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SECOND DIVISION
HEIRS OF CAYETANO PANGAN and
CONSUELO PANGAN,*
Petitioners,

G.R. No. 157374

Present:
QUISUMBING, J., Chairperson,
CARPIO-MORALES,
BRION,
DEL CASTILLO, and
ABAD, JJ.

versus -

SPOUSES ROGELIO PERRERAS and

Promulgated:
PRISCILLA PERRERAS,
Respondents.
August 27, 2009
x ------------------------------------------------------------------------------------------x
DECISION
BRION, J.:

The heirs[1] of spouses Cayetano and Consuelo Pangan (petitioners-heirs) seek the reversal of the Court of
Appeals (CA) decision[2] of June 26, 2002, as well its resolution of February 20, 2003, in CA-G.R. CV
Case No. 56590 through the present petition for review on certiorari.[3] The CA decision affirmed the
Regional Trial Courts (RTC) ruling[4] which granted the complaint for specific performance filed by spouses
Rogelio and Priscilla Perreras (respondents) against the petitioners-heirs, and dismissed the complaint for
consignation instituted by Consuelo Pangan (Consuelo) against the respondents.
THE FACTUAL ANTECEDENTS

The spouses Pangan were the owners of the lot and two-door apartment (subject properties)
located at 1142 Casaas St., Sampaloc, Manila.[5] On June 2, 1989, Consuelo agreed to sell to the
respondents the subject properties for the price of P540,000.00. On the same day, Consuelo
received P20,000.00 from the respondents as earnest money, evidenced by a receipt (June 2, 1989 receipt)
[6]
that also included the terms of the parties agreement.
Three days later, or on June 5, 1989, the parties agreed to increase the purchase price from P540,000.00
to P580,000.00.

2 | Page

In compliance with the agreement, the respondents issued two Far East Bank and Trust Company checks
payable to Consuelo in the amounts of P200,000.00 and P250,000.00 on June 15, 1989. Consuelo,
however, refused to accept the checks. She justified her refusal by saying that her children (the petitionersheirs) co-owners of the subject properties did not want to sell the subject properties. For the same reason,
Consuelo offered to return the P20,000.00 earnest money she received from the respondents, but the latter
rejected it. Thus, Consuelo filed a complaint for consignation against the respondents onSeptember 5,
1989, docketed as Civil Case No. 89-50258, before the RTC of Manila, Branch 28.
The respondents, who insisted on enforcing the agreement, in turn instituted an action for specific
performance against Consuelo before the same court onSeptember 26, 1989. This case was docketed as
Civil Case No. 89-50259. They sought to compel Consuelo and the petitioners-heirs (who were
subsequently impleaded as co-defendants) to execute a Deed of Absolute Sale over the subject properties.
In her Answer, Consuelo claimed that she was justified in backing out from the agreement on the
ground that the sale was subject to the consent of the petitioners-heirs who became co-owners of the
property upon the death of her husband, Cayetano. Since the petitioners-heirs disapproved of the sale,
Consuelo claimed that the contract became ineffective for lack of the requisite consent. She nevertheless
expressed her willingness to return the P20,000.00 earnest money she received from the respondents.
The RTC ruled in the respondents favor; it upheld the existence of a perfected contract of sale, at least
insofar as the sale involved Consuelos conjugal and hereditary shares in the subject properties. The trial
court found that Consuelos receipt of the P20,000.00 earnest money was an eloquent manifestation of the
perfection of the contract. Moreover, nothing in the June 2, 1989 receipt showed that the agreement was
conditioned on the consent of the petitioners-heirs. Even so, the RTC declared that the sale is valid and can
be enforced against Consuelo; as a co-owner, she had full-ownership of the part pertaining to her share
which she can alienate, assign, or mortgage. The petitioners-heirs, however, could not be compelled to
transfer and deliver their shares in the subject properties, as they were not parties to the agreement
between Consuelo and the respondents. Thus, the trial court ordered Consuelo to convey one-half
(representing Consuelos conjugal share) plus one-sixth (representing Consuelos hereditary share) of the
subject properties, and to pay P10,000.00 as attorneys fees to the respondents. Corollarily, it dismissed
Consuelos consignation complaint.
Consuelo and the petitioners-heirs appealed the RTC decision to the CA claiming that the trial court erred in
not finding that the agreement was subject to a suspensive condition the consent of the petitioners-heirs to
the agreement.The CA, however, resolved to dismiss the appeal and, therefore, affirmed the RTC
decision. As the RTC did, the CA found that the payment and receipt of earnest money was the operative
act that gave rise to a perfected contract, and that there was nothing in the parties agreement that would
indicate that it was subject to a suspensive condition. It declared:

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Nowhere in the agreement of the parties, as contained in the June 2, 1989 receipt issued
by [Consuelo] xxx, indicates that [Consuelo] reserved titled on [sic] the property, nor does it
contain any provision subjecting the sale to a positive suspensive condition.
Unconvinced by the correctness of both the RTC and the CA rulings, the petitioners-heirs filed the
present appeal by certiorari alleging reversible errors committed by the appellate court.
THE PETITION
The petitioners-heirs primarily contest the finding that there was a perfected contract executed by
the parties. They allege that other than the finding that Consuelo received P20,000.00 from the
respondents as earnest money, no other evidence supported the conclusion that there was a perfected
contract between the parties; they insist that Consuelo specifically informed the respondents that the sale
still required the petitioners-heirs consent as co-owners. The refusal of the petitioners-heirs to sell the
subject properties purportedly amounted to the absence of the requisite element of consent.
Even assuming that the agreement amounted to a perfected contract, the petitioners-heirs posed
the question of the agreements proper characterization whether it is a contract of sale or a contract to
sell. The petitioners-heirs posit that the agreement involves a contract to sell, and the
respondents belatedpayment of part of the purchase price, i.e., one day after the June 14, 1989 due date,
amounted to the non-fulfillment of a positive suspensive condition that prevented the contract from
acquiring obligatory force. In support of this contention, the petitioners-heirs cite the Courts ruling in the
case of Adelfa Rivera, et al. v. Fidela del Rosario, et al.: [7]
In a contract of sale, the title to the property passes to the vendee upon the
delivery of the thing sold; while in a contract to sell, ownership is, by agreement, reserved
in the vendor and is not to pass to the vendee until full payment of the purchase price. In a
contract to sell, the payment of the purchase price is a positive suspensive
condition, the failure of which is not a breach, casual or serious, but a situation that
prevents the obligation of the vendor to convey title from acquiring an obligatory
force.
[Rivera], however, failed to complete payment of the second installment. The nonfulfillment of the condition rendered the contract to sell ineffective and without force and
effect. [Emphasis in the original.]
From these contentions, we simplify the basic issues for resolution to three questions:
1.
2.
3.

Was there a perfected contract between the parties?

What is the nature of the contract between them? and
What is the effect of the respondents belated payment on their contract?

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THE COURTS RULING

There was a perfected contract between the parties
since all the essential requisites of a contract were
present
Article 1318 of the Civil Code declares that no contract exists unless the following requisites concur: (1)
consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3)
cause of the obligation established. Since the object of the parties agreement involves properties co-owned
by Consuelo and her children, the petitioners-heirs insist that their approval of the sale initiated by their
mother, Consuelo, was essential to its perfection. Accordingly, their refusal amounted to the absence of the
required element of consent.
That a thing is sold without the consent of all the co-owners does not invalidate the sale or render it
void. Article 493 of the Civil Code [8] recognizes the absolute right of a co-owner to freely dispose of his pro
indiviso share as well as the fruits and other benefits arising from that share, independently of the other coowners. Thus, when Consuelo agreed to sell to the respondents the subject properties, what she in fact
sold was her undivided interest that, as quantified by the RTC, consisted of one-half interest, representing
her conjugal share, and one-sixth interest, representing her hereditary share.
The petitioners-heirs nevertheless argue that Consuelos consent was predicated on their consent to the
sale, and that their disapproval resulted in the withdrawal of Consuelos consent. Yet, we find nothing in the
parties agreement or even conduct save Consuelos self-serving testimony that would indicate or from
which we can infer that Consuelos consent depended on her childrens approval of the sale. The explicit
terms of the June 8, 1989 receipt [9]provide no occasion for any reading that the agreement is subject to the
petitioners-heirs favorable consent to the sale.
The presence of Consuelos consent and, corollarily, the existence of a perfected contract between
the parties are further evidenced by the payment and receipt of P20,000.00, an earnest money by the
contracting parties common usage. The law on sales, specifically Article 1482 of the Civil Code, provides
that whenever earnest money is given in a contract of sale, it shall be considered as part of the
price and proof of the perfection of the contract.Although the presumption is not conclusive, as the
parties may treat the earnest money differently, there is nothing alleged in the present case that would give
rise to a contrary presumption. In cases where the Court reached a conclusion contrary to the presumption
declared in Article 1482, we found that the money initially paid was given to guarantee that the buyer would
not back out from the sale, considering that the parties to the sale have yet to arrive at a definite agreement
as to its terms that is, a situation where the contract has not yet been perfected .[10] These situations do not
obtain in the present case, as neither of the parties claimed that the P20,000.00 was given merely as
guarantee by the respondents, as vendees, that they would not back out from the sale. As we have pointed

5 | Page

out, the terms of the parties agreement are clear and explicit; indeed, all the essential elements of a
perfected contract are present in this case. While the respondents required that the occupants vacate the
subject properties prior to the payment of the second installment, the stipulation does not affect the
perfection of the contract, but only its execution.
In sum, the case contains no element, factual or legal, that negates the existence of a perfected
contract between the parties.
The characterization of the contract can be
considered irrelevant in this case in light of Article
1592 and the Maceda Law, and the petitioners-heirs
payment
The petitioners-heirs posit that the proper characterization of the contract entered into by the parties is
significant in order to determine the effect of the respondents breach of the contract (which purportedly
consisted of a one-day delay in the payment of part of the purchase price) and the remedies to which they,
as the non-defaulting party, are entitled.
The question of characterization of the contract involved here would necessarily call for a thorough analysis
of the parties agreement as embodied in the June 2, 1989 receipt, their contemporaneous acts, and the
circumstances surrounding the contracts perfection and execution. Unfortunately, the lower courts
factual findings provide insufficient detail for the purpose. A stipulation reserving ownership in the
vendor until full payment of the price is, under case law, typical in a contract to sell. [11] In this case, the
vendor made no reservation on the ownership of the subject properties. From this perspective, the parties
agreement may be considered a contract of sale. On the other hand, jurisprudence has similarly
established that the need to execute a deed of absolute sale upon completion of payment of the price
generally indicates that it is a contract to sell, as it implies the reservation of title in the vendor until the
vendee has completed the payment of the price. When the respondents instituted the action for specific
performance before the RTC, they prayed that Consuelo be ordered to execute a Deed of Absolute Sale;
this act may be taken to conclude that the parties only entered into a contract to sell.
Admittedly, the given facts, as found by the lower courts, and in the absence of additional details,
can be interpreted to support two conflicting conclusions. The failure of the lower courts to pry into these
matters mayunderstandably be explained by the issues raised before them, which did not require the
additional details. Thus, they found the question of the contractscharacterization immaterial in their
discussion of the facts and the law of the case. Besides, the petitioners-heirs raised the question of the
contracts characterization and the effect of the breach for the first time through the present Rule 45 petition.

6 | Page

Points of law, theories, issues and arguments not brought to the attention of the lower court need
not be, and ordinarily will not be, considered by the reviewing court, as they cannot be raised for the first
time at the appellate review stage. Basic considerations of fairness and due process require this rule. [12]
At any rate, we do not find the question of characterization significant to fully pass upon the
question of default due to the respondents breach; ultimately, the breach was cured and the contract
revived by the respondents payment a day after the due date.
In cases of breach due to nonpayment, the vendor may avail of the remedy of rescission in
a contract of sale. Nevertheless, the defaulting vendee may defeat the vendors right to rescind the
contract of sale if he pays the amount due before he receives a demand for rescission, either judicially or
by a notarial act, from the vendor. This right is provided under Article 1592 of the Civil Code:
Article 1592. In the sale of immovable property, even though it may have been
stipulated that upon failure to pay the price at the time agreed upon the rescission of the
contract shall of right take place, the vendee may pay, even after the expiration of the
period, as long as no demand for rescission of the contract has been made upon
him either judicially or by a notarial act. After the demand, the court may not grant him
a new term. [Emphasis supplied.]
Nonpayment of the purchase price in contracts to sell, however, does not constitute a breach;
rather, nonpayment is a condition that prevents the obligation from acquiring obligatory force and results in
its cancellation. We stated in Ong v. CA[13] that:
In a contract to sell, the payment of the purchase price is a positive
suspensive condition, the failure of which is not a breach, casual or serious, but a
situation that prevents the obligation of the vendor to convey title from acquiring
obligatory force. The non-fulfillment of the condition of full payment rendered the contract
to sell ineffective and without force and effect. [Emphasis supplied.]

As in the rescission of a contract of sale for nonpayment of the price, the defaulting vendee in a
contract to sell may defeat the vendors right to cancel by invoking the rights granted to him under Republic
Act No. 6552 or the Realty Installment Buyer Protection Act (also known as the Maceda Law); this law
provides for a 60-day grace period within which the defaulting vendee (who has paid less than two years of
installments) may still pay the installments due.Only after the lapse of the grace period with continued
nonpayment of the amounts due can the actual cancellation of the contract take place. The pertinent
provisions of the Maceda Law provide:
xxxx
Section 2. It is hereby declared a public policy to protect buyers of real estate on
installment payments against onerous and oppressive conditions.

7 | Page

Sec. 3. In all transactions or contracts involving the sale or financing of real

estate on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under Republic Act
Numbered Thirty-eight hundred forty-four as amended by Republic Act Numbered Sixtythree hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:
xxxx
Section 4. In case where less than two years of installments were paid, the
seller shall give the buyer a grace period of not less than 60 days from the date the
installment became due. If the buyer fails to pay the installments due at the expiration of
the grace period, the seller may cancel the contract after thirty days from the receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by notarial
act. [Emphasis supplied.]
Significantly, the Court has consistently held that the Maceda Law covers not only sales on installments of
real estate, but also financing of such acquisition; its Section 3 is comprehensive enough to include both
contracts of sale and contracts to sell, provided that the terms on payment of the price require at least two
installments. The contract entered into by the parties herein can very well fall under the Maceda Law.
Based on the above discussion, we conclude that the respondents payment onJune 15, 1989 of the
installment due on June 14, 1989 effectively defeated the petitioners-heirs right to have the contract
rescinded or cancelled. Whether the parties agreement is characterized as one of sale or to sell is not
relevant in light of the respondents payment within the grace period provided under Article 1592 of the Civil
Code and Section 4 of the Maceda Law. The petitioners-heirs obligation to accept the payment of the price
and to convey Consuelos conjugal and hereditary shares in the subject properties subsists.
WHEREFORE, we DENY the petitioners-heirs petition for review oncertiorari, and AFFIRM the
decision of the Court of Appeals dated June 24, 2002 and its resolution dated February 20, 2003 in CAG.R. CV Case No. 56590. Costs against the petitioners-heirs.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson

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CONCHITA CARPIO-MORALES
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it
is hereby certified that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice

9 | Page

THIRD DIVISION

HEIRS OF ARTURO REYES, represented

by Evelyn R. San Buenaventura,
Petitioners,

- versus -

ELENA SOCCO-BELTRAN,
Respondent.

G.R. No. 176474

Present:

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

November 27, 2008

x-------------------------------------------------x

DECISION

CHICO-NAZARIO, J.:

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

11 | P a g e

Petitioners averred that they took physical possession of the subject property in 1954 and had been
uninterrupted in their possession of the said property since then.
Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office conducted an
investigation, the results of which were contained in her Report/ Recommendation dated 15 April
1999. Other than recounting the afore-mentioned facts, Legal Officer Pinlac also made the following
findings in her Report/Recommendation: [7]
Further investigation was conducted by the undersigned and based on the
documentary evidence presented by both parties, the following facts were gathered: that
the house of [the] Reyes family is adjacent to the landholding in question and portion of the
subject property consisting of about 15 meters [were] occupied by the heirs of Arturo
Reyes were a kitchen and bathroom [were] constructed therein; on the remaining portion a
skeletal form made of hollow block[s] is erected and according to the heirs of late Arturo
Reyes, this was constructed since the year (sic) 70s at their expense; that construction of
the said skeletal building was not continued and left unfinished which according to the
affidavit of Patricia Hipolito the Reyes family where (sic) prevented by Elena Socco in their
attempt of occupancy of the subject landholding; (affidavit of Patricia Hipolito is hereto
attached as Annex F); that Elena Socco cannot physically and personally occupy the
subject property because of the skeletal building made by the Reyes family who have been
requesting that they be paid for the cost of the construction and the same be demolished
at the expense of Elena Socco; that according to Elena Socco, [she] is willing to waive her
right on the portion where [the] kitchen and bathroom is (sic) constructed but not the whole
of Lot [No.] 6-B adjudicated to her; that the Reyes family included the subject property to
the sworn statement of value of real properties filed before the municipality
ofDinalupihan, Bataan, copies of the documents are hereto attached as Annexes G and H;
that likewise Elena Socco has been continuously and religiously paying the realty tax due
on the said property.

In the end, Legal Officer Pinlac recommended the approval of respondents petition for issuance of
title over the subject property, ruling that respondent was qualified to own the subject property pursuant to
Article 1091 of the New Civil Code. [8] Provincial Agrarian Reform Officer (PARO)Raynor Taroy concurred in
the said recommendation in his Indorsement dated22 April 1999.[9]

12 | P a g e

In an Order dated 15 September 1999, DAR Regional Director Nestor R. Acosta, however,
dismissed respondents petition for issuance of title over the subject property on the ground that respondent
was not an actual tiller and had abandoned the said property for 40 years; hence, she had already
renounced her right to recover the same.[10] The dispositive part of the Order reads:
1. DISMISSING the claims of Elena Socco-Beltran, duly represented by
Myrna Socco for lack of merit;
2. ALLOCATING Lot No. 6-B under Psd-003-008565 with an area of 360 square
meters, more or less, situated Zamora Street, Dinalupihan,Bataan, in favor of the heirs of
Arturo Reyes.
3. ORDERING the complainant to refrain from any act tending to disturb the
peaceful possession of herein respondents.
4. DIRECTING the MARO of Dinalupihan, Bataan to process the pertinent
documents for the issuance of CLOA in favor of the heirs of Arturo Reyes. [11]

Respondent filed a Motion for Reconsideration of the foregoing Order, which was denied by DAR
Regional Director Acosta in another Order dated 15 September 1999.[12]
Respondent then appealed to the Office of the DAR Secretary. In an Order, dated 9 November
2001, the DAR Secretary reversed the Decision of DAR Regional Director Acosta after finding that neither
petitioners predecessor-in-interest, Arturo Reyes, nor respondent was an actual occupant of the subject
property. However, since it was respondent who applied to purchase the subject property, she was better
qualified to own said property as opposed to petitioners, who did not at all apply to purchase the
same.Petitioners were further disqualified from purchasing the subject property because they were not
landless. Finally, during the investigation of Legal Officer Pinlac, petitioners requested that respondent pay
them the cost of the construction of the skeletal house they built on the subject property. This was
construed by the DAR Secretary as a waiver by petitioners of their right over the subject property. [13] In the
said Order, the DAR Secretary ordered that:
WHEREFORE, premises considered, the September 15, 1999 Order is hereby
SET ASIDE and a new Order is hereby issued APPROVING the application to
purchase Lot [No.] 6-B of Elena Socco-Beltran.[14]

13 | P a g e

Petitioners sought remedy from the Office of the President by appealing the 9 November
2001 Decision of the DAR Secretary. Their appeal was docketed as O.P. Case No. 02-A-007. On 30 June
2003, the Office of the President rendered its Decision denying petitioners appeal and affirming the DAR
Secretarys Decision.[15] The fallo of the Decision reads:
WHEREFORE, premises considered, judgment appealed from isAFFIRMED and
the instant appeal DISMISSED.[16]

Petitioners Motion for Reconsideration was likewise denied by the Office of the President in a
Resolution dated 30 September 2004.[17] In the said Resolution, the Office of the President noted that
petitioners failed to allege in their motion the date when they received the Decision dated 30 June
2003. Such date was material considering that the petitioners Motion for Reconsideration was filed only on
14 April 2004, or almost nine months after the promulgation of the decision sought to be
reconsidered. Thus, it ruled that petitioners Motion for Reconsideration, filed beyond fifteen days from
receipt of the decision to be reconsidered, rendered the said decision final andexecutory.
Consequently, petitioners filed an appeal before the Court of Appeals, docketed as CA-G.R. SP No.
87066. Pending the resolution of this case, the DAR already issued on 8 July 2005 a Certificate of Land
Ownership Award (CLOA) over the subject property in favor of the respondents niece and representative,
Myrna Socco-Beltran.[18] Respondent passed away on 21 March 2001,[19] but the records do not ascertain
the identity of her legal heirs and her legatees.
Acting on CA-G.R. SP No. 87066, the Court of Appeals subsequently promulgated its Decision,
dated 31 January 2006, affirming the Decision dated30 June 2003 of the Office of the President. It held that
petitioners could not have been actual occupants of the subject property, since actual occupancy requires
the positive act of occupying and tilling the land, not just the introduction of an unfinished skeletal structure
thereon. The Contract to Sell on which petitioners based their claim over the subject property was executed
by Miguel Socco, who was not the owner of the said property and, therefore, had no right to transfer the
same. Accordingly, the Court of Appeals affirmed respondents right over the subject property, which
was derived form the original allocatees thereof.[20] The fallo of the said Decision reads:
WHEREFORE,
premises
considered,
the
instant PETITION
FOR
REVIEW is DISMISSED. Accordingly, the Decision dated 30 June 2003and the Resolution
dated 30 December 2004 both issued by the Office of the President are
hereby AFFIRMED in toto.[21]

14 | P a g e

The Court of Appeals denied petitioners Motion for Reconsideration of its Decision in a Resolution
dated 16 August 2006.[22]
Hence, the present Petition, wherein petitioners raise the following issues:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING
THE FINDINGS OF THE OFFICE OF THE PRESIDENT THAT THE SUBJECT LOT IS
VACANT AND THAT PETITIONERS ARE NOT ACTUAL OCCUPANTS THEREOF BY
DENYING THE LATTERS CLAIM THAT THEY HAVE BEEN IN OPEN, CONTINUOUS,
EXCLUSIVE, NOTORIOUS AND AVDERSE POSSESSION THEREOF SINCE 1954 OR
FOR MORE THAN THIRTY (30) YEARS.

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

15 | P a g e

The main issue in this case is whether or not petitioners have a better right to the subject property
over the respondent. Petitioners claim over the subject property is anchored on the Contract to Sell
executed between MiguelSocco and Arturo Reyes on 5 September 1954. Petitioners additionally allege that
they and their predecessor-in-interest, Arturo Reyes, have been in possession of the subject lot since 1954
for an uninterrupted period of more than 40 years.
The Court is unconvinced.
Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. It was
unmistakably stated in the Contract and made clear to both parties thereto that the vendor, Miguel
R. Socco, was not yet the owner of the subject property and was merely expecting to inherit the same as
his share as a co-heir of Constancias estate.[24] It was also declared in the Contract itself that Miguel
R. Soccos conveyance of the subject to the buyer, Arturo Reyes, was a conditional sale. It is, therefore,
apparent that the sale of the subject property in favor of Arturo Reyes was conditioned upon the event that
Miguel Socco would actually inherit and become the owner of the said property. Absent such occurrence,
Miguel R. Socco never acquired ownership of the subject property which he could validly transfer to Arturo
Reyes.
Under Article 1459 of the Civil Code on contracts of sale, The thing must be licit and the vendor
must have a right to transfer ownership thereof at the time it is delivered. The law specifically requires that
the vendor must have ownership of the property at the time it is delivered. Petitioners claim that the
property was constructively delivered to them in 1954 by virtue of the Contract to Sell. However, as already
pointed out by this Court, it was explicit in the Contract itself that, at the time it was executed, Miguel
R. Socco was not yet the owner of the property and was only expecting to inherit it. Hence, there was no
valid sale from which ownership of the subject property could have transferred from Miguel Socco to Arturo
Reyes. Without acquiring ownership of the subject property, Arturo Reyes also could not have conveyed the
same to his heirs, herein petitioners.
Petitioners, nevertheless, insist that they physically occupied the subject lot for more than 30 years
and, thus, they gained ownership of the property through acquisitive prescription, citing Sandoval v. Insular
Government [25]and San Miguel Corporation v. Court of Appeals. [26]
In Sandoval, petitioners therein sought the enforcement of Section 54, paragraph 6 of Act No. 926,
otherwise known as the Land Registration Act, which required -- for the issuance of a certificate of title to
agricultural public lands -- the open, continuous, exclusive, and notorious possession and occupation of the
same in good faith and under claim of ownership for more than ten years. After evaluating the evidence

16 | P a g e

presented, consisting of the testimonies of several witnesses and proof that fences were constructed
around the property, the Court in the afore-stated case denied the petition on the ground that petitioners
failed to prove that they exercised acts of ownership or were in open, continuous, and peaceful possession
of the whole land, and had caused it to be enclosed to the exclusion of other persons. It further decreed
that whoever claims such possession shall exercise acts of dominion and ownership which cannot be
mistaken for the momentary and accidental enjoyment of the property. [27]
In San Miguel Corporation, the Court reiterated the rule that the open, exclusive, and undisputed
possession of alienable public land for the period prescribed by law creates the legal fiction whereby land
ceases to be public land and is, therefore, private property. It stressed, however, that the occupation of the
land for 30 years must be conclusively established. Thus, the evidence offered by petitioner therein tax
declarations, receipts, and the sole testimony of the applicant for registration, petitioners predecessor-ininterest who claimed to have occupied the land before selling it to the petitioner were considered
insufficient to satisfy the quantum of proof required to establish the claim of possession required for
acquiring alienable public land.[28]
As in the two aforecited cases, petitioners herein were unable to prove actual possession of the
subject property for the period required by law. It was underscored in San Miguel Corporation that the open,
continuous, exclusive, and notorious occupation of property for more than 30 years must be no less
than conclusive, such quantum of proof being necessary to avoid the erroneous validation of actual
fictitious claims of possession over the property that is being claimed. [29]
In the present case, the evidence presented by the petitioners falls short of being conclusive. Apart
from their self-serving statement that they took possession of the subject property, the only proof offered to
support their claim was a general statement made in the letter [30] dated 4 February
2002 ofBarangay Captain Carlos Gapero, certifying that Arturo Reyes was the occupant of the subject
property since peace time and at present. The statement is rendered doubtful by the fact that as early as
1997, when respondent filed her petition for issuance of title before the DAR, Arturo Reyes had already
died and was already represented by his heirs, petitioners herein.
Moreover, the certification given by Barangay Captain Gapero that Arturo Reyes occupied the
premises for an unspecified period of time, i.e., since peace time until the present, cannot prevail over
Legal Officer Pinlacsmore particular findings in her Report/Recommendation. Legal Officer Pinlacreported
that petitioners admitted that it was only in the 1970s that they built the skeletal structure found on the
subject property. She also referred to the averments made by Patricia Hipolito in an Affidavit,[31] dated 26
February 1999, that the structure was left unfinished because respondent prevented petitioners from

17 | P a g e

occupying the subject property. Such findings disprove petitioners claims that their predecessor-in-interest,
Arturo Reyes, had been in open, exclusive, and continuous possession of the property since 1954. The
adverted findings were the result of Legal Officer Pinlacs investigation in the course of her official duties, of
matters within her expertise which were later affirmed by the DAR Secretary, the Office of the President,
and the Court of Appeals. The factual findings of such administrative officer, if supported by evidence, are
entitled to great respect.[32]
In contrast, respondents claim over the subject property is backed by sufficient evidence. Her
predecessors-in-interest, the spouses Laquian, have been identified as the original allocatees who have
fully paid for the subject property. The subject property was allocated to respondent in the extrajudicial
settlement by the heirs of Constancias estate. The document entitled Extra-judicial Settlement of the Estate
of the Deceased Constancia Socco was not notarized and, as a private document, can only bind the parties
thereto.However, its authenticity was never put into question, nor was its legality impugned. Moreover,
executed in 1965 by the heirs of Constancia Socco, or more than 30 years ago, it is an ancient document
which appears to be genuine on its face and therefore its authenticity must be upheld. [33] Respondent has
continuously paid for the realty tax due on the subject property, a fact which, though not conclusive, served
to strengthen her claim over the property. [34]
From the foregoing, it is only proper that respondents claim over the subject property be
upheld. This Court must, however, note that the Order of the DAR Secretary, dated 9 November 2001,
which granted the petitioners right to purchase the property, is flawed and may be assailed in the proper
proceedings. Records show that the DAR affirmed that respondents predecessors-in-interest,
Marcelo Laquian and Constancia Socco, having been identified as the original allocatee, have fully paid for
the subject property as provided under an agreement to sell. By the nature of a contract or agreement to
sell, the title over the subject property is transferred to the vendee upon the full payment of the stipulated
consideration. Upon the full payment of the purchase price, and absent any showing that
the allocatee violated the conditions of the agreement, ownership of the subject land should be conferred
upon the allocatee.[35] Since the extrajudicial partition transferring ConstanciaSoccos interest in the subject
land to the respondent is valid, there is clearly no need for the respondent to purchase the subject property,
despite the application for the purchase of the property erroneously filed by respondent.The only act which
remains to be performed is the issuance of a title in the name of her legal heirs, now that she is deceased.
Moreover, the Court notes that the records have not clearly established the right of respondents
representative, Myrna Socco-Arizo, over the subject property. Thus, it is not clear to this Court why the
DAR issued on 8 July 2005a CLOA[36] over the subject property in favor of Myrna Socco-Arizo.Respondents
death does not automatically transmit her rights to the property to Myrna Socco-Beltran. Respondent only

18 | P a g e

authorized Myrna Socco-Arizo, through a Special Power of Attorney [37] dated 10 March 1999, to represent
her in the present case and to administer the subject property for her benefit.There is nothing in the Special
Power of Attorney to the effect that MyrnaSocco-Arizo can take over the subject property as owner thereof
upon respondents death. That Miguel V. Socco, respondents only nephew, the son of the late Miguel
R. Socco, and Myrna Socco-Arizos brother, executed a waiver of his right to inherit from
respondent, does not automatically mean that the subject property will go to Myrna Socco-Arizo, absent
any proof that there is no other qualified heir to respondents estate. Thus, this Decision does not in any
way confirm the issuance of the CLOA in favor of Myrna Socco-Arizo, which may be assailed in appropriate
proceedings.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED.The assailed Decision of the Court
of Appeals
in
CA-G.R.
SP
No.
87066,
promulgated
on 31
January
2006,
is AFFIRMED with MODIFICATION.This Court withholds the confirmation of the validity of title over the
subject property in the name of Myrna Socco-Arizo pending determination of respondents legal heirs in
appropriate proceedings. No costs.
SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice
WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice
Acting Chairperson

RUBEN T. REYES

ANTONIO EDUARDO B. NACHURA

Associate Justice

19 | P a g e

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is
hereby certified that the conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-48194 March 15, 1990
JOSE
M.
JAVIER
and
ESTRELLA
vs.
COURT OF APPEALS and LEONARDO TIRO, respondents.

F.

JAVIER, petitioners,

20 | P a g e

Eddie Tamondong for petitioners.

Lope Adriano and Emmanuel Pelaez, Jr. for private respondent.
REGALADO, J.:
Petitioners pray for the reversal of the decision of respondent Court of Appeals in CA-G.R. No. 52296-R,
dated March 6, 1978, 1 the dispositive portion whereof decrees:
WHEREFORE, the judgment appealed from is hereby set aside and another one entered
ordering the defendants-appellees, jointly and solidarily, to pay plaintiff-appellant the sum
of P79,338.15 with legal interest thereon from the filing of the complaint, plus attorney's
fees in the amount of P8,000.00. Costs against defendants-appellees. 2
As found by respondent court or disclosed by the records, 3 this case was generated by the following
antecedent facts.
Private respondent is a holder of an ordinary timber license issued by the Bureau of Forestry covering
2,535 hectares in the town of Medina, Misamis Oriental. On February 15, 1966 he executed a "Deed of
Assignment" 4 in favor of herein petitioners the material parts of which read as follows:
xxx xxx xxx
I, LEONARDO A. TIRO, of legal age, married and a resident of Medina, Misamis Oriental,
for and in consideration of the sum of ONE HUNDRED TWENTY THOUSAND PESOS
(P120,000.00), Philippine Currency, do by these presents, ASSIGN, TRANSFER AND
CONVEY, absolutely and forever unto JOSE M. JAVIER and ESTRELLA F. JAVIER,
spouses, of legal age and a resident (sic) of 2897 F.B. Harrison, Pasay City, my shares of
stocks in the TIMBERWEALTH CORPORATION in the total amount of P120,000.00,
payment of which shall be made in the following manner:
1. Twenty thousand (P20,000.00) Pesos upon signing of this contract;
2. The balance of P100,000.00 shall be paid P10,000.00 every shipment
of export logs actually produced from the forest concession of
Timberwealth Corporation.
That I hereby agree to sign and endorse the stock certificate in favor of Mr. & Mrs. Jose M.
Javier, as soon as stock certificates are issued.
xxx xxx xxx
At the time the said deed of assignment was executed, private respondent had a pending application, dated
October 21, 1965, for an additional forest concession covering an area of 2,000 hectares southwest of and
adjoining the area of the concession subject of the deed of assignment. Hence, on February 28, 1966,
private respondent and petitioners entered into another "Agreement" 5 with the following stipulations:
xxx xxx xxx
1. That LEONARDO TIRO hereby agrees and binds himself to transfer, cede and convey
whatever rights he may acquire, absolutely and forever, to TIMBERWEALTH
CORPORATION, a corporation duly organized and existing under the laws of the
Philippines, over a forest concession which is now pending application and approval as
additional area to his existing licensed area under O.T. License No. 391-103166, situated
at Medina, Misamis Oriental;
2. That for and in consideration of the aforementioned transfer of rights over said additional
area to TIMBERWEALTH CORPORATION, ESTRELLA F. JAVIER and JOSE M. JAVIER,
both directors and stockholders of said corporation, do hereby undertake to pay
LEONARDO TIRO, as soon as said additional area is approved and transferred to
TIMBERWEALTH CORPORATION the sum of THIRTY THOUSAND PESOS (P30,000.00),

21 | P a g e

which amount of money shall form part of their paid up capital stock in TIMBERWEALTH
CORPORATION;
3. That this Agreement is subject to the approval of the members of the Board of Directors
of the TIMBERWEALTH CORPORATION.
xxx xxx xxx
On November 18, 1966, the Acting Director of Forestry wrote private respondent that his forest concession
was renewed up to May 12, 1967 under O.T.L. No. 391-51267, but since the concession consisted of only
2,535 hectares, he was therein informed that:
In pursuance of the Presidential directive of May 13, 1966, you are hereby given until May
12, 1967 to form an organization such as a cooperative, partnership or corporation with
other adjoining licensees so as to have a total holding area of not less than 20,000
hectares of contiguous and compact territory and an aggregate allowable annual cut of not
less than 25,000 cubic meters, otherwise, your license will not be further renewed. 6
Consequently, petitioners, now acting as timber license holders by virtue of the deed of assignment
executed by private respondent in their favor, entered into a Forest Consolidation Agreement 7 on April 10,
1967 with other ordinary timber license holders in Misamis Oriental, namely, Vicente L. De Lara, Jr.,
Salustiano R. Oca and Sanggaya Logging Company. Under this consolidation agreement, they all agreed
to pool together and merge their respective forest concessions into a working unit, as envisioned by the
aforementioned directives. This consolidation agreement was approved by the Director of Forestry on May
10, 1967. 8 The working unit was subsequently incorporated as the North Mindanao Timber Corporation,
with the petitioners and the other signatories of the aforesaid Forest Consolidation Agreement as
incorporators. 9
On July 16, 1968, for failure of petitioners to pay the balance due under the two deeds of assignment,
private respondent filed an action against petitioners, based on the said contracts, for the payment of the
amount of P83,138.15 with interest at 6% per annum from April 10, 1967 until full payment, plus
P12,000.00 for attorney's fees and costs.
On September 23, 1968, petitioners filed their answer admitting the due execution of the contracts but
interposing the special defense of nullity thereof since private respondent failed to comply with his
contractual obligations and, further, that the conditions for the enforceability of the obligations of the parties
failed to materialize. As a counterclaim, petitioners sought the return of P55,586.00 which private
respondent had received from them pursuant to an alleged management agreement, plus attorney's fees
and costs.
On October 7, 1968, private respondent filed his reply refuting the defense of nullity of the contracts in this
wise:
What were actually transferred and assigned to the defendants were plaintiff's rights and
interest in a logging concession described in the deed of assignment, attached to the
complaint and marked as Annex A, and agreement Annex E; that the "shares of stocks"
referred to in paragraph II of the complaint are terms used therein merely to designate or
identify those rights and interests in said logging concession. The defendants actually
made use of or enjoyed not the "shares of stocks" but the logging concession itself; that
since the proposed Timberwealth Corporation was owned solely and entirely by
defendants, the personalities of the former and the latter are one and the same. Besides,
before the logging concession of the plaintiff or the latter's rights and interests therein were
assigned or transferred to defendants, they never became the property or assets of the
Timberwealth Corporation which is at most only an association of persons composed of
the defendants. 10

22 | P a g e

and contending that the counterclaim of petitioners in the amount of P55,586.39 is actually only a part of
the sum of P69,661.85 paid by the latter to the former in partial satisfaction of the latter's claim. 11
After trial, the lower court rendered judgment dismissing private respondent's complaint and ordering him to
pay petitioners the sum of P33,161.85 with legal interest at six percent per annum from the date of the filing
of the answer until complete payment. 12
As earlier stated, an appeal was interposed by private respondent to the Court of Appeals which reversed
the decision of the court of a quo.
On March 28, 1978, petitioners filed a motion in respondent court for extension of time to file a motion for
reconsideration, for the reason that they needed to change counsel. 13 Respondent court, in its resolution
dated March 31, 1978, gave petitioners fifteen (15) days from March 28, 1978 within which to file said
motion for reconsideration, provided that the subject motion for extension was filed on time. 14 On April 11,
1978, petitioners filed their motion for reconsideration in the Court of Appeals. 15 On April 21, 1978, private
respondent filed a consolidated opposition to said motion for reconsideration on the ground that the
decision of respondent court had become final on March 27, 1978, hence the motion for extension filed on
March 28, 1978 was filed out of time and there was no more period to extend. However, this was not acted
upon by the Court of Appeals for the reason that on April 20, 1978, prior to its receipt of said opposition, a
resolution was issued denying petitioners' motion for reconsideration, thus:
The motion for reconsideration filed on April 11, 1978 by counsel for defendants-appellees
is denied. They did not file any brief in this case. As a matter of fact this case was
submitted for decision without appellees' brief. In their said motion, they merely tried to
refute the rationale of the Court in deciding to reverse the appealed judgment. 16
Petitioners then sought relief in this Court in the present petition for review on certiorari. Private respondent
filed his comment, reiterating his stand that the decision of the Court of Appeals under review is already
final and executory.
Petitioners countered in their reply that their petition for review presents substantive and fundamental
questions of law that fully merit judicial determination, instead of being suppressed on technical and
insubstantial reasons. Moreover, the aforesaid one (1) day delay in the filing of their motion for extension is
excusable, considering that petitioners had to change their former counsel who failed to file their brief in the
appellate court, which substitution of counsel took place at a time when there were many successive
intervening holidays.
On July 26, 1978, we resolved to give due course to the petition.
The one (1) day delay in the filing of the said motion for extension can justifiably be excused, considering
that aside from the change of counsel, the last day for filing the said motion fell on a holiday following
another holiday, hence, under such circumstances, an outright dismissal of the petition would be too harsh.
Litigations should, as much as possible, be decided on their merits and not on technicalities. In a number of
cases, this Court, in the exercise of equity jurisdiction, has relaxed the stringent application of technical
rules in order to resolve the case on its merits. 17 Rules of procedure are intended to promote, not to defeat,
substantial justice and, therefore, they should not be applied in a very rigid and technical sense.
We now proceed to the resolution of this case on the merits.
The assignment of errors of petitioners hinges on the central issue of whether the deed of assignment
dated February 15, 1966 and the agreement of February 28, 1966 are null and void, the former for total
absence of consideration and the latter for non-fulfillment of the conditions stated therein.
Petitioners contend that the deed of assignment conveyed to them the shares of stocks of private
respondent in Timberwealth Corporation, as stated in the deed itself. Since said corporation never came
into existence, no share of stocks was ever transferred to them, hence the said deed is null and void for
lack of cause or consideration.

23 | P a g e

We do not agree. As found by the Court of Appeals, the true cause or consideration of said deed was the
transfer of the forest concession of private respondent to petitioners for P120,000.00. This finding is
supported by the following considerations, viz:
1. Both parties, at the time of the execution of the deed of assignment knew that the Timberwealth
Corporation stated therein was non-existent. 18
2. In their subsequent agreement, private respondent conveyed to petitioners his inchoate right over a
forest concession covering an additional area for his existing forest concession, which area he had applied
for, and his application was then pending in the Bureau of Forestry for approval.
3. Petitioners, after the execution of the deed of assignment, assumed the operation of the logging
concessions of private respondent. 19
4. The statement of advances to respondent prepared by petitioners stated: "P55,186.39 advances to L.A.
Tiro be applied to succeeding shipments. Based on the agreement, we pay P10,000.00 every after ( sic)
shipment. We had only 2 shipments" 20
5. Petitioners entered into a Forest Consolidation Agreement with other holders of forest concessions on
the strength of the questioned deed of assignment. 21
The aforesaid contemporaneous and subsequent acts of petitioners and private respondent reveal that the
cause stated in the questioned deed of assignment is false. It is settled that the previous and simultaneous
and subsequent acts of the parties are properly cognizable indica of their true intention. 22 Where the
parties to a contract have given it a practical construction by their conduct as by acts in partial performance,
such construction may be considered by the court in construing the contract, determining its meaning and
ascertaining the mutual intention of the parties at the time of contracting. 23 The parties' practical
construction of their contract has been characterized as a clue or index to, or as evidence of, their intention
or meaning and as an important, significant, convincing, persuasive, or influential factor in determining the
proper construction of the agreement. 24
The deed of assignment of February 15, 1966 is a relatively simulated contract which states a false cause
or consideration, or one where the parties conceal their true agreement. 25 A contract with a false
consideration is not null and void per se. 26 Under Article 1346 of the Civil Code, a relatively simulated
contract, when it does not prejudice a third person and is not intended for any purpose contrary to law,
morals, good customs, public order or public policy binds the parties to their real agreement.
The Court of Appeals, therefore, did not err in holding petitioners liable under the said deed and in ruling
that
. . . In view of the analysis of the first and second assignment of errors, the defendantsappellees are liable to the plaintiff-appellant for the sale and transfer in their favor of the
latter's forest concessions. Under the terms of the contract, the parties agreed on a
consideration of P120,000.00. P20,000.00 of which was paid, upon the signing of the
contract and the balance of P100,000.00 to be paid at the rate of P10,000.00 for every
shipment of export logs actually produced from the forest concessions of the appellant sold
to the appellees. Since plaintiff-appellant's forest concessions were consolidated or
merged with those of the other timber license holders by appellees' voluntary act under the
Forest Consolidation Agreement (Exhibit D), approved by the Bureau of Forestry (Exhibit
D-3), then the unpaid balance of P49,338.15 (the amount of P70,661.85 having been
received by the plaintiff-appellant from the defendants-appellees) became due and
demandable. 27
As to the alleged nullity of the agreement dated February 28, 1966, we agree with petitioners that they
cannot be held liable thereon. The efficacy of said deed of assignment is subject to the condition that the
application of private respondent for an additional area for forest concession be approved by the Bureau of

24 | P a g e

Forestry. Since private respondent did not obtain that approval, said deed produces no effect. When a
contract is subject to a suspensive condition, its birth or effectivity can take place only if and when the event
which constitutes the condition happens or is fulfilled. 28 If the suspensive condition does not take place, the
parties would stand as if the conditional obligation had never existed. 29
The said agreement is a bilateral contract which gave rise to reciprocal obligations, that is, the obligation of
private respondent to transfer his rights in the forest concession over the additional area and, on the other
hand, the obligation of petitioners to pay P30,000.00. The demandability of the obligation of one party
depends upon the fulfillment of the obligation of the other. In this case, the failure of private respondent to
comply with his obligation negates his right to demand performance from petitioners. Delivery and payment
in a contract of sale, are so interrelated and intertwined with each other that without delivery of the goods
there is no corresponding obligation to pay. The two complement each other. 30
Moreover, under the second paragraph of Article 1461 of the Civil Code, the efficacy of the sale of a mere
hope or expectancy is deemed subject to the condition that the thing will come into existence. In this case,
since private respondent never acquired any right over the additional area for failure to secure the approval
of the Bureau of Forestry, the agreement executed therefor, which had for its object the transfer of said right
to petitioners, never became effective or enforceable.
WHEREFORE, the decision of respondent Court of Appeals is hereby MODIFIED. The agreement of the
parties dated February 28, 1966 is declared without force and effect and the amount of P30,000.00 is
hereby ordered to be deducted from the sum awarded by respondent court to private respondent. In all
other respects, said decision of respondent court is affirmed.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-69970 November 28, 1988
FELIX
DANGUILAN, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, APOLONIA MELAD, assisted by her husband, JOSE
TAGACAY,respondents.
Pedro R. Perez, Jr. for petitioner.
Teodoro B. Mallonga for private respondent.
CRUZ, J.:
The subject of this dispute is the two lots owned by Domingo Melad which is claimed by both the petitioner
and the respondent. The trial court believed the petitioner but the respondent court, on appeal, upheld the
respondent. The case is now before us for a resolution of the issues once and for all.
On January 29, 1962, the respondent filed a complaint against the petitioner in the then Court of First
Instance of Cagayan for recovery of a farm lot and a residential lot which she claimed she had purchased
from Domingo Melad in 1943 and were now being unlawfully withheld by the defendant. 1 In his answer, the
petitioner denied the allegation and averred that he was the owner of the said lots of which he had been in
open, continuous and adverse possession, having acquired them from Domingo Melad in 1941 and
1943. 2 The case was dismissed for failure to prosecute but was refiled in 1967. 3
At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly signed by Domingo
Melad and duly notarized, which conveyed the said properties to her for the sum of P80.00. 4 She said the

25 | P a g e

amount was earned by her mother as a worker at the Tabacalera factory. She claimed to be the illegitimate
daughter of Domingo Melad, with whom she and her mother were living when he died in 1945. She moved
out of the farm only when in 1946 Felix Danguilan approached her and asked permission to cultivate the
land and to stay therein. She had agreed on condition that he would deliver part of the harvest from the
farm to her, which he did from that year to 1958. The deliveries having stopped, she then consulted the
municipal judge who advised her to file the complaint against Danguilan. The plaintiff 's mother, her only
other witness, corroborated this testimony. 5
For his part, the defendant testified that he was the husband of Isidra Melad, Domingo's niece, whom he
and his wife Juana Malupang had taken into their home as their ward as they had no children of their own.
He and his wife lived with the couple in their house on the residential lot and helped Domingo with the
cultivation of the farm. Domingo Melad signed in 1941 a private instrument in which he gave the defendant
the farm and in 1943 another private instrument in which he also gave him the residential lot, on the
understanding that the latter would take care of the grantor and would bury him upon his death. 6 Danguilan
presented three other witnesses 7 to corroborate his statements and to prove that he had been living in the
land since his marriage to Isidra and had remained in possession thereof after Domingo Melad's death in
1945. Two of said witnesses declared that neither the plaintiff nor her mother lived in the land with Domingo
Melad. 8
The decision of the trial court was based mainly on the issue of possession. Weighing the evidence
presented by the parties, the judge 9 held that the defendant was more believable and that the plaintiff's
evidence was "unpersuasive and unconvincing." It was held that the plaintiff's own declaration that she
moved out of the property in 1946 and left it in the possession of the defendant was contradictory to her
claim of ownership. She was also inconsistent when she testified first that the defendant was her tenant
and later in rebuttal that he was her administrator. The decision concluded that where there was doubt as to
the ownership of the property, the presumption was in favor of the one actually occupying the same, which
in this case was the defendant. 10
The review by the respondent court 11 of this decision was manifestly less than thorough. For the most part
it merely affirmed the factual findings of the trial court except for an irrelevant modification, and it was only
toward the end that it went to and resolved what it considered the lone decisive issue.
The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad had conveyed the
two parcels of land to the petitioner, were null and void. The reason was that they were donations of real
property and as such should have been effected through a public instrument. It then set aside the appealed
decision and declared the respondents the true and lawful owners of the disputed property.
The said exhibits read as follows:
EXHIBIT 2-b is quoted as follows: 12
I, DOMINGO MELAD, of legal age, married, do hereby declare in this receipt the truth of
my giving to Felix Danguilan, my agricultural land located at Barrio Fugu-Macusi,
Penablanca, Province of Cagayan, Philippine Islands; that this land is registered under my
name; that I hereby declare and bind myself that there is no one to whom I will deliver this
land except to him as he will be the one responsible for me in the event that I will die and
also for all other things needed and necessary for me, he will be responsible because of
this land I am giving to him; that it is true that I have nieces and nephews but they are not
living with us and there is no one to whom I will give my land except to Felix Danguilan for
he lives with me and this is the length175 m. and the width is 150 m.
IN WITNESS WHEREOF, I hereby sign my name below and also those present in the
execution of this receipt this 14th day of September 1941.
Penablanca Cagayan, September 14, 1941.

26 | P a g e

(SGD.) DOMINGO MELAD

WITNESSES:
1.
(T.M.)
ISIDRO
MELAD
2.
(SGD.)
FELIX
DANGUILAN
3. (T.M.) ILLEGIBLE
EXHIBIT 3-a is quoted as follows: 13
I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of Cagayan, do hereby
swear and declare the truth that I have delivered my residential lot at Centro, Penablanca,
Cagayan, to Felix Danguilan, my son-in-law because I have no child; that I have thought of
giving him my land because he will be the one to take care of SHELTERING me or bury
me when I die and this is why I have thought of executing this document; that the
boundaries of this lot ison the east, Cresencio Danguilan; on the north, Arellano Street;
on the south by Pastor Lagundi and on the west, Pablo Pelagio and the area of this lot is
35 meters going south; width and length beginning west to east is 40 meters.
IN WITNESS HEREOF, I hereby sign this receipt this 18th day of December 1943.
(SGD.) DOMINGO MELAD
WITNESSES:
(SGD.)
ILLEGIBLE
(SGD.) DANIEL ARAO
It is our view, considering the language of the two instruments, that Domingo Melad did intend to donate the
properties to the petitioner, as the private respondent contends. We do not think, however, that the donee
was moved by pure liberality. While truly donations, the conveyances were onerous donations as the
properties were given to the petitioner in exchange for his obligation to take care of the donee for the rest of
his life and provide for his burial. Hence, it was not covered by the rule in Article 749 of the Civil Code
requiring donations of real properties to be effected through a public instrument. The case at bar comes
squarely under the doctrine laid down in Manalo v. De Mesa, 14 where the Court held:
There can be no doubt that the donation in question was made for a valuable
consideration, since the donors made it conditional upon the donees' bearing the expenses
that might be occasioned by the death and burial of the donor Placida Manalo, a condition
and obligation which the donee Gregorio de Mesa carried out in his own behalf and for his
wife Leoncia Manalo; therefore, in order to determine whether or not said donation is valid
and effective it should be sufficient to demonstrate that, as a contract, it embraces the
conditions the law requires and is valid and effective, although not recorded in a public
instrument.
The private respondent argues that as there was no equivalence between the value of the lands donated
and the services for which they were being exchanged, the two transactions should be considered pure or
gratuitous donations of real rights, hence, they should have been effected through a public instrument and
not mere private writings. However, no evidence has been adduced to support her contention that the
values exchanged were disproportionate or unequal.
On the other hand, both the trial court and the respondent court have affirmed the factual allegation that the
petitioner did take care of Domingo Melad and later arranged for his burial in accordance with the condition
imposed by the donor. It is alleged and not denied that he died when he was almost one hundred years
old, 15which would mean that the petitioner farmed the land practically by himself and so provided for the
donee (and his wife) during the latter part of Domingo Melad's life. We may assume that there was a fair
exchange between the donor and the donee that made the transaction an onerous donation.

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

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In accordance with such disposition and provisions the delivery of a thing constitutes a
necessary and indispensable requisite for the purpose of acquiring the ownership of the
same by virtue of a contract. As Manresa states in his Commentaries on the Civil Code,
volume 10, pages 339 and 340: "Our law does not admit the doctrine of the transfer of
property by mere consent but limits the effect of the agreement to the due execution of the
contract. ... The ownership, the property right, is only derived from the delivery of a thing ...
"
As for the argument that symbolic delivery was effected through the deed of sale, which was a public
instrument, the Court has held:
The Code imposes upon the vendor the obligation to deliver the thing sold. The thing is
considered to be delivered when it is placed "in the hands and possession of the vendee."
(Civil Code, art. 1462). It is true that the same article declares that the execution of a public
instrument is equivalent to the delivery of the thing which is the object of the contract, but,
in order that this symbolic delivery may produce the effect of tradition, it is necessary that
the vendor shall have had such control over the thing sold that, at the moment of the sale,
its material delivery could have been made. It is not enough to confer upon the purchaser
the ownership and the right of possession. The thing sold must be placed in
his control. When there is no impediment whatever to prevent the thing sold passing into
the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the execution of the
instrument, the purchaser cannot have the enjoyment and material tenancy of the thing
and make use of it himself or through another in his name, because such tenancy and
enjoyment are opposed by the interposition of another will, then fiction yields to reality
the delivery has not been effected. 23
There is no dispute that it is the petitioner and not the private respondent who is in actual possession of the
litigated properties. Even if the respective claims of the parties were both to be discarded as being
inherently weak, the decision should still incline in favor of the petitioner pursuant to the doctrine
announced in Santos & Espinosa v. Estejada 24 where the Court announced:
If the claim of both the plaintiff and the defendant are weak, judgment must be for the
defendant, for the latter being in possession is presumed to be the owner, and cannot be
obliged to show or prove a better right.
WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial court REINSTATED,
with costs against the private respondent. It is so ordered.

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FIRST DIVISION
[G.R. No. 126376. November 20, 2003]
SPOUSES BERNARDO BUENAVENTURA and CONSOLACION JOAQUIN, SPOUSES JUANITO EDRA
and NORA JOAQUIN, SPOUSES RUFINO VALDOZ and EMMA JOAQUIN, and NATIVIDAD
JOAQUIN, petitioners, vs. COURT OF APPEALS, SPOUSES LEONARDO JOAQUIN and
FELICIANA LANDRITO, SPOUSES FIDEL JOAQUIN and CONCHITA BERNARDO, SPOUSES
TOMAS JOAQUIN and SOLEDAD ALCORAN, SPOUSES ARTEMIO JOAQUIN and SOCORRO
ANGELES, SPOUSES ALEXANDER MENDOZA and CLARITA JOAQUIN, SPOUSES
TELESFORO CARREON and FELICITAS JOAQUIN, SPOUSES DANILO VALDOZ and FE
JOAQUIN, and SPOUSES GAVINO JOAQUIN and LEA ASIS, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari[1] to annul the Decision[2] dated 26 June 1996 of the Court of
Appeals in CA-G.R. CV No. 41996. The Court of Appeals affirmed the Decision [3] dated 18 February
1993 rendered by Branch 65 of the Regional Trial Court of Makati (trial court) in Civil Case No. 895174. The trial court dismissed the case after it found that the parties executed the Deeds of Sale for valid
consideration and that the plaintiffs did not have a cause of action against the defendants.
The Facts
The Court of Appeals summarized the facts of the case as follows:
Defendant spouses Leonardo Joaquin and Feliciana Landrito are the parents of plaintiffs Consolacion,
Nora, Emma and Natividad as well as of defendants Fidel, Tomas, Artemio, Clarita, Felicitas, Fe, and
Gavino, all surnamed JOAQUIN. The married Joaquin children are joined in this action by their respective
spouses.

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Sought to be declared null and void ab initio are certain deeds of sale of real property executed by
defendant parents Leonardo Joaquin and Feliciana Landrito in favor of their co-defendant children and the
corresponding certificates of title issued in their names, to wit:
1. Deed of Absolute Sale covering Lot 168-C-7 of subdivision plan (LRC) Psd-256395 executed
on 11 July 1978, in favor of defendant Felicitas Joaquin, for a consideration of P6,000.00
(Exh. C), pursuant to which TCT No. [36113/T-172] was issued in her name (Exh. C-1);
2. Deed of Absolute Sale covering Lot 168-I-3 of subdivision plan (LRC) Psd-256394 executed on
7 June 1979, in favor of defendant Clarita Joaquin, for a consideration of P1[2],000.00 (Exh.
D), pursuant to which TCT No. S-109772 was issued in her name (Exh. D-1);
3 Deed of Absolute Sale covering Lot 168-I-1 of subdivision plan (LRC) Psd-256394 executed on
12 May 1988, in favor of defendant spouses Fidel Joaquin and Conchita Bernardo, for a
consideration of P54,[3]00.00 (Exh. E), pursuant to which TCT No. 155329 was issued to
them (Exh. E-1);
4. Deed of Absolute Sale covering Lot 168-I-2 of subdivision plan (LRC) Psd-256394 executed on
12 May 1988, in favor of defendant spouses Artemio Joaquin and Socorro Angeles, for a
consideration of P[54,3]00.00 (Exh. F), pursuant to which TCT No. 155330 was issued to
them (Exh. F-1); and
5. Absolute Sale of Real Property covering Lot 168-C-4 of subdivision plan (LRC) Psd-256395
executed on 9 September 1988, in favor of Tomas Joaquin, for a consideration of P20,000.00
(Exh. G), pursuant to which TCT No. 157203 was issued in her name (Exh. G-1).
[6. Deed of Absolute Sale covering Lot 168-C-1 of subdivision plan (LRC) Psd-256395 executed
on 7 October 1988, in favor of Gavino Joaquin, for a consideration of P25,000.00 (Exh. K),
pursuant to which TCT No. 157779 was issued in his name (Exh. K-1).]
In seeking the declaration of nullity of the aforesaid deeds of sale and certificates of title, plaintiffs, in their
complaint, aver:
- XXThe deeds of sale, Annexes C, D, E, F, and G, [and K] are simulated as they are, are NULL AND VOID AB
INITIO because
a) Firstly, there was no actual valid consideration for the deeds of sale xxx over the properties in
litis;

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b) Secondly, assuming that there was consideration in the sums reflected in the questioned
deeds, the properties are more than three-fold times more valuable than the measly sums
appearing therein;
c) Thirdly, the deeds of sale do not reflect and express the true intent of the parties (vendors and
vendees); and
d) Fourthly, the purported sale of the properties in litis was the result of a deliberate conspiracy
designed to unjustly deprive the rest of the compulsory heirs (plaintiffs herein) of their
legitime.
- XXI Necessarily, and as an inevitable consequence, Transfer Certificates of Title Nos. 36113/T-172, S-109772,
155329, 155330, 157203 [and 157779] issued by the Registrar of Deeds over the properties in litis xxx are
NULL AND VOID AB INITIO.
Defendants, on the other hand aver (1) that plaintiffs do not have a cause of action against them as well as
the requisite standing and interest to assail their titles over the properties in litis; (2) that the sales were with
sufficient considerations and made by defendants parents voluntarily, in good faith, and with full knowledge
of the consequences of their deeds of sale; and (3) that the certificates of title were issued with sufficient
factual and legal basis.[4](Emphasis in the original)
The Ruling of the Trial Court
Before the trial, the trial court ordered the dismissal of the case against defendant spouses Gavino
Joaquin and Lea Asis.[5] Instead of filing an Answer with their co-defendants, Gavino Joaquin and Lea Asis
filed a Motion to Dismiss.[6] In granting the dismissal to Gavino Joaquin and Lea Asis, the trial court noted
that compulsory heirs have the right to a legitime but such right is contingent since said right commences
only from the moment of death of the decedent pursuant to Article 777 of the Civil Code of the Philippines. [7]
After trial, the trial court ruled in favor of the defendants and dismissed the complaint. The trial court
stated:
In the first place, the testimony of the defendants, particularly that of the xxx father will show that the Deeds
of Sale were all executed for valuable consideration. This assertion must prevail over the negative
allegation of plaintiffs.
And then there is the argument that plaintiffs do not have a valid cause of action against defendants since
there can be no legitime to speak of prior to the death of their parents. The court finds this contention
tenable. In determining the legitime, the value of the property left at the death of the testator shall be
considered (Art. 908 of the New Civil Code). Hence, the legitime of a compulsory heir is computed as of the

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time of the death of the decedent.Plaintiffs therefore cannot claim an impairment of their legitime while their
parents live.
All the foregoing considered, this case is DISMISSED.
In order to preserve whatever is left of the ties that should bind families together, the counterclaim is
likewise DISMISSED.
No costs.
SO ORDERED.[8]
The Ruling of the Court of Appeals
The Court of Appeals affirmed the decision of the trial court. The appellate court ruled:
To the mind of the Court, appellants are skirting the real and decisive issue in this case, which is, whether
xxx they have a cause of action against appellees.
Upon this point, there is no question that plaintiffs-appellants, like their defendant brothers and sisters, are
compulsory heirs of defendant spouses, Leonardo Joaquin and Feliciana Landrito, who are their
parents. However, their right to the properties of their defendant parents, as compulsory heirs, is merely
inchoate and vests only upon the latters death. While still alive, defendant parents are free to dispose of
their properties, provided that such dispositions are not made in fraud of creditors.
Plaintiffs-appellants are definitely not parties to the deeds of sale in question. Neither do they claim to be
creditors of their defendant parents. Consequently, they cannot be considered as real parties in interest to
assail the validity of said deeds either for gross inadequacy or lack of consideration or for failure to express
the true intent of the parties. In point is the ruling of the Supreme Court in Velarde, et al. vs. Paez, et al.,
101 SCRA 376, thus:
The plaintiffs are not parties to the alleged deed of sale and are not principally or subsidiarily bound
thereby; hence, they have no legal capacity to challenge their validity.
Plaintiffs-appellants anchor their action on the supposed impairment of their legitime by the dispositions
made by their defendant parents in favor of their defendant brothers and sisters.But, as correctly held by
the court a quo, the legitime of a compulsory heir is computed as of the time of the death of the
decedent. Plaintiffs therefore cannot claim an impairment of their legitime while their parents live.
With this posture taken by the Court, consideration of the errors assigned by plaintiffs-appellants is
inconsequential.

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WHEREFORE, the decision appealed from is hereby AFFIRMED, with costs against plaintiffs-appellants.
SO ORDERED.[9]
Hence, the instant petition.
Issues
Petitioners assign the following as errors of the Court of Appeals:
1. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE IN
QUESTION HAD NO VALID CONSIDERATION.
2. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT EVEN ASSUMING THAT
THERE WAS A CONSIDERATION, THE SAME IS GROSSLY INADEQUATE.
3. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE DEEDS OF SALE DO NOT
EXPRESS THE TRUE INTENT OF THE PARTIES.
4. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CONVEYANCE WAS
PART AND PARCEL OF A CONSPIRACY AIMED AT UNJUSTLY DEPRIVING THE REST OF
THE CHILDREN OF THE SPOUSES LEONARDO JOAQUIN AND FELICIANA LANDRITO
OF THEIR INTEREST OVER THE SUBJECT PROPERTIES.
5. THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PETITIONERS HAVE A GOOD,
SUFFICIENT AND VALID CAUSE OF ACTION AGAINST THE PRIVATE RESPONDENTS. [10]
The Ruling of the Court
We find the petition without merit.
We will discuss petitioners legal interest over the properties subject of the Deeds of Sale before
discussing the issues on the purported lack of consideration and gross inadequacy of the prices of the
Deeds of Sale.
Whether Petitioners have a legal interest
over the properties subject of the Deeds of Sale
Petitioners Complaint betrays their motive for filing this case. In their Complaint, petitioners asserted
that the purported sale of the properties in litis was the result of a deliberate conspiracy designed to unjustly
deprive the rest of the compulsory heirs (plaintiffs herein) of their legitime. Petitioners strategy was to have

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

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a meeting of the minds of the parties as to the price, the contract of sale is valid, despite the manner of
payment, or even the breach of that manner of payment. If the real price is not stated in the contract, then
the contract of sale is valid but subject to reformation. If there is no meeting of the minds of the parties as to
the price, because the price stipulated in the contract is simulated, then the contract is void. [14] Article 1471
of the Civil Code states that if the price in a contract of sale is simulated, the sale is void.
It is not the act of payment of price that determines the validity of a contract of sale. Payment of the
price has nothing to do with the perfection of the contract.Payment of the price goes into the performance
of the contract. Failure to pay the consideration is different from lack of consideration. The former results in
a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the
latter prevents the existence of a valid contract. [15]
Petitioners failed to show that the prices in the Deeds of Sale were absolutely simulated. To prove
simulation, petitioners presented Emma Joaquin Valdozs testimony stating that their father, respondent
Leonardo Joaquin, told her that he would transfer a lot to her through a deed of sale without need for her
payment of the purchase price. [16] The trial court did not find the allegation of absolute simulation of price
credible. Petitioners failure to prove absolute simulation of price is magnified by their lack of knowledge of
their respondent siblings financial capacity to buy the questioned lots. [17] On the other hand, the Deeds of
Sale which petitioners presented as evidence plainly showed the cost of each lot sold. Not only did
respondents minds meet as to the purchase price, but the real price was also stated in the Deeds of
Sale. As of the filing of the complaint, respondent siblings have also fully paid the price to their respondent
father.[18]
Whether the Deeds of Sale are void
for gross inadequacy of price
Petitioners ask that assuming that there is consideration, the same is grossly inadequate as to
invalidate the Deeds of Sale.
Articles 1355 of the Civil Code states:
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (Emphasis supplied)
Article 1470 of the Civil Code further provides:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as may indicate a
defect in the consent, or that the parties really intended a donation or some other act or
contract. (Emphasis supplied)

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Petitioners failed to prove any of the instances mentioned in Articles 1355 and 1470 of the Civil Code
which would invalidate, or even affect, the Deeds of Sale.Indeed, there is no requirement that the price be
equal to the exact value of the subject matter of sale. All the respondents believed that they received the
commutative value of what they gave. As we stated in Vales v. Villa:[19]
Courts cannot follow one every step of his life and extricate him from bad bargains, protect him from unwise
investments, relieve him from one-sided contracts, or annul the effects of foolish acts. Courts cannot
constitute themselves guardians of persons who are not legally incompetent. Courts operate not because
one person has been defeated or overcome by another, but because he has been defeated or
overcome illegally. Men may do foolish things, make ridiculous contracts, use miserable judgment, and lose
money by them indeed, all they have in the world; but not for that alone can the law intervene and
restore. There must be, in addition, a violation of the law, the commission of what the law knows as
anactionable wrong, before the courts are authorized to lay hold of the situation and remedy it. (Emphasis
in the original)
Moreover, the factual findings of the appellate court are conclusive on the parties and carry greater
weight when they coincide with the factual findings of the trial court. This Court will not weigh the evidence
all over again unless there has been a showing that the findings of the lower court are totally devoid of
support or are clearly erroneous so as to constitute serious abuse of discretion. [20] In the instant case, the
trial court found that the lots were sold for a valid consideration, and that the defendant children actually
paid the purchase price stipulated in their respective Deeds of Sale. Actual payment of the purchase price
by the buyer to the seller is a factual finding that is now conclusive upon us.
WHEREFORE, we AFFIRM the decision of the Court of Appeals in toto.
SO ORDERED.

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Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173881

December 1, 2010

HYATT
ELEVATORS
and
ESCALATORS
CORPORATION, Petitioner,
vs.
CATHEDRAL HEIGHTS BUILDING COMPLEX ASSOCIATION, INC., Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari, 1 under Rule 45 of the Rules of Court, seeking to set
aside the April 20, 2006 Decision 2 and July 31, 2006 Resolution 3 of the Court of Appeals (CA), in CA-G.R.
CV No. 80427.
The facts of the case are as follows:
On October 1, 1994, petitioner Hyatt Elevators and Escalators Corporation entered into an "Agreement to
Service Elevators" (Service Agreement)4 with respondent Cathedral Heights Building Complex Association,
Inc., where petitioner was contracted to maintain four passenger elevators installed in respondent's
building. Under the Service Agreement, the duties and obligations of petitioner included monthly inspection,
adjustment and lubrication of machinery, motors, control parts and accessory equipments, including
switches and electrical wirings.5 Section D (2) of the Service Agreement provides that respondent shall pay
for the additional charges incurred in connection with the repair and supply of parts.
Petitioner claims that during the period of April 1997 to July 1998 it had incurred expenses amounting to
Php 1,161,933.47 in the maintenance and repair of the four elevators as itemized in a statement of
account.6Petitioner demanded from respondent the payment of the aforesaid amount allegedly through a
series of demand letters, the last one sent on July 18, 2000. 7 Respondent, however, refused to pay the
amount.

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Petitioner filed with the Regional Trial Court (RTC), Branch 100, Quezon City, a Complaint for sum of
money against respondent. Said complaint was docketed as Civil Case No. Q-01-43055.
On March 5, 2003, the RTC rendered Judgment 8 ruling in favor of petitioner, the dispositive portion of which
reads:
WHEREFORE, premises considered, JUDGMENT IS HEREBY RENDERED IN FAVOR OF THE
PLAINTIFF AND AGAINST THE DEFENDANT ordering the latter to pay Plaintiff as follows:
1. The sum of P1,161,933.27 representing the costs of the elevator parts used, and for services
and maintenance, with legal rate of interest from the filing of the complaint;
2. The sum of P50,000.00 as attorney's fees;
3. The costs of suit.
SO ORDERED.9
The RTC held that based on the sales invoices presented by petitioner, a contract of sale of goods was
entered into between the parties. Since petitioner was able to fulfill its obligation, the RTC ruled that it was
incumbent on respondent to pay for the services rendered. The RTC did not give credence to respondent's
claim that the elevator parts were never delivered and that the repairs were questionable, holding that such
defense was a mere afterthought and was never raised by respondent against petitioner at an earlier time.
Respondent filed a Motion for Reconsideration. 10 On August 17, 2003, the RTC issued a
Resolution11 denying respondent's motion. Respondent then filed a Notice of Appeal. 12
On April 20, 2006, the CA rendered a Decision finding merit in respondent's appeal, the dispositive portion
of which reads:
WHEREFORE, premises considered, the instant appeal is GRANTED. The Judgment of the Regional Trial
Court, Branch 100, Quezon City, dated March 5, 2003, is hereby REVERSED and SET ASIDE. The
complaint below is dismissed.
SO ORDERED.13
In reversing the RTC, the CA ruled that respondent did not give its consent to the purchase of the spare
parts allegedly installed in the defective elevators. Aside from the absence of consent, the CA also held that
there was no perfected contract of sale because there was no meeting of minds upon the price. On this
note, the CA ruled that the Service Agreement did not give petitioner the unbridled license to purchase and
install any spare parts and demand, after the lapse of a considerable length of time, payment of these
prices from respondent according to its own dictated price.

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Aggrieved, petitioner filed a Motion for Reconsideration, 14 which was, however, denied by the CA in a
Resolution dated July 31, 2006.
Hence, herein petition, with petitioner raising a lone issue for this Court's resolution, to wit:
WHETHER OR NOT THERE IS A PERFECTED CONTRACT OF SALE BETWEEN PETITIONER AND
RESPONDENT WITH REGARDS TO THE SPARE PARTS DELIVERED AND INSTALLED BY
PETITIONER ON THE FOUR ELEVATORS OF RESPONDENT AT ITS HOSPITAL UNDER THE
AGREEMENT TO SERVICE ELEVATORS AS TO RENDER RESPONDENT LIABLE FOR THEIR PRICES?
15

Before anything else, this Court shall address a procedural issue raised by respondent in its
Comment16 that the petition should be denied due course for raising questions of fact.
The determination of whether there exists a perfected contract of sale is essentially a question of fact. It is
already a well-settled rule that the jurisdiction of this Court in cases brought before it from the CA by virtue
of Rule 45 of the Revised Rules of Court is limited to reviewing errors of law. Findings of fact of the CA are
conclusive upon this Court. There are, however, recognized exceptions to the foregoing rule, namely: (1)
when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the inference
made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when
the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when,
in making its findings, the Court of Appeals went beyond the issues of the case, or its findings are contrary
to the admissions of both the appellant and the appellee; (7) when the findings are contrary to those of the
trial court; (8) when the findings are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition, as well as in the petitioners main and reply briefs, are not
disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record. 17
The present case falls under the 7th exception, as the RTC and the CA arrived at conflicting findings of fact.
Having resolved the procedural aspect, this Court shall now address the substantive issue raised by
petitioner. Petitioner contends that the CA erred when it ruled that there was no perfected contract of sale
between petitioner and respondent with regard to the spare parts delivered and installed.
It is undisputed that a Service Agreement was entered into by petitioner and respondent where petitioner
was commissioned to maintain respondent's four elevators. Embodied in the Service Agreement is a
stipulation relating to expenses incurred on top of regular maintenance of the elevators, to wit:
SERVICE AND INSPECTION FEE:
xxxx

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(2) In addition to the service fee mentioned in the preceding paragraph under this article, the Customer
shall pay whatever additional charges in connection with the repair, supply of parts other than those
specifically mentioned in ARTICLE A.2., or servicing of the elevator/s subject of this contract. 18
Petitioner claims that during the period of April 1997 to July 1998, it had used parts in the maintenance and
repair of the four elevators in the total amount of P1,161,933.47 as itemized in a statement of account 19 and
supported by sales invoices, delivery receipts, trouble call reports and maintenance and checking reports.
Respondent, however, refuses to pay the said amount arguing that petitioner had not complied with the
Standard Operating Procedure (SOP) following a breakdown of an elevator.
As testified to by respondent's witness Celestino Aguilar, the SOP following an elevator breakdown is as
follows: (a) they (respondent) will notify petitioner's technician; (b) the technician will evaluate the problem
and if the problem is manageable the repair was done right there and then; (c) if some parts have to be
replaced, petitioner will present the defective parts to the building administrator and a quotation is made; (d)
the quotation is then indorsed to respondent's Finance Department; and (e) a purchase order is then
prepared and submitted to the Board of Directors for approval. 20
Based on the foregoing procedure, respondent contends that petitioner had failed to follow the SOP since
no purchase orders from respondent's Finance Manager, or Board of Directors relating to the supposed
parts used were secured prior to the repairs. Consequently, since the repairs were not authorized,
respondent claims that it has no way of verifying whether the parts were actually delivered and installed as
alleged by petitioner.
At the outset, this Court observes that the SOP is not embodied in the Service Agreement nor was a
document evidencing the same presented in the RTC. The SOP appears, however, to be the industry
practice and as such was not contested by petitioner. Nevertheless, petitioner offers an excuse for noncompliance with the SOP on its claim that the SOP was not followed upon the behest and request of
respondent.
A perusal of petitioner's petition and evidence in the RTC shows that the main thrust of its case is premised
on the following claims: first, that the nature and operations of a hospital necessarily dictate that the
elevators are in good running condition at all times; and, second, that there was a verbal agreement
between petitioner's service manager and respondent's building engineer that the elevators should be
running in good condition at all times and breakdowns should only last one day.
In order to prove its allegations, petitioner presented Wilson Sua, its finance manager, as its sole witness.
Sua testified to the procedure followed by petitioner in servicing respondent's elevators, to wit:
Q: Can you tell us Mr. witness, what is the procedure actually followed whenever there is a need
for trouble call maintenance or repair?

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A: The St. Lukes Cathedrals personnel, which includes the administrative officers, the guard on
duty, or the receptionist, will call us through the phone if their elevators brake (sic) down.
Q: Then, what happened?
A: Immediately, we dispatched our technicians to check the trouble.
Q: And who were these technicians whom you normally or regularly dispatched to attend to the
trouble of the elevators of the defendant?
A: With regard to this St. Lukes, we dispatched Sunny Jones and Gilbert Cinamin.
Q: And what happened after dispatching these technicians?
A: They come back immediately to the office to request the parts needed for the troubleshooting of
the elevators.
Q: Then what happened?
A: A part will be brought to the project cite and they will install it and note it in the trouble call report
and have it received properly by the building guard or the receptionist or by the building engineers,
and they will test it for a couple of weeks to determine if the parts are the correct part needed for
that elevator and we will secure their approval, thereafter we will issue our invoices and delivery
receipts.
Q: This trouble call reports, are these in writing?
A: Yes, sir. These are in writing and these are being written within that day.
Q: Within the day of?
A: Of the trouble. And have it received by the duly personnel of St. Lukes Cathedral.
Q: And who prepared this trouble call reports?
A: The technician who actually checked the elevator.
Q: When do the parts being installed?
A: On the same date they brought the parts on the project cite.
Q: You mentioned sales invoice and delivery receipts. Who prepared these invoice?

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A: Those were prepared by our inventory clerk under my supervision?

Q: How about the delivery receipts?
A: Just the same.
Q: When would the sales invoice be prepared?
A: After the approval of the building engineer.
Q: But at the time that the sales invoice and delivery receipts were being prepared after the
approval of the building engineer, what happened to the parts? Were they already installed or
what?
A: They were already installed.
Q: Now, why would the parts be installed before the preparation of the sales invoice and the
delivery receipts?
A: There was an agreement between the building engineer and our service manager that the
elevator should be running in good condition at all times, breakdown should be at least one
day only. It cannot stop for more than a day. 21
On cross examination, Sua testified that the procedure was followed on the authority of a verbal agreement
between petitioner's service manager and respondent's engineer, thus:
Q: So, you mean to say that despite the fact that material are expensive you immediately installed
these equipments without the prior approval of the board?
A: There is no need for the approval of the board since there is a verbal agreement between the
building engineer and the Hyatt service manager to have the elevator run.
Q: Aside from the building engineer, there is a building administrator?
A: No, ma'am. He is already the building administrator and the building engineer. That is engineer
Tisor.
Q: And with regard to the fact that the delivery receipts were acknowledged by the engineer, is that
true?
A: Yes, ma'am.

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Q: You also mentioned earlier that aside from the building engineer, the receptionist and guards are
also authorized. Are you sure that they are authorized to receive the delivery receipts?
A: Yes, ma'am. It was an instruction given by Engineer Tisor, the building engineer and also the
building administrator to have it received.
Q: So, all these agreements are only verbally, it is not in writing?
A: Yes, ma'am.22
In its petition, petitioner claims that because of the special circumstances of the building being a hospital,
the procedure actually followed since October 1, 1994 was as follows:
1. Whenever any of the four elevators broke down, the administrative officers, security guard or the
receptionist of respondent called petitioner by telephone;
2. Petitioner dispatched immediately a technician to the St. Lukes Cathedral Heights Building to
check the trouble;
3. If the breakdown could be repaired without installation of parts, repair was done on the spot;
4. If the repair needed replacement of damaged parts, the technician went back to petitioners
office to get the necessary replacement parts;
5. The technician then returned to the St. Lukes Cathedral Heights Building and installed the
replacement parts and finished the repair;
6. The placement parts, which were installed in the presence of the security guard, building
engineers or receptionist of respondents whoever was available, were indicated in the trouble call
report or sometimes in the delivery receipt and copy of the said trouble call report or delivery
receipt was then given to the blue security guard, building engineers or receptionist, who duly
acknowledged the same;
7. Based on the trouble call report or the delivery receipts, which already indicated the replacement
parts installed and the services rendered, respondent should prepare the purchase order, but this
step was never followed by respondent for whatever reason;
8. In the meantime, the elevator was tested for a couple of weeks to see if the replacement parts
were correct and the approval of the building engineers was secured;
9. After the building engineers gave their approval that the replacement parts were correct or after
the lapse of two weeks and nothing was heard or no complaint was lodged, then the corresponding

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sales invoices and delivery receipts, if nothing had been issued yet, were prepared by petitioner
and given to respondent, thru its receptionists or security guards;
10. For its purposes, respondent should compare the trouble call reports or delivery receipts which
indicated the replacement parts installed or with the sales invoices and delivery receipts to confirm
the correctness of the transaction;
11. If respondent had any complaint that the parts were not actually installed or delivered or did not
agree with the price of the parts indicated in the sales invoices, then it should bring its complaint or
disagreement to the attention of petitioner. In this regard, no complaint or disagreement as to the
prices of the spare parts has been lodged by respondent. 23
In varying language, our Rules of Court, in speaking of burden of proof in civil cases, states that each party
must prove his own affirmative allegations and that the burden of proof lies on the party who would be
defeated if no evidence were given on either side.1avvphi1 Thus, in civil cases, the burden of proof is
generally on the plaintiff, with respect to his complaint. 24 In the case at bar, it is petitioner's burden to prove
that it is entitled to its claims during the period in dispute.
After an extensive review of the records and evidence on hand, this Court rules that petitioner has failed to
discharge its burden.
This Court finds that the testimony of Sua alone is insufficient to prove the existence of the verbal
agreement, especially in view of the fact that respondent insists that the SOP should have been followed. It
is an age-old rule in civil cases that one who alleges a fact has the burden of proving it and a mere
allegation is not evidence.25
The testimony of Sua, at best, only alleges but does not prove the existence of the verbal agreement. It
may even be hearsay. It bears stressing, that the agreement was supposedly entered into by petitioner's
service manager and respondent's building engineer. It behooves this Court as to why petitioner did not
present their service manager and Engineer Tisor, respondent's building engineer, the two individuals who
were privy to the transactions and who could ultimately lay the basis for the existence of the alleged verbal
agreement. It should have occurred to petitioner during the course of the trial that said testimonies would
have proved vital and crucial to its cause. Therefore, absent such testimonies, the existence of the verbal
agreement cannot be sustained by this Court.
Moreover, even assuming arguendo, that this Court were to believe the procedure outlined by Sua, his
testimony26 clearly mentions that prior to the preparation of the sales invoices and delivery receipts, the
parts delivered and installed must have been accepted by respondent's engineer or building administrator.
However, again, petitioner offered no evidence of such acceptance by respondents engineer prior to the
preparation of the sales invoices and delivery receipts.

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This Court is not unmindful of the fact that petitioner also alleges in its petition that the non-observance of
the SOP was the practice way back in 1994 when petitioner started servicing respondent's elevators. On
this note, petitioner argued in the following manner:
And most importantly, the Court of Appeals failed to appreciate that the parts being sought to be paid by
petitioner in the Complaint were delivered and installed during the period from April 1997 to July 1998,
which followed the same actual procedure adopted since October 1, 1994. Based on the same procedure
adopted because of the special circumstances of St. Luke's Cathedral Heights Building being a hospital,
respondent has paid the replacement parts installed from October 1994 to March 1997. Never did
respondent question the adopted actual procedure from October 1994 to March 1997. x x x 27
Was the procedure claimed by petitioner the adopted practice since 1994? This Court rules that other than
the foregoing allegation, petitioner has failed to prove the same. A perusal of petitioner's Formal Offer of
Evidence28would show that the only documents presented by it are sales invoices, trouble call reports and
delivery receipts, all relating to the alleged transactions between 1997 to 1998. It is unfortunate that
petitioner had failed to present in the RTC the documents from 1994 to 1996 for it may have proven that the
non-observance of the SOP was the practice since 1994. Such documents could have shown that
respondent had paid petitioner in the past without objection on similar transactions under similar billing
procedures. The same would have also validated petitioner's claim that the secretary and security guards
were all authorized to sign the documents. Unfortunately, for petitioner's cause, this Court has no basis to
validate its claim, because other than its bare allegation in the petition, petitioner offers no proof to
substantiate the same.
By the contract of sale, one of the contracting parties obligates himself to transfer the ownership of and
deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. 29 The
absence of any of the essential elements will negate the existence of a perfected contract of sale. In the
case at bar, the CA ruled that there was no perfected contract of sale between petitioner and respondent, to
wit:
Aside from the absence of consent, there was no perfected contract of sale because there was no meeting
of minds upon the price. As the law provides, the fixing of the price can never be left to the discretion of one
of the contracting parties. In this case, the absence of agreement as to the price is evidenced by the lack of
purchase orders issued by CHBCAI where the quantity, quality and price of the spare parts needed for the
repair of the elevators are stated. In these purchase orders, it would show that the quotation of the cost of
the spare parts earlier informed by Hyatt is acceptable to CHBCAI. However, as revealed by the records, it
was only Hyatt who determined the price, without the acceptance or conformity of CHBCAI. From the
moment the determination of the price is left to the judgment of one of the contracting parties, it cannot be
said that there has been an arrangement on the price since it is not possible for the other contracting party
to agree on something of which he does not know beforehand. 30

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Based on the evidence presented in the RTC, it is clear to this Court that petitioner had failed to secure the
necessary purchase orders from respondent's Board of Directors, or Finance Manager, to signify their
assent to the price of the parts to be used in the repair of the elevators. In Boston Bank of the Philippines v.
Manalo,31 this Court explained that the fixing of the price can never be left to the decision of one of the
contracting parties, to wit:
A definite agreement as to the price is an essential element of a binding agreement to sell personal or real
property because it seriously affects the rights and obligations of the parties. Price is an essential element
in the formation of a binding and enforceable contract of sale. The fixing of the price can never be left to
the decision of one of the contracting parties. But a price fixed by one of the contracting parties, if
accepted by the other, gives rise to a perfected sale.32
There would have been a perfected contract of sale had respondent accepted the price dictated by
petitioner even if such assent was given after the services were rendered. There is, however, no proof of
such acceptance on the part of respondent.
This Court shares the observation of the CA that the signatures of receipt by the information clerk or the
guard on duty on the sales invoices and delivery receipts merely pertain to the physical receipt of the
papers. It does not indicate that the parts stated were actually delivered and installed. Moreover, because
petitioner failed to prove the existence of the verbal agreement which allegedly authorized the
aforementioned individuals to sign in respondents behalf, such signatures cannot be tantamount to an
approval or acceptance by respondent of the parts allegedly used and the price quoted by petitioner.
Furthermore, what makes the claims doubtful and questionable is that the date of the sales invoice and the
date stated in the corresponding delivery receipt are too far apart as aptly found by the CA, to wit:
Further, We note that the date stated in the sales invoice vis-a-vis the date stated in the corresponding
delivery receipt is too far apart. For instance, Delivery Receipt No. 3492 dated February 13, 1998 has a
corresponding Sales Invoice No. 7147 dated June 30, 1998. What puts doubt to this transaction is the fact
that the sales invoice was prepared only after four (4) months from the delivery. The considerable length of
time that has lapsed from the delivery to the issuance of the sales invoice is questionable. Further the
delivery receipts were received months after its preparation. In the case of Delivery Receipt No. 3850 dated
November 26, 1997, Gumisad received this only on July 20, 1998, or after a lapse of eight (8) months.
Such kind of procedure followed by Hyatt is certainly contrary to usual business practice, especially since in
this case, it involves considerable amount of money. 33
Based on the foregoing, the CA was thus correct when it concluded that "the Service Agreement did not
give petitioner the unbridled license to purchase and install any spare parts and demand, after the lapse of
a considerable length of time, payment of these prices from respondent according to its own dictated
price."34

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Withal, this Court rules that petitioner's claim must fail for the following reasons: first, petitioner failed to
prove the existence of the verbal agreement that would authorize non-observance of the SOP; second,
petitioner failed to prove that such procedure was the practice since 1994; and, third, there was no
perfected contract of sale between the parties as there was no meeting of minds upon the price.
To stress, the burden of proof is on the plaintiff. He must rely on the strength of his case and not on the
weakness of respondent's defense. Based on the manner by which petitioner had presented its claim, this
Court is of the opinion that petitioner's case leaves too much to be desired.
WHERFORE, premises considered, the petition is DENIED. The April 20, 2006 Decision and July 31, 2006
Resolution of the Court of Appeals, in CA-G.R. CV No. 80427, are AFFIRMED.
SO ORDERED.

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

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As proof of the sale to him of 509 square meters, respondent attached to his answer a receipt (Exh. 2)
[5]
signed by the late Juan San Andres, which reads in full as follows: Missdaa
Received from Vicente Rodriguez the sum of Five Hundred (P500.00) Pesos representing
an advance payment for a residential lot adjoining his previously paid lot on three sides
excepting on the frontage with the agreed price of Fifteen (15.00) Pesos per square meter
and the payment of the full consideration based on a survey shall be due and payable in
five (5) years period from the execution of the formal deed of sale; and it is agreed that the
expenses of survey and its approval by the Bureau of Lands shall be borne by Mr.
Rodriguez.
Naga City, September 29, 1964.(Sgd.)JUAN R. SAN ANDRES
Noted:
(Sgd.)
VICENTE RODRIGUEZ
Vendee
Respondent also attached to his answer a letter of judicial administrator Ramon San Andres (Exh. 3),
[6]
asking payment of the balance of the purchase price. The letter reads:
Dear Inting,
Please accommodate my request for Three Hundred (P300.00) Pesos as I am in need of
funds as I intimated to you the other day.
We will just adjust it with whatever balance you have payable to the subdivision.
Thanks.
Vicente Rodriguez
Penafrancia Subdivision, Naga City
P.S.
You can let bearer Enrique del Castillo sign for the amount.
Received One Hundred Only(Sgd.)RAMON SAN ANDRES
3/30/66
Respondent deposited in court the balance of the purchase price amounting to P7,035.00 for the aforesaid
509-square meter lot. Sdaadsc
While the proceedings were pending, judicial administrator Ramon San Andres died and was substituted by
his son Ricardo San Andres. On the other hand, respondent Vicente Rodriguez died on August 15, 1989
and was substituted by his heirs. [7]
Petitioner, as plaintiff, presented two witnesses. The first witness, Engr. Jose Peero, [8] testified that based
on his survey conducted sometime between 1982 and 1985, respondent had enlarged the area which he
purchased from the late Juan San Andres by 509 square meters belonging to the latters estate. According
to Peero, the titled property (Exh. A-5) of respondent was enclosed with a fence with metal holes and
barbed wire, while the expanded area was fenced with barbed wire and bamboo and light
materials. Rtcspped
The second witness, Ricardo San Andres,[9] administrator of the estate, testified that respondent had not
filed any claim before Special Proceedings No. R-21 and denied knowledge of Exhibits 2 and 3. However,
he recognized the signature in Exhibit 3 as similar to that of the former administrator, Ramon San Andres.
Finally, he declared that the expanded portion occupied by the family of respondent is now enclosed with
barbed wire fence unlike before where it was found without fence.
On the other hand, Bibiana B. Rodriguez, [10] widow of respondent Vicente Rodriguez, testified that they had
purchased the subject lot from Juan San Andres, who was their compadre, on September 29, 1964, at

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P15.00 per square meter. According to her, they gave P500.00 to the late Juan San Andres who later
affixed his signature to Exhibit 2. She added that on March 30, 1966, Ramon San Andres wrote them a
letter asking for P300.00 as partial payment for the subject lot, but they were able to give him only P100.00.
She added that they had paid the total purchase price of P7,035.00 on November 21, 1988 by depositing it
in court. Bibiana B. Rodriquez stated that they had been in possession of the 509-square meter lot since
1964 when the late Juan San Andres signed the receipt. (Exh. 2) Lastly, she testified that they did not know
at that time the exact area sold to them because they were told that the same would be known after the
survey of the subject lot. Korte
On September 20, 1994, the trial court [11] rendered judgment in favor of petitioner. It ruled that there was no
contract of sale to speak of for lack of a valid object because there was no sufficient indication in Exhibit 2
to identify the property subject of the sale, hence, the need to execute a new contract.
Respondent appealed to the Court of Appeals, which on April 21, 1998 rendered a decision reversing the
decision of the trial court. The appellate court held that the object of the contract was determinable, and
that there was a conditional sale with the balance of the purchase price payable within five years from the
execution of the deed of sale. The dispositive portion of its decisions reads:
IN VIEW OF ALL THE FOREGOING, the judgment appealed from is hereby REVERSED
and SET ASIDE and a new one entered DISMISSING the complaint and rendering
judgment against the plaintiff-appellee:
1. to accept the P7,035.00 representing the balance of the purchase price of the portion
and which is deposited in court under Official Receipt No. 105754 (page 122, Records);
2. to execute the formal deed of sale over the said 509 square meter portion of Lot 1914B-2 in favor of appellant Vicente Rodriguez;
3. to pay the defendant-appellant the amount of P50,000.00 as damages and P10,000.00
attorneys fees as stipulated by them during the trial of this case; and
4. to pay the costs of the suit.
SO ORDERED.
Hence, this petition. Petitioner assigns the following errors as having been allegedly committed by the trial
court: Sclaw
I.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT THE DOCUMENT
(EXHIBIT "2") IS A CONTRACT TO SELL DESPITE ITS LACKING ONE OF THE
ESSENTIAL ELEMENTS OF A CONTRACT, NAMELY, OBJECT CERTAIN AND
SUFFICIENTLY DESCRIBED.
II.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS
OBLIGED TO HONOR THE PURPORTED CONTRACT TO SELL DESPITE NONFULFILLMENT BY RESPONDENT OF THE CONDITION THEREIN OF PAYMENT OF
THE BALANCE OF THE PURCHASE PRICE.
III.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT CONSIGNATION WAS
VALID DESPITE NON-COMPLIANCE WITH THE MANDATORY REQUIREMENTS
THEREOF.
IV.THE HON. COURT OF APPEALS ERRED IN HOLDING THAT LACHES AND
PRESCRIPTION DO NOT APPLY TO RESPONDENT WHO SOUGHT INDIRECTLY TO
ENFORCE THE PURPORTED CONTRACT AFTER THE LAPSE OF 24 YEARS.
The petition has no merit.
First. Art. 1458 of the Civil Code provides:

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

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Thus, all of the essential elements of a contract of sale are present, i.e., that there was a meeting of the
minds between the parties, by virtue of which the late Juan San Andres undertook to transfer ownership of
and to deliver a determinate thing for a price certain in money. As Art. 1475 of the Civil Code provides: Xlaw
The contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price. . . .
That the contract of sale is perfected was confirmed by the former administrator of the estates, Ramon San
Andres, who wrote a letter to respondent on March 30, 1966 asking for P300.00 as partial payment for the
subject lot. As the Court of Appeals observed:
Without any doubt, the receipt profoundly speaks of a meeting of the mind between San
Andres and Rodriguez for the sale of the property adjoining the 345 square meter portion
previously sold to Rodriguez on its three (3) sides excepting the frontage. The price is
certain, which is P15.00 per square meter. Evidently, this is a perfected contract of sale on
a deferred payment of the purchase price. All the pre-requisite elements for a valid
purchase transaction are present. Sale does not require any formal document for its
existence and validity. And delivery of possession of land sold is a consummation of the
sale (Galar vs. Husain, 20 SCRA 186 [1967]). A private deed of sale is a valid contract
between the parties (Carbonell v. CA, 69 SCRA 99 [1976]). Xsc
In the same vein, after the late Juan R. San Andres received the P500.00 downpayment
on March 30, 1966, Ramon R. San Andres wrote a letter to Rodriguez and received from
Rodriguez the amount of P100.00 (although P300.00 was being requested) deductible
from the purchase price of the subject portion. Enrique del Castillo, Ramons authorized
agent, correspondingly signed the receipt for the P100.00. Surely, this is explicitly a
veritable proof of the sale over the remaining portion of Lot 1914-B-2 and a confirmation by
Ramon San Andres of the existence thereof. [16]
There is a need, however, to clarify what the Court of Appeals said is a conditional contract of sale.
Apparently, the appellate court considered as a "condition" the stipulation of the parties that the full
consideration, based on a survey of the lot, would be due and payable within five (5) years from the
execution of a formal deed of sale. It is evident from the stipulations in the receipt that the vendor Juan San
Andres sold the residential lot in question to respondent and undertook to transfer the ownership thereof to
respondent without any qualification, reservation or condition. In Ang Yu Asuncion v. Court of Appeals,[17] we
held: Sc
In Dignos v. Court of Appeals (158 SCRA 375), we have said that, although denominated a
"Deed of Conditional Sale," a sale is still absolute where the contract is devoid of
any proviso that title is reserved or the right to unilaterally rescind is stipulated, e.g., until or
unless the price is paid. Ownership will then be transferred to the buyer upon actual or
constructive delivery (e.g., by the execution of a public document) of the property sold.
Where the condition is imposed upon the perfection of the contract itself, the failure of the
condition would prevent such perfection. If the condition is imposed on the obligation of a
party which is not fulfilled, the other party may either waive the condition or refuse to
proceed with the sale. (Art. 1545, Civil Code)
Thus, in one case, when the sellers declared in a "Receipt of Down Payment" that they received an amount
as purchase price for a house and lot without any reservation of title until full payment of the entire
purchase price, the implication was that they sold their property. [18] In Peoples Industrial and Commercial
Corporation v. Court of Appeals,[19] it was stated:

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A deed of sale is considered absolute in nature where there is neither a stipulation in the deed that title to
the property sold is reserved in the seller until full payment of the price, nor one giving the vendor the right
to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. Scmis
Applying these principles to this case, it cannot be gainsaid that the contract of sale between the parties is
absolute, not conditional. There is no reservation of ownership nor a stipulation providing for a unilateral
rescission by either party. In fact, the sale was consummated upon the delivery of the lot to respondent.
[20]
Thus, Art. 1477 provides that the ownership of the thing sold shall be transferred to the vendee upon the
actual or constructive delivery thereof.
The stipulation that the "payment of the full consideration based on a survey shall be due and payable in
five (5) years from the execution of a formal deed of sale" is not a condition which affects the efficacy of the
contract of sale. It merely provides the manner by which the full consideration is to be computed and the
time within which the same is to be paid. But it does not affect in any manner the effectivity of the contract.
Consequently, the contention that the absence of a formal deed of sale stipulated in the receipt prevents
the happening of a sale has no merit. Missc
Second. With respect to the contention that the Court of Appeals erred in upholding the validity of a
consignation of P7,035.00 representing the balance of the purchase price of the lot, nowhere in the
decision of the appellate court is there any mention of consignation. Under Art. 1257 of this Civil Code,
consignation is proper only in cases where an existing obligation is due. In this case, however, the
contracting parties agreed that full payment of purchase price shall be due and payable within five (5) years
from the execution of a formal deed of sale. At the time respondent deposited the amount of P7,035.00 in
the court, no formal deed of sale had yet been executed by the parties, and, therefore, the five-year period
during which the purchase price should be paid had not commenced. In short, the purchase price was not
yet due and payable.
This is not to say, however, that the deposit of the purchase price in the court is erroneous. The Court of
Appeals correctly ordered the execution of a deed of sale and petitioners to accept the amount deposited
by respondent.
Third. The claim of petitioners that the price of P7,035.00 is iniquitous is untenable. The amount is based
on the agreement of the parties as evidenced by the receipt (Exh. 2). Time and again, we have stressed the
rule that a contract is the law between the parties, and courts have no choice but to enforce such contract
so long as they are not contrary to law, morals, good customs or public policy. Otherwise, courts would be
interfering with the freedom of contract of the parties. Simply put, courts cannot stipulate for the parties nor
amend the latters agreement, for to do so would be to alter the real intentions of the contracting parties
when the contrary function of courts is to give force and effect to the intentions of the parties.Misspped
Fourth. Finally, petitioners argue that respondent is barred by prescription and laches from enforcing the
contract. This contention is likewise untenable. The contract of sale in this case is perfected, and the
delivery of the subject lot to respondent effectively transferred ownership to him. For this reason,
respondent seeks to comply with his obligation to pay the full purchase price, but because the deed of sale
is yet to be executed, he deemed it appropriate to deposit the balance of the purchase price in court.
Accordingly, Art. 1144 of the Civil Code has no application to the instant case. [21] Considering that a survey
of the lot has already been conducted and approved by the Bureau of Lands, respondents heirs, assigns or
successors-in-interest should reimburse the expenses incurred by herein petitioners, pursuant to the
provisions of the contract. Spped
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the modification that respondent is
ORDERED to reimburse petitioners for the expenses of the survey. Jospped
SO ORDERED.

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FIRST DIVISION
[G.R. No. 125088. April 14, 2004]
LAGRIMAS A. BOY, petitioner, vs. COURT OF APPEALS, ISAGANI P. RAMOS and ERLINDA
GASINGAN RAMOS, respondents.
DECISION
AZCUNA, J.:
Before us is a petition for review on certiorari of the decision of the Court of Appeals in an ejectment
case, docketed as CA-G.R. SP No. 38716, which reversed and set aside the decision [1] of the Regional Trial
Court of Manila, Branch 54, [2] and reinstated the decision [3] of the Metropolitan Trial Court of Manila, Branch
14,[4]ordering petitioner to vacate the disputed premises and to pay rent until the premises are vacated and
possession is turned over to private respondents.

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The facts, as stated by the Court of Appeals, are as follows:

On September 24, 1993, the spouses Isagani P. Ramos and Erlinda Gasingan Ramos, private
respondents herein, filed an action for ejectment against Lagrimas A. Boy (Lagrimas), petitioner herein, with
the Metropolitan Trial Court of Manila. In their Complaint, the spouses Ramos alleged that they are the
owners of a parcel of land with an area of 55.75 square meters, and the house existing thereon, situated
at 1151 Florentino Torres St., Singalong, Manila. They acquired the said properties from Lagrimas who sold
the same to them by virtue of a Deed of Absolute Sale, [5]which was executed on June 4, 1986. However,
Lagrimas requested for time to vacate the premises, and they agreed thereto, because they were not in
immediate need of the premises. Time came when they needed the said house as they were only renting
their own residence. They then demanded that Lagrimas vacate the subject premises, but she refused to
do so. Hence, they initiated this action for ejectment against Lagrimas. [6]
In her Answer, Lagrimas alleged that sometime in September 1984, in order to accommodate her
brothers need for a placement fee to work abroad, she borrowedP15,000 from the spouses Ramos, who
asked for the subject property as collateral.On June 4, 1986, the spouses Ramos caused her to sign a
Deed of Absolute Sale purporting to show that she sold the property in question to them for the sum
ofP31,000. The balance of P16,000 was promised to be paid on that date, but the promise was never
fulfilled. Sometime in May 1988, Erlinda Ramos and Lagrimas executed an agreement (Kasunduan)
[7]
acknowledging that the subject parcel of land, together with the upper portion of the house thereon, had
been sold by Lagrimas to the spouses Ramos for P31,000; that of the said price, the sum ofP22,500
(representing P15,000 cash loan plus P7,500 as interest from September 1984 to May 1988) had been
paid; that the balance of P8,500 would be paid on the last week of August 1988; and that possession of the
property would be transferred to the spouses Ramos only upon full payment of the purchase price. [8]
Lagrimas admitted that the counsel of the spouses Ramos sent her a letter demanding that she vacate
the premises. Lagrimas alleged that the demand for her to pay the sum of P6,000 per month has no legal
basis. Lagrimas was summoned by the Punong Barangay for conciliation, but no settlement was reached. [9]
The Metropolitan Trial Court (MeTC) noted the existence of a Deed of Absolute Sale executed by the
spouses Ramos and Lagrimas on June 4, 1986. The Deed was duly acknowledged before a Notary Public
and the parties therein did not deny its due execution. The MeTC observed that Lagrimas defense that the
spouses Ramos still had to pay the amount of P16,000 to complete the full consideration ofP31,000 was
nowhere to be found in the Deed of Absolute Sale. [10]
The MeTC held that the Kasunduan, which Lagrimas attached to her Answer, cannot be given binding
effect. The MeTC stated that while Erlinda Ramos admitted the existence of said document, she thought
that Lagrimas was only asking for an additional amount. Erlinda Ramos claimed that after signing and
reading the document, she realized that it did not contain the true facts of the situation since they had
already purchased the subject property and were, therefore, the owners thereof. Erlinda Ramos, thereafter,

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refused to give her residence certificate and asked the notary public not to notarize the document. Said
incident was attested to by way of affidavit by Lutgarda Reyes, the friend and companion of Lagrimas. [11]
Moreover, the MeTC ruled that the continued occupation by Lagrimas of said property after the sale,
without payment of rent, was by mere tolerance. It held that since the spouses Ramos, who were staying in
a rented place, were asked to vacate the same, they were in need to take possession of their own property.
[12]

The MeTC thus rendered judgment in favor of private respondents, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs [herein private respondents] and
against the defendant [herein petitioner], ordering the latter and the persons claiming rights under her to
vacate the premises known as 1151 Florentino [Torres] Street, Singalong, Manila. The defendant is likewise
ordered to pay plaintiffs the sum ofP1,000.00 per month as reasonable compensation for the use and
occupation of the premises from the filing of this complaint until the premises is vacated and possession is
turned over to the plaintiffs; the further sum of P5,000.00 as attorneys fees plus the costs of the suit.
Defendants counterclaim is hereby dismissed for lack of merit.
SO ORDERED.[13]
Petitioner appealed said decision to the Regional Trial Court, which rendered judgment in her favor,
thus:
In view of the foregoing, this Court hereby reverses the assailed Decision and dismisses the
complaint. Costs against the appellee.
The order previously issued granting execution pending appeal is accordingly recalled.
SO ORDERED.[14]
The Regional Trial Court (RTC) held that the Kasunduan was binding between the parties and was the
true agreement between them. It ruled that pending the determination of the question of ownership, it
cannot deprive the party in actual possession of the right to continue peacefully with said possession. Since
the question of ownership was inextricably woven with that of possession, the RTC held that the MeTC
should have dismissed the case because jurisdiction pertains to another tribunal. [15]
Private respondents filed a petition for review of the decision of the RTC with the Court of
Appeals. They faulted the respondent Judge for giving credence to theKasunduan and holding that it
prevailed over the Deed of Absolute Sale. The Court of Appeals ruled in favor of private respondents, thus:

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WHEREFORE, the decision of the respondent Judge herein appealed from is herebyREVERSED and SET
ASIDE, and the decision of the Metropolitan Trial Court is herebyREINSTATED.
SO ORDERED.[16]
The Court of Appeals found, thus:
A review of the records discloses that the private respondent [herein petitioner Lagrimas] acquired the
subject property from one Marianita C. Valera by virtue of two instruments.The first one is a Deed of Sale
dated September 27, 1984, in which the vendor Marianita C.Valera sold a house of light wooden materials
and her rights as a bonafide tenant of the land on which it stands, to the vendee Lagrimas A. Boy
for P31,000.00 (Annex 1 to the Affidavit of Lagrimas A. Boy, p. 67, Record). The second one is a deed of
absolute sale and assignment of rights dated March 18, 1985, in which the vendor Ma. Nita C. Valera sold
a residential house and her rights and interests over a parcel of land in which it is located, to vendee
Lagrimas A. Boy, for the price of P31,000.00 (Annex 2, Affidavit of Lagrimas A. Boy, pp. 68-69, Record).
It appears from the foregoing that Marianita C. Valera was originally one of the tenants/residents of 669
square meters of land owned by the PNB. She constructed a house on a 55.75 square meter portion of the
said land. In 1984, she sold the house and only her rights as tenant of the land to private respondent,
because the PNB had not yet sold the land to the residents. In 1985, the sale of the land to the residents
had already been accomplished.Hence, she sold the house and her rights and interests to the land to the
private respondent.
Significantly, these contracts coincide with certain events in the relationship between the petitioners [herein
private respondents spouses Ramos] and private respondent. According to the Answer of private
respondent, sometime in September, 1984, she borrowed the sum of P15,000.00 from the petitioners to
accommodate her brothers placement fee to work abroad (par. 7, Answer, p. 19, Record). And on March
19, 1985, the private respondent executed a deed of real estate mortgage (Annex a to the Affidavit of
Erlinda C. Ramos, pp. 54-55, Record), in which she mortgaged the properties she has acquired from
Marianita C. Valera to the petitioners, to secure a loan in the amount of P26,200.00, payable within three
months.
One year later, on June 4, 1986, the private respondent executed a deed of absolute sale in which she sold
the same property acquired from Marianita C. Valera to the petitioners, for the price of P31,000.00. [17]
Considering that petitioner borrowed P26,200 from private respondents, which loan was covered by a
real estate mortgage of the subject house and lot, and the subsequent sale of the property to private
respondents for P31,000 after non-payment of the loan, the Court of Appeals did not give credence to the
statement in the Kasunduan that private respondents paid only P22,500 to petitioner since her
indebtedness already reached P26,200. The Court of Appeals gave weight to the argument of private

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respondents that Erlinda Ramos was merely tricked into signing the Kasunduan. It gave credence to the
version of private respondents on how the Kasunduan came to be executed but not notarized, thus:
x x x Erlinda G. Ramos alleged in her affidavit that sometime in May, 1988, the exact date of which she
cannot recall, Lagrimas Boy went to their residence and pleaded that even if they have already fully paid
the subject house and lot, she was asking for an additional amount because she needed the money and
there was no one for her to approach (walang ibang matatakbuhan). She [Erlinda Ramos] claimed she
committed a mistake because she agreed to give an additional amount and went with [Lagrimas] to Atty.
Estacio at the City Hall. [Lagrimas] arrive[d] ahead [of] Atty. Estacio in company with her friend Lutgarda
Bayas. Atty. Estacio told her [Erlinda Ramos] that she will give an additional amount and she agreed
without the knowledge of her husband. Atty. Estacio handed to her a piece of paper and she was made to
sign and she acceded and signed it without reading. After [Lagrimas] and her witnesses including her
companion Lutgarda Bayas signed the paper, she [Erlinda Ramos] go[t] it and read it. It was at that point
that she discovered that what were written thereon were not in accordance with the true and real fact and
situation that the subject house and lot already belongs to them because they have purchased it already
and {Lagrimas} only requested for an addition. She [Erlinda Ramos] told Atty. Estacio to change (baguhin)
the statement because she was not agreeable and she did not give her residence certificate
(Cedula). Notary Public Estacio said that he cannot notarize the document (purported Kasunduan) because
she [Erlinda Ramos] refused saying she wasPumapalag. He said that Erlinda Ramos and [Lagrimas]
should talk to each other again. She [Erlinda Ramos] committed another mistake because she left the place
leaving the piece of paper -- purported Kasunduan without knowing that [Lagrimas] kept it. Erlinda Ramos
innocently failed to demand the said piece of paper which [Lagrimas] is now using. She returned to Atty.
Estacio to get the piece of paper but he answered her saying naibasura naand she trusted him but this
time, it turned out that [Lagrimas] kept it which she is using now in this case. [18]
The Court of Appeals stated that the fact that petitioner has remained in possession of the property
sold, and paid its real estate taxes, would have made out a case for equitable mortgage. However, it noted
that petitioner did not raise this defense, but admitted having sold the property to private respondents,
alleging only that they have not paid the purchase price in full. It, therefore, ruled that the preponderance of
evidence is against petitioner.
Hence, this petition, with the following assigned errors:
I
THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS DISCRETION IN NOT
INTERPRETING THAT THE KASUNDUAN EXECUTED BY AND BETWEEN PETITIONER (DEFENDANT)
AND PRIVATE RESPONDENT (PLAINTIFF) SUPERSEDES THE DEED OF SALE WHICH HAS NOT
BEEN CONSUMMATED.
II

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THE RESPONDENT COURT GRAVELY ERRED AND ABUSED ITS DISCRETION IN MISINTERPRETING
AND DISREGARDING THE KASUNDUAN AS NOT APPLICABLE IN THE CASE AT BAR.
III
THE RESPONDENT COURT ERRED AND ABUSED ITS DISCRETION IN REVERSING AND
DISMISSING THE DECISION OF THE REGIONAL TRIAL COURT AND [IN REINSTATING] THE
DECISION OF THE COURT A QUO.[19]
Petitioner contends that, as ruled by the RTC, since the question of ownership in this case is
interwoven with that of possession, the MeTC should have dismissed the case because jurisdiction pertains
to another tribunal.
The contention is without merit.
The only issue for resolution in an unlawful detainer case is physical or material possession of the
property involved, independent of any claim of ownership by any of the party litigants. [20]
Prior to the effectivity of Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980), the
jurisdiction of inferior courts was confined to receiving evidence of ownership in order to determine only the
nature and extent of possession, by reason of which such jurisdiction was lost the moment it became
apparent that the issue of possession was interwoven with that of ownership. [21]
With the enactment of Batas Pambansa Blg. 129, inferior courts were granted jurisdiction to resolve
questions of ownership provisionally in order to determine the issue of possession, thus:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in
Civil Cases.- Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall
exercise:
xxx
(2) Exclusive original jurisdiction over cases of forcible entry and unlawful
detainer: Provided, That when in such cases, the defendant raises the question of
ownership in his pleadings and the question of possession cannot be resolved
without deciding the issue of ownership, the issue of ownership shall be resolved
only to determine the issue of possession.
Section 16, Rule 70 (Forcible Entry and Unlawful Detainer) of the Rules of Court, as amended,
similarly provides:

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Sec.16. Resolving defense of ownership.- When the defendant raises the defense of ownership in his
pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the
issue of ownership shall be resolved only to determine the issue of possession.
Thus, in forcible entry and unlawful detainer cases, if the defendant raises the question of ownership
in his pleadings and the question of possession cannot be resolved without deciding the issue of
ownership, the inferior courts have the undoubted competence provisionally to resolve the issue of
ownership for the sole purpose of determining the issue of possession. [22] The MeTC, therefore, did not err
in taking cognizance of the instant case.
Petitioner also contends that the Court of Appeals erred by misinterpreting and disregarding
the Kasunduan, which is binding between the parties and expressed their true intent. Petitioner asserts that
the Kasunduan supersedes the Deed of Absolute Sale, which is actually a contract to sell. In effect,
petitioner is asking this Court to review the factual finding of Court of Appeals on the true nature of
theKasunduan.
As a rule, the findings of the fact of the Court of Appeals are final and cannot be reviewed on appeal
by this Court, provided they are borne out by the record or are based on substantial evidence. [23] After
reviewing the records herein, this Court finds no ground to change the factual finding of the Court of
Appeals on theKasunduan, with the resulting holding that it is not binding on the parties.
The remaining issue is whether the Court of Appeals correctly ruled that private respondents have a
right of material possession over the disputed property.
It has been established that petitioner sold the subject property to private respondents for the price
of P31,000, as evidenced by the Deed of Absolute Sale, [24] the due execution of which was not controverted
by petitioner. The contract is absolute in nature, without any provision that title to the property is reserved in
the vendor until full payment of the purchase price. [25] By the contract of sale,[26]petitioner (as vendor),
obligated herself to transfer the ownership of, and to deliver, the subject property to private respondents (as
vendees) after they paid the price ofP31,000. Under Article 1477 of the Civil Code, the ownership of the
thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. In addition,
Article 1498 of the Civil Code provides that when the sale is made through a public instrument, as in this
case, the execution thereof shall be equivalent to the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or cannot clearly be inferred. In this case, the Deed
of Absolute Sale does not contain any stipulation against the constructive delivery of the property to private
respondents. In the absence of stipulation to the contrary, the ownership of the property sold passes to the
vendee upon the actual or constructive delivery thereof. [27] The Deed of Absolute Sale, therefore, supports
private respondents right of material possession over the subject property.
The finding of the MeTC, sustained by the Court of Appeals, is that the continued occupation by
petitioner of said property after the sale, without payment of rent, was by mere tolerance. Private

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respondents claimed that petitioner requested for time to vacate the premises and they agreed thereto
because they did not need the property at that time. However, when private respondents were asked to
vacate their rented residence, they demanded that petitioner vacate the subject property, but petitioner
refused to do so. A person who occupies the land of another at the latters tolerance or permission, without
any contract between them, is bound by an implied promise that he will vacate the same upon demand,
failing which a summary action for ejectment is the proper remedy against him. [28]
WHEREFORE, the assailed decision of the Court of Appeals, in CA-G.R. SP No. 38716, which
reversed and set aside the decision of the Regional Trial Court, and reinstated the decision of the
Metropolitan Trial Court, is hereby AFFIRMED.No costs.
SO ORDERED.

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Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION
ROBERTO D. TUAZON,

G.R. No. 168325

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Petitioner,
- versus Present:
LOURDES Q. DEL ROSARIO-SUAREZ,
CATALINA R. SUAREZ-DE LEON, WILFREDO DE
LEON, MIGUEL LUIS S. DE LEON, ROMMEL LEE
S. DE LEON, and GUILLERMA L. SANDICOSILVA, as attorney-in-fact of the defendants,
exceptLourdes Q. Del Rosario-Suarez,
Respondents.

CORONA, C. J., Chairperson,

LEONARDO-DE CASTRO,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

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

DECISION

DEL CASTILLO, J.:

In a situation where the lessor makes an offer to sell to the lessee a certain property at a fixed price within a certain
period, and the lessee fails to accept the offer or to purchase on time, then the lessee loses his right to buy the
property and the owner can validly offer it to another.
This Petition for Review on Certiorari[1] assails the Decision[2] dated May 30, 2005 of the Court of Appeals (CA) in CAG.R. CV No. 78870, which affirmed the Decision[3] dated November 18, 2002 of the Regional Trial Court (RTC),
Branch 101, Quezon City in Civil Case No. Q-00-42338.
Factual Antecedents
Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a parcel of land, containing more or less an
area of 1,211 square meters located along Tandang Sora Street, Barangay Old Balara, Quezon City and previously
covered by Transfer Certificate of Title (TCT) No. RT-56118[4] issued by the Registry of Deeds of Quezon City.
On June 24, 1994, petitioner Roberto D. Tuazon (Roberto) and Lourdes executed a Contract of Lease[5] over the
abovementioned parcel of land for a period of three years. The lease commenced in March 1994 and ended in
February 1997. During the effectivity of the lease, Lourdes sent a letter[6] dated January 2, 1995 to Roberto where she

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offered to sell to the latter subject parcel of land. She pegged the price atP37,541,000.00 and gave him two years
from January 2, 1995 to decide on the said offer.
On June 19, 1997, or more than four months after the expiration of the Contract of Lease, Lourdes sold
subject parcel of land to her only child, Catalina Suarez-De Leon, her son-in-law Wilfredo De Leon, and her two
grandsons, Miguel Luis S. De Leon and Rommel S. De Leon (the De Leons), for a total consideration of
only P2,750,000.00 as evidenced by a Deed of Absolute Sale[7] executed by the parties. TCT No. 177986[8] was then
issued by the Registry of Deeds of Quezon City in the name of the De Leons.
The new owners through their attorney-in-fact, Guillerma S. Silva, notified Roberto to vacate the
premises. Roberto refused hence, the De Leons filed a complaint for Unlawful Detainer before the Metropolitan Trial
Court (MeTC) ofQuezon City against him. On August 30, 2000, the MeTC rendered a Decision[9]ordering Roberto to
vacate the property for non-payment of rentals and expiration of the contract.
Ruling of the Regional Trial Court
On November 8, 2000, while the ejectment case was on appeal, Roberto filed with the RTC of Quezon City a
Complaint[10] for Annulment of Deed of Absolute Sale, Reconveyance, Damages and Application for Preliminary
Injunction againstLourdes and the De Leons. On November 13, 2000, Roberto filed a Notice of Lis Pendens[11] with
the Registry of Deeds of Quezon City.
On January 8, 2001, respondents filed An Answer with Counterclaim [12]praying that the Complaint be
dismissed for lack of cause of action. They claimed that the filing of such case was a mere leverage of Roberto
against them because of the favorable Decision issued by the MeTC in the ejectment case.
On September 17, 2001, the RTC issued an Order[13] declaring Lourdes and the De Leons in default for their
failure to appear before the court for the second time despite notice. Upon a Motion for Reconsideration,[14] the trial
court in an Order[15] dated October 19, 2001 set aside its Order of default.
After trial, the court a quo rendered a Decision declaring the Deed of Absolute Sale made by Lourdes in
favor of the De Leons as valid and binding. The offer made by Lourdes to Roberto did not ripen into a contract to sell
because the price offered by the former was not acceptable to the latter. The offer made byLourdes is no longer
binding and effective at the time she decided to sell the subject lot to the De Leons because the same was not
accepted by Roberto. Thus, in a Decision dated November 18, 2002, the trial court dismissed the complaint. Its
dispositive portion reads:

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WHEREFORE, premises considered, judgment is hereby rendered dismissing the aboveentitled Complaint for lack of merit, and ordering the Plaintiff to pay the Defendants, the following:
1.
2.
3.
4.

the amount of P30,000.00 as moral damages;

the amount of P30,000.00 as exemplary damages;
the amount of P30,000.00 as attorneys fees; and
cost of the litigation.

SO ORDERED.[16]

Ruling of the Court of Appeals

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

Petitioners Arguments

Roberto claims that Lourdes violated his right to buy subject property under
the principle of right of first refusal by not giving him notice and the opportunity to buy the property under the same
terms and conditions or specifically based on the much lower price paid by the De Leons.
Roberto further contends that he is enforcing his right of first refusal based onEquatorial Realty Development, Inc. v.
Mayfair Theater, Inc.[18] which is the leading case on the right of first refusal.

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Respondents Arguments
On the other hand, respondents posit that this case is not covered by the principle of right of first refusal but
an unaccepted unilateral promise to sell or, at best, a contract of option which was not perfected. The letter
of Lourdes to Roberto clearly embodies an option contract as it grants the latter only two years to exercise the option
to buy the subject property at a price certain of P37,541,000.00. As an option contract, the said letter would have been
binding upon Lourdes without need of any consideration, had Roberto accepted the offer. But in this case there was
no acceptance made neither was there a distinct consideration for the option contract.
Our Ruling
The petition is without merit.
This case involves an option contract and not a contract of a
right of first refusal

In Beaumont v. Prieto,[19] the nature of an option contract is explained thus:

In his Law Dictionary, edition of 1897, Bouvier defines an option as a contract, in the following language:
A contract by virtue of which A, in consideration of the payment of a certain sum to B,
acquires the privilege of buying from, or selling to, B certain securities or properties within a limited
time at a specified price. (Story vs. Salamon, 71 N. Y., 420.)
From Vol. 6, page 5001, of the work Words and Phrases, citing the case of Ide vs. Leiser (24 Pac., 695;
10 Mont., 5; 24 Am. St. Rep., 17) the following quotation has been taken:
An agreement in writing to give a person the option to purchase lands within a given time
at a named price is neither a sale nor an agreement to sell. It is simply a contract by which the
owner of property agrees with another person that he shall have the right to buy his
property at a fixed price within a certain time. He does not sell his land; he does not then agree
to sell it; but he does sell something; that is, the right or privilege to buy at the election or option of
the other party. The second party gets in praesenti, not lands, nor an agreement that he shall have
lands, but he does get something of value; that is, the right to call for and receive lands if he elects.
The owner parts with his right to sell his lands, except to the second party, for a limited period. The
second party receives this right, or rather, from his point of view, he receives the right to elect to buy.

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But the two definitions above cited refer to the contract of option, or, what amounts to the same thing, to the
case where there was cause or consideration for the obligation x x x. (Emphasis supplied.)

On the other hand, in Ang Yu Asuncion v. Court of Appeals,[20] an elucidation on the right of first refusal was
made thus:

In the law on sales, the so-called right of first refusal is an innovative juridical relation. Needless to
point out, it cannot be deemed a perfected contract of sale under Article 1458 of the Civil Code.
Neither can the right of first refusal, understood in its normal concept, per se be brought within the
purview of an option under the second paragraph of Article 1479, aforequoted, or possibly of an
offer under Article 1319 of the same Code. An option or an offer would require, among other
things, a clear certainty on both the object and the cause or consideration of the envisioned
contract. In a right of first refusal, while the object might be made determinate, the exercise
of the right, however, would be dependent not only on the grantor's eventual intention to
enter into a binding juridical relation with another but also on terms, including the price, that
obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely
belonging to a class of preparatory juridical relations governed not by contracts (since the essential
elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among
other laws of general application, the pertinent scattered provisions of the Civil Code on human
conduct.
Even on the premise that such right of first refusal has been decreed under a final
judgment, like here, its breach cannot justify correspondingly an issuance of a writ of execution
under a judgment that merely recognizes its existence, nor would it sanction an action for specific
performance without thereby negating the indispensable element of consensuality in the perfection
of contracts. It is not to say, however, that the right of first refusal would be inconsequential for, such
as already intimated above, an unjustified disregard thereof, given, for instance, the circumstances
expressed in Article 19 of the Civil Code, can warrant a recovery for damages. (Emphasis
supplied.)

From the foregoing, it is thus clear that an option contract is entirely different and distinct from a right of first refusal in
that in the former, the option granted to the offeree is for a fixed period and at a determined price. Lacking these
two essential requisites, what is involved is only a right of first refusal.

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In this case, the controversy is whether the letter of Lourdes to Roberto dated January 2, 1995 involved an option
contract or a contract of a right of first refusal. In its entirety, the said letter-offer reads:

206 Valdes Street

Josefa Subd. Balibago
Angeles City 2009
January 2, 1995
Tuazon Const. Co.
986 Tandang Sora Quezon City
Dear Mr. Tuazon,

I received with great joy and happiness the big box of sweet grapes and ham, fit for a kings
party. Thanks very much.

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

It is clear that the above letter embodies an option contract as it grants Roberto a fixed period of only two years to buy
the subject property at a price certain ofP37,541,000.00. It being an option contract, the rules applicable are found in
Articles 1324 and 1479 of the Civil Code which provide:

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Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer
may be withdrawn at any time before acceptance by communicating such withdrawal, except when
the option is founded upon a consideration, as something paid or promised.
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally
demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is
binding upon the promissor if the promise is supported by a consideration distinct from the price.

It is clear from the provision of Article 1324 that there is a great difference between the effect of an option
which is without a consideration from one which is founded upon a consideration. If the option is without any
consideration, the offeror may withdraw his offer by communicating such withdrawal to the offeree at anytime before
acceptance; if it is founded upon a consideration, the offeror cannot withdraw his offer before the lapse of the period
agreed upon.
The second paragraph of Article 1479 declares that an accepted unilateral promise to buy or to sell a determinate
thing for a price certain is binding upon the promissor if the promise is supported by a consideration distinct from the
price. Sanchez v. Rigos[21] provided an interpretation of the said second paragraph of Article 1479 in relation to Article
1324. Thus:

There is no question that under Article 1479 of the new Civil Code "an option to sell," or "a
promise to buy or to sell," as used in said article, to be valid must be "supported by a consideration
distinct from the price." This is clearly inferred from the context of said article that a unilateral
promise to buy or to sell,even if accepted, is only binding if supported by consideration. In other
words, "an accepted unilateral promise can only have a binding effect if supported by a
consideration, which means that the option can still be withdrawn, even if accepted, if the same is
not supported by any consideration. Hence, it is not disputed that the option is without
consideration. It can therefore be withdrawn notwithstanding the acceptance made of it by appellee.

It is true that under Article 1324 of the new Civil Code, the general rule regarding offer and
acceptance is that, when the offerer gives to the offeree a certain period to accept, "the offer may be
withdrawn at any time before acceptance" except when the option is founded upon consideration,
but this general rule must be interpreted as modified by the provision of Article 1479 above referred

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to, which applies to "a promise to buy and sell" specifically. As already stated, this rule requires that
a promise to sell to be valid must be supported by a consideration distinct from the price.

In Diamante v. Court of Appeals,[22] this Court further declared that:

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

xxxx

Even if the promise was accepted, private respondent was not bound thereby in the
absence of a distinct consideration. (Emphasis ours.)

In this case, it is undisputed that Roberto did not accept the terms stated in the letter of Lourdes as he
negotiated for a much lower price. Robertos act of negotiating for a much lower price was a counter-offer and is
therefore not an acceptance of the offer of Lourdes. Article 1319 of the Civil Code provides:

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. The offer must be certain and the acceptance absolute.
A qualified acceptance constitutes a counter-offer.(Emphasis supplied.)

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The counter-offer of Roberto for a much lower price was not accepted byLourdes. There is therefore no
contract that was perfected between them with regard to the sale of subject property. Roberto, thus, does not have
any right to demand that the property be sold to him at the price for which it was sold to the De Leons neither does he
have the right to demand that said sale to the De Leons be annulled.

Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. is

not applicable here

It is the position of Roberto that the facts of this case and that of Equatorial are similar in nearly all aspects. Roberto is
a lessee of the property like Mayfair Theater in Equatorial. There was an offer made to Roberto by Lourdes during the
effectivity of the contract of lease which was also the case in Equatorial. There were negotiations as to the price which
did not bear fruit because Lourdes sold the property to the De Leons which was also the case in Equatorial wherein
Carmelo and Bauermann sold the property to Equatorial. The existence of the lease of the property is known to the
De Leons as they are related to Lourdes while inEquatorial, the lawyers of Equatorial studied the lease contract
of Mayfair over the property. The property in this case was sold by Lourdes to the De Leons at a much lower price
which is also the case in Equatorial where Carmelo and Bauerman sold to Equatorial at a lesser price. It is Robertos
conclusion that as in the case ofEquatorial, there was a violation of his right of first refusal and hence annulment or
rescission of the Deed of Absolute Sale is the proper remedy.
Robertos reliance in Equatorial is misplaced. Despite his claims, the facts inEquatorial radically differ from the facts of
this case. Roberto overlooked the fact that in Equatorial, there was an express provision in the Contract of Lease that
(i)f the LESSOR should desire to sell the leased properties, the LESSEE shall be given 30-days
exclusive option to purchase the same.

There is no such similar provision in the Contract of Lease between Roberto and Lourdes. What is involved
here is a separate and distinct offer made by Lourdesthrough a letter dated January 2, 1995 wherein she is selling the
leased property to Roberto for a definite price and which gave the latter a definite period for acceptance.Roberto was
not given a right of first refusal. The letter-offer of Lourdes did not form part of the Lease Contract because it was
made more than six months after the commencement of the lease.

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

Lastly, Roberto argues that Lourdes should be sanctioned for her failure to file her appellees brief before the CA.
Certainly, the appellees failure to file her brief would not mean that the case would be automatically decided against
her. Under the circumstances, the prudent action on the part of the CA would be to deem Lourdes to have waived her
right to file her appellees brief. De Leon v. Court of Appeals,[23] is instructive when this Court decreed:

On the second issue, we hold that the Court of Appeals did not commit grave abuse of
discretion in considering the appeal submitted for decision. The proper remedy in case of denial of
the motion to dismiss is to file the appellees brief and proceed with the appeal. Instead, petitioner
opted to file a motion for reconsideration which, unfortunately, was pro forma. All the grounds raised
therein have been discussed in the first resolution of the respondent Court of Appeals. There is no
new ground raised that might warrant reversal of the resolution. A cursory perusal of the motion
would readily show that it was a near verbatim repetition of the grounds stated in the motion to
dismiss; hence, the filing of the motion for reconsideration did not suspend the period for filing the

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appellees brief. Petitioner was therefore properly deemed to have waived his right to file
appellees brief.(Emphasis supplied.)

In the above cited case, De Leon was the plaintiff in a Complaint for a sum of money in the RTC. He obtained a
favorable judgment and so defendant went to the CA. The appeal of defendant-appellant was taken cognizance of by
the CA but De Leon filed a Motion to Dismiss the Appeal with Motion to Suspend Period to file Appellees Brief. The
CA denied the Motion to Dismiss. De Leon filed a Motion for Reconsideration which actually did not suspend the
period to file the appellees brief. De Leon therefore failed to file his brief within the period specified by the rules and
hence he was deemed by the CA to have waived his right to file appellees brief.
The failure of the appellee to file his brief would not result to the rendition of a decision favorable to the appellant. The
former is considered only to have waived his right to file the Appellees Brief. The CA has the jurisdiction to resolve the
case based on the Appellants Brief and the records of the case forwarded by the RTC. The appeal is therefore
considered submitted for decision and the CA properly acted on it.

WHEREFORE, the instant petition for review on certiorari is DENIED.The assailed Decision of the Court of
Appeals in CA-G.R. CV No. 78870, which affirmed the Decision dated November 18, 2002 of the Regional Trial
Court, Branch 101, Quezon City in Civil Case No. Q-00-42338 is AFFIRMED.

SO ORDERED.

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FIRST DIVISION

SPOUSES ONNIE SERRANO AND

AMPARO HERRERA,
Petitioners,

G.R. No. 139173

Present:
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
CORONA,
*
AZCUNA, and
GARCIA, JJ.

- versus -

GODOFREDO CAGUIAT,
Respondent.

Promulgated:

February 28, 2007

x------------------------------------------------------------------------------------------------------x

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

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Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision [1] of the Court of Appeals dated January 29, 1999 and its Resolution
dated July 14, 1999 in CA-G.R. CV No. 48824.
Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot located in Las
Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905.
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot. Petitioners
agreed to sell it at P1,500.00 per square meter. Respondent then gave petitioners P100,000.00 as partial
payment. In turn, petitioners gave respondent the corresponding receipt stating that respondent promised
to pay the balance of the purchase price on or beforeMarch 23, 1990, thus:
Las Pias, Metro Manila
March 19, 1990
RECEIPT FOR PARTIAL PAYMENT OF LOT NO. 23 COVERED BY TCT
NO. T-9905, LAS PIAS, METROMANILA
RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE
HUNDRED THOUSAND PESOS (P100,000.00) ASPARTIAL PAYMENT OF
OUR LOT SITUATED IN LAS PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN
AREA OF 439 SQUARE METERS.
MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR
BEFORE MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL
DEED OF SALE ON THIS DATE.
SIGNED THIS 19TH DAY OF MARCH, 1990 AT LAS PIAS, M.M.
(SGD) AMPARO HERRERA (SGD) ONNIE SERRANO[2]

On March 28, 1990, respondent, through his counsel Atty. PoncianoEspiritu, wrote petitioners
informing them of his readiness to pay the balance of the contract price and requesting them to prepare the
final deed of sale.[3]

On April 4, 1990, petitioners, through Atty. Ruben V. Lopez, sent a letter [4] to respondent stating that
petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990 and that they are canceling the
transaction. Petitioners also informed respondent that he can recover the earnest money of P100,000.00
anytime.

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Again, on April 6, 1990,[5] petitioners wrote respondent stating that they delivered to his counsel
Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in the amount of P100,000.00
payable to him.

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

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

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The basic issue to be resolved is whether the document entitled Receipt for Partial Payment
signed by both parties earlier mentioned is a contract to sell or a contract of sale.

Petitioners contend that the Receipt is not a perfected contract of sale as provided for in Article
1458 in relation to Article 1475[10] of the Civil Code. The delivery to them of P100,000.00 as down payment
cannot be considered as proof of the perfection of a contract of sale under Article 1482 [11] of the same Code
since there was no clear agreement between the parties as to the amount of consideration.
[9]

Generally, the findings of fact of the lower courts are entitled to great weight and should not be
disturbed except for cogent reasons. 14 Indeed, they should not be changed on appeal in the absence of a
clear showing that the trial court overlooked, disregarded, or misinterpreted some facts of weight
and significance, which if considered would have altered the result of the case. [12] In the present
case, we find that both the trial court and the Court of Appeals interpreted some significant facts resulting in
an erroneous resolution of the issue involved.

In holding that there is a perfected contract of sale, both courts mainly relied on the earnest
money given by respondent to petitioners.They invoked Article 1482 of the Civil Code which provides that
"Whenever earnest money is given in a contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract."

We are not convinced.

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

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

RECEIVED FROM MR. GODOFREDO CAGUIAT THE AMOUNT OF ONE

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

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

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's
obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the
suspensive condition does not take place, the parties would stand as if the conditional obligation had never
existed. The suspensive condition is commonly full payment of the purchase price.[15]

The differences between a contract to sell and a contract of sale are well-settled in
jurisprudence. As early as 1951, in Sing Yee v. Santos,[16] we held that:
x x x [a] distinction must be made between a contract of sale in which title passes to the
buyer upon delivery of the thing sold and a contract to sell x x xwhere by agreement the
ownership is reserved in the seller and is not to pass until the full payment, of the purchase
price is made. In the first case, non-payment of the price is a negative resolutory condition;
in the second case, full payment is a positive suspensive condition. Being contraries, their
effect in law cannot be identical. In the first case, the vendor has lost and cannot recover
the ownership of the land sold until and unless the contract of sale is itself resolved and set
aside. In the second case, however, the title remains in the vendor if the vendee does not
comply with the condition precedent of making payment at the time specified in the
contract.

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In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the
buyer until full payment of the price.[17]
In this case, the Receipt for Partial Payment shows that the true agreement between the parties is
a contract to sell.
First, ownership over the property was retained by petitioners and was not to pass to respondent
until full payment of the purchase price.Thus, petitioners need not push through with the sale should
respondent fail to remit the balance of the purchase price before the deadline on March 23, 1990. In effect,
petitioners have the right to rescind unilaterally the contract the moment respondent fails to pay within the
fixed period.[18]
Second, the agreement between the parties was not embodied in a deed of sale. The absence of a
formal deed of conveyance is a strong indication that the parties did not intend immediate transfer of
ownership, but only a transfer after full payment of the purchase price. [19]
Third, petitioners retained possession of the certificate of title of the lot. This is an additional
indication that the agreement did not transfer to respondent, either by actual or constructive delivery,
ownership of the property.[20]
It is true that Article 1482 of the Civil Code provides that Whenever earnest money is given in a
contract of sale, it shall be considered as part of the price and proof of the perfection of the
contract. However, this article speaks of earnest money given in a contract of sale. In this case,
the earnest money was given in a contract to sell. The earnest money forms part of the consideration
only if the sale is consummated upon full payment of the purchase price. [21] Now, since the earnest money
was given in a contract to sell, Article 1482, which speaks of a contract of sale, does not apply.
As previously discussed, the suspensive condition (payment of the balance by respondent) did not
take place. Clearly, respondent cannot compel petitioners to transfer ownership of the property to him.

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

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SO ORDERED.

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Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 74553 June 8, 1989
SERVICEWIDE
SPECIALISTS,
INCORPORATED, petitioner,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT, GALICANO SITON AND JUDGE
JUSTINIANO DE DUMO respondents.
Labaguis, Loyola, Angara & Associates for petitioner.
Godofredo de Guzman for respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of a decision of the Intermediate Appellate Court (now Court of
Appeals) in ACG.R. CV No. 03876 affirming in toto the decision of the Regional Trial Court of Manila in Civil
Case No. 82-4364 entitled, "Servicewide Specialists, Inc. vs. Galicano Siton and John Doe."
The antecedent facts in this case as found by the lower court are as follows:
The private respondent Galicano Siton purchased from Car Traders Philippines, Inc. a vehicle described as
Mitsubishi Celeste two-door with air-conditioning, Engine 2M-62799, Serial No. A73-2652 and paid P
25,000.00 as downpayment of the price. The remaining balance of P 68,400.00, includes not only the
remaining principal obligation but also advance interests and premiums for motor vehicle insurance
policies.
On August 14, 1979, Siton executed a promissory note in favor of Car Traders Philippines, Inc. expressly
stipulating that the face value of the note which is P 68,400. 00, shall "be payable, without need of notice of
demand, in installments of the amounts following and at the dates hereinafter set forth, to wit: P 1,900.00
monthly for 36 months due and payable on the 14th day of each month starting September 14, 1979, thru
and inclusive of August 14, 1982" (p. 84, Rollo). There are additional stipulations in the Promissory Note
consisting of, among others:
1 Interest at the rate of 14% per annum to be added on each unpaid installment from
maturity;
2 If default is made in the payment of any of the installments or interest thereon, the total
principal sum then remaining unpaid, together with accrued interest thereon shall at once
become due and demandable;
3 In case of default, and attorney's services are availed of, there shall be added a sum
equal to 25% of the total sum due thereon to cover attorney's fees, aside from expenses of
collection and legal costs (p. 84, Rollo).
As further security, Siton executed a Chattel Mortgage over the subject motor vehicle in favor of Car
Traders Philippines, Inc. (pp. 85-88, Rollo). The Chattel Mortgage Contract provides additional stipulations,
such as: a) the waiver by the mortgagor of his rights under Art. 1252 of the Civil Code to designate the
application of his payments and authorize the mortgagee or its assigns to apply such payments to either his
promissory note or to any of his existing obligations to the mortgagee or its assigns at the latter's discretion;
and b) concerning the insurance of the subject motor vehicle, the mortgagor is under obligation to secure

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the necessary policy in an amount not less than the outstanding balance of the mortgage obligation and
that loss thereof shall be made payable to the mortgagee or its assigns as its interest may appear, with the
further obligation of the mortgagor to deliver the policy to the mortgagee. The mortgagor further agrees that
in default of his effecting or renewing the insurance and delivering the policy as endorsed to the mortgagee
within five (5) days after the execution of the mortgage or the expiry date of the insurance, the mortgagee
may, at his option but without any obligation to do so, effect such insurance or obtain such renewal for the
account of the mortgagor.
The credit covered by the promissory note and chattel mortgage executed by respondent Galicano Siton
was first assigned by Car Traders Philippines, Inc. in favor of Filinvest Credit Corporation. Subsequently,
Filinvest Credit Corporation likewise reassigned said credit in favor of petitioner Servicewide Specialists,
Inc. and respondent Siton was advised of this second assignment.
Alleging that Siton failed to pay the part of the installment which fell due on November 2, 1981 as well as
the subsequent installments which fell due on December 2, 1981 and January 2, 1982, respectively, the
petitioner filed this action against Galicano Siton and "John Doe."
The relief sought by the plaintiff is a Writ of Replevin over subject motor vehicle or, in the alternative, for a
sum of money of P 20,319.42 plus interest thereon at the rate of 14% per annum from January 11, 1982
until fully paid; and in either case, for defendants to pay certain sum of money for attorney's fees, liquidated
damages, bonding fees and other expenses incurred in the seizure of the motor vehicle plus costs of suit.
After the service of summons, Justiniano de Dumo, identifying himself as the "John Doe" in the Complaint,
inasmuch as he is in possession of the subject vehicle, filed his Answer with Counterclaim and with
Opposition to the prayer for a Writ of Replevin. Said defendant, alleged the fact that he has bought the
motor vehicle from Galicano Siton on November 24, 1979; that as such successor, he stepped into the
rights and obligations of the seller; that he has religiously paid the installments as stipulated upon in the
promissory note. He also manifested that the Answer he has filed in his behalf should likewise serve as a
responsive pleading for his co-defendant Galicano Siton.
On January 12, 1984, the Regional Trial Court rendered a decision, the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered as follows:
1. Denying the issuance of a Writ of Replevin in this case;
2. Ordering defendants to pay jointly and severally, the plaintiff, the remaining balance on
the motor vehicle reckoned as of January 25, 1982, without additional interest and
charges, and the same to be paid by installments, per the terms of the Promissory Note,
payable on the 14th day of each month starting the month after this Decision shall have
become final, until the full payment of the remaining obligation;
3. The Chattel Mortgage contract is deemed to cover the obligation petition stated in par. 2,
supra, without prejudice to the parties, including defendant de Dumo, to now execute a
new promissory note and/or chattel mortgage contract;
4. Ordering defendants to pay, jointly and severally, the sum of another P 3,859.90 to the
plaintiff by way of refunding the premium payments in the past on insurance policies over
subject car;
5. Each party shall bear his own expenses and attorney's fees; and
6. The claim of one party against the other(s) for damages, and vice-versa are hereby
denied and dismissed. There is no pronouncement as to costs.
SO ORDERED. (pp. 95-96, Rollo)
Not satisfied with the decision of the trial court, the petitioner appealed to the Intermediate Appellate Court.
On April 25, 1986, the respondent Appellate Court rendered judgment affirming in toto the decision of the
trial court. The dispositive portion of the judgment states:

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WHEREFORE, the appealed judgment is in full accord with the evidence and the law is
hereby therefore affirmed in all its parts. Costs against plaintiff-appellant.
SO ORDERED. (p. 42, Rollo).
Hence, the instant petition was filed, praying for a reversal of the above-mentioned decision in favor of
private respondents, with the petitioner assigning the following errors:
2.1 The Honorable Respondent, the Intermediate Appellate Court erred and gravely
abused its discretion in concluding that there was a valid sale of the mortgaged vehicle
between Siton and De Dumo;
2.2 The Honorable Respondent, the Intermediate Appellate Court erred and gravely
abused its discretion in holding that the petitioner (plaintiff) and its predecessors-in-interest
are bound by the questionable and invalid unnotarized Deed of Sale between Siton and De
Dumo, even as neither petitioner (plaintiff) nor its predecessors-in-interest had knowledge
nor had they given their written or verbal consent thereto;
2.3 The Honorable Respondent, the Intermediate Appellate Court erred and gravely
abused its discretion in ruling that the mortgagee (petitioner) has the obligation to make
demands to De Dumo for payment on the Promissory Note when De Dumo is not privy
thereto;
2.4 The Honorable Respondent, the Intermediate Appellate Court erred and acted with
grave abuse of discretion in refusing to issue the Writ of Replevin despite due compliance
by petitioner of the requirements of Rule 60, Sections 1 and 2 of REVISED RULES OF
COURT;
2.5 The Honorable Respondent, the Intermediate Appellate Court acted with grave abuse
of discretion in ruling that petitioner (creditor-mortgagee) is obliged to inform respondent
De Dumo (not privy to the mortgage) to submit the insurance policy over the mortgaged
"res" and to demand the payor-third-party (De Dumo) to redeem his rubber check; (pp. 4-5,
Rollo).
In its first assigned error, petitioner alleges that the sale of the mortgaged vehicle between the mortgagor
Siton and De Dumo was void, as the sale is prohibited under the provisions of the Deed of Chattel
Mortgage, the Chattel Mortgage Act (Act 1508) and the Revised Penal Code. The Deed of Chattel
Mortgage executed by the petitioner and Siton stipulates:
The Mortgagor shall not sell, mortgage or in any other way, encumber or dispose of the
property herein mortgaged without the previous written consent of the Mortgagee. (p. 85,
Rollo).
The rule is settled that the chattel mortgagor continues to be the owner of the property, and therefore, has
the power to alienate the same; however, he is obliged under pain of penal liability, to secure the written
consent of the mortgagee. (Francisco, Vicente, Jr., Revised Rules of Court in the Philippines, (1972),
Volume IV-B Part I, p. 525). Thus, the instruments of mortgage are binding, while they subsist, not only
upon the parties executing them but also upon those who later, by purchase or otherwise, acquire the
properties referred to therein.
The absence of the written consent of the mortgagee to the sale of the mortgaged property in favor of a
third person, therefore, affects not the validity of the sale but only the penal liability of the mortgagor under
the Revised Penal Code and the binding effect of such sale on the mortgagee under the Deed of Chattel
Mortgage.
Anent its second, third and fifth assigned errors, petitioner submits that it is not bound by the deed of sale
made by Siton in favor of De Dumo, as neither petitioner nor its predecessor has given their written or
verbal consent thereto pursuant to the Deed of Chattel Mortgage.

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On this matter, the appellate court upheld the findings of the trial court, as follows, to wit:
The first issue is whether or not the sale and transfer of the motor vehicle, subject matter
of the chattel mortgage, made by Siton in favor of Atty. de Dumo is illegal and violative of
the Chattel Mortgage Law. The supposition is that if it were illegal, then plaintiff has all the
right to file this action and to foreclose on the chattel mortgage. Both defendants testified
that, before the projected sale, they went to a certain. Atty. Villa of Filinvest Credit
Corporation advising the latter of the intended sale and transfer. Defendants were
accordingly advised that the verbal information given to the corporation would suffice, and
that it would be tedious and impractical to effect a change of transfer of ownership as that
would require a new credit investigation as to the capacity and worthiness of Atty. De
Dumo, being the new debtor. The further suggestion given by Atty. Villa is that the account
should be maintained in the name of Galicano Siton. Plaintiff claims that it and its
predecessor had never been notified of the sale much less were they notified in writing as
required by the contract. On this particular issue, it would really appear that, since the
transfer, it was Atty. de Dumo who had been paying said account, almost invariably with his
personal checks. In fact, one of the checks that supposedly bounced, marked Exhibit J and
the relative receipt as Exhibit 16, was Atty. de Dumo's personal check. Note that plaintiff
has been accepting such payments by defendant de Dumo. It would appear, therefore, that
there was an implied acceptance by the plaintiff and its predecessor of the transfer.
Another reasonable conclusion is that, while there was failure on the part of defendants to
comply strictly and literaly with their contract, there was substantial compliance therewith.
(pp. 92-93, Rollo)
We agree with the aforequoted findings and conclusions of the lower court which were affirmed on appeal
by the Court of Appeals. The conclusions and findings of facts by the trial court are entitled to great weight
and will not be disturbed on appeal unless for strong and cogent reasons because the trial court is in a
better position to examine real evidence as well as to observe the demeanor of witnesses while testifying
on the case. (Macua vs. Intermediate Appellate Court, No. L-70810, October 26, 1987,155 SCRA 29)
There is no dispute that the Deed of Chattel Mortgage executed between Siton and the petitioner requires
the written consent of the latter as mortgagee in the sale or transfer of the mortgaged vehicle. We cannot
ignore the findings, however, that before the sale, prompt inquiries were made by private respondents with
Filinvest Credit Corporation regarding any possible future sale of the mortgaged property; and that it was
upon the advice of the company's credit lawyer that such a verbal notice is sufficient and that it would be
convenient if the account would remain in the name of the mortgagor Siton.
Even the personal checks of de Dumo were accepted by petitioner as payment of some of the installments
under the promissory note (p. 92, Rollo). If it is true that petitioner has not acquiesced in the sale, then, it
should have inquired as to why de Dumo's checks were being used to pay Siton's obligations.
Based on the foregoing circumstances, the petitioner is bound by its predecessor company's
representations. This is based on the doctrine of estoppel, through which, "an admission or representation
is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person
relying thereon" (Art. 1431, Civil Code). Like the related principles of volenti non lit injuria (consent to
injury), waiver and acquiescence, estoppel finds its origin generally in the equitable notion that one may not
change his position, and profit from his own wrongdoing when he has caused another to rely on his former
representations (Sy vs. Central Bank, No. L-41480, April 30, 1976, 70 SCRA 570).
Further, it is worthy to note that despite the arguments of petitioner that it is not bound by the sale of the
vehicle to de Dumo, and that the latter is a stranger to the transaction between Filinvest and Siton,
nevertheless, it admitted de Dumo's obligation as purchaser of the property when it named the latter as one

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of the defendants in the lower court. Petitioner even manifested in its prayer in the appellant's brief and in
the petition before Us, that de Dumo be ordered to pay petitioner, jointly and severally with Siton the unpaid
balance on the promissory note (pp. 32 and 72, Rollo).
In the fourth assigned error by petitioner, the latter claims that the appellate court gravely erred in upholding
the trial court's refusal to issue that Writ of Replevin despite compliance with the requirements of the Rules.
This contention is devoid of merit.
Article 1484 of the New Civil Code prescribes three remedies which a vendor may pursue in a contract of
sale of personal property the price of which is payable in installments, to wit: 1) to exact fulfillment of the
obligation; 2) cancel the sale; and 3) foreclose the mortgage on the thing sold. These remedies are
alternative and the vendor cannot avail of them at the same time.
It is clear from the prayer of petitioner in its brief on appeal to the appellate court that it had chosen the
remedy of fulfillment when it asked the appellate court to order private respondents to pay the remaining
unpaid sums under the promissory note (p. 31, Rollo). By having done so, it has deemed waived the third
remedy of foreclosure, and it cannot therefore ask at the same time for a Writ of Replevin as preparatory
remedy to foreclosure of mortgage. In a similar case, where the vendor filed an action containing three
remedies: to collect the purchase price; to seize the property purchased by suing for replevin and to
foreclose the mortgage executed thereon, We held that such a scheme is not only irregular but is a flagrant
circumvention of the prohibition of the law (Luneta Motor Company vs. Dimagiba No. L-17061, December
30, 1961, 3 SCRA 884).
Finally, the petitioner argues that the judgment of the appellate court was not in accordance with its own
findings and those of the trial court showing private respondents' default in the payment of three monthly
installments as a result of the dishonor of three checks issued as payments; and that as a consequence
thereof, the full amount of the unpaid balance under the promissory note became due and demandable
pursuant to the terms of the promissory note.
This contention is impressed with merit. The findings of the trial court on this issue, which were affirmed by
the appellate court, state, as follows:
The second point of issue is whether or not defendants were in arrears when the complaint
was filed on January 25, 1982. Plaintiff claims that there were three payments by checks
made by defendants, which are ineffective (Art. 1249, Civil Code) as said checks bounced
for insufficient finding. .... The debtor/obligor is allegedly obliged, as per the Chattel
Mortgage Contract, to have the motor vehicle insured and, failing which, the creditor may
insure the same for the account of the debtor. Such payments, therefore, together with the
value of the three checks that had been dishonored, are the reasons for defendants'
delinquency. On defendant's part, more particularly Atty. de Dumo's, they submit that there
was no delinquency as, in fact, defendants have receipts to evidence payment for the
months of November 1981 (Exhibit 18 dated November 3, 1981), December 1981 (Exhibit
17 dated December 2, 1981), and January, 1982 (Exhibit 30, dated January 5, 1982).
On cross-examination, Atty. de Dumo admitted that really one of his checks (Exhibit J) was
dishonored. There is no evidence on way [or] the other whether said check was replaced
subsequently with a good one. Likewise, there is no clarification in the record as to
whether the two other dishonored checks had been replaced. As to the insurance policies,
defendants claimed on the witness stand that they were the ones who had the vehicle
insured, for, otherwise, defendant de Dumo could not have registered the motor vehicle for
the years 1980 up to 1982. Defendants further contend that they complied with their
undertaking by notifying verbally the creditor of that fact. There is no denying the fact
however, that the insurance policies obtained were not endorsed, much less surrendered,

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to the plaintiff; in fact such policies were not shown in court to evidence the proper
indorsement of the policies in favor of the creditor. (pp. 93-94, Rollo). (Emphasis supplied)
It is evident from the foregoing findings that the checks issued by the defendants as payment for the
installments for November and December, 1981 and January, 1982 were dishonored and were not shown
to have been replaced. The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been cashed. (Art. 1249,
Civil Code). When the existence of the debt is fully established by the evidence contained in the record, the
burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a
defense to the claim of the creditor. (Chua Chienco vs. Vargas, 11 Phil. 219). In the absence of any
showing that the aforestated checks were replaced and subsequently cashed, We can only infer that the
monthly installments for November, 1981, December, 1981 and January, 1982 have not been paid. In view
of the above, it is not correct for the appellate court to ignore the evidence on record showing the default of
private respondents in their obligations. The fact that Siton and de Dumo were not advised or notified of
their failure to comply with their obligations under the note and under the Deed of Chattel Mortgage is of no
importance. Article 1169 of the Civil Code provides:
Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
1. When the obligation or the law expressly so declares;
xxx xxx xxx
The promissory note executed by Siton in favor of Car Traders Philippines, Inc. expressly stipulates that the
unpaid balance shall be payable, without need of notice or demand, in fixed monthly installments; and that
if default be made in the payment of any of the installments or interest thereon as and when the same
becomes due and payable as specified above, the total principal sum then remaining unpaid, together with
accrued interest thereon, shall at once become due and payable (p. 84, Rollo). The parties are bound by
this agreement.
In view of the foregoing, We find it correct to hold both the respondents Galicano Siton and Justiniano de
Dumo liable for their obligations to petitioner herein. In the case at bar, the purchase of the car by
respondent de Dumo from respondent Siton does not necessarily imply the extinguishment of the liability of
the latter. Since it was neither established nor shown that Siton was released from responsibility under the
promissory note, the same does not constitute novation by substitution of debtors under Article 1293 of the
Civil Code. Likewise, the fact that petitioner company accepts payments from a third person like respondent
de Dumo, who has assumed the obligation, will result merely to the addition of debtors and not novation.
Hence, the creditor may therefore enforce the obligation against both debtors. (Straight vs. Hashell, 49 Phil.
614; Mata vs. Serra, 47 Phil. 464; McCullough vs. Veloso, 46 Phil. 1; Pacific Commercial vs. Sotto, 34 Phil.
237). If there is no agreement as to solidarity, the first and new debtors are considered obligated jointly.
(Lopez vs. Court of Appeals, et al., No. L-33157, June 29, 1982, 114 SCRA 671; Dungo vs. Lopena, et al.,
L-18377, December 29, 1962, 6 SCRA 1007).
ACCORDINGLY, the petition is GRANTED and the assailed decision of the Court of Appeals dated April 25,
1986 is hereby REVERSED and SET ASIDE, and a new one entered, ordering the private respondents
Galicano Siton and Justiniano de Dumo, jointly to pay to petitioner Servicewide Specialists, Incorporated,
the total sum of the remaining unpaid balance on the promissory note with interest thereon at fourteen
percent per annum from January 25, 1982 until fully paid, as well as stipulated attorney's fees and
liquidated damages; and to reimburse to petitioner the sum of P 3,859.90 for the premium payments on the
insurance policies over the subject vehicle. Costs against private respondents.
SO ORDERED.

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EN BANC
[B.M. No. 793. July 30, 2004]
IN RE: SUSPENSION FROM THE PRACTICE OF LAW IN THE TERRITORY OF GUAM OF ATTY. LEON
G. MAQUERA
RESOLUTION
TINGA, J.:
May a member of the Philippine Bar who was disbarred or suspended from the practice of law in a
foreign jurisdiction where he has also been admitted as an attorney be meted the same sanction as a
member of the Philippine Bar for the same infraction committed in the foreign jurisdiction? There is a Rule
of Court provision covering this cases central issue. Up to this juncture, its reach and breadth have not
undergone the test of an unsettled case.
In a Letter dated August 20, 1996,[1] the District Court of Guam informed this Court of the suspension
of Atty. Leon G. Maquera (Maquera) from the practice of law in Guam for two (2) years pursuant to
the Decision rendered by the Superior Court of Guam on May 7, 1996 in Special Proceedings Case No.
SP0075-94,[2] a disciplinary case filed by the Guam Bar Ethics Committee against Maquera.
The Court referred the matter of Maqueras suspension in Guam to the Bar Confidant for comment in
its Resolution dated November 19, 1996.[3] Under Section 27, Rule 138 of the Revised Rules of Court, the
disbarment or suspension of a member of the Philippine Bar in a foreign jurisdiction, where he has also
been admitted as an attorney, is also a ground for his disbarment or suspension in this realm, provided the
foreign courts action is by reason of an act or omission constituting deceit, malpractice or other gross
misconduct, grossly immoral conduct, or a violation of the lawyers oath.
In a Memorandum dated February 20, 1997, then Bar Confidant Atty. Erlinda C. Verzosa
recommended that the Court obtain copies of the record of Maqueras case since the documents

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transmitted by the Guam District Court do not contain the factual and legal bases for Maqueras suspension
and are thus insufficient to enable her to determine whether Maqueras acts or omissions which resulted in
his suspension in Guam are likewise violative of his oath as a member of the Philippine Bar. [4]
Pursuant to this Courts directive in its Resolution dated March 18, 1997,[5] the Bar Confidant sent a
letter dated November 13, 1997 to the District Court of Guam requesting for certified copies of the record of
the disciplinary case against Maquera and of the rules violated by him. [6]
The Court received certified copies of the record of Maqueras case from the District Court of Guam on
December 8, 1997.[7]
Thereafter, Maqueras case was referred by the Court to the Integrated Bar of the Philippines (IBP) for
investigation report and recommendation within sixty (60) days from the IBPs receipt of the case records. [8]
The IBP sent Maquera a Notice of Hearing requiring him to appear before the IBPs Commission on
Bar Discipline on July 28, 1998. [9] However, the notice was returned unserved because Maquera had
already moved from his last known address in Agana, Guam and did not leave any forwarding address. [10]
On October 9, 2003, the IBP submitted to the Court its Report and Recommendation and
its Resolution No. XVI-2003-110, indefinitely suspending Maquera from the practice of law within the
Philippines until and unless he updates and pays his IBP membership dues in full. [11]
The IBP found that Maquera was admitted to the Philippine Bar on February 28, 1958. On October 18,
1974, he was admitted to the practice of law in the territory of Guam. He was suspended from the practice
of law in Guam for misconduct, as he acquired his clients property as payment for his legal services, then
sold it and as a consequence obtained an unreasonably high fee for handling his clients case. [12]
In its Decision, the Superior Court of Guam stated that on August 6, 1987, Edward Benavente, the
creditor of a certain Castro, obtained a judgment against Castro in a civil case. Maquera served as Castros
counsel in said case. Castros property subject of the case, a parcel of land, was to be sold at a public
auction in satisfaction of his obligation to Benavente. Castro, however, retained the right of redemption over
the property for one year. The right of redemption could be exercised by paying the amount of the judgment
debt within the aforesaid period.[13]
At the auction sale, Benavente purchased Castros property for Five Hundred U.S. Dollars
(US$500.00), the amount which Castro was adjudged to pay him. [14]
On December 21, 1987, Castro, in consideration of Maqueras legal services in the civil case involving
Benavente, entered into an oral agreement with Maquera and assigned his right of redemption in favor of
the latter.[15]

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On January 8, 1988, Maquera exercised Castros right of redemption by paying Benavente US$525.00
in satisfaction of the judgment debt. Thereafter, Maquera had the title to the property transferred in his
name.[16]
On December 31, 1988, Maquera sold the property to C.S. Chang and C.C. Chang for Three Hundred
Twenty Thousand U.S. Dollars (US$320,000.00). [17]
On January 15, 1994, the Guam Bar Ethics Committee (Committee) conducted hearings regarding
Maqueras alleged misconduct.[18]
Subsequently, the Committee filed a Petition in the Superior Court of Guam praying that Maquera be
sanctioned for violations of Rules 1.5 [19] and 1.8(a)[20] of the Model Rules of Professional Conduct (Model
Rules) in force in Guam. In its Petition, the Committee claimed that Maquera obtained an unreasonably
high fee for his services. The Committee further alleged that Maquera himself admitted his failure to comply
with the requirement in Rule 1.8 (a) of the Model Rules that a lawyer shall not enter into a business
transaction with a client or knowingly acquire a pecuniary interest adverse to a client unless the transaction
and the terms governing the lawyers acquisition of such interest are fair and reasonable to the client, and
are fully disclosed to, and understood by the client and reduced in writing. [21]
The Committee recommended that Maquera be: (1) suspended from the practice of law in Guam for a
period of two [2] years, however, with all but thirty (30) days of the period of suspension deferred; (2)
ordered to return to Castro the difference between the sale price of the property to the Changs and the
amount due him for legal services rendered to Castro; (3) required to pay the costs of the disciplinary
proceedings; and (4) publicly reprimanded. It also recommended that other jurisdictions be informed that
Maquera has been subject to disciplinary action by the Superior Court of Guam. [22]
Maquera did not deny that Castro executed a quitclaim deed to the property in his favor as
compensation for past legal services and that the transaction, except for the deed itself, was oral and was
not made pursuant to a prior written agreement. However, he contended that the transaction was made
three days following the alleged termination of the attorney-client relationship between them, and that the
property did not constitute an exorbitant fee for his legal services to Castro. [23]
On May 7, 1996, the Superior Court of Guam rendered its Decision[24]suspending Maquera from the
practice of law in Guam for a period of two (2) years and ordering him to take the Multi-State Professional
Responsibility Examination (MPRE) within that period. The court found that the attorney-client relationship
between Maquera and Castro was not yet completely terminated when they entered into the oral
agreement to transfer Castros right of redemption to Maquera on December 21, 1987. It also held that
Maquera profited too much from the eventual transfer of Castros property to him since he was able to sell
the same to the Changs with more than US$200,000.00 in profit, whereas his legal fees for services
rendered to Castro amounted only to US$45,000.00. The court also ordered him to take the MPRE upon

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his admission during the hearings of his case that he was aware of the requirements of the Model Rules
regarding business transactions between an attorney and his client in a very general sort of way. [25]
On the basis of the Decision of the Superior Court of Guam, the IBP concluded that although the said
court found Maquera liable for misconduct, there is no evidence to establish that [Maquera] committed a
breach of ethics in the Philippines. [26] However, the IBP still resolved to suspend him indefinitely for his
failure to pay his annual dues as a member of the IBP since 1977, which failure is, in turn, a ground for
removal of the name of the delinquent member from the Roll of Attorneys under Section 10, Rule 139-A of
the Revised Rules of Court.[27]
The power of the Court to disbar or suspend a lawyer for acts or omissions committed in a foreign
jurisdiction is found in Section 27, Rule 138 of the Revised Rules of Court, as amended by Supreme
Court Resolution dated February 13, 1992, which states:
Section 27. Disbarment or suspension of attorneys by Supreme Court, grounds therefor.A member of the
bar may be disbarred or suspended from his office as attorney by the Supreme Court for any deceit,
malpractice, or other gross misconduct in such office, grossly immoral conduct, or by reason of his
conviction of a crime involving moral turpitude, or for any violation of the oath which he is required to
take before admission to practice, or for a willful disobedience appearing as attorney for a party to a
case without authority to do so. The practice of soliciting cases at law for the purpose of gain, either
personally or through paid agents or brokers, constitutes malpractice.
The disbarment or suspension of a member of the Philippine Bar by a competent court or other
disciplinatory agency in a foreign jurisdiction where he has also been admitted as an attorney is a
ground for his disbarment or suspension if the basis of such action includes any of the acts
hereinabove enumerated.
The judgment, resolution or order of the foreign court or disciplinary agency shall be prima facie
evidence of the ground for disbarment or suspension (Emphasis supplied).
The Court must therefore determine whether Maqueras acts, namely: acquiring by assignment
Castros right of redemption over the property subject of the civil case where Maquera appeared as counsel
for him; exercising the right of redemption; and, subsequently selling the property for a huge profit, violate
Philippine law or the standards of ethical behavior for members of the Philippine Bar and thus constitute
grounds for his suspension or disbarment in this jurisdiction.
The Superior Court of Guam found that Maquera acquired his clients property by exercising the right
of redemption previously assigned to him by the client in payment of his legal services. Such transaction
falls squarely under Article 1492 in relation to Article 1491, paragraph 5 of the Civil Code of the Philippines.
Paragraph 5 of Article 1491 [28] prohibits the lawyers acquisition by assignment of the clients property which

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is the subject of the litigation handled by the lawyer. Under Article 1492, [29] the prohibition extends to sales
in legal redemption.
The prohibition ordained in paragraph 5 of Article 1491 and Article 1492 is founded on public policy
because, by virtue of his office, an attorney may easily take advantage of the credulity and ignorance of his
client[30] and unduly enrich himself at the expense of his client.
The case of In re: Ruste[31] illustrates the significance of the aforementioned prohibition. In that case,
the attorney acquired his clients property subject of a case where he was acting as counsel pursuant to a
deed of sale executed by his clients in his favor. He contended that the sale was made at the instance of
his clients because they had no money to pay him for his services. The Court ruled that the lawyers
acquisition of the property of his clients under the circumstances obtaining therein rendered him liable for
malpractice. The Court held:
Whether the deed of sale in question was executed at the instance of the spouses driven by financial
necessity, as contended by the respondent, or at the latters behest, as contended by the complainant, is of
no moment. In either case an attorney occupies a vantage position to press upon or dictate his terms to a
harassed client, in breach of the rule so amply protective of the confidential relations, which must
necessarily exist between attorney and client, and of the rights of both. [32]
The Superior Court of Guam also hinted that Maqueras acquisition of Castros right of redemption, his
subsequent exercise of said right, and his act of selling the redeemed property for huge profits were tainted
with deceit and bad faith when it concluded that Maquera charged Castro an exorbitant fee for his legal
services. The court held that since the assignment of the right of redemption to Maquera was in payment
for his legal services, and since the property redeemed by him had a market value of US$248,220.00 as of
December 21, 1987 (the date when the right of redemption was assigned to him), he is liable for
misconduct for accepting payment for his legal services way beyond his actual fees which amounted only
to US$45,000.00.
Maqueras acts in Guam which resulted in his two (2)-year suspension from the practice of law in that
jurisdiction are also valid grounds for his suspension from the practice of law in the Philippines. Such acts
are violative of a lawyers sworn duty to act with fidelity toward his clients. They are also violative of the
Code of Professional Responsibility, specifically, Canon 17 which states that [a] lawyer owes fidelity to the
cause of his client and shall be mindful the trust and confidence reposed in him; and Rule 1.01 which
prohibits lawyers from engaging in unlawful, dishonest, immoral or deceitful conduct. The requirement of
good moral character is not only a condition precedent to admission to the Philippine Bar but is also a
continuing requirement to maintain ones goods standing in the legal profession. [33]
It bears stressing that the Guam Superior Courts judgment ordering Maqueras suspension from the
practice of law in Guam does not automatically result in his suspension or disbarment in the
Philippines. Under Section 27,[34] Rule 138 of the Revised Rules of Court, the acts which led to his

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suspension in Guam are mere grounds for disbarment or suspension in this jurisdiction, at that only if the
basis of the foreign courts action includes any of the grounds for disbarment or suspension in this
jurisdiction.[35] Likewise, the judgment of the Superior Court of Guam only constitutes prima facie evidence
of Maqueras unethical acts as a lawyer. [36] More fundamentally, due process demands that he be given the
opportunity to defend himself and to present testimonial and documentary evidence on the matter in an
investigation to be conducted in accordance with Rule 139-B of the Revised Rules of Court. Said rule
mandates that a respondent lawyer must in all cases be notified of the charges against him. It is only after
reasonable notice and failure on the part of the respondent lawyer to appear during the scheduled
investigation that an investigation may be conducted ex parte.[37]
The Court notes that Maquera has not yet been able to adduce evidence on his behalf regarding the
charges of unethical behavior in Guam against him, as it is not certain that he did receive the Notice of
Hearing earlier sent by the IBPs Commission on Bar Discipline. Thus, there is a need to ascertain
Maqueras current and correct address in Guam in order that another notice, this time specifically informing
him of the charges against him and requiring him to explain why he should not be suspended or disbarred
on those grounds (through this Resolution), may be sent to him.
Nevertheless, the Court agrees with the IBP that Maquera should be suspended from the practice of
law for non-payment of his IBP membership dues from 1977 up to the present. [38] Under Section 10, Rule
139-A of the Revised Rules of Court, non-payment of membership dues for six (6) months shall warrant
suspension of membership in the IBP, and default in such payment for one year shall be ground for removal
of the name of the delinquent member from the Roll of Attorneys. [39]
WHEREFORE, Atty. Leon G. Maquera is required to SHOW CAUSE, within fifteen (15) days from
receipt of this Resolution, why he should not be suspended or disbarred for his acts which gave rise to the
disciplinary proceedings against him in the Superior Court of Guam and his subsequent suspension in said
jurisdiction.
The Bar Confidant is directed to locate the current and correct address of Atty. Maquera in Guam and
to serve upon him a copy of this Resolution.
In the meantime, Atty. Maquera is SUSPENDED from the practice of law for ONE (1) YEAR or until he
shall have paid his membership dues, whichever comes later.
Let a copy of this Resolution be attached to Atty. Maqueras personal record in the Office of the Bar
Confidant and copies be furnished to all chapters of the Integrated Bar of the Philippines and to all courts in
the land.
SO ORDERED.

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Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION
G.R. No. L-68838

March 11, 1991

FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio Fabillo, Roman
Fabillo,
Cristeta
F.
Maglinte
and
Antonio
Fabillo), petitioners,
vs.

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THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case Division) and ALFREDO
MURILLO (substituted by his heirs Fiamita M. Murillo, Flor M. Agcaoili and Charito M.
Babol),respondents.
Francisco
A.
Von Kaiser P. Soro for private respondent.

Tan

for

petitioners.

FERNAN, C.J.:
In the instant petition for review on certiorari, petitioners seek the reversal of the appellate court's decision
interpreting in favor of lawyer Alfredo M. Murillo the contract of services entered into between him and his
clients, spouses Florencio Fabillo and Josefa Taa.
In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her brother, Florencio, a
house and lot in San Salvador Street, Palo, Leyte which was covered by tax declaration No. 19335, and to
her husband, Gregorio D. Brioso, a piece of land in Pugahanay, Palo, Leyte. 1 After Justina's death,
Florencio filed a petition for the probate of said will. On June 2, 1962, the probate court approved the
project of partition "with the reservation that the ownership of the land declared under Tax Declaration No.
19335 and the house erected thereon be litigated and determined in a separate proceedings." 2
Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San
Salvador property. Acquiescing to render his services, Murillo wrote Florencio the following handwritten
letter:
Dear Mr. Fabillo:
I have instructed my stenographer to prepare the complaint and file the same on Wednesday if you are
ready with the filing fee and sheriffs fee of not less than P86.00 including transportation expenses.
Considering that Atty. Montilla lost this case and the present action is a revival of a lost case, I trust that you
will gladly give me 40% of the money value of the house and lot as a contigent (sic) fee in case of a
success. When I come back I shall prepare the contract of services for your signature.
Thank you.
Cordially
(Sgd.)
Aug. 9, 1964 3

Alfredo

M.

Thirteen days later, Florencio and Murillo entered into the following contract:
CONTRACT OF SERVICES

yours,
Murillo

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KNOW ALL MEN BY THESE PRESENTS:

That I, FLORENCIO FABILLO, married to JOSEFA TANA, of legal age, Filipino citizen and with
residence and postal address at Palo, Leyte, was the Petitioner in Special Proceedings No. 843,
entitled "In the Matter of the Testate Estate of the late Justina Fabillo, Florencio Fabillo, Petitioner"
of the Court of First Instance of Leyte;
That by reason of the Order of the Court of First Instance of Leyte dated June 2, 1962, my claim for
the house and lot mentioned in paragraph one (1) of the last will and testament of the late Justina
Fabillo, was denied altho the will was probated and allowed by the Court;
That acting upon the counsel of Atty. Alfredo M. Murillo, I have cause(d) the preparation and filing
of another case, entitled "Florencio Fabillo vs. Gregorio D. Brioso," which was docketed as Civil
Case No. 3532 of the Court of First Instance of Leyte;
That I have retained and engaged the services of Atty. ALFREDO M. MURILLO, married and of
legal age, with residence and postal address at Santa Fe, Leyte to be my lawyer not only in Social
Proceedings No. 843 but also in Civil Case No. 3532 under the following terms and conditions;
That he will represent me and my heirs, in case of my demise in the two cases until their
successful conclusion or until the case is settled to my entire satisfaction;
That for and in consideration for his legal services, in the two cases, I hereby promise and bind
myself to pay Atty. ALFREDO M. MURILLO, in case of success in any or both cases the sum
equivalent to FORTY PER CENTUM (40%) of whatever benefit I may derive from such casesto be
implemented as follows:
If the house and lot in question is finally awarded to me or a part of the same by virtue of an
amicable settlement, and the same is sold, Atty. Murillo, is hereby constituted as Atty. in-fact to sell
and convey the said house and lot and he shall be given as his compensation for his services as
counsel and as attorney-in-fact the sum equivalent to forty per centum of the purchase price of the
house and lot;
If the same house and lot is just mortgage(d) to any person, Atty. Murillo shall be given the sum
equivalent to forty per centum (40%) of the proceeds of the mortgage;
If the house and lot is leased to any person, Atty. Murillo shall be entitled to receive an amount
equivalent to 40% (FORTY PER CENTUM) of the rentals of the house and lot, or a part thereof;
If the house and lot or a portion thereof is just occupied by the undersigned or his heirs, Atty.
Murillo shall have the option of either occupying or leasing to any interested party FORTY PER
CENT of the house and lot.

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Atty. Alfredo M. Murillo shall also be given as part of his compensation for legal services in the two
cases FORTY PER CENTUM of whatever damages, which the undersigned can collect in either or
both cases, provided, that in case I am awarded attorney's fees, the full amount of attorney's fees
shall be given to the said Atty. ALFREDO M. MURILLO;
That in the event the house and lot is (sic) not sold and the same is maintained by the undersigned
or his heirs, the costs of repairs, maintenance, taxes and insurance premiums shall be for the
account of myself or my heirs and Attorney Murillo, in proportion to our rights and interest
thereunder that is forty per cent shall be for the account of Atty. Murillo and sixty per cent shall be
for my account or my heirs.
IN WITNESS HEREOF, I hereby set unto my signature below this 22nd day of August 1964 at
Tacloban City.
(Sgd.) FLORENCIO FABILLO
(Sgd.)
JOSEFA
WITH MY CONFORMITY:

T.

FABILLO

(Sgd.) ALFREDO M. MURILLO

(Sgd.)
(Witness)

ROMAN

T.

FABILLO (Sgd.)
CRISTETA
4
(Witness)

F.

MAGLINTE

Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3532 against Gregorio D. Brioso
to recover the San Salvador property. The case was terminated on October 29, 1964 when the court, upon
the parties' joint motion in the nature of a compromise agreement, declared Florencio Fabillo as the lawful
owner not only of the San Salvador property but also the Pugahanay parcel of land.
Consequently, Murillo proceeded to implement the contract of services between him and Florencio Fabillo
by taking possession and exercising rights of ownership over 40% of said properties. He installed a tenant
in the Pugahanay property.
Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties and refused to give
Murillo his share of their produce. 5 Inasmuch as his demands for his share of the produce of the
Pugahanay property were unheeded, Murillo filed on March 23, 1970 in the then Court of First Instance of
Leyte a complaint captioned "ownership of a parcel of land, damages and appointment of a receiver"
against Florencio Fabillo, his wife Josefa Taa, and their children Ramon (sic) Fabillo and Cristeta F.
Maglinte. 6
Murillo prayed that he be declared the lawful owner of forty per cent of the two properties; that defendants
be directed to pay him jointly and severally P900.00 per annum from 1966 until he would be given his share

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of the produce of the land plus P5,000 as consequential damages and P1,000 as attorney's fees, and that
defendants be ordered to pay moral and exemplary damages in such amounts as the court might deem just
and reasonable.
In their answer, the defendants stated that the consent to the contract of services of the Fabillo spouses
was vitiated by old age and ailment; that Murillo misled them into believing that Special Proceedings No.
843 on the probate of Justina's will was already terminated when actually it was still pending resolution; and
that the contingent fee of 40% of the value of the San Salvador property was excessive, unfair and
unconscionable considering the nature of the case, the length of time spent for it, the efforts exerted by
Murillo, and his professional standing.
They prayed that the contract of services be declared null and void; that Murillo's fee be fixed at 10% of the
assessed value of P7,780 of the San Salvador property; that Murillo be ordered to account for the P1,000
rental of the San Salvador property which he withdrew from the court and for the produce of the Pugahanay
property from 1965 to 1966; that Murillo be ordered to vacate the portion of the San Salvador property
which he had occupied; that the Pugahanay property which was not the subject of either Special
Proceedings No. 843 or Civil Case No. 3532 be declared as the exclusive property of Florencio Fabillo, and
that Murillo be ordered to pay moral damages and the total amount of P1,000 representing expenses of
litigation and attorney's fees.
In its decision of December 2, 1975, 7 the lower court ruled that there was insufficient evidence to prove
that the Fabillo spouses' consent to the contract was vitiated. It noted that the contract was witnessed by
two of their children who appeared to be highly educated. The spouses themselves were old but literate
and physically fit.
In claiming jurisdiction over the case, the lower court ruled that the complaint being one "to recover real
property from the defendant spouses and their heirs or to enforce a lien thereon," the case could be
decided independent of the probate proceedings. Ruling that the contract of services did not violate Article
1491 of the Civil Code as said contract stipulated a contingent fee, the court upheld Murillo's claim for
"contingent attorney's fees of 40% of the value of recoverable properties." However, the court declared
Murillo to be the lawful owner of 40% of both the San Salvador and Pugahanay properties and the
improvements thereon. It directed the defendants to pay jointly and severally to Murillo the amount of
P1,200 representing 40% of the net produce of the Pugahanay property from 1967 to 1973; entitled Murillo
to 40% of the 1974 and 1975 income of the Pugahanay property which was on deposit with a bank, and
ordered defendants to pay the costs of the suit.
Both parties filed motions for the reconsideration of said decision: Fabillo, insofar as the lower court
awarded 40% of the properties to Murillo and the latter insofar as it granted only P1,200 for the produce of
the properties from 1967 to 1973. On January 29, 1976, the lower court resolved the motions and modified
its decision thus:

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ACCORDINGLY, the judgment heretofore rendered is modified to read as follows:

(a) Declaring the plaintiff as entitled to and the true and lawful owner of forty percent (40%) of the
parcels of land and improvements thereon covered by Tax Declaration Nos. 19335 and 6229
described in Paragraph 5 of the complaint;
(b) Directing all the defendants to pay jointly and severally to the plaintiff the sum of Two Thousand
Four Hundred Fifty Pesos (P2,450.00) representing 40% of the net produce of the Pugahanay
property from 1967 to 1973;
(c) Declaring the plaintiff entitled to 40% of the 1974 and 1975 income of said riceland now on
deposit with the Prudential Bank, Tacloban City, deposited by Mr. Pedro Elona, designated receiver
of the property;
(d) Ordering the defendants to pay the plaintiff the sum of Three Hundred Pesos (P 300.00) as
attorney's fees; and
(e) Ordering the defendants to pay the costs of this suit.
SO ORDERED.
In view of the death of both Florencio and Justina Fabillo during the pendency of the case in the lower
court, their children, who substituted them as parties to the case, appealed the decision of the lower court
to the then Intermediate Appellate Court. On March 27, 1984, said appellate court affirmed in toto the
decision of the lower court. 8
The instant petition for review on certiorari which was interposed by the Fabillo children, was filed shortly
after Murillo himself died. His heirs likewise substituted him in this case. The Fabillos herein question the
appellate court's interpretation of the contract of services and contend that it is in violation of Article 1491 of
the Civil Code.
The contract of services did not violate said provision of law. Article 1491 of the Civil Code, specifically
paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial auction,
properties and rights which are the objects of litigation in which they may take part by virtue of their
profession. The said prohibition, however, applies only if the sale or assignment of the property takes place
during the pendency of the litigation involving the client's property. 9
Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said
prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not made during the
pendency of the litigation but only after judgment has been rendered in the case handled by the lawyer. In
fact, under the 1988 Code of Professional Responsibility, a lawyer may have a lien over funds and property

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of his client and may apply so much thereof as may be necessary to satisfy his lawful fees and
disbursements. 10
As long as the lawyer does not exert undue influence on his client, that no fraud is committed or imposition
applied, or that the compensation is clearly not excessive as to amount to extortion, a contract for
contingent fee is valid and enforceable. 11 Moreover, contingent fees were impliedly sanctioned by No. 13 of
the Canons of Professional Ethics which governed lawyer-client relationships when the contract of services
was entered into between the Fabillo spouses and Murillo. 12
However, we disagree with the courts below that the contingent fee stipulated between the Fabillo spouses
and Murillo is forty percent of the properties subject of the litigation for which Murillo appeared for the
Fabillos. A careful scrutiny of the contract shows that the parties intended forty percent of the value of the
properties as Murillo's contingent fee. This is borne out by the stipulation that "in case of success of any or
both cases," Murillo shall be paid "the sum equivalent to forty per centum of whatever benefit" Fabillo would
derive from favorable judgments. The same stipulation was earlier embodied by Murillo in his letter of
August 9, 1964 aforequoted.
Worth noting are the provisions of the contract which clearly states that in case the properties are sold,
mortgaged, or leased, Murillo shall be entitled respectively to 40% of the "purchase price," "proceeds of the
mortgage," or "rentals." The contract is vague, however, with respect to a situation wherein the properties
are neither sold, mortgaged or leased because Murillo is allowed "to have the option of occupying or
leasing to any interested party forty per cent of the house and lot." Had the parties intended that Murillo
should become the lawful owner of 40% of the properties, it would have been clearly and unequivocally
stipulated in the contract considering that the Fabillos would part with actual portions of their properties and
cede the same to Murillo.
The ambiguity of said provision, however, should be resolved against Murillo as it was he himself who
drafted the contract. 13 This is in consonance with the rule of interpretation that, in construing a contract of
professional services between a lawyer and his client, such construction as would be more favorable to the
client should be adopted even if it would work prejudice to the lawyer. 14 Rightly so because of the
inequality in situation between an attorney who knows the technicalities of the law on the one hand and a
client who usually is ignorant of the vagaries of the law on the other hand. 15
Considering the nature of the case, the value of the properties subject matter thereof, the length of time and
effort exerted on it by Murillo, we hold that Murillo is entitled to the amount of Three Thousand Pesos
(P3,000.00) as reasonable attorney's fees for services rendered in the case which ended on a compromise
agreement. In so ruling, we uphold "the time-honored legal maxim that a lawyer shall at all times uphold the
integrity and dignity of the legal profession so that his basic ideal becomes one of rendering service and
securing justice, not money-making. For the worst scenario that can ever happen to a client is to lose the
litigated property to his lawyer in whom all trust and confidence were bestowed at the very inception of the
legal controversy." 16

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WHEREFORE, the decision of the then Intermediate Appellate Court is hereby reversed and set aside and
a new one entered (a) ordering the petitioners to pay Atty. Alfredo M. Murillo or his heirs the amount of
P3,000.00 as his contingent fee with legal interest from October 29, 1964 when Civil Case No. 3532 was
terminated until the amount is fully paid less any and all amounts which Murillo might have received out of
the produce or rentals of the Pugahanay and San Salvador properties, and (b) ordering the receiver of said
properties to render a complete report and accounting of his receivership to the court below within fifteen
(15) days from the finality of this decision. Costs against the private respondent.
SO ORDERED.

THIRD DIVISION

PROVINCE OF CEBU, G.R. No. 170115

Petitioner,
Present:
Ynares-Santiago, J. (Chairperson),

Austria-Martinez,
- versus - Corona,*

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Nachura, and
Reyes, JJ.
HEIRS OF RUFINA MORALES,
NAMELY: FELOMINA V. PANOPIO,
NENITA VILLANUEVA, ERLINDA V.
ADRIANO and CATALINA V. QUESADA,
Respondents. Promulgated:

February 19, 2008

x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari of the Decision [1] of the Court of Appeals dated March 29, 2005 in
CA-G.R. CV No. 53632, which affirmed in toto the Decision[2] of the Regional Trial Court of Cebu City,
Branch 6, in Civil Case No. CEB-11140 for specific performance and reconveyance of property. Also
assailed is the Resolution[3] dated August 31, 2005 denying the motion for reconsideration.

On September 27, 1961, petitioner Province of Cebu leased [4] in favor of Rufina Morales a 210-square
meter lot which formed part of Lot No. 646-A of the Banilad Estate. Subsequently or sometime in 1964,
petitioner donated several parcels of land to the City of Cebu. Among those donated was Lot No. 646-A
which the City of Cebu divided into sub-lots. The area occupied by Morales was thereafter denominated as
Lot No. 646-A-3, for which Transfer Certificate of Title (TCT) No. 30883 [5] was issued in favor of the City
ofCebu.

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On July 19, 1965, the city sold Lot No. 646-A-3 as well as the other donated lots at public auction in order
to raise money for infrastructure projects. The highest bidder for Lot No. 646-A-3 was Hever Bascon but
Morales was allowed to match the highest bid since she had a preferential right to the lot as actual
occupant thereof.[6] Morales thus paid the required deposit and partial payment for the lot. [7]

In the meantime, petitioner filed an action for reversion of donation against the City of Cebu docketed as
Civil Case No. 238-BC before Branch 7 of the then Court of First Instance of Cebu. On May 7, 1974,
petitioner and the City ofCebu entered into a compromise agreement which the court approved on July 17,
1974.[8] The agreement provided for the return of the donated lots to petitioner except those that have
already been utilized by the City of Cebu.Pursuant thereto, Lot No. 646-A-3 was returned to petitioner and
registered in its name under TCT No. 104310. [9]

Morales died on February 20, 1969 during the pendency of Civil Case No. 238-BC. [10] Apart from
the deposit and down payment, she was not able to make any other payments on the balance of the
purchase price for the lot.

On March 11, 1983, one of the nieces of Morales, respondent Catalina V. Quesada, wrote to then
Cebu Governor Eduardo R. Gullas asking for the formal conveyance of Lot No. 646-A-3 to Morales
surviving heirs, in accordance with the award earlier made by the City of Cebu.[11] This was followed by
another letter of the same tenor dated October 10, 1986 addressed to Governor Osmundo G. Rama.[12]

The requests remained unheeded thus, Quesada, together with the other nieces of Morales
namely, respondents Nenita Villanueva and Erlinda V. Adriano, as well as Morales sister, Felomina V.
Panopio, filed an action for specific performance and reconveyance of property against petitioner, which
was docketed as Civil Case No. CEB-11140 before Branch 6 of the RegionalTrial Court of Cebu City.
[13]
They also consigned with the court the amount of P13,450.00 representing the balance of the purchase
price which petitioner allegedly refused to accept. [14]

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Panopio died shortly after the complaint was filed. [15]

Respondents averred that the award at public auction of the lot to Morales was a valid and binding contract
entered into by the City of Cebu and that the lot was inadvertently returned to petitioner under the
compromise judgment in Civil Case No. 238-BC. They alleged that they could not pay the balance of the
purchase price during the pendency of said case due to confusion as to whom and where payment should
be made. They thus prayed that judgment be rendered ordering petitioner to execute a final deed of
absolute sale in their favor, and that TCT No. 104310 in the name of petitioner be cancelled. [16]

Petitioner filed its answer but failed to present evidence despite several opportunities given thus, it was
deemed to have waived its right to present evidence. [17]
On March 6, 1996, the trial court rendered judgment, the dispositive part of which reads:

WHEREFORE, judgment is rendered in favor of the plaintiffs and against

the defendant Province of Cebu, hereby directing the latter to convey Lot646-A-3 to the
plaintiffs as heirs of Rufina Morales, and in this connection, to execute the necessary deed
in favor of said plaintiffs.

No pronouncement as to costs.

SO ORDERED.[18]

In ruling for the respondents, the trial court held thus:

[T]he Court is convinced that there was already a consummated sale between the City
of Cebu and Rufina Morales. There was the offer to sell in that public auction sale. It was
accepted by Rufina Morales with her bid and was granted the award for which she paid the
agreed downpayment. It cannot be gainsaid that at that time the owner of the property was
the City of Cebu. It has the absolute right to dispose of it thru that public auction sale. The

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donation by the defendant Province of Cebu to Cebu City was not voided in that Civil Case
No. 238-BC. The compromise agreement between the parties therein on the basis of
which judgment was rendered did not provide nullification of the sales or disposition made
by the City of Cebu. Being virtually successor-in-interest of City of Cebu, the defendant is
bound by the contract lawfully entered into by the former. Defendant did not initiate any
move to invalidate the sale for one reason or another. Hence, it stands as a perfectly valid
contract which defendant must respect. Rufina Morales had a vested right over the
property. The plaintiffs being the heirs or successors-in-interest of Rufina Morales, have
the right to ask for the conveyance of the property to them. While it may be true that the
title of the property still remained in the name of the City of Cebu until full payment is
made, and this could be the reason why the lot in question was among those reverted to
the Province, the sellers obligation under the contract was, for all legal purposes,
transferred to, and assumed by, the defendant Province of Cebu. It is then bound by such
contract.[19]

Petitioner appealed to the Court of Appeals which affirmed the decision of the trial court in toto. Upon denial
of its motion for reconsideration, petitioner filed the instant petition under Rule 45 of the Rules of Court,
alleging that the appellate court erred in:

FINDING THAT RUFINA MORALES AND RESPONDENTS, AS HER HEIRS, HAVE THE
RIGHT TO EQUAL THE BID OF THE HIGHEST BIDDER OF THE SUBJECT PROPERTY
AS LESSEES THEREOF;

FINDING THAT WITH THE DEPOSIT AND PARTIAL PAYMENT MADE BY RUFINA
MORALES, THE SALE WAS IN EFFECT CLOSED FOR ALL LEGAL PURPOSES, AND
THAT THE TRANSACTION WAS PERFECTED AND CONSUMMATED;

FINDING THAT LACHES AND/OR PRESCRIPTION ARE NOT APPLICABLE AGAINST

RESPONDENTS;

FINDING THAT DUE TO THE PENDENCY OF CIVIL CASE NO. 238-BC, PLAINTIFFS
WERE NOT ABLE TO PAY THE AGREED INSTALLMENTS;

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AFFIRMING THE DECISION OF THE TRIAL COURT IN FAVOR OF THE

RESPONDENTS AND AGAINST THE PETITIONERS.[20]

The petition lacks merit.

The appellate court correctly ruled that petitioner, as successor-in-interest of the City of Cebu, is bound to
respect the contract of sale entered into by the latter pertaining to Lot No. 646-A-3. The City of Cebu was
the owner of the lot when it awarded the same to respondents predecessor-in-interest, Morales, who later
became its owner before the same was erroneously returned to petitioner under the compromise
judgment. The award is tantamount to a perfected contract of sale between Morales and the City of Cebu,
while partial payment of the purchase price and actual occupation of the property by Morales and
respondents effectively transferred ownership of the lot to the latter. This is true notwithstanding the failure
of Morales and respondents to pay the balance of the purchase price.

Petitioner can no longer assail the award of the lot to Morales on the ground that she had no right to match
the highest bid during the public auction.Whether Morales, as actual occupant and/or lessee of the lot, was
qualified and had the right to match the highest bid is a foregone matter that could have been questioned
when the award was made. When the City of Cebu awarded the lot to Morales, it is assumed that she met
all qualifications to match the highest bid. The subject lot was auctioned in 1965 or more than four decades
ago and was never questioned. Thus, it is safe to assume, as the appellate court did, that all requirements
for a valid public auction sale were complied with.

A sale by public auction is perfected when the auctioneer announces its perfection by the fall of the
hammer or in other customary manner. [21] It does not matter that Morales merely matched the bid of the
highest bidder at the said auction sale. The contract of sale was nevertheless perfected as to Morales,
since she merely stepped into the shoes of the highest bidder.

Consequently, there was a meeting of minds between the City of Cebuand Morales as to the lot
sold and its price, such that each party could reciprocally demand performance of the contract from the
other.[22] A contract of sale is a consensual contract and is perfected at the moment there is a meeting of

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minds upon the thing which is the object of the contract and upon the price. From that moment, the parties
may reciprocally demand performance subject to the provisions of the law governing the form of
contracts. The elements of a valid contract of sale under Article 1458 of the Civil Code are: (1) consent or
meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent. [23] All
these elements were present in the transaction between the City of Cebu and Morales.

There is no merit in petitioners assertion that there was no perfected contract of sale because no
Contract of Purchase and Sale was ever executed by the parties. As previously stated, a contract of sale is
a consensual contract that is perfected upon a meeting of minds as to the object of the contract and its
price. Subject to the provisions of the Statute of Frauds, a formal document is not necessary for the sale
transaction to acquire binding effect. [24] For as long as the essential elements of a contract of sale are
proved to exist in a given transaction, the contract is deemed perfected regardless of the absence of a
formal deed evidencing the same.

Similarly, petitioner erroneously contends that the failure of Morales to pay the balance of the
purchase price is evidence that there was really no contract of sale over the lot between Morales and the
City of Cebu. On the contrary, the fact that there was an agreed price for the lot proves that a contract of
sale was indeed perfected between the parties. Failure to pay the balance of the purchase price did not
render the sale inexistent or invalid, but merely gave rise to a right in favor of the vendor to either demand
specific performance or rescission of the contract of sale. [25] It did not abolish the contract of sale or result in
its automatic invalidation.

As correctly found by the appellate court, the contract of sale between the City of Cebu and
Morales was also partially consummated. The latter had paid the deposit and downpayment for the lot in
accordance with the terms of the bid award. She first occupied the property as a lessee in 1961, built a
house thereon and was continuously in possession of the lot as its owner until her death in
1969. Respondents, on the other hand, who are all surviving heirs of Morales, likewise occupied the
property during the latters lifetime and continue to reside on the property to this day. [26]

The stages of a contract of sale are as follows: (1) negotiation, covering the period from the time
the prospective contracting parties indicate interest in the contract to the time the contract is perfected;

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(2) perfection, which takes place upon the concurrence of the essential elements of the sale which are the
meeting of the minds of the parties as to the object of the contract and upon the price; and
(3) consummation, which begins when the parties perform their respective undertakings under the contract
of sale, culminating in the extinguishment thereof. [27] In this case, respondents predecessor had
undoubtedly commenced performing her obligation by making a down payment on the purchase
price. Unfortunately, however, she was not able to complete the payments due to legal complications
between petitioner and the city.

Thus, the City of Cebu could no longer dispose of the lot in question when it was included as
among those returned to petitioner pursuant to the compromise agreement in Civil Case No. 238-BC. The
City of Cebu had sold the property to Morales even though there remained a balance on the purchase price
and a formal contract of sale had yet to be executed. Incidentally, the failure of respondents to pay the
balance on the purchase price and the non-execution of a formal agreement was sufficiently explained by
the fact that the trial court, in Civil Case No. 238-BC, issued a writ of preliminary injunction enjoining the city
from further disposing the donated lots. According to respondents, there was confusion as to the
circumstances of payment considering that both the city and petitioner had refused to accept payment by
virtue of the injunction.[28] It appears that the parties simply mistook Lot 646-A-3 as among those not yet
sold by the city.

The City of Cebu was no longer the owner of Lot 646-A-3 when it ceded the same to petitioner
under the compromise agreement in Civil Case No. 238-BC. At that time, the city merely retained rights as
an unpaid seller but had effectively transferred ownership of the lot to Morales. As successor-in-interest of
the city, petitioner could only acquire rights that its predecessor had over the lot. These rights include the
right to seek rescission or fulfillment of the terms of the contract and the right to damages in either case. [29]

In this regard, the records show that respondent Quesada wrote to then Cebu Governor Eduardo
R. Gullas on March 11, 1983, asking for the formal conveyance of Lot 646-A-3 pursuant to the award and
sale earlier made by the City of Cebu. On October 10, 1986, she again wrote to Governor Osmundo G.
Rama reiterating her previous request. This means that petitioner had known, at least as far back as 1983,
that the city sold the lot to respondents predecessor and that the latter had paid the deposit and the
required down payment. Despite this knowledge, however, petitioner did not avail of any rightful recourse to
resolve the matter.

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Article 1592 of the Civil Code pertinently provides:

Article 1592. In the sale of immovable property, even though it may have been stipulated
that upon failure to pay the price at the time agreed upon the rescission of the contract
shall of right take place, the vendee may pay, even after the expiration of the period, as
long as no demand for rescission of the contract has been made upon him either judicially
or by notarial act. After the demand, the court may not grant him a new term.
(Underscoring supplied)

Thus, respondents could still tender payment of the full purchase price as no demand for rescission had
been made upon them, either judicially or through notarial act. While it is true that it took a long time for
respondents to bring suit for specific performance and consign the balance of the purchase price, it is
equally true that petitioner or its predecessor did not take any action to have the contract of sale
rescinded. Article 1592 allows the vendee to pay as long as no demand for rescission has been made.
[30]
The consignation of the balance of the purchase price before the trial court thus operated as full
payment, which resulted in the extinguishment of respondents obligation under the contract of sale.

Finally, petitioner cannot raise the issue of prescription and laches at this stage of the
proceedings. Contrary to petitioners assignment of errors, the appellate court made no findings on the
issue because petitioner never raised the matter of prescription and laches either before the trial court or
Court of Appeals. It is basic that defenses and issues not raised below cannot be considered on appeal.
[31]
Thus, petitioner cannot plead the matter for the first time before this Court.

WHEREFORE, in view of the foregoing, the petition is hereby DENIED and the decision and resolution of
the Court of Appeals in CA-G.R. CV No. 53632 are AFFIRMED.

SO ORDERED.

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THIRD DIVISION
[G.R. No. 103577. October 7, 1996]

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ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A. CORONEL, ANNABELLE C.

GONZALES (for herself and on behalf of Floraida C. Tupper, as attorney-in-fact), CIELITO A.
CORONEL, FLORAIDA A. ALMONTE, and CATALINA BALAIS MABANAG, petitioners, vs.
THE COURT OF APPEALS, CONCEPCION D. ALCARAZ and RAMONA PATRICIA ALCARAZ,
assisted by GLORIA F. NOEL as attorney-in-fact,respondents.
DECISION
MELO, J.:
The petition before us has its roots in a complaint for specific performance to compel herein petitioners
(except the last named, Catalina Balais Mabanag) to consummate the sale of a parcel of land with its
improvements located along Roosevelt Avenue in Quezon City entered into by the parties sometime in
January 1985 for the price of P1,240,000.00.
The undisputed facts of the case were summarized by respondent court in this wise:
On January 19, 1985, defendants-appellants Romulo Coronel, et. al. (hereinafter referred to as Coronels)
executed a document entitled Receipt of Down Payment (Exh. A) in favor of plaintiff Ramona Patricia
Alcaraz (hereinafter referred to as Ramona) which is reproduced hereunder:
RECEIPT OF DOWN PAYMENT
P1,240,000.00 - Total amount
50,000.00 - Down payment
-----------------------------------------P1,190,000.00 - Balance
Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand Pesos
purchase price of our inherited house and lot, covered by TCT No. 119627 of the Registry of Deeds of
Quezon City, in the total amount of P1,240,000.00.
We bind ourselves to effect the transfer in our names from our deceased father, Constancio P. Coronel, the
transfer certificate of title immediately upon receipt of the down payment above-stated.
On our presentation of the TCT already in or name, We will immediately execute the deed of absolute sale
of said property and Miss Ramona Patricia Alcaraz shall immediately pay the balance of
the P1,190,000.00.

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Clearly, the conditions appurtenant to the sale are the following:

1. Ramona will make a down payment of Fifty Thousand (P50,000.00) pesos upon execution of the
document aforestated;
2. The Coronels will cause the transfer in their names of the title of the property registered in the name of
their deceased father upon receipt of the Fifty Thousand (P50,000.00) Pesos down payment;
3. Upon the transfer in their names of the subject property, the Coronels will execute the deed of absolute
sale in favor of Ramona and the latter will pay the former the whole balance of One Million One Hundred
Ninety Thousand (P1,190,000.00) Pesos.
On the same date (January 15, 1985), plaintiff-appellee Concepcion D. Alcaraz (hereinafter referred to as
Concepcion), mother of Ramona, paid the down payment of Fifty Thousand (P50,000.00) Pesos (Exh. B,
Exh. 2).
On February 6, 1985, the property originally registered in the name of the Coronels father was transferred
in their names under TCT No. 327043 (Exh. D; Exh 4)
On February 18, 1985, the Coronels sold the property covered by TCT No. 327043 to intervenor-appellant
Catalina B. Mabanag (hereinafter referred to as Catalina) for One Million Five Hundred Eighty Thousand
(P1,580,000.00) Pesos after the latter has paid Three Hundred Thousand (P300,000.00) Pesos (Exhs. F-3;
Exh. 6-C)
For this reason, Coronels canceled and rescinded the contract (Exh. A) with Ramona by depositing the
down payment paid by Concepcion in the bank in trust for Ramona Patricia Alcaraz.
On February 22, 1985, Concepcion, et. al., filed a complaint for a specific performance against the
Coronels and caused the annotation of a notice of lis pendens at the back of TCT No. 327403 (Exh. E; Exh.
5).
On April 2, 1985, Catalina caused the annotation of a notice of adverse claim covering the same property
with the Registry of Deeds of Quezon City (Exh. F; Exh. 6).
On April 25, 1985, the Coronels executed a Deed of Absolute Sale over the subject property in favor of
Catalina (Exh. G; Exh. 7).
On June 5, 1985, a new title over the subject property was issued in the name of Catalina under TCT No.
351582 (Exh. H; Exh. 8).
(Rollo, pp. 134-136)

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In the course of the proceedings before the trial court (Branch 83, RTC,Quezon City) the parties
agreed to submit the case for decision solely on the basis of documentary exhibits. Thus, plaintiffs therein
(now private respondents) proffered their documentary evidence accordingly marked as Exhibits A through
J, inclusive of their corresponding submarkings. Adopting these same exhibits as their own, then
defendants (now petitioners) accordingly offered and marked them as Exhibits 1 through 10, likewise
inclusive of their corresponding submarkings. Upon motion of the parties, the trial court gave them thirty
(30) days within which to simultaneously submit their respective memoranda, and an additional 15 days
within which to submit their corresponding comment or reply thereto, after which, the case would be
deemed submitted for resolution.
On April 14, 1988, the case was submitted for resolution before Judge Reynaldo Roura, who was then
temporarily detailed to preside over Branch 82 of the RTC of Quezon City. On March 1, 1989, judgment
was handed down by Judge Roura from his regular bench at Macabebe, Pampanga for the Quezon
City branch, disposing as follows:
WHEREFORE, judgment for specific performance is hereby rendered ordering defendant to execute in
favor of plaintiffs a deed of absolute sale covering that parcel of land embraced in and covered by Transfer
Certificate of Title No. 327403 (now TCT No. 331582) of the Registry of Deeds for Quezon City, together
with all the improvements existing thereon free from all liens and encumbrances, and once accomplished,
to immediately deliver the said document of sale to plaintiffs and upon receipt thereof, the plaintiffs are
ordered to pay defendants the whole balance of the purchase price amounting to P1,190,000.00 in
cash.Transfer Certificate of Title No. 331582 of the Registry of Deeds for Quezon City in the name of
intervenor is hereby canceled and declared to be without force and effect.Defendants and intervenor and all
other persons claiming under them are hereby ordered to vacate the subject property and deliver
possession thereof to plaintiffs. Plaintiffs claim for damages and attorneys fees, as well as the
counterclaims of defendants and intervenors are hereby dismissed.
No pronouncement as to costs.
So Ordered.
Macabebe, Pampanga for Quezon City, March 1, 1989.
(Rollo, p. 106)
A motion for reconsideration was filed by petitioners before the new presiding judge of the Quezon
City RTC but the same was denied by Judge Estrella T. Estrada, thusly:
The prayer contained in the instant motion, i.e., to annul the decision and to render anew decision by the
undersigned Presiding Judge should be denied for the following reasons: (1) The instant case became
submitted for decision as of April 14, 1988 when the parties terminated the presentation of their respective

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documentary evidence and when the Presiding Judge at that time was Judge Reynaldo Roura. The fact
that they were allowed to file memoranda at some future date did not change the fact that the hearing of the
case was terminated before Judge Roura and therefore the same should be submitted to him for
decision; (2) When the defendants and intervenor did not object to the authority of Judge Reynaldo Roura
to decide the case prior to the rendition of the decision, when they met for the first time before the
undersigned Presiding Judge at the hearing of a pending incident in Civil Case No. Q-46145 on November
11, 1988, they were deemed to have acquiesced thereto and they are now estopped from questioning said
authority of Judge Roura after they received the decision in question which happens to be adverse to
them; (3) While it is true that Judge Reynaldo Roura was merely a Judge-on-detail at this Branch of the
Court, he was in all respects the Presiding Judge with full authority to act on any pending incident
submitted before this Court during his incumbency. When he returned to his Official Station at Macabebe,
Pampanga, he did not lose his authority to decide or resolve cases submitted to him for decision or
resolution because he continued as Judge of the Regional Trial Court and is of co-equal rank with the
undersigned Presiding Judge. The standing rule and supported by jurisprudence is that a Judge to whom a
case is submitted for decision has the authority to decide the case notwithstanding his transfer to another
branch or region of the same court (Sec. 9, Rule 135, Rule of Court).
Coming now to the twin prayer for reconsideration of the Decision dated March 1, 1989 rendered in the
instant case, resolution of which now pertains to the undersigned Presiding Judge, after a meticulous
examination of the documentary evidence presented by the parties, she is convinced that the Decision of
March 1, 1989 is supported by evidence and, therefore, should not be disturbed.
IN VIEW OF THE FOREGOING, the Motion for Reconsideration and/or to Annul Decision and Render
Anew Decision by the Incumbent Presiding Judge dated March 20, 1989 is hereby DENIED.
SO ORDERED.
Quezon City, Philippines, July 12, 1989.
(Rollo, pp. 108-109)
Petitioners thereupon interposed an appeal, but on December 16, 1991, the Court of Appeals (Buena,
Gonzaga-Reyes, Abad-Santos (P), JJ.) rendered its decision fully agreeing with the trial court.
Hence, the instant petition which was filed on March 5, 1992. The last pleading, private respondents
Reply Memorandum, was filed on September 15, 1993. The case was, however, re-raffled to
undersigned ponente only on August 28, 1996, due to the voluntary inhibition of the Justice to whom the
case was last assigned.
While we deem it necessary to introduce certain refinements in the disquisition of respondent court in
the affirmance of the trial courts decision, we definitely find the instant petition bereft of merit.

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The heart of the controversy which is the ultimate key in the resolution of the other issues in the case
at bar is the precise determination of the legal significance of the document entitled Receipt of Down
Payment which was offered in evidence by both parties. There is no dispute as to the fact that the said
document embodied the binding contract between Ramona Patricia Alcaraz on the one hand, and the heirs
of Constancio P. Coronel on the other, pertaining to a particular house and lot covered by TCT No. 119627,
as defined in Article 1305 of the Civil Code of the Philippines which reads as follows:
Art. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service.
While, it is the position of private respondents that the Receipt of Down Payment embodied a
perfected contract of sale, which perforce, they seek to enforce by means of an action for specific
performance, petitioners on their part insist that what the document signified was a mere executory contract
to sell, subject to certain suspensive conditions, and because of the absence of Ramona P. Alcaraz, who
left for the United States of America, said contract could not possibly ripen into a contract of absolute sale.
Plainly, such variance in the contending parties contention is brought about by the way each interprets
the terms and/or conditions set forth in said private instrument. Withal, based on whatever relevant and
admissible evidence may be available on record, this Court, as were the courts below, is now called upon
to adjudge what the real intent of the parties was at the time the said document was executed.
The Civil Code defines a contract of sale, thus:
Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The
essential elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
c) Price certain in money or its equivalent.
Under this definition, a Contract to Sell may not be considered as a Contract ofSale because the first
essential element is lacking. In a contract to sell, the prospective seller explicitly reserves the transfer of
title to the prospective buyer, meaning, the prospective seller does not as yet agree or consent to transfer
ownership of the property subject of the contract to sell until the happening of an event, which for present
purposes we shall take as the full payment of the purchase price. What the seller agrees or obliges himself
to do is to fulfill his promise to sell the subject property when the entire amount of the purchase price is

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delivered to him. In other words the full payment of the purchase price partakes of a suspensive condition,
the non-fulfillment of which prevents the obligation to sell from arising and thus, ownership is retained by
the prospective seller without further remedies by the prospective buyer. In Roque vs. Lapuz (96 SCRA 741
[1980]), this Court had occasion to rule:
Hence, We hold that the contract between the petitioner and the respondent was a contract to sell where
the ownership or title is retained by the seller and is not to pass until the full payment of the price, such
payment being a positive suspensive condition and failure of which is not a breach, casual or serious, but
simply an event that prevented the obligation of the vendor to convey title from acquiring binding force.
Stated positively, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, the prospective sellers obligation to sell the subject property by entering into a contract of
sale with the prospective buyer becomes demandable as provided in Article 1479 of the Civil Code which
states:
Art. 1479. A promise to buy and sell a determinate thing for a price certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the
promissor of the promise is supported by a consideration distinct from the price.
A contract to sell may thus be defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the prospective buyer,
binds himself to sell the said property exclusively to the prospective buyer upon fulfillment of the condition
agreed upon, that is, full payment of the purchase price.
A contract to sell as defined hereinabove, may not even be considered as a conditional contract of
sale where the seller may likewise reserve title to the property subject of the sale until the fulfillment of a
suspensive condition, because in a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may or may not occur. If the
suspensive condition is not fulfilled, the perfection of the contract of sale is completely abated (cf. Homesite
and Housing Corp. vs. Court of Appeals, 133 SCRA 777 [1984]). However, if the suspensive condition is
fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of
the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by
operation of law without any further act having to be performed by the seller.
In a contract to sell, upon the fulfillment of the suspensive condition which is the full payment of the
purchase price, ownership will not automatically transfer to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to the prospective buyer by
entering into a contract of absolute sale.

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It is essential to distinguish between a contract to sell and a conditional contract of sale specially in
cases where the subject property is sold by the owner not to the party the seller contracted with, but to a
third person, as in the case at bench. In a contract to sell, there being no previous sale of the property, a
third person buying such property despite the fulfillment of the suspensive condition such as the full
payment of the purchase price, for instance, cannot be deemed a buyer in bad faith and the prospective
buyer cannot seek the relief of reconveyance of the property.There is no double sale in such case. Title to
the property will transfer to the buyer after registration because there is no defect in the owner-sellers
title per se, but the latter, of course, may be sued for damages by the intending buyer.
In a conditional contract of sale, however, upon the fulfillment of the suspensive condition, the sale
becomes absolute and this will definitely affect the sellers title thereto. In fact, if there had been previous
delivery of the subject property, the sellers ownership or title to the property is automatically transferred to
the buyer such that, the seller will no longer have any title to transfer to any third person.Applying Article
1544 of the Civil Code, such second buyer of the property who may have had actual or constructive
knowledge of such defect in the sellers title, or at least was charged with the obligation to discover such
defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyers title. In case a
title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the
sale.
With the above postulates as guidelines, we now proceed to the task of deciphering the real nature of
the contract entered into by petitioners and private respondents.
It is a canon in the interpretation of contracts that the words used therein should be given their natural
and ordinary meaning unless a technical meaning was intended (Tan vs. Court of Appeals, 212 SCRA 586
[1992]). Thus, when petitioners declared in the said Receipt of Down Payment that they -Received from Miss Ramona Patricia Alcaraz of 146 Timog, Quezon City, the sum of Fifty Thousand
Pesos purchase price of our inherited house and lot, covered by TCT No. 1199627 of the Registry of
Deeds of Quezon City, in the total amount of P1,240,000.00.
without any reservation of title until full payment of the entire purchase price, the natural and ordinary idea
conveyed is that they sold their property.
When the Receipt of Down payment is considered in its entirety, it becomes more manifest that there
was a clear intent on the part of petitioners to transfer title to the buyer, but since the transfer certificate of
title was still in the name of petitioners father, they could not fully effect such transfer although the buyer
was then willing and able to immediately pay the purchase price. Therefore, petitioners-sellers undertook
upon receipt of the down payment from private respondent Ramona P. Alcaraz, to cause the issuance of a
new certificate of title in their names from that of their father, after which, they promised to present said title,
now in their names, to the latter and to execute the deed of absolute sale whereupon, the latter shall, in
turn, pay the entire balance of the purchase price.

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The agreement could not have been a contract to sell because the sellers herein made no express
reservation of ownership or title to the subject parcel of land. Furthermore, the circumstance which
prevented the parties from entering into an absolute contract of sale pertained to the sellers themselves
(the certificate of title was not in their names) and not the full payment of the purchase price. Under the
established facts and circumstances of the case, the Court may safely presume that, had the certificate of
title been in the names of petitioners-sellers at that time, there would have been no reason why an absolute
contract of sale could not have been executed and consummated right there and then.
Moreover, unlike in a contract to sell, petitioners in the case at bar did not merely promise to sell the
property to private respondent upon the fulfillment of the suspensive condition. On the contrary, having
already agreed to sell the subject property, they undertook to have the certificate of title change to their
names and immediately thereafter, to execute the written deed of absolute sale.
Thus, the parties did not merely enter into a contract to sell where the sellers, after compliance by the
buyer with certain terms and conditions, promised to sell the property to the latter. What may be perceived
from the respective undertakings of the parties to the contract is that petitioners had already agreed to sell
the house and lot they inherited from their father, completely willing to transfer ownership of the subject
house and lot to the buyer if the documents were then in order. It just so happened, however, that the
transfer certificate of title was then still in the name of their father. It was more expedient to first effect the
change in the certificate of title so as to bear their names. That is why they undertook to cause the issuance
of a new transfer of the certificate of title in their names upon receipt of the down payment in the amount
of P50,000.00. As soon as the new certificate of title is issued in their names, petitioners were committed to
immediately execute the deed of absolute sale. Only then will the obligation of the buyer to pay the
remainder of the purchase price arise.
There is no doubt that unlike in a contract to sell which is most commonly entered into so as to protect
the seller against a buyer who intends to buy the property in installment by withholding ownership over the
property until the buyer effects full payment therefor, in the contract entered into in the case at bar, the
sellers were the ones who were unable to enter into a contract of absolute sale by reason of the fact that
the certificate of title to the property was still in the name of their father. It was the sellers in this case who,
as it were, had the impediment which prevented, so to speak, the execution of an contract of absolute sale.
What is clearly established by the plain language of the subject document is that when the said
Receipt of Down Payment was prepared and signed by petitioners Romulo A. Coronel, et. al., the parties
had agreed to a conditional contract of sale, consummation of which is subject only to the successful
transfer of the certificate of title from the name of petitioners father, Constancio P. Coronel, to their names.
The Court significantly notes that this suspensive condition was, in fact, fulfilled on February 6, 1985
(Exh. D; Exh. 4). Thus, on said date, the conditional contract of sale between petitioners and private
respondent Ramona P. Alcaraz became obligatory, the only act required for the consummation thereof
being the delivery of the property by means of the execution of the deed of absolute sale in a public

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instrument, which petitioners unequivocally committed themselves to do as evidenced by the Receipt of

Down Payment.
Article 1475, in correlation with Article 1181, both of the Civil Code, plainly applies to the case at
bench. Thus,
Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand performance, subject to the provisions of the law
governing the form of contracts.
Art. 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening of the event which constitutes the condition.
Since the condition contemplated by the parties which is the issuance of a certificate of title in
petitioners names was fulfilled on February 6, 1985, the respective obligations of the parties under the
contract of sale became mutually demandable, that is, petitioners, as sellers, were obliged to present the
transfer certificate of title already in their names to private respondent Ramona P. Alcaraz, the buyer, and to
immediately execute the deed of absolute sale, while the buyer on her part, was obliged to forthwith pay the
balance of the purchase price amounting to P1,190,000.00.
It is also significant to note that in the first paragraph in page 9 of their petition, petitioners conclusively
admitted that:
3. The petitioners-sellers Coronel bound themselves to effect the transfer in our names from our
deceased father Constancio P. Coronel, the transfer certificate of title immediately upon
receipt of the downpayment above-stated". The sale was still subject to this suspensive
condition. (Emphasis supplied.)
(Rollo, p. 16)
Petitioners themselves recognized that they entered into a contract of sale subject to a suspensive
condition. Only, they contend, continuing in the same paragraph, that:
. . . Had petitioners-sellers not complied with this condition of first transferring the title to the property
under their names, there could be no perfected contract of sale. (Emphasis supplied.)
(Ibid.)
not aware that they have set their own trap for themselves, for Article 1186 of the Civil Code expressly
provides that:

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Art. 1186. The condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment.
Besides, it should be stressed and emphasized that what is more controlling than these mere
hypothetical arguments is the fact that the condition herein referred to was actually and indisputably
fulfilled on February 6, 1985, when a new title was issued in the names of petitioners as evidenced by
TCT No. 327403 (Exh. D; Exh. 4).
The inevitable conclusion is that on January 19, 1985, as evidenced by the document denominated as
Receipt of Down Payment (Exh. A; Exh. 1), the parties entered into a contract of sale subject to the
suspensive condition that the sellers shall effect the issuance of new certificate title from that of their fathers
name to their names and that, on February 6, 1985, this condition was fulfilled (Exh. D; Exh. 4).
We, therefore, hold that, in accordance with Article 1187 which pertinently provides Art. 1187. The effects of conditional obligation to give, once the condition has been fulfilled, shall retroact to
the day of the constitution of the obligation . . .
In obligations to do or not to do, the courts shall determine, in each case, the retroactive effect of the
condition that has been complied with.
the rights and obligations of the parties with respect to the perfected contract of sale became mutually due
and demandable as of the time of fulfillment or occurrence of the suspensive condition on February 6,
1985. As of that point in time, reciprocal obligations of both seller and buyer arose.
Petitioners also argue there could been no perfected contract on January 19, 1985 because they were
then not yet the absolute owners of the inherited property.
We cannot sustain this argument.
Article 774 of the Civil Code defines Succession as a mode of transferring ownership as follows:
Art. 774. Succession is a mode of acquisition by virtue of which the property, rights and obligations to the
extent and value of the inheritance of a person are transmitted through his death to another or others by his
will or by operation of law.
Petitioners-sellers in the case at bar being the sons and daughters of the decedent Constancio P.
Coronel are compulsory heirs who were called to succession by operation of law. Thus, at the point their
father drew his last breath, petitioners stepped into his shoes insofar as the subject property is concerned,
such that any rights or obligations pertaining thereto became binding and enforceable upon them. It is
expressly provided that rights to the succession are transmitted from the moment of death of the decedent
(Article 777, Civil Code;Cuison vs. Villanueva, 90 Phil. 850 [1952]).

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Be it also noted that petitioners claim that succession may not be declared unless the creditors have
been paid is rendered moot by the fact that they were able to effect the transfer of the title to the property
from the decedents name to their names on February 6, 1985.
Aside from this, petitioners are precluded from raising their supposed lack of capacity to enter into an
agreement at that time and they cannot be allowed to now take a posture contrary to that which they took
when they entered into the agreement with private respondent Ramona P. Alcaraz. The Civil Code
expressly states that:
Art. 1431. Through estoppel an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying thereon.
Having represented themselves as the true owners of the subject property at the time of sale, petitioners
cannot claim now that they were not yet the absolute owners thereof at that time.
Petitioners also contend that although there was in fact a perfected contract of sale between them and
Ramona P. Alcaraz, the latter breach her reciprocal obligation when she rendered impossible the
consummation thereof by going to the United States of America, without leaving her address, telephone
number, and Special Power of Attorney (Paragraphs 14 and 15, Answer with Compulsory Counterclaim to
the Amended Complaint, p. 2; Rollo, p. 43), for which reason, so petitioners conclude, they were correct in
unilaterally rescinding the contract of sale.
We do not agree with petitioners that there was a valid rescission of the contract of sale in the instant
case. We note that these supposed grounds for petitioners rescission, are mere allegations found only in
their responsive pleadings, which by express provision of the rules, are deemed controverted even if no
reply is filed by the plaintiffs (Sec. 11, Rule 6, Revised Rules of Court). The records are absolutely bereft of
any supporting evidence to substantiate petitioners allegations. We have stressed time and again that
allegations must be proven by sufficient evidence (Ng Cho Cio vs. Ng Diong, 110 Phil. 882 [1961]; Recaro
vs. Embisan, 2 SCRA 598 [1961]). Mere allegation is not an evidence (Lagasca vs. De Vera, 79 Phil. 376
[1947]).
Even assuming arguendo that Ramona P. Alcaraz was in the United States of America on February 6,
1985, we cannot justify petitioners-sellers act of unilaterally and extrajudicially rescinding the contract of
sale, there being no express stipulation authorizing the sellers to extrajudicially rescind the contract of
sale. (cf. Dignos vs. CA, 158 SCRA 375 [1988]; Taguba vs. Vda. De Leon, 132 SCRA 722 [1984])
Moreover, petitioners are estopped from raising the alleged absence of Ramona P. Alcaraz because
although the evidence on record shows that the sale was in the name of Ramona P. Alcaraz as the buyer,
the sellers had been dealing with Concepcion D. Alcaraz, Ramonas mother, who had acted for and in
behalf of her daughter, if not also in her own behalf. Indeed, the down payment was made by Concepcion
D. Alcaraz with her own personal Check (Exh. B; Exh. 2) for and in behalf of Ramona P. Alcaraz. There is

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no evidence showing that petitioners ever questioned Concepcions authority to represent Ramona P.
Alcaraz when they accepted her personal check. Neither did they raise any objection as regards payment
being effected by a third person. Accordingly, as far as petitioners are concerned, the physical absence of
Ramona P. Alcaraz is not a ground to rescind the contract of sale.
Corollarily, Ramona P. Alcaraz cannot even be deemed to be in default, insofar as her obligation to
pay the full purchase price is concerned. Petitioners who are precluded from setting up the defense of the
physical absence of Ramona P. Alcaraz as above-explained offered no proof whatsoever to show that they
actually presented the new transfer certificate of title in their names and signified their willingness and
readiness to execute the deed of absolute sale in accordance with their agreement. Ramonas
corresponding obligation to pay the balance of the purchase price in the amount of P1,190,000.00 (as
buyer) never became due and demandable and, therefore, she cannot be deemed to have been in default.
Article 1169 of the Civil Code defines when a party in a contract involving reciprocal obligations may
be considered in default, to wit:
Art. 1169. Those obliged to deliver or to do something, incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation.
xxx
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment one of the parties
fulfill his obligation, delay by the other begins. (Emphasis supplied.)
There is thus neither factual nor legal basis to rescind the contract of sale between petitioners and
respondents.
With the foregoing conclusions, the sale to the other petitioner, Catalina B. Mabanag, gave rise to a
case of double sale where Article 1544 of the Civil Code will apply, to wit:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred
to the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith
first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof to the person who presents the oldest title, provided there is good
faith.

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The record of the case shows that the Deed of Absolute Sale dated April 25, 1985 as proof of the
second contract of sale was registered with the Registry of Deeds of Quezon City giving rise to the
issuance of a new certificate of title in the name of Catalina B. Mabanag on June 5, 1985. Thus, the second
paragraph of Article 1544 shall apply.
The above-cited provision on double sale presumes title or ownership to pass to the buyer, the
exceptions being: (a) when the second buyer, in good faith, registers the sale ahead of the first buyer, and
(b) should there be no inscription by either of the two buyers, when the second buyer, in good faith,
acquires possession of the property ahead of the first buyer. Unless, the second buyer satisfies these
requirements, title or ownership will not transfer to him to the prejudice of the first buyer.
In his commentaries on the Civil Code, an accepted authority on the subject, now a distinguished
member of the Court, Justice Jose C. Vitug, explains:
The governing principle is prius tempore, potior jure (first in time, stronger in right).Knowledge by the first
buyer of the second sale cannot defeat the first buyers rights except when the second buyer first registers
in good faith the second sale (Olivares vs. Gonzales, 159 SCRA 33). Conversely, knowledge gained by the
second buyer of the first sale defeats his rights even if he is first to register, since knowledge taints his
registration with bad faith (see also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December
1984). In Cruz vs. Cabana (G.R. No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential,
to merit the protection of Art. 1544, second paragraph, that the second realty buyer must act in good faith in
registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99, Crisostomo vs. CA, G.R.
No. 95843, 02 September 1992).
(J. Vitug, Compendium of Civil Law and Jurisprudence, 1993 Edition, p. 604).
Petitioners point out that the notice of lis pendens in the case at bar was annotated on the title of the
subject property only on February 22, 1985, whereas, the second sale between petitioners Coronels and
petitioner Mabanag was supposedly perfected prior thereto or on February 18, 1985. The idea conveyed is
that at the time petitioner Mabanag, the second buyer, bought the property under a clean title, she was
unaware of any adverse claim or previous sale, for which reason she is a buyer in good faith.
We are not persuaded by such argument.
In a case of double sale, what finds relevance and materiality is not whether or not the second buyer
in good faith but whether or not said second buyer registers such second sale in good faith, that is, without
knowledge of any defect in the title of the property sold.
As clearly borne out by the evidence in this case, petitioner Mabanag could not have in good faith,
registered the sale entered into on February 18, 1985 because as early as February 22, 1985, a notice
of lis pendens had been annotated on the transfer certificate of title in the names of petitioners, whereas

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petitioner Mabanag registered the said sale sometime in April, 1985. At the time of registration, therefore,
petitioner Mabanag knew that the same property had already been previously sold to private respondents,
or, at least, she was charged with knowledge that a previous buyer is claiming title to the same
property. Petitioner Mabanag cannot close her eyes to the defect in petitioners title to the property at the
time of the registration of the property.
This Court had occasions to rule that:
If a vendee in a double sale registers the sale after he has acquired knowledge that there was a previous
sale of the same property to a third party or that another person claims said property in a previous sale, the
registration will constitute a registration in bad faith and will not confer upon him any right. (Salvoro vs.
Tanega, 87 SCRA 349 [1978]; citing Palarca vs. Director of Land, 43 Phil. 146; Cagaoan vs. Cagaoan, 43
Phil. 554; Fernandez vs. Mercader, 43 Phil. 581.)
Thus, the sale of the subject parcel of land between petitioners and Ramona P. Alcaraz, perfected on
February 6, 1985, prior to that between petitioners and Catalina B. Mabanag on February 18, 1985, was
correctly upheld by both the courts below.
Although there may be ample indications that there was in fact an agency between Ramona as
principal and Concepcion, her mother, as agent insofar as the subject contract of sale is concerned, the
issue of whether or not Concepcion was also acting in her own behalf as a co-buyer is not squarely raised
in the instant petition, nor in such assumption disputed between mother and daughter. Thus, We will not
touch this issue and no longer disturb the lower courts ruling on this point.
WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed
judgment AFFIRMED.
SO ORDERED.