, entitles the
contracting parties reciprocally to demand the fulfillment of the
contract." And article 1447 of the same Code provides that in
order that the price may be considered certain, it shall be
sufficient that it be so in relation to some certain thing, or that
its determination be left to the judgment of some particular
person, and should the latter be unable or unwilling to fix the
price, the contract shall be inoperative. And according to article
1449 of the same Code, the designation of the price can never
be left to the determination of one of the contracting parties.
As we have said, a price certain which the lessee should pay
the lessor for the land in case he should desire to buy it has
not been fixed; neither has anything which may have definite
value or which may serve as a basis for the fixing of the price
been designated. Also, no determinate person has been
named to fix the price.
The price of the leased land not having been fixed and the
lessor not having bound himself to sell it, the essential
elements which give life to the contract are lacking. It follows
that the lessee cannot compel the lessor to sell the leased land
to him.
Having arrived at this conclusion, we do not find sufficient
grounds for reversing the decision appealed from, which is
hereby affirmed, with costs against the appellant.
Imperial, Diaz, Laurel, and Concepcion, JJ., concur.
6. Toyota Shaw Inc. v. CA
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-116650 May 23, 1995
TOYOTA SHAW, INC., petitioner,
vs.
COURT OF APPEALS and LUNA L. SOSA, respondents.

DAVIDE, JR., J .:
At the heart of the present controversy is the document marked
Exhibit "A"
1
for the private respondent, which was signed by a
sales representative of Toyota Shaw, Inc. named Popong
Bernardo. The document reads as follows:
4 June 1989
AGREEMENTS BETWEEN MR. SOSA
& POPONG BERNARDO OF TOYOTA
SHAW, INC.
1. all necessary documents will be submitted to TOYOTA
SHAW, INC. (POPONG BERNARDO) a week after, upon
arrival of Mr. Sosa from the Province (Marinduque) where the
unit will be used on the 19th of June.
2. the downpayment of P100,000.00 will be paid by Mr. Sosa
on June 15, 1989.
3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up
[sic] and released by TOYOTA SHAW, INC. on the 17th of
June at 10 a.m.
Very truly yours,
(Sgd.) POPONG BERNARDO.
Was this document, executed and signed by the petitioner's
sales representative, a perfected contract of sale, binding upon
the petitioner, breach of which would entitle the private
respondent to damages and attorney's fees? The trial court
and the Court of Appeals took the affirmative view. The
petitioner disagrees. Hence, this petition for review oncertiorari.
The antecedents as disclosed in the decisions of both the trial
court and the Court of Appeals, as well as in the pleadings of
petitioner Toyota Shaw, Inc. (hereinafter Toyota) and
respondent Luna L. Sosa (hereinafter Sosa) are as follows.
Sometime in June of 1989, Luna L. Sosa wanted to purchase a
Toyota Lite Ace. It was then a seller's market and Sosa had
difficulty finding a dealer with an available unit for sale. But
upon contacting Toyota Shaw, Inc., he was told that there was
an available unit. So on 14 June 1989, Sosa and his son,
Gilbert, went to the Toyota office at Shaw Boulevard, Pasig,
Metro Manila. There they met Popong Bernardo, a sales
representative of Toyota.
Sosa emphasized to Bernardo that he needed the Lite Ace not
later than 17 June 1989 because he, his family, and
abalikbayan guest would use it on 18 June 1989 to go to
Marinduque, his home province, where he would celebrate his
birthday on the 19th of June. He added that if he does not
arrive in his hometown with the new car, he would become a
"laughing stock." Bernardo assured Sosa that a unit would be
ready for pick up at 10:00 a.m. on 17 June 1989. Bernardo
then signed the aforequoted "Agreements Between Mr. Sosa &
Popong Bernardo of Toyota Shaw, Inc." It was also agreed
upon by the parties that the balance of the purchase price
would be paid by credit financing through B.A. Finance, and for
this Gilbert, on behalf of his father, signed the documents of
Toyota and B.A. Finance pertaining to the application for
financing.
The next day, 15 June 1989, Sosa and Gilbert went to Toyota
to deliver the downpayment of P100,000.00. They met
Bernardo who then accomplished a printed Vehicle Sales
Proposal (VSP) No. 928,
2
on which Gilbert signed under the
subheading CONFORME. This document shows that the
customer's name is "MR. LUNA SOSA" with home address at
No. 2316 Guijo Street, United Paraaque II; that the model
series of the vehicle is a "Lite Ace 1500" described as "4 Dr
minibus"; that payment is by "installment," to be financed by
"B.A.,"
3
with the initial cash outlay of P100,000.00 broken
down as follows:
a) downpayment P 53,148.00
b) insurance P 13,970.00
c) BLT registration fee P 1,067.00
CHMO fee P 2,715.00
service fee P 500.00
accessories P 29,000.00

and that the "BALANCE TO BE FINANCED" is "P274,137.00."
The spaces provided for "Delivery Terms" were not filled-up. It
also contains the following pertinent provisions:
CONDITIONS OF SALES
1. This sale is subject to availability of unit.
2. Stated Price is subject to change without prior notice, Price
prevailing and in effect at time of selling will apply. . . .
Rodrigo Quirante, the Sales Supervisor of Bernardo, checked
and approved the VSP.
On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert
to inform him that the vehicle would not be ready for pick up at
10:00 a.m. as previously agreed upon but at 2:00 p.m. that
same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the
latter's office. According to Sosa, Bernardo informed them that
the Lite Ace was being readied for delivery. After waiting for
about an hour, Bernardo told them that the car could not be
delivered because "nasulot ang unit ng ibang malakas."
Toyota contends, however, that the Lite Ace was not delivered
to Sosa because of the disapproval by B.A. Finance of the
credit financing application of Sosa. It further alleged that a
particular unit had already been reserved and earmarked for
Sosa but could not be released due to the uncertainty of
payment of the balance of the purchase price. Toyota then
gave Sosa the option to purchase the unit by paying the full
purchase price in cash but Sosa refused.
After it became clear that the Lite Ace would not be delivered
to him, Sosa asked that his downpayment be refunded. Toyota
did so on the very same day by issuing a Far East Bank check
for the full amount of P100,000.00,
4
the receipt of which was
shown by a check voucher of Toyota,
5
which Sosa signed with
the reservation, "without prejudice to our future claims for
damages."
Thereafter, Sosa sent two letters to Toyota. In the first letter,
dated 27 June 1989 and signed by him, he demanded the
refund, within five days from receipt, of the downpayment of
P100,000.00 plus interest from the time he paid it and the
payment of damages with a warning that in case of Toyota's
failure to do so he would be constrained to take legal
action.
6
The second, dated 4 November 1989 and signed by
M. O. Caballes, Sosa's counsel, demanded one million pesos
representing interest and damages, again, with a warning that
legal action would be taken if payment was not made within
three days.
7
Toyota's counsel answered through a letter dated
27 November 1989
8
refusing to accede to the demands of
Sosa. But even before this answer was made and received by
Sosa, the latter filed on 20 November 1989 with Branch 38 of
the Regional Trial Court (RTC) of Marinduque a complaint
against Toyota for damages under Articles 19 and 21 of the
Civil Code in the total amount of P1,230,000.00.
9
He
alleges, inter alia, that:
9. As a result of defendant's failure and/or refusal to deliver the
vehicle to plaintiff, plaintiff suffered embarrassment,
humiliation, ridicule, mental anguish and sleepless nights
because: (i) he and his family were constrained to take the
public transportation from Manila to Lucena City on their way to
Marinduque; (ii) his balikbayan-guest canceled his scheduled
first visit to Marinduque in order to avoid the inconvenience of
taking public transportation; and (iii) his relatives, friends,
neighbors and other provincemates, continuously irked him
about "his Brand-New Toyota Lite Ace that never was."
Under the circumstances, defendant should be made liable to
the plaintiff for moral damages in the amount of One Million
Pesos (P1,000,000.00).
10

In its answer to the complaint, Toyota alleged that no sale was
entered into between it and Sosa, that Bernardo had no
authority to sign Exhibit "A" for and in its behalf, and that
Bernardo signed Exhibit "A" in his personal capacity. As
special and affirmative defenses, it alleged that: the VSP did
not state date of delivery; Sosa had not completed the
documents required by the financing company, and as a matter
of policy, the vehicle could not and would not be released prior
to full compliance with financing requirements, submission of
all documents, and execution of the sales agreement/invoice;
the P100,000.00 was returned to and received by Sosa; the
venue was improperly laid; and Sosa did not have a sufficient
cause of action against it. It also interposed compulsory
counterclaims.
After trial on the issues agreed upon during the pre-trial
session,
11
the trial court rendered on 18 February 1992 a
decision in favor of Sosa.
12
It ruled that Exhibit "A," the
"AGREEMENTS BETWEEN MR. SOSA AND POPONG
BERNARDO," was a valid perfected contract of sale between
Sosa and Toyota which bound Toyota to deliver the vehicle to
Sosa, and further agreed with Sosa that Toyota acted in bad
faith in selling to another the unit already reserved for him.
As to Toyota's contention that Bernardo had no authority to
bind it through Exhibit "A," the trial court held that the extent of
Bernardo's authority "was not made known to plaintiff," for as
testified to by Quirante, "they do not volunteer any information
as to the company's sales policy and guidelines because they
are internal matters."
13
Moreover, "[f]rom the beginning of the
transaction up to its consummation when the downpayment
was made by the plaintiff, the defendants had made known to
the plaintiff the impression that Popong Bernardo is an
authorized sales executive as it permitted the latter to do acts
within the scope of an apparent authority holding him out to the
public as possessing power to do these acts."
14
Bernardo then
"was an agent of the defendant Toyota Shaw, Inc. and hence
bound the defendants."
15

The court further declared that "Luna Sosa proved his social
standing in the community and suffered besmirched reputation,
wounded feelings and sleepless nights for which he ought to
be compensated."
16
Accordingly, it disposed as follows:
WHEREFORE, viewed from the above findings, judgment is
hereby rendered in favor of the plaintiff and against the
defendant:
1. ordering the defendant to pay to the plaintiff the sum of
P75,000.00 for moral damages;
2. ordering the defendant to pay the plaintiff the sum of
P10,000.00 for exemplary damages;
3. ordering the defendant to pay the sum of P30,000.00
attorney's fees plus P2,000.00 lawyer's transportation fare per
trip in attending to the hearing of this case;
4. ordering the defendant to pay the plaintiff the sum of
P2,000.00 transportation fare per trip of the plaintiff in
attending the hearing of this case; and
5. ordering the defendant to pay the cost of suit.
SO ORDERED.
Dissatisfied with the trial court's judgment, Toyota appealed to
the Court of Appeals. The case was docketed as CA-G.R. CV
No. 40043. In its decision promulgated on 29 July 1994,
17
the
Court of Appeals affirmed in toto the appealed decision.
Toyota now comes before this Court via this petition and raises
the core issue stated at the beginning of the ponenciaand also
the following related issues: (a) whether or not the standard
VSP was the true and documented understanding of the
parties which would have led to the ultimate contract of sale,
(b) whether or not Sosa has any legal and demandable right to
the delivery of the vehicle despite the non-payment of the
consideration and the non-approval of his credit application by
B.A. Finance, (c) whether or not Toyota acted in good faith
when it did not release the vehicle to Sosa, and (d) whether or
not Toyota may be held liable for damages.
We find merit in the petition.
Neither logic nor recourse to one's imagination can lead to the
conclusion that Exhibit "A" is a perfected contract of sale.
Article 1458 of the Civil Code defines a contract of sale as
follows:
Art. 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain
in money or its equivalent.
A contract of sale may be absolute or conditional.
and Article 1475 specifically provides when it is deemed
perfected:
Art. 1475. 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 contracts.
What is clear from Exhibit "A" is not what the trial court and the
Court of Appeals appear to see. It is not a contract of sale. No
obligation on the part of Toyota to transfer ownership of a
determinate thing to Sosa and no correlative obligation on the
part of the latter to pay therefor a price certain appears therein.
The provision on the downpayment of P100,000.00 made no
specific reference to a sale of a vehicle. If it was intended for a
contract of sale, it could only refer to a sale on installment
basis, as the VSP executed the following day confirmed. But
nothing was mentioned about the full purchase price and the
manner the installments were to be paid.
This Court had already ruled that a definite agreement on the
manner of payment of the price is an essential element in the
formation of a binding and enforceable contract of sale.
18
This
is so because the agreement as to the manner of payment
goes into the price such that a disagreement on the manner of
payment is tantamount to a failure to agree on the price.
Definiteness as to the price is an essential element of a binding
agreement to sell personal property.
19

Moreover, Exhibit "A" shows the absence of a meeting of
minds between Toyota and Sosa. For one thing, Sosa did not
even sign it. For another, Sosa was well aware from its title,
written in bold letters, viz.,
AGREEMENTS BETWEEN MR. SOSA & POPONG
BERNARDO OF TOYOTA SHAW, INC.
that he was not dealing with Toyota but with Popong Bernardo
and that the latter did not misrepresent that he had the
authority to sell any Toyota vehicle. He knew that Bernardo
was only a sales representative of Toyota and hence a mere
agent of the latter. It was incumbent upon Sosa to act with
ordinary prudence and reasonable diligence to know the extent
of Bernardo's authority as an
agent
20
in respect of contracts to sell Toyota's vehicles. A
person dealing with an agent is put upon inquiry and must
discover upon his peril the authority of the agent.
21

At the most, Exhibit "A" may be considered as part of the initial
phase of the generation or negotiation stage of a contract of
sale. There are three stages in the contract of sale, namely:
(a) preparation, conception, or generation, which is the period
of negotiation and bargaining, ending at the moment of
agreement of the parties;
(b) perfection or birth of the contract, which is the moment
when the parties come to agree on the terms of the contract;
and
(c) consummation or death, which is the fulfillment or
performance of the terms agreed upon in the contract.
22

The second phase of the generation or negotiation stage in this
case was the execution of the VSP. It must be emphasized
that thereunder, the downpayment of the purchase price was
P53,148.00 while the balance to be paid on installment should
be financed by B.A. Finance Corporation. It is, of course, to be
assumed that B.A. Finance Corp. was acceptable to Toyota,
otherwise it should not have mentioned B.A. Finance in the
VSP.
Financing companies are defined in Section 3(a) of R.A. No.
5980, as amended by P.D. No. 1454 and P.D. No. 1793, as
"corporations or partnerships, except those regulated by the
Central Bank of the Philippines, the Insurance Commission
and the Cooperatives Administration Office, which are primarily
organized for the purpose of extending credit facilities to
consumers and to industrial, commercial, or agricultural
enterprises, either by discounting or factoring commercial
papers or accounts receivables, or by buying and selling
contracts, leases, chattel mortgages, or other evidence of
indebtedness, or by leasing of motor vehicles, heavy
equipment and industrial machinery, business and office
machines and equipment, appliances and other movable
property."
23

Accordingly, in a sale on installment basis which is financed by
a financing company, three parties are thus involved: the buyer
who executes a note or notes for the unpaid balance of the
price of the thing purchased on installment, the seller who
assigns the notes or discounts them with a financing company,
and the financing company which is subrogated in the place of
the seller, as the creditor of the installment buyer.
24
Since B.A.
Finance did not approve Sosa's application, there was then no
meeting of minds on the sale on installment basis.
We are inclined to believe Toyota's version that B.A. Finance
disapproved Sosa's application for which reason it suggested
to Sosa that he pay the full purchase price. When the latter
refused, Toyota cancelled the VSP and returned to him his
P100,000.00. Sosa's version that the VSP was cancelled
because, according to Bernardo, the vehicle was delivered to
another who was "mas malakas" does not inspire belief and
was obviously a delayed afterthought. It is claimed that
Bernardo said, "Pasensiya kayo, nasulot ang unit ng ibang
malakas," while the Sosas had already been waiting for an
hour for the delivery of the vehicle in the afternoon of 17 June
1989. However, in paragraph 7 of his complaint, Sosa
solemnly states:
On June 17, 1989 at around 9:30 o'clock in the morning,
defendant's sales representative, Mr. Popong Bernardo, called
plaintiff's house and informed the plaintiff's son that the vehicle
will not be ready for pick-up at 10:00 a.m. of June 17, 1989 but
at 2:00 p.m. of that day instead. Plaintiff and his son went to
defendant's office on June 17 1989 at 2:00 p.m. in order to
pick-up the vehicle but the defendant for reasons known only
to its representatives, refused and/or failed to release the
vehicle to the plaintiff. Plaintiff demanded for an explanation,
but nothing was given; . . . (Emphasis supplied).
25

The VSP was a mere proposal which was aborted in lieu of
subsequent events. It follows that the VSP created no
demandable right in favor of Sosa for the delivery of the vehicle
to him, and its non-delivery did not cause any legally
indemnifiable injury.
The award then of moral and exemplary damages and
attorney's fees and costs of suit is without legal basis. Besides,
the only ground upon which Sosa claimed moral damages is
that since it was known to his friends, townmates, and relatives
that he was buying a Toyota Lite Ace which they expected to
see on his birthday, he suffered humiliation, shame, and
sleepless nights when the van was not delivered. The van
became the subject matter of talks during his celebration that
he may not have paid for it, and this created an impression
against his business standing and reputation. At the bottom of
this claim is nothing but misplaced pride and ego. He should
not have announced his plan to buy a Toyota Lite Ace knowing
that he might not be able to pay the full purchase price. It was
he who brought embarrassment upon himself by bragging
about a thing which he did not own yet.
Since Sosa is not entitled to moral damages and there being
no award for temperate, liquidated, or compensatory damages,
he is likewise not entitled to exemplary damages. Under Article
2229 of the Civil Code, exemplary or corrective damages are
imposed by way of example or correction for the public good,
in addition to moral, temperate, liquidated, or compensatory
damages.
Also, it is settled that for attorney's fees to be granted, the court
must explicitly state in the body of the decision, and not only in
the dispositive portion thereof, the legal reason for the award of
attorney's fees.
26
No such explicit determination thereon was
made in the body of the decision of the trial court. No reason
thus exists for such an award.
WHEREFORE, the instant petition is GRANTED. The
challenged decision of the Court of Appeals in CA-G.R. CV
NO. 40043 as well as that of Branch 38 of the Regional Trial
Court of Marinduque in Civil Case No. 89-14 are REVERSED
and SET ASIDE and the complaint in Civil Case No. 89-14 is
DISMISSED. The counterclaim therein is likewise DISMISSED.
No pronouncement as to costs.
SO ORDERED.
Padilla, Bellosillo and Kapunan, JJ., concur.
Quiason, J., is on leave.
7. Ong v. Ong
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-67888 October 8, 1985
IMELDA ONG, ET AL., petitioners,
vs.
ALFREDO ONG, ET AL., respondents.
Faustino Y Bautista and Fernando M. Mangubat for private
respondent.

RELOVA, J .:
This is a petition for review on certiorari of the decision, dated
June 20, 1984, of the Intermediate Appellate Court, in AC-G.R.
No. CV-01748, affirming the judgment of the Regional Trial
Court of Makati, Metro Manila. Petitioner Imelda Ong assails
the interpretation given by respondent Appellate Court to the
questioned Quitclaim Deed.
Records show that on February 25, 1976 Imelda Ong, for and
in consideration of One (P1.00) Peso and other valuable
considerations, executed in favor of private respondent Sandra
Maruzzo, then a minor, a Quitclaim Deed whereby she
transferred, released, assigned and forever quit-claimed to
Sandra Maruzzo, her heirs and assigns, all her rights, title,
interest and participation in the ONE-HALF () undivided
portion of the parcel of land, particularly described as follows:
A parcel of land (Lot 10-B of the subdivision plan (LRC) Psd
157841, being a portion of Lot 10, Block 18, Psd-13288, LRC
(GLRC) Record No. 2029, situated in the Municipality of
Makati, Province of Rizal, Island of Luzon ... containing an area
of ONE HUNDRED AND TWENTY FIVE (125) SQUARE
METERS, more or less.
On November 19, 1980, Imelda Ong revoked the aforesaid
Deed of Quitclaim and, thereafter, on January 20, 1982
donated the whole property described above to her son, Rex
Ong-Jimenez.
On June 20, 1983, Sandra Maruzzo, through her guardian (ad
litem) Alfredo Ong, filed with the Regional Trial Court of Makati,
Metro Manila an action against petitioners, for the recovery of
ownership/possession and nullification of the Deed of Donation
over the portion belonging to her and for Accounting.
In their responsive pleading, petitioners claimed that the
Quitclaim Deed is null and void inasmuch as it is equivalent to
a Deed of Donation, acceptance of which by the donee is
necessary to give it validity. Further, it is averred that the
donee, Sandra Maruzzo, being a minor, had no legal
personality and therefore incapable of accepting the donation.
Upon admission of the documents involved, the parties filed
their responsive memoranda and submitted the case for
decision.
On December 12, 1983, the trial court rendered judgment in
favor of respondent Maruzzo and held that the Quitclaim Deed
is equivalent to a Deed of Sale and, hence, there was a valid
conveyance in favor of the latter.
Petitioners appealed to the respondent Intermediate Appellate
Court. They reiterated their argument below and, in addition,
contended that the One (P1.00) Peso consideration is not a
consideration at all to sustain the ruling that the Deed of
Quitclaim is equivalent to a sale.
On June 20, 1984, respondent Intermediate Appellate Court
promulgated its Decision affirming the appealed judgment and
held that the Quitclaim Deed is a conveyance of property with
a valid cause or consideration; that the consideration is the
One (P1.00) Peso which is clearly stated in the deed itself; that
the apparent inadequacy is of no moment since it is the usual
practice in deeds of conveyance to place a nominal amount
although there is a more valuable consideration given.
Not satisfied with the decision of the respondent Intermediate
Appellate Court, petitioners came to Us questioning the
interpretation given by the former to this particular document.
On March 15, 1985, respondent Sandra Maruzzo, through her
guardian ad litem Alfredo Ong, filed an Omnibus Motion
informing this Court that she has reached the age of majority
as evidenced by her Birth Certificate and she prays that she be
substituted as private respondent in place of her guardian ad
litem Alfredo Ong. On April 15, 1985, the Court issued a
resolution granting the same.
A careful perusal of the subject deed reveals that the
conveyance of the one- half () undivided portion of the
above-described property was for and in consideration of the
One (P 1.00) Peso and the other valuable
considerations (emphasis supplied) paid by private respondent
Sandra Maruzzo through her representative, Alfredo Ong, to
petitioner Imelda Ong. Stated differently, the cause or
consideration is not the One (P1.00) Peso alone but also the
other valuable considerations. As aptly stated by the Appellate
Court-
... although the cause is not stated in the contract it is
presumed that it is existing unless the debtor proves the
contrary (Article 1354 of the Civil Code). One of the disputable
presumptions is that there is a sufficient cause of the contract
(Section 5, (r), Rule 131, Rules of Court). It is a legal
presumption of sufficient cause or consideration supporting a
contract even if such cause is not stated therein (Article 1354,
New Civil Code of the Philippines.) This presumption cannot be
overcome by a simple assertion of lack of consideration
especially when the contract itself states that consideration
was given, and the same has been reduced into a public
instrument with all due formalities and solemnities. To
overcome the presumption of consideration the alleged lack of
consideration must be shown by preponderance of evidence in
a proper action. (Samanilla vs, Cajucom, et al., 107 Phil. 432).
The execution of a deed purporting to convey ownership of a
realty is in itself prima facie evidence of the existence of a
valuable consideration, the party alleging lack of consideration
has the burden of proving such allegation. (Caballero, et al. vs.
Caballero, et al., (CA), 45 O.G. 2536).
Moreover, even granting that the Quitclaim deed in question is
a donation, Article 741 of the Civil Code provides that the
requirement of the acceptance of the donation in favor of minor
by parents of legal representatives applies only to onerous and
conditional donations where the donation may have to assume
certain charges or burdens (Article 726, Civil Code). The
acceptance by a legal guardian of a simple or pure donation
does not seem to be necessary (Perez vs. Calingo, CA-40
O.G. 53). Thus, Supreme Court ruled in Kapunan vs. Casilan
and Court of Appeals, (109 Phil. 889) that the donation to an
incapacitated donee does not need the acceptance by the
lawful representative if said donation does not contain any
condition. In simple and pure donation, the formal acceptance
is not important for the donor requires no right to be protected
and the donee neither undertakes to do anything nor assumes
any obligation. The Quitclaim now in question does not impose
any condition.
The above pronouncement of respondent Appellate Court finds
support in the ruling of this Court in Morales Development Co.,
Inc. vs. CA, 27 SCRA 484, which states that "the major
premise thereof is based upon the fact that the consideration
stated in the deeds of sale in favor of Reyes and the Abellas is
P1.00. It is not unusual, however, in deeds of conveyance
adhering to the Anglo-Saxon practice of stating that the
consideration given is the sum of P1.00, although the actual
consideration may have been much more. Moreover, assuming
that said consideration of P1.00 is suspicious, this
circumstance, alone, does not necessarily justify the inference
that Reyes and the Abellas were not purchasers in good faith
and for value. Neither does this inference warrant the
conclusion that the sales were null and void ab initio. Indeed,
bad faith and inadequacy of the monetary consideration do not
render a conveyance inexistent, for the assignor's liberality
may be sufficient cause for a valid contract (Article 1350, Civil
Code), whereas fraud or bad faith may render either rescissible
or voidable, although valid until annulled, a contract concerning
an object certain entered into with a cause and with the
consent of the contracting parties, as in the case at bar."
WHEREFORE. the appealed decision of the Intermediate
Appellate Court should be, as it is hereby AFFIRMED, with
costs against herein petitioners.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, De la Fuente
and Patajo, JJ., concur.
Gutierrez, Jr., J., in the result.
8. Aguilar v. Rubiato
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-14823 December 9, 1919
HILARIA AGUILAR, plaintiff-appellant,
vs.
JUAN RUBIATO, defendant-appellant, and MANUEL
GONZALEZ VILA, defendant-appellee.
Francisco A. Delgado for plaintiff and appellant.
Abaya and Pamatmat for defendant and appellant.
MALCOLM, J .:
As certainly as may be ascertained, the facts of record in this
case are believed to be the following:
Juan Rubiato is a resident of the municipality of Nagcarlan,
Province of Laguna, of somewhat ordinary intelligence and
astuteness. Early in the year 1915, he was the owner of
various parcels of land having a potential value of
approximately P26,000. Rubiato was desirous of obtaining a
loan of not to exceed P1,000. Being in this state of mind, two
men, Manuel Gonzalez Vila a procurador judicial and one
Gregorio Azucena, and possibly another, one Marto
Encarnacion, came to the house of Rubiato and there induced
him to sign the second page of a power of attorney in favor of
Manuel Gonzalez Vila. This power of attorney, introduced in
evidence as Exhibit A, reads as follows:
To all whom it may concern:
I, Juan Rubiato e Isles, of age, married, a resident of the barrio
of Rizal, municipality of Nagcarlan, Province of Laguna,
Philippine Islands, do hereby freely and voluntarily set forth the
following:
First. That I own and possess the full and absolute dominion
over eight parcels of land (planted with about two thousand five
hundred coconut trees) situated in the aforesaid barrio,
municipality of Nagcarlan, Province of Laguna, P. I.; that the
description and boundaries of same are duly described in the
possessory title (dated the 15th day of January, 1896) (titulo
posesorio) issued to me by the former Spanish sovereignty;
that same is inscribed in the register of property of said
province under numbers 141, 144, 146, 148, 150, 152, 154
and 156; that these facts are proven by the certificate written
on the legal official papers numbered 0.153.826, 0.460.498,
0.455.683 and 0.460.459 and duly authorized by registrar, Sr.
Antonio Roura, . . .lawphi1.net
Second. That being unable, on account of illness, to go in
person to Manila, I hereby declare that I grant to Sr. Manuel
Gonzalez Vila, a resident of the municipality of San Pablo,
Province of Laguna, P. I., any power whatever required by law
to secure in said city a loan not exceeding one thousand pesos
(P1,000), Philippine currency; that he shall secure same in my
name and representation; that he may secure same either
under the rate of interest and conditions considered most
convenient and beneficial for my interests, or under pacto de
retro; that furthermore he has ample power to execute, sign
and ratify, as though he were myself, any writing necessary for
the mortgage of my land described in the aforementioned
document; and the he holds this special power of attorney over
said lands to the end that same may be used as a guaranty of
the loan to be secured. . . .
By reason of the power thus given, Manuel Gonzalez Vila on
April 29, 1915, formulated the document introduced in
evidence as Exhibit C, by which the lands of Rubiato were sold
to Hilaria Aguilar of Manila, for the sum of P800, with right of
repurchase within one year, Rubiato to remain in possession of
the land as lessee and to pay P120 every three months as
lease rent. Hilaria Aguilar never saw the lands in question and
did not know, until after she had consulted her attorney, exactly
what her rights were. Manuel Gonzalez Vila received from
Hilaria Aguilar the P800 mentioned in Exhibit C as the selling
price of the land. Whether this money was then passed on to
Juan Rubiato is uncertain, although it is undeniable that Hilaria
Aguilar has never been paid the money she advanced.
The one year mentioned in the pacto de retro having expired
without Hilaria Aguilar having received the principal nor any
part of the lease rent, she began action against Juan Rubiato
and Manuel Gonzalez Vila to consolidate the eight parcels of
land in her name. After due trial, the trial judge, the Hon.
Manuel Camus, rendered a decision in which he recited the
facts somewhat, although not exactly, as hereinbefore set
forth. The court found that the power of attorney only
authorized Manuel Gonzalez Vila to obtain a loan subject to a
mortgage, and not to sell the property. The judgment handed
down was to the effect that the plaintiff Hilaria Aguilar recover
from the defendant Juan Rubiato the sum of P800 with interest
at the rate of 60 per cent per annum from April 29, 1915 until
May 1, 1916, and with interest at the rate of 12 per cent per
annum from May 1, 1916, until the payment of the principal,
with the costs against the defendant. Both parties appealed.
The points raised by the plaintiff-appellant going as they do to
the facts and these being as hereinbefore stated, no lengthy
discussion of plaintiff's five assignments of error need be
indulged in. The issue is not precisely relative to an
interpretation of the power of attorney. The court is under no
necessity of seizing on inexact language in order to hold that
the document authorized a mortgage and not a sale. The so-
called power of attorney might indeed be construed as
authorizing Vila to sell the property of Rubiato. And it might
indeed be construed under a conception similar to that of the
trial court's as a loan guaranteed by a mortgage. But the
controlling fact is, that the power of attorney was in reality no
power of attorney but a sham document.
In addition to the evidence, there is one very cogent reason
which impels us to the conclusion that Rubiato is only
responsible to the plaintiff for a loan. It is that the
inadequacy of the price which Vila obtained for the eight
parcels of land belonging to Rubiato is so great that the minds
revolts at it. It is an agreement which a reasonable man would
neither directly nor indirectly be likely to enter into or to consent
to. To hold that the power of attorney signed by Rubiato
authorized Vila to enter into the instant contract of sale would
be equivalent to holding, if we may be permitted to use the
language of Lord Hardwicke, that "a man in his senses and not
under delusion" would dispose of lands worth P26,000 for
P1,000, and would pay interest thereon at the rate of 60 per
cent per annum. (See 6 R. C. L., 679, 841.)
The members of this court after most particular and cautious
consideration, having in view all the facts and all the naturals
tendencies of mankind, consider that Rubiato is only
responsible to the plaintiff for the loan of P800.
The points advanced by defendant-appellant likewise
necessitate only brief consideration. While entertaining some
doubt as to the justice of requiring Rubiato to pay back the
amount of P800, we do not feel authorized in disturbing this
finding of the trial court. It may well be that Vila and his
partners, acting as middlemen, fabricated the document which
Rubiato signed, secured the money from Hilaria Aguilar, and
then pocketed the same. Yet as minor details somewhat
corroborative of the result reached by the trial court, are the
undeniable facts that Rubiato admitted his desire to obtain a
loan, that Hilaria Aguilar made such a loan, and that while the
testimony of Vila is not overly truthful, in this one respect we do
have his forceful statement that the money was paid over to
Rubiato. That payment of the sum of P800 was not explicity
prayed for in the complaint, does not deprive the court of
power to render judgment for this amount, because it is a rule
of good pleading that "the demand in the complaint is no part
of the statement of the cause of action, and does not give it
character. The facts alleged do this, and the plaintiff is entitled
to so much relief as they warrant." (Sutherland on Code
Pleading, Vol. I, sec. 186; Code of Civil Procedure, sec. 126.)
The only remaining question which merits resolution, on which
the plaintiff and defendants flatly disagree, relates to the
interest which should be allowed. The trial court, it will be
remembered, permitted the plaintiff to recover interest at the
rate of 60 per cent per annum from April 29, 1915, when
the pacto de retro was formulated, until May 1, 1916, the date
when the Usury Law, Act No. 2655, went into effect, and
interest at the rate of 12 per cent per annum after that date. It
is, of course, true, as previously decided by this court in United
States vs. Constantino Tan Quingco Chua ([1919], 39 Phil.,
552), that usury laws, such as that in force in the Philippines,
are to be construed prospectively and not retrospectively. As
stated in the decision just cited, "The reason is, that if the
contract is legal at its inception, it cannot be rendered illegal by
any subsequent legislation, for this would be tantamount to the
impairment of the obligation for the contract." As we have held
that the defendant is under obligation to the plaintiff for a mere
loan, as this loan fails to name a lawful rate of interest, and as
interest at the rate of 60 per cent per annum is unquestionably
exorbitant and usurious under the Usury Law, on and after the
date when this law became effective, the defendant would be
liable for the legal rate of interest, which is 6 per cent per
annum. We would even go further and hold that he would be
liable only for such interest prior to the enactment of the Usury
Law. This we can do under the sanction of article 1255 of the
Civil Code which condemns agreements contrary to morals
and public policy.
Judgment is affirmed, with the sole modification that the
plaintiff shall only recover interest at the rate of 6 per cent per
annum on the sum of P800 from April 29, 1915 until paid,
without special finding as to costs in this instance. So ordered.
Arellano, C.J., Torres, Araullo, Street and Avancea, JJ.,
concur.
9. PNB v. Gonzalez

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-21026 February 13, 1924
PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs.
MANUEL ERNESTO GONZALEZ, defendant-appellee.
SATURNINO LOPEZ, buyer and appellant.
Camus and Delgado, Turner and Rheberg, Serviliano de la
Cruz for appellant.
Palma, Leuterio and Yamzon for defendant-appellee.
No appearance for the plaintiff-appellee.
STATEMENT
November 23, 1921, Philippine National Bank commenced a
suit against Manuel Ernesto Gonzales to foreclose a real
mortgage made to secure a promissory note for P15,000.
March 17, 1922, the plaintiff bank filed an amended complaint
against the same defendant, in which the original was
reproduced, to foreclose a second mortgage for P15,000 upon
the same land described in the original complaint. The
defendant was duly served in both proceedings with both the
original and amended complaints, and made defaults in both
cases. On April 21, 1922, the bank filed a motion for default.
August 8, 1922, the court declared the defendant in default,
and set the case for hearing on August 23, 1922, at which time
the bank appeared and presented proofs of all the facts
alleged in its original and amended complaints. August 28,
1922, the court rendered judgment in favor of the bank and
against the defendant, requiring him within three months from
the date to pay the plaintiff the amount of the two mortgages in
question, together with the interest and costs, and that in
default thereof, execution should be issued for the sale of the
property to satisfy the judgment. December 7, 1922, and for
want of any payment, the plaintiff moved the court for an
execution, and on January 11, 1923, an execution was issued
for the sale of the real property described in the mortgages to
satisfy the amount of the judgment. On August 28, 1922, the
total of the judgment in the first cause of action, including the
interest, was P17,313.59, and in the second mortgage, on the
same date, it was P17,755.
The property advertised for sale was evidenced by Torrens
Certificate of Title and described in Exhibits A, B and C, of
which Exhibit A contains 3,657,703 square meters, Exhibit B
1,335,505, square meters and Exhibit C 263,765 square
meters. Pursuant to the execution the property was duly
advertised for sale, and that described in Exhibits B and C was
sold to Saturnino Lopez, the appellant here, for P15,000, that
being the highest bid, and he being the highest bidder.
February 16, 1923, the sheriff filed a motion to confirm the sale
to Lopez, which was set down for hearing on March 9, 1923,
and due notice was given to all the parties in interest. At a
hearing on that date, the court made an order duly conforming
the sale.
April 5, 1923, the defendant Gonzales, through his then
attorney, filed the following motion:
Comes now the defendant and to the Honorable Court
respectfully shows that he applies for a reconsideration of the
order entered in this case under the date of March 9, 1923,
confirming the sale at public auction made by the deputy
provincial sheriff Mr. Jose V. Lopez in favor of Mr. Saturnino
Lopez of the two parcels of land included in certificate of title
No. 5136 of the property of the defendant and judgment debtor
Mr. Manuel Ernesto Gonzales. This motion is based on the
following ground:
That said order is not in accordance with law.
It was set down for hearing on April 7, 1923, and notice was
duly given. April 16, 1923, the court rendered a decision in
which he found as a fact that all of the necessary requisites for
the notice of sale had been duly complied with but that it
appeared that the value of the land, which was sold to the
appellant, was P45,940, for which he did only 15,000, and on
account of this difference in value for taxation purposes and
the value for which the land was sold, the court set aside the
confirmation, and ordered a resale "thereby giving the
aforesaid defendant a greater opportunity in order that he may
obtain a better price, if possible, from the sale of the aforesaid
lands." From that order, Lopez appeals, assigning as error that
"the trial court erred in setting aside, without good cause
having been shown, the prior order confirming the judicial sale,
and ordering the resale of the land in question.

JOHNS, J .:
That is the only question involved on this appeal. It will be
noted that in the first instance, the trial court confirmed the sale
on the motion of the sheriff, and that in the last order, he
specifically found as a fact that there had been a compliance of
all of the essential requisites for a sale on execution, and that
the order, confirming the sale, was set aside upon the sole
ground of inadequacy of consideration. It will also be noted that
in the motion to set aside the sale, the only ground specified is
"that order is not in accordance with law." In other words, in the
motion itself no grounds are specifically set forth or alleged as
to why the sale should be set aside, and that in the body of the
motion, it is not claimed that the land was sold for an
inadequate consideration.
Although the trial court set aside the sale "for the purpose of
avoiding exorbitant damages to said defendant," the only
evidence presented at the hearing on the motion as to the
value of any land was the certificate of the municipal and
deputy treasurer of Santo Tomas, Pangasinan, of date March
26, 1923, to the effect that four pieces of land of the defendant
Gonzales contain 162 hectares, 4 ares, and 26 centares, and
had a combined assessed valuation of P45,940.
Not a witness was called to testify as to the value of the land.
In other words, the only evidence before the court as to value
was the certificate of the deputy municipal treasurer, and that
was to the effect that the four pieces of land therein described
had an assessed valuation of P45,940. Neither was there any
showing made nor any evidence presented, that, in the event
the property in question was resold, that it would sell for more
than P15,000. That as to the land in question, it appears of
record that on August 28, 1922, the amount of the bank's
judgment was P17,313.59. It also appears that the bank was
personally represented at the sale, and that it refused to bid
more than P15,000. For such reason, the property was sold to
Lopez, as the highest bidder. In other words, it appears of
record that the bank itself consented and agreed to the sale of
the property in question for more than P3,000 less than the
amount of its claim.
The only ground specified in the motion of April 5, 1923, is
"that said order is not in accordance with law." No other
grounds are pointed out or assigned, and the order of the court
setting aside the sale was based upon that motion.
The rule is fundamental that the confirmation of a sale, or the
setting aside of the confirmation, is largely a matter in the
discretion of the trial court, and section 257 of the Code of Civil
Procedure povides:
* * * Should the court decline to confirm the sale, for good
cause shown, and should set it aside, it shall order a resale in
accordance with law.
In the instant case, the court in its original order confirmed the
sale and later set it aside upon a motion, specifying "that said
order is not in accordance with law." In setting the sale aside,
the court finds that "although the requisites prescribed for the
sale at public auction of the land were complied with," it set
aside the sale for inadequacy of consideration without any
proof as to the value of the land, except the assessed
valuation, or without any showing whatever that, in the event of
a resale, the property would sell for more money. It also
appears that the bank was represented at the sale, and that it
consented and agreed to the sale of the property in question to
Lopez for P3,000 less than the amount of its claim. It also
appears that the suit to foreclose was commenced on
November 23, 1921; that the judgment was rendered by
default August 28, 1922; and that the property was not sold
until February 14, 1923. In other words, Gonzales had sixteen
months after the suit was commenced to find a purchaser that
would be ready, able, and willing to pay the amount of the
mortgage, and to stop the sale, and when the property in
question was actually sold, it sold for P3,000 less than the
amount of the bank's claim.
We frankly concede that the trial court has a large discretion in
setting aside and confirming the sale of real property, and that,
where a proper motion is filed, and the evidence tends to
support the motion, the decision of the trial court should be
final. Be that as it may, the motion to set aside the confirmation
should point out and specify why it should be set aside, and
there should be reasonable evidence in the record tending to
support the motion. In the instant case, the motion upon which
the court based it as action does not specify or point out a
single reason why the confirmation should be set aside,
Neither is there any evidence to sustain the motion.
The rule is well stated in Graffam and Doble vs. Burgess (117
U.S., 180), in which the syllabus says:
A judicial sale of real estate will not be set aside for
inadequacy of price, unless the inadequacy be so great as to
shock the conscience, or unless there be additional
circumstances against its fairness.
If the inadequacy of price paid for the purchase of real estate
at a sale on an execution be so gross as to shock the
conscience, or if in addition to gross inadequacy the purchaser
has been guilty of unfairness or has taken any undue
advantage, or if the owner of the property or the party
interested in it has been for any other reason misled or
surprised, then the sale will be regarded as fraudulent and
void, and the party injured will be permitted to redeem the
property sold.
The same principle is laid down by this court in Warner, Barnes
& Co. vs. Santos (14 Phil., 446), in which the syllabus says:
* * * That a judicial sale of real estate in an action to foreclose
will not be set aside for inadequacy of price, unless the
inadequacy be so great as to shock the conscience or unless
there be additional circumstances against its fairness.
Ruling Case Law, vol. 16, page 100, says:
It is by no means a matter of discretion with the court to
rescind a sale which it has once confirmed, nor is the sale to
be rescinded for mere inadequacy or price, or for an increase
of price alone, irregularity, and the like. Some special ground
must be laid such as fraud and collusion accident, mutual
mistake, breach of trust, or misconduct upon the part of the
purchaser, or other party connected with the sale, which has
worked injustice to the party complaining and was unknown to
him at the time the sale was confirmed.
In the instant case, there is no claim or pretense that there was
any fraud or collusion, or that in any way Gonzales was misled
or deceived. The bank was personally represented at the sale,
and there is no showing whatever that, if the property was
resold, it would sell for a centavo more than the P15,000.
For such reasons, the judgment of the trial court, setting aside
the confirmation of the sale, is reversed, and the sale will stand
affirmed as of the date of the original confirmation by the trial
court, with costs in favor of the appellant. Such judgment to be
without prejudice to the right of Gonzales, if any, to redeem. So
ordered.
Araullo, C.J., Johnson, Malcolm, Avancea and Romualdez,
JJ., concur.
10. De Leon v. Salvador
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-34518 January 24, 1974
AURORA P. DE LEON, petitioner,
vs.
HONORABLE JUDGE FERNANDO CRUZ of the Court of First
Instance of Rizal, Caloocan City, Branch XII and EUSEBIO
BERNABE, respondents.
Tolentino, Garcia, Cruz and Reyes for petitioner.
Taada, Sanchez, Taada and Taada and Raquiza,
Esparrago and Associates for respondent Eusebio Bernabe.

TEEHANKEE, J.:1wph1.t
The Court herein reiterates the rule that in the absence of
overriding considerations, the judgment debtor will not be
granted preliminary injunction to enjoin execution of a final
judgment or implementation of an already executed judgment
simply because of the filing by the judgment debtor of a new
action for annulment of the executed judgment on bare
allegations of fraud, because the presumption is that such
judgment was legally and validly rendered. This rule doubly
holds true where the judgment debtor has already failed in a
previous action to annul the execution sale for alleged
irregularities and this Court has already sustained the validity
of the execution sale in a final judgment rendered over three
years ago.
On December 28, 1970, this Court rendered its joint decision in
Cases L-30871
1
and L-31603
2
involving the same
protagonists at bar, wherein the decisive issue of conflict of
jurisdiction between two branches of the Caloocan City court of
first instance was stated thus:
... which court, Branch XII presided by Judge Cruz or Branch
XIV presided by Judge Salvador has exclusive jurisdiction to
set aside for alleged irregularities the execution sale held on
February 14, 1967 by virtue of the writ for the execution of the
final judgment in the first case (No. C-189) issued by Judge
Cruz' court and to order a new auction sale which was the
relief sought by the judgment debtor in the second case (No.
C-1217) in Judge Salvador's court?
3

The Court sustained the exclusive jurisdiction of Judge Cruz's
court, holding that "(I)t is patent that such exclusive jurisdiction
was vested in Judge Cruz' court. Having acquired jurisdiction
over Case No. C-189 and rendered judgment that had become
final and executory, it retained jurisdiction over its judgment, to
the exclusion of all other coordinate courts for its execution and
all incidents thereof, and to control, in furtherance of justice,
the conduct of its ministerial officers in connection therewith.
Execution of its judgment having been carried out by the sheriff
with the levy and sale of the judgment debtor's properties,
Eusebio Bernabe as judgment debtor could not in the guise of
a new and separate second action (Case No. 1217) ask
another court of co-ordinate jurisdiction, Judge Salvador's
court, to interfere by injunction with the execution proceedings,
to set them aside and to order the holding of a new execution
sale instead of seeking such relief by proper motion and
application from Judge Cruz' court which had exclusive
jurisdiction over the execution proceedings and the properties
sold at the execution sale.
4

This Court thus upheld the validity of the execution sale held
on February 14, 1967 of respondent Bernabe's two real
properties (registered under T.C.T. Nos. 94985 and 94986 of
Caloocan City) wherein petitioner Aurora de Leon (sister of the
judgment creditor Enrique de Leon) was the highest bidder and
of Judge Cruz' orders of September 5, 1969 and January 5,
1970 in the first case (No. C-189) consolidating ownership of
the properties in petitioner de Leon with the expiration of the
redemption period and ordering respondent to surrender his
owner's duplicate certificates of title to the properties thus sold
to petitioner "since said orders were within the exclusive
competence and jurisdiction of Judge Cruz' court."
5

By the same token, this Court held that Judge Salvador had no
jurisdiction to take cognizance of respondent Bernabe's second
action (Case No. C-1217) against his judgment creditor
Enrique de Leon and herein petitioner Aurora P. de Leon as
purchaser to set aside or annul the execution on February 14,
1967 "for being anomalous and irregular" and to order the
holding of a new auction sale. This Court therefore nullified
Judge Salvador's orders of May 20, 1969 and June 23, 1969
allowing redemption of the properties "notwithstanding that the
one-year redemption period had already lapsed more than one
year ago on February 21, 1968"
6
and declared his court
"without jurisdiction over Civil Case No. C-1217 other than to
dismiss the same."
7

Pursuant to this Court's said decision, petitioner assumed
control of the properties and collection of the rentals therefrom,
while under the Court's resolution of March 15, 1971,
Bernabe's motion for the return of the redemption amount of
P33,817.28 accepted by the sheriff under Judge Salvador's
order of May 20, 1969 which this Court set aside and declared
null and void, was granted as a matter of equity.
It now turns out that respondent Bernabe filed under the same
date of March 15, 1971 still another action against petitioner
Aurora P. de Leon, et al. (docketed as Case No. C-2048)
8
for
annulment or declaration of nullity of the judgment rendered
against him in the first case (No. C-189) at the execution sale
of which petitioner de Leon had acquired his properties in
question on the ground that "the judgment rendered in Civil
Case No. C-189 which led to the execution and sale of his
properties, was null and void because the same was secured
by Enrique de Leon, Jr., petitioner's brother and the plaintiff
named in Civil Case No. C-189, through fraud, deceit and
misrepresentation in that his (Enrique de Leon, Jr.') signatures
appearing in the document (lease contract) on which his
complaint in Civil Case No. C-189 was founded, and in the
verification of said complaint, were both falsified by his father,
Enrique de Leon, Jr. is not entitled to the judgment he obtained
in Civil Case No. C-189 because the complaint which gave rise
to it was not instituted by him but by his father, Enrique de
Leon, Sr. the person who signed the verification thereof
declaring that he is the plaintiff named therein."
9

When petitioner asked respondent judge to finally enforce his
previous orders of September 5, 1969 and January 5, 1970 for
the surrender and cancellation of respondent Bernabe's
certificates of title and the issuance of new certificates in
petitioner's favor (as upheld by this Court's previous decision
above referred to), respondent judge denied petitioner's
motions to this effect per his orders of June 11, 1971 and
September 8, 1971 on the ground of pendency of respondents'
new action for annulment of judgment (Case No.
C-2048). Respondent Judge had per his order of June 10,
1971 in this new annulment case denied petitioner's motion to
dismiss (on grounds of res judicata and lack of cause of action
since it was premised on allegations of intrinsic, not extrinsic,
fraud) stating that petitioner's grounds for dismissal "do not
appear to be indubitable" and ordered petitioner to answer the
complaint.
10
In an earlier order of March 17, 1971, "to preserve
the status quo between the parties" he had ordered petitioner
and her co-defendants "to refrain from taking any further action
on the properties of the plaintiff, Eusebio Bernabe."
11

Hence, the present petition for certiorari, prohibition
and mandamus.
12
The Court, in giving due course, issued on
January 15, 1972 its writ of preliminary injunction enjoining
respondents from further restraining this Court's final decision
in Cases L-30871 and L-31603 above referred to and
respondent judge from further taking cognizance of and
proceeding with the annulment case (No. C-2048).
The crucial issue thus presented at bar is whether respondent
judge acted with grave abuse of discretion amounting to
excess of jurisdiction in issuing his challenged orders
restraining in effect implementation of this Court's final decision
of December 28, 1970 which sustained his own orders of
September 5, 1969 and January 5, 1970 in the original case
(No. C-189) "confirming Aurora's acquisition of title to the
properties by virtue of the execution sale and ordering Bernabe
to transfer possession to her"
13
simply from the bare fact that
respondent Bernabe has filed on March 15, 1971
a second action for annulment of the executed judgment for
alleged fraud (Case No. C-2048) after his first action for
annulment of theexecution sale in favor of petitioner Aurora
(Case No. C-1217) had failed and this Court had sustained by
final judgment the very orders implementing the execution sale
which respondent judge would now enjoin?
The Court holds that respondent judge did so act with grave
abuse of discretion. In the absence of overriding
considerations and none has been shown here the
implementation of execution proceedings already performed in
satisfaction of a judgment and sustained by final judgment of
this Court (for consolidation of title of the properties acquired in
the execution sale by petitioner Aurora and her exercise of the
rights of ownership and possession the same) will not be
enjoined, simply because of the filing by the judgment debtor of
a new action for annulment of the executed judgment on the
ground of fraud, because the presumption is that such
judgment was legally and validly rendered. This is doubly true
where as in this case respondent judgment debtor has already
failed in a previous action to annul the execution sale and this
Court sustained the validity of such sale in a final judgment
rendered over three years ago on December 28, 1970.
As was stressed in the similar case of Quintero vs.
Martinez
14
where the judgment debtor sought to enjoin
execution of a final judgment of the municipal court in an action
filed by him for the annulment thereof on the ground "that the
said judgment was obtained through fraud, falsification and
collusion", the Court sustained the court of first instance's
action of refusing to issue a preliminary injunction against
execution of the final judgment, ruling that "unless and until the
court sets aside as null and void the final judgment of the
municipal court of Manila ... on the ground of fraud, the
execution thereof cannot be enjoined ... because the
presumption is that the judgment was legally rendered. ... To
issue a preliminary injunction (on mere allegations of fraud)
would be to allow judgment debtors to delay the execution of a
final judgment against them by filing a complaint (for
annulment of judgment with injunction) irrespective of the final
outcome of the action."
15
Parenthetically, it may be noted that
a judgment debtor seeking annulment of judgment affecting
real property may avail of a notice oflis pendens as provided in
Rule 14, section 24 for the protection of his alleged rights to
the property.
Equally pertinent is the established doctrine that where there is
no question about the jurisdiction of the court over the parties
and subject matter and the proceedings
were free from extrinsic fraud, the judgment cannot be
declared null and void even if it were assumed that the court
committed an error of judgment or reached an erroneous
conclusion in deciding the case, since such errors of
judgment not of jurisdiction are correctible and reviewable
only by appeal and "if no appeal is taken, the decision,
erroneous or not, becomes final and executory, and is valid
and binding between the parties."
16

Thus, when respondent judge in obedience to this Court's
preliminary injunction subsequently ordered respondent
Bernabe to surrender his titles under pain of cancellation and
authorized petitioner Aurora "to resume collecting rentals from
the properties" per his orders of April 7, 1972, July 1, 1972 and
September 11, 1972 and Bernabe sought to impugn such
orders in a petition forcertiorari filed with this Court on
September 28, 1972 (docketed as Case L-35559
17
) the Court
dismissed the petition for lack of merit per its resolutions of
October 31, 1972 and November 28, 1972.
Here, respondent Bernabe admittedly had his day in Court in
the original case (No. C-189) where judgment was obtained
and executed against him, his appeal from the judgment failed,
and his special civil action for certiorari again Judge Cruz'
orders confirming petitioner Aurora's acquisition of title to the
properties by virtue of the execution sale was decided
adversely against him in this Court's decision of December 28,
1970.
He now alleges fraud in his new complaint only in the judgment
creditor's father (Enrique de Leon, Sr.) allegedly falsified his
(the son's) signatures in the lease contract and in the
complaint supra.
18
In respondent Bernabe's belated
supplementary memorandum of May 19, 1973, however,
realizing perhaps that his bare allegations as to the father
having falsified the signatures of his son, the judgment creditor,
in the lease contract and the complaint do not make out a case
of extrinsic fraud since he was no way deprived of his day in
court, he now makes for the first time allegations not made
below of a "second fraud" alleged collusion between his lawyer
in the first case (C-189) and the de Leons and indicates that he
would correspondingly seek an "amendment of pleading if
necessary to serve the ends of justice."
The best-case view for respondent then is that while he could
file such action or amended action for annulment of the
executed judgment (on the assumption that his first action to
annul the execution sale in Case No. 1217 is not res judicata)
such filing per se does not invalidate the judgment nor entitle
him to a preliminary injunction suspending effects and
consequences of the executed judgment to prejudice of
petitioner Aurora, whose rights as purchaser of the properties
at the execution sale have been recognized by this Court's final
judgment of December 28, 1970, until and unless he shall have
obtained a final judgment for annulment.
The worst-case view for respondent is that respondent judge
may take a second look at petitioner's motion to dismiss for
lack of cause of action on the ground that the fraud alleged in
respondent's new complaint does not constitute extrinsic
fraud which alone warrants annulment of a judgment and
then resolve after hearing the parties that indeed
no extrinsic fraud is alleged in respondent's second complaint
for annulment or such amendments thereof as shall have been
permitted and that the same should therefore be dismissed
without need of trial for failure to state a cause of action.
The question of extrinsic fraud has been extensively discussed
in the Court's ample jurisprudence on the matter. In the latest
case of Cruz vs. Navarro,
19
Mr. Justice Castro succinctly
defined fraud as "extrinsic when it is employed to deprive a
party of his day in court, thereby preventing him from asserting
his right to the property."
In Libudan vs. Gil
20
, extrinsic fraud was likewise described as
the "fraudulent scheme of the prevailing litigant (which)
prevents a party from having his day in court or from
presenting his case." It was therein emphasized that an action
to annul judgment on grounds of intrinsic fraud such as "acts of
a party in a litigation during the trial, such as the use of forged
instruments or perjured testimony, which did not affect the
presentation of the case, but did prevent a fair and just
determination of the case,"
21
would be unavailing, since it is
the business of a party litigant to meet and repel his opponent's
perjured or falsified evidence and it is settled law that judicial
determination however erroneous of matters brought within the
court's jurisdiction must be corrected in the sameproceeding on
appeal and cannot be invalidated in another proceeding as
otherwise the losing party could attack the judgment at any
time by attributing imaginary falsehoods to his adversary's
proofs.
In Cordovis vs. Obias
22
it was stressed that while "equity
abhors fraud ... not every fraud can be a ground to annul a
judgment, otherwise litigations would never end."
ACCORDINGLY, the writ of certiorari is granted and
respondent judge's questioned orders of June 11, 1971 and
September 8, 1971 in Case No. C-189 denying implementation
of his previous orders confirming petitioner's acquisition of title
to the properties (as set aside by respondent judge in his
subsequent orders of April 7, July 1, and September 11, 1972)
are hereby set aside and annulled. The preliminary injunction
heretofore issued on January 15, 1972 by the Court is set
aside insofar as it enjoined respondent judge from further
taking cognizance of and proceeding with the annulment case
(No. C-2048) with instructions to dispose of the same,
particularly as to the unresolved question raised in petitioner's
pending motion to dismiss of whether the allegations of
respondent's complaint therein make out a case of extrinsic
fraud so as to state a cause of action, in consonance with the
controlling principles and jurisprudence thereon as set forth in
the Court's opinion. No pronouncement as to costs.
Makalintal, C.J., Castro, Makasiar, Esguerra and Muoz
Palma, J J ., concur.1
11. Heirs of Ureta v. Heirs of Ureta
Republic of the Philippines
SUPREME COURT
Manila
THIRD Division
G.R. No. 165748 September 14, 2011
HEIRS OF POLICRONIO M. URETA, SR., namely:
CONRADO B. URETA, MACARIO B. URETA, GLORIA
URETA-GONZALES, ROMEO B. URETA, RITA URETA-
SOLANO, NENA URETA-TONGCUA, VENANCIO B. URETA,
LILIA URETA-TAYCO, and HEIRS OF POLICRONIO B.
URETA, JR., namely: MIGUEL T. URETA, RAMON
POLICRONIO T. URETA, EMMANUEL T. URETA, and
BERNADETTE T. URETA, Petitioners,
vs.
HEIRS OF LIBERATO M. URETA, namely: TERESA F.
URETA, AMPARO URETA-CASTILLO, IGNACIO F. URETA,
SR., EMIRITO F. URETA, WILKIE F. URETA, LIBERATO F.
URETA, JR., RAY F. URETA, ZALDY F. URETA, and MILA
JEAN URETA CIPRIANO; HEIRS OF PRUDENCIA URETA
PARADERO, namely: WILLIAM U. PARADERO, WARLITO
U. PARADERO, CARMENCITA P. PERLAS, CRISTINA P.
CORDOVA, EDNA P. GALLARDO, LETICIA P. REYES;
NARCISO M. URETA; VICENTE M. URETA; HEIRS OF
FRANCISCO M. URETA, namely: EDITA T. URETA-REYES
and LOLLIE T. URETA-VILLARUEL; ROQUE M. URETA;
ADELA URETA-GONZALES; HEIRS OF INOCENCIO M.
URETA, namely: BENILDA V. URETA, ALFONSO V. URETA
II, DICK RICARDO V. URETA, and ENRIQUE V. URETA;
MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA,
WENEFREDA U. TARAN; and BENEDICT
URETA, Respondents.
x - - - - - - - - - - - - - - - -x
G.R. No. 165930
HEIRS OF LIBERATO M. URETA, namely: TERESA F.
URETA, AMPARO URETA-CASTILLO, IGNACIO F. URETA,
SR., EMIRITO F. URETA, WILKIE F. URETA, LIBERATO F.
URETA, JR., RAY F. URETA, ZALDY F. URETA, and MILA
JEAN URETA CIPRIANO; HEIRS OF PRUDENCIA URETA
PARADERO, namely: WILLIAM U. PARADERO, WARLITO
U. PARADERO, CARMENCITA P. PERLAS, CRISTINA P.
CORDOVA, EDNA P. GALLARDO, LETICIA P. REYES;
NARCISO M. URETA; VICENTE M. URETA; HEIRS OF
FRANCISCO M. URETA, namely: EDITA T. URETA-REYES
and LOLLIE T. URETA-VILLARUEL; ROQUE M. URETA;
ADELA URETA-GONZALES; HEIRS OF INOCENCIO M.
URETA, namely: BENILDA V. URETA, ALFONSO V. URETA
II, DICK RICARDO V. URETA, and ENRIQUE V. URETA;
MERLINDA U. RIVERA; JORGE URETA; ANDRES URETA,
WENEFREDA U. TARAN; and BENEDICT
URETA,Petitioners,
vs.
HEIRS OF POLICRONIO M. URETA, SR., namely:
CONRADO B. URETA, MACARIO B. URETA, GLORIA
URETA-GONZALES, ROMEO B. URETA, RITA URETA-
SOLANO, NENA URETA-TONGCUA, VENANCIO B. URETA,
LILIA URETA-TAYCO, and HEIRS OF POLICRONIO B.
URETA, JR., namely: MIGUEL T. URETA, RAMON
POLICRONIO T. URETA, EMMANUEL T. URETA, and
BERNADETTE T. URETA, Respondents.
D E C I S I O N
MENDOZA, J .:
These consolidated petitions for review on certiorari under
Rule 45 of the 1997 Revised Rules of Civil Procedure assail
the April 20, 2004 Decision
1
of the Court of Appeals (CA), and
its October 14, 2004 Resolution
2
in C.A.-G.R. CV No. 71399,
which affirmed with modification the April 26, 2001 Decision
3
of
the Regional Trial Court, Branch 9, Kalibo, Aklan (RTC) in Civil
Case No. 5026.
The Facts
In his lifetime, Alfonso Ureta (Alfonso) begot 14 children,
namely, Policronio, Liberato, Narciso, Prudencia, Vicente,
Francisco, Inocensio, Roque, Adela, Wenefreda, Merlinda,
Benedicto, Jorge, and Andres. The children of Policronio (Heirs
of Policronio), are opposed to the rest of Alfonsos children and
their descendants (Heirs of Alfonso).
Alfonso was financially well-off during his lifetime. He owned
several fishpens, a fishpond, a sari-sari store, a passenger
jeep, and was engaged in the buying and selling of copra.
Policronio, the eldest, was the only child of Alfonso who failed
to finish schooling and instead worked on his fathers lands.
Sometime in October 1969, Alfonso and four of his children,
namely, Policronio, Liberato, Prudencia, and Francisco, met at
the house of Liberato. Francisco, who was then a municipal
judge, suggested that in order to reduce the inheritance taxes,
their father should make it appear that he had sold some of his
lands to his children. Accordingly, Alfonso executed four (4)
Deeds of Sale covering several parcels of land in favor of
Policronio,
4
Liberato,
5
Prudencia,
6
and his common-law wife,
Valeriana Dela Cruz.
7
The Deed of Sale executed on October
25, 1969, in favor of Policronio, covered six parcels of land,
which are the properties in dispute in this case.
Since the sales were only made for taxation purposes and no
monetary consideration was given, Alfonso continued to own,
possess and enjoy the lands and their produce.
When Alfonso died on October 11, 1972, Liberato acted as the
administrator of his fathers estate. He was later succeeded by
his sister Prudencia, and then by her daughter, Carmencita
Perlas. Except for a portion of parcel 5, the rest of the parcels
transferred to Policronio were tenanted by the Fernandez
Family. These tenants never turned over the produce of the
lands to Policronio or any of his heirs, but to Alfonso and, later,
to the administrators of his estate.
Policronio died on November 22, 1974. Except for the said
portion of parcel 5, neither Policronio nor his heirs ever took
possession of the subject lands.
On April 19, 1989, Alfonsos heirs executed a Deed of Extra-
Judicial Partition,
8
which included all the lands that were
covered by the four (4) deeds of sale that were previously
executed by Alfonso for taxation purposes. Conrado,
Policronios eldest son, representing the Heirs of Policronio,
signed the Deed of Extra-Judicial Partition in behalf of his co-
heirs.
After their fathers death, the Heirs of Policronio found tax
declarations in his name covering the six parcels of land. On
June 15, 1995, they obtained a copy of the Deed of Sale
executed on October 25, 1969 by Alfonso in favor of
Policronio.
Not long after, on July 30, 1995, the Heirs of Policronio
allegedly learned about the Deed of Extra-Judicial Partition
involving Alfonsos estate when it was published in the July 19,
1995 issue of the Aklan Reporter.
Believing that the six parcels of land belonged to their late
father, and as such, excluded from the Deed of Extra-Judicial
Partition, the Heirs of Policronio sought to amicably settle the
matter with the Heirs of Alfonso. Earnest efforts proving futile,
the Heirs of Policronio filed a Complaint for Declaration of
Ownership, Recovery of Possession, Annulment of
Documents, Partition, and Damages
9
against the Heirs of
Alfonso before the RTC on November 17, 1995 where the
following issues were submitted: (1) whether or not the Deed of
Sale was valid; (2) whether or not the Deed of Extra-Judicial
Partition was valid; and (3) who between the parties was
entitled to damages.
The Ruling of the RTC
On April 26, 2001, the RTC dismissed the Complaint of the
Heirs of Policronio and ruled in favor of the Heirs of Alfonso in
a decision, the dispositive portion of which reads:
WHEREFORE, the Court finds that the preponderance of
evidence tilts in favor of the defendants, hence the instant case
is hereby DISMISSED.
The counterclaims are likewise DISMISSED.
With costs against plaintiffs.
SO ORDERED.
The RTC found that the Heirs of Alfonso clearly established
that the Deed of Sale was null and void. It held that the Heirs of
Policronio failed to rebut the evidence of the Heirs of Alfonso,
which proved that the Deed of Sale in the possession of the
former was one of the four (4) Deeds of Sale executed by
Alfonso in favor of his 3 children and second wife for taxation
purposes; that although tax declarations were issued in the
name of Policronio, he or his heirs never took possession of
the subject lands except a portion of parcel 5; and that all the
produce were turned over by the tenants to Alfonso and the
administrators of his estate and never to Policronio or his heirs.
The RTC further found that there was no money involved in the
sale. Even granting that there was, as claimed by the Heirs of
Policronio, 2,000.00 for six parcels of land, the amount was
grossly inadequate. It was also noted that the aggregate area
of the subject lands was more than double the average share
adjudicated to each of the other children in the Deed of Extra-
Judicial Partition; that the siblings of Policronio were the ones
who shared in the produce of the land; and that the Heirs of
Policronio only paid real estate taxes in 1996 and 1997. The
RTC opined that Policronio must have been aware that the
transfer was merely for taxation purposes because he did not
subsequently take possession of the properties even after the
death of his father.
The Deed of Extra-Judicial Partition, on the other hand, was
declared valid by the RTC as all the heirs of Alfonso were
represented and received equal shares and all the
requirements of a valid extra-judicial partition were met. The
RTC considered Conrados claim that he did not understand
the full significance of his signature when he signed in behalf of
his co-heirs, as a gratutitous assertion. The RTC was of the
view that when he admitted to have signed all the pages and
personally appeared before the notary public, he was
presumed to have understood their contents.
Lastly, neither party was entitled to damages. The Heirs of
Alfonso failed to present testimony to serve as factual basis for
moral damages, no document was presented to prove actual
damages, and the Heirs of Policronio were found to have filed
the case in good faith.
The Ruling of the CA
Aggrieved, the Heirs of Policronio appealed before the CA,
which rendered a decision on April 20, 2004, the dispositive
portion of which reads as follows:
WHEREFORE, the appeal is PARTIALLY GRANTED. The
appealed Decision, dated 26 April 2001, rendered by Hon.
Judge Dean R. Telan of the Regional Trial Court of Kalibo,
Aklan, Branch 9, is hereby AFFIRMED with MODIFICATION:
1.) The Deed of Sale in favor of Policronio Ureta, Sr., dated 25
October 1969, covering six (6) parcels of land is hereby
declared VOID for being ABSOLUTELY SIMULATED;
2.) The Deed of Extra-Judicial Partition, dated 19 April 1989, is
ANNULLED;
3.) The claim for actual and exemplary damages are
DISMISSED for lack of factual and legal basis.
The case is hereby REMANDED to the court of origin for the
proper partition of ALFONSO URETAS Estate in accordance
with Rule 69 of the 1997 Rules of Civil Procedure. No costs at
this instance.
SO ORDERED.
The CA affirmed the finding of the RTC that the Deed of Sale
was void. It found the Deed of Sale to be absolutely simulated
as the parties did not intend to be legally bound by it. As such,
it produced no legal effects and did not alter the juridical
situation of the parties. The CA also noted that Alfonso
continued to exercise all the rights of an owner even after the
execution of the Deed of Sale, as it was undisputed that he
remained in possession of the subject parcels of land and
enjoyed their produce until his death.
Policronio, on the other hand, never exercised any rights
pertaining to an owner over the subject lands from the time
they were sold to him up until his death. He never took or
attempted to take possession of the land even after his fathers
death, never demanded delivery of the produce from the
tenants, and never paid realty taxes on the properties. It was
also noted that Policronio never disclosed the existence of the
Deed of Sale to his children, as they were, in fact, surprised to
discover its existence. The CA, thus, concluded that Policronio
must have been aware that the transfer was only made for
taxation purposes.
The testimony of Amparo Castillo, as to the circumstances
surrounding the actual arrangement and agreement between
the parties prior to the execution of the four (4) Deeds of Sale,
was found by the CA to be unrebutted. The RTCs assessment
of the credibility of her testimony was accorded respect, and
the intention of the parties was given the primary consideration
in determining the true nature of the contract.
Contrary to the finding of the RTC though, the CA annulled the
Deed of Extra-Judicial Partition due to the incapacity of one of
the parties to give his consent to the contract. It held that
before Conrado could validly bind his co-heirs to the Deed of
Extra-Judicial Partition, it was necessary that he be clothed
with the proper authority. The CA ruled that a special power of
attorney was required under Article 1878 (5) and (15) of the
Civil Code. Without a special power of attorney, it was held that
Conrado lacked the legal capactiy to give the consent of his
co-heirs, thus, rendering the Deed of Extra-Judicial Partition
voidable under Article 1390 (1) of the Civil Code.
As a consequence, the CA ordered the remand of the case to
the RTC for the proper partition of the estate, with the option
that the parties may still voluntarily effect the partition by
executing another agreement or by adopting the assailed Deed
of Partition with the RTCs approval in either case. Otherwise,
the RTC may proceed with the compulsory partition of the
estate in accordance with the Rules.
With regard to the claim for damages, the CA agreed with the
RTC and dismissed the claim for actual and compensatory
damages for lack of factual and legal basis.
Both parties filed their respective Motions for Reconsideration,
which were denied by the CA for lack of merit in a Resolution
dated October 14, 2004.
In their Motion for Reconsideration, the Heirs of Policronio
argued that the RTC violated the best evidence rule in giving
credence to the testimony of Amparo Castillo with regard to the
simulation of the Deed of Sale, and that prescription had set in
precluding any question on the validity of the contract.
The CA held that the oral testimony was admissible under Rule
130, Section 9 (b) and (c), which provides that
evidence aliunde may be allowed to explain the terms of the
written agreement if the same failed to express the true intent
and agreement of the parties thereto, or when the validity of
the written agreement was put in issue. Furthermore, the CA
found that the Heirs of Policronio waived their right to object to
evidence aliunde having failed to do so during trial and for
raising such only for the first time on appeal. With regard to
prescription, the CA ruled that the action or defense for the
declaration of the inexistence of a contract did not prescribe
under Article 1410 of the Civil Code.
On the other hand, the Heirs of Alfonso argued that the Deed
of Extra-Judicial Partition should not have been annulled, and
instead the preterited heirs should be given their share. The
CA reiterated that Conrados lack of capacity to give his co-
heirs consent to the extra-judicial settlement rendered the
same voidable.
Hence, the present Petitions for Review on Certiorari.
The Issues
The issues presented for resolution by the Heirs of Policronio
in G.R. No. 165748 are as follows:
I.
Whether the Court of Appeals is correct in ruling that the
Deed of Absolute Sale of 25 October 1969 is void for being
absolutely fictitious and in relation therewith, may parol
evidence be entertained to thwart its binding effect after
the parties have both died?
Assuming that indeed the said document is simulated,
whether or not the parties thereto including their
successors in interest are estopped to question its
validity, they being bound by Articles 1412 and 1421 of the
Civil Code?
II.
Whether prescription applies to bar any question
respecting the validity of the Deed of Absolute Sale dated
25 October 1969? Whether prescription applies to bar any
collateral attack on the validity of the deed of absolute
sale executed 21 years earlier?
III.
Whether the Court of Appeals correctly ruled in nullifying
the Deed of Extrajudicial Partition because Conrado Ureta
signed the same without the written authority from his
siblings in contravention of Article 1878 in relation to
Article 1390 of the Civil Code and in relation therewith,
whether the defense of ratification and/or preterition
raised for the first time on appeal may be entertained?
The issues presented for resolution by the Heirs of Alfonso in
G.R. No. 165930 are as follows:
I.
Whether or not grave error was committed by the Trial
Court and Court of Appeals in declaring the Deed of Sale
of subject properties as absolutely simulated and null and
void thru parol evidence based on their factual findings as
to its fictitious nature, and there being waiver of any
objection based on violation of the parol evidence rule.
II.
Whether or not the Court of Appeals was correct in
holding that Conrado Uretas lack of capacity to give his
co-heirs consent to the Extra-Judicial Partition rendered
the same voidable.
III.
Granting arguendo that Conrado Ureta was not authorized
to represent his co-heirs and there was no ratification,
whether or not the Court of Appeals was correct in
ordering the remand of the case to the Regional Trial
Court for partition of the estate of Alfonso Ureta.
IV.
Since the sale in favor of Policronio Ureta Sr. was null and
void ab initio, the properties covered therein formed part
of the estate of the late Alfonso Ureta and was correctly
included in the Deed of Extrajudicial Partition even if no
prior action for nullification of the sale was filed by the
heirs of Liberato Ureta.
V.
Whether or not the heirs of Policronio Ureta Sr. can claim
that estoppel based on Article 1412 of the Civil Code as
well as the issue of prescription can still be raised on
appeal.
These various contentions revolve around two major issues, to
wit: (1) whether the Deed of Sale is valid, and (2) whether the
Deed of Extra-Judicial Partition is valid. Thus, the assigned
errors shall be discussed jointly and inseriatim.
The Ruling of the Court
Validity of the Deed of Sale
Two veritable legal presumptions bear on the validity of the
Deed of Sale: (1) that there was sufficient consideration for the
contract; and (2) that it was the result of a fair and regular
private transaction. If shown to hold, these presumptions infer
prima facie the transactions validity, except that it must yield to
the evidence adduced.
10

As will be discussed below, the evidence overcomes these two
presumptions.
Absolute Simulation
First, the Deed of Sale was not the result of a fair and regular
private transaction because it was absolutely simulated.
The Heirs of Policronio argued that the land had been validly
sold to Policronio as the Deed of Sale contained all the
essential elements of a valid contract of sale, by virtue of
which, the subject properties were transferred in his name as
evidenced by the tax declaration. There being no invalidation
prior to the execution of the Deed of Extra-Judicial Partition,
the probity and integrity of the Deed of Sale should remain
undiminished and accorded respect as it was a duly notarized
public instrument.
The Heirs of Policronio posited that his loyal services to his
father and his being the eldest among Alfonsos children, might
have prompted the old man to sell the subject lands to him at a
very low price as an advance inheritance. They explained that
Policronios failure to take possession of the subject lands and
to claim their produce manifests a Filipino family practice
wherein a child would take possession and enjoy the fruits of
the land sold by a parent only after the latters death. Policronio
simply treated the lands the same way his father Alfonso
treated them - where his children enjoyed usufructuary rights
over the properties, as opposed to appropriating them
exclusively to himself. They contended that Policronios failure
to take actual possession of the lands did not prove that he
was not the owner as he was merely exercising his right to
dispose of them. They argue that it was an error on the part of
the CA to conclude that ownership by Policronio was not
established by his failure to possess the properties sold.
Instead, emphasis should be made on the fact that the tax
declarations, being indicia of possession, were in Policronios
name.
They further argued that the Heirs of Alfonso failed to
appreciate that the Deed of Sale was clear enough to convey
the subject parcels of land. Citing jurisprudence, they contend
that there is a presumption that an instrument sets out the true
agreement of the parties thereto and that it was executed for
valuable consideration,
11
and where there is no doubt as to the
intention of the parties to a contract, the literal meaning of the
stipulation shall control.
12
Nowhere in the Deed of Sale is it
indicated that the transfer was only for taxation purposes. On
the contrary, the document clearly indicates that the lands
were sold. Therefore, they averred that the literal meaning of
the stipulation should control.
The Court disagrees.
The Court finds no cogent reason to deviate from the finding of
the CA that the Deed of Sale is null and void for being
absolutely simulated. The Civil Code provides:
Art. 1345. Simulation of a contract may be absolute or relative.
The former takes place when the parties do not intend to be
bound at all; the latter, when the parties conceal their true
agreement.
Art. 1346. An absolutely simulated or fictitious contract is void.
A relative simulation, when it does not prejudice a third person
and is not intended for any purpose contrary to law, morals,
good customs, public order or public policy binds the parties to
their real agreement.
Valerio v. Refresca
13
is instructive on the matter of simulation
of contracts:
In absolute simulation, there is a colorable contract but it has
no substance as the parties have no intention to be bound by
it. The main characteristic of an absolute simulation is that the
apparent contract is not really desired or intended to produce
legal effect or in any way alter the juridical situation of the
parties. As a result, an absolutely simulated or fictitious
contract is void, and the parties may recover from each other
what they may have given under the contract. However, if the
parties state a false cause in the contract to conceal their real
agreement, the contract is relatively simulated and the parties
are still bound by their real agreement. Hence, where the
essential requisites of a contract are present and the
simulation refers only to the content or terms of the contract,
the agreement is absolutely binding and enforceable between
the parties and their successors in interest.
Lacking, therefore, in an absolutely simulated contract is
consent which is essential to a valid and enforceable
contract.
14
Thus, where a person, in order to place his property
beyond the reach of his creditors, simulates a transfer of it to
another, he does not really intend to divest himself of his title
and control of the property; hence, the deed of transfer is but a
sham.
15
Similarly, in this case, Alfonso simulated a transfer to
Policronio purely for taxation purposes, without intending to
transfer ownership over the subject lands.
The primary consideration in determining the true nature of a
contract is the intention of the parties. If the words of a contract
appear to contravene the evident intention of the parties, the
latter shall prevail. Such intention is determined not only from
the express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties.
16
The
true intention of the parties in this case was sufficiently proven
by the Heirs of Alfonso.
The Heirs of Alfonso established by a preponderance of
evidence
17
that the Deed of Sale was one of the four (4)
absolutely simulated Deeds of Sale which involved no actual
monetary consideration, executed by Alfonso in favor of his
children, Policronio, Liberato, and Prudencia, and his second
wife, Valeriana, for taxation purposes.
Amparo Castillo, the daughter of Liberato, testified, to wit:
Q: Now sometime in the year 1969 can you recall if your
grandfather and his children [met] in your house?
A: Yes sir, that was sometime in October 1969 when they [met]
in our house, my grandfather, my late uncle Policronio Ureta,
my late uncle Liberato Ureta, my uncle Francisco Ureta, and
then my auntie Prudencia Ureta they talk[ed] about, that idea
came from my uncle Francisco Ureta to [sell] some parcels of
land to his children to lessen the inheritance tax whatever
happened to my grandfather, actually no money involved in
this sale.
Q: Now you said there was that agreement, verbal agreement.
[W]here were you when this Alfonso Ureta and his children
gather[ed] in your house?
A: I was near them in fact I heard everything they were talking
[about]
x x x
Q: Were there documents of sale executed by Alfonso Ureta in
furtherance of their verbal agreement?
A: Yes sir.
Q: To whom in particular did your grandfather Alfonso Ureta
execute this deed of sale without money consideration
according to you?
A: To my uncle Policronio Ureta and to Prudencia Ureta
Panadero.
Q: And who else?
A: To Valeriana dela Cruz.
Q: How about your father?
A: He has.
18

The other Deeds of Sale executed by Alfonso in favor of his
children Prudencia and Liberato, and second wife Valeriana, all
bearing the same date of execution, were duly presented in
evidence by the Heirs of Alfonso, and were uncontested by the
Heirs of Policronio. The lands which were the subject of these
Deeds of Sale were in fact included in the Deed of Extra-
Judicial Partition executed by all the heirs of Alfonso, where it
was expressly stipulated:
That the above-named Amparo U. Castillo, Prudencia U.
Paradero, Conrado B. Ureta and Merlinda U. Rivera do hereby
recognize and acknowledge as a fact that the properties
presently declared in their respective names or in the names of
their respective parents and are included in the foregoing
instrument are actually the properties of the deceased Alfonso
Ureta and were transferred only for the purpose of effective
administration and development and convenience in the
payment of taxes and, therefore, all instruments conveying or
affecting the transfer of said properties are null and void from
the beginning.
19

As found by the CA, Alfonso continued to exercise all the rights
of an owner even after the execution of the Deeds of Sale. It
was undisputed that Alfonso remained in possession of the
subject lands and enjoyed their produce until his death. No
credence can be given to the contention of the Heirs of
Policrionio that their father did not take possession of the
subject lands or enjoyed the fruits thereof in deference to a
Filipino family practice. Had this been true, Policronio should
have taken possession of the subject lands after his father
died. On the contrary, it was admitted that neither Policronio
nor his heirs ever took possession of the subject lands from the
time they were sold to him, and even after the death of both
Alfonso and Policronio.
It was also admitted by the Heirs of Policronio that the tenants
of the subject lands never turned over the produce of the
properties to Policronio or his heirs but only to Alfonso and the
administrators of his estate. Neither was there a demand for
their delivery to Policronio or his heirs. Neither did Policronio
ever pay real estate taxes on the properties, the only payment
on record being those made by his heirs in 1996 and 1997 ten
years after his death. In sum, Policronio never exercised any
rights pertaining to an owner over the subject lands.
The most protuberant index of simulation of contract is the
complete absence of an attempt in any manner on the part of
the ostensible buyer to assert rights of ownership over the
subject properties. Policronios failure to take exclusive
possession of the subject properties or, in the alternative, to
collect rentals, is contrary to the principle of ownership. Such
failure is a clear badge of simulation that renders the whole
transaction void.
20

It is further telling that Policronio never disclosed the existence
of the Deed of Sale to his children. This, coupled with
Policronios failure to exercise any rights pertaining to an
owner of the subject lands, leads to the conclusion that he was
aware that the transfer was only made for taxation purposes
and never intended to bind the parties thereto.
As the above factual circumstances remain unrebutted by the
Heirs of Policronio, the factual findings of the RTC, which were
affirmed by the CA, remain binding and conclusive upon this
Court.
21

It is clear that the parties did not intend to be bound at all, and
as such, the Deed of Sale produced no legal effects and did
not alter the juridical situation of the parties. The Deed of Sale
is, therefore, void for being absolutely simulated pursuant to
Article 1409 (2) of the Civil Code which provides:
Art. 1409. The following contracts are inexistent and void from
the beginning:
x x x
(2) Those which are absolutely simulated or fictitious;
x x x
For guidance, the following are the most fundamental
characteristics of void or inexistent contracts:
1) As a general rule, they produce no legal effects whatsoever
in accordance with the principle "quod nullum est nullum
producit effectum."
2) They are not susceptible of ratification.
3) The right to set up the defense of inexistence or absolute
nullity cannot be waived or renounced.
4) The action or defense for the declaration of their inexistence
or absolute nullity is imprescriptible.
5) The inexistence or absolute nullity of a contract cannot be
invoked by a person whose interests are not directly affected.
22

Since the Deed of Sale is void, the subject properties were
properly included in the Deed of Extra-Judicial Partition of the
estate of Alfonso.
Absence and Inadequacy of Consideration
The second presumption is rebutted by the lack of
consideration for the Deed of Sale.
In their Answer,
23
the Heirs of Alfonso initially argued that the
Deed of Sale was void for lack of consideration, and even
granting that there was consideration, such was inadequate.
The Heirs of Policronio counter that the defenses of absence
or inadequacy of consideration are not grounds to render a
contract void.
The Heirs of Policronio contended that under Article 1470 of
the Civil Code, gross inadequacy of the price does not affect a
contract of sale, except as it may indicate a defect in the
consent, or that the parties really intended a donation or some
other act or contract. Citing jurisprudence, they argued that
inadequacy of monetary consideration does not render a
conveyance inexistent as liberality may be sufficient cause for
a valid contract, whereas fraud or bad faith may render it either
rescissible or voidable, although valid until annulled.
24
Thus,
they argued that if the contract suffers from inadequate
consideration, it remains valid until annulled, and the remedy of
rescission calls for judicial intervention, which remedy the Heirs
of Alfonso failed to take.
It is further argued that even granting that the sale of the
subject lands for a consideration of 2,000.00 was inadequate,
absent any evidence of the fair market value of the land at the
time of its sale, it cannot be concluded that the price at which it
was sold was inadequate.
25
As there is nothing in the records
to show that the Heirs of Alfonso supplied the true value of the
land in 1969, the amount of 2,000.00 must thus stand as its
saleable value.
On this issue, the Court finds for the Heirs of Alfonso.
For lack of consideration, the Deed of Sale is once again found
to be void. It states that Policronio paid, and Alfonso received,
the 2,000.00 purchase price on the date of the signing of the
contract:
That I, ALFONSO F. URETA, x x x for and in consideration of
the sum of TWO THOUSAND (2,000.00) PESOS, Philippine
Currency, to me in hand paid by POLICRONIO M. URETA, x x
x, do hereby CEDE, TRANSFER, and CONVEY, by way of
absolute sale, x x x six (6) parcels of land x x x.
26
[Emphasis
ours]
Although, on its face, the Deed of Sale appears to be
supported by valuable consideration, the RTC found that there
was no money involved in the sale.
27
This finding was affirmed
by the CA in ruling that the sale is void for being absolutely
simulated. Considering that there is no cogent reason to
deviate from such factual findings, they are binding on this
Court.
It is well-settled in a long line of cases that where a deed of
sale states that the purchase price has been paid but in fact
has never been paid, the deed of sale is null and void for lack
of consideration.
28
Thus, although the contract states that the
purchase price of 2,000.00 was paid by Policronio to Alfonso
for the subject properties, it has been proven that such was
never in fact paid as there was no money involved. It must,
therefore, follow that the Deed of Sale is void for lack of
consideration.
Given that the Deed of Sale is void, it is unnecessary to
discuss the issue on the inadequacy of consideration.
Parol Evidence and Hearsay
The Heirs of Policronio aver that the rules on parol evidence
and hearsay were violated by the CA in ruling that the Deed of
Sale was void.
They argued that based on the parol evidence rule, the Heirs
of Alfonso and, specifically, Amparo Castillo, were not in a
position to prove the terms outside of the contract because
they were not parties nor successors-in-interest in the Deed of
Sale in question. Thus, it is argued that the testimony of
Amparo Castillo violates the parol evidence rule.
Stemming from the presumption that the Heirs of Alfonso were
not parties to the contract, it is also argued that the parol
evidence rule may not be properly invoked by either party in
the litigation against the other, where at least one of the parties
to the suit is not a party or a privy of a party to the written
instrument in question and does not base a claim on the
instrument or assert a right originating in the instrument or the
relation established thereby.
29

Their arguments are untenable.
The objection against the admission of any evidence must be
made at the proper time, as soon as the grounds therefor
become reasonably apparent, and if not so made, it will be
understood to have been waived. In the case of testimonial
evidence, the objection must be made when the objectionable
question is asked or after the answer is given if the
objectionable features become apparent only by reason of
such answer.
30
In this case, the Heirs of Policronio failed to
timely object to the testimony of Amparo Castillo and they are,
thus, deemed to have waived the benefit of the parol evidence
rule.
Granting that the Heirs of Policronio timely objected to the
testimony of Amparo Castillo, their argument would still fail.
Section 9 of Rule 130 of the Rules of Court provides:
Section 9. Evidence of written agreements. When the terms
of an agreement have been reduced to writing, it is considered
as containing all the terms agreed upon and there can be,
between the parties and their successors in interest, no
evidence of such terms other than the contents of the written
agreement.
However, a party may present evidence to modify, explain or
add to the terms of written agreement if he puts in issue in his
pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true
intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or
their successors in interest after the execution of the written
agreement.
The term "agreement" includes wills.
[Emphasis ours]
Paragraphs (b) and (c) are applicable in the case at bench.
The failure of the Deed of Sale to express the true intent and
agreement of the parties was clearly put in issue in the
Answer
31
of the Heirs of Alfonso to the Complaint. It was
alleged that the Deed of Sale was only made to lessen the
payment of estate and inheritance taxes and not meant to
transfer ownership. The exception in paragraph (b) is allowed
to enable the court to ascertain the true intent of the parties,
and once the intent is clear, it shall prevail over what the
document appears to be on its face.
32
As the true intent of the
parties was duly proven in the present case, it now prevails
over what appears on the Deed of Sale.
The validity of the Deed of Sale was also put in issue in the
Answer, and was precisely one of the issues submitted to the
RTC for resolution.
33
The operation of the parol evidence rule
requires the existence of a valid written agreement. It is, thus,
not applicable in a proceeding where the validity of such
agreement is the fact in dispute, such as when a contract may
be void for lack of consideration.
34
Considering that the Deed
of Sale has been shown to be void for being absolutely
simulated and for lack of consideration, the Heirs of Alfonso
are not precluded from presenting evidence to modify, explain
or add to the terms of the written agreement.
The Heirs of Policronio must be in a state of confusion in
arguing that the Heirs of Alfonso may not question the Deed of
Sale for not being parties or successors-in-interest therein on
the basis that the parol evidence rule may not be properly
invoked in a proceeding or litigation where at least one of the
parties to the suit is not a party or a privy of a party to the
written instrument in question and does not base a claim on
the instrument or assert a right originating in the instrument or
the relation established thereby. If their argument was to be
accepted, then the Heirs of Policronio would themselves be
precluded from invoking the parol evidence rule to exclude the
evidence of the Heirs of Alfonso.
Indeed, the applicability of the parol evidence rule requires that
the case be between parties and their successors-in-
interest.
35
In this case, both the Heirs of Alfonso and the Heirs
of Policronio are successors-in-interest of the parties to the
Deed of Sale as they claim rights under Alfonso and Policronio,
respectively. The parol evidence rule excluding evidence
aliunde, however, still cannot apply because the present case
falls under two exceptions to the rule, as discussed above.
With respect to hearsay, the Heirs of Policronio contended that
the rule on hearsay was violated when the testimony of
Amparo Castillo was given weight in proving that the subject
lands were only sold for taxation purposes as she was a
person alien to the contract. Even granting that they did not
object to her testimony during trial, they argued that it should
not have been appreciated by the CA because it had no
probative value whatsoever.
36

The Court disagrees.
It has indeed been held that hearsay evidence whether
objected to or not cannot be given credence for having no
probative value.
37
This principle, however, has been relaxed in
cases where, in addition to the failure to object to the
admissibility of the subject evidence, there were other pieces
of evidence presented or there were other circumstances
prevailing to support the fact in issue. In Top-Weld
Manufacturing, Inc. v. ECED S.A.,
38
this Court held:
Hearsay evidence alone may be insufficient to establish a fact
in an injunction suit (Parker v. Furlong, 62 P. 490) but, when no
objection is made thereto, it is, like any other evidence, to be
considered and given the importance it deserves. (Smith v.
Delaware & Atlantic Telegraph & Telephone Co., 51 A 464).
Although we should warn of the undesirability of issuing
judgments solely on the basis of the affidavits submitted,
where as here, said affidavits are overwhelming,
uncontroverted by competent evidence and not inherently
improbable, we are constrained to uphold the allegations of the
respondents regarding the multifarious violations of the
contracts made by the petitioner.
In the case at bench, there were other prevailing
circumstances which corroborate the testimony of Amparo
Castillo. First, the other Deeds of Sale which were executed in
favor of Liberato, Prudencia, and Valeriana on the same day
as that of Policronios were all presented in evidence. Second,
all the properties subject therein were included in the Deed of
Extra-Judicial Partition of the estate of Alfonso. Third,
Policronio, during his lifetime, never exercised acts of
ownership over the subject properties (as he never demanded
or took possession of them, never demanded or received the
produce thereof, and never paid real estate taxes
thereon). Fourth, Policronio never informed his children of the
sale.
As the Heirs of Policronio failed to controvert the evidence
presented, and to timely object to the testimony of Amparo
Castillo, both the RTC and the CA correctly accorded probative
weight to her testimony.
Prior Action Unnecessary
The Heirs of Policronio averred that the Heirs of Alfonso should
have filed an action to declare the sale void prior to executing
the Deed of Extra-Judicial Partition. They argued that the sale
should enjoy the presumption of regularity, and until overturned
by a court, the Heirs of Alfonso had no authority to include the
land in the inventory of properties of Alfonsos estate. By doing
so, they arrogated upon themselves the power of invalidating
the Deed of Sale which is exclusively vested in a court of law
which, in turn, can rule only upon the observance of due
process. Thus, they contended that prescription, laches, or
estoppel have set in to militate against assailing the validity of
the sale.
The Heirs of Policronio are mistaken.
A simulated contract of sale is without any cause or
consideration, and is, therefore, null and void; in such case, no
independent action to rescind or annul the contract is
necessary, and it may be treated as non-existent for all
purposes.
39
A void or inexistent contract is one which has no
force and effect from the beginning, as if it has never been
entered into, and which cannot be validated either by time or
ratification. A void contract produces no effect whatsoever
either against or in favor of anyone; it does not create, modify
or extinguish the juridical relation to which it
refers.
40
Therefore, it was not necessary for the Heirs of
Alfonso to first file an action to declare the nullity of the Deed of
Sale prior to executing the Deed of Extra-Judicial Partition.
Personality to Question Sale
The Heirs of Policronio contended that the Heirs of Alfonso are
not parties, heirs, or successors-in-interest under the
contemplation of law to clothe them with the personality to
question the Deed of Sale. They argued that under Article
1311 of the Civil Code, contracts take effect only between the
parties, their assigns and heirs. Thus, the genuine character of
a contract which personally binds the parties cannot be put in
issue by a person who is not a party thereto. They posited that
the Heirs of Alfonso were not parties to the contract; neither did
they appear to be beneficiaries by way of assignment or
inheritance. Unlike themselves who are direct heirs of
Policronio, the Heirs of Alfonso are not Alfonsos direct heirs.
For the Heirs of Alfonso to qualify as parties, under Article
1311 of the Civil Code, they must first prove that they are
either heirs or assignees. Being neither, they have no legal
standing to question the Deed of Sale.
They further argued that the sale cannot be assailed for being
barred under Article 1421 of the Civil Code which provides that
the defense of illegality of a contract is not available to third
persons whose interests are not directly affected.
Again, the Court disagrees.
Article 1311 and Article 1421 of the Civil Code provide:
Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, x x x
Art. 1421. The defense of illegality of contracts is not available
to third persons whose interests are not directly affected.
The right to set up the nullity of a void or non-existent contract
is not limited to the parties, as in the case of annullable or
voidable contracts; it is extended to third persons who are
directly affected by the contract. Thus, where a contract is
absolutely simulated, even third persons who may be
prejudiced thereby may set up its inexistence.
41
The Heirs of
Alfonso are the children of Alfonso, with his deceased children
represented by their children (Alfonsos grandchildren). The
Heirs of Alfonso are clearly his heirs and successors-in-interest
and, as such, their interests are directly affected, thereby
giving them the right to question the legality of the Deed of
Sale.
Inapplicability of Article 842
The Heirs of Policronio further argued that even assuming that
the Heirs of Alfonso have an interest in the Deed of Sale, they
would still be precluded from questioning its validity. They
posited that the Heirs of Alfonso must first prove that the sale
of Alfonsos properties to Policronio substantially diminished
their successional rights or that their legitimes would be unduly
prejudiced, considering that under Article 842 of the Civil Code,
one who has compulsory heirs may dispose of his estate
provided that he does not contravene the provisions of the Civil
Code with regard to the legitime of said heirs. Having failed to
do so, they argued that the Heirs of Alfonso should be
precluded from questioning the validity of the Deed of Sale.
Still, the Court disagrees.
Article 842 of the Civil Code provides:
Art. 842. One who has no compulsory heirs may dispose by
will of all his estate or any part of it in favor of any person
having capacity to succeed.
One who has compulsory heirs may dispose of his estate
provided he does not contravene the provisions of this Code
with regard to the legitime of said heirs.
This article refers to the principle of freedom of disposition by
will. What is involved in the case at bench is not a disposition
by will but by Deed of Sale. Hence, the Heirs of Alfonso need
not first prove that the disposition substantially diminished their
successional rights or unduly prejudiced their legitimes.
Inapplicability of Article 1412
The Heirs of Policronio contended that even assuming that the
contract was simulated, the Heirs of Alfonso would still be
barred from recovering the properties by reason of Article 1412
of the Civil Code, which provides that if the act in which the
unlawful or forbidden cause does not constitute a criminal
offense, and the fault is both on the contracting parties, neither
may recover what he has given by virtue of the contract or
demand the performance of the others undertaking. As the
Heirs of Alfonso alleged that the purpose of the sale was to
avoid the payment of inheritance taxes, they cannot take from
the Heirs of Policronio what had been given to their father.
On this point, the Court again disagrees.
Article 1412 of the Civil Code is as follows:
Art. 1412. If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following
rules shall be observed:
(1) When the fault is on the part of both contracting parties,
neither may recover what he has given by virtue of the
contract, or demand the performance of the others
undertaking;
(2) When only one of the contracting parties is at fault, he
cannot recover what he has given by reason of the contract, or
ask for the fulfillment of what has been promised him. The
other, who is not at fault, may demand the return of what he
has given without any obligation to comply with his promise.
Article 1412 is not applicable to fictitious or simulated
contracts, because they refer to contracts with an illegal cause
or subject-matter.
42
This article presupposes the existence of a
cause, it cannot refer to fictitious or simulated contracts which
are in reality non-existent.
43
As it has been determined that the
Deed of Sale is a simulated contract, the provision cannot
apply to it.
Granting that the Deed of Sale was not simulated, the
provision would still not apply. Since the subject properties
were included as properties of Alfonso in the Deed of Extra-
Judicial Partition, they are covered by corresponding
inheritance and estate taxes. Therefore, tax evasion, if at all
present, would not arise, and Article 1412 would again be
inapplicable.
Prescription
From the position that the Deed of Sale is valid and not void,
the Heirs of Policronio argued that any question regarding its
validity should have been initiated through judicial process
within 10 years from its notarization in accordance with Article
1144 of the Civil Code. Since 21 years had already elapsed
when the Heirs of Alfonso assailed the validity of the Deed of
Sale in 1996, prescription had set in. Furthermore, since the
Heirs of Alfonso did not seek to nullify the tax declarations of
Policronio, they had impliedly acquiesced and given due
recognition to the Heirs of Policronio as the rightful inheritors
and should, thus, be barred from laying claim on the land.
The Heirs of Policronio are mistaken.
Article 1410 of the Civil Code provides:
Art. 1410. The action for the declaration of the inexistence of a
contract does not prescribe.
This is one of the most fundamental characteristics of void or
inexistent contracts.
44

As the Deed of Sale is a void contract, the action for the
declaration of its nullity, even if filed 21 years after its
execution, cannot be barred by prescription for it is
imprescriptible. Furthermore, the right to set up the defense of
inexistence or absolute nullity cannot be waived or
renounced.
45
Therefore, the Heirs of Alfonso cannot be
precluded from setting up the defense of its inexistence.
Validity of the Deed of Extra-Judicial Partition
The Court now resolves the issue of the validity of the Deed of
Extra-Judicial Partition.
Unenforceability
The Heirs of Alfonso argued that the CA was mistaken in
annulling the Deed of Extra-Judicial Partition due to the
incapacity of Conrado to give the consent of his co-heirs for
lack of a special power of attorney. They contended that what
was involved was not the capacity to give consent in behalf of
the co-heirs but the authority to represent them. They argue
that the Deed of Extra-Judicial Partition is not a voidable or an
annullable contract under Article 1390 of the Civil Code, but
rather, it is an unenforceable or, more specifically, an
unauthorized contract under Articles 1403 (1) and 1317 of the
Civil Code. As such, the Deed of Extra-Judicial Partition should
not be annulled but only be rendered unenforceable against
the siblings of Conrado.
They further argued that under Article 1317 of the Civil Code,
when the persons represented without authority have ratified
the unauthorized acts, the contract becomes enforceable and
binding. They contended that the Heirs of Policronio ratified the
Deed of Extra-Judicial Partition when Conrado took possession
of one of the parcels of land adjudicated to him and his
siblings, and when another parcel was used as collateral for a
loan entered into by some of the Heirs of Policronio. The Deed
of Extra-Judicial Partition having been ratified and its benefits
accepted, the same thus became enforceable and binding
upon them.
The Heirs of Alfonso averred that granting arguendo that
Conrado was not authorized to represent his co-heirs and
there was no ratification, the CA should not have remanded the
case to the RTC for partition of Alfonsos estate. They argued
that the CA should not have applied the Civil Code general
provision on contracts, but the special provisions dealing with
succession and partition. They contended that contrary to the
ruling of the CA, the extra-judicial parition was not an act of
strict dominion, as it has been ruled that partition of inherited
land is not a conveyance but a confirmation or ratification of
title or right to the land.
46
Therefore, the law requiring a special
power of attorney should not be applied to partitions.
On the other hand, the Heirs of Policronio insisted that the CA
pronouncement on the invalidity of the Deed of Extra-Judicial
Partition should not be disturbed because the subject
properties should not have been included in the estate of
Alfonso, and because Conrado lacked the written authority to
represent his siblings. They argued with the CA in ruling that a
special power of attorney was required before Conrado could
sign in behalf of his co-heirs.
The Heirs of Policronio denied that they ratified the Deed of
Extra-Judicial Partition. They claimed that there is nothing on
record that establishes that they ratified the partition. Far from
doing so, they precisely questioned its execution by filing a
complaint. They further argued that under Article 1409 (3) of
the Civil Code, ratification cannot be invoked to validate the
illegal act of including in the partition those properties which do
not belong to the estate as it provides another mode of
acquiring ownership not sanctioned by law.
Furthermore, the Heirs of Policronio contended that the
defenses of unenforceability, ratification, and preterition are
being raised for the first time on appeal by the Heirs of Alfonso.
For having failed to raise them during the trial, the Heirs of
Alfonso should be deemed to have waived their right to do so.
The Court agrees in part with the Heirs of Alfonso.
To begin, although the defenses of unenforceability, ratification
and preterition were raised by the Heirs of Alfonso for the first
time on appeal, they are concomitant matters which may be
taken up. As long as the questioned items bear relevance and
close relation to those specifically raised, the interest of justice
would dictate that they, too, must be considered and resolved.
The rule that only theories raised in the initial proceedings may
be taken up by a party thereto on appeal should refer to
independent, not concomitant matters, to support or oppose
the cause of action.
47

In the RTC, the Heirs of Policronio alleged that Conrados
consent was vitiated by mistake and undue influence, and that
he signed the Deed of Extra-Judicial Partition without the
authority or consent of his co-heirs.
The RTC found that Conrados credibility had faltered, and his
claims were rejected by the RTC as gratuitous assertions. On
the basis of such, the RTC ruled that Conrado duly
represented his siblings in the Deed of Extra-Judicial Partition.
On the other hand, the CA annulled the Deed of Extra-Judicial
Partition under Article 1390 (1) of the Civil Code, holding that a
special power of attorney was lacking as required under Article
1878 (5) and (15) of the Civil Code. These articles are as
follows:
Art. 1878. Special powers of attorney are necessary in the
following cases:
x x x
(5) To enter into any contract by which the ownership of an
immovable is transmitted or acquired either gratuitously or for a
valuable consideration;
x x x
(15) Any other act of strict dominion.
Art. 1390. The following contracts are voidable or annullable,
even though there may have been no damage to the
contracting parties:
(1) Those where one of the parties is incapable of giving
consent to a contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a
proper action in court. They are susceptible of ratification.
This Court finds that Article 1878 (5) and (15) is inapplicable to
the case at bench. It has been held in several cases
48
that
partition among heirs is not legally deemed a conveyance of
real property resulting in change of ownership. It is not a
transfer of property from one to the other, but rather, it is a
confirmation or ratification of title or right of property that an
heir is renouncing in favor of another heir who accepts and
receives the inheritance. It is merely a designation and
segregation of that part which belongs to each heir. The Deed
of Extra-Judicial Partition cannot, therefore, be considered as
an act of strict dominion. Hence, a special power of attorney is
not necessary.
In fact, as between the parties, even an oral partition by the
heirs is valid if no creditors are affected. The requirement of a
written memorandum under the statute of frauds does not
apply to partitions effected by the heirs where no creditors are
involved considering that such transaction is not a conveyance
of property resulting in change of ownership but merely a
designation and segregation of that part which belongs to each
heir.
49

Neither is Article 1390 (1) applicable. Article 1390 (1)
contemplates the incapacity of a party to give consent to a
contract. What is involved in the case at bench though is not
Conrados incapacity to give consent to the contract, but rather
his lack of authority to do so. Instead, Articles 1403 (1), 1404,
and 1317 of the Civil Code find application to the
circumstances prevailing in this case. They are as follows:
Art. 1403. The following contracts are unenforceable, unless
they are ratified:
(1) Those entered into in the name of another person by one
who has been given no authority or legal representation, or
who has acted beyond his powers;
Art. 1404. Unauthorized contracts are governed by Article 1317
and the principles of agency in Title X of this Book.
Art. 1317. No one may contract in the name of another without
being authorized by the latter, or unless he has by law a right
to represent him.
A contract entered into in the name of another by one who has
no authority or legal representation, or who has acted beyond
his powers, shall be unenforceable, unless it is ratified,
expressly or impliedly, by the person on whose behalf it has
been executed, before it is revoked by the other contracting
party.
Such was similarly held in the case of Badillo v. Ferrer:
The Deed of Extrajudicial Partition and Sale is not a voidable
or an annullable contract under Article 1390 of the New Civil
Code. Article 1390 renders a contract voidable if one of the
parties is incapable of giving consent to the contract or if the
contracting partys consent is vitiated by mistake, violence,
intimidation, undue influence or fraud. x x x
The deed of extrajudicial parition and sale is an unenforceable
or, more specifically, an unauthorized contract under Articles
1403(1) and 1317 of the New Civil Code.
50

Therefore, Conrados failure to obtain authority from his co-
heirs to sign the Deed of Extra-Judicial Partition in their behalf
did not result in his incapacity to give consent so as to render
the contract voidable, but rather, it rendered the contract valid
but unenforceable against Conrados co-heirs for having been
entered into without their authority.
A closer review of the evidence on record, however, will show
that the Deed of Extra-Judicial Partition is not unenforceable
but, in fact, valid, binding and enforceable against all the Heirs
of Policronio for having given their consent to the contract.
Their consent to the Deed of Extra-Judicial Partition has been
proven by a preponderance of evidence.
Regarding his alleged vitiated consent due to mistake and
undue influence to the Deed of Extra-Judicial Partition,
Conrado testified, to wit:
Q: Mr. Ureta you remember having signed a document entitled
deed of extra judicial partition consisting of 11 pages and
which have previously [been] marked as Exhibit I for the
plaintiffs?
A: Yes sir.
Q: Can you recall where did you sign this document?
A: The way I remember I signed that in our house.
Q: And who requested or required you to sign this document?
A: My aunties.
Q: Who in particular if you can recall?
A: Nay Pruding Panadero.
Q: You mean that this document that you signed was brought
to your house by your Auntie Pruding Pa[r]adero [who]
requested you to sign that document?
A: When she first brought that document I did not sign that said
document because I [did] no[t] know the contents of that
document.
Q: How many times did she bring this document to you [until]
you finally signed the document?
A: Perhaps 3 times.
Q: Can you tell the court why you finally signed it?
A: Because the way she explained it to me that the land of my
grandfather will be partitioned.
Q: When you signed this document were your brothers and
sisters who are your co-plaintiffs in this case aware of your act
to sign this document?
A: They do not know.
x x x
Q: After you have signed this document did you inform your
brothers and sisters that you have signed this document?
No I did not.
51

x x x
Q: Now you read the document when it was allegedly brought
to your house by your aunt Pruding Pa[r]adero?
A: I did not read it because as I told her I still want to ask the
advise of my brothers and sisters.
Q: So do I get from you that you have never read the
document itself or any part thereof?
A: I have read the heading.
x x x
Q: And why is it that you did not read all the pages of this
document because I understand that you know also how to
read in English?
A: Because the way Nay Pruding explained to me is that the
property of my grandfather will be partitioned that is why I am
so happy.
x x x
Q: You mean to say that after you signed this deed of extra
judicial partition up to the present you never informed them?
A: Perhaps they know already that I have signed and they read
already the document and they have read the document.
Q: My question is different, did you inform them?
A: The document sir? I did not tell them.
Q: Even until now?
A: Until now I did not inform them.
52

This Court finds no cogent reason to reverse the finding of the
RTC that Conrados explanations were mere gratuitous
assertions not entitled to any probative weight. The RTC found
Conrados credibility to have faltered when he testified that
perhaps his siblings were already aware of the Deed of Extra-
Judicial Partition. The RTC was in the best position to judge
the credibility of the witness testimony. The CA also
recognized that Conrados consent was not vitiated by mistake
and undue influence as it required a special power of attorney
in order to bind his co-heirs and, as such, the CA thereby
recognized that his signature was binding to him but not with
respect to his co-heirs. Findings of fact of the trial court,
particularly when affirmed by the CA, are binding to this
Court.
53

Furthermore, this Court notes other peculiarities in Conrados
testimony. Despite claims of undue influence, there is no
indication that Conrado was forced to sign by his aunt,
Prudencia Paradero. In fact, he testified that he was happy to
sign because his grandfathers estate would be partitioned.
Conrado, thus, clearly understood the document he signed. It
is also worth noting that despite the document being brought to
him on three separate occasions and indicating his intention to
inform his siblings about it, Conrado failed to do so, and still
neglected to inform them even after he had signed the
partition. All these circumstances negate his claim of vitiated
consent. Having duly signed the Deed of Extra-Judicial
Partition, Conrado is bound to it. Thus, it is enforceable against
him.
Although Conrados co-heirs claimed that they did not
authorize Conrado to sign the Deed of Extra-Judicial Partition
in their behalf, several circumstances militate against their
contention.
First, the Deed of Extra-Judicial Partition was executed on April
19, 1989, and the Heirs of Policronio claim that they only came
to know of its existence on July 30, 1995 through an issue of
the Aklan Reporter. It is difficult to believe that Conrado did not
inform his siblings about the Deed of Extra-Judicial Partition or
at least broach its subject with them for more than five years
from the time he signed it, especially after indicating in his
testimony that he had intended to do so.
Second, Conrado retained possession of one of the parcels of
land adjudicated to him and his co-heirs in the Deed of Extra-
Judicial Partition.
Third, after the execution of the partition on April 19, 1989 and
more than a year before they claimed to have discovered the
existence of the Deed of Extra-Judicial Partition on July 30,
1995, some of the Heirs of Policronio, namely, Rita Solano,
Macario Ureta, Lilia Tayco, and Venancio Ureta executed on
June 1, 1994, a Special Power of Attorney
54
in favor of their
sister Gloria Gonzales, authorizing her to obtain a loan from a
bank and to mortgage one of the parcels of land adjudicated to
them in the Deed of Extra-Judicial Partition to secure payment
of the loan. They were able to obtain the loan using the land as
collateral, over which a Real Estate Mortgage
55
was
constituted. Both the Special Power of Attorney and the Real
Estate Mortgage were presented in evidence in the RTC, and
were not controverted or denied by the Heirs of Policronio.
Fourth, in the letter dated August 15, 1995, sent by the counsel
of the Heirs of Policronio to the Heirs of Alfonso requesting for
amicable settlement, there was no mention that Conrados
consent to the Deed of Extra-Judicial Partition was vitiated by
mistake and undue influence or that they had never authorized
Conrado to represent them or sign the document on their
behalf. It is questionable for such a pertinent detail to have
been omitted. The body of said letter is reproduced hereunder
as follows:
Greetings:
Your nephews and nieces, children of your deceased brother
Policronio Ureta, has referred to me for appropriate legal action
the property they inherited from their father consisting of six (6)
parcels of land which is covered by a Deed of Absolute Sale
dated October 25, 1969. These properties ha[ve] already been
transferred to the name of their deceased father immediately
after the sale, machine copy of the said Deed of Sale is hereto
attached for your ready reference.
Lately, however, there was published an Extra-judicial Partition
of the estate of Alfonso Ureta, which to the surprise of my
clients included the properties already sold to their father
before the death of said Alfonso Ureta. This inclusion of their
property is erroneous and illegal because these properties
were covered by the Deed of Absolute Sale in favor of their
father Policronio Ureta no longer form part of the estate of
Alfonso Ureta. Since Policronio Ureta has [sic] died in 1974
yet, these properties have passed by hereditary succession to
his children who are now the true and lawful owners of the said
properties.
My clients are still entitled to a share in the estate of Alfonso
Ureta who is also their grandfather as they have stepped into
the shoes of their deceased father Policronio Ureta. But this
estate of Alfonso Ureta should already exclude the six (6)
parcels of land covered by the Deed of Absolute Sale in favor
of Policronio Ureta.
My clients cannot understand why the properties of their late
father [should] be included in the estate of their grandfather
and be divided among his brothers and sisters when said
properties should only be divided among themselves as
children of Policronio Ureta.
Since this matter involves very close members of the same
family, I have counseled my clients that an earnest effort
towards a compromise or amicable settlement be first explored
before resort to judicial remedy is pursued. And a compromise
or amicable settlement can only be reached if all the parties
meet and discuss the problem with an open mind. To this end,
I am suggesting a meeting of the parties on September 16,
1995 at 2:00 P.M. at B Place Restaurant at C. Laserna St.,
Kalibo, Aklan. It would be best if the parties can come or be
represented by their duly designated attorney-in-fact together
with their lawyers if they so desire so that the problem can be
discussed unemotionally and intelligently.
I would, however, interpret the failure to come to the said
meeting as an indication that the parties are not willing to or
interested in amicable settlement of this matter and as a go
signal for me to resort to legal and/or judicial remedies to
protest the rights of my clients.
Thank you very much.
56

Based on the foregoing, this Court concludes that the
allegation of Conrados vitiated consent and lack of authority to
sign in behalf of his co-heirs was a mere afterthought on the
part of the Heirs of Policronio. It appears that the Heirs of
Policronio were not only aware of the existence of the Deed of
Extra-Judicial Partition prior to June 30, 1995 but had, in fact,
given Conrado authority to sign in their behalf. They are now
estopped from questioning its legality, and the Deed of Extra-
Judicial Partition is valid, binding, and enforceable against
them.
In view of the foregoing, there is no longer a need to discuss
the issue of ratification.
Preterition
The Heirs of Alfonso were of the position that the absence of
the Heirs of Policronio in the partition or the lack of authority of
their representative results, at the very least, in their preterition
and not in the invalidity of the entire deed of partition.
Assuming there was actual preterition, it did not render the
Deed of Extra-Judicial Partition voidable. Citing Article 1104 of
the Civil Code, they aver that a partition made with preterition
of any of the compulsory heirs shall not be rescinded, but the
heirs shall be proportionately obliged to pay the share of the
person omitted. Thus, the Deed of Extra-Judicial Partition
should not have been annulled by the CA. Instead, it should
have ordered the share of the heirs omitted to be given to
them.
The Heirs of Alfonso also argued that all that remains to be
adjudged is the right of the preterited heirs to represent their
father, Policronio, and be declared entitled to his share. They
contend that remand to the RTC is no longer necessary as the
issue is purely legal and can be resolved by the provisions of
the Civil Code for there is no dispute that each of Alfonsos
heirs received their rightful share. Conrado, who received
Policronios share, should then fully account for what he had
received to his other co-heirs and be directed to deliver their
share in the inheritance.
These arguments cannot be given credence.
Their posited theory on preterition is no longer viable. It has
already been determined that the Heirs of Policronio gave their
consent to the Deed of Extra-Judicial Partition and they have
not been excluded from it. Nonetheless, even granting that the
Heirs of Policronio were denied their lawful participation in the
partition, the argument of the Heirs of Alfonso would still fail.
Preterition under Article 854 of the Civil Code is as follows:
Art. 854. The preterition or omission of one, some, or all of the
compulsory heirs in the direct line, whether living at the time of
the execution of the will or born after the death of the testator,
shall annul the institution of heir; but the devises and legacies
shall be valid insofar as they are not inofficious.
If the omitted compulsory heirs should die before the testator,
the institution shall be effectual, without prejudice to the right of
representation.
Preterition has been defined as the total omission of a
compulsory heir from the inheritance.1wphi1 It consists in the
silence of the testator with regard to a compulsory heir,
omitting him in the testament, either by not mentioning him at
all, or by not giving him anything in the hereditary property but
without expressly disinheriting him, even if he is mentioned in
the will in the latter case.
57
Preterition is thus a concept of
testamentary succession and requires a will. In the case at
bench, there is no will involved. Therefore, preterition cannot
apply.
Remand Unnecessary
The Deed of Extra-Judicial Partition is in itself valid for
complying with all the legal requisites, as found by the RTC, to
wit:
A persual of the Deed of Extra-judicial Partition would reveal
that all the heirs and children of Alfonso Ureta were
represented therein; that nobody was left out; that all of them
received as much as the others as their shares; that it
distributed all the properties of Alfonso Ureta except a portion
of parcel 29 containing an area of 14,000 square meters, more
or less, which was expressly reserved; that Alfonso Ureta, at
the time of his death, left no debts; that the heirs of Policronio
Ureta, Sr. were represented by Conrado B. Ureta; all the
parties signed the document, was witnessed and duly
acknowledged before Notary Public Adolfo M. Iligan of Kalibo,
Aklan; that the document expressly stipulated that the heirs to
whom some of the properties were transferred before for
taxation purposes or their children, expressly recognize and
acknowledge as a fact that the properties were transferred only
for the purpose of effective administration and development
convenience in the payment of taxes and, therefore, all
instruments conveying or effecting the transfer of said
properties are null and void from the beginning (Exhs. 1-4, 7-
d).
58

Considering that the Deed of Sale has been found void and the
Deed of Extra-Judicial Partition valid, with the consent of all the
Heirs of Policronio duly given, there is no need to remand the
case to the court of origin for partition.1vvph!1
WHEREFORE, the petition in G.R. No. 165748 is DENIED.
The petition in G.R. No. 165930 is GRANTED. The assailed
April 20, 2004 Decision and October 14, 2004 Resolution of
the Court of Appeals in CA-G.R. CV No. 71399, are
hereby MODIFIED in this wise:
(1) The Deed of Extra-Judicial Partition, dated April 19, 1989,
is VALID, and
(2) The order to remand the case to the court of origin is
hereby DELETED.
SO ORDERED.