Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 166862 December 20, 2006
MANILA METAL CONTAINER CORPORATION, petitioner,
REYNALDO C. TOLENTINO, intervenor,
vs.
PHILIPPINE NATIONAL AN!, respondent,
DMCI"PRO#ECT DE$ELOPERS, INC., intervenor.
D ! I S I O N
CALLE#O, SR., J.%
"efore us is a petition for revie# on certiorari of the Decision
$
of the !ourt of %ppeals &!%' in !%().R. No.
*+$,- #hich affir.ed the decision
/
of the Re0ional Trial !ourt &RT!', "ranch 1$, Pasi0 !it2, in !ivil !ase No.
,3,,$, and its Resolution
-
den2in0 the .otion for reconsideration filed b2 petitioner Manila Metal !ontainer
!orporation &MM!!'.
T&e A'(ece)e'(*
Petitioner #as the o#ner of a 3,4$, s5uare .eter parcel of land located in Mandalu2on0 &no# a !it2', Metro
Manila. The propert2 #as covered b2 Transfer !ertificate of Title &T!T' No. --/463 of the Re0istr2 of Deeds of
Ri7al. To secure a P644,444.44 loan it had obtained fro. respondent Philippine National "an8 &PN"',
petitioner e9ecuted a real estate .ort0a0e over the lot. Respondent PN" later 0ranted petitioner a ne# credit
acco..odation of P$,444,444.44: and, on Nove.ber $+, $61-, petitioner e9ecuted an %.end.ent
*
of Real
state Mort0a0e over its propert2. On March -$, $63$, petitioner secured another loan of P+,-,444.44 fro.
respondent PN", pa2able in 5uarterl2 install.ents of P-/,+,4.44, plus interests and other char0es.
,
On %u0ust ,, $63/, respondent PN" filed a petition for e9tra;udicial foreclosure of the real estate .ort0a0e
and sou0ht to have the propert2 sold at public auction for P6$$,,-/./$, petitioner<s outstandin0 obli0ation to
respondent PN" as of =une -4, $63/,
+
plus interests and attorne2<s fees.
%fter due notice and publication, the propert2 #as sold at public auction on Septe.ber /3, $63/ #here
respondent PN" #as declared the #innin0 bidder for P$,444,444.44. The !ertificate of Sale
1
issued in its
favor #as re0istered #ith the Office of the Re0ister of Deeds of Ri7al, and #as annotated at the dorsal portion
of the title on Februar2 $1, $63-. Thus, the period to redee. the propert2 #as to e9pire on Februar2 $1, $63*.
Petitioner sent a letter dated %u0ust /,, $63- to respondent PN", re5uestin0 that it be 0ranted an e9tension of
ti.e to redee.>repurchase the propert2.
3
In its repl2 dated %u0ust -4, $63-, respondent PN" infor.ed
petitioner that the re5uest had been referred to its Pasa2 !it2 "ranch for appropriate action and
reco..endation.
6
In a letter
$4
dated Februar2 $4, $63*, petitioner reiterated its re5uest for a one 2ear e9tension fro. Februar2
$1, $63* #ithin #hich to redee.>repurchase the propert2 on install.ent basis. It reiterated its re5uest to
repurchase the propert2 on install.ent.
$$
Mean#hile, so.e PN" Pasa2 !it2 "ranch personnel infor.ed
petitioner that as a .atter of polic2, the ban8 does not accept ?partial rede.ption.?
$/
Since petitioner failed to redee. the propert2, the Re0ister of Deeds cancelled T!T No. -/463 on =une $,
$63*, and issued a ne# title in favor of respondent PN".
$-
Petitioner<s offers had not 2et been acted upon b2
respondent PN".
Mean#hile, the Special %ssets Mana0e.ent Depart.ent &S%MD' had prepared a state.ent of account, and
as of =une /,, $63* petitioner<s obli0ation a.ounted to P$,,1*,,+4.*1. This included the bid price
of P$,4,+,6/*.,4, interest, advances of insurance pre.iu.s, advances on realt2 ta9es, re0istration e9penses,
.iscellaneous e9penses and publication cost.
$*
@hen apprised of the state.ent of account, petitioner
re.itted P1/,,444.44 to respondent PN" as ?deposit to repurchase,? and Official Receipt No. 613$6$ #as
issued to it.
$,
In the .eanti.e, the S%MD reco..ended to the .ana0e.ent of respondent PN" that petitioner be allo#ed
to repurchase the propert2 for P$,,1*,,+4.44. In a letter dated Nove.ber $*, $63*, the PN" .ana0e.ent
infor.ed petitioner that it #as re;ectin0 the offer and the reco..endation of the S%MD. It #as su00ested that
petitioner purchase the propert2 for P/,++4,444.44, its .ini.u. .ar8et value. Respondent PN" 0ave
petitioner until Dece.ber $,, $63* to act on the proposal: other#ise, its P1/,,444.44 deposit #ould be
returned and the propert2 #ould be sold to other interested bu2ers.
$+
Petitioner, ho#ever, did not a0ree to respondent PN"<s proposal. Instead, it #rote another letter dated
Dece.ber $/, $63* re5uestin0 for a reconsideration. Respondent PN" replied in a letter dated Dece.ber /3,
$63*, #herein it reiterated its proposal that petitioner purchase the propert2 for P/,++4,444.44. PN" a0ain
infor.ed petitioner that it #ould return the deposit should petitioner desire to #ithdra# its offer to purchase the
propert2.
$1
On Februar2 /,, $63,, petitioner, throu0h counsel, re5uested that PN" reconsider its letter dated
Dece.ber /3, $63*. Petitioner declared that it had alread2 a0reed to the S%MD<s offer to purchase the
propert2 forP$,,1*,,+4.*1, and that #as #h2 it had paid P1/,,444.44. Petitioner #arned respondent PN" that
it #ould see8 ;udicial recourse should PN" insist on the position.
$3
On =une *, $63,, respondent PN" infor.ed petitioner that the PN" "oard of Directors had accepted
petitioner<s offer to purchase the propert2, but for P$,6-$,-36.,- in cash less the P1/,,444.44 alread2
deposited #ith it.
$6
On pa0e t#o of the letter #as a space above the t2pe#ritten na.e of petitioner<s President,
Pablo )abriel, #here he #as to affi9 his si0nature. Ao#ever, Pablo )abriel did not confor. to the letter but
.erel2 indicated therein that he had received it.
/4
Petitioner did not respond, so PN" re5uested petitioner in a
letter dated =une -4, $633 to sub.it an a.ended offer to repurchase.
Petitioner re;ected respondent<s proposal in a letter dated =ul2 $*, $633. It .aintained that respondent PN"
had a0reed to sell the propert2 for P$,,1*,,+4.*1, and that since its P1/,,444.44 do#npa2.ent had been
accepted, respondent PN" #as proscribed fro. increasin0 the purchase price of the propert2.
/$
Petitioner
averred that it had a net balance pa2able in the a.ount of P+*-,*,/.-*. Respondent PN", ho#ever, re;ected
petitioner<s offer to pa2 the balance of P+*-,*,/.-* in a letter dated %u0ust $, $636.
//
On %u0ust /3, $636, petitioner filed a co.plaint a0ainst respondent PN" for ?%nnul.ent of Mort0a0e and
Mort0a0e Foreclosure, Deliver2 of Title, or Specific Perfor.ance #ith Da.a0es.? To support its cause of action
for specific perfor.ance, it alle0ed the follo#in0B
-*. %s earl2 as =une /,, $63*, PN" had accepted the do#n pa2.ent fro. Manila Metal in the
substantial a.ount of P1/,,444.44 for the rede.ption>repurchase price of P$,,1*,,+4.*1 as
approved b2 its SM%D and considerin0 the reliance .ade b2 Manila Metal and the lon0 ti.e that
has elapsed, the approval of the hi0her .ana0e.ent of the "an8 to confir. the a0ree.ent of its
SM%D is clearl2 a potestative condition #hich cannot le0all2 pre;udice Manila Metal #hich has
acted and relied on the approval of SM%D. The "an8 cannot ta8e advanta0e of a condition #hich
is entirel2 dependent upon its o#n #ill after acceptin0 and benefitin0 fro. the substantial pa2.ent
.ade b2 Manila Metal.
-,. PN" approved the repurchase price of P$,,1*,,+4.*1 for #hich it accepted P1/,,444.44 fro.
Manila Metal. PN" cannot ta8e advanta0e of its o#n dela2 and lon0 inaction in de.andin0 a
hi0her a.ount based on unilateral co.putation of interest rate #ithout the consent of Manila
Metal.
Petitioner later filed an a.ended co.plaint and supported its clai. for da.a0es #ith the follo#in0 ar0u.entsB
-+. That in order to protect itself a0ainst the #ron0ful and .alicious acts of the defendant "an8,
plaintiff is constrained to en0a0e the services of counsel at an a0reed fee of P,4,444.44 and to
incur liti0ation e9penses of at least P-4,444.44, #hich the defendant PN" should be conde.ned
to pa2 the plaintiff Manila Metal.
-1. That b2 reason of the #ron0ful and .alicious actuations of defendant PN", plaintiff Manila
Metal suffered bes.irched reputation for #hich defendant PN" is liable for .oral da.a0es of at
least P,4,444.44.
-3. That for the #ron0ful and .alicious act of defendant PN" #hich are hi0hl2 reprehensible,
e9e.plar2 da.a0es should be a#arded in favor of the plaintiff b2 #a2 of e9a.ple or correction for
the public 0ood of at least P-4,444.44.
/-
Petitioner pra2ed that, after due proceedin0s, ;ud0.ent be rendered in its favor, thusB
a' Declarin0 the %.ended Real state Mort0a0e &%nne9 ?%?' null and void and #ithout an2 le0al
force and effect.
b' Declarin0 defendant<s acts of e9tra(;udiciall2 foreclosin0 the .ort0a0e over plaintiff<s propert2
and settin0 it for auction sale null and void.
c' Orderin0 the defendant Re0ister of Deeds to cancel the ne# title issued in the na.e of PN"
&T!T NO. *-16/' coverin0 the propert2 described in para0raph * of the !o.plaint, to reinstate
T!T No. -14/, in the na.e of Manila Metal and to cancel the annotation of the .ort0a0e in
5uestion at the bac8 of the T!T No.-14/, described in para0raph * of this !o.plaint.
d' Orderin0 the defendant PN" to return and>or deliver ph2sical possession of the T!T
No. -14/,described in para0raph * of this !o.plaint to the plaintiff Manila Metal.
e' Orderin0 the defendant PN" to pa2 the plaintiff Manila Metal<s actual da.a0es, .oral and
e9e.plar2 da.a0es in the a00re0ate a.ount of not less than P34,444.44 as .a2 be #arranted b2
the evidence and fi9ed b2 this Aonorable !ourt in the e9ercise of its sound discretion, and
attorne2<s fees of P,4,444.44 and liti0ation e9penses of at least P-4,444.44 as .a2 be proved
durin0 the trial, and costs of suit.
Plaintiff li8e#ise pra2s for such further reliefs #hich .a2 be dee.ed ;ust and e5uitable in the
pre.ises.
/*
In its %ns#er to the co.plaint, respondent PN" averred, as a special and affir.ative defense, that it had
ac5uired o#nership over the propert2 after the period to redee. had elapsed. It clai.ed that no contract of
sale #as perfected bet#een it and petitioner after the period to redee. the propert2 had e9pired.
Durin0 pre(trial, the parties a0reed to sub.it the case for decision, based on their stipulation of facts.
/,
The
parties a0reed to li.it the issues to the follo#in0B
$. @hether or not the =une *, $63, letter of the defendant approvin0>acceptin0 plaintiff<s offer to
purchase the propert2 is still valid and le0all2 enforceable.
/. @hether or not the plaintiff has #aived its ri0ht to purchase the propert2 #hen it failed to
confor. #ith the conditions set forth b2 the defendant in its letter dated =une *, $63,.
-. @hether or not there is a perfected contract of sale bet#een the parties.
/+
@hile the case #as pendin0, respondent PN" de.anded, on Septe.ber /4, $636, that petitioner vacate the
propert2 #ithin $, da2s fro. notice,
/1
but petitioners refused to do so.
On March $3, $66-, petitioner offered to repurchase the propert2 for P-,,44,444.44.
/3
The offer #as ho#ever
re;ected b2 respondent PN", in a letter dated %pril $-, $66-. %ccordin0 to it, the prevailin0 .ar8et value of the
propert2 #as appro9i.atel2 P-4,444,444.44, and as a .atter of polic2, it could not sell the propert2 for less
than its .ar8et value.
/6
On =une /$, $66-, petitioner offered to purchase the propert2 for P*,/,4,444.44 in
cash.
-4
The offer #as a0ain re;ected b2 respondent PN" on Septe.ber $-, $66-.
-$
On Ma2 -$, $66*, the trial court rendered ;ud0.ent dis.issin0 the a.ended co.plaint and respondent PN"<s
counterclai.. It ordered respondent PN" to refund the P1/,,444.44 deposit petitioner had .ade.
-/
The trial
court ruled that there #as no perfected contract of sale bet#een the parties: hence, petitioner had no cause of
action for specific perfor.ance a0ainst respondent. The trial court declared that respondent had re;ected
petitioner<s offer to repurchase the propert2. Petitioner, in turn, re;ected the ter.s and conditions contained in
the =une *, $63, letter of the S%MD. @hile petitioner had offered to repurchase the propert2 per its letter of
=ul2 $*, $633, the a.ount of P+*-,*//.-* #as #a2 belo# the P$,/4+,-36.,- #hich respondent PN" had
de.anded. It further declared that the P1/,,444.44 re.itted b2 petitioner to respondent PN" on =une *, $63,
#as a ?deposit,? and not a do#npa2.ent or earnest .one2.
On appeal to the !%, petitioner .ade the follo#in0 alle0ationsB
I
TA CO@R !ODRT RRD IN RDCIN) TA%T DFND%NT(%PPCC<S CTTR D%TD *
=DN $63, %PPROVIN)>%!!PTIN) PC%INTIFF(%PPCC%NT<S OFFR TO PDR!A%S TA
SD"=!T PROPRTE IS NOT V%CID %ND NFOR!%"C.
II
TA CO@R !ODRT RRD IN RDCIN) TA%T TAR @%S NO PRF!TD !ONTR%!T OF
S%C "T@N PC%INTIFF(%PPCC%NT %ND DFND%NT(%PPCC.
III
TA CO@R !ODRT RRD IN RDCIN) TA%T PC%INTIFF(%PPCCC%NT @%IVD ITS RI)AT
TO PDR!A%S TA SD"=!T PROPRTE @AN IT F%ICD TO !ONFORM @ITA
!ONDITIONS ST FORTA "E DFND%NT(%PPCC IN ITS CTTR D%TD * =DN $63,.
IV
TA CO@R !ODRT RRD IN DISR)%RDIN) TA F%!T TA%T IT @%S TA DFND%NT(
%PPCC @AI!A RNDRD IT DIFFI!DCT IF NOT IMPOSSI"C FOR PC%INTIFF(
%PPCC%NT TO !OMPCT TA "%C%N! OF TAIR PDR!A%S PRI!.
V
TA CO@R !ODRT RRD IN DISR)%RDIN) TA F%!T TA%T TAR @%S NO V%CID
RS!ISSION OR !%N!CC%TION OF SD"=!T !ONTR%!T OF RPDR!A%S.
VI
TA CO@R !ODRT RRD IN D!C%RIN) TA%T PC%INTIFF F%ICD %ND RFDSD TO
SD"MIT TA %MNDD RPDR!A%S OFFR.
VII
TA CO@R !ODRT RRD IN DISMISSIN) TA %MNDD !OMPC%INT OF PC%INTIFF(
%PPCC%NT.
VIII
TA CO@R !ODRT RRD IN NOT %@%RDIN) PC%INTIFF(%PPCC%NT %!TD%C, MOR%C
%ND FMPC%RE D%M%)S, %TTOTRNE<S FS %ND CITI)%TION FPNSS.
--
Mean#hile, on =une $1, $66-, petitioner<s "oard of Directors approved Resolution No. -(44*, #here it #aived,
assi0ned and transferred its ri0hts over the propert2 covered b2 T!T No. --466 and T!T No. -14/, in favor of
"a2ani )abriel, one of its Directors.
-*
Thereafter, "a2ani )abriel e9ecuted a Deed of %ssi0n.ent over ,$G of
the o#nership and .ana0e.ent of the propert2 in favor of Re2naldo Tolentino, #ho later .oved for leave to
intervene as plaintiff(appellant. On =ul2 $*, $66-, the !% issued a resolution 0rantin0 the .otion,
-,
and
li8e#ise 0ranted the .otion of Re2naldo Tolentino substitutin0 petitioner MM!!, as plaintiff(appellant, and his
.otion to #ithdra# as intervenor.
-+
The !% rendered ;ud0.ent on Ma2 $$, /444 affir.in0 the decision of the RT!.
-1
It declared that petitioner
obviousl2 never a0reed to the sellin0 price proposed b2 respondent PN" &P$,6-$,-36.,-' since petitioner had
8ept on insistin0 that the sellin0 price should be lo#ered to P$,,1*,,+4.*1. !learl2 therefore, there #as no
.eetin0 of the .inds bet#een the parties as to the price or consideration of the sale.
The !% ratiocinated that petitioner<s ori0inal offer to purchase the sub;ect propert2 had not been accepted b2
respondent PN". In fact, it .ade a counter(offer throu0h its =une *, $63, letter specificall2 on the sellin0 price:
petitioner did not a0ree to the counter(offer: and the ne0otiations did not prosper. Moreover, petitioner did not
pa2 the balance of the purchase price #ithin the si9t2(da2 period set in the =une *, $63, letter of respondent
PN". !onse5uentl2, there #as no perfected contract of sale, and as such, there #as no contract to rescind.
%ccordin0 to the appellate court, the clai. for da.a0es and the counterclai. #ere correctl2 dis.issed b2 the
court a 5uo for no evidence #as presented to support it. Respondent PN"<s letter dated =une -4, $633 cannot
revive the failed ne0otiations bet#een the parties. Respondent PN" .erel2 as8ed petitioner to sub.it an
a.ended offer to repurchase. @hile petitioner reiterated its re5uest for a lo#er sellin0 price and that the
balance of the repurchase be reduced, ho#ever, respondent re;ected the proposal in a letter dated %u0ust $,
$636.
Petitioner filed a .otion for reconsideration, #hich the !% li8e#ise denied.
Thus, petitioner filed the instant petition for revie# on certiorari, alle0in0 thatB
I. TA !ODRT OF %PP%CS RRD ON % HDSTION OF C%@ @AN IT RDCD TA%T TAR
IS NO PRF!TD !ONTR%!T OF S%C "T@N TA PTITIONR %ND RSPONDNT.
II. TA !ODRT OF %PP%CS RRD ON % HDSTION OF C%@ @AN IT RDCD TA%T TA
%MODNT OF PAP1/,,444.44 P%ID "E TA PTITIONR IS NOT %N %RNST MONE.
III. TA !ODRT OF %PP%CS RRD ON % HDSTION OF C%@ @AN IT RDCD TA%T TA
F%ICDR OF TA PTITIONR(%PPCC%NT TO SI)NIFE ITS !ONFORMITE TO TA TRMS
!ONT%IND IN PN"<S =DN *, $63, CTTR M%NS TA%T TAR @%S NO V%CID %ND
C)%CCE NFOR!%"C !ONTR%!T OF S%C "T@N TA P%RTIS.
IV. TA !ODRT OF %PP%CS RRD ON % HDSTION OF C%@ TA%T NON(P%EMNT OF
TA PTITIONR(%PPCC%NT OF TA "%C%N! OF TA OFFRD PRI! IN TA CTTR
OF PN" D%TD =DN *, $63,, @ITAIN SIFTE &+4' D%ES FROM NOTI! OF %PPROV%C
!ONSTITDTS NO V%CID %ND C)%CCE NFOR!%"C !ONTR%!T OF S%C "T@N
TA P%RTIS.
V. TA !ODRT OF %PP%CS SRIODSCE RRD @AN IT ACD TA%T TA CTTRS OF
PTITIONR(%PPCC%NT D%TD M%R!A $3, $66- %ND =DN /$, $66-, OFFRIN) TO "DE
TA SD"=!T PROPRTE %T DIFFRNT %MODNT @R PROOF TA%T TAR IS NO
PRF!TD !ONTR%!T OF S%C.
-3
The threshold issue is #hether or not petitioner and respondent PN" had entered into a perfected contract for
petitioner to repurchase the propert2 fro. respondent.
Petitioner .aintains that it had accepted respondent<s offer .ade throu0h the S%MD, to sell the propert2
forP$,,1*,,+4.44. @hen the acceptance #as .ade in its letter dated =une /,, $63*: it then
deposited P1/,,444.44 #ith the S%MD as partial pa2.ent, evidenced b2 Receipt No. 613$6* #hich
respondent had issued. Petitioner avers that the S%MD<s acceptance of the deposit a.ounted to an
acceptance of its offer to repurchase. Moreover, as 0leaned fro. the letter of S%MD dated =une *, $63,, the
PN" "oard of Directors had approved petitioner<s offer to purchase the propert2. It clai.s that this #as the
suspensive condition, the fulfill.ent of #hich 0ave rise to the contract. Respondent could no lon0er unilaterall2
#ithdra# its offer to sell the propert2 for P$,,1*,,+4.*1, since the acceptance of the offer resulted in a
perfected contract of sale: it #as obli0ed to re.it to respondent the balance of the ori0inal purchase price
of P$,,1*,,+4.*1, #hile respondent #as obli0ed to transfer o#nership and deliver the propert2 to petitioner,
confor.abl2 #ith %rticle $$,6 of the Ne# !ivil !ode.
Petitioner posits that respondent #as proscribed fro. increasin0 the interest rate after it had accepted
respondent<s offer to sell the propert2 for P$,,1*,,+4.44. !onse5uentl2, respondent could no lon0er validl2
.a8e a counter(offer of P$,6-$,136.33 for the purchase of the propert2. It li8e#ise .aintains that, althou0h
theP1/,,444.44 #as considered as ?deposit for the repurchase of the propert2? in the receipt issued b2 the
S%MD, the a.ount constitutes earnest .one2 as conte.plated in %rticle $*3/ of the Ne# !ivil !ode.
Petitioner cites the rulin0s of this !ourt in Villonco v. Bormaheco
-6
and Topacio v. Court of Appeals.
*4
Petitioner avers that its failure to append its confor.it2 to the =une *, $63* letter of respondent and its failure
to pa2 the balance of the price as fi9ed b2 respondent #ithin the +4(da2 period fro. notice #as to protest
respondent<s breach of its obli0ation to petitioner. It did not a.ount to a re;ection of respondent<s offer to sell
the propert2 since respondent #as .erel2 see8in0 to enforce its ri0ht to pa2 the balance of P$,,14,,+*.*1. In
an2 event, respondent had the option either to accept the balance of the offered price or to cause the
rescission of the contract.
Petitioner<s letters dated March $3, $66- and =une /$, $66- to respondent durin0 the pendenc2 of the case in
the RT! #ere .erel2 to co.pro.ise the pendin0 la#suit, the2 did not constitute separate offers to repurchase
the propert2. Such offer to co.pro.ise should not be ta8en a0ainst it, in accordance #ith Section /1, Rule
$-4 of the Revised Rules of !ourt.
For its part, respondent contends that the parties never 0raduated fro. the ?ne0otiation sta0e? as the2 could
not a0ree on the a.ount of the repurchase price of the propert2. %ll that transpired #as an e9chan0e of
proposals and counter(proposals, nothin0 .ore. It insists that a definite a0ree.ent on the a.ount and .anner
of pa2.ent of the price are essential ele.ents in the for.ation of a bindin0 and enforceable contract of sale.
There #as no such a0ree.ent in this case. Pri.aril2, the concept of ?suspensive condition? si0nifies a future
and uncertain event upon the fulfill.ent of #hich the obli0ation beco.es effective. It clearl2 presupposes the
e9istence of a valid and bindin0 a0ree.ent, the effectivit2 of #hich is subordinated to its fulfill.ent. Since
there is no perfected contract in the first place, there is no basis for the application of the principles 0overnin0
?suspensive conditions.?
%ccordin0 to respondent, the State.ent of %ccount prepared b2 S%MD as of =une /,, $63* cannot be
classified as a counter(offer: it is si.pl2 a recital of its total .onetar2 clai.s a0ainst petitioner. Moreover, the
a.ount stated therein could not li8e#ise be considered as the counter(offer since as ad.itted b2 petitioner, it
#as onl2 reco..endation #hich #as sub;ect to approval of the PN" "oard of Directors.
Neither can the receipt b2 the S%MD of P1/,,444.44 be re0arded as evidence of a perfected sale contract. %s
0leaned fro. the parties< Stipulation of Facts durin0 the proceedin0s in the court a quo, the a.ount is .erel2
an ac8no#led0.ent of the receipt of P1/,,444.44 as deposit to repurchase the propert2. The deposit
of P1/,,444.44 #as accepted b2 respondent on the condition that the purchase price #ould still be approved
b2 its "oard of Directors. Respondent .aintains that its acceptance of the a.ount #as 5ualified b2 that
condition, thus not absolute. Pendin0 such approval, it cannot be le0all2 clai.ed that respondent is alread2
bound b2 an2 contract of sale #ith petitioner.
%ccordin0 to respondent, petitioner 8ne# that the S%MD has no capacit2 to bind respondent and that its
authorit2 is li.ited to ad.inisterin0, .ana0in0 and preservin0 the properties and other special assets of PN".
The S%MD does not have the po#er to sell, encu.ber, dispose of, or other#ise alienate the assets, since the
po#er to do so .ust e.anate fro. its "oard of Directors. The S%MD #as not authori7ed b2 respondent<s
"oard to enter into contracts of sale #ith third persons involvin0 corporate assets. There is absolutel2 nothin0
on record that respondent authori7ed the S%MD, or .ade it appear to petitioner that it represented itself as
havin0 such authorit2.
Respondent reiterates that S%MD had infor.ed petitioner that its offer to repurchase had been approved b2
the "oard sub;ect to the condition, a.on0 others, ?that the sellin0 price shall be the total ban8<s clai. as of
docu.entation date 9 9 9 pa2able in cash &P1/,,444.44 alread2 deposited'
#ithin +4 da2s fro. notice of approval.? % ne# State.ent of %ccount #as attached therein indicatin0 the total
ban8<s clai. to be P$,6-$,-36.,- less deposit of P1/,,444.44, or P$,/4+,-36.44. Further.ore, #hile
respondent<s "oard of Directors accepted petitioner<s offer to repurchase the propert2, the acceptance #as
5ualified, in that it re5uired a hi0her sale price and sub;ect to specified ter.s and conditions enu.erated
therein. This 5ualified acceptance #as in effect a counter(offer, necessitatin0 petitioner<s acceptance in return.
T&e R+,-'. o/ (&e Co+r(
The rulin0 of the appellate court that there #as no perfected contract of sale bet#een the parties on =une *,
$63, is correct.
% contract is a .eetin0 of .inds bet#een t#o persons #hereb2 one binds hi.self, #ith respect to the other, to
0ive so.ethin0 or to render so.e service.
*$
Dnder %rticle $-$3 of the Ne# !ivil !ode, there is no contract
unless the follo#in0 re5uisites concurB
&$' !onsent of the contractin0 parties:
&/' Ob;ect certain #hich is the sub;ect .atter of the contract:
&-' !ause of the obli0ation #hich is established.
!ontracts are perfected b2 .ere consent #hich is .anifested b2 the .eetin0 of the offer and the acceptance
upon the thin0 and the cause #hich are to constitute the contract.
*/
Once perfected, the2 bind other
contractin0 parties and the obli0ations arisin0 therefro. have the for. of la# bet#een the parties and should
be co.plied #ith in 0ood faith. The parties are bound not onl2 to the fulfill.ent of #hat has been e9pressl2
stipulated but also to the conse5uences #hich, accordin0 to their nature, .a2 be in 8eepin0 #ith 0ood faith,
usa0e and la#.
*-
"2 the contract of sale, one of the contractin0 parties obli0ates hi.self to transfer the o#nership of and deliver
a deter.inate thin0, and the other to pa2 therefor a price certain in .one2 or its e5uivalent.
**
The absence of
an2 of the essential ele.ents #ill ne0ate the e9istence of a perfected contract of sale. %s the !ourt ruled
in Boston Bank of the Philippines v. ManaloB
*,
% definite a0ree.ent as to the price is an essential ele.ent of a bindin0 a0ree.ent to sell personal
or real propert2 because it seriousl2 affects the ri0hts and obli0ations of the parties. Price is an
essential ele.ent in the for.ation of a bindin0 and enforceable contract of sale. The fi9in0 of the
price can never be left to the decision of one of the contractin0 parties. "ut a price fi9ed b2 one of
the contractin0 parties, if accepted b2 the other, 0ives rise to a perfected sale.
*+
% contract of sale is consensual in nature and is perfected upon .ere .eetin0 of the .inds. @hen there is
.erel2 an offer b2 one part2 #ithout acceptance of the other, there is no contract.
*1
@hen the contract of sale
is not perfected, it cannot, as an independent source of obli0ation, serve as a bindin0 ;uridical relation bet#een
the parties.
*3
In San Miguel Properties Philippines, nc. v. !uang,
*6
the !ourt ruled that the sta0es of a contract of sale are
as follo#sB &$' ne0otiation, coverin0 the period fro. the ti.e the prospective contractin0 parties indicate
interest in the contract to the ti.e the contract is perfected: &/' perfection, #hich ta8es place upon the
concurrence of the essential ele.ents of the sale #hich are the .eetin0 of the .inds of the parties as to the
ob;ect of the contract and upon the price: and &-' consummation, #hich be0ins #hen the parties perfor. their
respective underta8in0s under the contract of sale, cul.inatin0 in the e9tin0uish.ent thereof.
% ne0otiation is for.all2 initiated b2 an offer, #hich, ho#ever, .ust be certain.
,4
%t an2 ti.e prior to the
perfection of the contract, either ne0otiatin0 part2 .a2 stop the ne0otiation. %t this sta0e, the offer .a2 be
#ithdra#n: the #ithdra#al is effective i..ediatel2 after its .anifestation. To convert the offer into a contract,
the acceptance .ust be absolute and .ust not 5ualif2 the ter.s of the offer: it .ust be plain, une5uivocal,
unconditional and #ithout variance of an2 sort fro. the proposal. In A"elfa Properties, nc. v. Court of
Appeals,
,$
the !ourt ruled thatB
9 9 9 The rule is that e9cept #here a for.al acceptance is so re5uired, althou0h the acceptance
.ust be affir.ativel2 and clearl2 .ade and .ust be evidenced b2 so.e acts or conduct
co..unicated to the offeror, it .a2 be sho#n b2 acts, conduct, or #ords of the acceptin0 part2
that clearl2 .anifest a present intention or deter.ination to accept the offer to bu2 or sell. Thus,
acceptance .a2 be sho#n b2 the acts, conduct, or #ords of a part2 reco0ni7in0 the e9istence of
the contract of sale.
,/
% 5ualified acceptance or one that involves a ne# proposal constitutes a counter(offer and a re;ection of the
ori0inal offer. % counter(offer is considered in la#, a re;ection of the ori0inal offer and an atte.pt to end the
ne0otiation bet#een the parties on a different basis.
,-
!onse5uentl2, #hen so.ethin0 is desired #hich is not
e9actl2 #hat is proposed in the offer, such acceptance is not sufficient to 0uarantee consent because an2
.odification or variation fro. the ter.s of the offer annuls the offer.
,*
The acceptance .ust be identical in all
respects #ith that of the offer so as to produce consent or .eetin0 of the .inds.
In this case, petitioner had until Februar2 $1, $63* #ithin #hich to redee. the propert2. Ao#ever, since it
lac8ed the resources, it re5uested for .ore ti.e to redee.>repurchase the propert2 under such ter.s and
conditions a0reed upon b2 the parties.
,,
The re5uest, #hich #as .ade throu0h a letter dated %u0ust /,, $63-,
#as referred to the respondent<s .ain branch for appropriate action.
,+
"efore respondent could act on the
re5uest, petitioner a0ain #rote respondent as follo#sB
$. Dpon approval of our re5uest, #e #ill pa2 2our 0oodselves ON ADNDRD I FIFTE
TAODS%ND PSOS &P$,4,444.44':
/. @ithin si9 .onths fro. date of approval of our re5uest, #e #ill pa2 another FODR ADNDRD
FIFTE TAODS%ND PSOS &P*,4,444.44': and
-. The re.ainin0 balance to0ether #ith the interest and other e9penses that #ill be incurred #ill be
paid #ithin the last si9 .onths of the one 2ear 0rave period re5uested for.
,1
@hen the petitioner #as told that respondent did not allo# ?01r(-1, re)em0(-o',?
,3
it sent a letter to
respondent<s President reiteratin0 its offer to purchase the propert2.
,6
There #as no response to petitioner<s
letters dated Februar2 $4 and $,, $63*.
The state.ent of account prepared b2 the S%MD statin0 that the net clai. of respondent as of =une /,, $63*
#asP$,,1*,,+4.*1 cannot be considered an un5ualified acceptance to petitioner<s offer to purchase the
propert2. The state.ent is but a co.putation of the a.ount #hich petitioner #as obli0ed to pa2 in case
respondent #ould later a0ree to sell the propert2, includin0 interests, advances on insurance pre.iu.,
advances on realt2 ta9es, publication cost, re0istration e9penses and .iscellaneous e9penses.
There is no evidence that the S%MD #as authori7ed b2 respondent<s "oard of Directors to accept petitioner<s
offer and sell the propert2 for P$,,1*,,+4.*1. %n2 acceptance b2 the S%MD of petitioner<s offer #ould not bind
respondent. %s this !ourt ruled in AF #ealt$ %evelopment, nc. vs. %iesehuan Freight Services, nc.B
+4
Section /- of the !orporation !ode e9pressl2 provides that the corporate po#ers of all
corporations shall be e9ercised b2 the board of directors. =ust as a natural person .a2 authori7e
another to do certain acts in his behalf, so .a2 the board of directors of a corporation validl2
dele0ate so.e of its functions to individual officers or a0ents appointed b2 it. Thus, contracts or
acts of a corporation .ust be .ade either b2 the board of directors or b2 a corporate a0ent dul2
authori7ed b2 the board. %bsent such valid dele0ation>authori7ation, the rule is that the
declarations of an individual director relatin0 to the affairs of the corporation, but not in the course
of, or connected #ith the perfor.ance of authori7ed duties of such director, are held not bindin0 on
the corporation.
Thus, a corporation can onl2 e9ecute its po#ers and transact its business throu0h its "oard of Directors and
throu0h its officers and a0ents #hen authori7ed b2 a board resolution or its b2(la#s.
+$
It appears that the S%MD had prepared a reco..endation for respondent to accept petitioner<s offer to
repurchase the propert2 even be2ond the one(2ear period: it reco..ended that petitioner be allo#ed to
redee. the propert2 and pa2 P$,,1*,,+4.44 as the purchase price. Respondent later approved the
reco..endation that the propert2 be sold to petitioner. "ut instead of the P$,,1*,,+4.*1 reco..ended b2 the
S%MD and to #hich petitioner had previousl2 confor.ed, respondent set the purchase price at P/,++4,444.44.
In fine, respondent<s acceptance of petitioner<s offer #as 5ualified, hence can be at .ost considered as a
counter(offer. If petitioner had accepted this counter(offer, a perfected contract of sale #ould have arisen: as it
turns out, ho#ever, petitioner .erel2 sou0ht to have the counter(offer reconsidered. This re5uest for
reconsideration #ould later be re;ected b2 respondent.
@e do not a0ree #ith petitioner<s contention that the P1/,,444.44 it had re.itted to respondent #as ?earnest
.one2? #hich could be considered as proof of the perfection of a contract of sale under %rticle $*3/ of the
Ne# !ivil !ode. The provision readsB
%RT. $*3/. @henever earnest .one2 is 0iven in a contract of sale, it shall be considered as part of
the price and as proof of the perfection of the contract.
This contention is li8e#ise ne0ated b2 the stipulation of facts #hich the parties entered into in the trial courtB
3. On =une 3, $63*, the Special %ssets Mana0e.ent Depart.ent &S%MD' of PN" prepared an
updated State.ent of %ccount sho#in0 MM!!<s total liabilit2 to PN" as of =une /,, $63* to be
P$,,1*,,+4.*1 and reco..ended this a.ount as the repurchase price of the sub;ect propert2.
6. On =une /,, $63*, MM!! paid P1/,,444.44 to PN" as deposit to repurchase the propert2. The
deposit of P725,000 was accepted by PNB on the condition that the purchase price is still
subject to the approval of the PNB Board.
+/
Thus, the P1/,,444.44 #as .erel2 a deposit to be applied as part of the purchase price of the propert2, in the
event that respondent #ould approve the reco..endation of S%MD for respondent to accept petitioner<s offer
to purchase the propert2 for P$,,1*,,+4.*1. Dnless and until the respondent accepted the offer on these
ter.s, no perfected contract of sale #ould arise. %bsent proof of the concurrence of all the essential ele.ents
of a contract of sale, the 0ivin0 of earnest .one2 cannot establish the e9istence of a perfected contract of
sale.
+-
It appears that, per its letter to petitioner dated =une *, $63,, the respondent had decided to accept the offer to
purchase the propert2 for P$,6-$,-36.,-. Ao#ever, this a.ounted to an a.end.ent of respondent<s 5ualified
acceptance, or an a.ended counter(offer, because #hile the respondent lo#ered the purchase price, it still
declared that its acceptance #as sub;ect to the follo#in0 ter.s and conditionsB
$. That the sellin0 price shall be the total "an8<s clai. as of docu.entation date &pls. see attached
state.ent of account as of ,(-$(3,', pa2able in cash &P1/,,444.44 alread2 deposited' #ithin si9t2
&+4' da2s fro. notice of approval:
/. The "an8 sells onl2 #hatever ri0hts, interests and participation it .a2 have in the propert2 and
2ou are char0ed #ith full 8no#led0e of the nature and e9tent of said ri0hts, interests and
participation and #aive 2our ri0ht to #arrant2 a0ainst eviction.
-. %ll ta9es and other 0overn.ent i.posts due or to beco.e due on the propert2, as #ell as
e9penses includin0 costs of docu.ents and science sta.ps, transfer fees, etc., to be incurred in
connection #ith the e9ecution and re0istration of all coverin0 docu.ents shall be borne b2 2ou:
*. That 2ou shall underta8e at 2our o#n e9pense and account the e;ect.ent of the occupants of
the propert2 sub;ect of the sale, if there are an2:
,. That upon 2our failure to pa2 the balance of the purchase price #ithin si9t2 &+4' da2s fro.
receipt of advice acceptin0 2our offer, 2our deposit shall be forfeited and the "an8 is thenceforth
authori7ed to sell the propert2 to other interested parties.
+. That the sale shall be sub;ect to such other ter.s and conditions that the Ce0al Depart.ent .a2
i.pose to protect the interest of the "an8.
+*
It appears that althou0h respondent re5uested petitioner to confor. to its a.ended counter(offer, petitioner
refused and instead re5uested respondent to reconsider its a.ended counter(offer. Petitioner<s re5uest #as
ulti.atel2 re;ected and respondent offered to refund its P1/,,444.44 deposit.
In su., then, there #as no perfected contract of sale bet#een petitioner and respondent over the sub;ect
propert2.
IN LIGHT O2 ALL THE 2OREGOING, the petition is DENIED.
The assailed decision is A22IRMED. !osts a0ainst petitioner Manila Metal !ontainer !orporation.
SO ORDERED.
&nares'Santiago, (., )orking Chairperson, Austria'Martine*, an" Chico'+a*ario, ((., concur.
Pangani,an, C.(., retired as of Dece.ber 1, /44+.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L"116630 M14 25, 1663
TOYOTA SHA7, INC., petitioner,
vs.
COURT O2 APPEALS 1') LUNA L. SOSA, respondents.

DA$IDE, #R., J!
%t the heart of the present controvers2 is the docu.ent .ar8ed 9hibit ?%?
1
for the private respondent, #hich
#as si0ned b2 a sales representative of To2ota Sha#, Inc. na.ed Popon0 "ernardo. The docu.ent reads as
follo#sB
* =une $636
%)RMNTS "T@N MR. SOS%
I POPON) "RN%RDO OF TOEOT%
SA%@, IN!.
$. all necessar2 docu.ents #ill be sub.itted to TOEOT% SA%@, IN!. &POPON)
"RN%RDO' a #ee8 after, upon arrival of Mr. Sosa fro. the Province &Marindu5ue'
#here the unit #ill be used on the $6th of =une.
/. the do#npa2.ent of P$44,444.44 #ill be paid b2 Mr. Sosa on =une $,, $636.
-. the TOEOT% SA%@, IN!. CIT %! 2ello#, #ill be pic8(up JsicK and released b2
TOEOT% SA%@, IN!. on the $1th of =une at $4 a...
Ver2 trul2 2ours,
&S0d.' POPON) "RN%RDO.
@as this docu.ent, e9ecuted and si0ned b2 the petitioner<s sales representative, a perfected contract of sale,
bindin0 upon the petitioner, breach of #hich #ould entitle the private respondent to da.a0es and attorne2<s
feesL The trial court and the !ourt of %ppeals too8 the affir.ative vie#. The petitioner disa0rees. Aence, this
petition for revie# oncertiorari.
The antecedents as disclosed in the decisions of both the trial court and the !ourt of %ppeals, as #ell as in the
pleadin0s of petitioner To2ota Sha#, Inc. &hereinafter To$ota' and respondent Cuna C. Sosa &hereinafter Sosa'
are as follo#s. So.eti.e in =une of $636, Cuna C. Sosa #anted to purchase a To2ota Cite %ce. It #as then a
seller<s .ar8et and Sosa had difficult2 findin0 a dealer #ith an available unit for sale. "ut upon contactin0
To2ota Sha#, Inc., he #as told that there #as an available unit. So on $* =une $636, Sosa and his son,
)ilbert, #ent to the To2ota office at Sha# "oulevard, Pasi0, Metro Manila. There the2 .et Popon0 "ernardo, a
sales representative of To2ota.
Sosa e.phasi7ed to "ernardo that he needed the Cite %ce not later than $1 =une $636 because he, his fa.il2,
and a,alik,a$an 0uest #ould use it on $3 =une $636 to 0o to Marindu5ue, his ho.e province, #here he #ould
celebrate his birthda2 on the $6th of =une. Ae added that if he does not arrive in his ho.eto#n #ith the ne#
car, he #ould beco.e a ?lau0hin0 stoc8.? "ernardo assured Sosa that a unit #ould be read2 for pic8 up at
$4B44 a... on $1 =une $636. "ernardo then si0ned the afore5uoted ?%0ree.ents "et#een Mr. Sosa I
Popon0 "ernardo of To2ota Sha#, Inc.? It #as also a0reed upon b2 the parties that the balance of the
purchase price #ould be paid b2 credit financin0 throu0h ".%. Finance, and for this )ilbert, on behalf of his
father, si0ned the docu.ents of To2ota and ".%. Finance pertainin0 to the application for financin0.
The ne9t da2, $, =une $636, Sosa and )ilbert #ent to To2ota to deliver the do#npa2.ent of P$44,444.44.
The2 .et "ernardo #ho then acco.plished a printed Vehicle Sales Proposal &VSP' No. 6/3,
2
on #hich
)ilbert si0ned under the subheadin0 !ONFORM. This docu.ent sho#s that the custo.er<s na.e is ?MR.
CDN% SOS%? #ith ho.e address at No. /-$+ )ui;o Street, Dnited ParaMa5ue II: that the .odel series of the
vehicle is a ?Cite %ce $,44? described as ?* Dr .inibus?: that pa2.ent is b2 ?install.ent,? to be financed b2
?".%.,?
5
#ith the initial cash outla2 of P$44,444.44 bro8en do#n as follo#sB
a' do#npa2.ent N P ,-,$*3.44
b' insurance N P $-,614.44
c' "CT re0istration fee N P $,4+1.44
!AMO fee N P /,1$,.44
service fee N P ,44.44
accessories N P /6,444.44

and that the ?"%C%N! TO " FIN%N!D? is ?P/1*,$-1.44.? The spaces provided for ?Deliver2 Ter.s? #ere
not filled(up. It also contains the follo#in0 pertinent provisionsB
!ONDITIONS OF S%CS
$. This sale is sub;ect to availabilit2 of unit.
/. Stated Price is sub;ect to chan0e #ithout prior notice, Price prevailin0 and in effect at
ti.e of sellin0 #ill appl2. . . .
Rodri0o Huirante, the Sales Supervisor of "ernardo, chec8ed and approved the VSP.
On $1 =une $636, at around 6B-4 a..., "ernardo called )ilbert to infor. hi. that the vehicle #ould not be
read2 for pic8 up at $4B44 a... as previousl2 a0reed upon but at /B44 p... that sa.e da2. %t /B44 p..., Sosa
and )ilbert .et "ernardo at the latter<s office. %ccordin0 to Sosa, "ernardo infor.ed the. that the Cite %ce
#as bein0 readied for deliver2. %fter #aitin0 for about an hour, "ernardo told the. that the car could not be
delivered because ?nasulot ang unit ng i,ang malakas.?
To2ota contends, ho#ever, that the Cite %ce #as not delivered to Sosa because of the disapproval b2 ".%.
Finance of the credit financin0 application of Sosa. It further alle0ed that a particular unit had alread2 been
reserved and ear.ar8ed for Sosa but could not be released due to the uncertaint2 of pa2.ent of the balance
of the purchase price. To2ota then 0ave Sosa the option to purchase the unit b2 pa2in0 the full purchase price
in cash but Sosa refused.
%fter it beca.e clear that the Cite %ce #ould not be delivered to hi., Sosa as8ed that his do#npa2.ent be
refunded. To2ota did so on the ver2 sa.e da2 b2 issuin0 a Far ast "an8 chec8 for the full a.ount of
P$44,444.44,
8
the receipt of #hich #as sho#n b2 a chec8 voucher of To2ota,
3
#hich Sosa si0ned #ith the
reservation, ?#ithout pre;udice to our future clai.s for da.a0es.?
Thereafter, Sosa sent t#o letters to To2ota. In the first letter, dated /1 =une $636 and si0ned b2 hi., he
de.anded the refund, #ithin five da2s fro. receipt, of the do#npa2.ent of P$44,444.44 plus interest fro. the
ti.e he paid it and the pa2.ent of da.a0es #ith a #arnin0 that in case of To2ota<s failure to do so he #ould
be constrained to ta8e le0al action.
6
The second, dated * Nove.ber $636 and si0ned b2 M. O. !aballes,
Sosa<s counsel, de.anded one .illion pesos representin0 interest and da.a0es, a0ain, #ith a #arnin0 that
le0al action #ould be ta8en if pa2.ent #as not .ade #ithin three da2s.
9
To2ota<s counsel ans#ered throu0h a
letter dated /1 Nove.ber $636
8
refusin0 to accede to the de.ands of Sosa. "ut even before this ans#er #as
.ade and received b2 Sosa, the latter filed on /4 Nove.ber $636 #ith "ranch -3 of the Re0ional Trial !ourt
&RT!' of Marindu5ue a co.plaint a0ainst To2ota for da.a0es under %rticles $6 and /$ of the !ivil !ode in the
total a.ount of P$,/-4,444.44.
6
Ae alle0es, inter alia, thatB
6. %s a result of defendant<s failure and>or refusal to deliver the vehicle to plaintiff,
plaintiff suffered e.barrass.ent, hu.iliation, ridicule, .ental an0uish and sleepless
ni0hts becauseB &i' he and his fa.il2 #ere constrained to ta8e the public transportation
fro. Manila to Cucena !it2 on their #a2 to Marindu5ue: &ii' his bali8ba2an(0uest
canceled his scheduled first visit to Marindu5ue in order to avoid the inconvenience of
ta8in0 public transportation: and &iii' his relatives, friends, nei0hbors and other
province.ates, continuousl2 ir8ed hi. about ?his "rand(Ne# To2ota Cite %ce N that
never #as.? Dnder the circu.stances, defendant should be .ade liable to the plaintiff
for .oral da.a0es in the a.ount of One Million Pesos &P$,444,444.44'.
10
In its ans#er to the co.plaint, To2ota alle0ed that no sale #as entered into bet#een it and Sosa, that
"ernardo had no authorit2 to si0n 9hibit ?%? for and in its behalf, and that "ernardo si0ned 9hibit ?%? in his
personal capacit2. %s special and affir.ative defenses, it alle0ed thatB the VSP did not state date of deliver2:
Sosa had not co.pleted the docu.ents re5uired b2 the financin0 co.pan2, and as a .atter of polic2, the
vehicle could not and #ould not be released prior to full co.pliance #ith financin0 re5uire.ents, sub.ission of
all docu.ents, and e9ecution of the sales a0ree.ent>invoice: the P$44,444.44 #as returned to and received
b2 Sosa: the venue #as i.properl2 laid: and Sosa did not have a sufficient cause of action a0ainst it. It also
interposed co.pulsor2 counterclai.s.
%fter trial on the issues a0reed upon durin0 the pre(trial session,
11
the trial court rendered on $3 Februar2
$66/ a decision in favor of Sosa.
12
It ruled that 9hibit ?%,? the ?%)RMNTS "T@N MR. SOS% %ND
POPON) "RN%RDO,? #as a valid perfected contract of sale bet#een Sosa and To2ota #hich bound To2ota
to deliver the vehicle to Sosa, and further a0reed #ith Sosa that To2ota acted in bad faith in sellin0 to another
the unit alread2 reserved for hi..
%s to To2ota<s contention that "ernardo had no authorit2 to bind it throu0h 9hibit ?%,? the trial court held that
the e9tent of "ernardo<s authorit2 ?#as not .ade 8no#n to plaintiff,? for as testified to b2 Huirante, ?the2 do not
volunteer an2 infor.ation as to the co.pan2<s sales polic2 and 0uidelines because the2 are internal
.atters.?
15
Moreover, ?JfKro. the be0innin0 of the transaction up to its consu..ation #hen the do#npa2.ent
#as .ade b2 the plaintiff, the defendants had .ade 8no#n to the plaintiff the i.pression that Popon0
"ernardo is an authori7ed sales e9ecutive as it per.itted the latter to do acts #ithin the scope of an apparent
authorit2 holdin0 hi. out to the public as possessin0 po#er to do these acts.?
18
"ernardo then ?#as an a0ent
of the defendant To2ota Sha#, Inc. and hence bound the defendants.?
13
The court further declared that ?Cuna Sosa proved his social standin0 in the co..unit2 and suffered
bes.irched reputation, #ounded feelin0s and sleepless ni0hts for #hich he ou0ht to be
co.pensated.?
16
%ccordin0l2, it disposed as follo#sB
@ARFOR, vie#ed fro. the above findin0s, ;ud0.ent is hereb2 rendered in favor
of the plaintiff and a0ainst the defendantB
$. orderin0 the defendant to pa2 to the plaintiff the su. of
P1,,444.44 for .oral da.a0es:
/. orderin0 the defendant to pa2 the plaintiff the su. of
P$4,444.44 for e9e.plar2 da.a0es:
-. orderin0 the defendant to pa2 the su. of P-4,444.44
attorne2<s fees plus P/,444.44 la#2er<s transportation fare per
trip in attendin0 to the hearin0 of this case:
*. orderin0 the defendant to pa2 the plaintiff the su. of
P/,444.44 transportation fare per trip of the plaintiff in attendin0
the hearin0 of this case: and
,. orderin0 the defendant to pa2 the cost of suit.
SO ORDRD.
Dissatisfied #ith the trial court<s ;ud0.ent, To2ota appealed to the !ourt of %ppeals. The case #as doc8eted
as !%().R. !V No. *44*-. In its decision pro.ul0ated on /6 =ul2 $66*,
19
the !ourt of %ppeals affir.ed in
toto the appealed decision.
To2ota no# co.es before this !ourt via this petition and raises the core issue stated at the be0innin0 of
the ponenciaand also the follo#in0 related issuesB &a' #hether or not the standard VSP #as the true and
docu.ented understandin0 of the parties #hich #ould have led to the ulti.ate contract of sale, &b' #hether or
not Sosa has an2 le0al and de.andable ri0ht to the deliver2 of the vehicle despite the non(pa2.ent of the
consideration and the non(approval of his credit application b2 ".%. Finance, &c' #hether or not To2ota acted in
0ood faith #hen it did not release the vehicle to Sosa, and &d' #hether or not To2ota .a2 be held liable for
da.a0es.
@e find .erit in the petition.
Neither lo0ic nor recourse to one<s i.a0ination can lead to the conclusion that 9hibit ?%? is a perfecte"
contract of sale.
%rticle $*,3 of the !ivil !ode defines a contract of sale as follo#sB
%rt. $*,3. "2 the contract of sale one of the contractin0 parties obli0ates hi.self to
transfer the o#nership of and to deliver a deter.inate thin0, and the other to pa2
therefor a price certain in .one2 or its e5uivalent.
% contract of sale .a2 be absolute or conditional.
and %rticle $*1, specificall2 provides #hen it is dee.ed perfectedB
%rt. $*1,. The contract of sale is perfected at the .o.ent there is a .eetin0 of .inds
upon the thin0 #hich is the ob;ect of the contract and upon the price.
Fro. that .o.ent, the parties .a2 reciprocall2 de.and perfor.ance, sub;ect to the
provisions of the la# 0overnin0 the for. of contracts.
@hat is clear fro. 9hibit ?%? is not #hat the trial court and the !ourt of %ppeals appear to see. It is not a
contract of sale. No obli0ation on the part of To2ota to transfer o#nership of a deter.inate thin0 to Sosa and
no correlative obli0ation on the part of the latter to pa2 therefor a price certain appears therein. The provision
on the do#npa2.ent of P$44,444.44 .ade no specific reference to a sale of a vehicle. If it #as intended for a
contract of sale, it could onl2 refer to a sale on install.ent basis, as the VSP e9ecuted the follo#in0 da2
confir.ed. "ut nothin0 #as .entioned about the full purchase price and the .anner the install.ents #ere to
be paid.
This !ourt had alread2 ruled that a definite a0ree.ent on the .anner of pa2.ent of the price is an essential
ele.ent in the for.ation of a bindin0 and enforceable contract of sale.
18
This is so because the a0ree.ent as
to the .anner of pa2.ent 0oes into the price such that a disa0ree.ent on the .anner of pa2.ent is
tanta.ount to a failure to a0ree on the price. Definiteness as to the price is an essential ele.ent of a bindin0
a0ree.ent to sell personal propert2.
16
Moreover, 9hibit ?%? sho#s the absence of a .eetin0 of .inds bet#een To2ota and Sosa. For one thin0,
Sosa did not even si0n it. For another, Sosa #as #ell a#are fro. its title, #ritten in bold letters, vi*.,
%)RMNTS "T@N MR. SOS% I POPON)
"RN%RDO OF TOEOT% SA%@, IN!.
that he #as not dealin0 #ith To2ota but #ith Popon0 "ernardo and that the latter did not .isrepresent that he
had the authorit2 to sell an2 To2ota vehicle. Ae 8ne# that "ernardo #as onl2 a sales representative of To2ota
and hence a .ere a0ent of the latter. It #as incu.bent upon Sosa to act #ith ordinar2 prudence and
reasonable dili0ence to 8no# the e9tent of "ernardo<s authorit2 as an
a0ent
20
in respect of contracts to sell To2ota<s vehicles. % person dealin0 #ith an a0ent is put upon in5uir2 and
.ust discover upon his peril the authorit2 of the a0ent.
21
%t the .ost, 9hibit ?%? .a2 be considered as part of the initial phase of the 0eneration or ne0otiation sta0e of
a contract of sale. There are three sta0es in the contract of sale, na.el2B
&a' preparation, conception, or 0eneration, #hich is the period of ne0otiation and
bar0ainin0, endin0 at the .o.ent of a0ree.ent of the parties:
&b' perfection or birth of the contract, #hich is the .o.ent #hen the parties co.e to
a0ree on the ter.s of the contract: and
&c' consu..ation or death, #hich is the fulfill.ent or perfor.ance of the ter.s a0reed
upon in the contract.
22
The second phase of the 0eneration or ne0otiation sta0e in this case #as the e9ecution of the VSP. It .ust be
e.phasi7ed that thereunder, the do#npa2.ent of the purchase price #as P,-,$*3.44 #hile the balance to be
paid on install.ent should be financed b2 ".%. Finance !orporation. It is, of course, to be assu.ed that ".%.
Finance !orp. #as acceptable to To2ota, other#ise it should not have .entioned ".%. Finance in the VSP.
Financin0 co.panies are defined in Section -&a' of R.%. No. ,634, as a.ended b2 P.D. No. $*,* and P.D. No.
$16-, as ?corporations or partnerships, e9cept those re0ulated b2 the !entral "an8 of the Philippines, the
Insurance !o..ission and the !ooperatives %d.inistration Office, #hich are pri.aril2 or0ani7ed for the
purpose of e9tendin0 credit facilities to consu.ers and to industrial, co..ercial, or a0ricultural enterprises,
either b2 discountin0 or factorin0 co..ercial papers or accounts receivables, or b2 bu2in0 and sellin0
contracts, leases, chattel .ort0a0es, or other evidence of indebtedness, or b2 leasin0 of .otor vehicles,
heav2 e5uip.ent and industrial .achiner2, business and office .achines and e5uip.ent, appliances and
other .ovable propert2.?
25
%ccordin0l2, in a sale on install.ent basis #hich is financed b2 a financin0 co.pan2, three parties are thus
involvedB the bu2er #ho e9ecutes a note or notes for the unpaid balance of the price of the thin0 purchased on
install.ent, the seller #ho assi0ns the notes or discounts the. #ith a financin0 co.pan2, and the financin0
co.pan2 #hich is subro0ated in the place of the seller, as the creditor of the install.ent bu2er.
28
Since ".%.
Finance did not approve Sosa<s application, there #as then no .eetin0 of .inds on the sale on install.ent
basis.
@e are inclined to believe To2ota<s version that ".%. Finance disapproved Sosa<s application for #hich reason
it su00ested to Sosa that he pa2 the full purchase price. @hen the latter refused, To2ota cancelled the VSP
and returned to hi. his P$44,444.44. Sosa<s version that the VSP #as cancelled because, accordin0 to
"ernardo, the vehicle #as delivered to another #ho #as ?mas malakas? does not inspire belief and #as
obviousl2 a dela2ed afterthou0ht. It is clai.ed that "ernardo said, ?Pasensi$a ka$o, nasulot ang unit ng i,ang
malakas,? #hile the Sosas had alread2 been #aitin0 for an hour for the deliver2 of the vehicle in the afternoon
of $1 =une $636. Ao#ever, in para0raph 1 of his co.plaint, Sosa sole.nl2 statesB
On =une $1, $636 at around 6B-4 o<cloc8 in the .ornin0, defendant<s sales
representative, Mr. Popon0 "ernardo, called plaintiff<s house and infor.ed the
plaintiff<s son that the vehicle #ill not be read2 for pic8(up at $4B44 a... of =une $1,
$636 but at /B44 p... of that da2 instead. Plaintiff an" his son -ent to "efen"ant.s
office on (une /0 /121 at 3455 p.m. in or"er to pick'up the vehicle ,ut the "efen"ant
for reasons kno-n onl$ to its representatives, refuse" an"6or faile" to release the
vehicle to the plaintiff. Plaintiff "eman"e" for an e7planation, ,ut nothing -as given: . . .
&.phasis supplied'.
23
The VSP #as a .ere proposal #hich #as aborted in lieu of subse5uent events. It follo#s that the VSP created
no de.andable ri0ht in favor of Sosa for the deliver2 of the vehicle to hi., and its non(deliver2 did not cause
an2 le0all2 inde.nifiable in;ur2.
The a#ard then of .oral and e9e.plar2 da.a0es and attorne2<s fees and costs of suit is #ithout le0al basis.
"esides, the onl2 0round upon #hich Sosa clai.ed .oral da.a0es is that since it #as 8no#n to his friends,
to#n.ates, and relatives that he #as bu2in0 a To2ota Cite %ce #hich the2 e9pected to see on his birthda2, he
suffered hu.iliation, sha.e, and sleepless ni0hts #hen the van #as not delivered. The van beca.e the
sub;ect .atter of tal8s durin0 his celebration that he .a2 not have paid for it, and this created an i.pression
a0ainst his business standin0 and reputation. %t the botto. of this clai. is nothin0 but .isplaced pride and
e0o. Ae should not have announced his plan to bu2 a To2ota Cite %ce 8no#in0 that he .i0ht not be able to
pa2 the full purchase price. It #as he #ho brou0ht e.barrass.ent upon hi.self b2 bra00in0 about a thin0
#hich he did not o#n 2et.
Since Sosa is not entitled to .oral da.a0es and there bein0 no a#ard for te.perate, li5uidated, or
co.pensator2 da.a0es, he is li8e#ise not entitled to e9e.plar2 da.a0es. Dnder %rticle ///6 of the !ivil
!ode, e9e.plar2 or corrective da.a0es are i.posed b2 #a2 of e9a.ple or correction for the public 0ood, in
addition to .oral, te.perate, li5uidated, or co.pensator2 da.a0es.
%lso, it is settled that for attorne2<s fees to be 0ranted, the court .ust e9plicitl2 state in the bod2 of the
decision, and not onl2 in the dispositive portion thereof, the le0al reason for the a#ard of attorne2<s fees.
26
No
such e9plicit deter.ination thereon #as .ade in the bod2 of the decision of the trial court. No reason thus
e9ists for such an a#ard.
@ARFOR, the instant petition is )R%NTD. The challen0ed decision of the !ourt of %ppeals in !%().R.
!V NO. *44*- as #ell as that of "ranch -3 of the Re0ional Trial !ourt of Marindu5ue in !ivil !ase No. 36($*
are RVRSD and ST %SID and the co.plaint in !ivil !ase No. 36($* is DISMISSD. The counterclai.
therein is li8e#ise DISMISSD.
No pronounce.ent as to costs.
SO ORDRD.
Pa"illa, Bellosillo an" 8apunan, ((., concur.
9uiason, (., is on leave.
Republic of the Philippines
SUPREME COURT
Manila
N "%N!
G.R. No. L"11861 A+.+*( 25, 1618
ANDRES :UIROGA, plaintiff(appellant,
vs.
PARSONS HARD7ARE CO., defendant(appellee.
Alfre"o Chicote, (ose Arnai* an" Pascual B. A*an*a for appellant.
Crossfiel" : ;.Brien for appellee.
A$ANCE;A, J%
On =anuar2 /*, $6$$, in this cit2 of .anila, a contract in the follo#in0 tenor #as
entered into b2 and bet#een the plaintiff, as part2 of the first part, and =. Parsons &to
#hose ri0hts and obli0ations the present defendant later subro0ated itself', as part2
of the second partB
!ONTR%!T F!DTD "E %ND "T@N %NDRS HDIRO)%
%ND =. P%RSONS, "OTA MR!A%NTS ST%"CISAD IN
M%NIC%, FOR TA F!CDSIV S%C OF ?HDIRO)%? "DS IN
TA VIS%E%N ISC%NDS.
%RTI!C $. Don %ndres Huiro0a 0rants the e9clusive ri0ht to sell his beds in
the Visa2an Islands to =. Parsons under the follo#in0 conditionsB
&%' Mr. Huiro0a shall furnish beds of his .anufacture to Mr. Parsons for the
latter<s establish.ent in Iloilo, and shall invoice the. at the sa.e price he
has fi9ed for sales, in Manila, and, in the invoices, shall .a8e and allo#ance
of a discount of /, per cent of the invoiced prices, as co..ission on the
sale: and Mr. Parsons shall order the beds b2 the do7en, #hether of the
sa.e or of different st2les.
&"' Mr. Parsons binds hi.self to pa2 Mr. Huiro0a for the beds received,
#ithin a period of si9t2 da2s fro. the date of their ship.ent.
&!' The e9penses for transportation and ship.ent shall be borne b2 M.
Huiro0a, and the frei0ht, insurance, and cost of unloadin0 fro. the vessel at
the point #here the beds are received, shall be paid b2 Mr. Parsons.
&D' If, before an invoice falls due, Mr. Huiro0a should re5uest its pa2.ent,
said pa2.ent #hen .ade shall be considered as a pro.pt pa2.ent, and as
such a deduction of / per cent shall be .ade fro. the a.ount of the invoice.
The sa.e discount shall be .ade on the a.ount of an2 invoice #hich Mr.
Parsons .a2 dee. convenient to pa2 in cash.
&' Mr. Huiro0a binds hi.self to 0ive notice at least fifteen da2s before hand
of an2 alteration in price #hich he .a2 plan to .a8e in respect to his beds,
and a0rees that if on the date #hen such alteration ta8es effect he should
have an2 order pendin0 to be served to Mr. Parsons, such order shall en;o2
the advanta0e of the alteration if the price thereb2 be lo#ered, but shall not
be affected b2 said alteration if the price thereb2 be increased, for, in this
latter case, Mr. Huiro0a assu.ed the obli0ation to invoice the beds at the
price at #hich the order #as 0iven.
&F' Mr. Parsons binds hi.self not to sell an2 other 8ind e9cept the ?Huiro0a?
beds.
%RT. /. In co.pensation for the e9penses of advertise.ent #hich, for the
benefit of both contractin0 parties, Mr. Parsons .a2 find hi.self obli0ed to
.a8e, Mr. Huiro0a assu.es the obli0ation to offer and 0ive the preference
to Mr. Parsons in case an2one should appl2 for the e9clusive a0enc2 for an2
island not co.prised #ith the Visa2an 0roup.
%RT. -. Mr. Parsons .a2 sell, or establish branches of his a0enc2 for the
sale of ?Huiro0a? beds in all the to#ns of the %rchipela0o #here there are no
e9clusive a0ents, and shall i..ediatel2 report such action to Mr. Huiro0a for
his approval.
%RT. *. This contract is .ade for an unli.ited period, and .a2 be ter.inated
b2 either of the contractin0 parties on a previous notice of ninet2 da2s to the
other part2.
Of the three causes of action alle0ed b2 the plaintiff in his co.plaint, onl2 t#o of the.
constitute the sub;ect .atter of this appeal and both substantiall2 a.ount to the
aver.ent that the defendant violated the follo#in0 obli0ationsB not to sell the beds at
hi0her prices than those of the invoices: to have an open establish.ent in Iloilo: itself
to conduct the a0enc2: to 8eep the beds on public e9hibition, and to pa2 for the
advertise.ent e9penses for the sa.e: and to order the beds b2 the do7en and in no
other .anner. %s .a2 be seen, #ith the e9ception of the obli0ation on the part of the
defendant to order the beds b2 the do7en and in no other .anner, none of the
obli0ations i.puted to the defendant in the t#o causes of action are e9pressl2 set
forth in the contract. "ut the plaintiff alle0ed that the defendant #as his a0ent for the
sale of his beds in Iloilo, and that said obli0ations are i.plied in a contract of
co..ercial a0enc2. The #hole 5uestion, therefore, reduced itself to a deter.ination
as to #hether the defendant, b2 reason of the contract hereinbefore transcribed, #as
a purchaser or an a0ent of the plaintiff for the sale of his beds.
In order to classif2 a contract, due re0ard .ust be 0iven to its essential clauses. In
the contract in 5uestion, #hat #as essential, as constitutin0 its cause and sub;ect
.atter, is that the plaintiff #as to furnish the defendant #ith the beds #hich the latter
.i0ht order, at the price stipulated, and that the defendant #as to pa2 the price in the
.anner stipulated. The price a0reed upon #as the one deter.ined b2 the plaintiff for
the sale of these beds in Manila, #ith a discount of fro. /4 to /, per cent, accordin0
to their class. Pa2.ent #as to be .ade at the end of si9t2 da2s, or before, at the
plaintiff<s re5uest, or in cash, if the defendant so preferred, and in these last t#o
cases an additional discount #as to be allo#ed for pro.pt pa2.ent. These are
precisel2 the essential features of a contract of purchase and sale. There #as the
obli0ation on the part of the plaintiff to suppl2 the beds, and, on the part of the
defendant, to pa2 their price. These features e9clude the le0al conception of an
a0enc2 or order to sell #hereb2 the .andator2 or a0ent received the thin0 to sell it,
and does not pa2 its price, but delivers to the principal the price he obtains fro. the
sale of the thin0 to a third person, and if he does not succeed in sellin0 it, he returns
it. "2 virtue of the contract bet#een the plaintiff and the defendant, the latter, on
receivin0 the beds, #as necessaril2 obli0ed to pa2 their price #ithin the ter. fi9ed,
#ithout an2 other consideration and re0ardless as to #hether he had or had not sold
the beds.
It #ould be enou0h to hold, as #e do, that the contract b2 and bet#een the defendant
and the plaintiff is one of purchase and sale, in order to sho# that it #as not one
.ade on the basis of a co..ission on sales, as the plaintiff clai.s it #as, for these
contracts are inco.patible #ith each other. "ut, besides, e9a.inin0 the clauses of
this contract, none of the. is found that substantiall2 supports the plaintiff<s
contention. Not a sin0le one of these clauses necessaril2 conve2s the idea of an
a0enc2. The #ords commission on sales used in clause &%' of article $ .ean nothin0
else, as stated in the contract itself, than a .ere discount on the invoice price. The
#ord agenc$, also used in articles / and -, onl2 e9presses that the defendant #as the
onl2 one that could sell the plaintiff<s beds in the Visa2an Islands. @ith re0ard to the
re.ainin0 clauses, the least that can be said is that the2 are not inco.patible #ith the
contract of purchase and sale.
The plaintiff calls attention to the testi.on2 of rnesto Vidal, a for.er vice(president
of the defendant corporation and #ho established and .ana0ed the latter<s business
in Iloilo. It appears that this #itness, prior to the ti.e of his testi.on2, had serious
trouble #ith the defendant, had .aintained a civil suit a0ainst it, and had even
accused one of its partners, )uiller.o Parsons, of falsification. Ae testified that it #as
he #ho drafted the contract 9hibit %, and, #hen 5uestioned as to #hat #as his
purpose in contractin0 #ith the plaintiff, replied that it #as to ,e an agent for his ,e"s
an" to collect a commission on sales. Ao#ever, accordin0 to the defendant<s
evidence, it #as Mariano Cope7 Santos, a director of the corporation, #ho prepared
9hibit %. "ut, even supposin0 that rnesto Vidal has stated the truth, his state.ent
as to #hat #as his idea in contractin0 #ith the plaintiff is of no i.portance, inas.uch
as the a0ree.ents contained in 9hibit % #hich he clai.s to have drafted, constitute,
as #e have said, a contract of purchase and sale, and not one of co..ercial a0enc2.
This onl2 .eans that rnesto Vidal #as .ista8en in his classification of the contract.
"ut it .ust be understood that a contract is #hat the la# defines it to be, and not #hat
it is called b2 the contractin0 parties.
The plaintiff also endeavored to prove that the defendant had returned beds that it
could not sell: that, #ithout previous notice, it for#arded to the defendant the beds
that it #anted: and that the defendant received its co..ission for the beds sold b2
the plaintiff directl2 to persons in Iloilo. "ut all this, at the .ost onl2 sho#s that, on the
part of both of the., there #as .utual tolerance in the perfor.ance of the contract in
disre0ard of its ter.s: and it 0ives no ri0ht to have the contract considered, not as the
parties stipulated it, but as the2 perfor.ed it. Onl2 the acts of the contractin0 parties,
subse5uent to, and in connection #ith, the e9ecution of the contract, .ust be
considered for the purpose of interpretin0 the contract, #hen such interpretation is
necessar2, but not #hen, as in the instant case, its essential a0ree.ents are clearl2
set forth and plainl2 sho# that the contract belon0s to a certain 8ind and not to
another. Further.ore, the return .ade #as of certain brass beds, and #as not
effected in e9chan0e for the price paid for the., but #as for other beds of another
8ind: and for the letter 9hibit C($, re5uested the plaintiff<s prior consent #ith respect
to said beds, #hich sho#s that it #as not considered that the defendant had a ri0ht,
b2 virtue of the contract, to .a8e this return. %s re0ards the ship.ent of beds #ithout
previous notice, it is insinuated in the record that these brass beds #ere precisel2 the
ones so shipped, and that, for this ver2 reason, the plaintiff a0reed to their return. %nd
#ith respect to the so(called co..issions, #e have said that the2 .erel2 constituted
a discount on the invoice price, and the reason for appl2in0 this benefit to the beds
sold directl2 b2 the plaintiff to persons in Iloilo #as because, as the defendant
obli0ated itself in the contract to incur the e9penses of advertise.ent of the plaintiff<s
beds, such sales #ere to be considered as a result of that advertise.ent.
In respect to the defendant<s obli0ation to order b2 the do7en, the onl2 one e9pressl2
i.posed b2 the contract, the effect of its breach #ould onl2 entitle the plaintiff to
disre0ard the orders #hich the defendant .i0ht place under other conditions: but if
the plaintiff consents to fill the., he #aives his ri0ht and cannot co.plain for havin0
acted thus at his o#n free #ill.
For the fore0oin0 reasons, #e are of opinion that the contract b2 and bet#een the
plaintiff and the defendant #as one of purchase and sale, and that the obli0ations the
breach of #hich is alle0ed as a cause of action are not i.posed upon the defendant,
either b2 a0ree.ent or b2 la#.
The ;ud0.ent appealed fro. is affir.ed, #ith costs a0ainst the appellant. So ordered.
Arellano, C.(., Torres, (ohnson, Street an" Malcolm, ((., concur.
Republic of the Philippines
SDPRM !ODRT
Manila
FIRST DIVISION

).R. No. C(/14** =une -4, $61,
THE COMMISSIONER O2 INTERNAL RE$ENUE, petitioner,
vs.
ENGINEERING E:UIPMENT AND SUPPLY COMPANY AND THE COURT O2 TA<
APPEALS, respondents.
).R. No. C(/1*,/ =une -4, $61,
ENGINEERING E:UIPMENT AND SUPPLY COMPANY, petitioner,
vs.
THE COMMISSIONER O2 INTERNAL RE$ENUE AND THE COURT O2 TA<
APPEALS, respondent.
;ffice of the Solicitor <eneral Antonio P. Barre"o, Assistant Solicitor <eneral Felicisimo #.
#osete, Solicitor =olita ;. <al'lang, an" Special Attorne$ <emaliel !. Montalino for
Commissioner of nternal #evenue, etc.
Melqui"es C. <utierre*, (ose >. ;ng, (uan <. Collas, (r., =uis Ma. <uerrero an" (.#. Balonkita
for ?ngineering an" Suppl$ Compan$.

S)DRR%, (.4
Petition for revie# on certiorari of the decision of the !ourt of Ta9 %ppeals in !T% !ase No. +3$,
dated Nove.ber /6, $6++, assessin0 a co.pensatin0 ta9 of P$1*,**$.+/ on the n0ineerin0
5uip.ent and Suppl2 !o.pan2.
%s found b2 the !ourt of Ta9 %ppeals, and as established b2 the evidence on record, the facts of
this case are as follo#sB
n0ineerin0 5uip.ent and Suppl2 !o. &n0ineerin0 for short', a do.estic corporation, is an
en0ineerin0 and .achiner2 fir.. %s operator of an inte0rated en0ineerin0 shop, it is en0a0ed,
a.on0 others, in the desi0n and installation of central t2pe air conditionin0 s2ste., pu.pin0
plants and steel fabrications. &Vol. I pp. $/($+ T.S.N. %u0ust /-, $6+4'
On =ul2 /1, $6,+, one =uan de la !ru7, #rote the then !ollector, no# !o..issioner, of Internal
Revenue denouncin0 n0ineerin0 for ta9 evasion b2 .isdeclarin0 its i.ported articles and
failin0 to pa2 the correct percenta0e ta9es due thereon in connivance #ith its forei0n suppliers
&9h. ?/? p. $ "IR record Vol. I'. n0ineerin0 #as li8e#ise denounced to the !entral "an8 &!"'
for alle0ed fraud in obtainin0 its dollar allocations. %ctin0 on these denunciations, a raid and
search #as conducted b2 a ;oint tea. of !entral "an8, &!"', National "ureau of Investi0ation
&N"I' and "ureau of Internal Revenue &"IR' a0ents on Septe.ber /1, $6,+, on #hich occasion
volu.inous records of the fir. #ere sei7ed and confiscated. &pp. $1-($11 T.S.N.'
On Septe.ber -4, $6,1, revenue e9a.iners Huesada and !atudan reported and reco..ended
to the then !ollector, no# !o..issioner, of Internal Revenue &hereinafter referred to as
!o..issioner' that n0ineerin0 be assessed for P*34,6$/.4$ as deficienc2 advance sales ta9
on the theor2 that it .isdeclared its i.portation of air conditionin0 units and parts and
accessories thereof #hich are sub;ect to ta9 under Section $3,&.'
$
of the Ta9 !ode, instead of
Section $3+ of the sa.e !ode. &9h. ?-? pp. ,6(+- "IR rec. Vol. I' This assess.ent #as revised
on =anuar2 /-, $6,6, in line #ith the observation of the !hief, "IR Ca# Division, and #as raised
to P6$+,-+/.,+ representin0 deficienc2 advance sales ta9 and .anufacturers sales ta9,
inclusive of the /,G and ,4G surchar0es. &pp. 1/(34 "IR rec. Vol. I'
On March -, $6,6. the !o..issioner assessed a0ainst, and de.anded upon, n0ineerin0
pa2.ent of the increased a.ount and su00ested that P$4,444 be paid as co.pro.ise in
e9tra;udicial settle.ent of n0ineerin0<s penal liabilit2 for violation of the Ta9 !ode. The fir.,
ho#ever, contested the ta9 assess.ent and re5uested that it be furnished #ith the details and
particulars of the !o..issioner<s assess.ent. &9h. ?"? and ?$,?, pp. 3+(33 "IR rec. Vol. I' The
!o..issioner replied that the assess.ent #as in accordance #ith la# and the facts of the
case.
On =ul2 -4, $6,6, n0ineerin0 appealed the case to the !ourt of Ta9 %ppeals and durin0 the
pendenc2 of the case the investi0atin0 revenue e9a.iners reduced n0ineerin0<s deficienc2 ta9
liabilities fro. P6$+,-+/.+, to P1*4,,31.3+ &9hs. ?R? and ?6? pp. $+/($14, "IR rec.', based on
findin0s after conferences had #ith n0ineerin0<s %ccountant and %uditor.
On Nove.ber /6, $6++, the !ourt of Ta9 %ppeals rendered its decision, the dispositive portion of
#hich reads as follo#sB
For %CC TA FOR)OIN) !ONSIDR%TIONS, the decision of respondent
appealed fro. is hereb2 .odified, and petitioner, as a contractor, is
declared e9e.pt fro. the deficienc2 .anufacturers sales ta9 coverin0 the
period fro. =une $, $6*3. to Septe.ber /, $6,+. Ao#ever, petitioner is
ordered to pa2 respondent, or his dul2 authori7ed collection a0ent, the su.
of P$1*,$*$.+/ as co.pensatin0 ta9 and /,G surchar0e for the period fro.
$6,- to Septe.ber $6,+. @ith costs a0ainst petitioner.
The !o..issioner, not satisfied #ith the decision of the !ourt of Ta9 %ppeals, appealed to this
!ourt on =anuar2 $3, $6+1, &).R. No. C(/14**'. On the other hand, n0ineerin0, on =anuar2 *,
$6+1, filed #ith the !ourt of Ta9 %ppeals a .otion for reconsideration of the decision
above.entioned. This #as denied on %pril +, $6+1, pro.ptin0 n0ineerin0 to file also #ith this
!ourt its appeal, doc8eted as ).R. No. C(/1*,/.
Since the t#o cases, ).R. No. C(/14** and ).R. No. C(/1*,/, involve the sa.e parties and
issues, @e have decided to consolidate and ;ointl2 decide the..
n0ineerin0 in its Petition clai.s that the !ourt of Ta9 %ppeals co..itted the follo#in0 errorsB
$. That the !ourt of Ta9 %ppeals erred in holdin0 n0ineerin0 5uip.ent I
Suppl2 !o.pan2 liable to the -4G co.pensatin0 ta9 on its i.portations of
e5uip.ent and ordinar2 articles used in the central t2pe air conditionin0
s2ste.s it desi0ned, fabricated, constructed and installed in the buildin0s
and pre.ises of its custo.ers, rather than to the co.pensatin0 ta9 of onl2
1G:
/. That the !ourt of Ta9 %ppeals erred in holdin0 n0ineerin0 5uip.ent I
Suppl2 !o.pan2 0uilt2 of fraud in effectin0 the said i.portations on the
basis of inco.plete 5uotations fro. the contents of alle0ed photostat copies
of docu.ents sei7ed ille0all2 fro. n0ineerin0 5uip.ent and Suppl2
!o.pan2 #hich should not have been ad.itted in evidence:
-. That the !ourt of Ta9 %ppeals erred in holdin0 n0ineerin0 5uip.ent I
Suppl2 !o.pan2 liable to the /,G surchar0e prescribed in Section $64 of
the Ta9 !ode:
*. That the !ourt of Ta9 %ppeals erred in holdin0 the assess.ent as not
havin0 prescribed:
,. That the !ourt of Ta9 %ppeals erred in holdin0 n0ineerin0 5uip.ent I
Suppl2 !o.pan2 liable for the su. of P$1*,$*$.+/ as -4G co.pensatin0
ta9 and /,G surchar0e instead of co.pletel2 absolvin0 it fro. the
deficienc2 assess.ent of the !o..issioner.
The !o..issioner on the other hand clai.s that the !ourt of Ta9 %ppeals erredB
$. In holdin0 that the respondent co.pan2 is a contractor and not a
.anufacturer.
/. In holdin0 respondent co.pan2 liable to the -G contractor<s ta9 i.posed
b2 Section $6$ of the Ta9 !ode instead of the -4G sales ta9 prescribed in
Section $3,&.' in relation to Section $6*&9' both of the sa.e !ode:
-. In holdin0 that the respondent co.pan2 is sub;ect onl2 to the -4G
co.pensatin0 ta9 under Section $64 of the Ta9 !ode and not to the -4G
advance sales ta9 i.posed b2 section $3- &b', in relation to section $3,&.'
both of the sa.e !ode, on its i.portations of parts and accessories of air
conditionin0 units:
*. In not holdin0 the co.pan2 liable to the ,4G fraud surchar0e under
Section $3- of the Ta9 !ode on its i.portations of parts and accessories of
air conditionin0 units, not#ithstandin0 the findin0 of said court that the
respondent co.pan2 fraudulentl2 .isdeclared the said i.portations:
,. In holdin0 the respondent co.pan2 liable for P$1*,$*$.+/ as
co.pensatin0 ta9 and /,G surchar0e instead of P1*4,,31.3+ as deficienc2
advance sales ta9, deficienc2 .anufacturers ta9 and /,G and ,4G
surchar0e for the period fro. =une $, $6*3 to Dece.ber -$, $6,+.
The .ain issue revolves on the 5uestion of #hether or not n0ineerin0 is a .anufacturer of air
conditionin0 units under Section $3,&.', supra, in relation to Sections $3-&b' and $6* of the
!ode, or a contractor under Section $6$ of the sa.e !ode.
The !o..issioner contends that n0ineerin0 is a .anufacturer and seller of air conditionin0
units and parts or accessories thereof and, therefore, it is sub;ect to the -4G advance sales ta9
prescribed b2 Section $3,&.' of the Ta9 !ode, in relation to Section $6* of the sa.e, #hich
defines a .anufacturer as follo#sB
Section $6*. N @ords and Phrases Defined. N In appl2in0 the provisions
of this Title, #ords and phrases shall be ta8en in the sense and e9tension
indicated belo#B
999 999 999
&9' ?Manufacturer? includes ever2 person #ho b2 ph2sical or che.ical
process alters the e9terior te9ture or for. or inner substance of an2 ra#
.aterial or .anufactured or partiall2 .anufactured products in such .anner
as to prepare it for a special use or uses to #hich it could not have been put
in its ori0inal condition, or #ho b2 an2 such process alters the 5ualit2 of an2
such .aterial or .anufactured or partiall2 .anufactured product so as to
reduce it to .ar8etable shape, or prepare it for an2 of the uses of industr2,
or #ho b2 an2 such process co.bines an2 such ra# .aterial or
.anufactured or partiall2 .anufactured products #ith other .aterials or
products of the sa.e or of different 8inds and in such .anner that the
finished product of such process of .anufacture can be put to special use
or uses to #hich such ra# .aterial or .anufactured or partiall2
.anufactured products in their ori0inal condition could not have been put,
and #ho in addition alters such ra# .aterial or .anufactured or partiall2
.anufactured products, or co.bines the sa.e to produce such finished
products for the purpose of their sale or distribution to others and not for his
o#n use or consu.ption.
In ans#er to the above contention, n0ineerin0 clai.s that it is not a .anufacturer and setter of
air(conditionin0 units and spare parts or accessories thereof sub;ect to ta9 under Section $3,&.'
of the Ta9 !ode, but a contractor en0a0ed in the desi0n, suppl2 and installation of the central
t2pe of air(conditionin0 s2ste. sub;ect to the -G ta9 i.posed b2 Section $6$ of the sa.e !ode,
#hich is essentiall2 a ta9 on the sale of services or labor of a contractor rather than on the sale
of articles sub;ect to the ta9 referred to in Sections $3*, $3, and $3+ of the !ode.
The ar0u.ents of both the n0ineerin0 and the !o..issioner call for a clarification of the ter.
contractor as #ell as the distinction bet#een a contract of sale and contract for furnishin0
services, labor and .aterials. The distinction bet#een a contract of sale and one for #or8, labor
and .aterials is tested b2 the in5uir2 #hether the thin0 transferred is one not in e9istence and
#hich never #ould have e9isted but for the order of the part2 desirin0 to ac5uire it, or a thin0
#hich #ould have e9isted and has been the sub;ect of sale to so.e other persons even if the
order had not been 0iven.
/
If the article ordered b2 the purchaser is e9actl2 such as the plaintiff
.a8es and 8eeps on hand for sale to an2one, and no chan0e or .odification of it is .ade at
defendant<s re5uest, it is a contract of sale, even thou0h it .a2 be entirel2 .ade after, and in
conse5uence of, the defendants order for it.
-
Our Ne# !ivil !ode, li8e#ise distin0uishes a contract of sale fro. a contract for a piece of #or8
thusB
%rt. $*+1. % contract for the deliver2 at a certain price of an article #hich the
vendor in the ordinar2 course of his business .anufactures or procures for
the 0eneral .ar8et, #hether the sa.e is on hand at the ti.e or not, is a
contract of sale, but if the 0oods are to be .anufactured speciall2 for the
custo.er and upon his special order and not for the 0eneral .ar8et, it is a
contract for a piece of #or8.
The #ord ?contractor? has co.e to be used #ith special reference to a person #ho, in the
pursuit of the independent business, underta8es to do a specific ;ob or piece of #or8 for other
persons, usin0 his o#n .eans and .ethods #ithout sub.ittin0 hi.self to control as to the pett2
details. &%raMas, %nnotations and =urisprudence on the National Internal Revenue !ode, p. -$3,
par. $6$ &/', $614 d.' The true test of a contractor as #as held in the cases of =u*on
Steve"oring Co., vs. Trini"a", *-, Phil. 34-, 341(343, and =a Carlota Sugar Central vs.
Trini"a", *-, Phil. 3$+, 3$6, #ould see. to be that he renders service in the course of an
independent occupation, representin0 the #ill of his e.plo2er onl2 as to the result of his #or8,
and not as to the .eans b2 #hich it is acco.plished.
@ith the fore0oin0 criteria as 0uideposts, @e shall no# e9a.ine #hether n0ineerin0 reall2 did
?.anufacture? and sell, as alle0ed b2 the !o..issioner to hold it liable to the advance sales ta9
under Section $3,&.', or it onl2 had its services ?contracted? for installation purposes to hold it
liable under section $63 of the Ta9 !ode.
I
%fter 0oin0 over the three volu.es of steno0raphic notes and the volu.inous record of the "IR
and the !T% as #ell as the e9hibits sub.itted b2 both parties, @e find that n0ineerin0 did not
.anufacture air conditionin0 units for sale to the 0eneral public, but i.ported so.e ite.s &as
refri0eration co.pressors in co.plete set, heat e9chan0ers or coils, t.s.n. p. -6' #hich #ere
used in e9ecutin0 contracts entered into b2 it. n0ineerin0, therefore, undertoo8 ne0otiations
and e9ecution of individual contracts for the desi0n, suppl2 and installation of air conditionin0
units of the central t2pe &t.s.n. pp. /4(-+: 9hs. ?F?, ?)?, ?A?, ?I?, ?=?, ?O?, ?C?, and ?M?', ta8in0
into consideration in the process such factors as the area of the space to be air conditioned: the
nu.ber of persons occup2in0 or #ould be occup2in0 the pre.ises: the purpose for #hich the
various air conditionin0 areas are to be used: and the sources of heat 0ain or coolin0 load on the
plant such as sun load, li0htin0, and other electrical appliances #hich are or .a2 be in the plan.
&t.s.n. p. -*, Vol. I' n0ineerin0 also testified durin0 the hearin0 in the !ourt of Ta9 %ppeals that
relative to the installation of air conditionin0 s2ste., n0ineerin0 desi0ned and en0ineered
co.plete each particular plant and that no t#o plants #ere identical but each had to be
en0ineered separatel2.
%s found b2 the lo#er court, #hich findin0
*
@e adopt N
n0ineerin0, in a nutshell, fabricates, asse.bles, supplies and installs in the
buildin0s of its various custo.ers the central t2pe air conditionin0 s2ste.:
prepares the plans and specifications therefor #hich are distinct and
different fro. each other: the air conditionin0 units and spare parts or
accessories thereof used b2 petitioner are not the #indo# t2pe of air
conditioner #hich are .anufactured, asse.bled and produced locall2 for
sale to the 0eneral .ar8et: and the i.ported air conditionin0 units and
spare parts or accessories thereof are supplied and installed b2 petitioner
upon previous orders of its custo.ers confor.abl2 #ith their needs and
re5uire.ents.
The facts and circu.stances afore5uoted support the theor2 that n0ineerin0 is a contractor
rather than a .anufacturer.
The !o..issioner in his "rief ar0ues that ?it is .ore in accord #ith reason and sound business
.ana0e.ent to sa2 that an2one #ho desires to have air conditionin0 units installed in his
pre.ises and #ho is in a position and #illin0 to pa2 the price can order the sa.e fro. the
co.pan2 &n0ineerin0' and, therefore, n0ineerin0 could have .ass produced and stoc8piled
air conditionin0 units for sale to the public or to an2 custo.er #ith enou0h .one2 to bu2 the
sa.e.? This is untenable in the li0ht of the fact that air conditionin0 units, pac8a0ed, or #hat #e
8no# as self(contained air conditionin0 units, are distinct fro. the central s2ste. #hich
n0ineerin0 dealt in. To Our .ind, the distinction as e9plained b2 n0ineerin0, in its "rief,
5uotin0 fro. boo8s, is not an idle pla2 of #ords as clai.ed b2 the !o..issioner, but a
si0nificant fact #hich @e ;ust cannot i0nore. %s 5uoted b2 n0ineerin0 5uip.ent I Suppl2 !o.,
fro. an n0ineerin0 handboo8 b2 C.!. Morro#, and #hich @e reproduce hereunder for eas2
referenceB
... there is a 0reat variet2 of e5uip.ent in use to do this ;ob &of air
conditionin0'. So.e devices are desi0ned to serve a specific t2pe of space:
others to perfor. a specific function: and still others as co.ponents to be
asse.bled into a tailor(.ade s2ste. to fit a particular buildin0. )enerall2,
ho#ever, the2 .a2 be 0rouped into t#o classifications N unitar2 and central
s2ste..
The unitar2 e5uip.ent classification includes those desi0ns such as roo.
air conditioner, #here all of the functional co.ponents are included in one
or t#o pac8a0es, and installation involves onl2 .a8in0 service connection
such as electricit2, #ater and drains. !entral(station s2ste.s, often referred
to as applied or built(up s2ste.s, re5uire the installation of co.ponents at
different points in a buildin0 and their interconnection.
The roo. air conditioner is a unitar2 e5uip.ent desi0ned specificall2 for a
roo. or si.ilar s.all space. It is uni5ue a.on0 air conditionin0 e5uip.ent
in t#o respectsB It is in the electrical appliance classification, and it is .ade
b2 a 0reat nu.ber of .anufacturers.
There is also the testi.on2 of one !arlos Navarro, a licensed Mechanical and lectrical
n0ineer, #ho #as once the !hair.an of the "oard of 9a.iners for Mechanical n0ineers and
#ho #as alle0edl2 responsible for the preparation of the refri0eration and air conditionin0 code
of the !it2 of Manila, #ho said that ?the central t2pe air conditionin0 s2ste. is an en0ineerin0 ;ob
that re5uires plannin0 and .eticulous la2out due to the fact that usuall2 architects assi0n
definite space and usuall2 the spaces the2 assi0n are ver2 s.all and of various si7es.
!ontinuin0 further, he testifiedB
I don<t thin8 I have seen central t2pe of air conditionin0 .achiner2 roo. that
are e9actl2 ali8e because all our buildin0s here are desi0ned b2 architects
dissi.ilar to e9istin0 buildin0s, and usuall2 the2 don<t coordinate and 0et the
advice of air conditionin0 and refri0eratin0 en0ineers so .uch so that #hen
#e co.e to desi0n, #e have to .a8e use of the available space that the2
are assi0nin0 to us so that #e have to desi0n the different co.ponent parts
of the air conditionin0 s2ste. in such a #a2 that #ill be acco..odated in
the space assi0ned and after#ards the s2ste. .a2 be considered as a
definite portion of the buildin0. ...
Definitel2 there is 5uite a bi0 difference in the operation because the #indo#
t2pe air conditioner is a sort of co.pro.ise. In fact it cannot control hu.idit2
to the desired level: rather the .anufacturers, b2 hit and .iss, #ere able to
satisf2 the.selves that the desired co.fort #ithin a roo. could be .ade b2
a definite settin0 of the .achine as it co.es fro. the factor2: #hereas the
central t2pe s2ste. definitel2 re5uires an intelli0ent operator. &t.s.n. pp. -4$(
-4,, Vol. II'
The point, therefore, is this N n0ineerin0 definitel2 did not and #as not en0a0ed in the
.anufacture of air conditionin0 units but had its services contracted for the installation of a
central s2ste.. The cases cited b2 the !o..issioner &%dvertisin0 %ssociates, Inc. vs. !ollector
of !usto.s, 61, Phil. +-+: !elestino !o I !o. vs. !ollector of Internal Revenue, 66 Phil. 3*$
and Manila Tradin0 I Suppl2 !o. vs. !it2 of Manila, ,+ O.). -+/6', are not in point. Neither are
the2 applicable because the facts in all the cases cited are entirel2 different. Ta8e for instance
the case of !elestino !o #here this !ourt held the ta9pa2er to be a .anufacturer rather than a
contractor of sash, doors and #indo#s .anufactured in its factor2. Indeed, fro. the ver2 start,
!elestino !o intended itself to be a .anufacturer of doors, #indo#s, sashes etc. as it did
re0ister a special trade na.e for its sash business and ordered co.pan2 stationer2 carr2in0 the
bold print ?ORINT%C S%SA F%!TORE &!CSTINO !O %ND !OMP%NE, PROP.' 6/+ Raon
St., Huiapo, Manila, Tel. No. etc., Manufacturers of %ll Oinds of Doors, @indo#s ... .? Ci8e#ise,
!elestino !o never put up a contractor<s bond as re5uired b2 %rticle $1/6 of the !ivil !ode.
%lso, as a 0eneral rule, sash factories receive orders for doors and #indo#s of special desi0n
onl2 in particular cases, but the bul8 of their sales is derived fro. read2(.ade doors and
#indo#s of standard si7es for the avera0e ho.e, #hich ?sales? #ere reflected in their boo8s of
accounts totallin0 P$$3,1,*.+6 for the period fro. =anuar2, $6,/ to Septe.ber -4, $6,/, or for
a period of onl2 nine &6' .onths. This !ourt found said su. difficult to have been derived fro.
its fe# custo.ers #ho placed special orders for these ite.s. %ppl2in0 the abovestated facts to
the case at bar, @e found the. to he inapposite. n0ineerin0 advertised itself as n0ineerin0
5uip.ent and Suppl2 !o.pan2, Machiner2 Mechanical Supplies, n0ineers, !ontractors, $1*
Mar5ues de !o.illas, Manila &9h. ?"? and ?$,? "IR rec. p. $3+', and not as .anufacturers. It
li8e#ise paid the contractors ta9 on all the contracts for the desi0n and construction of central
s2ste. as testified to b2 Mr. Re2 Par8er, its President and )eneral Mana0er. &t.s.n. p. $4/, $4-'
Si.ilarl2, n0ineerin0 did not have read2(.ade air conditionin0 units for sale but as per
testi.on2 of Mr. Par8er upon in5uir2 of =ud0e Cuciano of the !T% N
H N %side fro. the 0eneral co.ponents, #hich 0o into
air conditionin0 plant or s2ste. of the central t2pe
#hich 2our co.pan2 underta8es, and the procedure
follo#ed b2 2ou in obtainin0 and e9ecutin0 contracts
#hich 2ou have alread2 testified to in previous hearin0,
#ould 2ou sa2 that the coverin0 contracts for these
different pro;ects listed ... referred to in the list, 9h. ?F?
are identical in ever2 respectL I .ean ever2 plan or
s2ste. covered b2 these different contracts are
identical in standard in ever2 respect, so that 2ou can
reproduce the.L
% N No, sir. The2 are not all standard. On the contrar2,
none of the. are the sa.e. ach one .ust be
desi0ned and constructed to .eet the particular
re5uire.ents, #hether the application is to be operated.
&t.s.n. pp. $4$($4/'
@hat @e consider as on all fours #ith the case at bar is the case of S.M. =a-rence Co. vs.
McFarlan",!o..issioner of Internal Revenue of the State of Tennessee and Mc!anless, -,,
S@ /d, $44, $4$, ?#here the cause presents the 5uestion of #hether one en0a0ed in the
business of contractin0 for the establish.ent of air conditionin0 s2ste. in buildin0s, #hich #or8
re5uires, in addition to the furnishin0 of a coolin0 unit, the connection of such unit #ith electrical
and plu.bin0 facilities and the installation of ducts #ithin and throu0h #alls, ceilin0s and floors
to conve2 cool air to various parts of the buildin0, is liable for sale or use ta9 as a contractor
rather than a retailer of tan0ible personal propert2. %ppellee too8 the Position that appellant #as
not en0a0ed in the business of sellin0 air conditionin0 e5uip.ent as such but in the furnishin0 to
its custo.ers of co.pleted air conditionin0 s2ste.s pursuant to contract, #as a contractor
en0a0ed in the construction or i.prove.ent of real propert2, and as such #as liable for sales or
use ta9 as the consu.er of .aterials and e5uip.ent used in the consu..ation of contracts,
irrespective of the ta9 status of its contractors. To trans.it the #ar. or cool air over the
buildin0s, the appellant installed s2ste. of ducts runnin0 fro. the basic units throu0h #alls,
ceilin0s and floors to re0isters. The contract called for co.pleted air conditionin0 s2ste.s #hich
beca.e per.anent part of the buildin0s and i.prove.ents to the realt2.? The !ourt held the
appellant a contractor #hich used the .aterials and the e5uip.ent upon the value of #hich the
ta9 herein i.posed #as levied in the perfor.ance of its contracts #ith its custo.ers, and that
the custo.ers did not purchase the e5uip.ent and have the sa.e installed.
%ppl2in0 the facts of the afore.entioned case to the present case, @e see that the suppl2 of air
conditionin0 units to n0ineer<s various custo.ers, #hether the said .achineries #ere in hand
or not, #as especiall2 .ade for each custo.er and installed in his buildin0 upon his special
order. The air conditionin0 units installed in a central t2pe of air conditionin0 s2ste. #ould not
have e9isted but for the order of the part2 desirin0 to ac5uire it and if it e9isted #ithout the
special order of n0ineerin0<s custo.er, the said air conditionin0 units #ere not intended for sale
to the 0eneral public. Therefore, @e have but to affir. the conclusion of the !ourt of Ta9
%ppeals that n0ineerin0 is a contractor rather than a .anufacturer, sub;ect to the contractors
ta9 prescribed b2 Section $6$ of the !ode and not to the advance sales ta9 i.posed b2 Section
$3,&.' in relation to Section $6* of the sa.e !ode. Since it has been proved to Our satisfaction
that n0ineerin0 i.ported air conditionin0 units, parts or accessories thereof for use in its
construction business and these ite.s #ere never sold, resold, bartered or e9chan0ed,
n0ineerin0 should be held liable to pa2 ta9es prescribed under Section $64
,
of the !ode. This
co.pensatin0 ta9 is not a ta9 on the i.portation of 0oods but a ta9 on the use of i.ported 0oods
not sub;ect to sales ta9. n0ineerin0, therefore, should be held liable to the pa2.ent of -4G
co.pensatin0 ta9 in accordance #ith Section $64 of the Ta9 !ode in relation to Section $3,&.'
of the sa.e, but #ithout the ,4G .ar8 up provided in Section $3-&b'.
II
@e ta8e up ne9t the issue of fraud. The !o..issioner char0ed n0ineerin0 #ith .isdeclaration
of the i.ported air conditionin0 units and parts or accessories thereof so as to .a8e the.
sub;ect to a lo#er rate of percenta0e ta9 &1G' under Section $3+ of the Ta9 !ode, #hen the2 are
alle0edl2 sub;ect to a hi0her rate of ta9 &-4G' under its Section $3,&.'. This char0e of fraud #as
denied b2 n0ineerin0 but the !ourt of Ta9 %ppeals in its decision found adversel2 and said?
... @e are a.pl2 convinced fro. the evidence presented b2 respondent that
petitioner deliberatel2 and purposel2 .isdeclared its i.portations. This
evidence consists of letters #ritten b2 petitioner to its forei0n suppliers,
instructin0 the. on ho# to invoice and describe the air conditionin0 units
ordered b2 petitioner. ... &p. /$3 !T% rec.'
Despite the above findin0s, ho#ever, the !ourt of Ta9 %ppeals absolved n0ineerin0 fro.
pa2in0 the ,4G surchar0e prescribe b2 Section $3-&a' of the Ta9 !ode b2 reasonin0 out as
follo#sB
The i.position of the ,4G surchar0e prescribed b2 Section $3-&a' of the
Ta9 !ode is based on #illful ne0lect to file the .onthl2 return #ithin /4 da2s
after the end of each .onth or in case a false or fraudulent return is #illfull2
.ade, it can readil2 be seen, that petitioner cannot le0all2 be held sub;ect to
the ,4G surchar0e i.posed b2 Section $3-&a' of the Ta9 !ode. Neither can
petitioner be held sub;ect to the ,4G surchar0e under Section $64 of the
Ta9 !ode dealin0 on co.pensatin0 ta9 because the provisions thereof do
not include the ,4G surchar0e. @here a particular provision of the Ta9
!ode does not i.pose the ,4G surchar0e as fraud penalt2 #e cannot
enforce a non(e9istin0 provision of la# not#ithstandin0 the assess.ent of
respondent to the contrar2. Instances of the e9clusion in the Ta9 !ode of the
,4G surchar0e are those dealin0 on ta9 on ban8s, ta9es on receipts of
insurance co.panies, and franchise ta9. Ao#ever, if the Ta9 !ode i.poses
the ,4G surchar0e as fraud penalt2, it e9pressl2 so provides as in the cases
of inco.e ta9, estate and inheritance ta9es, 0ift ta9es, .inin0 ta9,
a.use.ent ta9 and the .onthl2 percenta0e ta9es. %ccordin0l2, #e hold that
petitioner is not sub;ect to the ,4G surchar0e despite the e9istence of fraud
in the absence of le0al basis to support the i.portation thereof. &p. //3 !T%
rec.'
@e have 0one over the e9hibits sub.itted b2 the !o..issioner evidencin0 fraud co..itted b2
n0ineerin0 and @e reproduce so.e of the. hereunder for clarit2.
%s earl2 as March $3, $6,-, n0ineerin0 in a letter of even date #rote to Trane !o. &9h. ?-(O?
pp. $,/($,,, "IR rec.' vi*4
Eour invoices should be .ade in the na.e of Madri0al I !o., Inc., Manila,
Philippines, c>o n0ineerin0 5uip.ent I Suppl2 !o., Manila, Philippines N
for#ardin0 all correspondence and shippin0 papers concernin0 this order to
us onl2 and not to the custo.er.
@hen invoicin0, 2our invoices should be e9actl2 as detailed in the
custo.er<s Cetter Order dated March $*th, $6,- attached. This is in
accordance #ith the Philippine i.port licenses 0ranted to Madri0al I !o.,
Inc. and such details .ust onl2 be sho#n on all papers and shippin0
docu.ents for this ship.ent. +o mention of -or"s air con"itioning
equipment shoul" ,e ma"e on an$ shipping "ocuments as -ell as on the
cases. Please 0ive this .atter 2our careful attention, other#ise 0reat
difficulties #ill be encountered #ith the Philippine "ureau of !usto.s #hen
clearin0 the ship.ent on its arrival in Manila. %ll invoices and cases should
be .ar8ed ?TAIS HDIPMNT FOR RIP%C !MNT !O.?
The sa.e instruction #as .ade to %c.e Industries, Inc., San Francisco, !alifornia in a letter
dated March $6, $6,- &9h. ?-(=($? pp. $,4($,$, "IR rec.'
On %pril +, $6,-, n0ineerin0 #rote to O#ens(!ornin0 Fiber0lass !orp., Ne# Eor8, D.S.%. &9h.
?-($? pp. $*1($*6, "IR rec.' also en;oinin0 the latter fro. .entionin0 or referrin0 to the ter. <air
conditionin0< and to describe the 0oods on order as Fiber0lass pipe and pipe fittin0 insulation
instead. Ci8e#ise on %pril -4, $6,-, n0ineerin0 threatened to discontinue the for#ardin0
service of Dniversal Transcontinental !orporation #hen it #rote Trane !o. &9h. ?-(A? p. $*+,
"IR rec.'B
It #ill be noted that the Dniversal Transcontinental !orporation is not
follo#in0 throu0h on the instructions #hich have been covered b2 the above
correspondence, and #hich indicates the necessit2 of discontinuin0 the use
of the ter. ?%ir conditionin0 Machiner2 or %ir !oolers?. Our instructions
concernin0 this 0eneral situation have been sent to 2ou in a.ple ti.e to
have avoided this error in ter.inolo02, and #e #ill as8 that on receipt of this
letter that 2ou a0ain #rite to Dniversal Transcontinental !orp. and infor.
the. that, if in the future, the2 are unable to cooperate #ith us on this
re5uire.ent, #e #ill thereafter be unable to utili7e their for#ardin0 service.
Please infor. the. that #e #ill not tolerate another failure to follo# our
re5uire.ents.
%nd on =ul2 $1, $6,- &9h( ?-(0? p. $*,, "IR rec.' n0ineerin0 #rote Trane !o. another
letter, vi*4
In the past, #e have al#a2s paid the air conditionin0 ta9 on cli.ate
chan0ers and that .ar8 is reco0ni7ed in the Philippines, as air conditionin0
e5uip.ent. This .atter of avoidin0 an2 tie(in on air conditionin0 is ver2
i.portant to us, and #e are as8in0 that fro. hereon that #hoever ta8es
care of the processin0 of our orders be carefull2 instructed so as to avoid
a0ain usin0 the ter. ?!li.ate chan0ers? or in an2 #a2 referrin0 to the
e5uip.ent as ?air conditionin0.?
%nd in response to the afore5uoted letter, Trane !o. #rote on =ul2 -4, $6,-, su00estin0 a
solution, vi*4
@e feel that #e can probabl2 solve all the proble.s b2 follo#in0 the
procedure outlined in 2our letter of March /,, $6,- #herein 2ou stated that
in all future ;obs 2ou #ould enclose photostatic copies of 2our i.port license
so that #e .i0ht .a8e up t#o sets of invoicesB one set describin0
e5uip.ent ordered si.pl2 accordin0 to the #a2 that the2 are listed on the
i.port license and another accordin0 to our ordinar2 re0ular .ethods of
order #rite(up. @e #ould then include the set .ade up accordin0 to the
i.port license in the shippin0 bo9es the.selves and use those ite.s as our
actual shippin0 docu.ents and invoices, and #e #ill send the other re0ular
invoice to 2ou, b2 separate correspondence. &9h( No. ?-(F($?, p. $** "IR
rec.'
%nother interestin0 letter of n0ineerin0 is one dated %u0ust /1, $6,, &9h. ?-(!? p. $*$ "IR
rec.'
In the process of clearin0 the ship.ent fro. the piers, one of the !usto.s
inspectors re5uested to see the pac8in0 list. Dpon presentin0 the pac8in0
list, it #as discovered that the sa.e #as prepared on a cop2 of 2our
letterhead #hich indicated that the Trane !o. .anufactured air conditionin0,
heatin0 and heat transfer e5uip.ent. %ccordin0l2, the inspectors insisted
that this e5uip.ent #as bein0 i.ported for air conditionin0 purposes.To
"ate, -e have not ,een a,le to clear the shipment an" it is possi,le that -e
-ill ,e require" to pa$ heav$ ta7es on equipment.
The purpose of this letter is to request that in the future, no "ocuments of
an$ kin" shoul" ,e sent -ith the or"er that in"icate in an$ -a$ that the
equipment coul" possi,l$ ,e use" for air con"itioning.
It is reali7ed that this a broad re5uest and fairl2 difficult to acco.plish and
ad.inister, but #e believe #ith proper caution it can be e9ecuted. Eour
cooperation and close supervision concernin0 these .atters #ill be
appreciated. &.phasis supplied'
The afore5uoted co..unications are stron0l2 indicative of the fraudulent intent of n0ineerin0
to .isdeclare its i.portation of air conditionin0 units and spare parts or accessories thereof to
evade pa2.ent of the -4G ta9. %nd since the co..ission of fraud is alto0ether too 0larin0, @e
cannot a0ree #ith the !ourt of Ta9 %ppeals in absolvin0 n0ineerin0 fro. the ,4G fraud
surchar0e, other#ise @e #ill be 0ivin0 pre.iu. to a plainl2 intolerable act of ta9 evasion. %s
aptl2 stated b2 then Solicitor )eneral, no# =ustice, %ntonio P. "arredoB <this circu.stance #ill
not free it fro. the ,4G surchar0e because in an2 case #hether it is sub;ect to advance sales
ta9 or co.pensatin0 ta9, it is re5uired b2 la# to trul2 declare its i.portation in the i.port entries
and internal revenue declarations before the i.portations .a2be released fro. custo.s
custod2. The said entries are the ver2 docu.ents #here the nature, 5uantit2 and value of the
i.ported 0oods declared and #here the custo.s duties, internal revenue ta9es, and other fees
or char0es incident to the i.portation are co.puted. These entries, therefore, serve the sa.e
purpose as the returns re5uired b2 Section $3-&a' of the !ode.<
%nent the /,G delin5uenc2 surchar0e, @e full2 a0ree to the rulin0 .ade b2 the !ourt of Ta9
%ppeals and hold n0ineerin0 liable for the sa.e. %s held b2 the lo#er courtB
%t first blush it #ould see. that the contention of petitioner that it is not
sub;ect to the delin5uenc2, surchar0e of /,G is sound, valid and tenable.
Ao#ever, a serious stud2 and critical anal2sis of the historical provisions of
Section $64 of the Ta9 !ode dealin0 on co.pensatin0 ta9 in relation to
Section $3-&a' of the sa.e !ode, #ill sho# that the contention of petitioner
is #ithout .erit. The ori0inal te9t of Section $64 of !o..on#ealth %ct *++,
other#ise 8no#n as the National Internal Revenue !ode, as a.ended b2
!o..on#ealth %ct No. ,4-, effective on October $, $6-6, does not provide
for the filin0 of a co.pensation ta9 return and pa2.ent of the /, G
surchar0e for late pa2.ent thereof. Dnder the ori0inal te9t of Section $64 of
the Ta9 !ode as a.ended b2 !o..on#ealth %ct No. ,4-, the contention of
the petitioner that it is not sub;ect to the /,G surchar0e appears to be
le0all2 tenable. Ao#ever, Section $64 of the Ta9 !ode #as subse5uentl2
a.ended b2 the Republic %cts Nos. /,-, -+$, $,$$ and $+$/ effective
October $, $6*+, =ul2 $, $6*3, =une 6, $6*6, =une $+, $6,+ and %u0ust /*,
$6,+ respectivel2, #hich invariabl2 provides a.on0 others, the follo#in0B
... If an2 article #ithdra#n fro. the custo.house or the
post office #ithout pa2.ent of the co.pensatin0 ta9 is
subse5uentl2 used b2 the i.porter for other purposes,
correspondin0 entr2 should be .ade in the boo8s of
accounts if an2 are 8ept or a #ritten notice thereof sent
to the !ollector of Internal Revenue and pa2.ent of the
correspondin0 co.pensatin0 ta9 .ade #ithin -4 da2s
fro. the date of such entr2 or notice and if ta9 is not
paid #ithin such period the a.ount of the ta9 shall be
increased b2 /,G the incre.ent to be a part of the ta9.
Since the i.ported air conditionin0 units(and spare parts or accessories thereof are sub;ect to
the co.pensatin0 ta9 of -4G as the sa.e #ere used in the construction business of
n0ineerin0, it is incu.bent upon the latter to co.pl2 #ith the afore5uoted re5uire.ent of
Section $64 of the !ode, b2 postin0 in its boo8s of accounts or notif2in0 the !ollector of Internal
Revenue that the i.ported articles #ere used for other purposes #ithin -4 da2s. ...
!onse5uentl2: as the -4G co.pensatin0 ta9 #as not paid b2 petitioner #ithin the ti.e
prescribed b2 Section $64 of the Ta9 !ode as a.ended, it is therefore sub;ect to the /,G
surchar0e for delin5uenc2 in the pa2.ent of the said ta9. &pp. //*(//+ !T% rec.'
III
Castl2 the 5uestion of prescription of the ta9 assess.ent has been put in issue. n0ineerin0
contends that it #as not 0uilt2 of ta9 fraud in effectin0 the i.portations and, therefore, Section
--/&a' prescribin0 ten 2ears is inapplicable, clai.in0 that the pertinent prescriptive period is five
2ears fro. the date the 5uestioned i.portations #ere .ade. % revie# of the record ho#ever
reveals that n0ineerin0 did file a ta9 return or declaration #ith the "ureau of !usto.s before it
paid the advance sales ta9 of 1G. %nd the declaration filed reveals that it did in fact .isdeclare
its i.portations. Section --/ of the Ta9 !ode #hich providesB
Section --/. N 9ceptions as to period of li.itation of assess.ent and
collection of ta9es. N
&a' In the case of a false or fraudulent return #ith intent to evade ta9 or of a
failure to file a return, the ta9 .a2 be assessed, or a proceedin0 in court for
the collection of such ta9 .a2 be be0un #ithout assess.ent at an2 ti.e
#ithin ten 2ears after the discover2 of the falsit2, fraud or o.ission.
is applicable, considerin0 the preponderance of evidence of fraud #ith the intent to evade the
hi0her rate of percenta0e ta9 due fro. n0ineerin0. The, ta9 assess.ent #as .ade #ithin the
period prescribed b2 la# and prescription had not set in a0ainst the )overn.ent.
@ARFOR, the decision appealed fro. is affir.ed #ith the .odification that n0ineerin0 is
hereb2 also .ade liable to pa2 the ,4G fraud surchar0e.
SO ORDRD.
Makalintal, C.(., Castro, Makasiar an" Martin, ((., concur.
Republic of the Philippines
SUPREME COURT
Manila
TAIRD DIVISION
G.R. No. 169888 #1'+1r4 20, 2006
ENRICO S. EULOGIO, Petitioner,
vs.
SPOUSES CLEMENTE APELES
1
1') LU= APELES, Respondents.
D ! I S I O N
CHICO"NA=ARIO, J!
Petitioner nrico S. ulo0io &nrico' filed this instant Petition for Revie# on !ertiorari under Rule *, of
the Revised Rules of !ourt assailin0 the Decision
/
dated /4 Dece.ber /44* of the !ourt of %ppeals in
!%().R. !V No. 1+6-- #hich reversed the Decision
-
dated 3 October /44/ of the Re0ional Trial !ourt
&RT!' of Hue7on !it2, "ranch /$,, in !ivil !ase No. H(66(-+3-*. The RT! directed respondents,
spouses !le.ente and Cu7 %peles &spouses %peles' to e9ecute a Deed of Sale over a piece of real
propert2 in favor of nrico after the latterQs pa2.ent of full consideration therefor.
The factual and procedural antecedents of the present case are as follo#sB
The real propert2 in 5uestion consists of a house and lot situated at No. 31 Ti.o0 %venue, Hue7on
!it2 &sub;ect propert2'. The lot has an area of -+4.+4 s5uare .eters, covered b2 Transfer !ertificate of
Title No. /,-664 issued b2 the Re0istr2 of Deeds of Hue7on !it2 in the na.es of the spouses %peles.
*
In $616, the spouses %peles leased the sub;ect propert2 to %rturo ulo0io &%rturo', nricoQs father.
Dpon %rturoQs death, his son nrico succeeded as lessor of the sub;ect propert2. nrico used the
sub;ect propert2 as his residence and place of business. nrico #as en0a0ed in the business of bu2in0
and sellin0 i.ported cars.
,
On + =anuar2 $631, the spouses %peles and nrico alle0edl2 entered into a !ontract of Cease
+
#ith
Option to Purchase involvin0 the sub;ect propert2. %ccordin0 to the said lease contract, Cu7 %peles #as
authori7ed to enter into the sa.e as the attorne2(in(fact of her husband, !le.ente, pursuant to a
Special Po#er of %ttorne2 e9ecuted b2 the latter in favor of the for.er on /* =anuar2 $616. The
contract purportedl2 afforded nrico, before the e9piration of the three(2ear lease period, the option to
purchase the sub;ect propert2 for a price not e9ceedin0P$., Million. The pertinent provisions of the
!ontract of Cease are reproduced belo#B
-. That this !ontract shall be effective co..encin0 fro. =anuar2 /+, $631 and shall re.ain
valid and bindin0 for TAR &-' E%RS fro. the said date. The CSSOR hereb2 0ives the
CSS under this !ontract of Cease the ri0ht and option to bu2 the sub;ect house and lot
#ithin the said -(2ear lease period.
*. That the purchase price or total consideration of the house and lot sub;ect of this !ontract
of Cease shall, should the CSS e9ercise his option to bu2 it on or before the e9piration
of the -(2ear lease period, be fi9ed or a0reed upon b2 the CSSOR and the CSS,
Provided, that the said purchase price, as it is hereb2 a0reed, shall not be .ore than ON
MICCION FIV ADNDRD TAODS%ND PSOS &P$,,44,444.44' and, provided further, that
the .onthl2 rentals paid b2 the CSS to the CSSOR durin0 the -(2ear lease period
shall for. part of or be deducted fro. the purchase price or total consideration as .a2
hereafter be .utuall2 fi9ed or a0reed upon b2 the CSSOR and the CSS.
,. That if the CSS shall 0ive oral or #ritten notice to the CSSOR on or before the
e9pir2 date of the -(2ear lease period stipulated herein of his desire to e9ercise his option to
bu2 or purchase the house and lot herein leased, the CSSOR upon receipt of the purchase
price>total consideration as fi9ed or a0reed upon less the total a.ount of .onthl2 rentals
paid the CSS durin0 the -(2ear lease period shall e9ecute the appropriate Deed to
SCC, TR%NSFR and !ONVE the house and lot sub;ect of this !ontract in favor of the
CSS, his heirs, successors and assi0ns, to0ether #ith all the fi9tures and accessories
therein, free fro. all liens and encu.brances.
"efore the e9piration of the three(2ear lease period provided in the lease contract, nrico e9ercised his
option to purchase the sub;ect propert2 b2 co..unicatin0 verball2 and in #ritin0 to Cu7 his #illin0ness
to pa2 the a0reed purchase price, but the spouses %peles supposedl2 i0nored nricoQs .anifestation.
This pro.pted nrico to see8 recourse fro. the ,aranga$ for the enforce.ent of his ri0ht to purchase
the sub;ect propert2, but despite several notices, the spouses %peles failed to appear before
the ,aranga$ for settle.ent proceedin0s. Aence, the,aranga$ issued to nrico a !ertificate to File
%ction.
1
In a letter dated /+ =anuar2 $661 to nrico, the spouses %peles de.anded that he pa2 his rental
arrears fro. =anuar2 $66$ to Dece.ber $66+ and he vacate the sub;ect propert2 since it #ould be
needed b2 the spouses %peles the.selves.
@ithout heedin0 the de.and of the spouses %peles, nrico instituted on /- Februar2 $666 a
!o.plaint for Specific Perfor.ance #ith Da.a0es a0ainst the spouses %peles before the RT!,
doc8eted as !ivil !ase No. H(66(-+3-*. nricoQs cause of action is founded on para0raph , of the
!ontract of Cease #ith Option to Purchase vestin0 hi. #ith the ri0ht to ac5uire o#nership of the
sub;ect propert2 after pa2in0 the a0reed a.ount of consideration.
Follo#in0 the pre(trial conference, trial on the .erits ensued before the RT!.
nrico hi.self testified as the sole #itness for his side. Ae narrated that he and Cu7 entered into the
!ontract of Cease #ith Option to Purchase on /+ =anuar2 $631, #ith Cu7 si0nin0 the said !ontract at
nricoQs office in Ti.o0 %venue, Hue7on !it2. The !ontract #as notari7ed on the sa.e da2 as
evidenced b2 the !ertification on the Notar2 PublicQs Report issued b2 the !ler8 of !ourt of the RT! of
Manila.
3
On the other hand, the spouses %peles denied that Cu7 si0ned the !ontract of Cease #ith Option to
Purchase, and posited that Cu7Qs si0nature thereon #as a for0er2. To buttress their contention, the
spouses %peles offered as evidence Cu7Qs Philippine Passport #hich sho#ed that on /+ =anuar2 $631,
the date #hen Cu7 alle0edl2 si0ned the said !ontract, she #as in the Dnited States of %.erica. The
spouses %peles li8e#ise presented several official docu.ents bearin0 her 0enuine si0natures to reveal
their re.ar8able discrepanc2 fro. the si0nature appearin0 in the disputed lease contract. The spouses
%peles .aintained that the2 did not intend to sell the sub;ect propert2.
6
%fter the spouses %peles established b2 docu.entar2 evidence that Cu7 #as not in the countr2 at the
ti.e the !ontract of Cease #ith Option to Purchase #as e9ecuted, nrico, in rebuttal, retracted his
prior declaration that the said !ontract #as si0ned b2 Cu7 on /+ =anuar2 $66+. Instead, nrico averred
that Cu7 si0ned the !ontract after she arrived in the Philippines on -4 Ma2 $631. nrico further related
that after Cu7 si0ned the lease contract, she too8 it #ith her for notari7ation, and b2 the ti.e the
docu.ent #as returned to hi., it #as alread2 notari7ed.
$4
On 3 October /44/, the RT! rendered a Decision in !ivil !ase No. H(66(-+3-* in favor of nrico.
Since none of the parties presented a hand#ritin0 e9pert, the RT! relied on its o#n e9a.ination of the
speci.en si0natures sub.itted to resolve the issue of for0er2. The RT! found stri8in0 si.ilarit2
bet#een Cu7Qs 0enuine si0natures in the docu.ents presented b2 the spouses %peles the.selves and
her purportedl2 for0ed si0nature in the !ontract of Cease #ith Option to Purchase. %bsent an2 findin0
of for0er2, the RT! bound the parties to the clear and une5uivocal stipulations the2 .ade in the lease
contract. %ccordin0l2, the RT! ordered the spouses %peles to e9ecute a Deed of Sale in favor of
nrico upon the latterQs pa2.ent of the a0reed a.ount of consideration. Thefallo of the RT! Decision
readsB
@ARFOR, this !ourt finds JnricoQsK co.plaint to be substantiated b2 preponderance of evidence
and accordin0l2 orders R
&$' JThe spouses %pelesK to co.pl2 #ith the provisions of the !ontract of Cease #ith Option
to Purchase: and upon pa2.ent of total consideration as stipulated in the said !ONTR%!T
for Jthe spouses %pelesK to e9ecute a Deed of %bsolute Sale in favor of JnricoK, over the
parcel of land and the i.prove.ents e9istin0 thereon located at No. 31 Ti.o0 %venue,
Hue7on !it2.
&/' JThe spouses %pelesK to pa2 JnricoK .oral and e9e.plar2 da.a0es in the respective
a.ounts ofP$44,444.44 and P,4,444.44.
&-' JThe spouses %pelesK to pa2 attorne2Qs fees of P,4,444.44 and costs of the suit.
$$
The spouses %peles challen0ed the adverse RT! Decision before the !ourt of %ppeals and ur0ed the
appellate court to nullif2 the assailed !ontract of Cease #ith Option to Purchase since Cu7Qs si0nature
thereon #as clearl2 a for0er2. The spouses %peles ar0ued that it #as ph2sicall2 i.possible for Cu7 to
si0n the said !ontract on /+ =anuar2 $631 since she #as not in the Philippines on that date and
returned five .onths thereafter. The spouses %peles called attention to nricoQs inconsistent
declarations as to .aterial details involvin0 the e9ecution of the lease contract, thereb2 castin0 doubt
on nricoQs credibilit2, as #ell as on the presu.ed re0ularit2 of the contract as a notari7ed docu.ent.
On /4 Dece.ber /44*, the !ourt of %ppeals rendered a Decision in !%().R. !V No. 1+6-- 0rantin0
the appeal of the spouses %peles and overturnin0 the ;ud0.ent of the RT!. In arrivin0 at its assailed
decision, the appellate court noted that the Notar2 Public did not observe ut.ost care in certif2in0 the
due e9ecution of the !ontract of Cease #ith Option to Purchase. The !ourt of %ppeals chose not to
accord the disputed !ontract full faith and credence. The !ourt of %ppeals held, thusB
@ARFOR, the fore0oin0 pre.ises considered, the appealed decision dated October 3, /44/ of
the Re0ional Trial !ourt of Hue7on !it2, "ranch /$, in !ivil !ase No. H(66(-+3-* for specific
perfor.ance #ith da.a0es is hereb2 RVRSD and a ne# is one entered dis.issin0 JnricoQsK
co.plaint.
$/
nricoQs Motion for Reconsideration #as denied b2 the !ourt of %ppeals in a Resolution
$-
dated /,
%pril /44,.
nrico is presentl2 before this !ourt see8in0 the reversal of the unfavorable ;ud0.ent of the !ourt of
%ppeals, assi0nin0 the follo#in0 errors theretoB
I.
TA !ODRT OF %PP%CS !OMMITTD &sic' RVRSI"C RROR @AN IT "RDSAD %SID
TA RDCIN) OF TA !ODRT % HDO DPAOCDIN) TA V%CIDITE OF TA !ONTR%!T OF C%S
@ITA OPTION TO PDR!A%S %ND IN CID TAROF RDCD TA%T TA S%ID !ONTR%!T OF
C%S @%S % FOR)RE %ND TADS, NDCC %ND VOID.
II.
TA !ODRT OF %PP%CS !OMMITTD &sic' RVRSI"C RROR @AN !ONTR%RE TO TA
FINDIN)S OF TA !ODRT % HDO IT RDCD TA%T TA DFNS OF FOR)RE @%S
SD"ST%NTI%CCE %ND !ONVIN!IN)CE PROVN "E !OMPTNT VIDN!.
Si.pl2, nrico faults the !ourt of %ppeals for disturbin0 the factual findin0s of the RT! in disre0ard of
the le0al aphoris. that the factual findin0s of the trial court should be accorded 0reat #ei0ht and
respect on appeal.
@e do not a0ree.
nricoQs insistence on the infallibilit2 of the findin0s of the RT! seriousl2 i.pairs the discretion of the
appellate tribunal to .a8e independent deter.ination of the .erits of the case appealed before it.
!ertainl2, the !ourt of %ppeals cannot s#allo# hoo8, line, and sin8er the factual conclusions of the trial
court #ithout cripplin0 the ver2 office of revie#. %lthou0h #e have indeed held that the factual findin0s
of the trial courts are to be accorded 0reat #ei0ht and respect, the2 are not absolutel2 conclusive upon
the appellate court.
$*
The reliance of appellate tribunals on the factual findin0s of the trial court is based on the postulate that
the latter had firsthand opportunit2 to hear the #itnesses and to observe their conduct and de.eanor
durin0 the proceedin0s. Ao#ever, #hen such findin0s are not anchored on their credibilit2 and their
testi.onies, but on the assess.ent of docu.ents that are available to appellate .a0istrates and
sub;ect to their scrutin2, reliance on the trial court finds no application.
$,
Moreover, appeal b2 #rit of error to the !ourt of %ppeals under Rule *$ of the Revised Rules of !ourt,
the parties .a2 raise both 5uestions of fact and>or of la#. In fact, it is i.perative for the !ourt of
%ppeals to revie# the findin0s of fact .ade b2 the trial court. The !ourt of %ppeals even has the po#er
to tr2 cases and conduct hearin0s, receive evidence and perfor. an2 and all acts necessar2 to resolve
factual issues raised in cases fallin0 #ithin its ori0inal and appellate ;urisdiction.
$+
nrico assiduousl2 pra2s before this !ourt to sustain the validit2 of the !ontract of Cease #ith Option
to Purchase. nrico asserts that the said !ontract #as voluntaril2 entered into and si0ned b2 Cu7 #ho
had it notari7ed herself. The spouses %peles should be obli0ed to respect the ter.s of the a0ree.ent,
and not be allo#ed to rene0e on their co..it.ent thereunder and frustrate the sanctit2 of contracts.
%0ain, #e are not persuaded. @e a0ree #ith the !ourt of %ppeals that in rulin0 out for0er2, the RT!
heavil2 relied on the testi.on2 proffered b2 nrico durin0 the trial, i0norin0 blatant contradictions that
destro2 his credibilit2 and the veracit2 of his clai.s. On direct e9a.ination, nrico testified that Cu7
si0ned the !ontract of Cease #ith Option to Purchase on /+ =anuar2 $631 in his presence,
$1
but he
recanted his testi.on2 on the .atter after the spouses %peles established b2 clear and convincin0
evidence that Cu7 #as not in the Philippines on that date.
$3
In rebuttal, nrico .ade a co.plete
turnabout and clai.ed that Cu7 si0ned the !ontract in 5uestion on -4 Ma2 $631 after her arrival in the
countr2.
$6
The inconsistencies in nricoQs version of events have seriousl2 i.paired the probative value
of his testi.on2 and cast serious doubt on his credibilit2. Ais contradictor2 state.ents on i.portant
details si.pl2 eroded the inte0rit2 of his testi.on2.
@hile it is true that a notari7ed docu.ent carries the evidentiar2 #ei0ht conferred upon it #ith respect
to its due e9ecution, and has in its favor the presu.ption of re0ularit2, this presu.ption, ho#ever, is not
absolute. It .a2 be rebutted b2 clear and convincin0 evidence to the contrar2.
/4
nrico hi.self
ad.itted that Cu7 too8 the docu.ent and had it notari7ed #ithout his presence. Such fact alone
overco.es the presu.ption of re0ularit2 since a notar2 public is en;oined not to notari7e a docu.ent
unless the persons #ho si0ned the sa.e are the ver2 sa.e persons #ho e9ecuted and personall2
appeared before the said notar2 public to attest to the contents and truth of #hat are stated therein.
%lthou0h there is no direct evidence to prove for0er2, preponderance of evidence inar0uabl2 favors the
spouses %peles. In civil cases, the part2 havin0 the burden of proof .ust establish his case b2 a
preponderance of evidence. Preponderance of evidence is the #ei0ht, credit, and value of the
a00re0ate evidence on either side and is usuall2 considered to be s2non2.ous #ith the ter. ?0reater
#ei0ht of the evidence? or ?0reater #ei0ht of the credible evidence.? Preponderance of evidence is a
phrase #hich, in the last anal2sis, .eans probabilit2 of the truth. It is evidence #hich is .ore
convincin0 to the court as #orthier of belief than that #hich is offered in opposition thereto.
/$
In the
case at bar, the spouses %peles #ere able to overco.e the burden of proof and prove b2 preponderant
evidence in disputin0 the authenticit2 and due e9ecution of the !ontract of Cease #ith Option to
Purchase. In contrast, nrico see.ed to rel2 onl2 on his o#n self(servin0 declarations, #ithout
assertin0 an2 proof of corroboratin0 testi.on2 or circu.stantial evidence to buttress his clai..
ven assu.in0 for the sa8e of ar0u.ent that #e a0ree #ith nrico that Cu7 voluntaril2 entered into the
!ontract of Cease #ith Option to Purchase and personall2 affi9ed her si0nature to the said docu.ent,
the provision on the option to purchase the sub;ect propert2 incorporated in said !ontract still re.ains
unenforceable.
There is no dispute that #hat nrico sou0ht to enforce in !ivil !ase No. H(66(-+3-* #as his purported
ri0ht to ac5uire o#nership of the sub;ect propert2 in the e9ercise of his option to purchase the sa.e
under the !ontract of Cease #ith Option to Purchase. Ae ulti.atel2 #ants to co.pel the spouses
%peles to alread2 e9ecute the Deed of Sale over the sub;ect propert2 in his favor.
%n option is a contract b2 #hich the o#ner of the propert2 a0rees #ith another person that the latter
shall have the ri0ht to bu2 the for.erQs propert2 at a fi9ed price #ithin a certain ti.e. It is a condition
offered or contract b2 #hich the o#ner stipulates #ith another that the latter shall have the ri0ht to bu2
the propert2 at a fi9ed price #ithin a certain ti.e, or under, or in co.pliance #ith certain ter.s and
conditions: or #hich 0ives to the o#ner of the propert2 the ri0ht to sell or de.and a sale.
//
%n option is
not of itself a purchase, but .erel2 secures the privile0e to bu2. It is not a sale of propert2 but a sale of
the ri0ht to purchase. It is si.pl2 a contract b2 #hich the o#ner of the propert2 a0rees #ith another
person that he shall have the ri0ht to bu2 his propert2 at a fi9ed price #ithin a certain ti.e. Ae does not
sell his land: he does not then a0ree to sell it: but he does sell so.ethin0, i.e., the ri0ht or privile0e to
bu2 at the election or option of the other part2. Its distin0uishin0 characteristic is that it i.poses no
bindin0 obli0ation on the person holdin0 the option, aside fro. the consideration for the offer.
/-
It is also so.eti.es called an ?unaccepted offer? and is sanctioned b2 %rticle $*16 of the !ivil !odeB
%rt. $*16. % pro.ise to bu2 and sell a deter.inate thin0 for a price certain is reciprocall2 de.andable.
%n accepted unilateral pro.ise to bu2 or to sell a deter.inate thin0 for a price certain is bindin0 upon
the pro.issor if the pro.ise is supported b2 a consideration distinct fro. the price.
The second para0raph of %rticle $*16 provides for the definition and conse5uent ri0hts and obli0ations
under an option contract. For an option contract to be valid and enforceable a0ainst the pro.issor,
there .ust be a separate and distinct consideration that supports it.
/*
In the land.ar8 case of South#estern Su0ar and Molasses !o.pan2 v. %tlantic )ulf and Pacific
!o.,
/,
#e declared that for an option contract to bind the pro.issor, it .ust be supported b2
considerationB
There is no 5uestion that under %rticle $*16 of the ne# !ivil !ode ?an option to sell,? or ?a pro.ise to
bu2 or to sell,? as used in said article, to be valid .ust be ?supported b2 a consideration distinct fro.
the price.? This is clearl2 inferred fro. the conte9t of said article that a unilateral pro.ise to bu2 or to
sell, even if accepted, is onl2 bindin0 if supported b2 a consideration. I' o(&er >or)*, ?1' 1cce0(e)
+'-,1(er1, 0rom-*e? c1' o',4 &1@e 1 b-')-'. e//ec( -/ *+00or(e) b4 1 co'*-)er1(-o', >&-c&
me1'* (&1( (&e o0(-o' c1' *(-,, be >-(&)r1>', e@e' -/ 1cce0(e), -/ (&e *1me -* 'o( *+00or(e) b4
1'4 co'*-)er1(-o'. Here -( -* 'o( )-*0+(e) (&1( (&e o0(-o' -* >-(&o+( co'*-)er1(-o'. I( c1'
(&ere/ore be >-(&)r1>' 'o(>-(&*(1')-'. (&e 1cce0(1'ce m1)e o/ -( b4 100e,,ee. &.phasis
supplied.'
The doctrine re5uirin0 the pa2.ent of consideration in an option contract enunciated in South#estern
Su0ar is resonated in subse5uent cases and re.ains controllin0 to this da2. @ithout consideration that
is separate and distinct fro. the purchase price, an option contract cannot be enforced: that holds true
even if the unilateral pro.ise is alread2 accepted b2 the optionee.
The consideration is ?the #h2 of the contracts, the essential reason #hich .oves the contractin0
parties to enter into the contract.? This definition illustrates that the consideration conte.plated to
support an option contract need not be .onetar2. %ctual cash need not be e9chan0ed for the option.
Ao#ever, b2 the ver2 nature of an option contract, as defined in %rticle $*16, the sa.e is an onerous
contract for #hich the consideration .ust be so.ethin0 of value, althou0h its 8ind .a2 var2.
/+
@e have painsta8in0l2 e9a.ined the !ontract of Cease #ith Option to Purchase, as #ell as the
pleadin0s sub.itted b2 the parties, and their testi.onies in open court, for an2 direct evidence or
evidence aliunde to prove the e9istence of consideration for the option contract, but #e have found
none. The onl2 consideration a0reed upon b2 the parties in the said !ontract is the supposed purchase
price for the sub;ect propert2 in the a.ount not e9ceedin0 P$., Million, #hich could not be dee.ed to
be the sa.e consideration for the option contract since the la# and ;urisprudence e9plicitl2 dictate that
for the option contract to be valid, it m+*( be *+00or(e) b4 1 co'*-)er1(-o' *e01r1(e 1') )-*(-'c(
/rom (&e 0r-ce.
In "ible "aptist !hurch v. !ourt of %ppeals,
/1
#e stressed that an option contract needs to be
supported b2 a separate consideration. The consideration need not be .onetar2 but could consist of
other thin0s or underta8in0s. Ao#ever, if the consideration is not .onetar2, these .ust be thin0s or
underta8in0s of value, in vie# of the onerous nature of the option contract. Further.ore, #hen a
consideration for an option contract is not .onetar2, said consideration .ust be clearl2 specified as
such in the option contract or clause.
In the present case, it is indubitable that no consideration #as 0iven b2 nrico to the spouses %peles
for the option contract. The absence of .onetar2 or an2 .aterial consideration 8eeps this !ourt fro.
enforcin0 the ri0hts of the parties under said option contract.
7HERE2ORE, in vie# of the fore0oin0, the instant Petition is DNID. The Decision dated /4
Dece.ber /44* and Resolution dated /, %pril /44, of the !ourt of %ppeals in !%().R. !V No. 1+6--
are hereb2 A22IRMED. No costs.
SO ORDRD.
MINITA $. CHICO"NA=ARIO
%ssociate =ustice
Republic of the Philippines
SUPREME COURT
Manila
N "%N!

G.R. No. 106123 December 2, 1668
ANG YU ASUNCION, ARTHUR GO AND !EH TIONG, petitioners,
vs.
THE HON. COURT O2 APPEALS 1') UEN REALTY DE$ELOPMENT
CORPORATION, respondents.
Antonio M. Al,ano for petitioners.
>mali, Soriano : Associates for private respon"ent.

$ITUG, J!
%ssailed, in this petition for revie#, is the decision of the !ourt of %ppeals, dated 4* Dece.ber
$66$, in !%().R. SP No. /+-*, settin0 aside and declarin0 #ithout force and effect the orders
of e9ecution of the trial court, dated -4 %u0ust $66$ and /1 Septe.ber $66$, in !ivil !ase No.
31(*$4,3.
The antecedents are recited in 0ood detail b2 the appellate court thusl2B
On =ul2 /6, $631 a Second %.ended !o.plaint for Specific Perfor.ance
#as filed b2 %n0 Eu %suncion and Oeh Tion0, et al., a0ainst "obb2 !u
Dn;ien0, Rose !u Dn;ien0 and =ose Tan before the Re0ional Trial !ourt,
"ranch -$, Manila in !ivil !ase No. 31(*$4,3, alle0in0, a.on0 others, that
plaintiffs are tenants or lessees of residential and co..ercial spaces o#ned
b2 defendants described as Nos. +-4(+-3 On0pin Street, "inondo, Manila:
that the2 have occupied said spaces since $6-, and have been reli0iousl2
pa2in0 the rental and co.pl2in0 #ith all the conditions of the lease contract:
that on several occasions before October 6, $63+, defendants infor.ed
plaintiffs that the2 are offerin0 to sell the pre.ises and are 0ivin0 the.
priorit2 to ac5uire the sa.e: that durin0 the ne0otiations, "obb2 !u Dn;ien0
offered a price of P+(.illion #hile plaintiffs .ade a counter offer of P,(
.illion: that plaintiffs thereafter as8ed the defendants to put their offer in
#ritin0 to #hich re5uest defendants acceded: that in repl2 to defendant<s
letter, plaintiffs #rote the. on October /*, $63+ as8in0 that the2 specif2 the
ter.s and conditions of the offer to sell: that #hen plaintiffs did not receive
an2 repl2, the2 sent another letter dated =anuar2 /3, $631 #ith the sa.e
re5uest: that since defendants failed to specif2 the ter.s and conditions of
the offer to sell and because of infor.ation received that defendants #ere
about to sell the propert2, plaintiffs #ere co.pelled to file the co.plaint to
co.pel defendants to sell the propert2 to the..
Defendants filed their ans#er den2in0 the .aterial alle0ations of the
co.plaint and interposin0 a special defense of lac8 of cause of action.
%fter the issues #ere ;oined, defendants filed a .otion for su..ar2
;ud0.ent #hich #as 0ranted b2 the lo#er court. The trial court found that
defendants< offer to sell #as never accepted b2 the plaintiffs for the reason
that the parties did not a0ree upon the ter.s and conditions of the proposed
sale, hence, there #as no contract of sale at all. Nonetheless, the lo#er
court ruled that should the defendants subse5uentl2 offer their propert2 for
sale at a price of P$$(.illion or belo#, plaintiffs #ill have the ri0ht of first
refusal. Thus the dispositive portion of the decision statesB
@ARFOR, ;ud0.ent is hereb2 rendered in favor of
the defendants and a0ainst the plaintiffs su..aril2
dis.issin0 the co.plaint sub;ect to the afore.entioned
condition that if the defendants subse5uentl2 decide to
offer their propert2 for sale for a purchase price of
leven Million Pesos or lo#er, then the plaintiffs has the
option to purchase the propert2 or of first refusal,
other#ise, defendants need not offer the propert2 to the
plaintiffs if the purchase price is hi0her than leven
Million Pesos.
SO ORDRD.
%00rieved b2 the decision, plaintiffs appealed to this !ourt in
!%().R. !V No. /$$/-. In a decision pro.ul0ated on Septe.ber /$, $664
&penned b2 =ustice Se0undino ). !hua and concurred in b2 =ustices
Vicente V. Mendo7a and Fernando %. Santia0o', this !ourt affir.ed #ith
.odification the lo#er court<s ;ud0.ent, holdin0B
In resu.e, there #as no .eetin0 of the .inds bet#een
the parties concernin0 the sale of the propert2. %bsent
such re5uire.ent, the clai. for specific perfor.ance
#ill not lie. %ppellants< de.and for actual, .oral and
e9e.plar2 da.a0es #ill li8e#ise fail as there e9ists no
;ustifiable 0round for its a#ard. Su..ar2 ;ud0.ent for
defendants #as properl2 0ranted. !ourts .a2 render
su..ar2 ;ud0.ent #hen there is no 0enuine issue as
to an2 .aterial fact and the .ovin0 part2 is entitled to a
;ud0.ent as a .atter of la# &)arcia vs. !ourt of
%ppeals, $1+ S!R% 3$,'. %ll re5uisites obtainin0, the
decision of the court a quo is le0all2 ;ustifiable.
@ARFOR, findin0 the appeal un.eritorious, the
;ud0.ent appealed fro. is hereb2 %FFIRMD, but
sub;ect to the follo#in0 .odificationB The court a quo in
the aforestated decision 0ave the plaintiffs(appellants
the ri0ht of first refusal onl2 if the propert2 is sold for a
purchase price of leven Million pesos or lo#er:
ho#ever, considerin0 the .ercurial and uncertain
forces in our .ar8et econo.2 toda2. @e find no reason
not to 0rant the sa.e ri0ht of first refusal to herein
appellants in the event that the sub;ect propert2 is sold
for a price in e9cess of leven Million pesos. No
pronounce.ent as to costs.
SO ORDRD.
The decision of this !ourt #as brou0ht to the Supre.e !ourt b2 petition for
revie# on certiorari. The Supre.e !ourt denied the appeal on Ma2 +, $66$
?for insufficienc2 in for. and substances? &%nne9 A, Petition'.
On Nove.ber $,, $664, #hile !%().R. !V No. /$$/- #as pendin0
consideration b2 this !ourt, the !u Dn;ien0 spouses e9ecuted a Deed of
Sale &%nne9 D, Petition' transferrin0 the propert2 in 5uestion to herein
petitioner "uen Realt2 and Develop.ent !orporation, sub;ect to the
follo#in0 ter.s and conditionsB
$. That for and in consideration of the su. of FIFTN
MICCION PSOS &P$,,444,444.44', receipt of #hich in
full is hereb2 ac8no#led0ed, the VNDORS hereb2
sells, transfers and conve2s for and in favor of the
VND, his heirs, e9ecutors, ad.inistrators or
assi0ns, the above(described propert2 #ith all the
i.prove.ents found therein includin0 all the ri0hts and
interest in the said propert2 free fro. all liens and
encu.brances of #hatever nature, e9cept the pendin0
e;ect.ent proceedin0:
/. That the VND shall pa2 the Docu.entar2 Sta.p
Ta9, re0istration fees for the transfer of title in his favor
and other e9penses incidental to the sale of above(
described propert2 includin0 capital 0ains ta9 and
accrued real estate ta9es.
%s a conse5uence of the sale, T!T No. $4,/,*>T(33$ in the na.e of the !u
Dn;ien0 spouses #as cancelled and, in lieu thereof, T!T No. $6,3$+ #as
issued in the na.e of petitioner on Dece.ber -, $664.
On =ul2 $, $66$, petitioner as the ne# o#ner of the sub;ect propert2 #rote a
letter to the lessees de.andin0 that the latter vacate the pre.ises.
On =ul2 $+, $66$, the lessees #rote a repl2 to petitioner statin0 that
petitioner brou0ht the propert2 sub;ect to the notice of lis pen"ens re0ardin0
!ivil !ase No. 31(*$4,3 annotated on T!T No. $4,/,*>T(33$ in the na.e
of the !u Dn;ien0s.
The lessees filed a Motion for 9ecution dated %u0ust /1, $66$ of the
Decision in !ivil !ase No. 31(*$4,3 as .odified b2 the !ourt of %ppeals in
!%().R. !V No. /$$/-.
On %u0ust -4, $66$, respondent =ud0e issued an order &%nne9 %, Petition'
5uoted as follo#sB
Presented before the !ourt is a Motion for 9ecution
filed b2 plaintiff represented b2 %tt2. %ntonio %lbano.
"oth defendants "obb2 !u Dn;ien0 and Rose !u
Dn;ien0 represented b2 %tt2. Vicente Sison and %tt2.
%nacleto Ma0no respectivel2 #ere dul2 notified in
toda2<s consideration of the .otion as evidenced b2 the
rubber sta.p and si0natures upon the cop2 of the
Motion for 9ecution.
The 0ist of the .otion is that the Decision of the !ourt
dated Septe.ber /$, $664 as .odified b2 the !ourt of
%ppeals in its decision in !% ).R. !V(/$$/-, and
elevated to the Supre.e !ourt upon the petition for
revie# and that the sa.e #as denied b2 the hi0hest
tribunal in its resolution dated Ma2 +, $66$ in ).R. No.
C(61/1+, had no# beco.e final and e9ecutor2. %s a
conse5uence, there #as an ntr2 of =ud0.ent b2 the
Supre.e !ourt as of =une +, $66$, statin0 that the
aforesaid .odified decision had alread2 beco.e final
and e9ecutor2.
It is the observation of the !ourt that this propert2 in
dispute #as the sub;ect of the+otice of =is
Pen"ens and that the .odified decision of this !ourt
pro.ul0ated b2 the !ourt of %ppeals #hich had
beco.e final to the effect that should the defendants
decide to offer the propert2 for sale for a price of P$$
Million or lo#er, and considerin0 the .ercurial and
uncertain forces in our .ar8et econo.2 toda2, the
sa.e ri0ht of first refusal to herein plaintiffs>appellants
in the event that the sub;ect propert2 is sold for a price
in e9cess of leven Million pesos or .ore.
@ARFOR, defendants are hereb2 ordered to
e9ecute the necessar2 Deed of Sale of the propert2 in
liti0ation in favor of plaintiffs %n0 Eu %suncion, Oeh
Tion0 and %rthur )o for the consideration of P$, Million
pesos in reco0nition of plaintiffs< ri0ht of first refusal and
that a ne# Transfer !ertificate of Title be issued in favor
of the bu2er.
%ll previous transactions involvin0 the sa.e propert2
not#ithstandin0 the issuance of another title to "uen
Realt2 !orporation, is hereb2 set aside as havin0 been
e9ecuted in bad faith.
SO ORDRD.
On Septe.ber //, $66$ respondent =ud0e issued another order, the
dispositive portion of #hich readsB
@ARFOR, let there be @rit of 9ecution issue in
the above(entitled case directin0 the Deput2 Sheriff
Ra.on nri5ue7 of this !ourt to i.ple.ent said @rit of
9ecution orderin0 the defendants a.on0 others to
co.pl2 #ith the aforesaid Order of this !ourt #ithin a
period of one &$' #ee8 fro. receipt of this Order and for
defendants to e9ecute the necessar2 Deed of Sale of
the propert2 in liti0ation in favor of the plaintiffs %n0 Eu
%suncion, Oeh Tion0 and %rthur )o for the
consideration of P$,,444,444.44 and orderin0 the
Re0ister of Deeds of the !it2 of Manila, to cancel and
set aside the title alread2 issued in favor of "uen Realt2
!orporation #hich #as previousl2 e9ecuted bet#een
the latter and defendants and to re0ister the ne# title in
favor of the aforesaid plaintiffs %n0 Eu %suncion, Oeh
Tion0 and %rthur )o.
SO ORDRD.
On the sa.e da2, Septe.ber /1, $66$ the correspondin0 #rit of e9ecution
&%nne9 !, Petition' #as issued.
1
On 4* Dece.ber $66$, the appellate court, on appeal to it b2 private respondent, set aside and
declared #ithout force and effect the above 5uestioned orders of the court a quo.
In this petition for revie# on certiorari, petitioners contend that "uen Realt2 can be held bound
b2 the #rit of e9ecution b2 virtue of the notice of lis pen"ens, carried over on T!T No. $6,3$+
issued in the na.e of "uen Realt2, at the ti.e of the latter<s purchase of the propert2 on $,
Nove.ber $66$ fro. the !u Dn;ien0s.
@e affir. the decision of the appellate court.
% not too recent develop.ent in real estate transactions is the adoption of such arran0e.ents
as the ri0ht of first refusal, a purchase option and a contract to sell. For read2 reference, #e
.i0ht point out so.e funda.ental precepts that .a2 find so.e relevance to this discussion.
%n obli0ation is a ;uridical necessit2 to 0ive, to do or not to do &Art. //@A, Civil Co"e'. The
obli0ation is constituted upon the concurrence of the essential ele.ents thereof, vi*B &a'
The vinculum Buris or Buri"ical tie #hich is the efficient cause established b2 the various sources
of obli0ations &la#, contracts, 5uasi(contracts, delicts and 5uasi(delicts': &b' the o,Bect #hich is
the prestation or conduct: re5uired to be observed &to 0ive, to do or not to do': and &c'
the su,Bect'persons #ho, vie#ed fro. the de.andabilit2 of the obli0ation, are the active
&obli0ee' and the passive &obli0or' sub;ects.
%.on0 the sources of an obli0ation is a contract &%rt. $$,1, !ivil !ode', #hich is a .eetin0 of
.inds bet#een t#o persons #hereb2 one binds hi.self, #ith respect to the other, to 0ive
so.ethin0 or to render so.e service &%rt. $-4,, !ivil !ode'. % contract under0oes various
sta0es that include its ne0otiation or preparation, its perfection and, finall2, its
consu..ation. +egotiation covers the period from the ti.e the prospective contractin0 parties
indicate interest in the contract to the ti.e the contract is concluded &perfected'.
The perfection of the contract ta8es place upon the concurrence of the essential ele.ents
thereof. % contract #hich is consensual as to perfection is so established upon a .ere .eetin0
of .inds, i.e., the concurrence of offer and acceptance, on the ob;ect and on the cause thereof.
% contract #hich re5uires, in addition to the above, the deliver2 of the ob;ect of the a0ree.ent,
as in a pled0e or commo"atum, is co..onl2 referred to as a real contract. In a solemn contract,
co.pliance #ith certain for.alities prescribed b2 la#, such as in a donation of real propert2, is
essential in order to .a8e the act valid, the prescribed for. bein0 thereb2 an essential ele.ent
thereof. The sta0e of consummationbe0ins #hen the parties perfor. their respective
underta8in0s under the contract cul.inatin0 in the e9tin0uish.ent thereof.
Dntil the contract is perfected, it cannot, as an independent source of obli0ation, serve as a
bindin0 ;uridical relation. In sales, particularl2, to #hich the topic for discussion about the case at
bench belon0s, the contract is perfected #hen a person, called the seller, obli0ates hi.self, for a
price certain, to deliver and to transfer o#nership of a thin0 or ri0ht to another, called the bu2er,
over #hich the latter a0rees. %rticle $*,3 of the !ivil !ode providesB
%rt. $*,3. "2 the contract of sale one of the contractin0 parties obli0ates
hi.self to transfer the o#nership of and to deliver a deter.inate thin0, and
the other to pa2 therefor a price certain in .one2 or its e5uivalent.
% contract of sale .a2 be absolute or conditional.
@hen the sale is not a,solute but con"itional, such as in a ?!ontract to Sell? #here invariabl2
the o#nership of the thin0 sold is retained until the fulfill.ent of a positive suspensive condition
&nor.all2, the full pa2.ent of the purchase price', the breach of the condition #ill prevent the
obli0ation to conve2 title fro. ac5uirin0 an obli0ator2 force.
2
In %ignos vs. Court of Appeals &$,3
S!R% -1,', #e have said that, althou0h deno.inated a ?Deed of !onditional Sale,? a sale is still
absolute #here the contract is devoid of an2 proviso that title is reserved or the ri0ht to
unilaterall2 rescind is stipulated, e.0., until or unless the price is paid. O#nership #ill then be
transferred to the bu2er upon actual or constructive deliver2 &e.0., b2 the e9ecution of a public
docu.ent' of the propert2 sold. @here the condition is i.posed upon the perfection of the
contract itself, the failure of the condition #ould prevent such perfection.
5
If the condition is
i.posed on the obli0ation of a part2 #hich is not fulfilled, the other part2 .a2 either #aive the
condition or refuse to proceed #ith the sale &%rt. $,*,, !ivil !ode'.
8
%n unconditional mutual promise to bu2 and sell, as lon0 as the ob;ect is .ade deter.inate and
the price is fi9ed, can be obli0ator2 on the parties, and co.pliance there#ith .a2 accordin0l2 be
e9acted.
3
%n accepte" unilateral promise #hich specifies the thing to ,e sol" an" the price to
,e paid, -hen couple" -ith a valua,le consi"eration "istinct and separate from the price, is #hat
.a2 properl2 be ter.ed a perfected contract ofoption. This contract is le0all2 bindin0, and in
sales, it confor.s #ith the second para0raph of %rticle $*16 of the !ivil !ode, vi7B
%rt. $*16. . . .
%n accepted unilateral pro.ise to bu2 or to sell a deter.inate thin0 for a
price certain is bindin0 upon the pro.issor if the pro.ise is supported b2 a
consideration distinct fro. the price. &$*,$a'
6
Observe, ho#ever, that the option is not the contract of sale itself.
9
The optionee has the ri0ht,
but not the obli0ation, to bu2. Once the option is e9ercised ti.el2, i.e., the offer is accepted
before a breach of the option, a bilateral pro.ise to sell and to bu2 ensues and both parties are
then reciprocall2 bound to co.pl2 #ith their respective underta8in0s.
8
Cet us elucidate a little. % ne0otiation is for.all2 initiated b2 an offer. %n i.perfect
pro.ise CpolicitacionD is .erel2 an offer. Public advertise.ents or solicitations and the li8e are
ordinaril2 construed as .ere invitations to .a8e offers or onl2 as proposals. These relations,
until a contract is perfected, are not considered bindin0 co..it.ents. Thus, at an2 ti.e prior to
the perfection of the contract, either ne0otiatin0 part2 .a2 stop the ne0otiation. The offer, at this
sta0e, .a2 be #ithdra#n: the #ithdra#al is effective i..ediatel2 after its .anifestation, such as
b2 its .ailin0 and not necessaril2 #hen the offeree learns of the #ithdra#al &Caudico vs. %rias,
*- Phil. /14'. @here a period is 0iven to the offeree #ithin #hich to accept the offer, the
follo#in0 rules 0enerall2 0overnB
&$' If the period is not itself founded upon or supported b2 a consideration, the offeror is still free
and has the ri0ht to #ithdra# the offer before its acceptance, or, if an acceptance has been
.ade, before the offeror<s co.in0 to 8no# of such fact, b2 co..unicatin0 that #ithdra#al to the
offeree &see Art. /E3F, Civil Co"eG see also Atkins, 8roll : Co. vs. Cua, /53 Phil. 1F2, holdin0
that this rule is applicable to a unilateral pro.ise to sell under %rt. $*16, .odif2in0 the previous
decision in South )estern Sugar vs. Atlantic <ulf, 10 Phil. 3F1G see also Art. /E/1, Civil Co"eG
#ural Bank of ParaHaque, nc., vs. #emola"o, /E@ SC#A F51G Sanche* vs. #igos, F@ SC#A
EA2'. The ri0ht to #ithdra#, ho#ever, .ust not be e9ercised #hi.sicall2 or arbitraril2: other#ise,
it could 0ive rise to a da.a0e clai. under %rticle $6 of the !ivil !ode #hich ordains that ?ever2
person .ust, in the e9ercise of his ri0hts and in the perfor.ance of his duties, act #ith ;ustice,
0ive ever2one his due, and observe honest2 and 0ood faith.?
&/' If the period has a separate consideration, a contract of ?option? is dee.ed perfecte", and it
#ould be a breach of that contract to #ithdra# the offer durin0 the a0reed period. The option,
ho#ever, is an independent contract b2 itself, and it is to be distin0uished fro. the pro;ected
.ain a0ree.ent &sub;ect .atter of the option' #hich is obviousl2 2et to be concluded. If, in fact,
the optioner(offeror -ith"ra-s the offer ,efore its acceptance&e9ercise of the option' b2 the
optionee(offeree, the latter .a2 not sue for specific performance on the proposed contract
&?ob;ect? of the option' since it has failed to reach its o#n sta0e of perfection. The optioner(
offeror, ho#ever, renders hi.self liable for da.a0es for breach of the option. In these cases,
care should be ta8en of the real nature of the consi"eration 0iven, for if, in fact, it has been
intended to be part of the consideration for the .ain contract #ith a ri0ht of #ithdra#al on the
part of the optionee, the .ain contract could be dee.ed perfected: a si.ilar instance #ould be
an ?earnest .one2? in a contract of sale that can evidence its perfection &Art. /F23, Civil Co"e'.
In the la# on sales, the so(called ?ri0ht of first refusal? is an innovative ;uridical relation.
Needless to point out, it cannot be dee.ed a perfected contract of sale under %rticle $*,3 of the
!ivil !ode. Neither can the ri0ht of first refusal, understood in its nor.al concept, per se be
brou0ht #ithin the purvie# of an option under the second para0raph of %rticle $*16,
afore5uoted, or possibl2 of an offer under %rticle $-$6
6
of the sa.e !ode. %n option or an offer
#ould re5uire, a.on0 other thin0s,
10
a clear certaint2 on both the ob;ect and the cause or
consideration of the envisioned contract. In a ri0ht of first refusal, #hile the ob;ect .i0ht be .ade
deter.inate, the e9ercise of the ri0ht, ho#ever, #ould be dependent not onl2 on the 0rantor<s
eventual intention to enter into a bindin0 ;uridical relation #ith another but also on ter.s,
includin0 the price, that obviousl2 are 2et to be later fir.ed up. Prior thereto, it can at best be so
described as .erel2 belon0in0 to a class of preparator2 ;uridical relations 0overned not b2
contracts &since the essential ele.ents to establish the vinculum Buris #ould still be indefinite
and inconclusive' but b2, a.on0 other la#s of 0eneral application, the pertinent scattered
provisions of the !ivil !ode on hu.an conduct.
ven on the pre.ise that such ri0ht of first refusal has been decreed under a final ;ud0.ent, li8e
here, its breach cannot ;ustif2 correspondin0l2 an issuance of a #rit of e9ecution under a
;ud0.ent that .erel2 reco0ni7es its e9istence, nor #ould it sanction an action for specific
perfor.ance #ithout thereb2 ne0atin0 the indispensable ele.ent of consensualit2 in the
perfection of contracts.
11
It is not to sa2, ho#ever, that the ri0ht of first refusal #ould be
inconse5uential for, such as alread2 inti.ated above, an un;ustified disre0ard thereof, 0iven, for
instance, the circu.stances e9pressed in %rticle $6
12
of the !ivil !ode, can #arrant a recover2
for da.a0es.
The final ;ud0.ent in !ivil !ase No. 31(*$4,3, it .ust be stressed, has .erel2 accorded a ?ri0ht
of first refusal? in favor of petitioners. The conse5uence of such a declaration entails no .ore
than #hat has heretofore been said. In fine, if, as it is here so conve2ed to us, petitioners are
a00rieved b2 the failure of private respondents to honor the ri0ht of first refusal, the re.ed2 is
not a #rit of e9ecution on the ;ud0.ent, since there is none to e9ecute, but an action for
da.a0es in a proper foru. for the purpose.
Further.ore, #hether private respondent "uen Realt2 Develop.ent !orporation, the alle0ed
purchaser of the propert2, has acted in 0ood faith or bad faith and #hether or not it should, in
an2 case, be considered bound to respect the re0istration of the lis pen"ens in !ivil !ase No.
31(*$4,3 are .atters that .ust be independentl2 addressed in appropriate proceedin0s. "uen
Realt2, not havin0 been i.pleaded in !ivil !ase No. 31(*$4,3, cannot be held sub;ect to the #rit
of e9ecution issued b2 respondent =ud0e, let alone ousted fro. the o#nership and possession
of the propert2, #ithout first bein0 dul2 afforded its da2 in court.
@e are also unable to a0ree #ith petitioners that the !ourt of %ppeals has erred in holdin0 that
the #rit of e9ecution varies the ter.s of the ;ud0.ent in !ivil !ase No. 31(*$4,3, later affir.ed
in !%().R. !V(/$$/-. The !ourt of %ppeals, in this re0ard, has observedB
Finall2, the 5uestioned #rit of e9ecution is in variance #ith the decision of
the trial court as .odified b2 this !ourt. %s alread2 stated, there #as nothin0
in said decision
15
that decreed the e9ecution of a deed of sale bet#een the
!u Dn;ien0s and respondent lessees, or the fi9in0 of the price of the sale, or
the cancellation of title in the na.e of petitioner &Ci.pin vs. I%!, $*1 S!R%
,$+: Pa.antasan n0 Cun0sod n0 Ma2nila vs. I%!, $*- S!R% -$$: De
)u7.an vs. !%, $-1 S!R% 1-4: Pastor vs. !%, $// S!R% 33,'.
It is li8e#ise 5uite obvious to us that the decision in !ivil !ase No. 31(*$4,3 could not have
decreed at the ti.e the e9ecution of an2 deed of sale bet#een the !u Dn;ien0s and petitioners.
@ARFOR, #e DPAOCD the !ourt of %ppeals in ulti.atel2 settin0 aside the 5uestioned
Orders, dated -4 %u0ust $66$ and /1 Septe.ber $66$, of the court a quo. !osts a0ainst
petitioners.
SO ORDRD.
+arvasa, C.(., Pa"illa, Bi"in, #egala"o, %avi"e, (r., #omero, Bellosillo, Melo, 9uiason, Puno
an" Men"o*a, ((., concur.
8apunan, (., took no part.
Feliciano, (., is on leave.
Republic of the Philippines
SUPREME COURT
FIRST DIVISION
G.R. No. 183550 Oc(ober 18, 2003
SPOUSES GOMER 1') LEONOR RAMOS, Petitioners,
vs.
SPOUSES SANTIAGO 1') MINDA HERUELA, SPOUSES CHERRY 1') RAYMOND
PALLORI, Respondents.
D ! I S I O N
CARPIO, J!
The !ase
"efore the !ourt is a petition for revie#
$
assailin0 the Decision
/
dated /- %u0ust /444 and the
Order dated /4 Septe.ber /444 of the Re0ional Trial !ourt &?trial court?' of Misa.is Oriental,
"ranch /$, in !ivil !ase No. 63(4+4. The trial court dis.issed the plaintiffsQ action for recover2 of
o#nership #ith da.a0es.
The %ntecedent Facts
The spouses )o.er and Ceonor Ra.os &?spouses Ra.os?' o#n a parcel of land, consistin0 of
$,33- s5uare .eters, covered b2 Transfer !ertificate of Title &?T!T?' No. $+,-, of the Re0ister
of Deeds of !a0a2an de Oro !it2. On $3 Februar2 $634, the spouses Ra.os .ade an
a0ree.ent #ith the spouses Santia0o and Minda Aeruela &?spouses Aeruela?'
-
coverin0 -4+
s5uare .eters of the land &?land?'. %ccordin0 to the spouses Ra.os, the a0ree.ent is a contract
of conditional sale. The spouses Aeruela alle0e that the contract is a sale on install.ent basis.
On /1 =anuar2 $663, the spouses Ra.os filed a co.plaint for Recover2 of O#nership #ith
Da.a0es a0ainst the spouses Aeruela. The case #as doc8eted as !ivil !ase No. 63(4+4. The
spouses Ra.os alle0e that out of theP$,,-44
*
consideration for the sale of the land, the
spouses Aeruela paid onl2 P*,444. The last install.ent that the spouses Aeruela paid #as on
$3 Dece.ber $63$. The spouses Ra.os assert that the spouses AeruelaQs un;ust refusal to pa2
the balance of the purchase price caused the cancellation of the Deed of !onditional Sale. In
=une $63/, the spouses Ra.os discovered that the spouses Aeruela #ere alread2 occup2in0 a
portion of the land. !herr2 and Ra2.ond Pallori &?spouses Pallori?', dau0hter and son(in(la#,
respectivel2, of the spouses Aeruela, erected another house on the land. The spouses Aeruela
and the spouses Pallori refused to vacate the land despite de.and b2 the spouses Ra.os.
The spouses Aeruela alle0e that the contract is a sale on install.ent basis. The2 paid P/,444 as
do#n pa2.ent and .ade the follo#in0 install.ent pa2.entsB
-$ March $634 P/44
/ Ma2 $634 P*44 &for %pril and Ma2 $634'
/4 =une $634 P/44 &for =une $634'
3 October $634 P,44 &for =ul2, %u0ust and part of Septe.ber
$634'
, March $63$ P*44 &for October and Nove.ber $634'
$3 Dece.ber $63$ P-44 &for Dece.ber $634 and part of =anuar2
$63$'
The spouses Aeruela further alle0e that the -4+ s5uare .eters specified in the contract #as
reduced to /3/ s5uare .eters because upon subdivision of the land, /* s5uare .eters beca.e
part of the road. The spouses Aeruela clai. that in March $63/, the2 e9pressed their #illin0ness
to pa2 the balance of P$$,-44 but the spouses Ra.os refused their offer.
T&e R+,-'. o/ (&e Tr-1, Co+r(
In its Decision
,
dated /- %u0ust /444, the trial court ruled that the contract is a sale b2
install.ent. The trial court ruled that the spouses Ra.os failed to co.pl2 #ith Section * of
Republic %ct No. +,,/ &?R% +,,/?',
+
as follo#sB
S!. *. In case #here less than t#o 2ears of install.ents #ere paid, the seller shall 0ive the
bu2er a 0race period of not less than si9t2 da2s fro. the date the install.ent beca.e due. If the
bu2er fails to pa2 the install.ents due at the e9piration of the 0race period, the seller .a2 cancel
the contract after thirt2 da2s fro. receipt b2 the bu2er of the notice of cancellation or the
de.and for rescission of the contract b2 a notarial act.
The dispositive portion of the Decision readsB
@ARFOR, the co.plaint is hereb2 dis.issed and plaintiffJsK are ordered to e9ecute the
correspondin0 Deed of Sale in favor of defendants after the latter have paid the re.ainin0
balance of leven Thousand and Three Aundred Pesos &P$$,-44.44'.
Plaintiffs are further ordered to pa2 defendants the su. of P/4,444.44, as %ttorne2Qs fees
and P$4,444.44 as liti0ation e9penses.
SO ORDRD.
1
In an Order
3
dated /4 Septe.ber /444, the trial court denied the spouses Ra.osQ .otion for
reconsideration.
Aence, this petition.
T&e I**+e*
The spouses Ra.os raise the follo#in0 issuesB
I. @hether R% +,,/ is applicable to an absolute sale of land:
II. @hether %rticles $$6$ and $,6/ of the !ivil !ode are applicable to the present case:
III. @hether the spouses Ra.os have a ri0ht to cancel the sale:
IV. @hether the spouses Aeruela have a ri0ht to da.a0es.
6
T&e R+,-'. o/ (&e Co+r(
The petition is partl2 .eritorious.
The "#ree$ent is a %ontract to &ell
In its Decision, the trial court ruled on #hether the contract .ade b2 the parties is a conditional
sale or a sale on install.ent. The spouses Ra.osQ pre.ise is that since the trial court ruled that
the contract is a sale on install.ent, the trial court also in effect declared that the sale is an
absolute sale. The spouses Ra.os alle0e that R% +,,/ is not applicable to an absolute sale.
%rticle $*,3 of the !ivil !ode provides that a contract of sale .a2 be absolute or conditional. %
contract of sale is absolute #hen title to the propert2 passes to the vendee upon deliver2 of the
thin0 sold.
$4
% deed of sale is absolute #hen there is no stipulation in the contract that title to the
propert2 re.ains #ith the seller until full pa2.ent of the purchase price.
$$
The sale is also
absolute if there is no stipulation 0ivin0 the vendor the ri0ht to cancel unilaterall2 the contract the
.o.ent the vendee fails to pa2 #ithin a fi9ed period.
$/
In a conditional sale, as in a contract to
sell, o#nership re.ains #ith the vendor and does not pass to the vendee until full pa2.ent of
the purchase price.
$-
The full pa2.ent of the purchase price parta8es of a suspensive condition,
and non(fulfill.ent of the condition prevents the obli0ation to sell fro. arisin0.
$*
In this case, the a0ree.ent of the parties is e.bodied in a one(pa0e, hand#ritten
docu.ent.
$,
The docu.ent does not contain the usual ter.s and conditions of a for.al deed of
sale. The ori0inal docu.ent, elevated to this !ourt as part of the Records, is torn in part. Onl2
the #ords ?CMNT "%SIS? is le0ible on the title. The na.es and addresses of the parties and
the identit2 of the propert2 cannot be ascertained. The a0ree.ent onl2 provides for the follo#in0
ter.s of the saleB
TRMJSK OF S%CB
PRI! PR SHM P,4.44 F -4+ SHM P $,,-44.44
DO@N P%EMNT &T@O TAODS%ND PSOS' R /,444.44
"%C%N! P%E%"C %T MINIMDM OF P/44.44 P $-,-44.44
PR MONTA DNTIC FDCCE P%ID SSSSSSS
In 'anuel v (odri#ue), et al.,
$+
the !ourt ruled that to be a #ritten contract, all the ter.s .ust
be in #ritin0, so that a contract partl2 in #ritin0 and partl2 oral is in le0al effect an oral contract.
The !ourt reiterated the 'anuelrulin0 in "lfonso v %ourt of "ppealsB
$1
999 In Manuel, ?onl2 the price and the ter.s of pa2.ent #ere in #ritin0,? but the .ost i.portant
.atter in the controvers2, the alle0ed transfer of title #as never ?reduced to an2 #ritten
docu.ent.J?K It #as held that the contract should not be considered as a #ritten but an oral one:
not a sale but a pro.ise to sell: and that ?the absence of a for.al deed of conve2ance? #as a
stron0 indication ?that the parties did not intend i..ediate transfer of title, but onl2 a transfer
after full pa2.ent of the price.? Dnder these circu.stances, the !ourt ruled %rticle $,4* of the
!ivil !ode of $336 &%rt. $,6/ of the present !ode' to be inapplicable to the contract in
controvers2 R a contract to sell or pro.ise to sell R ?#here title re.ains #ith the vendor until
fulfill.ent of a positive suspensive condition, such as full pa2.ent of the price 9 9 J9K.
The records sho# that the spouses Aeruela did not i..ediatel2 ta8e actual, ph2sical
possession of the land. %ccordin0 to the spouses Ra.os, in March $63$, the2 allo#ed the niece
of the spouses Aeruela to occup2 a portion of the land. Indeed, the spouses Ra.os alle0ed that
the2 onl2 discovered in =une $63/ that the spouses Aeruela #ere alread2 occup2in0 the land. In
their ans#er to the co.plaint, the spouses Aeruela and the spouses Pallori alle0ed that their
occupation of the land is la#ful because havin0 .ade partial pa2.ents of the purchase price,
?the2 alread2 considered the.selves o#ners? of the land.
$3
!learl2, there #as no transfer of title
to the spouses Aeruela. The spouses Ra.os retained their o#nership of the land. This onl2
sho#s that the parties did not intend the transfer of o#nership until full pa2.ent of the purchase
price.
(" *552 is the "pplicable +aw
The trial court did not err in appl2in0 R% +,,/ to the present case.
%rticles $$6$
$6
and $,6/
/4
of the !ivil !ode are applicable to contracts of sale. In contracts to
sell, R% +,,/ applies. In (illo v %ourt of "ppeals,
/$
the !ourt declaredB
999 Ono#n as the Maceda Ca#, R.%. No. +,,/ reco0ni7es in conditional sales of all 8inds of real
estate &industrial, co..ercial, residential' the ri0ht of the seller to cancel the contract upon non(
pa2.ent of an install.ent b2 the bu2er, #hich is si.pl2 an event that prevents the obli0ation of
the vendor to conve2 title fro. ac5uirin0 bindin0 force. It also provides the ri0ht of the bu2er on
install.ents in case he defaults in the pa2.ent of succeedin0 install.ents 999.
Sections - and * of R% +,,/ provideB
Sec. -. In all transactions or contracts involvin0 the sale or financin0 of real estate on install.ent
pa2.ents, includin0 residential condo.iniu. apart.ents but e9cludin0 industrial lots,
co..ercial buildin0s and sales to tenants under Republic %ct Nu.bered Thirt2(ei0ht hundred
fort2(four as a.ended b2 Republic %ct Nu.bered Si9t2(three hundred ei0ht2(nine, #here the
bu2er has paid at least t#o 2ears of install.ents, the bu2er is entitled to the follo#in0 ri0hts in
case he defaults in the pa2.ent of succeedin0 install.entsB
&a' To pa2, #ithout additional interest, the unpaid install.ents due #ithin the total 0race period
earned b2 hi., #hich is hereb2 fi9ed at the rate of one .onth 0race period for ever2 one 2ear of
install.ent pa2.ents .adeBProvi"e", That this ri0ht shall be e9ercised b2 the bu2er onl2 once in
ever2 five 2ears of the life of the contract and its e9tensions, if an2.
&b' If the contract is cancelled, the seller shall refund to the bu2er the cash surrender value of
the pa2.ents on the propert2 e5uivalent to fift2 per cent of the total pa2.ents .ade and, after
five 2ears of install.ents, an additional five per cent ever2 2ear but not to e9ceed ninet2 per cent
of the total pa2.ents .adeB Provi"e", That the actual cancellation of the contract shall ta8e
place after thirt2 da2s fro. receipt b2 the bu2er of the notice of cancellation or the de.and for
rescission of the contract b2 a notarial act and upon full pa2.ent of the cash surrender value to
the bu2er.
Do#n pa2.ents, deposits or options on the contract shall be included in the co.putation of the
total nu.ber of install.ents .ade.
Sec. *. In case #here less than t#o 2ears of install.ents #ere paid, the seller shall 0ive the
bu2er a 0race period of not less than si9t2 da2s fro. the date the install.ent beca.e due. If the
bu2er fails to pa2 the install.ents due at the e9piration of the 0race period, the seller .a2 cancel
the contract after thirt2 da2s fro. receipt b2 the bu2er of the notice of cancellation or the
de.and for rescission of the contract b2 a notarial act.
In this case, the spouses Aeruela paid less than t#o 2ears of install.ents. Thus, Section * of R%
+,,/ applies. Ao#ever, there #as neither a notice of cancellation nor de.and for rescission b2
notarial act to the spouses Aeruela. In ,ly$pia -ousin#, .nc v Panasiatic Travel %orp,
//
the
!ourt ruled that the vendor could 0o to court to de.and ;udicial rescission in lieu of a notarial act
of rescission. Ao#ever, an action for reconve2ance is not an action for rescission. The !ourt
e9plained in ,ly$piaB
The action for reconve2ance filed b2 petitioner #as predicated on an assu.ption that its contract
to sell e9ecuted in favor of respondent bu2er had been validl2 cancelled or rescinded. The
records #ould sho# that, indeed, no such cancellation too8 place at an2 ti.e prior to the
institution of the action for reconve2ance. 999
999
999 Not onl2 is an action for reconve2ance conceptuall2 different fro. an action for rescission
but that, also, the effects that flo# fro. an affir.ative ;ud0.ent in either case #ould be
.ateriall2 dissi.ilar in various respects. The ;udicial resolution of a contract 0ives rise to .utual
restitution #hich is not necessaril2 the situation that can arise in an action for reconve2ance.
%dditionall2, in an action for rescission &also often ter.ed as resolution', unli8e in an action for
reconve2ance predicated on an e9tra;udicial rescission &rescission b2 notarial act', the !ourt,
instead of decreein0 rescission, .a2 authori7e for a ;ust cause the fi9in0 of a period.
/-
In the present case, there bein0 no valid rescission of the contract to sell, the action for
reconve2ance is pre.ature. Aence, the spouses Aeruela have not lost the statutor2 0race
period #ithin #hich to pa2. The trial court should have fi9ed the 0race period to si9t2 da2s
confor.abl2 #ith Section * of R% +,,/.
The spouses Aeruela are not entirel2 fault(free. The2 have been re.iss in perfor.in0 their
obli0ation. The trial court found that the spouses Aeruela offered once to pa2 the balance of the
purchase price. Ao#ever, the spouses Aeruela did not consi0n the pa2.ent durin0 the
pendenc2 of the case. In the .ean#hile, the spouses Aeruela en;o2ed the use of the land.
For the breach of obli0ation, the court, in its discretion, and appl2in0 %rticle //46 of the !ivil
!ode,
/*
.a2 a#ard interest at the rate of +G per annu. on the a.ount of da.a0es.
/,
The
spouses Aeruela have been en;o2in0 the use of the land since $63/. In $66,, the2 allo#ed their
dau0hter and son(in(la#, the spouses Pallori, to construct a house on the land. Dnder the
circu.stances, the !ourt dee.s it proper to a#ard interest at +G per annu. on the balance of
the purchase price.
The records do not sho# #hen the spouses Ra.os .ade a de.and fro. the spouses Aeruela
for pa2.ent of the balance of the purchase price. The co.plaint onl2 alle0ed that the spouses
AeruelaQs ?un;ust refusal to pa2 in full the purchase price 999 has caused the Deed of
!onditional Sale to be rescinded, revo8ed and annulled.?
/+
The co.plaint did not specif2 #hen
the spouses Ra.os .ade the de.and for pa2.ent. For purposes of co.putin0 the le0al
interest, the rec8onin0 period should be the filin0 on /1 =anuar2 $663 of the co.plaint for
reconve2ance, #hich the spouses Ra.os erroneousl2 considered an action for rescission of the
contract.
The !ourt notes the reduction of the land area fro. -4+ s5uare .eters to /3/ s5uare .eters.
Dpon subdivision of the land, /* s5uare .eters beca.e part of the road. Ao#ever, Santia0o
Aeruela e9pressed his #illin0ness to pa2 for the -4+ s5uare .eters a0reed upon despite the
reduction of the land area.
/1
Thus, there is no dispute on the a.ount of the purchase price even
#ith the reduction of the land area.
,n the "ward of "ttorney/s 0ees and +iti#ation 12penses
The trial court ordered the spouses Ra.os to pa2 the spouses Aeruela and the spouses Pallori
the a.ount ofP/4,444 as attorne2Qs fees and P$4,444 as liti0ation e9penses. %rticle //43
/3
of
the !ivil !ode provides that sub;ect to certain e9ceptions, attorne2Qs fees and e9penses of
liti0ation, other than ;udicial costs, cannot be recovered in the absence of stipulation. None of
the enu.erated e9ceptions applies to this case. Further, the polic2 of the la# is to put no
pre.iu. on the ri0ht to liti0ate.
/6
Aence, the a#ard of attorne2Qs fees and liti0ation e9penses
should be deleted.
7HERE2ORE, #e A22IRM the Decision dated /- %u0ust /444 of the Re0ional Trial !ourt of
Misa.is Oriental, "ranch /$, dis.issin0 the co.plaint for Recover2 of O#nership #ith
Da.a0es, #ith the follo#in0 MODI2ICATIONB
$. The spouses Aeruela shall pa2 the spouses Ra.os P$$,-44 as balance of the purchase price
plus interest at +G per annu. fro. /1 =anuar2 $663. The spouses Aeruela shall pa2 #ithin +4
da2s fro. finalit2 of this Decision:
/. Dpon pa2.ent, the spouses Ra.os shall e9ecute a deed of absolute sale of the land and
deliver the certificate of title in favor of the spouses Aeruela:
-. In case of failure to thus pa2 #ithin +4 da2s fro. finalit2 of this Decision, the spouses Aeruela
and the spouses Pallori shall i..ediatel2 vacate the pre.ises #ithout need of further de.and,
and the do#n pa2.ent and install.ent pa2.ents of P*,444 paid b2 the spouses Aeruela shall
constitute rental for the land:
*. The a#ard of P/4,444 as attorne2Qs fees and P$4,444 as liti0ation e9penses in favor of the
spouses Aeruela and the spouses Pallori is deleted.
SO ORDERED.
ANTONIO T. CARPIO
%ssociate =ustice
Republic of the Philippines
SUPREME COURT
Manila
S!OND DIVISION
G.R. No. 138686 #+'e 25, 2003
HEIRS O2 #ESUS M. MASCU;ANA, re0re*e'(e) b4 #OSE MA. R. MASCU;ANA, petitioners,
vs.
COURT O2 APPEALS, A:UILINO ARTE, 1') SPOUSES RODOL2O 1') CORA=ON
LAYUMAS, respondents.
D ! I S I O N
CALLE#O, SR., J!
This is a petition for revie# on certiorari of the Decision
$
of the !ourt of %ppeals &!%' in !%().R. !V
No. ,-$$1 affir.in0 the Decision
/
of the Re0ional Trial !ourt &RT!' of San !arlos !it2, Ne0ros
Occidental, #hich ordered the dis.issal of the petitionersQ co.plaint for recover2 of possession and
da.a0es.
The %ntecedents
)ertrudis @uthrich and her si9 other siblin0s #ere the co(o#ners of a parcel of land identified as Cot
No. $/* of the San !arlos !it2, Ne0ros Occidental !adastre, #ith an area of $,1/6 s5uare .eters and
covered b2 Transfer !ertificate of Title &T!T' No. $*,-(R &T(/66-1'(-3.
-
Over ti.e, )ertrudis and t#o
other co(o#ners sold each of their one(seventh &$>1' shares, or a total area of 1*$ s5uare .eters, to
=esus MascuMana. The latter then sold a portion of his $*4(s5uare(.eter undivided share of the
propert2 to Diosdado Su.ilhi0. MascuMana later sold an additional $+4(s5uare(.eter portion to
Su.ilhi0 on %pril 1, $6+$. Ao#ever, the parties a0reed to revo8e the said deed of sale and, in lieu
thereof, e9ecuted a Deed of %bsolute Sale on %u0ust $/, $6+$. In the said deed, MascuMana, as
vendor, sold an undivided *+6(s5uare(.eter portion of the propert2 for P*,+64.44, #ith P-,+64.44 as
do#n pa2.ent, and under the follo#in0 ter.s of pa2.entB
That the balance of ON TAODS%ND PSOS &P$,444.44' shall be paid b2 the VND unto the
VNDOR as soon as the above(portions of Cot $/* shall have been surve2ed in the na.e of the
VND and all papers pertinent and necessar2 to the issuance of a separate !ertificate of Title in the
na.e of the VND shall have been prepared.
*
On Dece.ber -$, $6+$, MascuMana and =ose ). stabillo e9ecuted a Deed of 9chan0e and
%bsolute Sale of Real state,
,
in #hich stabillo deeded to MascuMana a portion of his propert2
abuttin0 that of Su.ilhi0 on the southeast.
In the .eanti.e, a surve2 #as conducted for the co(o#ners of Cot No. $/* on =ul2 6, $6+/. The
subdivision plan of the said lot #as approved b2 the Director of Cands on %u0ust /, $6+/. The portion
of the propert2 deeded to Su.ilhi0 #as identified in the said plan as Cot No. $/*(".
+
Mean#hile, MascuMana died intestate on %pril /4, $6+, and #as survived b2 his heirs, va M. llisin,
Renee Ae#lett, !ar.en Vda. de OpeMa, Marilou D2 and =ose Ma. R. MascuMana.
On %pril /*, $6+3, Su.ilhi0 e9ecuted a Deed of Sale of Real Propert2
1
on a portion of Cot No. $/*("
#ith an area of *+6 s5uare .eters and the i.prove.ents thereon, in favor of !ora7on Ca2u.as, the
#ife of =ud0e Rodolfo Ca2u.as, for the price of P$$,444.44. The spouses Ca2u.as then had the
propert2 subdivided into t#o lotsB Cot No. $/*("(/ #ith an area of 1$ s5uare .eters under the na.e of
=esus MascuMana, and Cot No. $/*("($, #ith an area of *+6 s5uare .eters under their na.es.
3
The
spouses Ca2u.as too8 possession of the propert2 and caused the cuttin0 of tall 0rasses thereon.
Dpon the plea of a reli0ious or0ani7ation, the2 allo#ed a chapel to be constructed on a portion of the
propert2.
6
In =anuar2 $63,, the spouses Ca2u.as allo#ed %5uilino "arte to sta2 on a portion of the
propert2 to #ard off s5uatters.
$4
"arte and his 8in, Rosto. "arte, then had their houses constructed on
the propert2.
On October $, $63,, the spouses Ca2u.as received a Cetter
$$
fro. the counsel of Renee Tedre#,
offerin0 to bu2 their share of the propert2 for DST$,444.44. For her part, !ora7on Ca2u.as #rote
Pepito MascuMana, offerin0 to pa2 the a.ount of P$,444.44, the balance of the purchase price of the
propert2 under the deed of absolute sale e9ecuted b2 MascuMana and Su.ilhi0 on %u0ust $/,
$6+$.
$/
Ao#ever, the addressee refused to receive the .ail .atter.
$-
Dn8no#n to the spouses Ca2u.as, T!T No. 363+
$*
#as issued over Cot No. $/*(" in the na.e of
=esus MascuMana on March $1, $63+.
On Nove.ber $1, $63+, the heirs of MascuMana filed a !o.plaint
$,
for recover2 of possession of Cot
No. $/*(" and da.a0es #ith a #rit of preli.inar2 in;unction, alle0in0 that the2 o#ned the sub;ect lot b2
virtue of successional ri0hts fro. their deceased father. The2 averred that "arte surreptitiousl2 entered
the pre.ises, fenced the area and constructed a house thereon #ithout their consent. %ttached as
anne9es to the co.plaint #ere T!T No. 363+ and a certification
$+
fro. the Office of the !it2 Treasurer,
Cand Ta9 Division, vouchin0 that the propert2 in 5uestion #as o#ned b2 the petitioners and that the2
had paid the ta9es thereon until $66/.
In his ans#er to the co.plaint, "arte ad.itted havin0 occupied a portion of Cot No. $/*(", but clai.ed
that he secured the per.ission of Rodolfo Ca2u.as, the o#ner of the sub;ect propert2. Ae added that
he did not fence the propert2, and that the petitioners did not use the sa.e as a passa0e#a2 in 0oin0
to "roce Street fro. their house. "arte raised the follo#in0 special defensesB &a' the petitioners #ere
estopped fro. assertin0 o#nership over the lot in 5uestion because the2 did not ob;ect #hen he
occupied the said portion of the lot: &b' neither did the petitioners protest #hen a church #as built on
the propert2, or #hen residential houses #ere constructed thereon: &c' the petitioners still as8ed "arte
and the other occupants #hether the2 had notified Rodolfo Ca2u.as of the constructions on the
propert2: and &d' the heirs of MascuMana, throu0h the la#2er of Mrs. Renee M. Tedre#, even #rote a
letter
$1
to Rodolfo Ca2u.as on October $, $63,, e9pressin0 her #illin0ness to bu2 the sub;ect propert2
for DST$,444.44.
On %pril 3, $66$, the spouses Ca2u.as filed a Motion for Ceave to Intervene,
$3
alle0in0 therein that
the2 had a le0al interest in Cot No. $/*("($ as its bu2ers fro. Su.ilhi0, #ho in turn purchased the
sa.e fro. MascuMana. In their ans#er in intervention,
$6
the spouses Ca2u.as alle0ed that the2 #ere
the true o#ners of the sub;ect propert2 and that the2 had #anted to pa2 the ta9es thereon, but the
Cand Ta9 cler8 refused to receive their pa2.ents on account that the petitioners had alread2 .ade
such pa2.ent. The spouses Ca2u.as further .aintained that the petitioners had no cause of action
a0ainst "arte, as the2 had authori7ed hi. to occup2 a portion of Cot No. $/*("($. The spouses
Ca2u.as also averred that the petitioners #ere estopped fro. den2in0 their ri0ht of o#nership and
possession of the sub;ect lot, as one of the. had even offered to repurchase a portion of Cot No. $/*(
" via letter. The said spouses interposed a counterclai. for da.a0es, clai.in0 o#nership over the
propert2, and pra2ed, thusB
@ARFOR, it is .ost respectfull2 pra2ed that this AONOR%"C !ODRT render ;ud0.ent in favor
of the Intervenors and the defendant %5uilino "arte, orderin0B
$. That the co.plaint a0ainst %5uilino "arte be dis.issed #ith costs a0ainst the plaintiff:
/. That the Intervenors spouses =ud0e Rodolfo S. Ca2u.as and !ora7on %. Ca2u.as be
declared as the le0al and true o#ners of Cot $/*(":
-. That the plaintiffs should deliver i..ediatel2 to the Intervenors, T!T No. 363+ #hich is in
their possession:
*. That the plaintiffs be .ade to pa2 to the Intervenors the su. of TAIRTE TAODS%ND
&P-4,444.44' PSOS .oral da.a0es: TN TAODS%ND &P$4,444.44' PSOS attorne2Qs
fees plus TAR ADNDRD &P-44.44' PSOS as appearance fee per hearin0.
Intervenors pra2 for such other relief and re.edies as .a2 be dee.ed b2 this Aonorable !ourt as ;ust
and e5uitable in the pre.ises.
%t the trial, intervenor Rodolfo Ca2u.as testified that he and his #ife bou0ht the sub;ect propert2 in
$6+3, and that nobod2 ob;ected to their possession of the land, includin0 the petitioners. In $614, a
reli0ious or0ani7ation as8ed his per.ission to construct a chapel on the disputed lot: he allo#ed the
construction since the sa.e #ould be used for the fiesta. Ae further declared that part of the chapel
still stood on the propert2. In $63,, a fire ra7ed the to#nQs public .ar8et, thereb2 dislocatin0 nu.erous
people. "arte #as one of the fire victi.s, #ho also happened to be a 0ood friend and political
supporter of Rodolfo. Out of 0ood#ill, "arte #as allo#ed to occup2 a portion of the said lot, alon0 #ith
so.e other fire victi.s. Rodolfo clarified that the others #ere to sta2 there onl2 on a te.porar2 basis,
but ad.itted that "arteQs children also sta2ed in the sub;ect propert2.
/4
Rodolfo Ca2u.as further narrated that in $631, !ora7on #rote one of the petitioners(heirs, Pepito
MascuMana, re5uestin0 that the title of the lot be transferred in Su.ilhi0Qs na.e so that the2 could
li8e#ise arran0e for the conve2ance of the title in their na.es. Pepito failed to clai. the letter, and
thereafter, filed a case of e;ect.ent a0ainst "arte and Rodolfo Ca2u.asQ brother(in(la#, Pepito %ntonio.
The case, the #itness added, #as dis.issed as a0ainst the t#o parties. Offered in evidence #ere the
follo#in0B a S#orn State.ent on the !urrent and Fair Mar8et Value of the Real Propert2 issued in $61-
as re5uired b2 Presidential Decree No. 1+, and ta9 receipts.
/$
Rodolfo Ca2u.as ad.itted on cross(e9a.ination that at the ti.e the2 bou0ht the propert2 fro.
Su.ilhi0, the title #as still in the possession of the @uthrich fa.il2. Ae added that he filed an adverse
clai. before the Re0ister of Deeds of San !arlos !it2, Ne0ros Occidental, on Cot No. $/*(" in =anuar2
$63+, or after the case had alread2 been filed in court. Castl2, the #itness deposed that he did not
fence the propert2 after bu2in0 the sa.e, but that his brother(in(la# constructed a coco(lu.ber 2ard
thereon upon his authorit2.
//
On =anuar2 -4, $66+, the trial court rendered ;ud0.ent in favor of "arte and the spouses Ca2u.as.
The fallo of the decision readsB
@ARFOR, pre.ises considered, ;ud0.ent is hereb2 rendered in favor of Intervenors(
counterclai.ants and defendant and a0ainst plaintiffs(counterclai. defendants orderin0 as follo#sB
$. The dis.issal of the plaintiffQs co.plaint #ith costs a0ainst the.:
/. The plaintiffs to ;ointl2 pa2 Intervenors(counterclai.ants no# RT! =ud0e Rodolfo S.
Ca2u.as and !ora7on %. Ca2u.asB
&a' P$4,444.44 for attorne2Qs fees: and
&b' P-4,444.44 as .oral da.a0es:
-. The plaintiffs, as counterclai. defendants, to co.pl2 #ith the above(stated obli0ation of
their late father, Mr. =esus MascuMana, under the Deed of %bsolute Sale, 9h. ?-?, pp. 6/(
6-, 9p., thru plaintiff Mr. =ose MascuMana, includin0 the dese0ra0ation &sic' surve2 to
dese0re0ate the *+6(s5uare(.eter portion of said Cot No. $/*(", San !arlos !adastre, this
province, sold to the late Diosdado Su.ilhi0, if the sa.e has not 2et been done despite
#hat has been said herein earlier to said effect, and the e9ecution of the Final Deed of Sale
in their capacit2 as the heirs and successors(in(interest of the late Mr. =esus MascuMana,
thru Mr. =ose MascuMana, coverin0 the *+6(s5uare(.eter dese0re0ated portion of said Cot
No. $/*(", #ithin si9t2 &+4' da2s counted fro. the finalit2 of this Decision, in favor of the
Intervenors(spouses, after #hich the said Intervenors(spouses shall pa2 the., thru Mr. =ose
MascuMana, the P$,444.44 balance due to the. as successors(in(interest of the late Mr.
=esus MascuMana:
*. In case plaintiffs fail to co.pl2 #ith #hat are herein ordered for the. to do, the !ler8 of
!ourt V of this !ourt to do all that the2 #ere to do as herein ordered in the te9t and
dispositive portion hereof, at the e9pense of Intervenors spouses to be later rei.bursed b2
plaintiffs, includin0 the dese0ra0ation &sic' surve2 of said *+6(s5uare(.eter portion of said
Cot JNo.K $/*(", San !arlos !adastre, Ne0ros Occidental, if the sa.e has not 2et been
done and the e9ecution of the Final Deed of Sale on behalf of all the plaintiffs as heirs and
successors(in(interest of the late Mr. =esus MascuMana coverin0 the said dese0re0ated
portion of *+6 s5uare .eters of the aforesaid lot, in favor of Intervenors spouses, to the end
that separate title therefor .a2 be issued in their na.es, after the2 shall have paid
the P$,444.44 balance due plaintiffs under said Deed of %bsolute Sale, 9h. ?-.?
SO ORDRD.
/-
Forth#ith, the petitioners appealed the case to the !%, raisin0 the follo#in0 issues of fact and la#B
a. @hether or not the contract of alienation of Cot No. $/*(" in favor of Diosdado Su.ilhi0
in $6+$ #as a contract to sell or a contract of sale:
b. @hether or not Diosdado Su.ilhi0 had an2 ri0ht to sell Cot No. $/*(" in favor of
intervenor !ora7on Ca2u.as in $6+3.
/*
On Ma2 ,, /44-, the !% affir.ed the decision of the trial court. It ruled that the contract bet#een the
petitionersQ father and Su.ilhi0 #as one of sale. Fore.ost, the !% e9plained, the contract #as
deno.inated as a ?Deed of %bsolute Sale.? The stipulations in the contract li8e#ise revealed the clear
intention on the part of the vendor &MascuMana' to alienate the propert2 in favor of the vendee
&Su.ilhi0'. In three various docu.ents, the late MascuMana even .ade declarations that Su.ilhi0 #as
alread2 the o#ner of the disputed land. The !% added that the ad.ission .a2 be 0iven in evidence
a0ainst MascuMana and his predecessors(in(interest under Section /+, Rule $-4 of the Revised Rules
on vidence. %s to the ar0u.ent that the contract bet#een MascuMana and Su.ilhi0 #as not effective
because it #as sub;ect to a suspensive condition that did not occur, the !% ruled that the condition
referred to b2 the petitioners refers onl2 to the pa2.ent of the balance of the purchase price and not to
the effectivit2 of the contract./avvphi/.*-I
%s to the petitionersQ contention that even if the contract #ere one of sale, o#nership cannot be
transferred to Su.ilhi0 because MascuMana #as not 2et the o#ner of the lot at the ti.e of the alle0ed
sale, the appellate court ruled that the re0istration of the land to be sold is not a prere5uisite to a
contract of sale.
The Present Petition
%00rieved, the petitioners filed the instant petition for revie# on certiorari #ith this !ourt, #here the
follo#in0 lone le0al issue #as raisedB
@%S TA S%C OF COT NO. $/*(" M%D "E =SDS M. M%S!DU%N% IN F%VOR OF DIOSD%DO
SDMICAI) % !ONTR%!T TO SCC OR !ONTR%!T OF S%CL
/,
@e note that the ori0inal action of the petitioners a0ainst %5uilino "arte #as one for recover2 of
possession of Cot No. $/*(". @ith the intervention of the respondents Rodolfo and !ora7on Ca2u.as
#ho clai.ed o#nership over the propert2, and the ac5uiescence of the parties, evidence #as adduced
to prove #ho, bet#een the petitioners &as plaintiffs' and the respondents &as defendants(intervenors'
#ere the la#ful o#ners of the sub;ect propert2 and entitled to its possession.
The petitioners resolutel2 contend that the Deed of %bsolute Sale dated %u0ust $/, $6+$ bet#een their
father and Su.ilhi0 #as a .ere contract to sell because at the ti.e of the said sale, the late
MascuMana #as not 2et the re0istered o#ner of Cot No. $/* or an2 of its portions. The2 assert that
Su.ilhi0 could not have ac5uired an2 ri0hts over the lot due to the fact that a person can onl2 sell #hat
he o#ns or is authori7ed to sell, and the bu2er can ac5uire no .ore than #hat the seller can transfer
le0all2. Finall2, the petitioners insist that the docu.ent in controvers2 #as sub;ect to a suspensive
condition, not a resolutor2 condition, #hich is a t2pical attribute of a contract of sale.
The petition is denied for lac8 of .erit.
The issues raised b2 the petitioners in this case are factual, and under Rule *, of the Rules of !ourt,
onl2 5uestions of la# .a2 be raised in this !ourt, the reason bein0 that this !ourt is not a trier of facts.
It is not to re(e9a.ine the evidence on record and to calibrate the sa.e. Moreover, the findin0s and
conclusions of the trial court as affir.ed b2 the !% are conclusive on the !ourt, absent of an2 evidence
that the trial court, as #ell as the !% i0nored, .isinterpreted and .isconstrued facts and
circu.stances of substance #hich, if considered, #ould alter or reverse the outco.e of the case.
/+
@e have revie#ed the records and find no ;ustification for a reversal or even a .odification of the
assailed decision of the !%.
ven on the .erits of the petition, the !ourt finds that the decision of the trial court as #ell as the rulin0
of the !% are based on the evidence on record and the applicable la#.
The petitioners reiterated their pose that the deed of absolute sale over the propert2 e9ecuted b2 their
father, =esus MascuMana, as vendor, and Diosdado Su.ilhi0 as vendee, #as a contract to sell and not
a contract of sale. The2 assert that on its face, the contract appears to be a contract to sell, because
the pa2.ent of the P$,444.44 balance of the purchase price #as sub;ect to a suspensive conditionB the
surve2 of the propert2, the se0re0ation of the portion thereof sub;ect of the sale, and the co.pletion of
the docu.ents necessar2 for the issuance of a Torrens title over the propert2 to and in the na.e of
Su.ilhi0 #ho #as the vendee. The petitioners assert that Su.ilhi0 never paid the aforesaid a.ount to
the vendor: hence, the obli0ation of the latter and his predecessors(in(interest &herein petitioners' to
e9ecute a final deed of sale never arose. %s such, the2 aver, title to the propert2 re.ained reserved in
the vendor and his heirs even after his death. There #as no need for the vendor to rescind the deed or
collect the said a.ount of P$,444.44 under %rticle $$6$ of the Ne# !ivil !ode because such a re.ed2
applies onl2 to contracts of sale. The petitioners insist that Su.ilhi0 never ac5uired title over the
propert2: he could not have transferred an2 title to the respondents. Su.ilhi0 could not have
transferred that #hich he did not o#n.
The petitionersQ contention has no factual and le0al bases.
The deed of absolute sale e9ecuted b2 =esus MascuMana and Su.ilhi0, provides, thusB
That the VNDOR is the true and absolute o#ner of a parcel of land 8no#n as Cot No. $/* of the
!adastral Surve2 of San !arlos, situated at "roce Street and is free fro. liens and encu.brances,
and covered b2 O.!.T. No. T(/66J-K1 &R($*,-' of Re0. of Deeds, Ne0ros Occ.
That for and in consideration of the su. of FODR TAODS%ND SIF ADNDRD NINTE PSOS
&P*,+64.44', Philippine !urrenc2, to be paid b2 the VND in the .anner hereinafter stated, the
VNDOR does hereb2 sell, transfer, cede and conve2, a portion of the above(described propert2
containin0 an area of *+6 s5uare .eters, the s8etch of #hich can be found at the bac8 of this
docu.ent and havin0 a fronta0e at "roce Street of around $* .eters, and fro. the "roce Street to the
interior on its South#est side #ith a len0th of -4.6 .eters, #ith a len0th of /*.3 .eters on its Northeast
side #here it turned to the ri0ht #ith a len0th of /.3 .eters and continuin0 to North#est #ith a len0th of
+.1/ .eters, the bac82ard di.ension is $1., .eters to the North#est, unto the VND, his heirs and
assi0ns, b2 #a2 of %bsolute Sale, upon the receipt of the do#n pa2.ent of TAR TAODS%ND SIF
ADNDRD NINTE PSOS &P-,+64.44', #hich is hereb2 ac8no#led0ed b2 the VNDOR as received
b2 hi..la-phil.net
That the balance of ON TAODS%ND PSOS &P$,444.44' shall be paid b2 the VND unto the
VNDOR as soon as the above(portions of Cot $/* shall have been surve2ed in the na.e of the
VND and all papers pertinent and necessar2 to the issuance of a separate !ertificate of Title in the
na.e of the VND shall have been prepared.
The evidence on record sho#s that durin0 the lifeti.e of vendor =esus MascuMana, and even after his
death, his heirs, the petitioners herein, une5uivocabl2 declared that Diosdado Su.ilhi0 #as the o#ner
of the propert2 sub;ect of this case, and that the respondents ac5uired title over the propert2, havin0
purchased the sa.e via a deed of absolute sale fro. Diosdado Su.ilhi0. Thus, on Dece.ber -$,
$6+$, =esus MascuMana and =ose stabillo e9ecuted a Deed of 9chan0e and %bsolute Sale of Real
state, in #hich both parties declared that the2 #ere co(o#ners of portions of Cot No. $/* abutted b2
the propert2 o#ned b2 Diosdado Su.ilhi0.
/1
In the subdivision plan of Cot No. $/*, si0ned b2 Ricardo Huilop, Private Cand Surve2or, follo#in0 his
surve2 of Cot No. $/* on =ul2 6, $6+/ for and in behalf of =esus MascuMana, et al., it appears that Cot
No. $/*(" #ith an area of ,*4 s5uare .eters belon0ed to Diosdado Su.ilhi0,
/3
#hich is abutted b2 Cot
No. $/*(!, o#ned b2 =esus MascuMana.
On October $, $63,, lon0 after the death of =esus MascuMana, one of his heirs, petitioner Renee
Tedre#, throu0h counsel, #rote respondent Rodolfo Ca2u.as offerin0 to bu2 the propert2 occupied b2
his overseer %5uilino "arte for DST$,444.44B
%TTE. RODOCFO S. C%EDM%S
San !arlos !it2
Ne0ros Occidental
Dear %tt2. Ca2u.asB
This has reference to the lot located at "roce Street, portions of #hich are presentl2 occupied b2 Mr.
"arte.
Mrs. Renee Tedre# &nee %0apu2an', #ho is no# in the Dnited States, #ould li8e to offer the a.ount of
T$,444.44 to bu2 2our share of the said lot.
If 2ou are a.enable, 8indl2 infor. the undersi0ned for hi. to co..unicate J#ithK Mrs. Tedre# in
!alifornia.
Ver2 trul2 2ours,
&S0d.'
S%MDC SM CP%M%
/6
It #as onl2 after the respondents re;ected the proposal of petitioner Renee Tedre# that the petitioners
secured title over the propert2 on March $1, $63+ in the na.e of =esus MascuMana &alread2 deceased
at the ti.e', cancelin0 T!T No. 6+1 issued on =ul2 +, $6+/ under the na.e of =esus MascuMana, #ho
appears to be a co(o#ner of Cot No. $/* #ith an undivided t#o(seventh &/>1' portion thereof.
-4
@hile it is true that =esus MascuMana e9ecuted the deed of absolute sale over the propert2 on %u0ust
$/, $6+$ in favor of Diosdado Su.ilhi0 for P*,+64.44, and that it #as onl2 on =ul2 +, $6+/ that T!T
No. 6+1 #as issued in his na.e as one of the co(o#ners of Cot No. $/*, Diosdado Su.ilhi0 and the
respondents nevertheless ac5uired o#nership over the propert2. The deed of sale e9ecuted b2 =esus
MascuMana in favor of Diosdado Su.ilhi0 on %u0ust $/, $6+$ #as a perfected contract of sale over
the propert2. It is settled that a perfected contract of sale cannot be challen0ed on the 0round of the
non(transfer of o#nership of the propert2 sold at that ti.e of the perfection of the contract, since it is
consu..ated upon deliver2 of the propert2 to the vendee. It is throu0h tradition or deliver2 that the
bu2er ac5uires o#nership of the propert2 sold. %s provided in %rticle $*,3 of the Ne# !ivil !ode, #hen
the sale is .ade throu0h a public instru.ent, the e9ecution thereof is e5uivalent to the deliver2 of the
thin0 #hich is the ob;ect of the contract, unless the contrar2 appears or can be inferred. The record of
the sale #ith the Re0ister of Deeds and the issuance of the certificate of title in the na.e of the bu2er
over the propert2 .erel2 bind third parties to the sale. %s bet#een the seller and the bu2er, the transfer
of o#nership ta8es effect upon the e9ecution of a public instru.ent coverin0 the real propert2.
-$
Con0
before the petitioners secured a Torrens title over the propert2, the respondents had been in actual
possession of the propert2 and had desi0nated "arte as their overseer.
%rticle $*,3 of the Ne# !ivil !ode providesB
"2 the contract of sale, one of the contractin0 parties obli0ates hi.self to transfer the o#nership of and
to deliver a deter.inate thin0, and the other to pa2 therefor a price certain in .one2 or its e5uivalent.
% contract of sale .a2 be absolute or conditional.
Thus, there are three essential ele.ents of sale, to #itB
a' !onsent or .eetin0 of the .inds, that is, consent to transfer o#nership in e9chan0e for
the price:
b' Deter.inate sub;ect .atter: and
c' Price certain in .one2 or its e5uivalent.
-/
In this case, there #as a .eetin0 of the .inds bet#een the vendor and the vendee, #hen the vendor
undertoo8 to deliver and transfer o#nership over the propert2 covered b2 the deed of absolute sale to
the vendee for the price of P*,+64.44 of #hich P-,+64.44 #as paid b2 the vendee to the vendor as
do#n pa2.ent. The vendor undertoo8 to have the propert2 sold, surve2ed and se0re0ated and a
separate title therefor issued in the na.e of the vendee, upon #hich the latter #ould be obli0ed to pa2
the balance of P$,444.44. There #as no stipulation in the deed that the title to the propert2 re.ained
#ith the vendor, or that the ri0ht to unilaterall2 resolve the contract upon the bu2erQs failure to pa2
#ithin a fi9ed period #as 0iven to such vendor. Patentl2, the contract e9ecuted b2 the parties is a deed
of sale and not a contract to sell. %s the !ourt ruled in a recent caseB
In %ignos v. Court of Appeals &$,3 S!R% -1,', #e have said that, althou0h deno.inated a ?Deed of
!onditional Sale,? a sale is still absolute #here the contract is devoid of an2 proviso that title is
reserved or the ri0ht to unilaterall2 rescind is stipulated, e.g., until or unless the price is paid.
O#nership #ill then be transferred to the bu2er upon actual or constructive deliver2 &e.g. b2 the
e9ecution of a public docu.ent' of the propert2 sold. @here the condition is i.posed upon the
perfection of the contract itself, the failure of the condition #ould prevent such perfection. If the
condition is i.posed on the obli0ation of a part2 #hich is not fulfilled, the other part2 .a2 either #aive
the condition or refuse to proceed #ith the sale. &%rt. $,*,, !ivil !ode'
Thus, in one case, #hen the sellers declared in a ?Receipt of Do#n Pa2.ent? that the2 received an
a.ount as purchase price for a house and lot #ithout an2 reservation of title until full pa2.ent of the
entire purchase price, the i.plication #as that the2 sold their propert2. In PeopleJs n"ustrial an"
Commercial Corporation v. Court of Appeals, it #as statedB
% deed of sale is considered absolute in nature #here there is neither a stipulation in the deed that title
to the propert2 sold is reserved in the seller until full pa2.ent of the price, nor one 0ivin0 the vendor
the ri0ht to unilaterall2 resolve the contract the .o.ent the bu2er fails to pa2 #ithin a fi9ed period.
%ppl2in0 these principles to this case, it cannot be 0ainsaid that the contract of sale bet#een the
parties is absolute, not conditional. There is no reservation of o#nership nor a stipulation providin0 for
a unilateral rescission b2 either part2. In fact, the sale #as consu..ated upon the deliver2 of the lot to
respondent. Thus, %rt. $*11 provides that the o#nership of the thin0 sold shall be transferred to the
vendee upon the actual or constructive deliver2 thereof.
--
The condition in the deed that the balance of P$,444.44 shall be paid to the vendor b2 the vendee as
soon as the propert2 sold shall have been surve2ed in the na.e of the vendee and all papers pertinent
and necessar2 to the issuance of a separate certificate of title in the na.e of the vendee shall have
been prepared is not a condition #hich prevented the efficac2 of the contract of sale. It .erel2 provides
the .anner b2 #hich the total purchase price of the propert2 is to be paid. The condition did not
prevent the contract fro. bein0 in full force and effectB
The stipulation that the ?pa2.ent of the full consideration based on a surve2 shall be due and pa2able
in five &,' 2ears fro. the e9ecution of a for.al deed of sale? is not a condition #hich affects the efficac2
of the contract of sale. It .erel2 provides the .anner b2 #hich the full consideration is to be co.puted
and the ti.e #ithin #hich the sa.e is to be paid. "ut it does not affect in an2 .anner the effectivit2 of
the contract. V
-*
In a contract to sell, o#nership is retained b2 a seller and is not to be transferred to the vendee until full
pa2.ent of the price. Such pa2.ent is a positive suspensive condition, the failure of #hich is not a
breach of contract but si.pl2 an event that prevented the obli0ation fro. ac5uirin0 bindin0 force.
-,
It bears stressin0 that in a contract of sale, the non(pa2.ent of the price is a resolutor2 condition #hich
e9tin0uishes the transaction that, for a ti.e, e9isted and dischar0es the obli0ation created under the
transaction.
-+
% seller cannot unilaterall2 and e9tra;udiciall2 rescind a contract of sale unless there is an
e9press stipulation authori7in0 it. In such case, the vendor .a2 file an action for specific perfor.ance
or ;udicial rescission.
-1
%rticle $$+6 of the Ne# !ivil !ode provides that in reciprocal obli0ations, neither part2 incurs in dela2 if
the other does not co.pl2 or is not read2 to co.pl2 in a proper .anner #ith #hat is incu.bent upon
hi.: fro. the .o.ent one of the parties fulfills his obli0ation, dela2 b2 the other be0ins. In this case,
the vendor &=esus MascuMana' failed to co.pl2 #ith his obli0ation of se0re0atin0 Cot No. $/*(" and
the issuance of a Torrens title over the propert2 in favor of the vendee, or the latterQs successors(in(
interest, the respondents herein. @orse, petitioner =ose MascuMana #as able to secure title over the
propert2 under the na.e of his deceased father.
IN LIGHT O2 ALL THE 2OREGOING, the petition is DNID for lac8 of .erit. !osts a0ainst the
petitioners.
SO ORDRD.
Puno, &!hair.an', %ustria(Martine7, Tin0a, and !hico(Na7ario, ==., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 69589 #+,4 6, 1666
#AIME G. ONG, petitioner,
vs.
THE HONORALE COURT O2 APPEALS, SPOUSES MIGUEL !. ROLES 1') ALE#ANDRO M.
ROLES,respondents.

YNARES"SANTIAGO, J!
"efore us is a petition for revie# on certiorari fro. the ;ud0.ent rendered b2 the !ourt of %ppeals #hich,
e9cept as to the a#ard of e9e.plar2 da.a0es, affir.ed the decision of the Re0ional Trial !ourt of Cucena
!it2, "ranch +4, settin0 aside the ?%0ree.ent of Purchase and Sale? entered into b2 herein petitioner and
private respondent spouses in !ivil !ase No. 3,(3,./K-phi/.nLt
On Ma2 $4, $63-, petitioner =ai.e On0, on the one hand, and respondent spouses Mi0uel O. Robles and
%le;andra Robles, on the other hand, e9ecuted an ?%0ree.ent of Purchase and Sale? respectin0 t#o parcels
of land situated at "arrio Puri, San %ntonio, Hue7on. The ter.s and conditions of the contract readB?
$. That for and in consideration of the a0reed purchase price of T@O MICCION PSOS
&P/,444,444.44', Philippine currenc2, the .ode and .anner of pa2.ent is as follo#sB
%. The initial pa2.ent of SIF ADNDRD TAODS%ND PSOS
&P+44,444.44' as verball2 a0reed b2 the parties, shall be
bro8en do#n as follo#sB
$. P$4-,*66.6$ shall be paid, and as
alread2 paid b2 the B>&?# to
theS?==?#S on March //, $63-, as
stipulated under the Certification of
un"ertaking dated March //, $63- and
covered b2 a chec8 of even date.
/. That the su. of P*6+,,44.46 shall be
paid directl2 b2 the B>&?# to the "an8
of Philippine Islands to ans#er for the
loan of the S?==?#S #hich as of March
$,, $63- a.ounted to P,-1,-$4.$4, and
for the interest that .a2 accrued &sic'
fro. March $,, $63-, up to the ti.e said
obli0ation of theS?==?#S #ith the said
ban8 has been settled, provided
ho#ever that the a.ount in e9cess of
P*6+,,44.46, shall be char0eable fro.
the ti.e deposit of the S?==?#S #ith
the aforesaid ban8.
". That the balance of ON MICCION FODR ADNDRD
TAODS%ND &P$,*44,444.44' PSOS shall be paid b2
the B>&?# to the S?==?#S in four &*' e5ual 5uarterl2
install.ents of TAR ADNDRD FIFTE TAODS%ND PSOS
&P-,4,444.44', the first to be due and pa2able on =une $,,
$63-, and ever2 5uarter thereafter, until the #hole a.ount is
full2 paid, b2 these presents pro.ise to sell to said "DER the
t#o &/' parcels of a0ricultural land includin0 the rice .ill and the
pi00er2 #hich are the .ost notable i.prove.ents thereon,
situated at "aran0a2 Puri, San %ntonio Hue7on, . . .
/. That upon the pa2.ent of the total purchase price b2 the B>&?# the S?==?#S bind
the.selves to deliver to the for.er a 0ood and sufficient deed of sale and conve2ance
for the described t#o &/' parcels of land, free and clear fro. all liens and
encu.brances.
-. That i..ediatel2 upon the e9ecution of this docu.ent, the S?==?#S shall deliver,
surrender and transfer possession of the said parcels of land includin0 all the
i.prove.ents that .a2 be found thereon, to the B>&?#, and the latter shall ta8e over
fro. the S?==?# the possession, operation, control and .ana0e.ent of the
RI!MICC and PI))RE found on the aforesaid parcels of land.
*. That all pa2.ents due and pa2able under this contract shall be effected in the
residence of theS?==?#S located at "aran0a2 Puri, San %ntonio, Hue7on unless
another place shall have been subse5uentl2 desi0nated b2 both parties in #ritin0.
999 999 999
1
On Ma2 $,, $63-, petitioner On0 too8 possession of the sub;ect parcels of land to0ether #ith the pi00er2,
buildin0, rice.ill, residential house and other i.prove.ents thereon.
Pursuant to the contract the2 e9ecuted, petitioner paid respondent spouses the su. of P$4-,*66.6$
2
b2
depositin0 it #ith the Dnited !oconut Planters "an8. Subse5uentl2, petitioner deposited su.s of .one2 #ith
the "an8 of Philippine Islands &"PI',
5
in accordance #ith their stipulation that petitioner pa2 the loan of
respondents #ith "PI.
To ans#er for his balance of P$,*44,444.44 petitioner issued four &*' post(dated Metro "an8 chec8s pa2able
to respondent spouses in the a.ount of P-,4,4444.44 each, na.el2B !hec8 No. $,1143 dated =une $,,
$63-,
8
!hec8 No. $,1146 dated Septe.ber $,, $63-,
3
!hec8 No. $,11$4 dated Dece.ber $,, $63-
6
and
!hec8 No. $,11$$ dated March $,, $63*.
9
@hen presented for pa2.ent, ho#ever, the chec8s #ere
dishonored due to insufficient funds. Petitioner pro.ised to replace the chec8s but failed to do so. To .a8e
.atters #orse, out of the P*6+,,44.44 loan of respondent spouses #ith the "an8 of the Philippine Islands,
#hich petitioner, as per a0ree.ent, should have paid, petitioner onl2 .ana0ed to dole out no .ore than
P-6-,+16.+4. @hen the ban8 threatened to foreclose the respondent spouses< .ort0a0e, the2 sold three
transfor.ers of the rice .ill #orth P,$,*$$.44 to pa2 off their outstandin0 obli0ation #ith said ban8, #ith the
8no#led0e and confor.it2 of petitioner.
8
Petitioner, in return, voluntaril2 0ave the spouses authorit2 to operate
the rice .ill.
6
Ae, ho#ever, continued to be in possession of the t#o parcels of land #hile private respondents
#ere forced to use the rice .ill for residential purposes.
On %u0ust /, $63,, respondent spouses, throu0h counsel, sent petitioner a de.and letter as8in0 for the return
of the properties. Their de.and #as left unheeded, so, on Septe.ber /, $63,, the2 filed #ith the Re0ional
Trial !ourt of Cucena !it2, "ranch +4, a co.plaint for rescission of contract and recover2 of properties #ith
da.a0es. Cater, #hile the case #as still pendin0 #ith the trial court, petitioner introduced .a;or i.prove.ents
on the sub;ect properties b2 constructin0 a co.plete fence .ade of hollo# bloc8s and e9pandin0 the pi00er2.
These pro.pted the respondent spouses to as8 for a #rit of preli.inar2 in;unction.
10
The trial court 0ranted
the application and en;oined petitioner fro. introducin0 i.prove.ents on the properties e9cept for repairs.
11
On =une $, $636 the trial court rendered a decision, the dispositive portion of #hich reads as follo#sB
IN VI@ OF TA FOR)OIN), ;ud0.ent is hereb2 renderedB
a' Orderin0 that the contract entered into b2 plaintiff spouses Mi0uel O. Robles and
%le;andra M. Robles and the defendant, =ai.e On0 captioned ?%0ree.ent of Purchase
and Sale,? .ar8ed as 9hibit ?%? set aside:
b' Orderin0 defendant, =ai.e On0 to deliver the t#o &/' parcels of land #hich are the
sub;ect .atter of 9hibit ?%? to0ether #ith the i.prove.ents thereon to the spouses
Mi0uel O. Robles and %le;andro M. Robles:
c' Orderin0 plaintiff spouses, Mi0uel Robles and %le;andra Robles to return to =ai.e
On0 the su. of P*61,$16.,$:
d' Orderin0 defendant =ai.e On0 to pa2 the plaintiffs the su. of P$44,444.44 as
e9e.plar2 da.a0es: and
e' Orderin0 defendant =ai.e On0 to pa2 the plaintiffs spouses Mi0uel O. Robles and
%le;andra Robles the su. of P/4,444.44 as attorne2<s fees and liti0ation e9penses.
The .otion of the plaintiff spouses Mi0uel O. Roles and %le;andra Robles for the
appoint.ent of receivership is rendered .oot and acade.ic.
SO ORDRD.
12
Fro. this decision, petitioner appealed to the !ourt of %ppeals, #hich affir.ed the decision of the Re0ional
Trial !ourt but deleted the a#ard of e9e.plar2 da.a0es. In affir.in0 the decision of the trial court, the !ourt
of %ppeals noted that the failure of petitioner to co.pletel2 pa2 the purchase price is a substantial breach of
his obli0ation #hich entitles the private respondents to rescind their contract under %rticle $$6$ of the Ne#
!ivil !ode. Aence, the instant petition.
%t the outset, it .ust be stated that the issues raised b2 the petitioner are 0enerall2 factual in nature and #ere
alread2 passed upon b2 the !ourt of %ppeals and the trial court. Ti.e and a0ain, #e have stated that it is not
the function of the Supre.e !ourt to assess and evaluate all over a0ain the evidence, testi.onial and
docu.entar2, adduced b2 the parties to an appeal, particularl2 #here, such as in the case at bench, the
findin0s of both the trial court and the appellate court on the .atter coincide. There is no co0ent reason sho#n
that #ould ;ustif2 the court to discard the factual findin0s of the t#o courts belo# and to superi.pose its
o#n.
15
The onl2 pertinent le0al issues raised #hich are #orth2 of discussion are &$' #hether the contract entered into
b2 the parties .a2 be validl2 rescinded under %rticle $$6$ of the Ne# !ivil !ode: and &/' #hether the parties
had novated their ori0inal contract as to the ti.e and .anner of pa2.ent.
Petitioner contends that %rticle $$6$ of the Ne# !ivil !ode is not applicable since he has alread2 paid
respondent spouses a considerable su. and has therefore substantiall2 co.plied #ith his obli0ation. Ae cites
%rticle $-3- instead, to the effect that #here specific perfor.ance is available as a re.ed2, rescission .a2 not
be resorted to.
% discussion of the aforesaid articles is in order.
Rescission, as conte.plated in %rticles $-34, et seq., of the Ne# !ivil !ode, is a re.ed2 0ranted b2 la# to the
contractin0 parties and even to third persons, to secure the reparation of da.a0es caused to the. b2 a
contract, even if this should be valid, b2 restoration of thin0s to their condition at the .o.ent prior to the
celebration of the contract.
18
It i.plies a contract, #hich even if initiall2 valid, produces a lesion or a pecuniar2
da.a0e to so.eone.
13
On the other hand, %rticle $$6$ of the Ne# !ivil !ode refers to rescission applicable to reciprocal obli0ations.
Reciprocal obli0ations are those #hich arise fro. the sa.e cause, and in #hich each part2 is a debtor and a
creditor of the other, such that the obli0ation of one is dependent upon the obli0ation of the other.
16
The2 are
to be perfor.ed si.ultaneousl2 such that the perfor.ance of one is conditioned upon the si.ultaneous
fulfill.ent of the other. Rescission of reciprocal obli0ations under %rticle $$6$ of the Ne# !ivil !ode should be
distin0uished fro. rescission of contracts under %rticle $-3-. %lthou0h both presuppose contracts validl2
entered into and subsistin0 and both re5uire .utual restitution #hen proper, the2 are not entirel2 identical.
@hile %rticle $$6$ uses the ter. ?rescission,? the ori0inal ter. #hich #as used in the old !ivil !ode, fro.
#hich the article #as based, #as ?resolution.
19
? Resolution is a principal action #hich is based on breach of a
part2, #hile rescission under %rticle $-3- is a subsidiar2 action li.ited to cases of rescission for lesion under
%rticle $-3$ of the Ne# !ivil !ode, #hich e9pressl2 enu.erates the follo#in0 rescissible contractsB
$. Those #hich are entered into b2 0uardians #henever the
#ards #ho. the2 represent suffer lesion b2 .ore than one
fourth of the value of the thin0s #hich are the ob;ect thereof:
/. Those a0reed upon in representation of absentees, if the
latter suffer the lesion stated in the precedin0 nu.ber:
-. Those underta8en in fraud of creditors #hen the latter cannot
in an2 .anner collect the clai.s due the.:
*. Those #hich refer to thin0s under liti0ation if the2 have been
entered into b2 the defendant #ithout the 8no#led0e and
approval of the liti0ants or of co.petent ;udicial authorit2:
,. %ll other contracts speciall2 declared b2 la# to be sub;ect to
rescission.
Obviousl2, the contract entered into b2 the parties in the case at bar does not fall under
an2 of those .entioned b2 %rticle $-3$. !onse5uentl2, %rticle $-3- is inapplicable.
Ma2 the contract entered into bet#een the parties, ho#ever, be rescinded based on
%rticle $$6$L
% careful readin0 of the parties< ?%0ree.ent of Purchase and Sale? sho#s that it is in
the nature of a contract to sell, as distin0uished fro. a contract of sale. In a contract of
sale, the title to the propert2 passes to the vendee upon the deliver2 of the thin0 sold:
#hile in a contract to sell, o#nership is, b2 a0ree.ent, reserved in the vendor and is
not to pass to the vendee until full pa2.ent of the purchase price.
18
In a contract to
sell, the pa2.ent of the purchase price is a positive suspensive condition, the failure of
#hich is not a breach, casual or serious, but a situation that prevents the obli0ation of
the vendor to conve2 title fro. ac5uirin0 an obli0ator2 force.
16
Respondents in the case at bar bound the.selves to deliver a deed of absolute sale
and clean title coverin0 the t#o parcels of land upon full pa2.ent b2 the bu2er of the
purchase price of P/,444,444.44. This pro.ise to sell #as sub;ect to the fulfill.ent of
the suspensive condition of full pa2.ent of the purchase price b2 the petitioner.
Petitioner, ho#ever, failed to co.plete pa2.ent of the purchase price. The non(
fulfill.ent of the condition of full pa2.ent rendered the contract to sell ineffective and
#ithout force and effect. It .ust be stressed that the breach conte.plated in %rticle
$$6$ of the Ne# !ivil !ode is the obli0or<s failure to co.pl2 #ith an
obli0ation.
20
Failure to pa2, in this instance, is not even a breach but .erel2 an event
#hich prevents the vendor<s obli0ation to conve2 title fro. ac5uirin0 bindin0
force.
21
Aence, the a0ree.ent of the parties in the case at bench .a2 be set aside,
but not because of a breach on the part of petitioner for failure to co.plete pa2.ent of
the purchase price. Rather, his failure to do so brou0ht about a situation #hich
prevented the obli0ation of respondent spouses to conve2 title fro. ac5uirin0 an
obli0ator2 force.
Petitioner insists, ho#ever, that the contract #as novated as to the .anner and ti.e of
pa2.ent.
@e are not persuaded. %rticle $/6/ of the Ne# !ivil !ode states that, ?In order that an
obli0ation .a2 be e9tin0uished b2 another #hich substitutes the sa.e, it is i.perative
that it be so declared in une5uivocal ter.s, or that the old and the ne# obli0ations be
on ever2 point inco.patible #ith each other.?
Novation is never presu.ed, it .ust be proven as a fact either b2 e9press stipulation of
the parties or b2 i.plication derived fro. an irreconcilable inco.patibilit2 bet#een the
old and the ne# obli0ation.
22
Petitioner cites the follo#in0 instances as proof that the
contract #as novatedB the retrieval of the transfor.ers fro. petitioner<s custod2 and
their sale b2 the respondents to MR%C!O on the condition that the proceeds thereof
be accounted for b2 the respondents and deducted fro. the price of the contract: the
ta8e(over b2 the respondents of the custod2 and operation of the rice .ill: and the
continuous and re0ular #ithdra#als b2 respondent Mi0uel Robles of install.ent su.s
per vouchers &9hs. ?3? to ?*1?' on the condition that these install.ents be credited to
petitioner<s account and deducted fro. the balance of the purchase price.
!ontrar2 to petitioner<s clai., records sho# that the parties never even intended to
novate their previous a0ree.ent. It is true that petitioner paid respondents s.all su.s
of .one2 a.ountin0 to P*3,+34.44, in contravention of the .anner of pa2.ent
stipulated in their contract. These install.ents #ere, ho#ever, ob;ected to b2
respondent spouses, and petitioner replied that these represented the interest of the
principal a.ount #hich he o#ed the..
25
Records further sho# that petitioner a0reed to
the sale of MR%C!O transfor.ers b2 private respondents to pa2 for the balance of
their subsistin0 loan #ith the "an8 of Philippine Islands. Petitioner<s letter of
authori7ation readsB
999 999 999
Dnder this authorit2, it is .utuall2 understood that #hatever pa2.ent received fro.
MR%C!O as pa2.ent to the transfro.ers #ill be considered as partial pa2.ent of the
undersi0ned<s obli0ation to Mr. and Mrs. Mi0uel O. Robles.
The sa.e #ill be utili7ed as partial pa2.ent to e9istin0 loan #ith the "an8 of Philippine
Islands.
It is also .utuall2 understood that this pa2.ent to the "an8 of Philippine Islands #ill be
rei.bursed to Mr. and Mrs. Mi0uel O. Robles b2 the undersi0ned. J.phasis
suppliedK
28
It should be noted that #hile it #as. a0reed that part of the purchase price in the su. of
P*6+,,44.44 #ould be directl2 deposited b2 petitioner to the "an8 of Philippine Islands
to ans#er for the loan of respondent spouses, petitioner onl2 .ana0ed to deposit
P-6-,+16.+4. @hen the ban8 threatened to foreclose the properties, petitioner
apparentl2 could not even raise the su. needed to forestall an2 action on the part of
the ban8. !onse5uentl2, he authori7ed respondent spouses to sell the three &-'
transfor.ers. Ao#ever, althou0h the parties a0reed to credit the proceeds fro. the
sale of the transfor.ers to petitioner<s obli0ation, he #as supposed to rei.burse the
sa.e later to respondent spouses. This can onl2 .ean that there #as never an
intention on the part of either of the parties to novate petitioner<s .anner of pa2.ent.
Petitioner contends that the parties verball2 a0reed to novate the .anner of pa2.ent
#hen respondent spouses proposed to operate the rice .ill on the condition that the2
#ill account for its earnin0s. @e find that this is unsubstantiated b2 the evidenced on
the record. The tenor of his letter dated %u0ust $/, $63* to respondent spouses, in
fact, sho#s that petitioner had a ?little .isunderstandin0? #ith respondent spouses
#ho. he #as evidentl2 tr2in0 to appease b2 authori7in0 the. to continue te.poraril2
#ith the operation of the rice .ill. !learl2, #hile petitioner .i0ht have #anted to novate
the ori0inal a0ree.ent as to his .anner of pa2.ent, the records are bereft of evidence
that respondent spouses #illin0l2 a0reed to .odif2 their previous arran0e.ent.
In order for novation to ta8e place, the concurrence of the follo#in0 re5uisites is
indispensableB &$' there .ust be a previous valid obli0ation: &/' there .ust be an
a0ree.ent of the parties concerned to a ne# contract: &-' there .ust be the
e9tin0uish.ent of the old contract: and &*' there .ust be the validit2 of the ne#
contract.
23
The aforesaid re5uisites are not found in the case at bench. The
subse5uent acts of the parties hardl2 de.onstrate their intent to dissolve the old
obli0ation as a consideration for the e.er0ence of the ne# one. @e repeat to the point
of triteness, novation is never presu.ed, there .ust be an e9press intention to novate.
%s re0ards the i.prove.ents introduced b2 petitioner to the pre.ises and for #hich he
clai.s rei.burse.ent, #e see no reason to depart fro. the rulin0 of the trial court and
the appellate court that petitioner is a builder in bad faith. Ae introduced the
i.prove.ents on the pre.ises 8no#in0 full2 #ell that he has not paid the
consideration of the contract in full and over the vi0orous ob;ections of respondent
spouses. Moreover, petitioner introduced .a;or i.prove.ents on the pre.ises even
#hile the case a0ainst hi. #as pendin0 before the trial court.
The a#ard of e9e.plar2 da.a0es #as correctl2 deleted b2 the !ourt of %ppeals in as
.uch as no .oral, te.perate, li5uidated or co.pensator2 da.a0es in addition to
e9e.plar2 da.a0es #ere a#arded.
@ARFOR, the decision rendered b2 the !ourt of %ppeals is hereb2 %FFIRMD
#ith the MODIFI!%TION that respondent spouses are ordered to return to petitioner
the su. of P*3,+34.44 in addition to the a.ounts alread2 a#arded. !osts a0ainst
petitioner./K-phi/.nLt
SO ORDRD.
%avi"e, (r., C.(., Melo, 8apunan an" Par"o, ((., concur.
Republic of the Philippines
SUPREME COURT
Manila
TAIRD DIVISION
G.R. No. 105399 Oc(ober 9, 1666
ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNAELLE C.
GON=ALES A/or &er*e,/ 1') o' be&1,/ o/ 2,or-)1 C. T+00er, 1* 1((or'e4"-'"/1c(B, CIELITO A.
CORONEL, 2LORAIDA A. ALMONTE, 1') CATALINA ALAIS MAANAG, petitioners,
vs.
THE COURT O2 APPEALS, CONCEPCION D. ALCARA=, 1') RAMONA PATRICIA ALCARA=,
1**-*(e) b4 GLORIA 2. NOEL 1* 1((or'e4"-'"/1c(, respondents.

MELO, J!p
The petition before us has its roots in a co.plaint for specific perfor.ance to co.pel herein petitioners
&e9cept the last na.ed, !atalina "alais Mabana0' to consu..ate the sale of a parcel of land #ith its
i.prove.ents located alon0 Roosevelt %venue in Hue7on !it2 entered into b2 the parties so.eti.e in
=anuar2 $63, for the price of P$,/*4,444.44.
The undisputed facts of the case #ere su..ari7ed b2 respondent court in this #iseB
On =anuar2 $6, $63,, defendants(appellants Ro.ulo !oronel, et al. &hereinafter
referred to as !oronels' e9ecuted a docu.ent entitled ?Receipt of Do#n
Pa2.ent? &9h. ?%?' in favor of plaintiff Ra.ona Patricia %lcara7 &hereinafter
referred to as Ra.ona' #hich is reproduced hereunderB
R!IPT OF DO@N P%EMNT
P$,/*4,444.44 N Total a.ount
,4,444 N Do#n pa2.ent
NNNNNNNNNNN
P$,$64,444.44 N "alance
Received fro. Miss Ra.ona Patricia %lcara7 of $*+ Ti.o0, Hue7on !it2, the
su. of Fift2 Thousand Pesos purchase price of our inherited house and lot,
covered b2 T!T No. $$6+/1 of the Re0istr2 of Deeds of Hue7on !it2, in the total
a.ount of P$,/*4,444.44.
@e bind ourselves to effect the transfer in our na.es fro. our deceased father,
!onstancio P. !oronel, the transfer certificate of title i..ediatel2 upon receipt of
the do#n pa2.ent above(stated.
On our presentation of the T!T alread2 in or na.e, @e #ill i..ediatel2 e9ecute
the deed of absolute sale of said propert2 and Miss Ra.ona Patricia %lcara7
shall i..ediatel2 pa2 the balance of the P$,$64,444.44.
!learl2, the conditions appurtenant to the sale are the follo#in0B
$. Ra.ona #ill .a8e a do#n pa2.ent of Fift2 Thousand &P,4,444.44' Pesos
upon e9ecution of the docu.ent aforestated:
/. The !oronels #ill cause the transfer in their na.es of the title of the propert2
re0istered in the na.e of their deceased father upon receipt of the Fift2
Thousand &P,4,444.44' Pesos do#n pa2.ent:
-. Dpon the transfer in their na.es of the sub;ect propert2, the !oronels #ill
e9ecute the deed of absolute sale in favor of Ra.ona and the latter #ill pa2 the
for.er the #hole balance of One Million One Aundred Ninet2 Thousand
&P$,$64,444.44' Pesos.
On the sa.e date &=anuar2 $,, $63,', plaintiff(appellee !oncepcion D. %lcara7
&hereinafter referred to as !oncepcion', .other of Ra.ona, paid the do#n
pa2.ent of Fift2 Thousand &P,4,444.44' Pesos &9h. ?"?, 9h. ?/?'.
On Februar2 +, $63,, the propert2 ori0inall2 re0istered in the na.e of the
!oronels< father #as transferred in their na.es under T!T
No. -/14*- &9h. ?D?: 9h. ?*?'
On Februar2 $3, $63,, the !oronels sold the propert2 covered b2 T!T No.
-/14*- to intervenor(appellant !atalina ". Mabana0 &hereinafter referred to as
!atalina' for One Million Five Aundred i0ht2 Thousand &P$,,34,444.44' Pesos
after the latter has paid Three Aundred Thousand &P-44,444.44' Pesos &9hs.
?F(-?: 9h. ?+(!?'
For this reason, !oronels canceled and rescinded the contract &9h. ?%?' #ith
Ra.ona b2 depositin0 the do#n pa2.ent paid b2 !oncepcion in the ban8 in
trust for #amona Patricia Alcara*.
On Februar2 //, $63,, !oncepcion, et al., filed a co.plaint for specific
perfor.ance a0ainst the !oronels and caused the annotation of a notice of lis
pen"ens at the bac8 of T!T No. -/1*4- &9h. ??: 9h. ?,?'.
On %pril /, $63,, !atalina caused the annotation of a notice of adverse clai.
coverin0 the sa.e propert2 #ith the Re0istr2 of Deeds of Hue7on !it2 &9h. ?F?:
9h. ?+?'.
On %pril /,, $63,, the !oronels e9ecuted a Deed of %bsolute Sale over the
sub;ect propert2 in favor of !atalina &9h. ?)?: 9h. ?1?'.
On =une ,, $63,, a ne# title over the sub;ect propert2 #as issued in the na.e of
!atalina under T!T No. -,$,3/ &9h. ?A?: 9h. ?3?'.
&#ollo, pp. $-*($-+'
In the course of the proceedin0s before the trial court &"ranch 3-, RT!, Hue7on !it2' the parties
a0reed to sub.it the case for decision solel2 on the basis of docu.entar2 e9hibits. Thus, plaintiffs
therein &no# private respondents' proffered their docu.entar2 evidence accordin0l2 .ar8ed as
9hibits ?%? throu0h ?=?, inclusive of their correspondin0 sub.ar8in0s. %doptin0 these sa.e e9hibits as
their o#n, then defendants &no# petitioners' accordin0l2 offered and .ar8ed the. as 9hibits ?$?
throu0h ?$4?, li8e#ise inclusive of their correspondin0 sub.ar8in0s. Dpon .otion of the parties, the
trial court 0ave the. thirt2 &-4' da2s #ithin #hich to si.ultaneousl2 sub.it their respective
.e.oranda, and an additional $, da2s #ithin #hich to sub.it their correspondin0 co..ent or repl2
thereof, after #hich, the case #ould be dee.ed sub.itted for resolution.
On %pril $*, $633, the case #as sub.itted for resolution before =ud0e Re2naldo Roura, #ho #as then
te.poraril2 detailed to preside over "ranch 3/ of the RT! of Hue7on !it2. On March $, $636,
;ud0.ent #as handed do#n b2 =ud0e Roura fro. his re0ular bench at Macabebe, Pa.pan0a for the
Hue7on !it2 branch, disposin0 as follo#sB
@ARFOR, ;ud0.ent for specific perfor.ance is hereb2 rendered orderin0
defendant to e9ecute in favor of plaintiffs a deed of absolute sale coverin0 that
parcel of land e.braced in and covered b2 Transfer !ertificate of Title No.
-/1*4- &no# T!T No. --$,3/' of the Re0istr2 of Deeds for Hue7on !it2,
to0ether #ith all the i.prove.ents e9istin0 thereon free fro. all liens and
encu.brances, and once acco.plished, to i..ediatel2 deliver the said
docu.ent of sale to plaintiffs and upon receipt thereof, the said docu.ent of sale
to plaintiffs and upon receipt thereof, the plaintiffs are ordered to pa2 defendants
the #hole balance of the purchase price a.ountin0 to P$,$64,444.44 in cash.
Transfer !ertificate of Title No. --$,3/ of the Re0istr2 of Deeds for Hue7on !it2
in the na.e of intervenor is hereb2 canceled and declared to be #ithout force
and effect. Defendants and intervenor and all other persons clai.in0 under the.
are hereb2 ordered to vacate the sub;ect propert2 and deliver possession thereof
to plaintiffs. Plaintiffs< clai. for da.a0es and attorne2<s fees, as #ell as the
counterclai.s of defendants and intervenors are hereb2 dis.issed.
No pronounce.ent as to costs.
So Ordered.
Macabebe, Pa.pan0a for Hue7on !it2, March $, $636.
&#ollo, p. $4+'
% .otion for reconsideration #as filed b2 petitioner before the ne# presidin0 ;ud0e of the Hue7on !it2
RT! but the sa.e #as denied b2 =ud0e strella T. strada, thusl2B
The pra2er contained in the instant .otion, i.e., to annul the decision and to
render ane# decision b2 the undersi0ned Presidin0 =ud0e should be denied for
the follo#in0 reasonsB &$' The instant case beca.e sub.itted for decision as of
%pril $*, $633 #hen the parties ter.inated the presentation of their respective
docu.entar2 evidence and #hen the Presidin0 =ud0e at that ti.e #as =ud0e
Re2naldo Roura. The fact that the2 #ere allo#ed to file .e.oranda at so.e
future date did not chan0e the fact that the hearin0 of the case #as ter.inated
before =ud0e Roura and therefore the sa.e should be sub.itted to hi. for
decision: &/' @hen the defendants and intervenor did not ob;ect to the authorit2
of =ud0e Re2naldo Roura to decide the case prior to the rendition of the decision,
#hen the2 .et for the first ti.e before the undersi0ned Presidin0 =ud0e at the
hearin0 of a pendin0 incident in !ivil !ase No. H(*+$*, on Nove.ber $$, $633,
the2 #ere dee.ed to have ac5uiesced thereto and the2 are no# estopped fro.
5uestionin0 said authorit2 of =ud0e Roura after the2 received the decision in
5uestion #hich happens to be adverse to the.: &-' @hile it is true that =ud0e
Re2naldo Roura #as .erel2 a =ud0e(on(detail at this "ranch of the !ourt, he
#as in all respects the Presidin0 =ud0e #ith full authorit2 to act on an2 pendin0
incident sub.itted before this !ourt durin0 his incu.benc2. @hen he returned to
his Official Station at Macabebe, Pa.pan0a, he did not lose his authorit2 to
decide or resolve such cases sub.itted to hi. for decision or resolution because
he continued as =ud0e of the Re0ional Trial !ourt and is of co(e5ual ran8 #ith
the undersi0ned Presidin0 =ud0e. The standin0 rule and supported b2
;urisprudence is that a =ud0e to #ho. a case is sub.itted for decision has the
authorit2 to decide the case not#ithstandin0 his transfer to another branch or
re0ion of the sa.e court &Sec. 6, Rule $-,, Rule of !ourt'.
!o.in0 no# to the t#in pra2er for reconsideration of the Decision dated March $,
$636 rendered in the instant case, resolution of #hich no# pertains to the
undersi0ned Presidin0 =ud0e, after a .eticulous e9a.ination of the docu.entar2
evidence presented b2 the parties, she is convinced that the Decision of March $,
$636 is supported b2 evidence and, therefore, should not be disturbed.
IN VI@ OF TA FOR)OIN), the ?Motion for Reconsideration and>or to %nnul
Decision and Render %ne# Decision b2 the Incu.bent Presidin0 =ud0e? dated
March /4, $636 is hereb2 DNID.
SO ORDRD.
Hue7on !it2, Philippines, =ul2 $/, $636.
&#ollo, pp. $43($46'
Petitioners thereupon interposed an appeal, but on Dece.ber $+, $66$, the !ourt of %ppeals &"uena,
)on7a0a(Re2es, %bad Santos &P', ==.' rendered its decision full2 a0reein0 #ith the trial court.
Aence, the instant petition #hich #as filed on March ,, $66/. The last pleadin0, private respondents<
Repl2 Me.orandu., #as filed on Septe.ber $,, $66-. The case #as, ho#ever, re(raffled to
undersi0ned ponente onl2 on %u0ust /3, $66+, due to the voluntar2 inhibition of the =ustice to #ho.
the case #as last assi0ned.
@hile #e dee. it necessar2 to introduce certain refine.ents in the dis5uisition of respondent court in
the affir.ance of the trial court<s decision, #e definitel2 find the instant petition bereft of .erit.
The heart of the controvers2 #hich is the ulti.ate 8e2 in the resolution of the other issues in the case
at bar is the precise deter.ination of the le0al si0nificance of the docu.ent entitled ?Receipt of Do#n
Pa2.ent? #hich #as offered in evidence b2 both parties. There is no dispute as to the fact that said
docu.ent e.bodied the bindin0 contract bet#een Ra.ona Patricia %lcara7 on the one hand, and the
heirs of !onstancio P. !oronel on the other, pertainin0 to a particular house and lot covered b2 T!T
No. $$6+/1, as defined in %rticle $-4, of the !ivil !ode of the Philippines #hich reads as follo#sB
%rt. $-4,. % contract is a .eetin0 of .inds bet#een t#o persons #hereb2 one
binds hi.self, #ith respect to the other, to 0ive so.ethin0 or to render so.e
service.
@hile, it is the position of private respondents that the ?Receipt of Do#n Pa2.ent? e.bodied a
perfected contract of sale, #hich perforce, the2 see8 to enforce b2 .eans of an action for specific
perfor.ance, petitioners on their part insist that #hat the docu.ent si0nified #as a .ere e9ecutor2
contract to sell, sub;ect to certain suspensive conditions, and because of the absence of Ra.ona P.
%lcara7, #ho left for the Dnited States of %.erica, said contract could not possibl2 ripen into a contract
absolute sale.
Plainl2, such variance in the contendin0 parties< contentions is brou0ht about b2 the #a2 each
interprets the ter.s and>or conditions set forth in said private instru.ent. @ithal, based on #hatever
relevant and ad.issible evidence .a2 be available on record, this, !ourt, as #ere the courts belo#, is
no# called upon to ad;ud0e #hat the real intent of the parties #as at the ti.e the said docu.ent #as
e9ecuted.
The !ivil !ode defines a contract of sale, thusB
%rt. $*,3. "2 the contract of sale one of the contractin0 parties obli0ates hi.self
to transfer the o#nership of and to deliver a deter.inate thin0, and the other to
pa2 therefor a price certain in .one2 or its e5uivalent.
Sale, b2 its ver2 nature, is a consensual contract because it is perfected b2 .ere consent. The
essential ele.ents of a contract of sale are the follo#in0B
a' !onsent or .eetin0 of the .inds, that is, consent to transfer o#nership in
e9chan0e for the price:
b' Deter.inate sub;ect .atter: and
c' Price certain in .one2 or its e5uivalent.
Dnder this definition, a !ontract to Sell .a2 not be considered as a !ontract of Sale because the first
essential ele.ent is lac8in0. In a contract to sell, the prospective seller e9plicit2 reserves the transfer of
title to the prospective bu2er, .eanin0, the prospective seller does not as 2et a0ree or consent to
transfer o#nership of the propert2 sub;ect of the contract to sell until the happenin0 of an event, #hich
for present purposes #e shall ta8e as the full pa2.ent of the purchase price. @hat the seller a0rees or
obli0es hi.self to do is to fulfill is pro.ise to sell the sub;ect propert2 #hen the entire a.ount of the
purchase price is delivered to hi.. In other #ords the full pa2.ent of the purchase price parta8es of a
suspensive condition, the non(fulfill.ent of #hich prevents the obli0ation to sell fro. arisin0 and thus,
o#nership is retained b2 the prospective seller #ithout further re.edies b2 the prospective bu2er.
In #oque vs. =apu* &6+ S!R% 1*$ J$634K', this !ourt had occasion to ruleB
Aence, @e hold that the contract bet#een the petitioner and the respondent #as
a contract to sell #here the o#nership or title is retained b2 the seller and is not
to pass until the full pa2.ent of the price, such pa2.ent bein0 a positive
suspensive condition and failure of #hich is not a breach, casual or serious, but
si.pl2 an event that prevented the obli0ation of the vendor to conve2 title fro.
ac5uirin0 bindin0 force.
Stated positivel2, upon the fulfill.ent of the suspensive condition #hich is the full pa2.ent of the
purchase price, the prospective seller<s obli0ation to sell the sub;ect propert2 b2 enterin0 into a contract
of sale #ith the prospective bu2er beco.es de.andable as provided in %rticle $*16 of the !ivil !ode
#hich statesB
%rt. $*16. % pro.ise to bu2 and sell a deter.inate thin0 for a price certain is
reciprocall2 de.andable.
%n accepted unilateral pro.ise to bu2 or to sell a deter.inate thin0 for a price
certain is bindin0 upon the pro.issor if the pro.ise is supported b2 a
consideration distinct fro. the price.
% contract to sell .a2 thus be defined as a bilateral contract #hereb2 the prospective seller, #hile
e9pressl2 reservin0 the o#nership of the sub;ect propert2 despite deliver2 thereof to the prospective
bu2er, binds hi.self to sell the said propert2 e9clusivel2 to the prospective bu2er upon fulfill.ent of the
condition a0reed upon, that is, full pa2.ent of the purchase price.
% contract to sell as defined hereinabove, .a2 not even be considered as a conditional contract of sale
#here the seller .a2 li8e#ise reserve title to the propert2 sub;ect of the sale until the fulfill.ent of a
suspensive condition, because in a conditional contract of sale, the first ele.ent of consent is present,
althou0h it is conditioned upon the happenin0 of a contin0ent event #hich .a2 or .a2 not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale is co.pletel2 abated
&cf. Ao.esite and housin0 !orp. vs. !ourt of %ppeals, $-- S!R% 111 J$63*K'. Ao#ever, if the
suspensive condition is fulfilled, the contract of sale is thereb2 perfected, such that if there had alread2
been previous deliver2 of the propert2 sub;ect of the sale to the bu2er, o#nership thereto auto.aticall2
transfers to the bu2er b2 operation of la# #ithout an2 further act havin0 to be perfor.ed b2 the seller.
In a contract to sell, upon the fulfill.ent of the suspensive condition #hich is the full pa2.ent of the
purchase price, o#nership #ill not auto.aticall2 transfer to the bu2er althou0h the propert2 .a2 have
been previousl2 delivered to hi.. The prospective seller still has to conve2 title to the prospective
bu2er b2 enterin0 into a contract of absolute sale.
It is essential to distin0uish bet#een a contract to sell and a conditional contract of sale speciall2 in
cases #here the sub;ect propert2 is sold b2 the o#ner not to the part2 the seller contracted #ith, but to
a third person, as in the case at bench. In a contract to sell, there bein0 no previous sale of the
propert2, a third person bu2in0 such propert2 despite the fulfill.ent of the suspensive condition such as
the full pa2.ent of the purchase price, for instance, cannot be dee.ed a bu2er in bad faith and the
prospective bu2er cannot see8 the relief of reconve2ance of the propert2. There is no double sale in
such case. Title to the propert2 #ill transfer to the bu2er after re0istration because there is no defect in
the o#ner(seller<s title per se, but the latter, of course, .a2 be used for da.a0es b2 the intendin0
bu2er.
In a conditional contract of sale, ho#ever, upon the fulfill.ent of the suspensive condition, the sale
beco.es absolute and this #ill definitel2 affect the seller<s title thereto. In fact, if there had been
previous deliver2 of the sub;ect propert2, the seller<s o#nership or title to the propert2 is auto.aticall2
transferred to the bu2er such that, the seller #ill no lon0er have an2 title to transfer to an2 third person.
%ppl2in0 %rticle $,** of the !ivil !ode, such second bu2er of the propert2 #ho .a2 have had actual or
constructive 8no#led0e of such defect in the seller<s title, or at least #as char0ed #ith the obli0ation to
discover such defect, cannot be a re0istrant in 0ood faith. Such second bu2er cannot defeat the first
bu2er<s title. In case a title is issued to the second bu2er, the first bu2er .a2 see8 reconve2ance of the
propert2 sub;ect of the sale.
@ith the above postulates as 0uidelines, #e no# proceed to the tas8 of decipherin0 the real nature of
the contract entered into b2 petitioners and private respondents.
It is a canon in the interpretation of contracts that the #ords used therein should be 0iven their natural
and ordinar2 .eanin0 unless a technical .eanin0 #as intended &Tan vs. !ourt of %ppeals, /$/ S!R%
,3+ J$66/K'. Thus, #hen petitioners declared in the said ?Receipt of Do#n Pa2.ent? that the2 N
Received fro. Miss Ra.ona Patricia %lcara7 of $*+ Ti.o0, Hue7on !it2, the
su. of Fift2 Thousand Pesos purchase price of our inherite" house an" lot,
covered b2 T!T No. $$66+/1 of the Re0istr2 of Deeds of Hue7on !it2, in the
total a.ount of P$,/*4,444.44.
#ithout an2 reservation of title until full pa2.ent of the entire purchase price, the natural and
ordinar2 idea conve2ed is that the2 sold their propert2.
@hen the ?Receipt of Do#n Pa2.ent? is considered in its entiret2, it beco.es .ore .anifest that there
#as a clear intent on the part of petitioners to transfer title to the bu2er, but since the transfer certificate
of title #as still in the na.e of petitioner<s father, the2 could not full2 effect such transfer althou0h the
bu2er #as then #illin0 and able to i..ediatel2 pa2 the purchase price. Therefore, petitioners(sellers
undertoo8 upon receipt of the do#n pa2.ent fro. private respondent Ra.ona P. %lcara7, to cause the
issuance of a ne# certificate of title in their na.es fro. that of their father, after #hich, the2 pro.ised
to present said title, no# in their na.es, to the latter and to e9ecute the deed of absolute sale
#hereupon, the latter shall, in turn, pa2 the entire balance of the purchase price.
The a0ree.ent could not have been a contract to sell because the sellers herein .ade no e7press
reservation of o-nership or title to the su,Bect parcel of lan". Further.ore, the circu.stance #hich
prevented the parties fro. enterin0 into an absolute contract of sale pertained to the sellers
the.selves &the certificate of title #as not in their na.es' and not the full pa2.ent of the purchase
price. Dnder the established facts and circu.stances of the case, the !ourt .a2 safel2 presu.e that,
had the certificate of title been in the na.es of petitioners(sellers at that ti.e, there #ould have been
no reason #h2 an absolute contract of sale could not have been e9ecuted and consu..ated ri0ht
there and then.
Moreover, unli8e in a contract to sell, petitioners in the case at bar did not .erel2 pro.ise to sell the
properl2 to private respondent upon the fulfill.ent of the suspensive condition. On the contrar2, havin0
alread2 a0reed to sell the sub;ect propert2, the2 undertoo8 to have the certificate of title chan0ed to
their na.es and i..ediatel2 thereafter, to e9ecute the #ritten deed of absolute sale.
Thus, the parties did not .erel2 enter into a contract to sell #here the sellers, after co.pliance b2 the
bu2er #ith certain ter.s and conditions, pro.ised to sell the propert2 to the latter. @hat .a2 be
perceived fro. the respective underta8in0s of the parties to the contract is that petitioners had alread2
a0reed to sell the house and lot the2 inherited fro. their father, co.pletel2 #illin0 to transfer full
o#nership of the sub;ect house and lot to the bu2er if the docu.ents #ere then in order. It ;ust
happened, ho#ever, that the transfer certificate of title #as then still in the na.e of their father. It #as
.ore e9pedient to first effect the chan0e in the certificate of title so as to bear their na.es. That is #h2
the2 undertoo8 to cause the issuance of a ne# transfer of the certificate of title in their na.es upon
receipt of the do#n pa2.ent in the a.ount of P,4,444.44. %s soon as the ne# certificate of title is
issued in their na.es, petitioners #ere co..itted to i..ediatel2 e9ecute the deed of absolute sale.
Onl2 then #ill the obli0ation of the bu2er to pa2 the re.ainder of the purchase price arise.
There is no doubt that unli8e in a contract to sell #hich is .ost co..onl2 entered into so as to protect
the seller a0ainst a bu2er #ho intends to bu2 the propert2 in install.ent b2 #ithholdin0 o#nership over
the propert2 until the bu2er effects full pa2.ent therefor, in the contract entered into in the case at bar,
the sellers #ere the one #ho #ere unable to enter into a contract of absolute sale b2 reason of the fact
that the certificate of title to the propert2 #as still in the na.e of their father. It #as the sellers in this
case #ho, as it #ere, had the i.pedi.ent #hich prevented, so to spea8, the e9ecution of an contract
of absolute sale.
@hat is clearl2 established b2 the plain lan0ua0e of the sub;ect docu.ent is that #hen the said
?Receipt of Do#n Pa2.ent? #as prepared and si0ned b2 petitioners Ro.eo %. !oronel, et al., the
parties had a0reed to a conditional contract of sale, consu..ation of #hich is sub;ect onl2 to the
successful transfer of the certificate of title fro. the na.e of petitioners< father, !onstancio P. !oronel,
to their na.es.
The !ourt si0nificantl2 notes this suspensive condition #as, in fact, fulfilled on Februar2 +, $63, &9h.
?D?: 9h. ?*?'. Thus, on said date, the conditional contract of sale bet#een petitioners and private
respondent Ra.ona P. %lcara7 beca.e obli0ator2, the onl2 act re5uired for the consu..ation thereof
bein0 the deliver2 of the propert2 b2 .eans of the e9ecution of the deed of absolute sale in a public
instru.ent, #hich petitioners une5uivocall2 co..itted the.selves to do as evidenced b2 the ?Receipt
of Do#n Pa2.ent.?
%rticle $*1,, in correlation #ith %rticle $$3$, both of the !ivil !ode, plainl2 applies to the case at bench.
Thus,
%rt. $*1,. The contract of sale is perfected at the .o.ent there is a .eetin0 of
.inds upon the thin0 #hich is the ob;ect of the contract and upon the price.
Fro. the .o.ent, the parties .a2 reciprocall2 de.and perfor.ance, sub;ect to
the provisions of the la# 0overnin0 the for. of contracts.
%rt. $$3$. In conditional obli0ations, the ac5uisition of ri0hts, as #ell as the
e9tin0uish.ent or loss of those alread2 ac5uired, shall depend upon the
happenin0 of the event #hich constitutes the condition.
Since the condition conte.plated b2 the parties #hich is the issuance of a certificate of title in
petitioners< na.es #as fulfilled on Februar2 +, $63,, the respective obli0ations of the parties under the
contract of sale beca.e .utuall2 de.andable, that is, petitioners, as sellers, #ere obli0ed to present
the transfer certificate of title alread2 in their na.es to private respondent Ra.ona P. %lcara7, the
bu2er, and to i..ediatel2 e9ecute the deed of absolute sale, #hile the bu2er on her part, #as obli0ed
to forth#ith pa2 the balance of the purchase price a.ountin0 to P$,$64,444.44.
It is also si0nificant to note that in the first para0raph in pa0e 6 of their petition, petitioners conclusivel2
ad.itted thatB
-. The petitioners(sellers !oronel bound the.selves ?to effect the transfer in our
na.es fro. our deceased father !onstancio P. !oronel, the transfer certificate of
title i..ediatel2 upon receipt of the do#npa2.ent above(stated?. The sale -as
still su,Bect to this suspensive con"ition. &.phasis supplied.'
&#ollo, p. $+'
Petitioners the.selves reco0ni7ed that the2 entered into a contract of sale sub;ect to a suspensive
condition. Onl2, the2 contend, continuin0 in the sa.e para0raph, thatB
. . . Aad petitioners(sellers not complie" #ith this condition of first transferrin0 the
title to the propert2 under their na.es, there could be no perfected contract of
sale. &.phasis supplied.'
&,i".'
not a#are that the2 set their o#n trap for the.selves, for %rticle $$3+ of the !ivil !ode
e9pressl2 provides thatB
%rt. $$3+. The condition shall be dee.ed fulfilled #hen the obli0or voluntaril2
prevents its fulfill.ent.
"esides, it should be stressed and e.phasi7ed that #hat is .ore controllin0 than these .ere
h2pothetical ar0u.ents is the fact that the con"ition herein referre" to -as actuall$ an" in"isputa,l$
fulfille" on Fe,ruar$ A, /12@, #hen a ne# title #as issued in the na.es of petitioners as evidenced b2
T!T No. -/1*4- &9h. ?D?: 9h. ?*?'.
The inevitable conclusion is that on =anuar2 $6, $63,, as evidenced b2 the docu.ent deno.inated as
?Receipt of Do#n Pa2.ent? &9h. ?%?: 9h. ?$?', the parties entered into a contract of sale sub;ect onl2
to the suspensive condition that the sellers shall effect the issuance of ne# certificate title fro. that of
their father<s na.e to their na.es and that, on Februar2 +, $63,, this condition #as fulfilled &9h. ?D?:
9h. ?*?'.
@e, therefore, hold that, in accordance #ith %rticle $$31 #hich pertinentl2 provides N
%rt. $$31. The effects of conditional obli0ation to 0ive, once the condition has
been fulfilled, shall retroact to the da2 of the constitution of the obli0ation . . .
In obli0ation to do or not to do, the courts shall deter.ine, in each case, the
retroactive effect of the condition that has been co.plied #ith.
the ri0hts and obli0ations of the parties #ith respect to the perfected contract of sale
beca.e .utuall2 due and de.andable as of the ti.e of fulfill.ent or occurrence of the
suspensive condition on Februar2 +, $63,. %s of that point in ti.e, reciprocal obli0ations of
both seller and bu2er arose.
Petitioners also ar0ue there could been no perfected contract on =anuar2 $6, $63, because the2 #ere
then not 2et the absolute o#ners of the inherited propert2.
@e cannot sustain this ar0u.ent.
%rticle 11* of the !ivil !ode defines Succession as a .ode of transferrin0 o#nership as follo#sB
%rt. 11*. Succession is a .ode of ac5uisition b2 virtue of #hich the propert2,
ri0hts and obli0ations to be e9tent and value of the inheritance of a person are
trans.itted throu0h his death to another or others b2 his #ill or b2 operation of
la#.
Petitioners(sellers in the case at bar bein0 the sons and dau0hters of the decedent
!onstancio P. !oronel are co.pulsor2 heirs #ho #ere called to succession b2 operation of
la#. Thus, at the point their father dre# his last breath, petitioners stepped into his shoes
insofar as the sub;ect propert2 is concerned, such that an2 ri0hts or obli0ations pertainin0
thereto beca.e bindin0 and enforceable upon the.. It is e9pressl2 provided that ri0hts to
the succession are trans.itted fro. the .o.ent of death of the decedent &%rticle 111, !ivil
!ode: !uison vs. Villanueva, 64 Phil. 3,4 J$6,/K'.
"e it also noted that petitioners< clai. that succession .a2 not be declared unless the creditors have
been paid is rendered .oot b2 the fact that the2 #ere able to effect the transfer of the title to the
propert2 fro. the decedent<s na.e to their na.es on Februar2 +, $63,.
%side fro. this, petitioners are precluded fro. raisin0 their supposed lac8 of capacit2 to enter into an
a0ree.ent at that ti.e and the2 cannot be allo#ed to no# ta8e a posture contrar2 to that #hich the2
too8 #hen the2 entered into the a0ree.ent #ith private respondent Ra.ona P. %lcara7. The !ivil !ode
e9pressl2 states thatB
%rt. $*-$. Throu0h estoppel an ad.ission or representation is rendered
conclusive upon the person .a8in0 it, and cannot be denied or disproved as
a0ainst the person rel2in0 thereon.
Aavin0 represented the.selves as the true o#ners of the sub;ect propert2 at the ti.e of
sale, petitioners cannot clai. no# that the2 #ere not 2et the absolute o#ners thereof at that
ti.e.
Petitioners also contend that althou0h there #as in fact a perfected contract of sale bet#een the. and
Ra.ona P. %lcara7, the latter breached her reciprocal obli0ation #hen she rendered i.possible the
consu..ation thereof b2 0oin0 to the Dnited States of %.erica, #ithout leavin0 her address,
telephone nu.ber, and Special Po#er of %ttorne2 &Para0raphs $* and $,, %ns#er #ith !o.pulsor2
!ounterclai. to the %.ended !o.plaint, p. /: #ollo, p. *-', for #hich reason, so petitioners conclude,
the2 #ere correct in unilaterall2 rescindin0 rescindin0 the contract of sale.
@e do not a0ree #ith petitioners that there #as a valid rescission of the contract of sale in the instant
case. @e note that these supposed 0rounds for petitioners< rescission, are .ere alle0ations found onl2
in their responsive pleadin0s, #hich b2 e9press provision of the rules, are dee.ed controverted even if
no repl2 is filed b2 the plaintiffs &Sec. $$, Rule +, Revised Rules of !ourt'. The records are absolutel2
bereft of an2 supportin0 evidence to substantiate petitioners< alle0ations. @e have stressed ti.e and
a0ain that alle0ations .ust be proven b2 sufficient evidence &N0 !ho !io vs. N0 Dion0, $$4 Phil. 33/
J$6+$K: Recaro vs. .bisan, / S!R% ,63 J$6+$K. Mere alle0ation is not an evidence &Ca0asca vs. De
Vera, 16 Phil. -1+ J$6*1K'.
ven assu.in0 arguen"o that Ra.ona P. %lcara7 #as in the Dnited States of %.erica on Februar2 +,
$63,, #e cannot ;ustif2 petitioner(sellers< act of unilaterall2 and e9tradiciall2 rescindin0 the contract of
sale, there bein0 no e9press stipulation authori7in0 the sellers to e9tar;udiciall2 rescind the contract of
sale. &cf. Di0nos vs. !%, $,3 S!R% -1, J$633K: Ta0uba vs. Vda. de Ceon, $-/ S!R% 1// J$63*K'
Moreover, petitioners are estopped fro. raisin0 the alle0ed absence of Ra.ona P. %lcara7 because
althou0h the evidence on record sho#s that the sale #as in the na.e of Ra.ona P. %lcara7 as the
bu2er, the sellers had been dealin0 #ith !oncepcion D. %lcara7, Ra.ona<s .other, #ho had acted for
and in behalf of her dau0hter, if not also in her o#n behalf. Indeed, the do#n pa2.ent #as .ade b2
!oncepcion D. %lcara7 #ith her o#n personal chec8 &9h. ?"?: 9h. ?/?' for and in behalf of Ra.ona P.
%lcara7. There is no evidence sho#in0 that petitioners ever 5uestioned !oncepcion<s authorit2 to
represent Ra.ona P. %lcara7 #hen the2 accepted her personal chec8. Neither did the2 raise an2
ob;ection as re0ards pa2.ent bein0 effected b2 a third person. %ccordin0l2, as far as petitioners are
concerned, the ph2sical absence of Ra.ona P. %lcara7 is not a 0round to rescind the contract of sale.
!orollaril2, Ra.ona P. %lcara7 cannot even be dee.ed to be in default, insofar as her obli0ation to pa2
the full purchase price is concerned. Petitioners #ho are precluded fro. settin0 up the defense of the
ph2sical absence of Ra.ona P. %lcara7 as above(e9plained offered no proof #hatsoever to sho# that
the2 actuall2 presented the ne# transfer certificate of title in their na.es and si0nified their #illin0ness
and readiness to e9ecute the deed of absolute sale in accordance #ith their a0ree.ent. Ra.ona<s
correspondin0 obli0ation to pa2 the balance of the purchase price in the a.ount of P$,$64,444.44 &as
bu2er' never beca.e due and de.andable and, therefore, she cannot be dee.ed to have been in
default.
%rticle $$+6 of the !ivil !ode defines #hen a part2 in a contract involvin0 reciprocal obli0ations .a2 be
considered in default, to #itB
%rt. $$+6. Those obli0ed to deliver or to do so.ethin0, incur in dela2 fro. the
ti.e the obli0ee ;udiciall2 or e9tra;udiciall2 de.ands fro. the. the fulfill.ent of
their obli0ation.
999 999 999
In reciprocal obli0ations, neither part2 incurs in dela2 if the other "oes not compl$
or is not rea"$ to compl$ in a proper manner -ith -hat is incum,ent upon him.
Fro. the .o.ent one of the parties fulfill his obli0ation, dela2 b2 the other
be0ins. &.phasis supplied.'
There is thus neither factual nor le0al basis to rescind the contract of sale bet#een petitioners and
respondents.
@ith the fore0oin0 conclusions, the sale to the other petitioner, !atalina ". Mabana0, 0ave rise to a
case of double sale #here %rticle $,** of the !ivil !ode #ill appl2, to #itB
%rt. $,**. If the sa.e thin0 should have been sold to different vendees, the
o#nership shall be transferred to the person #ho .a2 have first ta8en
possession thereof in 0ood faith, if it should be .ovable propert2.
Should if be i..ovable propert2, the o#nership shall belon0 to the person
ac5uirin0 it #ho in 0ood faith first recorded it in Re0istr2 of Propert2.
Should there be no inscription, the o#nership shall pertain to the person #ho in
0ood faith #as first in the possession: and, in the absence thereof to the person
#ho presents the oldest title, provided there is 0ood faith.
The record of the case sho#s that the Deed of %bsolute Sale dated %pril /,, $63, as proof of the
second contract of sale #as re0istered #ith the Re0istr2 of Deeds of Hue7on !it2 0ivin0 rise to the
issuance of a ne# certificate of title in the na.e of !atalina ". Mabana0 on =une ,, $63,. Thus, the
second para0raph of %rticle $,** shall appl2.
The above(cited provision on double sale presu.es title or o#nership to pass to the first bu2er, the
e9ceptions bein0B &a' #hen the second bu2er, in 0ood faith, re0isters the sale ahead of the first bu2er,
and &b' should there be no inscription b2 either of the t#o bu2ers, #hen the second bu2er, in 0ood
faith, ac5uires possession of the propert2 ahead of the first bu2er. Dnless, the second bu2er satisfies
these re5uire.ents, title or o#nership #ill not transfer to hi. to the pre;udice of the first bu2er.
In his co..entaries on the !ivil !ode, an accepted authorit2 on the sub;ect, no# a distin0uished
.e.ber of the !ourt, =ustice =ose !. Vitu0, e9plainsB
The 0overnin0 principle is prius tempore, potior Bure &first in ti.e, stron0er in
ri0ht'. Ono#led0e b2 the first bu2er of the second sale cannot defeat the first
bu2er<s ri0hts e9cept #hen the second bu2er first re0isters in 0ood faith the
second sale &Olivares vs. )on7ales, $,6 S!R% --'. !onversel2, 8no#led0e
0ained b2 the second bu2er of the first sale defeats his ri0hts even if he is first to
re0ister, since 8no#led0e taints his re0istration #ith bad faith &see also %stor0a
vs. !ourt of %ppeals, ).R. No. ,3,-4, /+ Dece.ber $63*'. In Cru*
vs. Ca,ana &).R. No. ,+/-/, // =une $63*, $/6 S!R% +,+', it has held that it is
essential, to .erit the protection of %rt. $,**, second para0raph, that the second
realt2 bu2er .ust act in 0ood faith in re0isterin0 his deed of sale &citin0 !arbonell
vs. !ourt of %ppeals, +6 S!R% 66, !risosto.o vs. !%, ).R. No. 6,3*-, 4/
Septe.ber $66/'.
&(. Vitug Compen"ium of Civil =a- an" (urispru"ence, /11E ?"ition, p. A5F'.
Petitioner point out that the notice of lis pen"ens in the case at bar #as annoted on the title of the
sub;ect propert2 onl2 on Februar2 //, $63,, #hereas, the second sale bet#een petitioners !oronels
and petitioner Mabana0 #as supposedl2 perfected prior thereto or on Februar2 $3, $63,. The idea
conve2ed is that at the ti.e petitioner Mabana0, the second bu2er, bou0ht the propert2 under a clean
title, she #as una#are of an2 adverse clai. or previous sale, for #hich reason she is bu2er in 0ood
faith.
@e are not persuaded b2 such ar0u.ent.
In a case of double sale, #hat finds relevance and .aterialit2 is not #hether or not the second bu2er
#as a bu2er in 0ood faith but #hether or not said second bu2er re0isters such second sale in 0ood
faith, that is, #ithout 8no#led0e of an2 defect in the title of the propert2 sold.
%s clearl2 borne out b2 the evidence in this case, petitioner Mabana0 could not have in 0ood faith,
re0istered the sale entered into on Februar2 $3, $63, because as earl2 as Februar2 //, $63,, a notice
of lis pen"ens had been annotated on the transfer certificate of title in the na.es of petitioners,
#hereas petitioner Mabana0 re0istered the said sale so.eti.e in %pril, $63,. %t the ti.e of
re0istration, therefore, petitioner Mabana0 8ne# that the sa.e propert2 had alread2 been previousl2
sold to private respondents, or, at least, she #as char0ed #ith 8no#led0e that a previous bu2er is
clai.in0 title to the sa.e propert2. Petitioner Mabana0 cannot close her e2es to the defect in
petitioners< title to the propert2 at the ti.e of the re0istration of the propert2.
This !ourt had occasions to rule thatB
If a vendee in a double sale re0isters that sale after he has ac5uired 8no#led0e
that there #as a previous sale of the sa.e propert2 to a third part2 or that
another person clai.s said propert2 in a pervious sale, the re0istration #ill
constitute a re0istration in bad faith and #ill not confer upon hi. an2 ri0ht.
&Salvoro vs. Tane0a, 31 S!R% -*6 J$613K: citin0 Palarca vs. Director of Cand, *-
Phil. $*+: !a0aoan vs. !a0aoan, *- Phil. ,,*: Fernande7 vs. Mercader, *- Phil.
,3$.'
Thus, the sale of the sub;ect parcel of land bet#een petitioners and Ra.ona P. %lcara7, perfected on
Februar2 +, $63,, prior to that bet#een petitioners and !atalina ". Mabana0 on Februar2 $3, $63,,
#as correctl2 upheld b2 both the courts belo#.
%lthou0h there .a2 be a.ple indications that there #as in fact an a0enc2 bet#een Ra.ona as
principal and !oncepcion, her .other, as a0ent insofar as the sub;ect contract of sale is concerned,
the issue of #hether or not !oncepcion #as also actin0 in her o#n behalf as a co(bu2er is not s5uarel2
raised in the instant petition, nor in such assu.ption disputed bet#een .other and dau0hter. Thus, @e
#ill not touch this issue and no lon0er disturb the lo#er courts< rulin0 on this point.
@ARFOR, pre.ises considered, the instant petition is hereb2 DISMISSD and the appealed
;ud0.ent %FFIRMD.
SO ORDRD.
+arvasa, C.(., %avi"e, (r. an" Francisco, ((., concur.
Pangani,an, (., took no part.
Republic of the Philippines
SUPREME COURT
Manila
TAIRD DIVISION
G.R. No. 161518 No@ember 23, 2006
#ULIE NAUS,
W
MICHELLE NAUS
W
1') ETTY TOLERO, Petitioners,
vs.
#OA:UIN PACSON 1') #ULIA PACSON, Respondents.
D ! I S I O N
PERALTA, J!
This is a petition for revie# on certiorari
$
of the Decision
/
of the !ourt of %ppeals in !%().R. !V No.
**6*$ dated Nove.ber /3, /44-. The !ourt of %ppeals affir.ed #ith .odification the Decision of the
Re0ional Trial !ourt of Ca Trinidad, "en0uet, "ranch $4, orderin0 petitioner "ett2 Tolero to e9ecute a
deed of absolute sale in favor of respondents, spouses =oa5uin and =ulia Pacson, over the lots
covered b2 Transfer !ertificate of Title &T!T' Nos. T($3+,4 and T($3+,$ upon pa2.ent to her b2
respondents of the su. of P,1,,**.J3K* representin0 the balance due for the full pa2.ent of the
propert2 sub;ect of this case: and orderin0 petitioner "ett2 Tolero to surrender to respondents her
o#nerQs duplicate cop2 of T!T Nos. T($3+,4 and T($3+,$.
The facts, as stated b2 the trial court,
-
are as follo#sB
The spouses "ate and =ulie Nabus #ere the o#ners of parcels of land #ith a total area of $,++,
s5uare .eters, situated in Pico, Ca Trinidad, "en0uet, dul2 re0istered in their na.es under T!T No. T(
6+61 of the Re0ister of Deeds of the Province of "en0uet. The propert2 #as .ort0a0ed b2 the
Spouses Nabus to the Philippine National "an8 &PN"', Ca Trinidad "ranch, to secure a loan in the
a.ount of P-4,444.44.
On Februar2 $6, $611, the Spouses Nabus e9ecuted a Deed of !onditional Sale
*
coverin0 $,444
s5uare .eters of the $,++, s5uare .eters of land in favor of respondents Spouses Pacson for a
consideration of P$14,444.44, #hich #as dul2 notari7ed on Februar2 /$, $611. The consideration #as
to be paid, thusB
TA%T, the consideration of the a.ount of P$14,444.44 #ill be paid b2 the VND herein in .2 favor
in the follo#in0 .annerB
a. That the su. of P$-,444.44, .ore or less, on or before Februar2 /$, $611 and #hich
a.ount #ill be paid directl2 to the PN", Ca Trinidad "ranch, and #hich #ill for. part of the
purchase price:
b. That after pa2in0 the above a.ount to the PN", Ca Trinidad, "en0uet branch, a balance
of aboutP$1,,44.44 re.ains as .2 .ort0a0e balance and this a.ount #ill be paid b2 the
VND herein at the rate of not less than P-,444.44 a .onth be0innin0 March $611, until
the said .ort0a0e balance is full2 li5uidated, and that all pa2.ents .ade b2 the VND to
the PN", Ca Trinidad, "en0uet branch, shall for. part of the consideration of this sale:
c. That, as soon as the .ort0a0e obli0ation #ith the PN" as cited above is full2 paid, then
the VND herein hereb2 obli0ates hi.self, his heirs and assi0ns, to pa2 the a.ount of
not less than P/,444.44 a .onth in favor of the VNDOR, his heirs and assi0ns, until the
full a.ount of P$14,444.44 is full2 covered&includin0 the pa2.ents cited in Pars. a and b
above':
TA%T, as soon as the full consideration of this sale has been paid b2 the VND, the correspondin0
transfer docu.ents shall be e9ecuted b2 the VNDOR to the VND for the portion sold:
TA%T, the portion sold is as sho#n in the si.ple s8etch hereto attached as %nne9 ?%? and .ade part
hereof:
TA%T, a se0re0ation surve2 for the portion sold in favor of the VND and the portion re.ainin0 in
favor of the VNDOR shall be e9ecuted as soon as possible, all at the e9pense of the VND herein:
TA%T, it is .utuall2 understood that in as .uch as there is a clai. b2 other persons of the entire
propert2 of #hich the portion sub;ect of this Instru.ent is onl2 a part, and that this clai. is no# the
sub;ect of a civil case no# pendin0 before "ranch III of the !ourt of First Instance of "a0uio and
"en0uet, should the VNDOR herein be defeated in the said civil action to the end that he is divested
of title over the area sub;ect of this Instru.ent, then he hereb2 #arrants that he shall return an2 and all
.onies paid b2 the VND herein #hether paid to the PN", Ca Trinidad, "en0uet "ranch, or directl2
received b2 herein VNDOR, all such .onies to be returned upon de.and b2 the VND:
TA%T, JaK portion of the parcel of land sub;ect of this instru.ent is presentl2 in the possession of Mr.
Marcos Taclo2, and the VNDOR a0rees to cooperate and assist in an2 .anner possible in the ouster
of said Mr. Marcos Taclo2 fro. said possession and occupation to the end that the VND herein
shall .a8e use of said portion as soon as is practicable:
TA%T, finall2, the P%RTIS hereb2 a0ree that this Instru.ent shall be bindin0 upon their respective
heirs, successors or assi0ns.
,
Pursuant to the Deed of !onditional Sale, respondents paid PN" the a.ount of P$/,4-3.3+ on
Februar2 //, $611
+
and P/4,1**.-4 on =ul2 $1, $613
1
for the full pa2.ent of the loan.
%t the ti.e of the transaction, Mr. Marcos Taclo2 had a bas8et(.a8in0 shop on the propert2, #hile the
spouses Delfin and Nelita Flores had a store. Taclo2 and the Spouses Flores vacated the propert2 after
respondents paid the. P*,444.44 each.
Thereafter, respondents too8 possession of the sub;ect propert2. The2 constructed an 34 b2 -/(feet
buildin0 and a steel(.attin0 fence around the propert2 to house their truc8 bod2(buildin0 shop #hich
the2 called the ?.iliano Truc8in0 "od2 "uilder and %uto Repair Shop.?
On Dece.ber /*, $611, before the pa2.ent of the balance of the .ort0a0e a.ount #ith PN", "ate
Nabus died. On %u0ust $1, $613, his survivin0 spouse, =ulie Nabus, and their .inor dau0hter, Michelle
Nabus, e9ecuted a Deed of 9tra =udicial Settle.ent over the re0istered land covered b2 T!T No.
6+61. On the basis of the said docu.ent, T!T No. T( $11$3
3
#as issued on Februar2 $1, $63* in the
na.es of =ulie Nabus and Michelle Nabus.
Mean#hile, respondents continued pa2in0 their balance, not in install.ents of P/,444.44 as a0reed
upon, but in various, often s.all a.ounts ran0in0 fro. as lo# as P$4.44
6
to as hi0h
as P$,,,++.44,
$4
spannin0 a period of al.ost seven 2ears, fro. March 6, $611
$$
to =anuar2 $1, $63*.
$/
There #as a total of -+* receipts of pa2.ent,
$-
#hich receipts #ere .ostl2 si0ned b2 =ulie Nabus, #ho
also si0ned as =ulie Huan #hen she re.arried. The others #ho si0ned #ere "ate Nabus: PN", Ca
Trinidad "ranch: Ma9i.a Nabus: S2lvia Re2es: Michelle Nabus and the second husband of =ulie
Nabus, )ereon Huan. Ma9i.a Nabus is the .other of "ate Nabus, #hile S2lvia Re2es is a niece.
The receipts sho#ed that the total su. paid b2 respondents to the Spouses Nabus
#as P$$/,*,,.$+,
$*
leavin0 a balance of P,1,,**.3*. The su. of P-4,444.44 #hich #as the value of
the pic8(up truc8 alle0edl2 sold and delivered in $613 to the Spouses Nabus, #as not considered as
pa2.ent because the re0istration papers re.ained in the na.e of its o#ner, Do.in0a D. Pacson, #ho
is the sister of =oa5uin Pacson. The vehicle #as also returned to respondents.
Durin0 the last #ee8 of =anuar2 $63*, =ulie Nabus, acco.panied b2 her second husband, approached
=oa5uin Pacson to as8 for the full pa2.ent of the lot. =oa5uin Pacson a0reed to pa2, but told her to
return after four da2s as his dau0hter, !atalina Pacson, #ould have to 0o over the nu.erous receipts
to deter.ine the balance to be paid. @hen =ulie Nabus returned after four da2s, =oa5uin sent her and
his dau0hter, !atalina, to %tt2. li7abeth Rillera for the e9ecution of the deed of absolute sale. Since
=ulie #as a #ido# #ith a .inor dau0hter, %tt2. Rillera re5uired =ulie Nabus to return in four da2s #ith
the necessar2 docu.ents, such as the deed of e9tra;udicial settle.ent, the transfer certificate of title in
the na.es of =ulie Nabus and .inor Michelle Nabus, and the 0uardianship papers of Michelle.
Ao#ever, =ulie Nabus did not return.
)ettin0 suspicious, !atalina Pacson #ent to the Re0ister of Deeds of the Province of "en0uet and
as8ed for a cop2 of the title of the land. She found that it #as still in the na.e of =ulie and Michelle
Nabus.
%fter a #ee8, !atalina Pacson heard a ru.or that the lot #as alread2 sold to petitioner "ett2 Tolero.
!atalina Pacson and %tt2. Rillera #ent to the Re0ister of Deeds of the Province of "en0uet, and found
that =ulie Nabus and her .inor dau0hter, Michelle Nabus, represented b2 the for.erQs .other as
appointed 0uardian b2 a court order dated October /6, $63/, had e9ecuted a Deed of %bsolute Sale in
favor of "ett2 Tolero on March ,, $63*, coverin0 the #hole lot co.prisin0 $,++, s5uare .eters.
$,
The
propert2 #as described in the deed of sale as co.prisin0 four lotsB &$' Cot %(/(%, #ith an area of 3-/
s5uare .eters: &/' Cot %(/(", $+3 s5uare .eters: &-' Cot %(/(!, /44 s5uare .eters: and &*' Cot %(/(D,
*+, s5uare .eters. Cots %(/(% and %(/(", #ith a co.bined area of $,444 s5uare .eters, correspond to
the lot previousl2 sold to =oa5uin and =ulia Pacson in the Deed of !onditional Sale.
!atalina Pacson and %tt2. Rillera also found that the !ertificate of Title over the propert2 in the na.e of
=ulie and Michelle Nabus #as cancelled on March $+, $63*, and four titles to the fours lots #ere
issued in the na.e of "ett2 Tolero, na.el2B T!T No. T($3+,4
$+
for Cot %(/(%: T!T No. $3+,$
$1
for Cot
%(/(": T!T No. T($3+,/
$3
for Cot %(/(!: and T($3+,-
$6
for Cot %(/(D.
On March //, $63*, the 0ate to the repair shop of the Pacsons #as padloc8ed. % si0n #as displa2ed
on the propert2 statin0 ?No Trespassin0.?
/4
On March /+, $63*, !atalina Pacson filed an affidavit(co.plaint re0ardin0 the padloc8in0 incident of
their repair shop #ith the police station at Ca Trinidad, "en0uet.
On March /3, /443, respondents =oa5uin and =ulia Pacson filed #ith the Re0ional Trial !ourt of Ca
Trinidad, "en0uet &trial court' a !o.plaint
/$
for %nnul.ent of Deeds, #ith da.a0es and pra2er for the
issuance of a #rit of preli.inar2 in;unction.
//
The2 sou0ht the annul.ent of &$' the 9tra(;udicial
Settle.ent of state, insofar as their ri0ht to the $,444(s5uare(.eter lot sub;ect of the Deed of
!onditional Sale
/-
#as affected: &/' T!T No. T($11$3 issued in the na.es of =ulie and Michelle Nabus:
and &-' the Deed of %bsolute Sale
/*
in favor of "ett2 Tolero and the transfer certificates of title issued
pursuant thereto. The2 also pra2ed for the a#ard of actual, .oral and e9e.plar2 da.a0es, as #ell as
attorne2Qs fees.
In their %ns#er,
/,
=ulie and Michelle Nabus alle0ed that respondent =oa5uin Pacson did not proceed
#ith the conditional sale of the sub;ect propert2 #hen he learned that there #as a pendin0 case over
the #hole propert2. =oa5uin proposed that he #ould rather lease the propert2 #ith a .onthl2 rental
of P/,444.44 and appl2 the su. ofP$-,444.44 as rentals, since the a.ount #as alread2 paid to the
ban8 and could no lon0er be #ithdra#n. Aence, he did not affi9 his si0nature to the second pa0e of a
cop2 of the Deed of !onditional Sale.
/+
=ulie Nabus alle0ed that in March $66*, due to her o#n
econo.ic needs and those of her .inor dau0hter, she sold the propert2 to "ett2 Tolero, #ith authorit2
fro. the court.
Durin0 the hearin0 on the .erits, =ulie Nabus testified that she sold the propert2 to "ett2 Tolero
because she #as in need of .one2. She stated that she #as free to sell the propert2 because the
Deed of !onditional Sale e9ecuted in favor of the Spouses Pacson #as converted into a contract of
lease. She clai.ed that at the ti.e #hen the Deed of !onditional Sale #as bein0 e9plained to the. b2
the notar2 public, =oa5uin Pacson alle0edl2 did not li8e the portion of the contract statin0 that there
#as a pendin0 case in court involvin0 the sub;ect propert2. !onse5uentl2, =oa5uin Pacson did not
continue to si0n the docu.ent: hence, the second pa0e of the docu.ent #as unsi0ned.
/1
Thereafter, it
#as alle0edl2 their understandin0 that the Pacsons #ould occup2 the propert2 as lessees and
#hatever a.ount paid b2 the. #ould be considered rentals.
"ett2 Tolero put up the defense that she #as a purchaser in 0ood faith and for value. She testified that
it #as =ulie Nabus #ho #ent to her house and offered to sell the propert2 consistin0 of t#o lots #ith a
co.bined area of $,444 s5uare .eters. She consulted %tt2. %urelio de Peralta before she a0reed to
bu2 the propert2. She and =ulie Nabus brou0ht to %tt2. De Peralta the pertinent papers such as T!T
No. T($11$3 in the na.es of =ulie and Michelle Nabus, the 0uardianship papers of Michelle Nabus and
the blueprint cop2 of the surve2 plan sho#in0 the t#o lots. %fter e9a.inin0 the docu.ents and findin0
that the title #as clean, %tt2. De Peralta 0ave her the 0o(si0nal to bu2 the propert2.
Tolero testified that upon pa2.ent of the a0reed price of P/44,444.44, the Deed of %bsolute Sale #as
e9ecuted and re0istered, resultin0 in the cancellation of the title of =ulie and Michelle Nabus and the
issuance in her na.e of T!T Nos. T($3+,4 and T($3+,$
/3
correspondin0 to the t#o lots. Thereafter,
she as8ed her co..on(la# husband, "en I0nacio, to padloc8 the 0ate to the propert2 and han0 the
?No Trespassin0? si0n.
Tolero also testified that as the ne# o#ner, she #as surprised and shoc8ed to receive the !o.plaint
filed b2 the Spouses Pacson. She ad.itted that she 8ne# ver2 #ell the Spouses Pacson, because
the2 used to bu2 ve0etables re0ularl2 fro. her. She had been residin0 alon0 the hi0h#a2 at Oilo.eter
*, Ca Trinidad, "en0uet since $61$. She 8ne# the land in 5uestion, because it #as onl2 ,4 .eters
a#a2 across the hi0h#a2. She also 8ne# that the Spouses Pacson had a shop on the propert2 for the
#eldin0 and bod2(buildin0 of vehicles. She #as not a#are of the Deed of !onditional Sale e9ecuted in
favor of the Pacsons, and she sa# the docu.ent for the first ti.e #hen =oa5uin Pacson sho#ed it to
her after she had alread2 bou0ht the propert2 and the title had been transferred in her na.e. %t the
ti.e she #as bu2in0 the propert2, =ulie Nabus infor.ed her that the Pacsons #ere .erel2 rentin0 the
propert2. She did not bother to verif2 if that #as true, because the Pacsons #ere no lon0er in the
propert2 for t#o 2ears before she bou0ht it.
In a Decision dated Septe.ber -4, $66-, the trial court ruled in favor of respondents. The dispositive
portion of the Decision readsB
@ARFOR, pre.ises considered, ;ud0.ent is hereb2 rendered in favor of the plaintiffs, orderin0
defendant "ett2 Tolero to e9ecute a deed of absolute sale in favor of the Spouses =oa5uin and =ulia
Pacson over the lots covered b2 Transfer !ertificates of Title Nos. T($3+,4 and T($3+,$ upon pa2.ent
to her b2 the plaintiffs of the su. of P,1,,**.J3K* representin0 the balance due for the full pa2.ent of
the propert2 sub;ect of this case. In addition to the e9ecution of a deed of absolute sale, defendant
"ett2 Tolero shall surrender to the plaintiffs her o#nerQs duplicate cop2 of Transfer !ertificates of Title
Nos. T($3+,4 and T($3+,$.
Defendants =ulie Nabus, Michelle Nabus, and "ett2 Tolero shall also pa2 the plaintiffs da.a0es as
follo#sBP,4,444.44 for .oral da.a0es: P/4,444.44 for e9e.plar2 da.a0es: and P$4,444.44 for
attorne2Qs fees and e9penses for liti0ation.
/6
T#o issues deter.ined b2 the trial court #ereB &$' @as the Deed of !onditional Sale bet#een the
Spouses Pacson and the Nabuses converted into a contract of leaseL and &/' @as "ett2 Tolero a
bu2er in 0ood faithL
The trial court held that the Deed of !onditional Sale #as not converted into a contract of lease
because the ori0inal cop2 of the contract
-4
sho#ed that all the pa0es #ere si0ned b2 all the parties to
the contract. "2 the presu.ption of re0ularit2, all other carbon copies .ust have been dul2 si0ned. The
failure of =oa5uin Pacson to si0n the second pa0e of one of the carbon copies of the contract #as b2
sheer inadvertence. The o.ission #as of no conse5uence since the si0natures of the parties in all the
other copies of the contract #ere co.plete. Moreover, all the receipts of pa2.ent e9pressl2 stated that
the2 #ere .ade in pa2.ent of the lot. Not a sin0le receipt sho#ed pa2.ent for rental.
Further, the trial court held that "ett2 Tolero #as not a purchaser in 0ood faith as she had actual
8no#led0e of the !onditional Sale of the propert2 to the Pacsons.
The trial court stated that the Deed of !onditional Sale contained reciprocal obli0ations bet#een the
parties, thusB
TA%T, as soon as the full consideration of this sale has been paid b2 the VND, the correspondin0
transfer docu.ents shall be e9ecuted b2 the VNDOR to the VND for the portion sold:
9 9 9 9
TA%T, finall2, the P%RTIS hereb2 a0ree that this Instru.ent shall be bindin0 upon their respective
heirs, successors or assi0ns.
-$
In other #ords, the trial court stated, #hen the vendees &the Spouses Pacson' #ere alread2 read2 to
pa2 their balance, it #as the correspondin0 obli0ation of the vendors &Nabuses' to e9ecute the transfer
docu.ents.
The trial court held that ?JuKnder %rticle $$6$ of the !ivil !ode, an in;ured part2 in a reciprocal
obli0ation, such as the Deed of !onditional Sale in the case at bar, .a2 choose bet#een the fulfill.ent
JorK the rescission of the obli0ation, #ith the pa2.ent of da.a0es in either case.? It stated that in filin0
the case, the Spouses Pacson opted for fulfill.ent of the obli0ation, that is, the e9ecution of the Deed
of %bsolute Sale in their favor upon pa2.ent of the purchase price.
Respondents appealed the decision of the trial court to the !ourt of %ppeals.
In the Decision dated Nove.ber /3, /44-, the !ourt of %ppeals affir.ed the trial courtQs decision, but
deleted the a#ard of attorne2Qs fees. The dispositive portion of the Decision readsB
@ARFOR, findin0 no reversible error in the Septe.ber -4, $66- Decision of the Re0ional Trial
!ourt of Ca Trinidad, "en0uet, "ranch $4, in !ivil !ase No. 3*(!V(4416, the instant appeal is hereb2
DISMISSD for lac8 of .erit, and the assailed Decision is hereb2 %FFIRMD and DPACD #ith the
.odification that the a#ard of attorne2Qs fees is deleted.
-/
Petitioners filed this petition raisin0 the follo#in0 issuesB
I
TA J!ODRT OF %PP%CSK RRD IN !ONSIDRIN) TA !ONTR%!T NTRD INTO
"T@N TA SPODSS "%T N%"DS %ND =DCI N%"DS %ND SPODSS =O%HDIN P%!SON
%ND =DCI% P%!SON TO " % !ONTR%!T OF S%C.
II
TA !ODRT % HDO RRD IN FINDIN) TA%T TAR %R ONCE T@O ISSDS IN TA !%S ON
%PP%C %ND TAE %RB @ATAR TA DD OF !ONDITION%C S%C @%S !ONVRTD INTO
% !ONTR%!T OF C%S: %ND TA%T J@ATARK PTITIONR "TTE TOCRO @%S % "DER IN
)OOD F%ITA.
III
TA%T TA TRI%C !ODRT RRD IN AOCDIN) TA%T JRSPONDNTSQK "%C%N! TO TA
SPODSS N%"DS DNDR TA !ONDITION%C S%C IS ONCE P,1,,**.J3K*.
IV
TA%T %SSDMIN) @ITAODT %DMITTIN) TA%T PTITIONR "TTE TOCRO @%S %@%R OF
TA FISTN! OF TA DD OF !ONDITION%C S%C, TA TRI%C !ODRT, %S @CC %S TA
J!ODRT OF %PP%CSK, RRD IN ORDRIN) PTITIONR "TTE TOCRO TO F!DT %
DD OF %"SOCDT S%C IN F%VOR OF TA JRSPONDNTSK %ND TO SDRRNDR TA
O@NR<S DDPCI!%T !OPE OF T!T NOS. T($3+,4 %ND T($3+,$, @AI!A @%S NOT PR%ED
FOR IN TA PR%ER IN TA !OMPC%INT.
V
TA%T TA J!ODRT OF %PP%CSK RRD IN FINDIN) "TTE TOCRO J%SK % "DER J@AOK
F%ICD TO T%O STPS IN INHDIRIN) FROM TA JRSPONDNTSK TA ST%TDS OF TA
PROPRTE IN HDSTION "FOR AR PDR!A%S, !ONTR%RE TO F%!TS ST%"CISAD "E
VIDN!.
VI
TA J!ODRT OF %PP%CSK RRD IN !ONSIDRIN) PTITIONR "TTE TOCRO % "DER IN
"%D F%ITA, I)NORIN) TA %PPCI!%TION OF TA DO!TRIN IN TA RDCIN) OF TA
SDPRM !ODRT IN TA !%S OF RODOCFO %CFONSO, T %C. VS. !ODRT OF %PP%CS, ).R.
NO. +-1*,.
--
The .ain issues to be resolved areB
$' @hether or not the Deed of !onditional Sale #as converted into a contract of lease:
/' @hether the Deed of !onditional Sale #as a contract to sell or a contract of sale.
%s re0ards the first issue, the Deed of !onditional Sale entered into b2 the Spouses Pacson and the
Spouses Nabus #as not converted into a contract of lease. The -+* receipts issued to the Spouses
Pacson contained either the phrase ?as partial pa2.ent of lot located in O.. *? or ?cash vale? or ?cash
vale &partial pa2.ent of lot located in O.. *',? evidencin0 sale under the contract and not the lease of
the propert2. Further, as found b2 the trial court, =oa5uin PacsonQs non(si0nin0 of the second pa0e of a
carbon cop2 of the Deed of !onditional Sale #as throu0h sheer inadvertence, since the ori0inal
contract
-*
and the other copies of the contract #ere all si0ned b2 =oa5uin Pacson and the other parties
to the contract.
On the second issue, petitioners contend that the contract e9ecuted b2 the respondents and the
Spouses Nabus #as a contract to sell, not a contract of sale. The2 alle0e that the contract #as sub;ect
to the suspensive condition of full pa2.ent of the consideration a0reed upon before o#nership of the
sub;ect propert2 could be transferred to the vendees. Since respondents failed to pa2 the full a.ount
of the consideration, havin0 an unpaid balance ofP,1,,**.3*, the obli0ation of the vendors to e9ecute
the Deed of %bsolute Sale in favor of respondents did not arise. Thus, the subse5uent Deed of
%bsolute Sale e9ecuted in favor of "ett2 Tolero, coverin0 the sa.e parcel of land #as valid, even if
Tolero #as a#are of the previous deed of conditional sale.
Moreover, petitioners contend that respondents violated the stipulated condition in the contract that the
.onthl2 install.ent to be paid #as P/,444.44, as respondents 0ave .ea0er a.ounts as lo#
as P$4.44.
Petitioners also assert that respondentsQ alle0ation that =ulie NabusQ failure to brin0 the pertinent
docu.ents necessar2 for the e9ecution of the final deed of absolute sale, #hich #as the reason for
their not havin0 paid the balance of the purchase price, #as untenable, and a la.e and shallo#
e9cuse for violation of the Deed of !onditional Sale. Respondents could have .ade a valid tender of
pa2.ent of their re.ainin0 balance, as it had been due for a lon0 ti.e, and upon refusal to accept
pa2.ent, the2 could have consi0ned their pa2.ent to the court as provided b2 la#. This, respondents
failed to do.
The !ourt holds that the contract entered into b2 the Spouses Nabus and respondents #as a contract
to sell, not a contract of sale.
% contract of sale is defined in %rticle $*,3 of the !ivil !ode, thusB
%rt. $*,3. "2 the contract of sale, one of the contractin0 parties obli0ates hi.self to transfer the
o#nership of and to deliver a deter.inate thin0, and the other to pa2 therefor a price certain in .one2
or its e5uivalent.
% contract of sale .a2 be absolute or conditional.
Ra.os v. Aeruela
-,
differentiates a contract of absolute sale and a contract of conditional sale as
follo#sB
%rticle $*,3 of the !ivil !ode provides that a contract of sale .a2 be absolute or conditional. %
contract of sale is absolute #hen title to the propert2 passes to the vendee upon deliver2 of the thin0
sold. % deed of sale is absolute #hen there is no stipulation in the contract that title to the propert2
re.ains #ith the seller until full pa2.ent of the purchase price. The sale is also absolute if there is no
stipulation 0ivin0 the vendor the ri0ht to cancel unilaterall2 the contract the .o.ent the vendee fails to
pa2 #ithin a fi9ed period. In a conditional sale, as in a contract to sell, o#nership re.ains #ith the
vendor and does not pass to the vendee until full pa2.ent of the purchase price. The full pa2.ent of
the purchase price parta8es of a suspensive condition, and non(fulfill.ent of the condition prevents the
obli0ation to sell fro. arisin0.
-+
!oronel v. !ourt of %ppeals
-1
distin0uished a contract to sell fro. a contract of sale, thusB
Sale, b2 its ver2 nature, is a consensual contract because it is perfected b2 .ere consent. The
essential ele.ents of a contract of sale are the follo#in0B
a' !onsent or .eetin0 of the .inds, that is, consent to transfer o#nership in e9chan0e for
the price:
b' Deter.inate sub;ect .atter: and
c' Price certain in .one2 or its e5uivalent.
Dnder this definition, a !ontract to Sell .a2 not be considered as a !ontract of Sale because the first
essential ele.ent is lac8in0. In a contract to sell, the prospective seller e9plicitl2 reserves the transfer
of title to the prospective bu2er, .eanin0, the prospective seller does not as 2et a0ree or consent to
transfer o#nership of the propert2 sub;ect of the contract to sell until the happenin0 of an event, #hich
for present purposes #e shall ta8e as the full pa2.ent of the purchase price. @hat the seller a0rees or
obli0es hi.self to do is to fulfill his pro.ise to sell the sub;ect propert2 #hen the entire a.ount of the
purchase price is delivered to hi.. In other #ords, the full pa2.ent of the purchase price parta8es of a
suspensive condition, the non(fulfil.ent of #hich prevents the obli0ation to sell fro. arisin0 and, thus,
o#nership is retained b2 the prospective seller #ithout further re.edies b2 the prospective bu2er.
9 9 9 9
Stated positivel2, upon the fulfill.ent of the suspensive condition #hich is the full pa2.ent of the
purchase price, the prospective sellerQs obli0ation to sell the sub;ect propert2 b2 enterin0 into a
contract of sale #ith the prospective bu2er beco.es de.andable as provided in %rticle $*16 of the
!ivil !ode #hich statesB
%rt. $*16. % pro.ise to bu2 and sell a deter.inate thin0 for a price certain is reciprocall2 de.andable.
%n accepted unilateral pro.ise to bu2 or to sell a deter.inate thin0 for a price certain is bindin0 upon
the pro.issor if the pro.ise is supported b2 a consideration distinct fro. the price.
% contract to sell .a2 thus be defined as a bilateral contract #hereb2 the prospective seller, #hile
e9pressl2 reservin0 the o#nership of the sub;ect propert2 despite deliver2 thereof to the prospective
bu2er, binds hi.self to sell the said propert2 e9clusivel2 to the prospective bu2er upon fulfill.ent of the
condition a0reed upon, that is, full pa2.ent of the purchase price.
% contract to sell as defined hereinabove, .a2 not even be considered as a conditional contract of sale
#here the seller .a2 li8e#ise reserve title to the propert2 sub;ect of the sale until the fulfill.ent of a
suspensive condition, because in a conditional contract of sale, the first ele.ent of consent is present,
althou0h it is conditioned upon the happenin0 of a contin0ent event #hich .a2 or .a2 not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale is co.pletel2 abated.
Ao#ever, if the suspensive condition is fulfilled, the contract of sale is thereb2 perfected, such that if
there had alread2 been previous deliver2 of the propert2 sub;ect of the sale to the bu2er, o#nership
thereto auto.aticall2 transfers to the bu2er b2 operation of la# #ithout an2 further act havin0 to be
perfor.ed b2 the seller.
In a contract to sell, upon the fulfill.ent of the suspensive condition #hich is the full pa2.ent of the
purchase price, o#nership #ill not auto.aticall2 transfer to the bu2er althou0h the propert2 .a2 have
been previousl2 delivered to hi.. The prospective seller still has to conve2 title to the prospective
bu2er b2 enterin0 into a contract of absolute sale.
-3
Further, !hua v. !ourt of %ppeals
-6
cited this distinction bet#een a contract of sale and a contract to
sellB
In a contract of sale, the title to the propert2 passes to the vendee upon the deliver2 of the thin0 sold:
in a contract to sell, o#nership is, b2 a0ree.ent, reserved in the vendor and is not to pass to the
vendee until full pa2.ent of the purchase price. Other#ise stated, in a contract of sale, the vendor
loses o#nership over the propert2 and cannot recover it until and unless the contract is resolved or
rescinded: #hereas, in a contract to sell, title is retained b2 the vendor until full pa2.ent of the price. In
the latter contract, pa2.ent of the price is a positive suspensive condition, failure of #hich is not a
breach but an event that prevents the obli0ation of the vendor to conve2 title fro. beco.in0 effective.
*4
It is not the title of the contract, but its e9press ter.s or stipulations that deter.ine the 8ind of contract
entered into b2 the parties. In this case, the contract entitled ?Deed of !onditional Sale? is actuall2 a
contract to sell. The contract stipulated that ?as soon as the full consideration of the sale has been paid
b2 the vendee, the correspondin0 transfer docu.ents shall be e9ecuted b2 the vendor to the vendee
for the portion sold.?
*$
@here the vendor pro.ises to e9ecute a deed of absolute sale upon the
co.pletion b2 the vendee of the pa2.ent of the price, the contract is onl2 a contract to sell.?
*/
The
aforecited stipulation sho#s that the vendors reserved title to the sub;ect propert2 until full pa2.ent of
the purchase price.
If respondents paid the Spouses Nabus in accordance #ith the stipulations in the Deed of !onditional
Sale, the consideration #ould have been full2 paid in =une $63-. Thus, durin0 the last #ee8 of =anuar2
$63*, =ulie Nabus approached =oa5uin Pacson to as8 for the full pa2.ent of the lot. =oa5uin Pacson
a0reed to pa2, but told her to return after four da2s as his dau0hter, !atalina Pacson, #ould have to 0o
over the nu.erous receipts to deter.ine the balance to be paid.
@hen =ulie Nabus returned after four da2s, =oa5uin Pacson sent =ulie Nabus and his dau0hter,
!atalina, to %tt2. li7abeth Rillera for the e9ecution of the deed of sale. Since "ate Nabus had alread2
died, and #as survived b2 =ulie and their .inor dau0hter, %tt2. Rillera re5uired =ulie Nabus to return in
four da2s #ith the necessar2 docu.ents such as the deed of e9tra;udicial settle.ent, the transfer
certificate of title in the na.es of =ulie Nabus and .inor Michelle Nabus, and the 0uardianship papers
of Michelle. Ao#ever, =ulie Nabus did not return.
%s vendees 0iven possession of the sub;ect propert2, the o#nership of #hich #as still #ith the
vendors, the Pacsons should have protected their interest and in5uired fro. =ulie Nabus #h2 she did
not return and then follo#ed throu0h #ith full pa2.ent of the purchase price and the e9ecution of the
deed of absolute sale. The Spouses Pacson had the le0al re.ed2 of consi0nin0 their pa2.ent to the
court: ho#ever, the2 did not do so. % ru.or that the propert2 had been sold to "ett2 Tolero pro.pted
the. to chec8 the veracit2 of the sale #ith the Re0ister of Deeds of the Province of "en0uet. The2
found out that on March ,, $63*, =ulie Nabus sold the sa.e propert2 to "ett2 Tolero throu0h a Deed of
%bsolute Sale, and ne# transfer certificates of title to the propert2 #ere issued to Tolero./avvphi/
Thus, the Spouses Pacson filed this case for the annul.ent of the contract of absolute sale e9ecuted
in favor of "ett2 Tolero and the transfer certificates of title issued in her na.e.
Dnfortunatel2 for the Spouses Pacson, since the Deed of !onditional Sale e9ecuted in their favor #as
.erel2 a contract to sell, the obli0ation of the seller to sell beco.es de.andable onl2 upon the
happenin0 of the suspensive condition.
*-
The full pa2.ent of the purchase price is the positive
suspensive condition, the failure of #hich is not a breach of contract, but si.pl2 an event that
prevented the obli0ation of the vendor to conve2 title fro. ac5uirin0 bindin0 force.
**
Thus, for its non(
fulfil.ent, there is no contract to spea8 of, the obli0or havin0 failed to perfor. the suspensive condition
#hich enforces a ;uridical relation.
*,
@ith this circu.stance, there can be no rescission or fulfil.ent of
an obli0ation that is still non(e9istent, the suspensive condition not havin0 occurred as 2et.
*+
.phasis
should be .ade that the breach conte.plated in %rticle $$6$ of the Ne# !ivil !ode is the obli0orQs
failure to co.pl2 #ith an obli0ation alread2 e9tant, not a failure of a condition to render bindin0 that
obli0ation.
*1
The trial court, therefore, erred in appl2in0 %rticle $$6$ of the !ivil !ode
*3
in this case b2 orderin0
fulfill.ent of the obli0ation, that is, the e9ecution of the deed of absolute sale in favor of the Spouses
Pacson upon full pa2.ent of the purchase price, #hich decision #as affir.ed b2 the !ourt of %ppeals.
%2ala Cife Insurance, Inc. v. Ra2 "urton Develop.ent !orporation
*6
heldB
videntl2, before the re.ed2 of specific perfor.ance .a2 be availed of, there .ust be a bre1c& of the
contract.
Dnder a contract to sell, the title of the thin0 to be sold is retained b2 the seller until the purchaser
.a8es full pa2.ent of the a0reed purchase price. Such pa2.ent is a positive suspensive condition,
the non(fulfill.ent of #hich is 'o( a breach of contract but .erel2 an event that prevents the seller fro.
conve2in0 title to the purchaser. The non(pa2.ent of the purchase price renders the contract to sell
ineffective and #ithout force and effect. Thus, a cause of action for specific perfor.ance does not
arise.
,4
Since the contract to sell #as #ithout force and effect, =ulie Nabus validl2 conve2ed the sub;ect
propert2 to another bu2er, petitioner "ett2 Tolero, throu0h a contract of absolute sale, and on the
stren0th thereof, ne# transfer certificates of title over the sub;ect propert2 #ere dul2 issued to Tolero.
,$
The Spouses Pacson, ho#ever, have the ri0ht to the rei.burse.ent of their pa2.ents to the Nabuses,
and are entitled to the a#ard of no.inal da.a0es. The !ivil !ode providesB
%rt. ///$. No.inal da.a0es are ad;udicated in order that a ri0ht of the plaintiff, #hich has been
violated or invaded b2 the defendant, .a2 be vindicated or reco0ni7ed, and not for the purpose of
inde.nif2in0 the plaintiff for an2 loss suffered b2 hi..
%rt. ////. The court .a2 a#ard no.inal da.a0es in ever2 obli0ation arisin0 fro. an2 source
enu.erated in article $$,1, or in ever2 case #here an2 propert2 ri0ht has been invaded.
%s stated b2 the trial court, under the Deed of !onditional Sale, respondents had the ri0ht to de.and
fro. petitioners =ulie and Michelle Nabus that the latter e9ecute in their favor a deed of absolute sale
#hen the2 #ere read2 to pa2 the re.ainin0 balance of the purchase price. The Nabuses had the
correspondin0 dut2 to respect the respondentsQ ri0ht, but the2 violated such ri0ht, for the2 could no
lon0er e9ecute the docu.ent since the2 had sold the propert2 to "ett2 Tolero.
,/
Aence, no.inal
da.a0es in the a.ount of P$4,444.44 are a#arded to respondents.
Respondents are not entitled to .oral da.a0es because contracts are not referred to in %rticle
//$6
,-
of the !ivil !ode, #hich enu.erates the cases #hen .oral da.a0es .a2 be recovered. %rticle
///4
,*
of the !ivil !ode allo#s the recover2 of .oral da.a0es in breaches of contract #here the
defendant acted fraudulentl2 or in bad faith. Ao#ever, this case involves a contract to sell, #herein full
pa2.ent of the purchase price is a positive suspensive condition, the non(fulfill.ent of #hich is 'o( a
breach of contract, but .erel2 an event that prevents the seller fro. conve2in0 title to the purchaser.
Since there is no breach of contract in this case, respondents are not entitled to .oral da.a0es.
In the absence of .oral, te.perate, li5uidated or co.pensator2 da.a0es, e9e.plar2 da.a0es cannot
be 0ranted for the2 are allo#ed onl2 in addition to an2 of the four 8inds of da.a0es .entioned.
,,
@ARFOR, the petition is )R%NTD. The Decision of the !ourt of %ppeals in !%().R. !V No.
**6*$, dated Nove.ber /3, /44-, is RVRSD and ST %SID. =ud0.ent is hereb2 rendered
upholdin0 the validit2 of the sale of the sub;ect propert2 .ade b2 petitioners =ulie Nabus and Michelle
Nabus in favor of petitioner "ett2 Tolero, as #ell as the validit2 of Transfer !ertificates of Title Nos. T(
$3+,4 and T($3+,$ issued in the na.e of "ett2 Tolero. Petitioners =ulie Nabus and Michelle Nabus are
ordered to rei.burse respondents spouses =oa5uin and =ulia Pacson the su. of One Aundred T#elve
Thousand Four Aundred Fift2(Five Pesos and Si9teen !entavos &P$$/,*,,.$+', and to pa2 =oa5uin
and =ulia Pacson no.inal da.a0es in the a.ount of Ten Thousand Pesos &P$4,444.44', #ith annual
interest of t#elve percent &$/G' until full pa2.ent of the a.ounts due to =oa5uin and =ulia Pacson.
No costs.
SO ORDRD.
DIOSDADO M. PERALTA
%ssociate =ustice