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I Nature and form from May 16, 1974 up to May 15, 1975.

from May 16, 1974 up to May 15, 1975. During this period, private respondent was
granted an option to purchase for the amount of P3,000.00 per square meter.
Republic of the Philippines Thereafter, the lease shall be on a per month basis with a monthly rental of P3,000.00.
SUPREME COURT For failure of private respondent to pay the increased rental of P8,000.00 per month
Manila effective June 1976, petitioners filed an action for ejectment (Civil Case No. VIII-29155)
on November 10, 1976 before the then City Court (now Metropolitan Trial Court) of
FIRST DIVISION Quezon City, Branch VIII. On November 22, 1982, the City Court rendered judgment 2
ordering private respondent to vacate the leased premises and to pay the sum of
G.R. No. 122544 January 28, 1999 P624,000.00 representing rentals in arrears and/or as damages in the form of
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BLAZA, ESTER ABAD DIZON and reasonable compensation for the use and occupation of the premises during the period
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON, of illegal detainer from June 1976 to November 1982 at the monthly rental of P8,000.00,
JR., petitioners, less payments made, plus 12% interest per annum from November 18, 1976, the date of
filing of the complaint, until fully paid, the sum of P8,000.00 a month starting December
vs. 1982, until private respondent fully vacates the premises, and to pay P20,000.00 as and
by way of attorney's fees.
Private respondent filed a certiorari petition praying for the issuance of a restraining
G.R. No. 124741 January 28, 1999 order enjoining the enforcement of said judgment and dismissal of the case for lack of
jurisdiction of the City Court.
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and Jose A. DIZON, On September 26, 1984, the then Intermidiate Appellate Court 3 (now Court of Appeals)
JR., petitioners, rendered a decision 4 stating that:
vs. . . ., the alleged question of whether petitioner was granted an extension of the option
to buy the property; whether such option, if any, extended the lease or whether
petitioner actually paid the alleged P300,000.00 to Fidela Dizon, as representative of
INC., respondents.
private respondents in consideration of the option and, whether petitioner thereafter
MARTINEZ, J.: offered to pay the balance of the supposed purchase price, are all merely incidental and
do not remove the unlawful detainer case from the jurisdiction or respondent court. In
Two consolidated petitions were filed before us seeking to set aside and annul the consonance with the ruling in the case of Teodoro, Jr. vs. Mirasol (supra), the above
decisions and resolutions of respondent Court of Appeals. What seemed to be a simple matters may be raised and decided in the unlawful detainer suit as, to rule otherwise,
ejectment suit was juxtaposed with procedural intricacies which finally found its way to would be a violation of the principle prohibiting multiplicity of suits. (Original Records,
this Court. pp. 38-39).
G.R. No. 122544: The motion for reconsideration was denied. On review, this Court dismissed the petition
in a resolution dated June 19, 1985 and likewise denied private respondent's
On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into
subsequent motion for reconsideration in a resolution dated September 9, 1985. 5
a Contract of Lease with Option to Buy with petitioners1 (lessors) involving a 1,755.80
square meter parcel of land situated at corner MacArthur Highway and South "H"
Street, Diliman, Quezon City. The term of the lease was for one (1) year commencing
On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of purchase price. Since private respondent did not consign to the court the balance of the
Quezon City (Civil Case No. Q-45541) an action for Specific Performance and Fixing of purchase price and continued to occupy the subject premises, it had the obligation to
Period for Obligation with prayer for the issuance of a restraining order pending hearing pay the amount of P1,700.00 in monthly rentals until full payment of the purchase price.
on the prayer for a writ of preliminary injunction. It sought to compel the execution of a The dispositive portion of said decision reads:
deed of sale pursuant to the option to purchase and the receipt of the partial payment,
and to fix the period to pay the balance. In an Order dated October 25, 1985, the trial WHEREFORE, the appealed decision in Case No. 46387 is AFFIRMED. The appealed
court denied the issuance of a writ of preliminary injunction on the ground that the decision in Case No. 45541 is, on the other hand, ANNULLED and SET ASIDE. The
decision of the then City Court for the ejectment of the private respondent, having been defendants-appellees are ordered to execute the deed of absolute sale of the property
affirmed by the then Intermediate Appellate Court and the Supreme Court, has become in question, free from any lien or encumbrance whatsoever, in favor of the plaintiff-
final and executory. appellant, and to deliver to the latter the said deed of sale, as well as the owner's
duplicate of the certificate of title to said property upon payment of the balance of the
Unable to secure an injunction, private respondent also filed before the RTC of Quezon purchase price by the plaintiff-appellant. The plaintiff-appellant is ordered to pay
City, Branch 102 (Civil Case No. Q-46487) on November 15, 1985 a complaint for P1,700.00 per month from June 1976, plus 6% interest per annum, until payment of the
Annulment of and Relief from Judgment with injunction and damages. In its decision 6 balance of the purchase price, as previously agreed upon by the parties.
dated May 12, 1986, the trial court dismissed the complaint for annulment on the
ground of res judicata, and the writ of preliminary injunction previously issued was SO ORDERED.
dissolved. It also ordered private respondent to pay P3,000.00 as attorney's fees. As a Upon denial of the motion for partil reconsideration (Civil Case No. Q-45541) by
consequence of private respondent's motion for reconsideration, the preliminary respondent Court of Appeals, 10 petitioners elevated the case via petition for certiorari
injunction was reinstated, thereby restraining the execution of the City Court's questioning the authority of Alice A. Dizon as agent of petitioners in receiving private
judgment on the ejectment case. respondent's partial payment amounting to P300,000.00 pursuant to the Contract of
The two cases were the after consolidated before the RTC of Quezon City, Branch 77. On Lease with Option to Buy. Petitioner also assail the propriety of private respondent's
April 28, 1989, a decision 7 was rendered dismissing private respondent's complaint in exercise of the option when it tendered the said amount on June 20, 1975 which
Civil Case No. Q-45541 (specific performance case) and denying its motion for purportedly resulted in a perfected contract of sale.
reconsideration in Civil Case No. 46487 (annulment of the ejectment case). The motion G.R. No. 124741:
for reconsideration of said decision was likewise denied.
Petitioners filed with respondent Court of Appeals a motion to remand the records of
On appeal, 8 respondent Court of Appeals rendered a decision 9 upholding the Civil Case No. 38-29155 (ejectment case) to the Metropolitan Trial Court (MTC), then
jurisdiction of the City Court of Quezon City in the ejectment case. It also concluded that City Court of Quezon City, Branch 38, for execution of the judgment 11 dated November
there was a perfected contract of sale between the parties on the leased premises and 22, 1982 which was granted in a resolution dated June 29, 1992. Private respondent
that pursuant to the option to buy agreement, private respondent had acquired the filed a motion to reconsider said resolution which was denied.
rights of a vendee in a contract of sale. It opined that the payment by private
respondent of P300,000.00 on June 20, 1975 as partial payment for the leased property, Aggrieved, private respondent filed a petition for certiorari, prohibition with preliminary
which petitioners accepted (through Alice A. Dizon) and for which an official receipt was injunction and/or restraining order with this Court (G.R. Nos. 106750-51) which was
issued, was the operative act that gave rise to a perfected contract of sale, and that for dismissed in a resolution dated September 16, 1992 on the ground that the same was a
failure of petitioners to deny receipt thereof, private respondent can therefore assume refiled case previously dismissed for lack of merit. On November 26, 1992, entry of
that Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the judgment was issued by this Court.
money in their behalf. The Court of Appeals went further by stating that in fact, what
was entered into was a "conditional contract of sale" wherein ownership over the On July 14, 1993, petitioners filed an urgent ex-parte motion for execution of the
leased property shall not pass to the private respondent until it has fully paid the decision in Civil Case No. 38-29155 with the MTC of Quezon City, Branch 38. On
September 13, 1993, the trial court ordered the issuance of a third alias writ of WHEREFORE, the motion for reconsideration is DENIED for lack of merit.
execution. In denying private respondent's motion for reconsideration, it ordered the
immediate implementation of the third writ of execution without delay. SO ORDERED. 17

On December 22, 1993, private respondent filed with the Regional Trial Court (RTC) of Hence, this instant petition.
Quezon City, Branch 104 a petition for certiorari and prohibition with preliminary We find both petitions impressed with merit.
injunction/restraining order (SP. PROC. No. 93-18722) challenging the enforceability and
validity of the MTC judgment as well as the order for its execution. First. Petitioners have established a right to evict private respondent from the subject
premises for non-payment of rentals. The term of the Contract of Lease with Option to
On January 11, 1994, RTC of Quezon City, Branch 104 issued an Buy was for a period of one (1) year (May 16, 1974 to May 15, 1975) during which the
order12 granting the issuance of a writ of preliminary injunction upon private private respondent was given an option to purchase said property at P3,000.00 square
respondent's' posting of an injunction bond of P50,000.00. meter. After the expiration thereof, the lease was for P3,000.00 per month.

Assailing the aforequoted order after denial of their motion for partial reconsideration,
petitioners filed a petition 13 for certiorari and prohibition with a prayer for a Admittedly, no definite period beyond the one-year term of lease was agreed upon by
temporary restraining order and/or preliminary injunction with the Court of Appeals. In petitioners and private respondent. However, since the rent was paid on a monthly
its decision, 14 the Court of Appeals dismissed the petition and ruled that: basis, the period of lease is considered to be from month to month in accordance with
The avowed purpose of this petition is to enjoin the public respondent from restraining Article 1687 of the New Civil Code.18 Where the rentals are paid monthly, the lease,
the ejectment of the private respondent. To grant the petition would be to allow the even if verbal may be deemed to be on a monthly basis, expiring at the end of every
ejectment of the private respondent. We cannot do that now in view of the decision of month pursuant to Article 1687, in relation to Article 1673 of the Civil Code. 19 In such
this Court in CA-G.R. CV Nos. 25153-54. Petitioners' alleged right to eject private case, a demand to vacate is not even necessary for judicial action after the expiration of
respondent has been demonstrated to be without basis in the said civil case. The every month. 20
petitioners have been shown, after all, to have no right to eject private respondents. When private respondent failed to pay the increased rental of P8,000.00 per month in
WHEREFORE, the petition is DENIED due course and is accordingly DISMISSED. June 1976, the petitioners had a cause of action to institute an ejectment suit against
the former with the then City Court. In this regard, the City Court (now MTC) had
SO ORDERED. 15 exclusive jurisdiction over the ejectment suit. The filing by private respondent of a suit
with the Regional Trial Court for specific performance to enforce the option to purchase
Petitioners' motion for reconsideration was denied in a resolution 16 by the Court of did not divest the then City Court of its jurisdiction to take cognizance over the
Appeals stating that: ejectment case. Of note is the fact that the decision of the City Court was affirmed by
This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the plaintiff- both the Intermediate Appellate Court and this Court.
appellant (private respondent herein) acquired the rights of a vendee in a contract of Second. Having failed to exercise the option within the stipulated one-year period,
sale, in effect, recognizing the right of the private respondent to possess the subject private respondent cannot enforce its option to purchase anymore. Moreover, even
premises. Considering said decision, we should not allow ejectment; to do so would assuming arguendo that the right to exercise the option still subsists at the time private
disturb the status quo of the parties since the petitioners are not in possession of the respondent tendered the amount on June 20, 1975, the suit for specific performance to
subject property. It would be unfair and unjust to deprive the private respondent of its enforce the option to purchase was filed only on October 7, 1985 or more than ten (10)
possession of the subject property after its rights have been established in a subsequent years after accrual of the cause of action as provided under Article 1144 of the New Civil
ruling. Code.21
performance, subject to the provisions of the law governing the form of contracts."
Thus, the elements of a contract of sale are consent, object, and price in money or its
In this case, there was a contract of lease for one (1) year with option to purchase. The equivalent. It bears stressing that the absence of any of these essential elements
contract of lease expired without the private respondent, as lessee, purchasing the negates the existence of a perfected contract of sale. Sale is a consensual contract and
property but remained in possession thereof. Hence, there was an implicit renewal of he who alleges it must show its existence by competent proof. 25
the contract of lease on a monthly basis. The other terms of the original contract of
lease which are revived in the implied new lease under Article 1670 of the New Civil In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to
Code 22 are only those terms which are germane to the lessee's right of continued petitioners (thru Alice A. Dizon) on the erroneous presumption that the said amount
enjoyment of the property leased. 23 Therefore, an implied new lease does not ipso tendered would constitute a perfected contract of sale pursuant to the contract of lease
facto carry with it any implied revival of private respondent's option to purchase (as with option to buy. There was no valid consent by the petitioners (as co-owners of the
lessee thereof) the leased premises. The provision entitling the lessee the option to leased premises) on the supposed sale entered into by Alice A. Dizon, as petitioners'
purchase the leased premises is not deemed incorporated in the impliedly renewed alleged agent, and private respondent. The basis for agency is representation and a
contract because it is alien to the possession of the lessee. Private respondent's right to person dealing with an agent is put upon inquiry and must discover upon his peril the
exercise the option to purchase expired with the termination of the original contract of authority of the agent. 26 As provided in Article 1868 of the New Civil Code, 27 there
lease for one year. The rationale of this Court is that: was no showing that petitioners consented to the act of Alice A. Dizon nor authorized
her to act on their behalf with regard to her transaction with private respondent. The
This is a reasonable construction of the provision, which is based on the presumption most prudent thing private respondent should have done was to ascertain the extent of
that when the lessor allows the lessee to continue enjoying possession of the property the authority of Alice A. Dizon. Being negligent in this regard, private respondent cannot
for fifteen days after the expiration of the contract he is willing that such enjoyment seek relief on the basis of a supposed agency.
shall be for the entire period corresponding to the rent which is customarily paid in
this case up to the end of the month because the rent was paid monthly. Necessarily, if In Bacaltos Coal Mines vs. Court of Appeals, 28 we explained the rule in dealing with an
the presumed will of the parties refers to the enjoyment of possession the presumption agent:
covers the other terms of the contract related to such possession, such as the amount of
rental, the date when it must be paid, the care of the property, the responsibility for Every person dealing with an agent is put upon inquiry and must discover upon his peril
repairs, etc. But no such presumption may be indulged in with respect to special the authority of the agent. If he does not make such inquiry, he is chargeable with
agreements which by nature are foreign to the right of occupancy or enjoyment knowledge of the agent's authority, and his ignorance of that authority will not be any
inherent in a contract of lease. 24 excuse. Persons dealing with an assumed agency, whether the assumed agency be a
general or special one, are bound at their peril, if they would hold the principal, to
Third. There was no perfected contract of sale between petitioners and private ascertain not only the fact of the agency but also the nature and extent of the authority,
respondent. Private respondent argued that it delivered the check of P300,000.00 to and in case either is controverted, the burden of proof is upon them to establish it.
Alice A. Dizon who acted as agent of petitioners pursuant to the supposed authority
given by petitioner Fidela Dizon, the payee thereof. Private respondent further For the long years that private respondent was able to thwart the execution of the
contended that petitioners' filing of the ejectment case against it based on the contract ejectment suit rendered in favor of petitioners, we now write finis to this controversy
of lease with option to buy holds petitioners in estoppel to question the authority of and shun further delay so as to ensure that this case would really attain finality.
petitioner Fidela Dizon. It insisted that the payment of P300,000.00 as partial payment WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated
of the purchase price constituted a valid exercise of the option to buy. March 29, 1994 and the resolution dated October 19, 1995 in CA-G.R. CV No. 25153-54,
Under Article 1475 of the New Civil Code, "the contract of sale is perfected at the as well as the decision dated December 11, 1995 and the resolution dated April 23, 1997
moment there is a meeting of minds upon the thing which is the object of the contract in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE.
and upon the price. From that moment, the parties may reciprocally demand
Let the records of this case be remanded to the trial court for immediate execution of
the judgment dated November 22, 1982 in Civil Case No. VIII-29155 of the then City
Court (now Metropolitan Trial Court) of Quezon City, Branch VIII as affirmed in the
decision dated September 26, 1984 of the then Intermediate Appellate Court (now
Court of Appeals) and in the resolution dated June 19, 1985 of this Court.

However, petitioners are ordered to REFUND to private respondent the amount of

P300,000.00 which they received through Alice A. Dizon on June 20, 1975.1wphi1.nt

Republic of the Philippines Jabil) for the sum of P28,000.00, payable in two installments, with an assumption of
indebtedness with the First Insular Bank of Cebu in the sum of P12,000.00, which was
SUPREME COURT paid and acknowledged by the vendors in the deed of sale (Exh. C) executed in favor of
Manila plaintiff-appellant, and the next installment in the sum of P4,000.00 to be paid on or
before September 15, 1965.

On November 25, 1965, the Dignos spouses sold the same land in favor of defendants
spouses, Luciano Cabigas and Jovita L. De Cabigas, who were then U.S. citizens, for the
price of P35,000.00. A deed of absolute sale (Exh. J, also marked Exh. 3) was executed by
G.R. No. L-59266 February 29, 1988 the Dignos spouses in favor of the Cabigas spouses, and which was registered in the
Office of the Register of Deeds pursuant to the provisions of Act No. 3344.


vs. As the Dignos spouses refused to accept from plaintiff-appellant the balance of the
purchase price of the land, and as plaintiff- appellant discovered the second sale made
HON. COURT OF APPEALS and ATILANO G. JABIL, respondents. by defendants-appellants to the Cabigas spouses, plaintiff-appellant brought the
present suit. (Rollo, pp. 27-28)

After due trial, the Court of first Instance of Cebu rendered its Decision on August
25,1972, the decretal portion of which reads:
This is a petition for review on certiorari seeking the reversal of the: (1) Decision * of the
9th Division, Court of Appeals dated July 31,1981, affirming with modification the
Decision, dated August 25, 1972 of the Court of First Instance ** of Cebu in civil Case WHEREFORE, the Court hereby declares the deed of sale executed on November 25,
No. 23-L entitled Atilano G. Jabil vs. Silvestre T. Dignos and Isabela Lumungsod de Dignos 1965 by defendant Isabela L. de Dignos in favor of defendant Luciano Cabigas, a citizen
and Panfilo Jabalde, as Attorney-in-Fact of Luciano Cabigas and Jovita L. de Cabigas; and of the United States of America, null and void ab initio, and the deed of sale executed by
(2) its Resolution dated December 16, 1981, denying defendant-appellant's (Petitioner's) defendants Silvestre T. Dignos and Isabela Lumungsod de Dignos not rescinded.
motion for reconsideration, for lack of merit. Consequently, the plaintiff Atilano G. Jabil is hereby ordered to pay the sum, of Sixteen
Thousand Pesos (P16,000.00) to the defendants-spouses upon the execution of the
Deed of absolute Sale of Lot No. 3453, Opon Cadastre and when the decision of this
case becomes final and executory.
The undisputed facts as found by the Court of Appeals are as follows:

The plaintiff Atilano G. Jabil is ordered to reimburse the defendants Luciano Cabigas and
The Dignos spouses were owners of a parcel of land, known as Lot No. 3453, of the
Jovita L. de Cabigas, through their attorney-in-fact, Panfilo Jabalde, reasonable amount
cadastral survey of Opon, Lapu-Lapu City. On June 7, 1965, appellants (petitioners)
corresponding to the expenses or costs of the hollow block fence, so far constructed.
Dignos spouses sold the said parcel of land to plaintiff-appellant (respondent Atilano J.
Judgment MODIFIED.

It is further ordered that defendants-spouses Silvestre T. Dignos and Isabela Lumungsod

de Dignos should return to defendants-spouses Luciano Cabigas and Jovita L. de Cabigas
the sum of P35,000.00, as equity demands that nobody shall enrich himself at the A motion for reconsideration of said decision was filed by the defendants- appellants
expense of another. (petitioners) Dignos spouses, but on December 16, 1981, a resolution was issued by the
Court of Appeals denying the motion for lack of merit.

The writ of preliminary injunction issued on September 23, 1966, automatically

becomes permanent in virtue of this decision. Hence, this petition.

With costs against the defendants. In the resolution of February 10, 1982, the Second Division of this Court denied the
petition for lack of merit. A motion for reconsideration of said resolution was filed on
March 16, 1982. In the resolution dated April 26,1982, respondents were required to
comment thereon, which comment was filed on May 11, 1982 and a reply thereto was
From the foregoing, the plaintiff (respondent herein) and defendants-spouss filed on July 26, 1982 in compliance with the resolution of June 16,1 982. On August
(petitioners herein) appealed to the Court of Appeals, which appeal was docketed 9,1982, acting on the motion for reconsideration and on all subsequent pleadings filed,
therein as CA-G.R. No. 54393-R, "Atilano G. Jabil v. Silvestre T. Dignos, et al." this Court resolved to reconsider its resolution of February 10, 1982 and to give due
course to the instant petition. On September 6, 1982, respondents filed a rejoinder to
reply of petitioners which was noted on the resolution of September 20, 1982.
On July 31, 1981, the Court of Appeals affirmed the decision of the lower court except
as to the portion ordering Jabil to pay for the expenses incurred by the Cabigas spouses
for the building of a fence upon the land in question. The disposive portion of said Petitioners raised the following assignment of errors:
decision of the Court of Appeals reads:

IN VIEW OF THE FOREGOING CONSIDERATIONS, except as to the modification of the
judgment as pertains to plaintiff-appellant above indicated, the judgment appealed
from is hereby AFFIRMED in all other respects.

II. Whether or not there was a valid rescission thereof.



It is significant to note that this petition was denied by the Second Division of this Court
III in its Resolution dated February 1 0, 1 982 for lack of merit, but on motion for
reconsideration and on the basis of all subsequent pleadings filed, the petition was
given due course.



The contract in question (Exhibit C) is a Deed of Sale, with the following conditions:

1. That Atilano G..Jabilis to pay the amount of Twelve Thousand Pesos P12,000.00) Phil.

2. That Atilano G. Jabil is to assume the balance of Twelve Thousand Pesos (P12,000.00)
V Loan from the First Insular Bank of Cebu;

BY AND LARGE, THE COURT OF APPEALS COMMITTED AN ERROR IN AFFIRMING WITH 3. That Atilano G. Jabil is to pay the said spouses the balance of Four. Thousand Pesos
MODIFICATION THE DECISION OF THE TRIAL COURT DUE TO GRAVE (P4,000.00) on or before September 15,1965;
MISINTERPRETATION, MISAPPLICATION AND MISAPPREHENSION OF THE TERMS OF THE 4. That the said spouses agrees to defend the said Atilano G. Jabil from other claims on
The foregoing assignment of errors may be synthesized into two main issues, to wit:

I. Whether or not subject contract is a deed of absolute sale or a contract Lot sell.
5. That the spouses agrees to sign a final deed of absolute sale in favor of Atilano G. Jabil A careful examination of the contract shows that there is no such stipulation reserving
over the above-mentioned property upon the payment of the balance of Four Thousand the title of the property on the vendors nor does it give them the right to unilaterally
Pesos. (Original Record, pp. 10-11) rescind the contract upon non-payment of the balance thereof within a fixed period.

In their motion for reconsideration, petitioners reiterated their contention that the On the contrary, all the elements of a valid contract of sale under Article 1458 of the
Deed of Sale (Exhibit "C") is a mere contract to sell and not an absolute sale; that the Civil Code, are present, such as: (1) consent or meeting of the minds; (2) determinate
same is subject to two (2) positive suspensive conditions, namely: the payment of the subject matter; and (3) price certain in money or its equivalent. In addition, Article 1477
balance of P4,000.00 on or before September 15,1965 and the immediate assumption of the same Code provides that "The ownership of the thing sold shall be transferred to
of the mortgage of P12,000.00 with the First Insular Bank of Cebu. It is further the vendee upon actual or constructive delivery thereof." As applied in the case of
contended that in said contract, title or ownership over the property was expressly Froilan v. Pan Oriental Shipping Co., et al. (12 SCRA 276), this Court held that in the
reserved in the vendor, the Dignos spouses until the suspensive condition of full and absence of stipulation to the contrary, the ownership of the thing sold passes to the
punctual payment of the balance of the purchase price shall have been met. So that vendee upon actual or constructive delivery thereof.
there is no actual sale until full payment is made (Rollo, pp. 51-52).
While it may be conceded that there was no constructive delivery of the land sold in the
In bolstering their contention that Exhibit "C" is merely a contract to sell, petitioners case at bar, as subject Deed of Sale is a private instrument, it is beyond question that
aver that there is absolutely nothing in Exhibit "C" that indicates that the vendors there was actual delivery thereof. As found by the trial court, the Dignos spouses
thereby sell, convey or transfer their ownership to the alleged vendee. Petitioners insist delivered the possession of the land in question to Jabil as early as March 27,1965 so
that Exhibit "C" (or 6) is a private instrument and the absence of a formal deed of that the latter constructed thereon Sally's Beach Resort also known as Jabil's Beach
conveyance is a very strong indication that the parties did not intend "transfer of Resort in March, 1965; Mactan White Beach Resort on January 15,1966 and Bevirlyn's
ownership and title but only a transfer after full payment" (Rollo, p. 52). Moreover, Beach Resort on September 1, 1965. Such facts were admitted by petitioner spouses
petitioners anchored their contention on the very terms and conditions of the contract, (Decision, Civil Case No. 23-L; Record on Appeal, p. 108).
more particularly paragraph four which reads, "that said spouses has agreed to sell the
herein mentioned property to Atilano G. Jabil ..." and condition number five which Moreover, the Court of Appeals in its resolution dated December 16,1981 found that
reads, "that the spouses agrees to sign a final deed of absolute sale over the mentioned the acts of petitioners, contemporaneous with the contract, clearly show that an
property upon the payment of the balance of four thousand pesos." absolute deed of sale was intended by the parties and not a contract to sell.

Such contention is untenable. Be that as it may, it is evident that when petitioners sold said land to the Cabigas
spouses, they were no longer owners of the same and the sale is null and void.
By and large, the issues in this case have already been settled by this Court in analogous
cases. II.

Thus, it has been held that a deed of sale is absolute in nature although denominated as Petitioners claim that when they sold the land to the Cabigas spouses, the contract of
a "Deed of Conditional Sale" where nowhere in the contract in question is a proviso or sale was already rescinded.
stipulation to the effect that title to the property sold is reserved in the vendor until full Applying the rationale of the case of Taguba v. Vda. de Leon (supra) which is on all fours
payment of the purchase price, nor is there a stipulation giving the vendor the right to with the case at bar, the contract of sale being absolute in nature is governed by Article
unilaterally rescind the contract the moment the vendee fails to pay within a fixed 1592 of the Civil Code. It is undisputed that petitioners never notified private
period Taguba v. Vda. de Leon, 132 SCRA 722; Luzon Brokerage Co., Inc. v. Maritime respondents Jabil by notarial act that they were rescinding the contract, and neither did
Building Co., Inc., 86 SCRA 305). they file a suit in court to rescind the sale. The most that they were able to show is a
letter of Cipriano Amistad who, claiming to be an emissary of Jabil, informed the Dignos
spouses not to go to the house of Jabil because the latter had no money and further
advised petitioners to sell the land in litigation to another party (Record on Appeal, p.
23). As correctly found by the Court of Appeals, there is no showing that Amistad was
properly authorized by Jabil to make such extra-judicial rescission for the latter who, on
the contrary, vigorously denied having sent Amistad to tell petitioners that he was
already waiving his rights to the land in question. Under Article 1358 of the Civil Code, it
is required that acts and contracts which have for their object the extinguishment of
real rights over immovable property must appear in a public document.

Petitioners laid considerable emphasis on the fact that private respondent Jabil had no
money on the stipulated date of payment on September 15,1965 and was able to raise
the necessary amount only by mid-October 1965.

It has been ruled, however, that "where time is not of the essence of the agreement, a
slight delay on the part of one party in the performance of his obligation is not a
sufficient ground for the rescission of the agreement" (Taguba v. Vda. de Leon, supra).
Considering that private respondent has only a balance of P4,000.00 and was delayed in
payment only for one month, equity and justice mandate as in the aforecited case that
Jabil be given an additional period within which to complete payment of the purchase

WHEREFORE, the petition filed is hereby Dismissed for lack of merit and the assailed
decision of the Court of Appeals is Affirmed in toto.

Republic of the Philippines - versus -




Petitioners, G.R. No. 139047

- versus - G.R. No. 139365



x- - - - - - - - - - - - - - - - - - - - - - x
Acting Chairperson,



(subject property). It previously formed part of a bigger parcel of agricultural land4 first
declared in the name of Domingo Lozada (Domingo) in the year 1916 under Tax
REYES, JJ. Declaration No. 2932.5

Promulgated: During the lifetime of Domingo, he was married twice. From his first marriage to
Hisberta Guevarra in the year 1873,6 he fathered two children, namely Bernardo and
Anatalia. After the death of Hisberta, Domingo married Graciana San Jose in the year
September 11, 2008 18877 and their marriage produced two children, namely Nicomedes and Pablo.

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x Domingo and Graciana died on 27 February 1930 and 12 August 1941, respectively. On
18 March 1965, Nicomedes and the heirs of his brother Pablo entered into an
DECISION Extrajudicial Settlement of the Estate8 of their parents Domingo and Graciana.
According to the settlement, the entire parcel of agricultural land declared in the name
of Domingo9 was divided into two, Lot 1 and Lot 2, in accordance with the approved
CHICO-NAZARIO, J.: subdivision plan Psu-205035. The subject property, i.e., Lot 1, was adjudicated to
Nicomedes; while Lot 2 was given to the heirs of Pablo. Nicomedes then declared the
subject property in his name in 1965 under Tax Declaration No. 2050.10
The two Petitions for Review on Certiorari1 now before this Court seek to challenge,
under Rule 45 of the Rules of Court, the Decision2 dated 17 June 1999 of the Court of
Appeals in CA-G.R. CV No. 35688, which reversed and set aside the Decision3 dated 25 On 23 June 1965, Nicomedes executed a Deed of Conditional Sale11 over the subject
November 1991 of the Regional Trial Court (RTC) of Pasay City, Branch 119, in the property in favor of Emma Ver Reyes (Emma), which provided:
consolidated cases of LRC Case No. LP-553-P (an application for registration of title to
real property) and Civil Case No. 6914-P (an action to declare ownership over real
property, formerly numbered Pq-8557-P). The Court of Appeals upheld the title of That the Vendor [Nicomedes] is the true and lawful owner of a parcel of land situated at
Rosario Bondoc to the disputed property, thus, overturning the finding of the RTC of Tungtong, Las Pinas, Rizal, more particularly described as follows:
Pasay City that Maria Q. Cristobal and Dulos Realty & Development Corporation have a
registrable title to the same property.

"A parcel of land (Lot 1 of plan Psu-205035), x x x; containing an area of NINETEEN

The Contracts still a portion of the land covered by Tax Declaration No. 2304 of Las Pinas, Rizal, in the
name of Domingo Lozada, and with a total assessed value of P1,860.00."

At the core of the controversy in the Petitions at bar is a parcel of unregistered land
located in Tungtong, Las Pias, formerly of the Province of Rizal, now a part of Metro
Manila, designated as Lot 1 of Plan Psu-205035, with an area of 19,545 square meters
That the [subject property] is a paraphernal property of the Vendor [Nicomedes], the
same having been inherited by him from his deceased mother, Graciana San Jose, but
was declared for taxation in the name of his deceased father, Domingo Lozada; 3. That the total price shall be subject to adjustment in accordance with the total area of
the above-described property that will be finally decreed by the court in favor of the
herein Vendor [Nicomedes]; and

That for and in consideration of the sum of FOUR PESOS AND FIFTY CENTAVOS (P4.50),
Philippine Currency, per square meter to be paid by the Vendee to the Vendor, the said
Vendor by these presents hereby SELLS, CEDES, TRANSFERS and CONVEYS by way of 4. That the Vendor [Nicomedes] will execute a final deed of absolute sale covering the
CONDITIONAL SALE the above-described parcel of land together with all the said property in favor of the Vendee [Emma] upon the full payment of the total
improvements thereon to the said Vendee [Emma], her heirs, assigns and successors, consideration in accordance with the stipulations above. (Emphases ours.)
free from all liens and encumbrances, under the following terms and conditions, to wit:

The Deed of Conditional Sale was registered in the Registry of Property for Unregistered
1. That the Vendee [Emma] will pay the Vendor [Nicomedes] as follows: Lands in August 1965.12

(a). TWENTY FIVE PERCENT (25%) of the total price on the date of the signing of this It would appear from the records of the case that Emma was only able to pay the first
contract; installment of the total purchase price agreed upon by the parties. Furthermore, as will
be discussed later on, Nicomedes did not succeed in his attempt to have any title to the
subject property issued in his name.

(b). The next TWENTY FIVE PERCENT (25%) of the total price upon the issuance of the
title for the land described above; and
On 14 June 1968, Nicomedes entered into another contract involving the subject
property with Rosario D. Bondoc (Rosario). Designated as an Agreement of Purchase
and Sale,13 the significant portions thereof states:
(c). The balance of FIFTY PERCENT (50%) of the total price within one (1) year from the
issuance of the said title;

NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of
2. That if the Vendee [Emma] fails to pay the Vendor [Nicomedes] the sums stated in Philippine Currency, which the BUYER [Rosario] shall pay to the SELLER [Nicomedes] in
paragraphs 1(b) and 1(c) above within the period stipulated and after the grace period the manner and form hereinafter specified, the SELLER [Nicomedes] by these presents
of one (1) month for each payment, this contract shall automatically be null and void hereby agreed and contracted to sell all his rights, interests, title and ownership over
and of no effect without the necessity of any demand, notice or filing the necessary the parcel of land x x x unto the BUYER [Rosario], who hereby agrees and binds herself
action in court, and the Vendor [Nicomedes] shall have the full and exclusive right to to purchase from the former, the aforesaid parcel of land, subject to the following terms
sell, transfer and convey absolutely the above-described property to any person, but the and conditions:
said Vendor [Nicomedes] shall return to the Vendee [Emma] all the amount paid to him
by reason of this contract without any interest upon the sale of the said property to
another person;
1. Upon the execution of this Agreement, the BUYER [Rosario] shall pay the SELLER
[Nicomedes], the sum of FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency.
The records of this case show that, of the entire consideration stipulated upon in the
Agreement, only the first installment was paid by Rosario. No title to the subject
property was ever delivered to her since, at the time of the execution of the above
2. [That] upon the delivery by the SELLER [Nicomedes] to the BUYER [Rosario] of a valid contract, Nicomedess application for the registration of the subject property was still
title of the aforesaid parcel of land, free from any and all liens and encumbrances, and pending.
the execution of the final Deed of Sale, the BUYER [Rosario] shall pay to the SELLER
(P37,705.00) Philippine Currency, and the final balance of ONE HUNDRED TWENTY
THREE THOUSAND AND TWO HUNDRED PESOS (P123,200.00) Philippine Currency, one Five months thereafter, Nicomedes executed on 10 August 1969 a third contract, a Deed
year from the date of execution of the final deed of sale, all without interest. of Absolute Sale of Unregistered Land,16 involving a portion of the subject property
measuring 2,000 square meters, in favor of Maria Q. Cristobal (Maria).17 The relevant
terms of the Deed recite:

3. That in the event the BUYER [Rosario] fails to pay any amount as specified in Section
2, Paragraph II, then this contract, shall, by the mere fact of non-payment expire itself
and shall be considered automatically cancelled, of no value and effect, and THAT I, NICOMEDES J. LOZADA, of legal age, Filipino citizen, married and a resident of
immediately thereafter the SELLER [Nicomedes] shall return to the BUYER [Rosario] the Las Pias, Rizal, Philippines, for and in consideration of the sum of TWENTY FIVE
sums of money he had received from the BUYER [Rosario] without any interests and THOUSAND (P25,000.00) PESOS, Philippine currency, receipt of which is hereby
whatever improvement or improvements made or introduced by the BUYER [Rosario] acknowledged to my full and entire satisfaction, do hereby sell, transfer and convey to
on the lot being sold shall accrue to the ownership and possession of the SELLER MARIA Q. CRISTOBAL, likewise of legal age, Filipino citizen, married to Juan [Dulos], and
[Nicomedes]. a resident of 114 Real Street, Las Pias, Rizal, Philippines, her heirs, executors,
administrators and assigns, TWO THOUSAND SQUARE METERS (2,000) for an easement
of way of a parcel of unregistered land situated in the Barrio of Tungtong, Municipality
of Las Pias, Province of Rizal, Philippines, exclusively belonging to and possessed by
xxxx me, and more particularly described as follows:

6. The SELLER [Nicomedes] hereby warrants the useful and peaceful possession and "A parcel of land described under Tax Declaration No. 9575 (Lot No. 1, Psu 205035),
occupation of the lot subject matter of this agreement by the BUYER [Rosario]. situated in the Barrio of Tuntong, Municipality of Las Pias, Province of Rizal,
(Emphasis ours.) Philippines. xxx [C]ontaining an area of 1.9545 hectares, more or less." (Emphasis ours.)

On 7 March 1969, Nicomedes and Rosario executed a Joint Affidavit,14 whereby they Nicomedes passed away on 29 June 1972. The Deed of Absolute Sale of Unregistered
confirmed the sale of the subject property by Nicomedes to Rosario through the Land between Nicomedes and Maria was registered only on 8 February 1973,18 or more
Agreement of Purchase and Sale dated 14 June 1968. They likewise agreed to have the than seven months after the formers death.
said Agreement registered with the Registry of Deeds in accordance with the provisions
of Section 194 of the Revised Administrative Code, as amended by Act No. 3344. The
Agreement of Purchase and Sale was thus registered on 10 March 1969.15
On 10 August 1979, Nicomedess heirs, namely, the four children from his first In view of the conflicting claims over the subject property, the CFI of Pasig dismissed
marriage,19 the six children from his second marriage,20 and his surviving second without prejudice LRC Case No. N-6577 on 21 November 1975 and ordered the parties
spouse Genoveva Pallera Vda. De Lozada, executed a Deed of Extrajudicial Settlement of therein, namely, the applicant Nicomedes and the oppositors/intervenors, to litigate
the Estate of the Late Nicomedes J. Lozada with Ratification of a Certain Deed of first the issues of ownership and possession.26
Absolute Sale of Unregistered Land.21 The heirs declared in said Deed of Extrajudicial
Settlement that the only property left by Nicomedes upon his death was the subject
property. They also ratified therein the prior sale of a portion of the subject property Five years later, on 27 June 1980, Domingos grandchildren from his first marriage,
made by Nicomedes in favor of Maria, but they clarified that the actual area of the Dominador, et al.,27 filed an Application for Registration28 of title to the subject
portion sold as presented in the plan was 2,287 square meters, not 2,000 square property with the CFI of Rizal, docketed as LRC Case No. LP-553-P. In their Application,
meters. After excluding the portion sold to Maria, the heirs claimed equal pro indiviso Dominador, et al., alleged, inter alia, that they were the owners of the subject property
shares in the remaining 17,258 square meters of the subject property. by virtue of inheritance; they were the actual occupants of the said property; and, other
than Emma, they had no knowledge of any encumbrance or claim of title affecting the
On 30 July 1980, Nicomedess heirs22 collectively sold, for the sum of P414,192.00, their
shares in the subject property in favor of Dulos Realty and Development Corporation
(Dulos Realty), as represented by its President Juan B. Dulos, via a Deed of Absolute Sale On 6 November 1980, Rosario, assisted by her husband Mariano Bondoc, invoking the
of an Unregistered Land.23 The said Deed of Absolute Sale dated 30 July 1980, however, Agreement of Purchase and Sale executed in her favor by Nicomedes on 14 June 1968,
was not registered. filed a Complaint29 before the CFI of Rizal for the declaration in her favor of ownership
over the subject property, with an application for a temporary restraining order or
preliminary injunction, against Trinidad Lozada (one of Domingos heirs from his first
The Cases marriage who applied for registration of the subject property in LRC Case No. LP-553-P)
and two other persons, who allegedly trespassed into the subject property. Rosarios
complaint was docketed as Civil Case No. Pq-8557-P.
On 11 April 1966, after executing the Deed of Conditional Sale in favor of Emma on 23
June 1965, Nicomedes filed an application for the registration of the subject property
with the then Court of First Instance (CFI) of Pasig, docketed as LRC Case No. N-6577. On 4 August 1981, the parties agreed to have LRC Case No. LP-553-P (the application for
The grandchildren of Domingo by his former marriage24 opposed the application for land registration of Dominador, et al.) consolidated with Civil Case No. Pq-8557-P (the
registration and Emma and her husband Ramon filed their intervention. action for declaration of ownership of Rosario).30

Sometime in 1973, following the execution in her favor of the Agreement of Purchase By subsequent events,31 and in consideration of the location of the subject property in
and Sale dated 14 June 1968 and Joint Affidavit dated 7 March 1969, Rosario filed a Las Pias, LRC Case No. LP-553-P and Civil Case No. Pq-8557-P, reinstated as Civil Case
motion to intervene in LRC Case No. N-6577 then pending before the CFI of Pasig; No. 6914-P, were finally transferred to and decided by the RTC of Pasay City.
however, her motion was denied by the CFI of Pasig, in an Order dated 2 June 1973.25
Rosario no longer appealed from the order denying her motion to intervene in said case.
In its Decision dated 25 November 1991, the RTC of Pasay City, Branch 119, disposed of
the cases thus:
Appeal, but this was denied by the Court of Appeals in a Resolution dated 15 January
WHEREFORE, considering all the foregoing, the court denies the application of
Dominador Salvador, Sr. et al, having no more right over the land applied for, dismisses
Civil Case No. Pq-8557-P now 6914 for lack of merit, and hereby declares Maria Cristobal
Dulos and Dulos Realty and Development Corporation to have a registrable title, In their respective Briefs before the appellate court,37 Emma and Rosario both faulted
confirming title and decreeing the registration of Lot 1 PSU-205035 containing a total the RTC of Pasay City for awarding the subject property to Maria and Dulos Realty. They
area of 19,545 square meters, 2,287 square meters of which appertains to Maria each claimed entitlement to the subject property and asserted the superiority of their
Cristobal Dulos married to Juan Dulos and the remaining portion, in favor of Dulos respective contracts as against those of the others.
Realty and Development Corporation, without pronouncement as to costs.32 (Emphasis
On 17 June 1999, the Court of Appeals rendered its assailed Decision, ruling as follows:

In so ruling, the RTC rationalized that the subject property constituted Domingos share
in the conjugal properties of his second marriage to Graciana San Jose and, therefore, As gathered above, both contracts [entered into with Emma and Rosario] gave
properly pertained to Nicomedes as one of his sons in said marriage. Being Domingos Nicomedes, as vendor, the right to unilaterally rescind the contract the moment the
heirs from his first marriage, Dominador, et al., were not entitled to the subject buyer failed to pay within a fixed period (Pingol v. CA, 226 SCRA 118), after which he, as
property. vendor, was obliged to return without interest the sums of money he had received from
the buyer (under the Deed of Conditional Sale [to Emma], upon the sale of the property
to another). Additionally, under the Agreement of Purchase and Sale [with Rosario], the
The lower court also found that neither Emma nor Rosario acquired a better title to the vendor, in case of rescission, would become the owner and entitled to the possession of
subject property as against Maria and Dulos Realty. No final deed of sale over the whatever improvements introduced by the buyer.
subject property was executed in favor of Emma or Rosario, while the sales of portions
of the same property in favor of Maria and of the rest to Dulos Realty were fully
consummated as evidenced by the absolute deeds of sale dated 10 August 1969 and 30 Under the Deed of Conditional Sale [to Emma], there was no provision that possession
July 1980, respectively. would be, in case of rescission, returned to the vendor, thereby implying that possession
remained with him (vendor). Such being the case, it appears to be a contract to sell.
Whereas under the Agreement of Purchase and Sale [with Rosario], the provision that in
Dominador, et al., Emma and her spouse Ramon Reyes (Ramon), and Rosario separately case of rescission, any improvements introduced by the vendee would become the
appealed to the Court of Appeals the foregoing Decision dated 25 November 1991 of vendors implies that possession was transferred to the vendee and, therefore, it
the RTC of Pasay City.33 Their consolidated appeals were docketed as CA-G.R. CV No. appears to be a contract of sale.

That the Agreement of Purchase and Sale [with Rosario] was a contract of sale gains
Dominador, et al., however, moved to withdraw their appeal in light of the amicable light from the Joint Affidavit subsequently executed by Rosario and Nicomedes stating
settlement they entered into with Maria and Dulos Realty.34 In a Resolution dated 24 that "an Agreement of Purchase and Sale wherein the former (Nicomedes J. Lozada)
September 1992,35 the Court of Appeals granted their Motion to Withdraw Appeal. sold to the latter (Rosario D. Bondoc) a parcel of land" had been executed but that the
Dominador, et al., later filed a motion to withdraw their earlier Motion to Withdraw lot "not having been registered under Act No. 496 nor under the Spanish Mortgage Law,
the parties hereto have agreed to register the Agreement of Purchase and Sale ... under But author Narciso Pea is inclined to concur that "better right" should refer to a "right
the provision of Section 194 of the Revised Administrative Code, as amended by Act No. which must have been acquired by a third party independently of the unregistered
3344." deed, such as, for instance, title by prescription, and that it has no reference to rights
acquired under that unregistered deed itself", he citing Nisce v. Milo, G.R. No. 425016,
January 17, 1936 Unrep. 62 Phil. 976 x x x.
Rosario registered the Agreement of Purchase and Sale alright on March 10, 1969. She
paid taxes on the lot from 1980 1985. She fenced the lot with concrete and hollow
blocks. And apart from opposing the land registration case, she filed a complaint against Given the fact that the contract in Emmas favor is a mere contract to sell, as against
Trinidad, et al., for declaration ownership. Rosarios contract which, as demonstrated above is one of sale and, in any event,
independently of Emmas contract to sell, she has no claim of a better right unlike
Rosario who has, not to mention the fact that she (Rosario) registered her contract
Article 1371 of the Civil Code provides: earlier than Emmas, Rosario must prevail.

"Art. 1371. In order to judge the intention of the contracting parties, their The lot having been previously sold to Rosario, there was no lot or portion thereof to be
contemporaneous and subsequent acts shall be principally considered." later sold to Maria and to Dulos Realty in 1979 and 1980, respectively.

From the provisions of the Agreement of Purchase and Sale [to Rosario] and the WHEREFORE, the appealed Joint Decision is hereby REVERSED and SET ASIDE and
subsequent acts of the parties then including the execution of the Joint Affidavit by another is rendered confirming the title of Rosario D. Bondoc over subject lot, Lot 1,
Rosario and Nicomedes stating that "an Agreement of Purchase and Sale wherein the PSU-205035 containing an area of 19,545 sq.m., ordering its registration in her name,
former (Nicomedes...) sold to the latter (Rosario...) a parcel of land", had been executed, and dismissing the claims of ownership of all other claimants. Appellees Maria Cristobal
there is no mistaking that the lot was sold to Rosario xxx. and Dulos Realty and Development Corporation and all other claimants to subject land
including all persons claiming under them are hereby ordered to vacate and restore
possession to appellant Rosario D. Bondoc.

Anent the effect of Rosarios registration of the Agreement of Purchase and Sale on
Emmas contract involving the same lot, Act No. 3344 (Amending Sec. 194 of the
Administrative Code [Recording of instruments or deeds relating to real estate not Upon issuance of title to subject lot, appellant Rosario D. Bondoc is ordered to pay the
registered under Act No. 496 or under the Spanish Mortgage Law]) provides that any balance of the purchase price to the heirs of Nicomedes Lozada in accordance with the
registration made under Sec. 194 of the Administrative Code "shall be understood to be Agreement of Purchase and Sale executed by the latter in her favor. This judgment is
without prejudice to a third party who has a better right". without prejudice to the rights which Emma Ver Reyes and Maria Cristobal and Dulos
Realty and Development Corporation might have against the estate or surviving heirs of
Nicomedes Lozada to the extent that the latter was/were benefited.38 (Emphasis ours.)

"Better right", however, was not defined by law.

Aggrieved, Emma and her husband Ramon,39 as well as Maria and Dulos Realty,40
without seeking reconsideration of the appellate courts decision, filed directly before
this Court separate Petitions for Review on Certiorari under Rule 45 of the Rules of REGISTRATION IN HER NAME AND DISMISSING THE CLAIM OF EMMA VER REYES AND
Court, docketed as G.R. No. 139047 and G.R. No. 139365, respectively, assailing the 17 RAMON REYES.43
June 1999 Decision of the appellate court. Upon the manifestation and motion of Maria
and Dulos Realty,41 the two Petitions were ordered consolidated by this Court in a
Resolution42 dated 13 December 1999. Maria and Dulos Realty, on the other hand, submitted in their Petition the following
issues for consideration of this Court:

In their Petition, Emma and her husband Ramon raise the following issues:






The fundamental issue that the Court is called upon to resolve is, in consideration of all
IV. the contracts executed by Nicomedes and/or his heirs involving the subject property,
which party acquired valid and registrable title to the same.


Emma and Ramon contend that although the subject property was conditionally sold to
them by Nicomedes, the "conditionality" of the sale did not suspend the transfer of
ownership over the subject property from Nicomedes to Emma. Even though After a conscientious review of the arguments and evidence presented by the parties,
Nicomedes may automatically rescind the contract in case of non-payment by Emma of the Court finds that the Deed of Conditional Sale between Nicomedes and Emma and
the balance of the purchase price, it did not bar the transfer of title to the subject the Agreement of Purchase and Sale between Nicomedes and Rosario were both mere
property to Emma in the meantime. Emma and Reyes likewise claim that there was contracts to sell and did not transfer ownership or title to either of the buyers in light of
constructive delivery of the subject property to Emma, inasmuch as the Deed of their failure to fully pay for the purchase price of the subject property.
Conditional Sale in her favor was a public instrument. Furthermore, Emma was in
possession of the subject property in the concept of owner since she had been paying
realty taxes for the same, albeit in the name of Nicomedes (in whose name it was In Coronel v. Court of Appeals,46 this Court effectively provided the guidelines for
declared), from the time of the sale in 1965 until 1972. Emma and Ramon also assert differentiating between a contract to sell and a contract of sale, to wit:
that Maria and Dulos Realty were in bad faith as the sales of the subject property in
their favor, on 10 August 1969 and 30 July 1980, respectively, occurred only after the
filing of the cases involving the property45 and the registration of the sale to Emma. The Civil Code defines a contract of sale, thus:
Finally, Emma and Ramon maintain that the Court of Appeals erred in ruling that the
contract in favor of Rosario was a contract of sale for the sole reason that actual
possession of the property was already transferred to the latter.
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.
For their part, Maria and Dulos Realty point out that Emma and Rosario are not holders
of absolute deeds of conveyances over the subject property, which would have entitled
them to register the same in their respective names. They further buttress their alleged
superior right to the subject property based on the execution of two notarized Sale, by its very nature, is a consensual contract because it is perfected by mere
documents of sale in their favor, which constituted symbolic and constructive delivery of consent. The essential elements of a contract of sale are the following:
the subject property to them. Maria and Dulos Realty likewise assert that the claims of
Emma and Rosario are already barred by laches and prescription because they only
decided to enforce their respective rights over the subject property after Domingos a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange
heirs filed with the CFI of Rizal on 27 June 1980 an application for registration of the for the price;
subject property, docketed as LRC Case No. LP-553-P, notwithstanding their knowledge
of Nicomedess death on 29 June 1972. Lastly, Maria and Dulos Realty aver that Rosario
is already barred by res judicata since her motion to intervene in LRC Case No. 6577, the
b) Determinate subject matter; and
case instituted by Nicomedes to register the subject property, was denied by the CFI of
Pasig. The dismissal of Rosarios motion to intervene in the case for registration of the
subject property already became final and executory, thus, barring Rosario from
pursuing her claim over the same. c) Price certain in money or its equivalent.

This Courts Ruling Under this definition, a Contract to Sell may not be considered as a Contract of Sale
because the first essential element is lacking. In a contract to sell, the prospective seller
explicitly reserves the transfer of title to the prospective buyer, meaning, the the prospective buyer upon fulfillment of the condition agreed upon, that is, full
prospective seller does not as yet agree or consent to transfer ownership of the payment of the purchase price.
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 A contract to sell as defined hereinabove, may not even be considered as a conditional
when the entire amount of the purchase price is delivered to him. In other words the contract of sale where the seller may likewise reserve title to the property subject of the
full payment of the purchase price partakes of a suspensive condition, the non- sale until the fulfillment of a suspensive condition, because in a conditional contract of
fulfillment of which prevents the obligation to sell from arising and thus, ownership is sale, the first element of consent is present, although it is conditioned upon the
retained by the prospective seller without further remedies by the prospective buyer. In happening of a contingent event which may or may not occur. If the suspensive
Roque vs. Lapuz (96 SCRA 741 [1980]), this Court had occasion to rule: 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
Hence, We hold that the contract between the petitioner and the respondent was a there had already been previous delivery of the property subject of the sale to the
contract to sell where the ownership or title is retained by the seller and is not to pass buyer, ownership thereto automatically transfers to the buyer by operation of law
until the full payment of the price, such payment being a positive suspensive condition without any further act having to be performed by the seller.
and failure of which is not a breach, casual or serious, but simply an event that
prevented the obligation of the vendor to convey title from acquiring binding force.
In 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
Stated positively, upon the fulfillment of the suspensive condition which is the full although the property may have been previously delivered to him. The prospective
payment of the purchase price, the prospective sellers obligation to sell the subject seller still has to convey title to the prospective buyer by entering into a contract of
property by entering into a contract of sale with the prospective buyer becomes absolute sale. (Emphases ours.)
demandable as provided in Article 1479 of the Civil Code which states:

Also in Coronel v. Court of Appeals, the Court highlighted the importance of making the
Art. 1479. A promise to buy and sell a determinate thing for a price certain is distinction between a contract to sell and a contract of sale:
reciprocally demandable.

It is essential to distinguish between a contract to sell and a conditional contract of sale

An accepted unilateral promise to buy or to sell a determinate thing for a price certain is specially in cases where the subject property is sold by the owner not to the party the
binding upon the promissor if the promise is supported by a consideration distinct from seller contracted with, but to a third person, as in the case at bench. In a contract to sell,
the price. 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
A contract to sell may thus be defined as a bilateral contract whereby the prospective buyer cannot seek the relief of reconveyance of the property. There is no double sale in
seller, while expressly reserving the ownership of the subject property despite delivery such case. Title to the property will transfer to the buyer after registration because
thereof to the prospective buyer, binds himself to sell the said property exclusively to 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.
Viewed in light of the foregoing pronouncements, the Deed of Conditional Sale executed
by Nicomedes in favor of Emma on 23 June 1965 is unmistakably a mere contract to sell.
In a conditional contract of sale, however, upon the fulfillment of the suspensive The Court looks beyond the title of said document, since the denomination or title given
condition, the sale becomes absolute and this will definitely affect the sellers title by the parties in their contract is not conclusive of the nature of its contents.52 In the
thereto. In fact, if there had been previous delivery of the subject property, the sellers construction or interpretation of an instrument, the intention of the parties is primordial
ownership or title to the property is automatically transferred to the buyer such that, and is to be pursued.53 If the terms of the contract are clear and leave no doubt upon
the seller will no longer have any title to transfer to any third person. Applying Article the intention of the contracting parties, the literal meaning of its stipulations shall
1544 of the Civil Code, such second buyer of the property who may have had actual or control. If the words appear to be contrary to the evident intention of the parties, the
constructive knowledge of such defect in the sellers title, or at least was charged with latter shall prevail over the former.54
the obligation to discover such defect, cannot be a registrant in good faith. Such second
buyer cannot defeat the first buyers title. In case a title is issued to the second buyer,
the first buyer may seek reconveyance of the property subject of the sale.47
A simple reading of the terms of the 23 June 1965 Deed of Conditional Sale readily
discloses that it contains stipulations characteristic of a contract to sell. It provides for
the automatic cancellation of the contract should Emma fail to pay the purchase price as
Even in the absence of an express stipulation to such effect, the intention of the parties required therein; and, in such an event, it grants Nicomedes the exclusive right to
to execute a contract to sell may be implied from the provisions of the contract. While thereafter sell the subject property to a third person. As in Adelfa Properties, the
Article 147848 of the Civil Code recognizes the right of the parties to agree that the contract between Nicomedes and Emma does not provide for reversion or
ownership of the thing shall not pass to the purchaser until he has fully paid the price reconveyance of the subject property to Nicomedes in the event of nonpayment by
therefore, the same statutory provision does not require that such be expressly Emma of the purchase price. More importantly, the Deed in question clearly states that
stipulated in the contract. Nicomedes will issue a final deed of absolute sale only upon the full payment of the
purchase price for the subject property. Taken together, the terms of the Deeds reveal
the evident intention of the parties to reserve ownership over the subject property to
In Adelfa Properties, Inc. v. Court of Appeals,49 the Court ruled that since the contract Nicomedes pending payment by Emma of the full purchase price for the same.
between the parties therein did not contain a stipulation on reversion or reconveyance
of the property to the seller in the event that the buyer did not comply with its
obligation, it may legally be inferred that the parties never intended to transfer While the Deed of Conditional Sale dated 23 June 1965 was indeed contained in a public
ownership to the buyer prior to the completion of the payment of the purchase price. instrument, it did not constitute constructive delivery of the subject property to Emma
Consequently, the contract involved in the aforementioned case was a mere contract to in view of the contrary inference in the Deed itself that the ownership over the subject
sell. property was reserved by Nicomedes.55 Moreover, other than her claim that she paid
the realty taxes on the subject property, Emma did not present any evidence that she
took actual and physical possession of the subject property at any given time.
An agreement is also considered a contract to sell if there is a stipulation therein giving
the vendor the rights to unilaterally rescind the contract the moment the vendee fails to
pay within a fixed period and to consequently open the subject property anew to This Court also finds that, contrary to the ruling of the Court of Appeals, the Agreement
purchase offers.50 In the same vein, where the seller promises to execute a deed of of Purchase and Sale executed by Nicomedes in favor of Rosario on 14 June 1968 is
absolute sale upon the completion by the buyer of the payment of the price, the likewise a mere contract to sell.
contract is only a contract to sell.51
The Agreement itself categorically states that Nicomedes only undertakes to sell the the BUYER without any interests and whatever improvement or improvements made or
subject property to Rosario upon the payment of the stipulated purchase price and that introduced by the BUYER on the lot being sold shall accrue to the ownership and
an absolute deed of sale is yet to be executed between the parties. Thus: possession of the SELLER.57

NOW, THEREFORE, for and in consideration of the foregoing premises and of the sum of As can be clearly read above, only the rights to possess the property and construct
ONE HUNDRED SEVENTY FIVE THOUSAND NINE HUNDRED FIVE PESOS (P175,905.00) improvements thereon have been evidently given to Rosario. The provisions of the
Philippine Currency, which the BUYER shall pay to the SELLER in the manner and form Agreement do not in any way indicate that the ownership of the subject property has
hereinafter specified, the SELLER by these presents hereby agreed and contracted to sell likewise been transferred to Rosario. That Nicomedes shall appropriate the
all his rights, interests, title and ownership over the parcel of land xxx unto the BUYER, improvements as his own should Rosario default in her payment of the purchase price
who hereby agrees and binds herself to purchase from the former, the aforesaid parcel only further supports the conclusion that title to the subject property itself still
of land, subject to the following terms and conditions: remained with Nicomedes.

1. Upon the execution of this Agreement, the BUYER shall pay the SELLER, the sum of The Court concludes that the Deed of Conditional Sale in favor of Emma and the
FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency. Agreement of Purchase and Sale in favor of Rosario were mere contracts to sell. As both
contracts remained unperfected by reason of the non-compliance with conditions
thereof by all of the parties thereto, Nicomedes can still validly convey the subject
2. That upon the delivery by the SELLER to the BUYER of a valid title of the aforesaid property to another buyer. This fact, however, is without prejudice to the rights of
parcel of land, free from any and all liens and encumbrances, and the execution of the Emma and Rosario to seek relief by way of damages against the estate and heirs of
final Deed of Sale, the BUYER shall pay to the SELLER, the sum of THIRTY SEVEN Nicomedes to the extent that the latter were benefited by the sale to succeeding
THOUSAND SEVEN HUNDRED FIVE PESOS (P37,705.00) Philippine Currency, and the final buyers.58
(P123,200.00) Philippine Currency, one year from the date of the execution of the final
deed of sale, all without interest.56 (Emphases ours.) Thus, the Deeds of Absolute Sale in favor of Maria and Dulos Realty were the only
conveyances of the subject property in this case that can be the source of a valid and
registrable title. Both contracts were designated as absolute sales and the provisions
The Agreement additionally grants Nicomedes the right to automatically cancel the thereof leave no doubt that the same were true contracts of sale. The total
same in the event of nonpayment by Rosario of any of the specified sums therein and considerations for the respective portions of the subject property were fully paid by the
any improvement introduced in the subject property shall thereby accrue to Nicomedes, buyers and no conditions whatsoever were stipulated upon by the parties as regards the
viz: transmission of the ownership of the said property to the said buyers.

3. That in the event the BUYER fails to pay any amount as specified in Section 2, The fact that Rosario was the first among the parties to register her contract in the
Paragraph II, then this contract, shall, by the mere fact of non-payment expire itself and Registry of Property for Unregistered Lands on 10 March 1969 is of no moment.
shall be considered automatically cancelled, of no value and effect, and immediately
thereafter the SELLER shall return to the buyer the sums of money he had received from
Act No. 3344,59 which amended Section 194 of the Administrative Code, enunciates
that any registration made under Section 194 of the Administrative Code "shall be
understood to be without prejudice to a third party who has a better right."

In this case, Maria and Dulos Realty acquired their title to the property in separate
deeds of absolute sale executed in their favor by Nicomedes and his heirs. Upon the
execution of these deeds, the ownership of the subject property was vested unto the
said buyers instantly, unlike the contracts to sell executed in favor of Emma and Rosario.
Consequently, the rights to the subject property of Maria and Dulos Realty, acquired
through the contracts of sale in their favor, are undeniably better or superior to those of
Emma or Rosario, and can thus be confirmed by registration.

In sum, this Court recognizes the valid and registrable rights of Maria and Dulos Realty
to the subject property, but without prejudice to the rights of Emma and Rosario to seek
damages against the estate and heirs of Nicomedes.

WHEREFORE, premises considered, the Petition in G.R. No. 139047 is DENIED, while the
Petition in G.R. No. 139365 is GRANTED. The assailed Decision of the Court of Appeals in
CA-G.R. CV No. 35688 dated 17 June 1999 is SET ASIDE and the Decision dated 25
November 1991 of the Regional Trial Court of Pasay City, Branch 119, is REINSTATED. No

Republic of the Philippines 1. Defendant Dra. Ninevetch M. Cruz the sum of P300,000.00 as and for moral damages
and the sum of P100,000.00 as and for exemplary damages;

2. Defendant Atty. Juan Belarmino the sum of P250,000.00 as and for moral damages
and the sum of P150,000.00 as and for exemplary damages;

3. Defendant Dra. Cruz and Atty. Belarmino the sum of P25,000.00 each as and for
attorney's fees and litigation expenses; and

G.R. No. 112212 March 2, 1998 4. The costs of suit.



COURT OF APPEALS, NINEVETCH CRUZ and JUAN BELARMINO, respondents. As found by the Court of Appeals and the lower court, the antecedent facts of this case
are as follows:

Petitioner Gregorio Fule, a banker by profession and a jeweler at the same time,
acquired a 10-hectare property in Tanay, Rizal (hereinafter "Tanay property"), covered
by Transfer Certificate of Title No. 320725 which used to be under the name of Fr.
This petition for review on certiorari questions the affirmance by the Court of Appeals of Antonio Jacobe. The latter had mortgaged it earlier to the Rural Bank of Alaminos (the
the decision 1 of the Regional Trial Court of San Pablo City, Branch 30, dismissing the Bank), Laguna, Inc. to secure a loan in the amount of P10,000.00, but the mortgage was
complaint that prayed for the nullification of a contract of sale of a 10-hectare property later foreclosed and the property offered for public auction upon his default.
in Tanay, Rizal in consideration of the amount of P40,000.00 and a 2.5 carat emerald-cut
diamond (Civil Case No. SP-2455). The lower court's decision disposed of the case as
In July 1984, petitioner, as corporate secretary of the bank, asked Remelia Dichoso and
Oliva Mendoza to look for a buyer who might be interested in the Tanay property. The
two found one in the person of herein private respondent Dr. Ninevetch Cruz. It so
WHEREFORE, premises considered, the Court hereby renders judgment dismissing the happened that at the time, petitioner had shown interest in buying a pair of emerald-cut
complaint for lack of merit and ordering plaintiff to pay: diamond earrings owned by Dr. Cruz which he had seen in January of the same year
when his mother examined and appraised them as genuine. Dr. Cruz, however, declined
petitioner's offer to buy the jewelry for P100,000.00. Petitioner then made another bid
to buy them for US$6,000.00 at the exchange rate of $1.00 to P25.00. At this point, jewelry was appraised only at P160,000.00, the parties agreed that the balance of
petitioner inspected said jewelry at the lobby of the Prudential Bank branch in San Pablo P40,000.00 would just be paid later in cash.
City and then made a sketch thereof. Having sketched the jewelry for twenty to thirty
minutes, petitioner gave them back to Dr. Cruz who again refused to sell them since the
exchange rate of the peso at the time appreciated to P19.00 to a dollar. As pre-arranged, petitioner left Atty. Belarmino's residence with Dichoso and Mendoza
and headed for the bank, arriving there at past 5:00 p.m. Dr. Cruz also arrived shortly
thereafter, but the cashier who kept the other key to the deposit box had already left
Subsequently, however, negotiations for the barter of the jewelry and the Tanay the bank. Dr. Cruz and Dichoso, therefore, looked for said cashier and found him having
property ensued. Dr. Cruz requested herein private respondent Atty. Juan Belarmino to a haircut. As soon as his haircut was finished, the cashier returned to the bank and
check the property who, in turn, found out that no sale or barter was feasible because arrived there at 5:48 p.m., ahead of Dr. Cruz and Dichoso who arrived at 5:55 p.m. Dr.
the one-year period for redemption of the said property had not yet expired at the time. Cruz and the cashier then opened the safety deposit box, the former retrieving a
transparent plastic or cellophane bag with the jewelry inside and handing over the same
to petitioner. The latter took the jewelry from the bag, went near the electric light at the
In an effort to cut through any legal impediment, petitioner executed on October 19, bank's lobby, held the jewelry against the light and examined it for ten to fifteen
1984, a deed of redemption on behalf of Fr. Jacobe purportedly in the amount of minutes. After a while, Dr. Cruz asked, "Okay na ba iyan?" Petitioner expressed his
P15,987.78, and on even date, Fr. Jacobe sold the property to petitioner for P75,000.00. satisfaction by nodding his head.
The haste with which the two deeds were executed is shown by the fact that the deed
of sale was notarized ahead of the deed of redemption. As Dr. Cruz had already agreed
to the proposed barter, petitioner went to Prudential Bank once again to take a look at For services rendered, petitioner paid the agents, Dichoso and Mendoza, the amount of
the jewelry. US$300.00 and some pieces of jewelry. He did not, however, give them half of the pair
of earrings in question which he had earlier promised.

In the afternoon of October 23, 1984, petitioner met Atty. Belarmino at the latter's
residence to prepare the documents of sale.2 Dr. Cruz herself was not around but Atty. Later, at about 8:00 o'clock in the evening of the same day, petitioner arrived at the
Belarmino was aware that she and petitioner had previously agreed to exchange a pair residence of Atty. Belarmino complaining that the jewelry given to him was fake. He
of emerald-cut diamond earrings for the Tanay property. Atty. Belarmino accordingly then used a tester to prove the alleged fakery. Meanwhile, at 8:30 p.m., Dichoso and
caused the preparation of a deed of absolute sale while petitioner and Dr. Cruz attended Mendoza went to the residence of Dr. Cruz to borrow her car so that, with Atty.
to the safekeeping of the jewelry. Belarmino, they could register the Tanay property. After Dr. Cruz had agreed to lend her
car, Dichoso called up Atty. Belarmino. The latter, however, instructed Dichoso to
proceed immediately to his residence because petitioner was there. Believing that
The following day, petitioner, together with Dichoso and Mendoza, arrived at the petitioner had finally agreed to give them half of the pair of earrings, Dichoso went
residence of Atty. Belarmino to finally execute a deed of absolute sale. Petitioner signed posthaste to the residence of Atty. Belarmino only to find petitioner already
the deed and gave Atty. Belarmino the amount of P13,700.00 for necessary expenses in demonstrating with a tester that the earrings were fake. Petitioner then accused
the transfer of title over the Tanay property. Petitioner also issued a certification to the Dichoso and Mendoza of deceiving him which they, however, denied. They countered
effect that the actual consideration of the sale was P200,000.00 and not P80,000.00 as that petitioner could not have been fooled because he had vast experience regarding
indicated in the deed of absolute sale. The disparity between the actual contract price jewelry. Petitioner nonetheless took back the US$300.00 and jewelry he had given
and the one indicated on the deed of absolute sale was purportedly aimed at minimizing them.
the amount of the capital gains tax that petitioner would have to shoulder. Since the
tester complaining about some fake jewelries (sic), there was already undue delay
because of the lapse of a considerable length of time since he got hold of subject
Thereafter, the group decided to go to the house of a certain Macario Dimayuga, a jewelries (sic). The lapse of two (2) hours more or less before plaintiff complained is
jeweler, to have the earrings tested. Dimayuga, after taking one look at the earrings, considered by the Court as unreasonable delay.3
immediately declared them counterfeit. At around 9:30 p.m., petitioner went to one
Atty. Reynaldo Alcantara residing at Lakeside Subdivision in San Pablo City, complaining
about the fake jewelry. Upon being advised by the latter, petitioner reported the matter
to the police station where Dichoso and Mendoza likewise executed sworn statements. The lower court further ruled that all the elements of a valid contract under Article 1458
of the Civil Code were present, namely: (a) consent or meeting of the minds; (b)
determinate subject matter, and (c) price certain in money or its equivalent. The same
elements, according to the lower court, were present despite the fact that the
On October 26, 1984, petitioner filed a complaint before the Regional Trial Court of San agreement between petitioner and Dr. Cruz was principally a barter contract. The lower
Pablo City against private respondents praying, among other things, that the contract of court explained thus:
sale over the Tanay property be declared null and void on the ground of fraud and

. . . . Plaintiff's ownership over the Tanay property passed unto Dra. Cruz upon the
constructive delivery thereof by virtue of the Deed of Absolute Sale (Exh. D). On the
On October 30, 1984, the lower court issued a temporary restraining order directing the other hand, the ownership of Dra. Cruz over the subject jewelries (sic) transferred to the
Register of Deeds of Rizal to refrain from acting on the pertinent documents involved in plaintiff upon her actual personal delivery to him at the lobby of the Prudential Bank. It
the transaction. On November 20, 1984, however, the same court lifted its previous is expressly provided by law that the thing sold shall be understood as delivered, when it
order and denied the prayer for a writ of preliminary injunction. is placed in the control and possession of the vendee (Art. 1497, Civil Code; Kuenzle &
Straff vs. Watson & Co. 13 Phil. 26). The ownership and/or title over the jewelries (sic)
was transmitted immediately before 6:00 p.m. of October 24, 1984. Plaintiff signified his
After trial, the lower court rendered its decision on March 7, 1989. Confronting the issue approval by nodding his head. Delivery or tradition, is one of the modes of acquiring
of whether or not the genuine pair of earrings used as consideration for the sale was ownership (Art. 712, Civil Code).
delivered by Dr. Cruz to petitioner, the lower court said:

Similarly, when Exhibit D was executed, it was equivalent to the delivery of the Tanay
The Court finds that the answer is definitely in the affirmative. Indeed, Dra. Cruz property in favor of Dra. Cruz. The execution of the public instrument (Exh. D) operates
delivered (the) subject jewelries (sic) into the hands of plaintiff who even raised the as a formal or symbolic delivery of the Tanay property and authorizes the buyer, Dra.
same nearer to the lights of the lobby of the bank near the door. When asked by Dra. Cruz to use the document as proof of ownership (Florendo v. Foz, 20 Phil. 399). More so,
Cruz if everything was in order, plaintiff even nodded his satisfaction (Hearing of Feb. since Exhibit D does not contain any proviso or stipulation to the effect that title to the
24, 1988). At that instance, plaintiff did not protest, complain or beg for additional time property is reserved with the vendor until full payment of the purchase price, nor is
to examine further the jewelries (sic). Being a professional banker and engaged in the there a stipulation giving the vendor the right to unilaterally rescind the contract the
jewelry business plaintiff is conversant and competent to detect a fake diamond from moment the vendee fails to pay within a fixed period (Taguba v. Vda. De Leon, 132 SCRA
the real thing. Plaintiff was accorded the reasonable time and opportunity to ascertain 722; Luzon Brokerage Co. Inc. vs. Maritime Building Co. Inc. 86 SCRA 305; Froilan v. Pan
and inspect the jewelries (sic) in accordance with Article 1584 of the Civil Code. Plaintiff Oriental Shipping Co. et al. 12 SCRA 276). 4
took delivery of the subject jewelries (sic) before 6:00 p.m. of October 24, 1984. When
he went at 8:00 p.m. that same day to the residence of Atty. Belarmino already with a
Aside from concluding that the contract of barter or sale had in fact been consummated the process. Both of them are near the twilight of their lives after maintaining and
when petitioner and Dr. Cruz parted ways at the bank, the trial court likewise dwelt on nurturing their good reputation in the community only to be stunned with a court case.
the unexplained delay with which petitioner complained about the alleged fakery. Thus: Since the filing of this case on October 26, 1984 up to the present they were living under
a pall of doubt. Surely, this affected not only their earning capacity in their practice of
their respective professions, but also they suffered besmirched reputations. Dra. Cruz
. . . . Verily, plaintiff is already estopped to come back after the lapse of considerable runs her own hospital and defendant Belarmino is a well respected legal practitioner.
length of time to claim that what he got was fake. He is a Business Management The length of time this case dragged on during which period their reputation were (sic)
graduate of La Salle University, Class 1978-79, a professional banker as well as a jeweler tarnished and their names maligned by the pendency of the case, the Court is of the
in his own right. Two hours is more than enough time to make a switch of a Russian belief that some of the damages they prayed for in their answers to the complaint are
diamond with the real diamond. It must be remembered that in July 1984 plaintiff made reasonably proportionate to the sufferings they underwent (Art. 2219, New Civil Code).
a sketch of the subject jewelries (sic) at the Prudential Bank. Plaintiff had a tester at 8:00 Moreover, because of the falsity, malice and baseless nature of the complaint
p.m. at the residence of Atty. Belarmino. Why then did he not bring it out when he was defendants were compelled to litigate. Hence, the award of attorney's fees is warranted
examining the subject jewelries (sic) at about 6:00 p.m. in the bank's lobby? Obviously, under the circumstances (Art. 2208, New Civil Code).6
he had no need for it after being satisfied of the genuineness of the subject jewelries
(sic). When Dra. Cruz and plaintiff left the bank both of them had fully performed their
respective prestations. Once a contract is shown to have been consummated or fully From the trial court's adverse decision, petitioner elevated the matter to the Court of
performed by the parties thereto, its existence and binding effect can no longer be Appeals. On October 20, 1992, the Court of Appeals, however, rendered a decision 7
disputed. It is irrelevant and immaterial to dispute the due execution of a contract if affirming in toto the lower court's decision. His motion for reconsideration having been
both of them have in fact performed their obligations thereunder and their respective denied on October 19, 1993, petitioner now files the instant petition alleging that:
signatures and those of their witnesses appear upon the face of the document (Weldon
Construction v. CA G.R. No. L-35721, Oct. 12, 1987).5
Finally, in awarding damages to the defendants, the lower court remarked: EARRING(S) FROM DEFENDANT CRUZ . . . ;

The Court finds that plaintiff acted in wanton bad faith. Exhibit 2-Belarmino purports to II. THE TRIAL COURT ERRED IN AWARDING MORAL AND EXEMPLARY DAMAGES AND
show that the Tanay property is worth P25,000.00. However, also on that same day it ATTORNEY'S FEES IN FAVOR OF DEFENDANTS AND AGAINST THE PLAINTIFF IN THIS
was executed, the property's worth was magnified at P75,000.00 (Exh. 3-Belarmino). CASE; and
How could in less than a day (Oct. 19, 1984) the value would (sic) triple under normal
circumstances? Plaintiff, with the assistance of his agents, was able to exchange the
Tanay property which his bank valued only at P25,000.00 in exchange for a genuine pair III. THE TRIAL, COURT ERRED IN NOT DECLARING THE DEED OF SALE OF THE TANAY
of emerald cut diamond worth P200,000.00 belonging to Dra. Cruz. He also retrieved PROPERTY (EXH. "D") AS NULL AND VOID OR IN NOT ANNULLING THE SAME, AND IN
the US$300.00 and jewelries (sic) from his agents. But he was not satisfied in being able FAILING TO GRANT REASONABLE DAMAGES IN FAVOR OF THE PLAINTIFF.8
to get subject jewelries for a song. He had to file a malicious and unfounded case against
Dra. Cruz and Atty. Belarmino who are well known, respected and held in high esteem in
San Pablo City where everybody practically knows everybody. Plaintiff came to Court
with unclean hands dragging the defendants and soiling their clean and good name in
As to the first allegation, the Court observes that petitioner is essentially raising a the rendition of the judgment. The March 6, 1989 hearing was conducted solely for the
factual issue as it invites us to examine and weigh anew the facts regarding the presentation of petitioner's rebuttal testimony. 13 In other words, Judge Jaramillo had
genuineness of the earrings bartered in exchange for the Tanay property. This, of ample time to study the case and write the decision because the rebuttal evidence
course, we cannot do without unduly transcending the limits of our review power in would only serve to confirm or verify the facts already presented by the parties.
petitions of this nature which are confined merely to pure questions of law. We accord,
as a general rule, conclusiveness to a lower court's findings of fact unless it is shown,
inter alia, that: (1) the conclusion is a finding grounded on speculations, surmises or The Court finds nothing anomalous in the said situation. No proof has been adduced
conjectures; (2) the inference is manifestly mistaken, absurd and impossible; (3) when that Judge Jaramillo was motivated by a malicious or sinister intent in disposing of the
there is a grave abuse of discretion; (4) when the judgment is based on a case with dispatch. Neither is there proof that someone else wrote the decision for him.
misapprehension of facts; (5) when the findings of fact are conflicting; and (6) when the The immediate rendition of the decision was no more than Judge Jaramillo's compliance
Court of Appeals, in making its findings, went beyond the issues of the case and the with his duty as a judge to "dispose of the court's business promptly and decide cases
same is contrary to the admission of both parties. 9 We find nothing, however, that within the required periods." 14 The two-year period within which Judge Jaramillo
warrants the application of any of these exceptions. handled the case provided him with all the time to study it and even write down its facts
as soon as these were presented to court. In fact, this Court does not see anything
wrong in the practice of writing a decision days before the scheduled promulgation of
Consequently, this Court upholds the appellate court's findings of fact especially judgment and leaving the dispositive portion for typing at a time close to the date of
because these concur with those of the trial court which, upon a thorough scrutiny of promulgation, provided that no malice or any wrongful conduct attends its adoption. 15
the records, are firmly grounded on evidence presented at the trial. 10 To reiterate, this The practice serves the dual purposes of safeguarding the confidentiality of draft
Court's jurisdiction is only limited to reviewing errors of law in the absence of any decisions and rendering decisions with promptness. Neither can Judge Jaramillo be
showing that the findings complained of are totally devoid of support in the record or made administratively answerable for the immediate rendition of the decision. The acts
that they are glaringly erroneous as to constitute serious abuse of discretion. 11 of a judge which pertain to his judicial functions are not subject to disciplinary power
unless they are committed with fraud, dishonesty, corruption or bad faith. 16 Hence, in
the absence of sufficient proof to the contrary, Judge Jaramillo is presumed to have
Nonetheless, this Court has to closely delve into petitioner's allegation that the lower performed his job in accordance with law and should instead be commended for his
court's decision of March 7, 1989 is a "ready-made" one because it was handed down a close attention to duty.
day after the last date of the trial of the case. 12 Petitioner, in this regard, finds it
incredible that Judge J. Ausberto Jaramillo was able to write a 12-page single-spaced
decision, type it and release it on March 7, 1989, less than a day after the last hearing on Having disposed of petitioner's first contention, we now come to the core issue of this
March 6, 1989. He stressed that Judge Jaramillo replaced Judge Salvador de Guzman petition which is whether the Court of Appeals erred in upholding the validity of the
and heard only his rebuttal testimony. contract of barter or sale under the circumstances of this case.

This allegation is obviously no more than a desperate effort on the part of petitioner to The Civil Code provides that contracts are perfected by mere consent. From this
disparage the lower court's findings of fact in order to convince this Court to review the moment, the parties are bound not only to the fulfillment of what has been expressly
same. It is noteworthy that Atty. Belarmino clarified that Judge Jaramillo had issued the stipulated but also to all the consequences which, according to their nature, may be in
first order in the case as early as March 9, 1987 or two years before the rendition of the keeping with good faith, usage and law. 17 A contract of sale is perfected at the
decision. In fact, Atty. Belarmino terminated presentation of evidence on October 13, moment there is a meeting of the minds upon the thing which is the object of the
1987, while Dr. Cruz finished hers on February 4, 1989, or more than a month prior to contract and upon the price. 18 Being consensual, a contract of sale has the force of law
between the contracting parties and they are expected to abide in good faith by their was worth exchanging for her jewelry as he represented that its value was P400,000.00
respective contractual commitments. Article 1358 of the Civil Code which requires the or more than double that of the jewelry which was valued only at P160,000.00. If indeed
embodiment of certain contracts in a public instrument, is only for convenience, 19 and petitioner's property was truly worth that much, it was certainly contrary to the nature
registration of the instrument only adversely affects third parties. 20 Formal of a businessman-banker like him to have parted with his real estate for half its price. In
requirements are, therefore, for the benefit of third parties. Non-compliance therewith short, it was in fact petitioner who resorted to machinations to convince Dr. Cruz to
does not adversely affect the validity of the contract nor the contractual rights and exchange her jewelry for the Tanay property.
obligations of the parties thereunder.

Moreover, petitioner did not clearly allege mistake as a ground for nullification of the
It is evident from the facts of the case that there was a meeting of the minds between contract of sale. Even assuming that he did, petitioner cannot successfully invoke the
petitioner and Dr. Cruz. As such, they are bound by the contract unless there are same. To invalidate a contract, mistake must "refer to the substance of the thing that is
reasons or circumstances that warrant its nullification. Hence, the problem that should the object of the contract, or to those conditions which have principally moved one or
be addressed in this case is whether or not under the facts duly established herein, the both parties to enter into the contract." 25 An example of mistake as to the object of
contract can be voided in accordance with law so as to compel the parties to restore to the contract is the substitution of a specific thing contemplated by the parties with
each other the things that have been the subject of the contract with their fruits, and another. 26 In his allegations in the complaint, petitioner insinuated that an inferior one
the price with interest.21 or one that had only Russian diamonds was substituted for the jewelry he wanted to
exchange with his 10-hectare land. He, however, failed to prove the fact that prior to
the delivery of the jewelry to him, private respondents endeavored to make such
Contracts that are voidable or annullable, even though there may have been no damage substitution.
to the contracting parties are: (1) those where one of the parties is incapable of giving
consent to a contract; and (2) those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud. 22 Accordingly, petitioner now stresses before Likewise, the facts as proven do not support the allegation that petitioner himself could
this Court that he entered into the contract in the belief that the pair of emerald-cut be excused for the "mistake." On account of his work as a banker-jeweler, it can be
diamond earrings was genuine. On the pretext that those pieces of jewelry turned out rightfully assumed that he was an expert on matters regarding gems. He had the
to be counterfeit, however, petitioner subsequently sought the nullification of said intellectual capacity and the business acumen as a banker to take precautionary
contract on the ground that it was, in fact, "tainted with fraud" 23 such that his consent measures to avert such a mistake, considering the value of both the jewelry and his
was vitiated. land. The fact that he had seen the jewelry before October 24, 1984 should not have
precluded him from having its genuineness tested in the presence of Dr. Cruz. Had he
done so, he could have avoided the present situation that he himself brought about.
There is fraud when, through the insidious words or machinations of one of the Indeed, the finger of suspicion of switching the genuine jewelry for a fake inevitably
contracting parties, the other is induced to enter into a contract which, without them, points to him. Such a mistake caused by manifest negligence cannot invalidate a juridical
he would not have agreed to. 24 The records, however, are bare of any evidence act. 27 As the Civil Code provides, "(t)here is no mistake if the party alleging it knew the
manifesting that private respondents employed such insidious words or machinations to doubt, contingency or risk affecting the object of the contract."28
entice petitioner into entering the contract of barter. Neither is there any evidence
showing that Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled
him to take the earrings in exchange for said property. On the contrary, Dr. Cruz did not Furthermore, petitioner was afforded the reasonable opportunity required in Article
initially accede to petitioner's proposal to buy the said jewelry. Rather, it appears that it 1584 of the Civil Code within which to examine the jewelry as he in fact accepted them
was petitioner, through his agents, who led Dr. Cruz to believe that the Tanay property when asked by Dr. Cruz if he was satisfied with the same. 29 By taking the jewelry
outside the bank, petitioner executed an act which was more consistent with his (2) Should the thing sold and delivered produce fruits or income;
exercise of ownership over it. This gains credence when it is borne in mind that he
himself had earlier delivered the Tanay property to Dr. Cruz by affixing his signature to
the contract of sale. That after two hours he later claimed that the jewelry was not the (3) Should he be in default, from the time of judicial or extrajudicial demand for the
one he intended in exchange for his Tanay property, could not sever the juridical tie that payment of the price.
now bound him and Dr. Cruz. The nature and value of the thing he had taken preclude
its return after that supervening period within which anything could have happened, not
excluding the alteration of the jewelry or its being switched with an inferior kind.
Not one of these cases obtains here. This case should, of course, be distinguished from
De la Cruz v. Legaspi, 33 where the court held that failure to pay the consideration after
the notarization of the contract as previously promised resulted in the vendee's liability
Both the trial and appellate courts, therefore, correctly ruled that there were no legal for payment of interest. In the case at bar, there is no stipulation for the payment of
bases for the nullification of the contract of sale. Ownership over the parcel of land and interest in the contract of sale nor proof that the Tanay property produced fruits or
the pair of emerald-cut diamond earrings had been transferred to Dr. Cruz and income. Neither did petitioner demand payment of the price as in fact he filed an action
petitioner, respectively, upon the actual and constructive delivery thereof. 30 Said to nullify the contract of sale.
contract of sale being absolute in nature, title passed to the vendee upon delivery of the
thing sold since there was no stipulation in the contract that title to the property sold
has been reserved in the seller until full payment of the price or that the vendor has the
right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed All told, petitioner appears to have elevated this case to this Court for the principal
period. 31 Such stipulations are not manifest in the contract of sale. reason of mitigating the amount of damages awarded to both private respondents
which petitioner considers as "exorbitant." He contends that private respondents do not
deserve at all the award of damages. In fact, he pleads for the total deletion of the
award as regards private respondent Belarmino whom he considers a mere "nominal
While it is true that the amount of P40,000.00 forming part of the consideration was still party" because "no specific claim for damages against him" was alleged in the
payable to petitioner, its nonpayment by Dr. Cruz is not a sufficient cause to invalidate complaint. When he filed the case, all that petitioner wanted was that Atty. Belarmino
the contract or bar the transfer of ownership and possession of the things exchanged should return to him the owner's duplicate copy of TCT No. 320725, the deed of sale
considering the fact that their contract is silent as to when it becomes due and executed by Fr. Antonio Jacobe, the deed of redemption and the check alloted for
demandable. 32 expenses. Petitioner alleges further that Atty. Belarmino should not have delivered all
those documents to Dr. Cruz because as the "lawyer for both the seller and the buyer in
the sale contract, he should have protected the rights of both parties." Moreover,
Neither may such failure to pay the balance of the purchase price result in the payment petitioner asserts that there was no firm basis for damages except for Atty. Belarmino's
of interest thereon. Article 1589 of the Civil Code prescribes the payment of interest by uncorroborated testimony.34
the vendee "for the period between the delivery of the thing and the payment of the
price" in the following cases:
Moral and exemplary damages may be awarded without proof of pecuniary loss. In
awarding such damages, the court shall take into account the circumstances obtaining in
(1) Should it have been so stipulated; the case said assess damages according to its discretion.35 To warrant the award of
damages, it must be shown that the person to whom these are awarded has sustained
injury. He must likewise establish sufficient data upon which the court can properly base
its estimate of the amount of damages.36 Statements of facts should establish such While, as a rule, moral damages cannot be recovered from a person who has filed a
data rather than mere conclusions or opinions of witnesses. 37 Thus: complaint against another in good faith because it is not sound policy to place a penalty
on the right to litigate, 41 the same, however, cannot apply in the case at bar. The
factual findings of the courts a quo to the effect that petitioner filed this case because
. . . . For moral damages to be awarded, it is essential that the claimant must have he was the victim of fraud; that he could not have been such a victim because he should
satisfactorily proved during the trial the existence of the factual basis of the damages have examined the jewelry in question before accepting delivery thereof, considering
and its causal connection with the adverse party's acts. If the court has no proof or his exposure to the banking and jewelry businesses; and that he filed the action for the
evidence upon which the claim for moral damages could be based, such indemnity could nullification of the contract of sale with unclean hands, all deserve full faith and credit to
not be outrightly awarded. The same holds true with respect to the award of exemplary support the conclusion that petitioner was motivated more by ill will than a sincere
damages where it must be shown that the party acted in a wanton, oppressive or attempt to protect his rights in commencing suit against respondents.
malevolent manner. 38

As pointed out earlier, a closer scrutiny of the chain of events immediately prior to and
In this regard, the lower court appeared to have awarded damages on a ground on October 24, 1984 itself would amply demonstrate that petitioner was not simply
analogous to malicious prosecution under Article 2219 (8) of the Civil Code 39 as shown negligent in failing to exercise due diligence to assure himself that what he was taking in
by (1) petitioner's "wanton bad faith" in bloating the value of the Tanay property which exchange for his property were genuine diamonds. He had rather placed himself in a
he exchanged for "a genuine pair of emerald-cut diamond worth P200,00.00;" and (2) situation from which it preponderantly appears that his seeming ignorance was actually
his filing of a "malicious and unfounded case" against private respondents who were just a ruse. Indeed, he had unnecessarily dragged respondents to face the travails of
"well known, respected and held in high esteem in San Pablo City where everybody litigation in speculating at the possible favorable outcome of his complaint when he
practically knows everybody" and whose good names in the "twilight of their lives" were should have realized that his supposed predicament was his own making. We, therefore,
soiled by petitioner's coming to court with "unclean hands," thereby affecting their see here no semblance of an honest and sincere belief on his part that he was swindled
earning capacity in the exercise of their respective professions and besmirching their by respondents which would entitle him to redress in court. It must be noted that
reputation. before petitioner was able to convince Dr. Cruz to exchange her jewelry for the Tanay
property, petitioner took pains to thoroughly examine said jewelry, even going to the
extent of sketching their appearance. Why at the precise moment when he was about
to take physical possession thereof he failed to exert extra efforts to check their
For its part, the Court of Appeals affirmed the award of damages to private respondents genuineness despite the large consideration involved has never been explained at all by
for these reasons: petitioner. His acts thus failed to accord with what an ordinary prudent man would have
done in the same situation. Being an experienced banker and a businessman himself
who deliberately skirted a legal impediment in the sale of the Tanay property and to
The malice with which Fule filed this case is apparent. Having taken possession of the minimize the capital gains tax for its exchange, it was actually gross recklessness for him
genuine jewelry of Dra. Cruz, Fule now wishes to return a fake jewelry to Dra. Cruz and, to have merely conducted a cursory examination of the jewelry when every opportunity
more than that, get back the real property, which his bank owns. Fule has obtained a for doing so was not denied him. Apparently, he carried on his person a tester which he
genuine jewelry which he could sell anytime, anywhere and to anybody, without the later used to prove the alleged fakery but which he did not use at the time when it was
same being traced to the original owner for practically nothing. This is plain and simple, most needed. Furthermore, it took him two more hours of unexplained delay before he
unjust enrichment.40 complained that the jewelry he received were counterfeit. Hence, we stated earlier that
anything could have happened during all the time that petitioner was in complete
possession and control of the jewelry, including the possibility of substituting them with
fake ones, against which respondents would have a great deal of difficulty defending
themselves. The truth is that petitioner even failed to successfully prove during trial that
the jewelry he received from Dr. Cruz were not genuine. Add to that the fact that he had
been shrewd enough to bloat the Tanay property's price only a few days after he
purchased it at a much lower value. Thus, it is our considered view that if this slew of
circumstances were connected, like pieces of fabric sewn into a quilt, they would
sufficiently demonstrate that his acts were not merely negligent but rather studied and

We do not have here, therefore, a situation where petitioner's complaint was simply
found later to be based on an erroneous ground which, under settled jurisprudence,
would not have been a reason for awarding moral and exemplary damages. 42 Instead,
the cause of action of the instant case appears to have been contrived by petitioner
himself. In other words, he was placed in a situation where he could not honestly
evaluate whether his cause of action has a semblance of merit, such that it would
require the expertise of the courts to put it to a test. His insistent pursuit of such case
then coupled with circumstances showing that he himself was guilty in bringing about
the supposed wrongdoing on which he anchored his cause of action would render him
answerable for all damages the defendant may suffer because of it. This is precisely
what took place in the petition at bar and we find no cogent reason to disturb the
findings of the courts below that respondents in this case suffered considerable
damages due to petitioner's unwarranted action.

WHEREFORE, the decision of the Court of Appeals dated October 20, 1992 is hereby
AFFIRMED in toto. Dr. Cruz, however, is ordered to pay petitioner the balance of the
purchase price of P40,000.00 within ten (10) days from the finality of this decision. Costs
against petitioner.

Republic of the Philippines Engineering Equipment and Supply Co. (Engineering for short), a domestic
SUPREME COURT corporation, is an engineering and machinery firm. As operator of an integrated
Manila engineering shop, it is engaged, among others, in the design and installation of central
type air conditioning system, pumping plants and steel fabrications. (Vol. I pp. 12-16
FIRST DIVISION T.S.N. August 23, 1960)

On July 27, 1956, one Juan de la Cruz, wrote the then Collector, now Commissioner, of
Internal Revenue denouncing Engineering for tax evasion by misdeclaring its imported
articles and failing to pay the correct percentage taxes due thereon in connivance with
G.R. No. L-27044 June 30, 1975
its foreign suppliers (Exh. "2" p. 1 BIR record Vol. I). Engineering was likewise
denounced to the Central Bank (CB) for alleged fraud in obtaining its dollar
THE COMMISSIONER OF INTERNAL REVENUE, petitioner, allocations. Acting on these denunciations, a raid and search was conducted by a joint
vs. team of Central Bank, (CB), National Bureau of Investigation (NBI) and Bureau of
ENGINEERING EQUIPMENT AND SUPPLY COMPANY AND THE COURT OF TAX APPEALS, Internal Revenue (BIR) agents on September 27, 1956, on which occasion voluminous
respondents. records of the firm were seized and confiscated. (pp. 173-177 T.S.N.)

G.R. No. L-27452 June 30, 1975 On September 30, 1957, revenue examiners Quesada and Catudan reported and
recommended to the then Collector, now Commissioner, of Internal Revenue
ENGINEERING EQUIPMENT AND SUPPLY COMPANY, petitioner, (hereinafter referred to as Commissioner) that Engineering be assessed for
vs. P480,912.01 as deficiency advance sales tax on the theory that it misdeclared its
THE COMMISSIONER OF INTERNAL REVENUE AND THE COURT OF TAX APPEALS, importation of air conditioning units and parts and accessories thereof which are
respondent. subject to tax under Section 185(m)1 of the Tax Code, instead of Section 186 of the
same Code. (Exh. "3" pp. 59-63 BIR rec. Vol. I) This assessment was revised on January
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo 23, 1959, in line with the observation of the Chief, BIR Law Division, and was raised to
R. Rosete, Solicitor Lolita O. Gal-lang, and Special Attorney Gemaliel H. Montalino for P916,362.56 representing deficiency advance sales tax and manufacturers sales tax,
Commissioner of Internal Revenue, etc. inclusive of the 25% and 50% surcharges. (pp. 72-80 BIR rec. Vol. I)

Melquides C. Gutierrez, Jose U. Ong, Juan G. Collas, Jr., Luis Ma. Guerrero and J.R. On March 3, 1959. the Commissioner assessed against, and demanded upon,
Balonkita for Engineering and Supply Company. Engineering payment of the increased amount and suggested that P10,000 be paid as
compromise in extrajudicial settlement of Engineering's penal liability for violation of
the Tax Code. The firm, however, contested the tax assessment and requested that it be
furnished with the details and particulars of the Commissioner's assessment. (Exh. "B"
and "15", pp. 86-88 BIR rec. Vol. I) The Commissioner replied that the assessment was in
ESGUERRA, J.: accordance with law and the facts of the case.

Petition for review on certiorari of the decision of the Court of Tax Appeals in CTA On July 30, 1959, Engineering appealed the case to the Court of Tax Appeals and during
Case No. 681, dated November 29, 1966, assessing a compensating tax of P174,441.62 the pendency of the case the investigating revenue examiners reduced Engineering's
on the Engineering Equipment and Supply Company. deficiency tax liabilities from P916,362.65 to P740,587.86 (Exhs. "R" and "9" pp. 162-
170, BIR rec.), based on findings after conferences had with Engineering's Accountant
As found by the Court of Tax Appeals, and as established by the evidence on record, and Auditor.
the facts of this case are as follows:
On November 29, 1966, the Court of Tax Appeals rendered its decision, the dispositive 3. That the Court of Tax Appeals erred in holding Engineering
portion of which reads as follows: Equipment & Supply Company liable to the 25% surcharge
prescribed in Section 190 of the Tax Code;
respondent appealed from is hereby modified, and petitioner, as a 4. That the Court of Tax Appeals erred in holding the assessment as
contractor, is declared exempt from the deficiency manufacturers not having prescribed;
sales tax covering the period from June 1, 1948. to September 2,
1956. However, petitioner is ordered to pay respondent, or his duly 5. That the Court of Tax Appeals erred in holding Engineering
authorized collection agent, the sum of P174,141.62 as Equipment & Supply Company liable for the sum of P174,141.62 as
compensating tax and 25% surcharge for the period from 1953 to 30% compensating tax and 25% surcharge instead of completely
September 1956. With costs against petitioner. absolving it from the deficiency assessment of the Commissioner.

The Commissioner, not satisfied with the decision of the Court of Tax Appeals, appealed The Commissioner on the other hand claims that the Court of Tax Appeals erred:
to this Court on January 18, 1967, (G.R. No. L-27044). On the other hand, Engineering,
on January 4, 1967, filed with the Court of Tax Appeals a motion for reconsideration of
1. In holding that the respondent company is a contractor and not a
the decision abovementioned. This was denied on April 6, 1967, prompting Engineering
to file also with this Court its appeal, docketed as G.R. No. L-27452.

2. In holding respondent company liable to the 3% contractor's tax

Since the two cases, G.R. No. L-27044 and G.R. No. L-27452, involve the same parties
imposed by Section 191 of the Tax Code instead of the 30% sales tax
and issues, We have decided to consolidate and jointly decide them.
prescribed in Section 185(m) in relation to Section 194(x) both of the
same Code;
Engineering in its Petition claims that the Court of Tax Appeals committed the following
3. In holding that the respondent company is subject only to the 30%
compensating tax under Section 190 of the Tax Code and not to the
1. That the Court of Tax Appeals erred in holding Engineering 30% advance sales tax imposed by section 183 (b), in relation to
Equipment & Supply Company liable to the 30% compensating tax section 185(m) both of the same Code, on its importations of parts
on its importations of equipment and ordinary articles used in the and accessories of air conditioning units;
central type air conditioning systems it designed, fabricated,
constructed and installed in the buildings and premises of its
4. In not holding the company liable to the 50% fraud surcharge
customers, rather than to the compensating tax of only 7%;
under Section 183 of the Tax Code on its importations of parts and
accessories of air conditioning units, notwithstanding the finding of
2. That the Court of Tax Appeals erred in holding Engineering said court that the respondent company fraudulently misdeclared
Equipment & Supply Company guilty of fraud in effecting the said the said importations;
importations on the basis of incomplete quotations from the
contents of alleged photostat copies of documents seized illegally
5. In holding the respondent company liable for P174,141.62 as
from Engineering Equipment and Supply Company which should not
compensating tax and 25% surcharge instead of P740,587.86 as
have been admitted in evidence;
deficiency advance sales tax, deficiency manufacturers tax and 25%
and 50% surcharge for the period from June 1, 1948 to December
31, 1956.
The main issue revolves on the question of whether or not Engineering is a services or labor of a contractor rather than on the sale of articles subject to the tax
manufacturer of air conditioning units under Section 185(m), supra, in relation to referred to in Sections 184, 185 and 186 of the Code.
Sections 183(b) and 194 of the Code, or a contractor under Section 191 of the same
Code. The arguments of both the Engineering and the Commissioner call for a clarification of
the term contractor as well as the distinction between a contract of sale and contract
The Commissioner contends that Engineering is a manufacturer and seller of air for furnishing services, labor and materials. The distinction between a contract of sale
conditioning units and parts or accessories thereof and, therefore, it is subject to the and one for work, labor and materials is tested by the inquiry whether the thing
30% advance sales tax prescribed by Section 185(m) of the Tax Code, in relation to transferred is one not in existence and which never would have existed but for the order
Section 194 of the same, which defines a manufacturer as follows: of the party desiring to acquire it, or a thing which would have existed and has been the
subject of sale to some other persons even if the order had not been given.2 If the
Section 194. Words and Phrases Defined. In applying the article ordered by the purchaser is exactly such as the plaintiff makes and keeps on hand
provisions of this Title, words and phrases shall be taken in the sense for sale to anyone, and no change or modification of it is made at defendant's request, it
and extension indicated below: is a contract of sale, even though it may be entirely made after, and in consequence of,
the defendants order for it.3
xxx xxx xxx
Our New Civil Code, likewise distinguishes a contract of sale from a contract for a piece
of work thus:
(x) "Manufacturer" includes every person who by physical or
chemical process alters the exterior texture or form or inner
substance of any raw material or manufactured or partially Art. 1467. A contract for the delivery at a certain price of an article
manufactured products in such manner as to prepare it for a special which the vendor in the ordinary course of his business
use or uses to which it could not have been put in its original manufactures or procures for the general market, whether the same
condition, or who by any such process alters the quality of any such is on hand at the time or not, is a contract of sale, but if the goods
material or manufactured or partially manufactured product so as to are to be manufactured specially for the customer and upon his
reduce it to marketable shape, or prepare it for any of the uses of special order and not for the general market, it is a contract for a
industry, or who by any such process combines any such raw piece of work.
material or manufactured or partially manufactured products with
other materials or products of the same or of different kinds and in The word "contractor" has come to be used with special reference to a person who, in
such manner that the finished product of such process of the pursuit of the independent business, undertakes to do a specific job or piece of work
manufacture can be put to special use or uses to which such raw for other persons, using his own means and methods without submitting himself to
material or manufactured or partially manufactured products in control as to the petty details. (Araas, Annotations and Jurisprudence on the National
their original condition could not have been put, and who in addition Internal Revenue Code, p. 318, par. 191 (2), 1970 Ed.) The true test of a contractor as
alters such raw material or manufactured or partially manufactured was held in the cases of Luzon Stevedoring Co., vs. Trinidad, 43, Phil. 803, 807-808, and
products, or combines the same to produce such finished products La Carlota Sugar Central vs. Trinidad, 43, Phil. 816, 819, would seem to be that he
for the purpose of their sale or distribution to others and not for his renders service in the course of an independent occupation, representing the will of his
own use or consumption. employer only as to the result of his work, and not as to the means by which it is
In answer to the above contention, Engineering claims that it is not a manufacturer and
setter of air-conditioning units and spare parts or accessories thereof subject to tax With the foregoing criteria as guideposts, We shall now examine whether Engineering
under Section 185(m) of the Tax Code, but a contractor engaged in the design, supply really did "manufacture" and sell, as alleged by the Commissioner to hold it liable to the
and installation of the central type of air-conditioning system subject to the 3% tax advance sales tax under Section 185(m), or it only had its services "contracted" for
imposed by Section 191 of the same Code, which is essentially a tax on the sale of installation purposes to hold it liable under section 198 of the Tax Code.
I with enough money to buy the same." This is untenable in the light of the fact that air
conditioning units, packaged, or what we know as self-contained air conditioning units,
After going over the three volumes of stenographic notes and the voluminous record of are distinct from the central system which Engineering dealt in. To Our mind, the
the BIR and the CTA as well as the exhibits submitted by both parties, We find that distinction as explained by Engineering, in its Brief, quoting from books, is not an idle
Engineering did not manufacture air conditioning units for sale to the general public, but play of words as claimed by the Commissioner, but a significant fact which We just
imported some items (as refrigeration compressors in complete set, heat exchangers or cannot ignore. As quoted by Engineering Equipment & Supply Co., from an Engineering
coils, t.s.n. p. 39) which were used in executing contracts entered into by it. Engineering, handbook by L.C. Morrow, and which We reproduce hereunder for easy reference:
therefore, undertook negotiations and execution of individual contracts for the design,
supply and installation of air conditioning units of the central type (t.s.n. pp. 20-36; Exhs. ... there is a great variety of equipment in use to do this job (of air
"F", "G", "H", "I", "J", "K", "L", and "M"), taking into consideration in the process such conditioning). Some devices are designed to serve a specific type of
factors as the area of the space to be air conditioned; the number of persons occupying space; others to perform a specific function; and still others as
or would be occupying the premises; the purpose for which the various air conditioning components to be assembled into a tailor-made system to fit a
areas are to be used; and the sources of heat gain or cooling load on the plant such as particular building. Generally, however, they may be grouped into
sun load, lighting, and other electrical appliances which are or may be in the plan. (t.s.n. two classifications unitary and central system.
p. 34, Vol. I) Engineering also testified during the hearing in the Court of Tax Appeals
that relative to the installation of air conditioning system, Engineering designed and The unitary equipment classification includes those designs such as
engineered complete each particular plant and that no two plants were identical but room air conditioner, where all of the functional components are
each had to be engineered separately. included in one or two packages, and installation involves only
making service connection such as electricity, water and drains.
As found by the lower court, which finding4 We adopt Central-station systems, often referred to as applied or built-up
systems, require the installation of components at different points in
Engineering, in a nutshell, fabricates, assembles, supplies and installs a building and their interconnection.
in the buildings of its various customers the central type air
conditioning system; prepares the plans and specifications therefor The room air conditioner is a unitary equipment designed
which are distinct and different from each other; the air conditioning specifically for a room or similar small space. It is unique among air
units and spare parts or accessories thereof used by petitioner are conditioning equipment in two respects: It is in the electrical
not the window type of air conditioner which are manufactured, appliance classification, and it is made by a great number of
assembled and produced locally for sale to the general market; and manufacturers.
the imported air conditioning units and spare parts or accessories
thereof are supplied and installed by petitioner upon previous There is also the testimony of one Carlos Navarro, a licensed Mechanical and Electrical
orders of its customers conformably with their needs and Engineer, who was once the Chairman of the Board of Examiners for Mechanical
requirements. Engineers and who was allegedly responsible for the preparation of the refrigeration
and air conditioning code of the City of Manila, who said that "the central type air
The facts and circumstances aforequoted support the theory that Engineering is a conditioning system is an engineering job that requires planning and meticulous layout
contractor rather than a manufacturer. due to the fact that usually architects assign definite space and usually the spaces they
assign are very small and of various sizes. Continuing further, he testified:
The Commissioner in his Brief argues that "it is more in accord with reason and sound
business management to say that anyone who desires to have air conditioning units I don't think I have seen central type of air conditioning machinery
installed in his premises and who is in a position and willing to pay the price can order room that are exactly alike because all our buildings here are
the same from the company (Engineering) and, therefore, Engineering could have mass designed by architects dissimilar to existing buildings, and usually
produced and stockpiled air conditioning units for sale to the public or to any customer they don't coordinate and get the advice of air conditioning and
refrigerating engineers so much so that when we come to design, Engineering did not have ready-made air conditioning units for sale but as per testimony
we have to make use of the available space that they are assigning of Mr. Parker upon inquiry of Judge Luciano of the CTA
to us so that we have to design the different component parts of the
air conditioning system in such a way that will be accommodated in Q Aside from the general components, which
the space assigned and afterwards the system may be considered as go into air conditioning plant or system of the
a definite portion of the building. ... central type which your company undertakes,
and the procedure followed by you in obtaining
Definitely there is quite a big difference in the operation because and executing contracts which you have already
the window type air conditioner is a sort of compromise. In fact it testified to in previous hearing, would you say
cannot control humidity to the desired level; rather the that the covering contracts for these different
manufacturers, by hit and miss, were able to satisfy themselves that projects listed ... referred to in the list, Exh. "F"
the desired comfort within a room could be made by a definite are identical in every respect? I mean every plan
setting of the machine as it comes from the factory; whereas the or system covered by these different contracts
central type system definitely requires an intelligent operator. (t.s.n. are identical in standard in every respect, so that
pp. 301-305, Vol. II) you can reproduce them?

The point, therefore, is this Engineering definitely did not and was not engaged in the A No, sir. They are not all standard. On the
manufacture of air conditioning units but had its services contracted for the installation contrary, none of them are the same. Each one
of a central system. The cases cited by the Commissioner (Advertising Associates, Inc. vs. must be designed and constructed to meet the
Collector of Customs, 97, Phil. 636; Celestino Co & Co. vs. Collector of Internal Revenue, particular requirements, whether the application
99 Phil. 841 and Manila Trading & Supply Co. vs. City of Manila, 56 O.G. 3629), are not in is to be operated. (t.s.n. pp. 101-102)
point. Neither are they applicable because the facts in all the cases cited are entirely
different. Take for instance the case of Celestino Co where this Court held the taxpayer What We consider as on all fours with the case at bar is the case of S.M. Lawrence Co.
to be a manufacturer rather than a contractor of sash, doors and windows vs. McFarland, Commissioner of Internal Revenue of the State of Tennessee and
manufactured in its factory. Indeed, from the very start, Celestino Co intended itself to McCanless, 355 SW 2d, 100, 101, "where the cause presents the question of whether
be a manufacturer of doors, windows, sashes etc. as it did register a special trade name one engaged in the business of contracting for the establishment of air conditioning
for its sash business and ordered company stationery carrying the bold print "ORIENTAL system in buildings, which work requires, in addition to the furnishing of a cooling unit,
SASH FACTORY (CELESTINO CO AND COMPANY, PROP.) 926 Raon St., Quiapo, Manila, the connection of such unit with electrical and plumbing facilities and the installation of
Tel. No. etc., Manufacturers of All Kinds of Doors, Windows ... ." Likewise, Celestino Co ducts within and through walls, ceilings and floors to convey cool air to various parts of
never put up a contractor's bond as required by Article 1729 of the Civil Code. Also, as a the building, is liable for sale or use tax as a contractor rather than a retailer of tangible
general rule, sash factories receive orders for doors and windows of special design only personal property. Appellee took the Position that appellant was not engaged in the
in particular cases, but the bulk of their sales is derived from ready-made doors and business of selling air conditioning equipment as such but in the furnishing to its
windows of standard sizes for the average home, which "sales" were reflected in their customers of completed air conditioning systems pursuant to contract, was a contractor
books of accounts totalling P118,754.69 for the period from January, 1952 to September engaged in the construction or improvement of real property, and as such was liable for
30, 1952, or for a period of only nine (9) months. This Court found said sum difficult to sales or use tax as the consumer of materials and equipment used in the consummation
have been derived from its few customers who placed special orders for these items. of contracts, irrespective of the tax status of its contractors. To transmit the warm or
Applying the abovestated facts to the case at bar, We found them to he inapposite. cool air over the buildings, the appellant installed system of ducts running from the
Engineering advertised itself as Engineering Equipment and Supply Company, Machinery basic units through walls, ceilings and floors to registers. The contract called for
Mechanical Supplies, Engineers, Contractors, 174 Marques de Comillas, Manila (Exh. "B" completed air conditioning systems which became permanent part of the buildings and
and "15" BIR rec. p. 186), and not as manufacturers. It likewise paid the contractors tax improvements to the realty." The Court held the appellant a contractor which used the
on all the contracts for the design and construction of central system as testified to by materials and the equipment upon the value of which the tax herein imposed was levied
Mr. Rey Parker, its President and General Manager. (t.s.n. p. 102, 103) Similarly,
in the performance of its contracts with its customers, and that the customers did not Despite the above findings, however, the Court of Tax Appeals absolved Engineering
purchase the equipment and have the same installed. from paying the 50% surcharge prescribe by Section 183(a) of the Tax Code by reasoning
out as follows:
Applying the facts of the aforementioned case to the present case, We see that the
supply of air conditioning units to Engineer's various customers, whether the said The imposition of the 50% surcharge prescribed by Section 183(a) of
machineries were in hand or not, was especially made for each customer and installed the Tax Code is based on willful neglect to file the monthly return
in his building upon his special order. The air conditioning units installed in a central within 20 days after the end of each month or in case a false or
type of air conditioning system would not have existed but for the order of the party fraudulent return is willfully made, it can readily be seen, that
desiring to acquire it and if it existed without the special order of Engineering's petitioner cannot legally be held subject to the 50% surcharge
customer, the said air conditioning units were not intended for sale to the general imposed by Section 183(a) of the Tax Code. Neither can petitioner
public. Therefore, We have but to affirm the conclusion of the Court of Tax Appeals that be held subject to the 50% surcharge under Section 190 of the Tax
Engineering is a contractor rather than a manufacturer, subject to the contractors tax Code dealing on compensating tax because the provisions thereof
prescribed by Section 191 of the Code and not to the advance sales tax imposed by do not include the 50% surcharge. Where a particular provision of
Section 185(m) in relation to Section 194 of the same Code. Since it has been proved to the Tax Code does not impose the 50% surcharge as fraud penalty
Our satisfaction that Engineering imported air conditioning units, parts or accessories we cannot enforce a non-existing provision of law notwithstanding
thereof for use in its construction business and these items were never sold, resold, the assessment of respondent to the contrary. Instances of the
bartered or exchanged, Engineering should be held liable to pay taxes prescribed under exclusion in the Tax Code of the 50% surcharge are those dealing on
Section 1905 of the Code. This compensating tax is not a tax on the importation of tax on banks, taxes on receipts of insurance companies, and
goods but a tax on the use of imported goods not subject to sales tax. Engineering, franchise tax. However, if the Tax Code imposes the 50% surcharge
therefore, should be held liable to the payment of 30% compensating tax in accordance as fraud penalty, it expressly so provides as in the cases of income
with Section 190 of the Tax Code in relation to Section 185(m) of the same, but without tax, estate and inheritance taxes, gift taxes, mining tax, amusement
the 50% mark up provided in Section 183(b). tax and the monthly percentage taxes. Accordingly, we hold that
petitioner is not subject to the 50% surcharge despite the existence
II of fraud in the absence of legal basis to support the importation
thereof. (p. 228 CTA rec.)
We take up next the issue of fraud. The Commissioner charged Engineering with
misdeclaration of the imported air conditioning units and parts or accessories thereof so We have gone over the exhibits submitted by the Commissioner evidencing fraud
as to make them subject to a lower rate of percentage tax (7%) under Section 186 of the committed by Engineering and We reproduce some of them hereunder for clarity.
Tax Code, when they are allegedly subject to a higher rate of tax (30%) under its Section
185(m). This charge of fraud was denied by Engineering but the Court of Tax Appeals in As early as March 18, 1953, Engineering in a letter of even date wrote to Trane Co. (Exh.
its decision found adversely and said" "3-K" pp. 152-155, BIR rec.) viz:

... We are amply convinced from the evidence presented by Your invoices should be made in the name of Madrigal & Co., Inc.,
respondent that petitioner deliberately and purposely misdeclared Manila, Philippines, c/o Engineering Equipment & Supply Co.,
its importations. This evidence consists of letters written by Manila, Philippines forwarding all correspondence and shipping
petitioner to its foreign suppliers, instructing them on how to papers concerning this order to us only and not to the customer.
invoice and describe the air conditioning units ordered by petitioner.
... (p. 218 CTA rec.) When invoicing, your invoices should be exactly as detailed in the
customer's Letter Order dated March 14th, 1953 attached. This is in
accordance with the Philippine import licenses granted to Madrigal
& Co., Inc. and such details must only be shown on all papers and
shipping documents for this shipment. No mention of words air changers" or in any way referring to the equipment as "air
conditioning equipment should be made on any shipping documents conditioning."
as well as on the cases. Please give this matter your careful
attention, otherwise great difficulties will be encountered with the And in response to the aforequoted letter, Trane Co. wrote on July 30, 1953, suggesting
Philippine Bureau of Customs when clearing the shipment on its a solution, viz:
arrival in Manila. All invoices and cases should be marked "THIS
We feel that we can probably solve all the problems by following the
procedure outlined in your letter of March 25, 1953 wherein you
The same instruction was made to Acme Industries, Inc., San Francisco, California in a stated that in all future jobs you would enclose photostatic copies of
letter dated March 19, 1953 (Exh. "3-J-1" pp. 150-151, BIR rec.) your import license so that we might make up two sets of invoices:
one set describing equipment ordered simply according to the way
On April 6, 1953, Engineering wrote to Owens-Corning Fiberglass Corp., New York, that they are listed on the import license and another according to
U.S.A. (Exh. "3-1" pp. 147-149, BIR rec.) also enjoining the latter from mentioning or our ordinary regular methods of order write-up. We would then
referring to the term 'air conditioning' and to describe the goods on order as Fiberglass include the set made up according to the import license in the
pipe and pipe fitting insulation instead. Likewise on April 30, 1953, Engineering shipping boxes themselves and use those items as our actual
threatened to discontinue the forwarding service of Universal Transcontinental shipping documents and invoices, and we will send the other regular
Corporation when it wrote Trane Co. (Exh. "3-H" p. 146, BIR rec.): invoice to you, by separate correspondence. (Exh- No. "3-F-1", p.
144 BIR rec.)
It will be noted that the Universal Transcontinental Corporation is
not following through on the instructions which have been covered Another interesting letter of Engineering is one dated August 27, 1955 (Exh. "3-C" p. 141
by the above correspondence, and which indicates the necessity of BIR rec.)
discontinuing the use of the term "Air conditioning Machinery or Air
Coolers". Our instructions concerning this general situation have In the process of clearing the shipment from the piers, one of the
been sent to you in ample time to have avoided this error in Customs inspectors requested to see the packing list. Upon
terminology, and we will ask that on receipt of this letter that you presenting the packing list, it was discovered that the same was
again write to Universal Transcontinental Corp. and inform them prepared on a copy of your letterhead which indicated that the
that, if in the future, they are unable to cooperate with us on this Trane Co. manufactured air conditioning, heating and heat transfer
requirement, we will thereafter be unable to utilize their forwarding equipment. Accordingly, the inspectors insisted that this equipment
service. Please inform them that we will not tolerate another failure was being imported for air conditioning purposes. To date, we have
to follow our requirements. not been able to clear the shipment and it is possible that we will be
required to pay heavy taxes on equipment.
And on July 17, 1953 (Exh- "3-g" p. 145, BIR rec.) Engineering wrote Trane Co. another
letter, viz: The purpose of this letter is to request that in the future, no
documents of any kind should be sent with the order that indicate in
In the past, we have always paid the air conditioning tax on climate any way that the equipment could possibly be used for air
changers and that mark is recognized in the Philippines, as air conditioning.
conditioning equipment. This matter of avoiding any tie-in on air
conditioning is very important to us, and we are asking that from It is realized that this a broad request and fairly difficult to
hereon that whoever takes care of the processing of our orders be accomplish and administer, but we believe with proper caution it
carefully instructed so as to avoid again using the term "Climate
can be executed. Your cooperation and close supervision concerning ... If any article withdrawn from the
these matters will be appreciated. (Emphasis supplied) customhouse or the post office without payment
of the compensating tax is subsequently used by
The aforequoted communications are strongly indicative of the fraudulent intent of the importer for other purposes, corresponding
Engineering to misdeclare its importation of air conditioning units and spare parts or entry should be made in the books of accounts if
accessories thereof to evade payment of the 30% tax. And since the commission of any are kept or a written notice thereof sent to
fraud is altogether too glaring, We cannot agree with the Court of Tax Appeals in the Collector of Internal Revenue and payment
absolving Engineering from the 50% fraud surcharge, otherwise We will be giving of the corresponding compensating tax made
premium to a plainly intolerable act of tax evasion. As aptly stated by then Solicitor within 30 days from the date of such entry or
General, now Justice, Antonio P. Barredo: 'this circumstance will not free it from the notice and if tax is not paid within such period
50% surcharge because in any case whether it is subject to advance sales tax or the amount of the tax shall be increased by 25%
compensating tax, it is required by law to truly declare its importation in the import the increment to be a part of the tax.
entries and internal revenue declarations before the importations maybe released from
customs custody. The said entries are the very documents where the nature, quantity Since the imported air conditioning units-and spare parts or accessories thereof are
and value of the imported goods declared and where the customs duties, internal subject to the compensating tax of 30% as the same were used in the construction
revenue taxes, and other fees or charges incident to the importation are computed. business of Engineering, it is incumbent upon the latter to comply with the aforequoted
These entries, therefore, serve the same purpose as the returns required by Section requirement of Section 190 of the Code, by posting in its books of accounts or notifying
183(a) of the Code.' the Collector of Internal Revenue that the imported articles were used for other
purposes within 30 days. ... Consequently; as the 30% compensating tax was not paid by
Anent the 25% delinquency surcharge, We fully agree to the ruling made by the Court of petitioner within the time prescribed by Section 190 of the Tax Code as amended, it is
Tax Appeals and hold Engineering liable for the same. As held by the lower court: therefore subject to the 25% surcharge for delinquency in the payment of the said tax.
(pp. 224-226 CTA rec.)
At first blush it would seem that the contention of petitioner that it
is not subject to the delinquency, surcharge of 25% is sound, valid III
and tenable. However, a serious study and critical analysis of the
historical provisions of Section 190 of the Tax Code dealing on Lastly the question of prescription of the tax assessment has been put in issue.
compensating tax in relation to Section 183(a) of the same Code, will Engineering contends that it was not guilty of tax fraud in effecting the importations
show that the contention of petitioner is without merit. The original and, therefore, Section 332(a) prescribing ten years is inapplicable, claiming that the
text of Section 190 of Commonwealth Act 466, otherwise known as pertinent prescriptive period is five years from the date the questioned importations
the National Internal Revenue Code, as amended by Commonwealth were made. A review of the record however reveals that Engineering did file a tax return
Act No. 503, effective on October 1, 1939, does not provide for the or declaration with the Bureau of Customs before it paid the advance sales tax of 7%.
filing of a compensation tax return and payment of the 25 % And the declaration filed reveals that it did in fact misdeclare its importations. Section
surcharge for late payment thereof. Under the original text of 332 of the Tax Code which provides:
Section 190 of the Tax Code as amended by Commonwealth Act No.
503, the contention of the petitioner that it is not subject to the 25% Section 332. Exceptions as to period of limitation of assessment
surcharge appears to be legally tenable. However, Section 190 of the and collection of taxes.
Tax Code was subsequently amended by the Republic Acts Nos. 253,
361, 1511 and 1612 effective October 1, 1946, July 1, 1948, June 9,
(a) In the case of a false or fraudulent return with intent to evade tax
1949, June 16, 1956 and August 24, 1956 respectively, which
or of a failure to file a return, the tax may be assessed, or a
invariably provides among others, the following:
proceeding in court for the collection of such tax may be begun
without assessment at any time within ten years after the discovery
of the falsity, fraud or omission.

is applicable, considering the preponderance of evidence of fraud with the intent to

evade the higher rate of percentage tax due from Engineering. The, tax assessment was
made within the period prescribed by law and prescription had not set in against the

WHEREFORE, the decision appealed from is affirmed with the modification that
Engineering is hereby also made liable to pay the 50% fraud surcharge.

Republic of the Philippines (C) The expenses for transportation and shipment shall be borne by M.
SUPREME COURT Quiroga, and the freight, insurance, and cost of unloading from the vessel at
Manila the point where the beds are received, shall be paid by Mr. Parsons.

EN BANC (D) If, before an invoice falls due, Mr. Quiroga should request its payment, said
payment when made shall be considered as a prompt payment, and as such a
G.R. No. L-11491 August 23, 1918 deduction of 2 per cent shall be made from the amount of the invoice.

ANDRES QUIROGA, plaintiff-appellant, The same discount shall be made on the amount of any invoice which Mr.
vs. Parsons may deem convenient to pay in cash.
PARSONS HARDWARE CO., defendant-appellee.
(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand
Alfredo Chicote, Jose Arnaiz and Pascual B. Azanza for appellant. of any alteration in price which he may plan to make in respect to his beds,
Crossfield & O'Brien for appellee. and agrees that if on the date when such alteration takes effect he should
have any order pending to be served to Mr. Parsons, such order shall enjoy
the advantage of the alteration if the price thereby be lowered, but shall not
be affected by said alteration if the price thereby be increased, for, in this
latter case, Mr. Quiroga assumed the obligation to invoice the beds at the
On January 24, 1911, in this city of manila, a contract in the following tenor was entered price at which the order was given.
into by and between the plaintiff, as party of the first part, and J. Parsons (to whose
rights and obligations the present defendant later subrogated itself), as party of the
(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga"
second part:


ART. 2. In compensation for the expenses of advertisement which, for the
benefit of both contracting parties, Mr. Parsons may find himself obliged to
make, Mr. Quiroga assumes the obligation to offer and give the preference to
Mr. Parsons in case anyone should apply for the exclusive agency for any
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the island not comprised with the Visayan group.
Visayan Islands to J. Parsons under the following conditions:
ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the "Quiroga" beds in all the towns of the Archipelago where there are no
latter's establishment in Iloilo, and shall invoice them at the same price he has exclusive agents, and shall immediately report such action to Mr. Quiroga for
fixed for sales, in Manila, and, in the invoices, shall make and allowance of a his approval.
discount of 25 per cent of the invoiced prices, as commission on the sale; and
Mr. Parsons shall order the beds by the dozen, whether of the same or of
ART. 4. This contract is made for an unlimited period, and may be terminated
different styles.
by either of the contracting parties on a previous notice of ninety days to the
other party.
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within
a period of sixty days from the date of their shipment.
Of the three causes of action alleged by the plaintiff in his complaint, only two of them
constitute the subject matter of this appeal and both substantially amount to the
averment that the defendant violated the following obligations: not to sell the beds at in the Visayan Islands. With regard to the remaining clauses, the least that can be said is
higher prices than those of the invoices; to have an open establishment in Iloilo; itself to that they are not incompatible with the contract of purchase and sale.
conduct the agency; to keep the beds on public exhibition, and to pay for the
advertisement expenses for the same; and to order the beds by the dozen and in no The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of
other manner. As may be seen, with the exception of the obligation on the part of the the defendant corporation and who established and managed the latter's business in
defendant to order the beds by the dozen and in no other manner, none of the Iloilo. It appears that this witness, prior to the time of his testimony, had serious trouble
obligations imputed to the defendant in the two causes of action are expressly set forth with the defendant, had maintained a civil suit against it, and had even accused one of
in the contract. But the plaintiff alleged that the defendant was his agent for the sale of its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted
his beds in Iloilo, and that said obligations are implied in a contract of commercial the contract Exhibit A, and, when questioned as to what was his purpose in contracting
agency. The whole question, therefore, reduced itself to a determination as to whether with the plaintiff, replied that it was to be an agent for his beds and to collect a
the defendant, by reason of the contract hereinbefore transcribed, was a purchaser or commission on sales. However, according to the defendant's evidence, it was Mariano
an agent of the plaintiff for the sale of his beds. Lopez Santos, a director of the corporation, who prepared Exhibit A. But, even
supposing that Ernesto Vidal has stated the truth, his statement as to what was his idea
In order to classify a contract, due regard must be given to its essential clauses. In the in contracting with the plaintiff is of no importance, inasmuch as the agreements
contract in question, what was essential, as constituting its cause and subject matter, is contained in Exhibit A which he claims to have drafted, constitute, as we have said, a
that the plaintiff was to furnish the defendant with the beds which the latter might contract of purchase and sale, and not one of commercial agency. This only means that
order, at the price stipulated, and that the defendant was to pay the price in the manner Ernesto Vidal was mistaken in his classification of the contract. But it must be
stipulated. The price agreed upon was the one determined by the plaintiff for the sale of understood that a contract is what the law defines it to be, and not what it is called by
these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. the contracting parties.
Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or
in cash, if the defendant so preferred, and in these last two cases an additional discount The plaintiff also endeavored to prove that the defendant had returned beds that it
was to be allowed for prompt payment. These are precisely the essential features of a could not sell; that, without previous notice, it forwarded to the defendant the beds
contract of purchase and sale. There was the obligation on the part of the plaintiff to that it wanted; and that the defendant received its commission for the beds sold by the
supply the beds, and, on the part of the defendant, to pay their price. These features plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part
exclude the legal conception of an agency or order to sell whereby the mandatory or of both of them, there was mutual tolerance in the performance of the contract in
agent received the thing to sell it, and does not pay its price, but delivers to the principal disregard of its terms; and it gives no right to have the contract considered, not as the
the price he obtains from the sale of the thing to a third person, and if he does not parties stipulated it, but as they performed it. Only the acts of the contracting parties,
succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the subsequent to, and in connection with, the execution of the contract, must be
defendant, the latter, on receiving the beds, was necessarily obliged to pay their price considered for the purpose of interpreting the contract, when such interpretation is
within the term fixed, without any other consideration and regardless as to whether he necessary, but not when, as in the instant case, its essential agreements are clearly set
had or had not sold the beds. forth and plainly show that the contract belongs to a certain kind and not to another.
Furthermore, the return made was of certain brass beds, and was not effected in
It would be enough to hold, as we do, that the contract by and between the defendant exchange for the price paid for them, but was for other beds of another kind; and for
and the plaintiff is one of purchase and sale, in order to show that it was not one made the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds,
on the basis of a commission on sales, as the plaintiff claims it was, for these contracts which shows that it was not considered that the defendant had a right, by virtue of the
are incompatible with each other. But, besides, examining the clauses of this contract, contract, to make this return. As regards the shipment of beds without previous notice,
none of them is found that substantially supports the plaintiff's contention. Not a single it is insinuated in the record that these brass beds were precisely the ones so shipped,
one of these clauses necessarily conveys the idea of an agency. The words commission and that, for this very reason, the plaintiff agreed to their return. And with respect to
on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, the so-called commissions, we have said that they merely constituted a discount on the
than a mere discount on the invoice price. The word agency, also used in articles 2 and invoice price, and the reason for applying this benefit to the beds sold directly by the
3, only expresses that the defendant was the only one that could sell the plaintiff's beds plaintiff to persons in Iloilo was because, as the defendant obligated itself in the
contract to incur the expenses of advertisement of the plaintiff's beds, such sales were
to be considered as a result of that advertisement.

In respect to the defendant's obligation to order by the dozen, the only one expressly
imposed by the contract, the effect of its breach would only entitle the plaintiff to
disregard the orders which the defendant might place under other conditions; but if the
plaintiff consents to fill them, he waives his right and cannot complain for having acted
thus at his own free will.

For the foregoing reasons, we are of opinion that the contract by and between the
plaintiff and the defendant was one of purchase and sale, and that the obligations the
breach of which is alleged as a cause of action are not imposed upon the defendant,
either by agreement or by law.

The judgment appealed from is affirmed, with costs against the appellant. So ordered.

Arellano, C.J., Torres, Johnson, Street and Malcolm, JJ., concur.

Republic of the Philippines Dao Heng thereupon filed in September 2000 an application to foreclose the real estate
SUPREME COURT mortgages executed by respondents. The properties subject of the mortgage were sold
Manila for P10,776,242 at a public auction conducted on December 20, 2000 to Banco de Oro
Universal Bank (hereafter petitioner) which was the highest bidder.
It appears that respondents negotiated for the redemption of the mortgages for by a
G.R. No. 173856 November 20, 2008 June 29, 2001 letter2 to them, petitioner, to which Dao Heng had been merged, through
its Vice President on Property Management & Credit Services Department, advised
respondent Lilia Laigo as follows:
SPS. LILIA and REYNALDO LAIGO, respondent. This is to formally advise you of the bank's response to your proposal pertaining to the
redemption of the two (2) foreclosed lots located in Fairview, Quezon City as has been
relayed to you last June 13, 2001 as follows:

1. Redemption price shall be P11.5MM plus 12% interest based on diminishing

balance payable in staggered payments up to January 2, 2002 as follows:

The Spouses Lilia and Reynaldo Laigo (respondents) obtained loans from Dao Heng
a. P3MM - immediately upon receipt of this approval
Bank, Inc. (Dao Heng) in the total amount of P11 Million, to secure the payment of
which they forged on October 28, 1996, November 18, 1996 and April 18, 1997 three
Real Estate Mortgages covering two parcels of land registered in the name of b. Balance payable in staggered payments (plus interest) up to
respondent "Lilia D. Laigo, . . . married to Reynaldo Laigo," one containing 569 square January 2, 2002
meters and the other containing 537 square meters.
2. Release Values for Partial Redemption:
The mortgages were duly registered in the Registry of Deeds of Quezon City.
a. TCT No. 92257 (along Commonwealth) P7.500 MM*
The loans were payable within 12 months from the execution of the promissory notes
covering the loans. As of 2000, respondents failed to settle their outstanding obligation, b. TCT No. N-146289 (along Regalado) P4.000 MM*
drawing them to verbally offer to cede to Dao Heng one of the two mortgaged lots by
way of dacion en pago. To appraise the value of the mortgaged lands, Dao Heng in fact * excluding 12% interest
commissioned an appraiser whose fees were shouldered by it and respondents.
3. Other Conditions:
There appears to have been no further action taken by the parties after the appraisal of
the properties.
a. Payments shall be covered by post dated checks

Dao Heng was later to demand the settlement of respondents' obligation by letter of
b. TCT No. 92257 shall be the first property to be released upon
August 18, 20001 wherein it indicated that they had an outstanding obligation of
payment of the first P7.5MM plus interest
P10,385,109.92 inclusive of interests and other charges. Respondents failed to heed the
demand, however.
c. Arrangement to be covered by an Agreement
If you are agreeable to the foregoing terms and conditions, please affix your signature an exception to the operation of the rule on statute of frauds because of their
showing your conformity thereto at the space provided below. (Emphasis and partial performance of the obligation in the dacion en pago consisting of the
underscoring in the original; italics supplied) delivery of the titles of the properties to the defendants. As correctly pointed
out by the defendants, the titles were not delivered to them pursuant to the
Nothing was heard from respondents, hence, petitioner by its Manager, Property dacion en pago but by reason of the execution of the mortgage loan
Management & Credit Services Department, advised her by letter of December 26, agreement. If indeed a dacion en pago agreement was entered into between
20013 that in view of their failure to conform to the conditions set by it for the the parties, it is inconceivable that a written document would not be drafted
redemption of the properties, it would proceed to consolidate the titles immediately considering the magnitude of the amount involved.5 (Emphasis and
after the expiration of the redemption period on January 2, 2002. underscoring supplied)

Six days before the expiration of the redemption period or on December 27, 2001, Respondents assailed the dismissal of their complaint via Petition for Review before this
respondents filed a complaint before the Regional Trial Court (RTC) of Quezon City, for Court which referred it to the Court of Appeals for disposition.
Annulment, Injunction with Prayer for Temporary Restraining Order (TRO), praying for
the annulment of the foreclosure of the properties subject of the real estate mortgages Reversing the trial court's dismissal of the complaint, the appellate court, by Decision of
and for them to be allowed "to deliver by way of dacion en pago' one of the mortgaged January 26, 2006,6 reinstated respondents' complaint.7
properties as full payment of [their] mortgaged obligation" and to, in the meantime,
issue a TRO directing the defendant-herein petitioner to desist from consolidating In ordering the reinstatement of respondents' complaint, the appellate court held that
ownership over their properties. the complaint states a cause of action, respondents having alleged that there was partial
performance of the agreement to settle their obligation via dacion en pago when they
By respondents' claim, Dao Heng verbally agreed to enter into a dacion en pago. agreed to have the properties appraised to thus place their agreement within the
exceptions provided under Article 14038 of the Civil Code on Statute of Frauds. Thus the
In its Opposition to respondents' Application for a TRO,4 petitioner claimed that there appellate court ratiocinated:
was no meeting of the minds between the parties on the settlement of respondents'
loan via dacion en pago. Particularly, in seeking exception to the application of the Statute of Frauds,
petitioners[-herein respondents] averred partial performance of the supposed
A hearing on the application for a TRO was conducted by Branch 215 of the RTC of verbal dacion en pago. In paragraph 5 of their complaint, they stated: "As part
Quezon City following which it denied the same. of the agreement, defendant Dao Heng Bank had the mortgaged property
appraised to determine which of the two shall be delivered as full payment of
the mortgage obligation; Also as part of the deal, plaintiffs for their part paid
Petitioner thereupon filed a Motion to Dismiss the complaint on the ground that the
P5,000.00 for the appraisal expense. As reported by the appraiser
claim on which respondents' action is founded is unenforceable under the Statute of
commissioned by Defendant Dao Heng, the appraised value of the mortgaged
Frauds and the complaint states no cause of action. Respondents opposed the motion,
properties were as follows: x x x" Having done so, petitioners are at least
contending that their delivery of the titles to the mortgaged properties constituted
entitled to a reasonable opportunity to prove their case in the course of a full
partial performance of their obligation under the dacion en pago to take it out from the
trial, to which the respondents may equally present their evidence in
coverage of the Statute of Frauds.
refutation of the formers' case. (Underscoring supplied)

The trial court granted petitioner's Motion to Dismiss in this wise:

Petitioner's Motion for Reconsideration having been denied by the appellate court by
Resolution of July 19, 2006, the present petition was filed faulting the appellate court in
[P]laintiffs' claim must be based on a document or writing evidencing the ruling:
alleged dacion en pago, otherwise, the same cannot be enforced in an action
in court. The Court is not persuaded by plaintiffs' contention that their case is
I. (b) Property No. 2 - T.C.T. No. 146289: P8,055,000.00 L36 Blk 87
Regalado Ave. Cor. Ipil St., Neopolitan, QC
THE ALLEGATIONS, AS WELL AS ADMISSIONS FROM THE RESPONDENTS, THAT [6] Sometime in December, year 2000, the protest of plaintiffs
THERE WAS NO PERFECTED DACION EN PAGO CONTRACT; notwithstanding and in blatant breach of the agreed "Dacion en pago" as the
mode of full payment of plaintiffs' mortgage obligation, defendant Dao Heng
II. Bank proceeded to foreclose the mortgaged properties above-described and
sold said properties which were aggregately valued at more than P20 Million
for only P10,776,242.00, an unconscionably very low price; (Underscoring
Even if a complaint states a cause of action, however, a motion to dismiss for
insufficiency of cause of action may be granted if the evidence discloses facts sufficient
to defeat the claim and enables the court to go beyond the disclosures in the complaint.
In such instances, the court can dismiss a complaint on this ground, even without a
. . . THAT THE COMPLAINT SUFFICIENTLY STATED A CAUSE OF ACTION. 9 hearing, by taking into account the discussions in said motion to dismiss and the
disposition thereto.10
Generally, the presence of a cause of action is determined from the facts alleged in the
complaint. In its Opposition to respondents' application for the issuance of a TRO,11 petitioner,
responding to respondents' allegation that it agreed to the settlement of their
In their complaint, respondents alleged: obligation via the assignment of one of the two mortgaged properties, alleged that
there was no meeting of the minds thereon:
4. Plaintiffs' claim that defendant Dao Heng Bank[s] foreclosure sale of the
4. Sometime in the middle of the year 2000, defendant Dao Heng Bank as the mortgaged properties was improper because there was an agreement to
creditor bank agreed to the full settlement of plaintiffs' mortgage obligation of dacion one of the two (2) mortgaged properties as full settlement of the loan
P9 Million through the assignment of one of the two (2) mortgaged obligation and that defendant Dao Heng Bank and Banco de Oro were already
properties; negotiating and colluding for the latter's acquisition of the mortgaged
[properties] for the unsconscionably low price of P10,776.242.00 are clearly
WITHOUT BASIS. Quite to the contrary, there was no meeting of the minds
[5] As part of the agreement, defendant Dao Heng Bank had the mortgaged between defendant Dao Heng Bank and the plaintiffs to dacion any of the
properties appraised to determine which of the two (2) mortgaged properties mortgaged properties as full settlement of the loan. Although there was a
shall be delivered as full payment of the mortgage obligation; Also as part of PROPOSAL and NEGOTIATIONS to settle the loan by way of dacion, nothing
the deal, plaintiffs for their part paid P5,000.00 for the appraisal expense; As came out of said proposal, much less did the negotiations mature into the
reported by the appraiser commissioned by defendant Dao Heng, the execution of a dacion en pago instrument. Defendant Dao Heng Bank found
appraised value of the mortgaged properties were as follows: the offer to settle by way of dacion not acceptable and thus, it opted to
foreclose on the mortgage.
(a) Property No. 1 - T.C.T. No. 92257: P12,518,000.00
The law clearly provides that "the debtor of a thing cannot compel the
L2A Blk 12 Don Mariano Marcos Ave., Fairview, QC creditor to receive a different one, although the latter may be of the same
value, or more valuable than that which is due" (Article 1244, New Civil Code).
"The oblige is entitled to demand fulfillment of the obligation or performance title to a property is not delivered to the mortgagee, what will prevent the mortgagor
as stipulated" (Palmares v. Court of Appeals, 288 SCRA 422 at p. 444 [1998]). from again encumbering it also by mortgage or even by sale to a third party.
"The power to decide whether or not to foreclose on the mortgage is the sole
prerogative of the mortgagee" (Rural Bank of San Mateo, Inc. vs. Intermediate Finally, that respondents did not deny proposing to redeem the mortgages,17 as
Appellate Court, 146 SCRA 205, at 213 [1986]) Defendant Dao Heng Bank reflected in petitioner's June 29, 2001 letter to them, dooms their claim of the existence
merely opted to exercise such prerogative.12 (Emphasis in the original; of a perfected dacion en pago.
capitalization and underscoring supplied)
WHEREFORE, the Court of Appeals Decision of January 26, 2006 is REVERSED and SET
Dacion en pago as a mode of extinguishing an existing obligation partakes of the nature ASIDE. The Resolution of July 2, 2002 of the Regional Trial Court of Quezon City, Branch
of sale whereby property is alienated to the creditor in satisfaction of a debt in money.13 215 dismissing respondents' complaint is REINSTATED.
It is an objective novation of the obligation, hence, common consent of the parties is
required in order to extinguish the obligation.

. . . In dacion en pago, as a special mode of payment, the debtor offers another thing to
the creditor who accepts it as equivalent of payment of an outstanding debt. The
undertaking really partakes in one sense of the nature of sale, that is, the creditor is
really buying the thing or property of the debtor, payment for which is to be charged
against the debtor's debt. As such the elements of a contract of sale, namely, consent,
object certain, and cause or consideration must be present. In its modern concept, what
actually takes place in dacion en pago is an objective novation of the obligation where
the thing offered as an accepted equivalent of the performance of an obligation is
considered as the object of the contract of sale, while the debt is considered the
purchase price. In any case, common consent is an essential prerequisite, be it sale or
novation, to have the effect of totally extinguishing the debt or obligation."14 (Emphasis,
italics and underscoring supplied; citation omitted)

Being likened to that of a contract of sale, dacion en pago is governed by the law on
sales.15 The partial execution of a contract of sale takes the transaction out of the
provisions of the Statute of Frauds so long as the essential requisites of consent of the
contracting parties, object and cause of the obligation concur and are clearly established
to be present.16

Respondents claim that petitioner's commissioning of an appraiser to appraise the value

of the mortgaged properties, his services for which they and petitioner paid, and their
delivery to petitioner of the titles to the properties constitute partial performance of
their agreement to take the case out of the provisions on the Statute of Frauds.

There is no concrete showing, however, that after the appraisal of the properties,
petitioner approved respondents' proposal to settle their obligation via dacion en pago.
The delivery to petitioner of the titles to the properties is a usual condition sine qua non
to the execution of the mortgage, both for security and registration purposes. For if the
Republic of the Philippines complaint was dismissed and defendant declared entitled to the properties in litigation.
SUPREME COURT Brought to the Court of Appeals, the judgment was reversed, and the contracts between
Manila plaintiff and Mary Ando held to be those of lease.

EN BANC The case is here on petition, by defendant Teodorica R. Viuda de Jose, now petitioner,
contending that the decision of the Court of Appeals is erroneous for the following
G.R. No. L-45955 April 5, 1939 reasons:

TEODORICA R. VIUDA DE JOSE, petitioner, (a) Summarizing the terms of both the "lease", Exhibits A and B, extracts from the part
vs. of the appealed decision appealed above, these data are highlighted:
JULIO VELOSO BARRUECO, respondent. Periodo
Valor del Primer Precio Alquiler
Exhibit necesario de
mueble pago restante mensual
Ramon Diokno for petitioner. pago
Ignacio B. Alcuaz for respondent.
P70.00 P14.00 P56.00 P5.00 Once meses
120.00 24.00 96.00 10.00 Diez meses
The petitioner-appellant brought this case before this court thru petition for a writ of .............
certiorari to review the decision of the Court of Appeals promulgated on October 30,
(B) Upon granting the deed, there are immediately payments of P14 and P24, which are
not rents, and which have no other meaning but payments on account of the price of
Mary Ando leased from Julio Barrueco a China cabinet valued T P70. She undertook, the furniture. These candidacies represent exactly the prepayment of 20 percent, or a
under the lease, to pay P14 upon signing the contract and P5 monthly thereafter for a fifth of the value.
period not specified but extendible at the owner's pleasure. The contract of lease
further provided that upon leasee's default, the contract would be rescinded; that the (C) The remaining four fifths of the value are payable in the form of monthly payments
leasee was not liberty to remove said cabinet from house No 1030 Misericordia Street within a period of 10 to 11 months. If this rent is not on account of the amount of
where she lived, and that upon failure to comply with the terms of the lease, the owner furniture, the contract will be outrageously immoral, usurious and oppressive.
could immediately take possession of the property leased. Under similar terms and
conditions, Mary Ando also leased from said store a narra wardrobe valued at P120, (D) It is undoubted that these payments are to cover the stipulated price, since the
paying P24 cash and P10 monthly. respondent admits that the consideration of the subsequent sale is the same monthly
payments, and the "lessee" says that "rents ... were on account of the total amount , ""
Unable to pay the rent of the house, Mary Ando attempted to move therefrom, taking As payment in installments ".
with her the cabinet and the wardrobe. She was presented from doing so by Teodorica
R. Viuda de Jose, the owner of the house, who claimed to be entitled to said personal (E) The prices of the furniture fixed in the deeds are in harmony with the term of sale by
properties in lieu of rents due. installments, since it is considerably increased. On the same day that the matter was
heard in the Municipal Court of Manila, the appellant-appellant took precious in the
Upon a complaint filed by Julio Veloso Barrueco to recover the properties in question identical furniture establishments, and I find that they are worth only P61 in total,
from Teodorica R. Viuda de Jose, the Court of First Instance of Manila held that the instead of P190 (nt, p.21) . This test has not been contradicted.
contracts of lease (Exhibits A and B) were fictitious, and that the real contract between
the plaintiff and Mary Ando was one of sale on the installment basis, wherefore, the
(F) The parties have not only been obliged, the one to deliver the furniture, and the all its terms and clauses together is that the contract entered into by them was the
other, to pay them. In effect, the thing has been delivered, and part of the price was purchase and sale contract and not lease .
In Manila Gas Corporation vs. Calupitan (G.R. No. 46378, promulgated December 17,
(G) The decision says that it is not an installment sale, but lease with option to purchase, 1938), we also observed:
but if the lease and purchase considerations are one and the same, as in the present
case, according to the same decision appealed, Then there is no double contract, but
For the above considerations, we are of opinion, and we hereby declare, that when a
one and simple, conditional sale or deadlines. To be leased with purchase option there
lease contract is levied on a movable property, it is stipulated that the alleged tenant
must be a purchase price other than the lease price, which does not occur in the present
will pay a certain amount when the contract is signed, and on or before the 5th day of
each Month, another determined amount, in the form of renter, giving the tenant the
right of option to buy the said furniture before the lease term expires, which is the time
that is needed to pay said amount at the rate of a month , Discounting the payments
made in advance and supposed monthly rent, and said tenant assumes the advance and
A perusal of the record of this case shows that in Exhibit A, the amount of P70 was fixed pays several monthly payments, being recorded in his account and receipts that are
as the cost price for the cupboard, P14 as the down payment made at the signing of the issued that these payments are on account of the amount of the Which is supposedly
contract and P5 as the monthly rentals of said furniture. In Exhibit B the amount of P120 leased, this contract has the concept of forward sale and not lease.
was also fixed as the cost price of the modern narra wardrobe, the down payment made
as P24 and the monthly rental at P10. These Exhibits A and B are denominated
CONTRACTS OF LEASE, the monthly payments for both pieces of furniture are called
rentals, and Mary Ando is mentioned as "leasee." What is the nature of these contracts?
Sellers desirous of making conditional sales of their goods, but who do not wish openly
The answer to this question is not to be found in any denomination which the parties
to make a bargain in that form, for one reason or another, have frequently resorted to
may have given to the instruments, and not alone in any particular provision it contains,
the device of making contracts in the form of leases either with options to the buyer to
disconnected from all others, but in the ruling intention of the parties, gathered from
purchase for a small consideration at the end of term, provided the so-called rent has
the language they have used. It is the legal effect of the whole which is to be sought for.
been duly paid, or with stipulations that if the rent throughout the term is paid, title
The form of the instrument is of little account. (See Herryford vs. Davis, 26 Law. ed. [ U.
shall thereupon vest in the lessee. It is obvious that such transactions are leases only in
S.], pp. 160, 162.).
name. The so-called rent must necessarily be regarded as payment of the price in
installments since the due payment of the agreed amount results, by the terms of the
We find that the parties intended to have the ownership of the furniture transferred to bargain, in the transfer of title to the lessee.
Mary Ando upon the latter complying with the conditions of the contract. (Testimony of
plaintiff, p. 9, s. n.; and Mary Ando, p. 17, s. n.) Cf. Valdez vs. Sibal 1., 46 Phil., 930.)
The writ of certiorari is granted, and the judgement of the Court of Appeals is reserved
and that of the Court of First Instance of Manila declared in full force and effect. With
In H. E. Heacock Co. vs. Buntal Manufacturing Co. (G. R. No. 44471, promulgated out costs. So ordered.
September 26, 1938), we said:

To be more abundant we must say that the fact of having fixed the price of the machine
in the contract, makes that it is not of lease but of sale, because in the leases, unlike the
contracts of sale, is redundancy unjustifiable, Fix or make mention of the price of the
thing that is given in lease. (1445, 1543, Civil Code.) When the terms of a contract are
not clear or are contradictory to each other, such as those in Exhibit A, the intent of the
parties must be effective (art. 1281 of the Civil Code) , And the intention of the plaintiff
and the defendants in this case as we see it printed in the Exhibit A contract, considering
Republic of the Philippines That the delivery of the subject matter of the Deed of Sale shall be
SUPREME COURT from time to time and at the expense of the VENDEE who shall do
Manila the harvesting and gathering of the fruits;

FIRST DIVISION That the Vendor's right, title, interest and participation herein
conveyed is of his own exclusive and absolute property, free from
G.R. No. L-36902 January 30, 1982 any liens and encumbrances and he warrants to the Vendee good
title thereto and to defend the same against any and all claims of all
persons whomsoever. 1
LUIS PICHEL, petitioner,
PRUDENCIO ALONZO, respondent. After the pre-trial conference, the Court a quo issued an Order dated November 9, 1972
which in part read thus:

The following facts are admitted by the parties:

Plaintiff Prudencio Alonzo was awarded by the Government that
parcel of land designated as Lot No. 21 of Subdivision Plan Psd
This is a petition to review on certiorari the decision of the Court of First Instance of
32465 of Balactasan, Lamitan, Basilan City in accordance with
Basilan City dated January 5, 1973 in Civil Case No. 820 entitled "Prudencio Alonzo,
Republic Act No. 477. The award was cancelled by the Board of
plaintiff, vs. Luis Pichel, defendant."
Liquidators on January 27, 1965 on the ground that, previous
thereto, plaintiff was proved to have alienated the land to another,
This case originated in the lower Court as an action for the annulment of a "Deed of in violation of law. In 197 2, plaintiff's rights to the land were
Sale" dated August 14, 1968 and executed by Prudencio Alonzo, as vendor, in favor of reinstated.
Luis Pichel, as vendee, involving property awarded to the former by the Philippine
Government under Republic Act No. 477. Pertinent portions of the document sued upon
On August 14, 1968, plaintiff and his wife sold to defendant an the
read as follows:
fruits of the coconut trees which may be harvested in the land in
question for the period, September 15, 1968 to January 1, 1976, in
That the VENDOR for and in consideration of the sum of FOUR consideration of P4,200.00. Even as of the date of sale, however, the
THOUSAND TWO HUNDRED PESOS (P4,200.00), Philippine Currency, land was still under lease to one, Ramon Sua, and it was the
in hand paid by the VENDEE to the entire satisfaction of the agreement that part of the consideration of the sale, in the sum of
VENDOR, the VENDOR hereby sells transfers, and conveys, by way of P3,650.00, was to be paid by defendant directly to Ramon Sua so as
absolute sale, all the coconut fruits of his coconut land, designated to release the land from the clutches of the latter. Pending said
as Lot No. 21 - Subdivision Plan No. Psd- 32465, situated at payment plaintiff refused to snow the defendant to make any
Balactasan Plantation, Lamitan, Basilan City, Philippines; harvest.

That for the herein sale of the coconut fruits are for all the fruits on In July 1972, defendant for the first time since the execution of the
the aforementioned parcel of land presently found therein as well as deed of sale in his favor, caused the harvest of the fruit of the
for future fruits to be produced on the said parcel of land during the coconut trees in the land.
years period; which shag commence to run as of SEPTEMBER
15,1968; up to JANUARY 1, 1976 (sic);
xxx xxx xxx
Considering the foregoing, two issues appear posed by the Any occupant or applicant of lands under this Act who transfers
complaint and the answer which must needs be tested in the whatever rights he has acquired on said lands and/or on the
crucible of a trial on the merits, and they are: improvements thereon before the date of the award or signature of
the contract of sale, shall not be entitled to apply for another piece
First. Whether or nor defendant actually paid to plaintiff the full of agricultural land or urban, homesite or residential lot, as the case
sum of P4,200.00 upon execution of the deed of sale. may be, from the National Abaca and Other Fibers Corporation; and
such transfer shall be considered null and void. 5
Second. Is the deed of sale, Exhibit 'A', the prohibited
encumbrance contemplated in Section 8 of Republic Act No. 477? 2 The dispositive portion of the lower Court's decision states:

Anent the first issue, counsel for plaintiff Alonzo subsequently 'stipulated and agreed WHEREFORE, it is the judgment of this Court that the deed of sale,
that his client ... admits fun payment thereof by defendant. 3 The remaining issue being Exhibit 'A', should be, as it is, hereby declared nun and void; that
one of law, the Court below considered the case submitted for summary judgment on plaintiff be, as he is, ordered to pay back to defendant the
the basis of the pleadings of the parties, and the admission of facts and documentary consideration of the sale in the sum of P4,200.00 the same to bear
evidence presented at the pre-trial conference. legal interest from the date of the filing of the complaint until paid;
that defendant shall pay to the plaintiff the sum of P500.00 as
attorney's fees.
The lower court rendered its decision now under review, holding that although the
agreement in question is denominated by the parties as a deed of sale of fruits of the
coconut trees found in the vendor's land, it actually is, for all legal intents and purposes, Costs against the defendant. 6
a contract of lease of the land itself. According to the Court:
Before going into the issues raised by the instant Petition, the matter of whether, under
... the sale aforestated has given defendant complete control and the admitted facts of this case, the respondent had the right or authority to execute the
enjoyment of the improvements of the land. That the contract is "Deed of Sale" in 1968, his award over Lot No. 21 having been cancelled previously by
consensual; that its purpose is to allow the enjoyment or use of a the Board of Liquidators on January 27, 1965, must be clarified. The case in point is Ras
thing; that it is onerous because rent or price certain is stipulated; vs. Sua 7 wherein it was categorically stated by this Court that a cancellation of an award
and that the enjoyment or use of the thing certain is stipulated to be granted pursuant to the provisions of Republic Act No. 477 does not automatically
for a certain and definite period of time, are characteristics which divest the awardee of his rights to the land. Such cancellation does not result in the
admit of no other conclusion. ... The provisions of the contract itself immediate reversion of the property subject of the award, to the State. Speaking
and its characteristics govern its nature. 4 through Mr. Justice J.B.L. Reyes, this Court ruled that "until and unless an appropriate
proceeding for reversion is instituted by the State, and its reacquisition of the ownership
and possession of the land decreed by a competent court, the grantee cannot be said to
The Court, therefore, concluded that the deed of sale in question is an encumbrance
have been divested of whatever right that he may have over the same property." 8
prohibited by Republic Act No. 477 which provides thus:

There is nothing in the record to show that at any time after the supposed cancellation
Sec. 8. Except in favor of the Government or any of its branches,
of herein respondent's award on January 27, 1965, reversion proceedings against Lot
units, or institutions, land acquired under the provisions of this Act
No. 21 were instituted by the State. Instead, the admitted fact is that the award was
or any permanent improvements thereon shall not be thereon and
reinstated in 1972. Applying the doctrine announced in the above-cited Ras case,
for a term of ten years from and after the date of issuance of the
therefore, herein respondent is not deemed to have lost any of his rights as grantee of
certificate of title, nor shall they become liable to the satisfaction of
Lot No. 21 under Republic Act No. 477 during the period material to the case at bar, i.e.,
any debt contracted prior to the expiration of such period.
from the cancellation of the award in 1965 to its reinstatement in 1972. Within said
period, respondent could exercise all the rights pertaining to a grantee with respect to ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the
Lot No. 21. contracting parties. The terms of the agreement are clear and unequivocal, hence the
literal and plain meaning thereof should be observed. Such is the mandate of the Civil
This brings Us to the issues raised by the instant Petition. In his Brief, petitioner Code of the Philippines which provides that:
contends that the lower Court erred:
Art. 1370. If the terms of a contract are clear and leave no doubt
1. In resorting to construction and interpretation of the deed of sale upon the intention of the contracting parties, the literal meaning of
in question where the terms thereof are clear and unambiguous and its stipulation shall control ... .
leave no doubt as to the intention of the parties;
Pursuant to the afore-quoted legal provision, the first and fundamental duty of the
2. In declaring granting without admitting that an interpretation is courts is the application of the contract according to its express terms, interpretation
necessary the deed of sale in question to be a contract of lease being resorted to only when such literal application is impossible. 9
over the land itself where the respondent himself waived and
abandoned his claim that said deed did not express the true Simply and directly stated, the "Deed of Sale dated August 14, 1968 is precisely what it
agreement of the parties, and on the contrary, respondent admitted purports to be. It is a document evidencing the agreement of herein parties for the sale
at the pre-trial that his agreement with petitioner was one of sale of of coconut fruits of Lot No. 21, and not for the lease of the land itself as found by the
the fruits of the coconut trees on the land; lower Court. In clear and express terms, the document defines the object of the contract
thus: "the herein sale of the coconut fruits are for an the fruits on the aforementioned
3. In deciding a question which was not in issue when it declared the parcel of land during the years ...(from) SEPTEMBER 15, 1968; up to JANUARY 1, 1976."
deed of sale in question to be a contract of lease over Lot 21; Moreover, as petitioner correctly asserts, the document in question expresses a valid
contract of sale. It has the essential elements of a contract of sale as defined under
Article 1485 of the New Civil Code which provides thus:
4. In declaring furthermore the deed of sale in question to be a
contract of lease over the land itself on the basis of facts which were
not proved in evidence; 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
5. In not holding that the deed of sale, Exhibit "A" and "2", expresses
money or its equivalent.
a valid contract of sale;

A contract of sale may be absolute or conditional.

6. In not deciding squarely and to the point the issue as to whether
or not the deed of sale in question is an encumbrance on the land
and its improvements prohibited by Section 8 of Republic Act 477; The subject matter of the contract of sale in question are the fruits of the coconut trees
and on the land during the years from September 15, 1968 up to January 1, 1976, which
subject matter is a determinate thing. Under Article 1461 of the New Civil Code, things
having a potential existence may be the object of the contract of sale. And in Sibal vs.
7. In awarding respondent attorney's fees even granting, without
Valdez, 50 Phil. 512, pending crops which have potential existence may be the subject
admitting, that the deed of sale in question is violative of Section 8
matter of the sale. Here, the Supreme Court, citing Mechem on Sales and American
of Republic Act 477.
cases said which have potential existence may be the subject matter of sale. Here, the
Supreme Court, citing Mechem on Sales and American cases said:
The first five assigned errors are interrelated, hence, We shall consider them together.
To begin with, We agree with petitioner that construction or interpretation of the
document in question is not called for. A perusal of the deed fails to disclose any
Mr. Mechem says that a valid sale may be made of a thing, which In concluding that the possession and enjoyment of the coconut trees can therefore be
though not yet actually in existence, is reasonably certain to come said to be the possession and enjoyment of the land itself because the defendant-lessee
into existence as the natural increment or usual incident of in order to enjoy his right under the contract, he actually takes possession of the land, at
something already in existence, and then belonging to the vendor, least during harvest time, gather all of the fruits of the coconut trees in the land, and
and the title will vest in the buyer the moment the thing comes into gain exclusive use thereof without the interference or intervention of the plaintiff-lessor
existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting such that said plaintiff-lessor is excluded in fact from the land during the period
vs. Packers Exchange, 21 Am. St. Rep. 63) Things of this nature are aforesaid, the trial court erred. The contract was clearly a "sale of the coconut fruits."
said to have a potential existence. A man may sell property of which The vendor sold, transferred and conveyed "by way of absolute sale, all the coconut
he is potentially and not actually possess. He may make a valid sale fruits of his land," thereby divesting himself of all ownership or dominion over the fruits
of the wine that a vineyard is expected to produce; or the grain a during the seven-year period. The possession and enjoyment of the coconut trees
field may grow in a given time; or the milk a cow may yield during cannot be said to be the possession and enjoyment of the land itself because these
the coming year; or the wool that shall thereafter grow upon sheep; rights are distinct and separate from each other, the first pertaining to the accessory or
or what may be taken at the next case of a fisherman's net; or fruits improvements (coconut trees) while the second, to the principal (the land). A transfer of
to grow; or young animals not yet in existence; or the goodwill of a the accessory or improvement is not a transfer of the principal. It is the other way
trade and the like. The thing sold, however, must be specific and around, the accessory follows the principal. Hence, the sale of the nuts cannot be
Identified. They must be also owned at the time by the vendor. (Hull interpreted nor construed to be a lease of the trees, much less extended further to
vs. Hull 48 Conn. 250 (40 Am. Rep., 165) (pp. 522-523). include the lease of the land itself.

We do not agree with the trial court that the contract executed by and between the The real and pivotal issue of this case which is taken up in petitioner's sixth assignment
parties is "actually a contract of lease of the land and the coconut trees there." (CFI of error and as already stated above, refers to the validity of the "Deed of Sale", as such
Decision, p. 62, Records). The Court's holding that the contract in question fits the contract of sale, vis-a-vis the provisions of Sec. 8, R.A. No. 477. The lower Court did not
definition of a lease of things wherein one of the parties binds himself to give to another rule on this question, having reached the conclusion that the contract at bar was one of
the enjoyment or use of a thing for a price certain and for a period which may be lease. It was from the context of a lease contract that the Court below determined the
definite or indefinite (Art. 1643, Civil Code of the Philippines) is erroneous. The essential applicability of Sec. 8, R.A. No. 477, to the instant case.
difference between a contract of sale and a lease of things is that the delivery of the
thing sold transfers ownership, while in lease no such transfer of ownership results as Resolving now this principal issue, We find after a close and careful examination of the
the rights of the lessee are limited to the use and enjoyment of the thing leased. terms of the first paragraph of Section 8 hereinabove quoted, that the grantee of a
parcel of land under R.A. No. 477 is not prohibited from alienating or disposing of the
In Rodriguez vs. Borromeo, 43 Phil. 479, 490, the Supreme Court held: natural and/or industrial fruits of the land awarded to him. What the law expressly
disallows is the encumbrance or alienation of the land itself or any of the permanent
Since according to article 1543 of the same Code the contract of improvements thereon. Permanent improvements on a parcel of land are things
lease is defined as the giving or the concession of the enjoyment or incorporated or attached to the property in a fixed manner, naturally or artificially. They
use of a thing for a specified time and fixed price, and since such include whatever is built, planted or sown on the land which is characterized by fixity,
contract is a form of enjoyment of the property, it is evident that it immutability or immovability. Houses, buildings, machinery, animal houses, trees and
must be regarded as one of the means of enjoyment referred to in plants would fall under the category of permanent improvements, the alienation or
said article 398, inasmuch as the terms enjoyment, use, and benefit encumbrance of which is prohibited by R.A. No. 477. While coconut trees are
involve the same and analogous meaning relative to the general permanent improvements of a land, their nuts are natural or industrial fruits which are
utility of which a given thing is capable. (104 Jurisprudencia Civil, meant to be gathered or severed from the trees, to be used, enjoyed, sold or otherwise
443) disposed of by the owner of the land. Herein respondents, as the grantee of Lot No. 21
from the Government, had the right and prerogative to sell the coconut fruits of the
trees growing on the property.
By virtue of R.A. No. 477, bona fide occupants, veterans, members of guerilla Art. 2208. In the absence of stipulation, attorney's fees and
organizations and other qualified persons were given the opportunity to acquire expenses of litigation, other than judicial costs, cannot be recovered,
government lands by purchase, taking into account their limited means. It was intended except:
for these persons to make good and productive use of the lands awarded to them, not
only to enable them to improve their standard of living, but likewise to help provide for (1) When exemplary damages are awarded;
the annual payments to the Government of the purchase price of the lots awarded to
them. Section 8 was included, as stated by the Court a quo, to protect the grantees from
(2) When the defendant's act or omission has compelled the plaintiff
themselves and the incursions of opportunists who prey on their misery and poverty." It
to litigate with third persons or to incur expenses to protect his
is there to insure that the grantees themselves benefit from their respective lots, to the
exclusion of other persons.

(3) In criminal cases of malicious prosecution against the plaintiff;

The purpose of the law is not violated when a grantee sells the produce or fruits of his
land. On the contrary, the aim of the law is thereby achieved, for the grantee is
encouraged and induced to be more industrious and productive, thus making it possible (4) In case of a clearly unfounded civil action or proceeding against
for him and his family to be economically self-sufficient and to lead a respectable life. At the plaintiff;
the same time, the Government is assured of payment on the annual installments on
the land. We agree with herein petitioner that it could not have been the intention of (5) Where the defendant acted in gross and evident bad faith in
the legislature to prohibit the grantee from selling the natural and industrial fruits of his refusing to satisfy the plaintiff's plainly valid, just and demandable
land, for otherwise, it would lead to an absurd situation wherein the grantee would not claim;
be able to receive and enjoy the fruits of the property in the real and complete sense.
(6) In actions for legal support;
Respondent through counsel, in his Answer to the Petition contends that even granting
arguendo that he executed a deed of sale of the coconut fruits, he has the "privilege to (7) In actions for the recovery of wages of household helpers,
change his mind and claim it as (an) implied lease," and he has the "legitimate right" to laborers and skilled workers;
file an action for annulment "which no law can stop." He claims it is his "sole
construction of the meaning of the transaction that should prevail and not petitioner.
(sic). 10 Respondent's counsel either misapplies the law or is trying too hard and going (8) In actions for indemnity under workmen's compensation and
too far to defend his client's hopeless cause. Suffice it to say that respondent-grantee, employer's liability laws;
after having received the consideration for the sale of his coconut fruits, cannot be
allowed to impugn the validity of the contracts he entered into, to the prejudice of (9) In a separate civil action to recover civil liability arising from a
petitioner who contracted in good faith and for a consideration. crime;

The issue raised by the seventh assignment of error as to the propriety of the award of (10) When at least double judicial costs are awarded;
attorney's fees made by the lower Court need not be passed upon, such award having
been apparently based on the erroneous finding and conclusion that the contract at bar (11) In any other case where the court deems it just and equitable
is one of lease. We shall limit Ourselves to the question of whether or not in accordance that attorney's fees and expenses of litigation should be recovered.
with Our ruling in this case, respondent is entitled to an award of attorney's fees. The
Civil Code provides that:
In all cases, the attorney's fees and expenses of litigation must be
We find that none of the legal grounds enumerated above exists to justify or warrant
the grant of attorney's fees to herein respondent.

IN VIEW OF THE FOREGOING, the judgment of the lower Court is hereby set aside and
another one is entered dismissing the Complaint. Without costs.

II Object of the contract officials in the administrative case; [2] dissolving the injunction
issued by the Court below; and [3] cancelling the registration of Lot
Republic of the Philippines No. 2, the disputed area, and ordering its reconveyance to the public
SUPREME COURT domain. No costs in this instance.
The background facts are stated by the Court of Appeals as follows:
The spouses Romeo Martinez and Leonor Suarez, now petitioners-
appellees, are the registered owners of two (2) parcels of land
located in Lubao, Pampanga, covered by transfer certificate of title
No. 15856 of the Register of Deeds of the said province. Both parcels
G.R. No. L-31271 April 29, 1974
of land are fishponds. The property involved in the instant case is
the second parcel mentioned in the above-named transfer
ROMEO MARTINEZ and LEONOR SUAREZ, spouses, petitioners-appellants, certificate of title.
The disputed property was originally owned by one Paulino
COMMUNICATIONS, respondents-appellees.
Montemayor, who secured a "titulo real" over it way back in 1883.
After the death of Paulino Montemayor the said property passed to
Flores Macapagal, Ocampo and Balbastro for petitioners-appellants. his successors-in-interest, Maria Montemayor and Donata
Montemayor, who in turn, sold it, as well as the first parcel, to a
Office of the Solicitor General Felix Q. Antonio, Acting Assistant Solicitor General certain Potenciano Garcia.
Dominador L. Quiroz and Solicitor Concepcion T. Agapinan for respondents-appellees.
Because Potenciano Garcia was prevented by the then municipal
president of Lubao, Pedro Beltran, from restoring the dikes
constructed on the contested property, the former, on June 22,
ESGUERRA, J.:p 1914, filed Civil Case No. 1407 with the Court of First Instance
against the said Pedro Beltran to restrain the latter in his official
capacity from molesting him in the possession of said second parcel,
Petition for review by certiorari of the judgment of the Court of Appeals dated and on even date, applied for a writ of preliminary injunction, which
November 17, 1969 in its CA-G.R. 27655-R which reverses the judgment of the Court of was issued against said municipal president. The Court, by decision
First Instance of Pampanga in favor of petitioners-appellants against the Secretary and promulgated June 12, 1916, declared permanent the preliminary
Undersecretary of Public Works & Communications in the case instituted to annul the injunction, which, decision, on appeal, was affirmed by the Supreme
order of November 25, 1958 of respondent Secretary of Public Works & Court on August 21, 1918. From June 22, 1914, the dikes around the
Communications directing the removal by the petitioners of the dikes they had property in question remained closed until a portion thereof was
constructed on Lot No. 15856 of the Register of Deeds of Pampanga, which order was again opened just before the outbreak of the Pacific War.
issued pursuant to the provisions of Republic Act No. 2056. The dispositive portion of
the judgment of reversal of the Court of Appeals reads as follows:
On April 17, 1925. Potenciano Garcia applied for the registration of
both parcels of land in his name, and the Court of First Instance of
IN VIEW OF THE FOREGOING CONSIDERATIONS, the judgment Pampanga, sitting as land registration court, granted the registration
appealed from is hereby reversed, and another entered: [1] over and against the opposition of the Attorney-General and the
upholding the validity of the decision reached by the respondent Director of Forestry. Pursuant to the Court's decision, original
certificate of title No. 14318, covering said parcels 1 and 2 was enjoined from molesting them in their possession of their property
issued to the spouses Potenciano Garcia and Lorenza Sioson. and in the construction of the dikes therein. The writ of preliminary
injunction applied for was issued against the respondent municipal
These parcels of land were subsequently bought by Emilio Cruz de Mayor, who immediately elevated the injunction suit for review to
Dios in whose name transfer certificate of title No. 1421 was first the Supreme Court, which dismissed Mayor Zagad's petition on
issued on November 9, 1925. September 7, 1953. With this dismissal order herein appellee
spouses proceeded to construct the dikes in the disputed parcel of
Thereafter, the ownership of these properties changed hands until
eventually they were acquired by the herein appellee spouses who
hold them by virtue of transfer certificate of title No. 15856. Some four (4) years later, and while Civil Case No. 751 was still
pending the Honorable Florencio Moreno, then Secretary of Public
Works and Communications, ordered another investigation of the
To avoid any untoward incident, the disputants agreed to refer the
said parcel of land, directing the appellees herein to remove the
matter to the Committee on Rivers and Streams, by then composed
dikes they had constructed, on the strength of the authority vested
of the Honorable Pedro Tuason, at that time Secretary of Justice, as
in him by Republic Act No. 2056, approved on June 13, 1958,
chairman, and the Honorable Salvador Araneta and Vicente Orosa,
entitled "An Act To Prohibit, Remove and/or Demolish the
Secretary of Agriculture and National Resources and Secretary of
Construction of Dams. Dikes, Or Any Other Walls In Public Navigable
Public Works and Communications, respectively, as members. This
Waters, Or Waterways and In Communal Fishing Grounds, To
committee thereafter appointed a Sub-Committee to investigate the
Regulate Works in Such Waters or Waterways And In Communal
case and to conduct an ocular inspection of the contested property,
Fishing Grounds, And To Provide Penalties For Its Violation, And For
and on March 11, 1954, said Sub-Committee submitted its report to
Other Purposes. 1 The said order which gave rise to the instant
the Committee on Rivers and Streams to the effect that Parcel No. 2
proceedings, embodied a threat that the dikes would be demolished
of transfer certificate of title No. 15856 was not a public river but a
should the herein appellees fail to comply therewith within thirty
private fishpond owned by the herein spouses.
(30) days.

On July 7, 1954, the Committee on Rivers and Streams rendered its

The spouses Martinez replied to the order by commencing on
decision the dispositive part of which reads:
January 2, 1959 the present case, which was decided in their favor
by the lower Court in a decision dated August 10, 1959, the
"In view of the foregoing considerations, the dispositive part of which reads:
spouses Romeo Martinez and Leonor Suarez
should be restored to the exclusive possession,
"WHEREFORE, in view of the foregoing
use and enjoyment of the creek in question
considerations, the Court hereby declares the
which forms part of their registered property
decision, Exhibit S, rendered by the
and the decision of the courts on the matter be
Undersecretary of Public Works and
given full force and effect."
Communications null and void; declares the
preliminary injunction, hereto for issued,
The municipal officials of Lubao, led by Acting Mayor Mariano Zagad, permanent, and forever enjoining both
apparently refused to recognize the above decision, because on respondents from molesting the spouses Romeo
September 1, 1954, the spouses Romeo Martinez and Leonor Suarez Martinez and Leonor Suarez in their possession,
instituted Civil Case No. 751 before the Court of First Instance of use and enjoyment of their property described in
Pampanga against said Mayor Zagad, praying that the latter be Plan Psu-9992 and referred to in their petition."
"Without pronouncement as to costs." that respondents' threat of prosecuting petitioners under Section 3
thereof for acts done four years before its enactment renders the
"SO ORDERED." said law ex post facto.

As against this judgment respondent officials of the Department of The Court of Appeals sustained the above-mentioned assignment of errors committed
Public Works and Communications took the instant appeal, by the Court of First Instance of Pampanga and, as previously stated, reversed the
contending that the lower Court erred: judgment of the latter court. From this reversal this appeal by certiorari was taken, and
before this Court, petitioners-appellants assigned the following errors allegedly
committed by the Court of Appeals:
1. In holding that then Senator Rogelio de la Rosa, complainant in
the administrative case, is not an interested party and his letter-
complaint dated August 15, 1958 did not confer jurisdiction upon 1. THE COURT OF APPEALS ERRED IN DECLARING IN THE INSTANT
the respondent Undersecretary of Public Works and CASE THAT PARCEL NO. 2 OF TRANSFER CERTIFICATE OF TITLE NO.
Communications to investigate the said administrative case; 15856 IS A PUBLIC RIVER AND ORDERING THE CANCELLATION OF ITS
2. In holding that the duty to investigate encroachments upon public
rivers conferred upon the respondent Secretary under Republic Act
No. 7056 cannot be lawfully delegated by him to his subordinates;
3. In holding that the investigation ordered by the respondent
Secretary in this case is illegal on the ground that the said
respondent Secretary has arrogated unto himself the power, which
he does not possess, of reversing, making nugatory, and setting
aside the two lawful decisions of the Court Exhibits K and I, and even
annulling thereby, the one rendered by the highest Tribunal of the
4. In not sustaining respondent's claim that petitioners have no
cause of action because the property in dispute is a public river and
in holding that the said claim has no basis in fact and in law;
5. In not passing upon and disposing of respondent's counterclaim; PRINCIPLE THAT THE PERSONS DEALING WITH REGISTERED LAND
6. In not sustaining respondent's claim that the petition should not CONDITION OF THE PROPERTY.
have been entertained on the ground that the petitioners have not
exhausted administrative remedies; and The 1st and 2nd assignment of errors, being closely related, will be taken up together.

7. In holding that the decision of the respondents is illegal on the The ruling of the Court of Appeals that Lot No. 2 covered by Transfer Certificate of Title
ground that it violates the principles that laws shall have no No. 15856 of the petitioners-appellants is a public stream and that said title should be
retroactive effect unless the contrary is provided and in holding that cancelled and the river covered reverted to public domain, is assailed by the petitioners-
the said Republic Act No. 2056 is unconstitutional on the ground
appellants as being a collateral attack on the indefeasibility of the torrens title originally It is useless for the appellant now to allege that she has obtained
issued in 1925 in favor of the petitioners-appellants' predecessor-in-interest, Potenciano certificate of title No. 329 in her favor because the said certificate
Garcia, which is violative of the rule of res judicata. It is argued that as the decree of does not confer upon her any right to the creek in question,
registration issued by the Land Registration Court was not re-opened through a petition inasmuch as the said creek, being of the public domain, is included
for review filed within one (1) year from the entry of the decree of title, the certificate among the various exceptions enumerated in Section 39 of Act 496
of title issued pursuant thereto in favor of the appellants for the land covered thereby is to which the said certificate is subject by express provision of the
no longer open to attack under Section 38 of the Land Registration Act (Act 496) and the law.
jurisprudence on the matter established by this Tribunal. Section 38 of the Land
Registration Act cited by appellants expressly makes a decree of registration, which The same ruling was laid down in Director of Lands v. Roman Catholic Bishop of
ordinarily makes the title absolute and indefeasible, subject to the exemption stated in Zamboanga, 61 Phil. 644, as regards public plaza.
Section 39 of the said Act among which are: "liens, claims or rights arising or existing
under the laws or Constitution of the United States or of the Philippine Islands which the
In Dizon, et al. v. Rodriguez, et al., G.R. No. L-20300-01 and G.R. No. L-20355-56, April
statute of the Philippine Islands cannot require to appear of record in the registry."
30, 1965, 20 SCRA 704, it was held that the incontestable and indefeasible character of a
Torrens certificate of title does not operate when the land covered thereby is not
At the time of the enactment of Section 496, one right recognized or existing under the capable of registration.
law is that provided for in Article 339 of the old Civil Code which reads as follows:
It is, therefore, clear that the authorities cited by the appellants as to the conclusiveness
Property of public ownership is: and incontestability of a Torrens certificate of title do not apply here. The Land
Registration Court has no jurisdiction over non-registerable properties, such as public
1. That destined to the public use, such as roads, canals, rivers, navigable rivers which are parts of the public domain, and cannot validly adjudge the
torrents, ports, and bridges constructed by the State, and banks registration of title in favor of a private applicant. Hence, the judgment of the Court of
shores, roadsteads, and that of a similar character. (Par. 1) First Instance of Pampanga as regards the Lot No. 2 of Certificate of Title No. 15856 in
the name of petitioners-appellants may be attacked at any time, either directly or
The above-mentioned properties are parts of the public domain intended for public use, collaterally, by the State which is not bound by any prescriptive period provided for by
are outside the commerce of men and, therefore, not subject to private appropriation. ( the Statute of Limitations (Article 1108, par. 4, new Civil Code). The right of reversion or
3 Manresa, 6th ed. 101-104.) reconveyance to the State of the public properties fraudulently registered and which are
not capable of private appropriation or private acquisition does not prescribe. (Republic
v. Ramona Ruiz, et al., G.R. No. L-23712, April 29, 1968, 23 SCRA 348; Republic v. Ramos,
In Ledesma v. Municipality of Iloilo, 49 Phil. 769, this Court held:
G.R. No.
L-15484, January 31, 1963, 7 SCRA 47.)
A simple possession of a certificate of title under the Torrens system
does not necessarily make the possessor a true owner of all the
When it comes to registered properties, the jurisdiction of the Secretary of Public Works
property described therein. If a person obtains title under the
& Communications under Republic Act 2056 to order the removal or obstruction to
Torrens system which includes by mistake or oversight, lands which
navigation along a public and navigable creek or river included therein, has been
cannot be registered under the Torrens system, he does not by
definitely settled and is no longer open to question (Lovina v. Moreno, G.R. No L-17821,
virtue of said certificate alone become the owner of the land illegally
November 29, 1963, 9 SCRA 557; Taleon v. Secretary of Public Works & Communications
G.R. No. L-24281, May 16, 1961, 20 SCRA 69, 74).

In Mercado v. Municipal President of Macabebe, 59 Phil. 592, it was also said:

The evidence submitted before the trial court which was passed upon by the
respondent Court of Appeals shows that Lot No. 2 (Plan Psu 992) of Transfer Certificate
of Title No. 15856, is a river of the public domain. The technical description of both Lots
Nos. 1 and 2 appearing in Original Certificate of Title No. 14318 of the Register of Deeds These stipulations were accepted by the petitioners-appellants in the same conveyance
of Pampanga, from which the present Transfer Certificate of Title No. 15856 was in the following terms:
derived, confirms the fact that Lot No. 2 embraced in said title is bounded practically on
all sides by rivers. As held by the Court of First Instance of Pampanga in Civil Case No. Romeo Martinez y Leonor Suarez, mayores de edad, filipinos y
1247 for injunction filed by the petitioners' predecessors-in-interest against the residentes en al Barrio de Julo Municipio de Malabon, Provincia de
Municipal Mayor of Lubao and decided in 1916 (Exh. "L"), Lot No. 2 is a branch of the Rizal, por la presente, declaran que estan enterados del contenido
main river that has been covered with water since time immemorial and, therefore, part de este documento y lo aceptan en los precisos terminos en que
of the public domain. This finding having been affirmed by the Supreme Court, there is arriba uedan consignados. (Exh. 13-a, ibid)
no longer any doubt that Lot No. 2 of Transfer Certificate of Title No. 15856 of
petitioners is a river which is not capable of private appropriation or acquisition by
Before purchasing a parcel of land, it cannot be contended that the appellants who
prescription. (Palanca v. Com. of the Philippines, 69 Phil. 449; Meneses v. Com. of the
were the vendees did not know exactly the condition of the land that they were buying
Philippines, 69 Phil. 647). Consequently, appellants' title does not include said river.
and the obstacles or restrictions thereon that may be put up by the government in
connection with their project of converting Lot No. 2 in question into a fishpond.
II Nevertheless, they willfully and voluntarily assumed the risks attendant to the sale of
said lot. One who buys something with knowledge of defect or lack of title in his vendor
As regards the 3rd assignment of error, there is no weight in the appellants' argument cannot claim that he acquired it in good faith (Leung Lee v. Strong Machinery Co., et al.,
that, being a purchaser for value and in good faith of Lot No. 2, the nullification of its 37 Phil. 664).
registration would be contrary to the law and to the applicable decisions of the Supreme
Court as it would destroy the stability of the title which is the core of the system of The ruling that a purchaser of a registered property cannot go beyond the record to
registration. Appellants cannot be deemed purchasers for value and in good faith as in make inquiries as to the legality of the title of the registered owner, but may rely on the
the deed of absolute conveyance executed in their favor, the following appears: registry to determine if there is no lien or encumbrances over the same, cannot be
availed of as against the law and the accepted principle that rivers are parts of the
6. Que la segunda parcela arriba descrita y mencionada esta public domain for public use and not capable of private appropriation or acquisition by
actualmente abierta, sin malecones y excluida de la primera parcela prescription.
en virtud de la Orden Administrative No. 103, tal como fue
enmendada, del pasado regimen o Gobierno. FOR ALL THE FOREGOING, the judgment of the Court of Appeals appealed from is in
accordance with law, and the same is hereby affirmed with costs against the petitioners-
7. Que los citados compradores Romeo Martinez y Leonor Suarez se appellants.
encargan de gestionar de las autoridades correspondientes para que
la citada segunda parcela pueda ser convertida de nuevo en Makalintal, C.J., Castro, Teehankee and Muoz Palma, JJ., concur.
pesqueria, corriendo a cuenta y cargo de los mismos todos los

8. Que en el caso de que dichos compradores no pudiesen conseguir

sus propositos de convertir de nuevo en pesquera la citada segunda
parcela, los aqui vendedores no devolveran ninguna cantidad de
dinero a los referidos compradores; este es, no se disminuiriat el
precio de esta venta. (Exh. 13-a, p. 52, respondents record of
Republic of the Philippines Que en consideracion a la suma total de SEIS MIL CUATRO CIENTOS VEINTIDOS
SUPREME COURT PESOS (P6,422.00), moneda filipina que por la presente declaro haber recibido
Manila a mi entera satisfaccion del Gobierno Municipal de Iloilo, cedo y traspaso en
venta real y difinitiva a dicho Gobierno Municipal de Iloilo los lotes y porciones
EN BANC de los mismos que a continuacion se especifican a saber: el lote No. 5 en toda
su extension; una porcion de 7669 metros cuadrados del lote No. 2, cuya
porcion esta designada como sub-lotes Nos. 2-B y 2-C del piano de subdivision
G.R. No. L-24732 April 30, 1968
de dichos lotes preparado por la Certeza Surveying Co., Inc., y una porcion de
10,788 metros cuadrados del lote No. 1214 cuya porcion esta designada
PIO SIAN MELLIZA, petitioner, como sub-lotes Nos. 1214-B-2 y 1214-B-3 del mismo plano de subdivision.
Asimismo nago constar que la cesion y traspaso que ariba se mencionan es de
venta difinitiva, y que para la mejor identificacion de los lotes y porciones de
los mismos que son objeto de la presente, hago constar que dichos lotes y
Cornelio P. Ravena for petitioner. porciones son los que necesita el Gobierno Municipal de Iloilo para la
Office of the Solicitor General for respondents. construccion de avenidas, parques y City Hall site del Municipal Government
Center de iloilo, segun el plano Arellano.
On January 14, 1938 Juliana Melliza sold her remaining interest in Lot 1214 to Remedios
Juliana Melliza during her lifetime owned, among other properties, three parcels of Sian Villanueva who thereafter obtained her own registered title thereto, under
residential land in Iloilo City registered in her name under Original Certificate of Title No. Transfer Certificate of Title No. 18178. Remedios in turn on November 4, 1946
3462. Said parcels of land were known as Lots Nos. 2, 5 and 1214. The total area of Lot transferred her rights to said portion of land to Pio Sian Melliza, who obtained Transfer
No. 1214 was 29,073 square meters. Certificate of Title No. 2492 thereover in his name. Annotated at the back of Pio Sian
Melliza's title certificate was the following:
On November 27, 1931 she donated to the then Municipality of Iloilo, 9,000 square
meters of Lot 1214, to serve as site for the municipal hall. 1 The donation was however ... (a) that a portion of 10,788 square meters of Lot 1214 now designated as
revoked by the parties for the reason that the area donated was found inadequate to Lots Nos. 1214-B-2 and 1214-B-3 of the subdivision plan belongs to the
meet the requirements of the development plan of the municipality, the so-called Municipality of Iloilo as per instrument dated November 15, 1932....
"Arellano Plan". 2
On August 24, 1949 the City of Iloilo, which succeeded to the Municipality of Iloilo,
Subsequently, Lot No. 1214 was divided by Certeza Surveying Co., Inc. into Lots 1214-A donated the city hall site together with the building thereon, to the University of the
and 1214-B. And still later, Lot 1214-B was further divided into Lots 1214-B-1, Lot 1214- Philippines (Iloilo branch). The site donated consisted of Lots Nos. 1214-B, 1214-C and
B-2 and Lot 1214-B-3. As approved by the Bureau of Lands, Lot 1214-B-1 with 4,562 1214-D, with a total area of 15,350 square meters, more or less.
square meters, became known as Lot 1214-B; Lot 1214-B-2, with 6,653 square meters,
was designated as Lot 1214-C; and Lot 1214-B-13, with 4,135 square meters, became Sometime in 1952, the University of the Philippines enclosed the site donated with a
Lot 1214-D. wire fence. Pio Sian Melliza thereupon made representations, thru his lawyer, with the
city authorities for payment of the value of the lot (Lot 1214-B). No recovery was
On November 15, 1932 Juliana Melliza executed an instrument without any caption obtained, because as alleged by plaintiff, the City did not have funds (p. 9, Appellant's
containing the following: Brief.)
The University of the Philippines, meanwhile, obtained Transfer Certificate of Title No. render the contract invalid because the law requires as an essential element of sale, a
7152 covering the three lots, Nos. 1214-B, 1214-C and 1214-D. "determinate" object (Art. 1445, now 1448, Civil Code).

On December 10, 1955 Pio Sian Melliza filed an action in the Court of First Instance of Appellees, on the other hand, contend that the present appeal improperly raises only
Iloilo against Iloilo City and the University of the Philippines for recovery of Lot 1214-B questions of fact. And, further, they argue that the parties to the document in question
or of its value. really intended to include Lot 1214-B therein, as shown by the silence of the vendor
after Iloilo City exercised ownership thereover; that not to include it would have been
The defendants answered, contending that Lot 1214-B was included in the public absurd, because said lot is contiguous to the others admittedly included in the
instrument executed by Juliana Melliza in favor of Iloilo municipality in 1932. After conveyance, lying directly in front of the city hall, separating that building from Lots
stipulation of facts and trial, the Court of First Instance rendered its decision on August 1214-C and 1214-D, which were included therein. And, finally, appellees argue that the
15, 1957, dismissing the complaint. Said court ruled that the instrument executed by sale's object was determinate, because it could be ascertained, at the time of the
Juliana Melliza in favor of Iloilo municipality included in the conveyance Lot 1214-B. In execution of the contract, what lots were needed by Iloilo municipality for avenues,
support of this conclusion, it referred to the portion of the instrument stating: parks and city hall site "according to the Arellano Plan", since the Arellano plan was then
already in existence.
Asimismo hago constar que la cesion y traspaso que arriba se mencionan es de
venta difinitiva, y que para la major identificacion de los lotes y porciones de The appeal before Us calls for the interpretation of the public instrument dated
los mismos que son objeto de la presente, hago constar que dichos lotes y November 15, 1932. And interpretation of such contract involves a question of law,
porciones son los que necesita el Gobierno municipal de Iloilo para la since the contract is in the nature of law as between the parties and their successors-in-
construccion de avenidas, parques y City Hall site del Municipal Government interest.
Center de Iloilo, segun el plano Arellano.
At the outset, it is well to mark that the issue is whether or not the conveyance by
and ruled that this meant that Juliana Melliza not only sold Lots 1214-C and 1214-D but Juliana Melliza to Iloilo municipality included that portion of Lot 1214 known as Lot
also such other portions of lots as were necessary for the municipal hall site, such as Lot 1214-B. If not, then the same was included, in the instrument subsequently executed by
1214-B. And thus it held that Iloilo City had the right to donate Lot 1214-B to the U.P. Juliana Melliza of her remaining interest in Lot 1214 to Remedios Sian Villanueva, who in
turn sold what she thereunder had acquired, to Pio Sian Melliza. It should be stressed,
also, that the sale to Remedios Sian Villanueva from which Pio Sian Melliza derived
Pio Sian Melliza appealed to the Court of Appeals. In its decision on May 19, 1965, the
title did not specifically designate Lot 1214-B, but only such portions of Lot 1214 as
Court of Appeals affirmed the interpretation of the Court of First Instance, that the
were not included in the previous sale to Iloilo municipality (Stipulation of Facts, par. 5,
portion of Lot 1214 sold by Juliana Melliza was not limited to the 10,788 square meters
Record on Appeal, p. 23). And thus, if said Lot 1214-B had been included in the prior
specifically mentioned but included whatever was needed for the construction of
conveyance to Iloilo municipality, then it was excluded from the sale to Remedios Sian
avenues, parks and the city hall site. Nonetheless, it ordered the remand of the case for
Villanueva and, later, to Pio Sian Melliza.
reception of evidence to determine the area actually taken by Iloilo City for the
construction of avenues, parks and for city hall site.
The point at issue here is then the true intention of the parties as to the object of the
public instrument Exhibit "D". Said issue revolves on the paragraph of the public
The present appeal therefrom was then taken to Us by Pio Sian Melliza. Appellant
instrument aforequoted and its purpose, i.e., whether it was intended merely to further
maintains that the public instrument is clear that only Lots Nos. 1214-C and 1214-D with
describe the lots already specifically mentioned, or whether it was intended to cover
a total area of 10,788 square meters were the portions of Lot 1214 included in the sale;
other lots not yet specifically mentioned.
that the purpose of the second paragraph, relied upon for a contrary interpretation, was
only to better identify the lots sold and none other; and that to follow the interpretation
accorded the deed of sale by the Court of Appeals and the Court of First Instance would First of all, there is no question that the paramount intention of the parties was to
provide Iloilo municipality with lots sufficient or adequate in area for the construction of
the Iloilo City hall site, with its avenues and parks. For this matter, a previous donation
for this purpose between the same parties was revoked by them, because of inadequacy the said lots specifically mentioned in the public instrument Exhibit "D", and the
of the area of the lot donated. projected city hall site, with its area, as then shown in the Arellano plan (Exhibit 2), it
could be determined which, and how much of the portions of land contiguous to those
Secondly, reading the public instrument in toto, with special reference to the specifically named, were needed for the construction of the city hall site.
paragraphs describing the lots included in the sale, shows that said instrument describes
four parcels of land by their lot numbers and area; and then it goes on to further And, moreover, there is no question either that Lot 1214-B is contiguous to Lots 1214-C
describe, not only those lots already mentioned, but the lots object of the sale, by and 1214-D, admittedly covered by the public instrument. It is stipulated that, after
stating that said lots are the ones needed for the construction of the city hall site, execution of the contract Exhibit "D", the Municipality of Iloilo possessed it together
avenues and parks according to the Arellano plan. If the parties intended merely to with the other lots sold. It sits practically in the heart of the city hall site. Furthermore,
cover the specified lots Lots 2, 5, 1214-C and 1214-D, there would scarcely have been Pio Sian Melliza, from the stipulation of facts, was the notary public of the public
any need for the next paragraph, since these lots are already plainly and very clearly instrument. As such, he was aware of its terms. Said instrument was also registered with
described by their respective lot number and area. Said next paragraph does not really the Register of Deeds and such registration was annotated at the back of the
add to the clear description that was already given to them in the previous one. corresponding title certificate of Juliana Melliza. From these stipulated facts, it can be
inferred that Pio Sian Melliza knew of the aforesaid terms of the instrument or is
It is therefore the more reasonable interpretation, to view it as describing those other chargeable with knowledge of them; that knowing so, he should have examined the
portions of land contiguous to the lots aforementioned that, by reference to the Arellano Arellano plan in relation to the public instrument Exhibit "D"; that, furthermore, he
plan, will be found needed for the purpose at hand, the construction of the city hall site. should have taken notice of the possession first by the Municipality of Iloilo, then by the
City of Iloilo and later by the University of the Philippines of Lot 1214-B as part of the
city hall site conveyed under that public instrument, and raised proper objections
Appellant however challenges this view on the ground that the description of said other
thereto if it was his position that the same was not included in the same. The fact
lots in the aforequoted second paragraph of the public instrument would thereby be
remains that, instead, for twenty long years, Pio Sian Melliza and his predecessors-in-
legally insufficient, because the object would allegedly not be determinate as required
interest, did not object to said possession, nor exercise any act of possession over Lot
by law.
1214-B. Applying, therefore, principles of civil law, as well as laches, estoppel, and
equity, said lot must necessarily be deemed included in the conveyance in favor of Iloilo
Such contention fails on several counts. The requirement of the law that a sale must municipality, now Iloilo City.
have for its object a determinate thing, is fulfilled as long as, at the time the contract is
entered into, the object of the sale is capable of being made determinate without the
WHEREFORE, the decision appealed from is affirmed insofar as it affirms that of the
necessity of a new or further agreement between the parties (Art. 1273, old Civil Code;
Court of First Instance, and the complaint in this case is dismissed. No costs. So ordered.
Art. 1460, New Civil Code). The specific mention of some of the lots plus the statement
that the lots object of the sale are the ones needed for city hall site, avenues and parks,
according to the Arellano plan, sufficiently provides a basis, as of the time of the Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and
execution of the contract, for rendering determinate said lots without the need of a new Fernando, JJ., concur.
and further agreement of the parties. Concepcion , C.J., is on leave.

The Arellano plan was in existence as early as 1928. As stated, the previous donation of Footnotes
land for city hall site on November 27, 1931 was revoked on March 6, 1932 for being
inadequate in area under said Arellano plan. Appellant claims that although said plan
existed, its metes and bounds were not fixed until 1935, and thus it could not be a basis
for determining the lots sold on November 15, 1932. Appellant however fails to consider
that the area needed under that plan for city hall site was then already known; that the
specific mention of some of the lots covered by the sale in effect fixed the
corresponding location of the city hall site under the plan; that, therefore, considering
Republic of the Philippines Plaintiff proved that no sugar had been delivered to it under this contract nor had it
SUPREME COURT been able to recover the P3,000. Plaintiff prayed for judgment for the P3,000 and, in
Manila addition, for P1,200 under paragraph 4, supra. Judgment was rendered for P3,000 only,
and from this judgment both parties appealed.
The points raised by the defendant will be considered first. He alleges that the court
G.R. No. L-9935 February 1, 1915 erred in refusing to permit parol evidence showing that the parties intended that the
sugar was to be secured from the crop which the defendant raised on his plantation,
and that he was unable to fulfill the contract by reason of the almost total failure of his
YU TEK and CO., plaintiff-appellant,
crop. This case appears to be one to which the rule which excludes parol evidence to
add to or vary the terms of a written contract is decidedly applicable. There is not the
BASILIO GONZALES, defendant-appellant.
slightest intimation in the contract that the sugar was to be raised by the defendant.
Parties are presumed to have reduced to writing all the essential conditions of their
Beaumont, Tenney and Ferrier for plaintiff. contract. While parol evidence is admissible in a variety of ways to explain the meaning
Buencamino and Lontok for defendant. of written contracts, it cannot serve the purpose of incorporating into the contract
additional contemporaneous conditions which are not mentioned at all in the writing,
TRENT, J.: unless there has been fraud or mistake. In an early case this court declined to allow
parol evidence showing that a party to a written contract was to become a partner in a
The basis of this action is a written contract, Exhibit A, the pertinent paragraphs of firm instead of a creditor of the firm. (Pastor vs. Gaspar, 2 Phil. Rep., 592.) Again, in
which follow: Eveland vs. Eastern Mining Co. (14 Phil. Rep., 509) a contract of employment provided
that the plaintiff should receive from the defendant a stipulated salary and expenses.
The defendant sought to interpose as a defense to recovery that the payment of the
1. That Mr. Basilio Gonzalez hereby acknowledges receipt of the sum of salary was contingent upon the plaintiff's employment redounding to the benefit of the
P3,000 Philippine currency from Messrs. Yu Tek and Co., and that in defendant company. The contract contained no such condition and the court declined
consideration of said sum be obligates himself to deliver to the said Yu Tek to receive parol evidence thereof.
and Co., 600 piculs of sugar of the first and second grade, according to the
result of the polarization, within the period of three months, beginning on the
1st day of January, 1912, and ending on the 31st day of March of the same In the case at bar, it is sought to show that the sugar was to be obtained exclusively
year, 1912. from the crop raised by the defendant. There is no clause in the written contract which
even remotely suggests such a condition. The defendant undertook to deliver a
specified quantity of sugar within a specified time. The contract placed no restriction
2. That the said Mr. Basilio Gonzales obligates himself to deliver to the said upon the defendant in the matter of obtaining the sugar. He was equally at liberty to
Messrs. Yu Tek and Co., of this city the said 600 piculs of sugar at any place purchase it on the market or raise it himself. It may be true that defendant owned a
within the said municipality of Santa Rosa which the said Messrs. Yu Tek and plantation and expected to raise the sugar himself, but he did not limit his obligation to
Co., or a representative of the same may designate. his own crop of sugar. Our conclusion is that the condition which the defendant seeks to
add to the contract by parol evidence cannot be considered. The rights of the parties
3. That in case the said Mr. Basilio Gonzales does not deliver to Messrs. Yu Tek must be determined by the writing itself.
and Co. the 600 piculs of sugar within the period of three months, referred to
in the second paragraph of this document, this contract will be rescinded and The second contention of the defendant arises from the first. He assumes that the
the said Mr. Basilio Gonzales will then be obligated to return to Messrs. Yu Tek contract was limited to the sugar he might raise upon his own plantation; that the
and Co. the P3,000 received and also the sum of P1,200 by way of indemnity contract represented a perfected sale; and that by failure of his crop he was relieved
for loss and damages. from complying with his undertaking by loss of the thing due. (Arts. 1452, 1096, and
1182, Civil Code.) This argument is faulty in assuming that there was a perfected sale. factories. So, in the Barretto case, the particular shares of stock which the parties
Article 1450 defines a perfected sale as follows: desired to transfer were capable of designation. In the Tan Leonco case, where a
quantity of hemp was the subject of the contract, it was shown that that quantity had
The sale shall be perfected between vendor and vendee and shall be binding been deposited in a specific warehouse, and thus set apart and distinguished from all
on both of them, if they have agreed upon the thing which is the object of the other hemp.
contract and upon the price, even when neither has been delivered.
A number of cases have been decided in the State of Louisiana, where the civil law
Article 1452 reads: "The injury to or the profit of the thing sold shall, after the contract prevails, which confirm our position. Perhaps the latest is Witt Shoe Co. vs. Seegars and
has been perfected, be governed by the provisions of articles 1096 and 1182." Co. (122 La., 145; 47 Sou., 444). In this case a contract was entered into by a traveling
salesman for a quantity of shoes, the sales having been made by sample. The court said
of this contract:
This court has consistently held that there is a perfected sale with regard to the "thing"
whenever the article of sale has been physically segregated from all other articles Thus,
a particular tobacco factory with its contents was held sold under a contract which did But it is wholly immaterial, for the purpose of the main question, whether
not provide for either delivery of the price or of the thing until a future time. Mitchell was authorized to make a definite contract of sale or not, since the
McCullough vs. Aenlle and Co. (3 Phil. Rep., 295). Quite similar was the recent case of only contract that he was in a position to make was an agreement to sell or an
Barretto vs. Santa Marina (26 Phil. Rep., 200) where specified shares of stock in a executory contract of sale. He says that plaintiff sends out 375 samples of
tobacco factory were held sold by a contract which deferred delivery of both the price shoes, and as he was offering to sell by sample shoes, part of which had not
and the stock until the latter had been appraised by an inventory of the entire assets of been manufactured and the rest of which were incorporated in plaintiff's
the company. In Borromeo vs. Franco (5 Phil. Rep., 49) a sale of a specific house was stock in Lynchburg, Va., it was impossible that he and Seegars and Co. should
held perfected between the vendor and vendee, although the delivery of the price was at that time have agreed upon the specific objects, the title to which was to
withheld until the necessary documents of ownership were prepared by the vendee. In pass, and hence there could have been no sale. He and Seegars and Co. might
Tan Leonco vs. Go Inqui (8 Phil. Rep., 531) the plaintiff had delivered a quantity of hemp have agreed, and did (in effect ) agree, that the identification of the objects
into the warehouse of the defendant. The defendant drew a bill of exchange in the sum and their appropriation to the contract necessary to make a sale should
of P800, representing the price which had been agreed upon for the hemp thus thereafter be made by the plaintiff, acting for itself and for Seegars and Co.,
delivered. Prior to the presentation of the bill for payment, the hemp was destroyed. and the legend printed in red ink on plaintiff's billheads ("Our responsibility
Whereupon, the defendant suspended payment of the bill. It was held that the hemp ceases when we take transportation Co's. receipt `In good order'" indicates
having been already delivered, the title had passed and the loss was the vendee's. It is plaintiff's idea of the moment at which such identification and appropriation
our purpose to distinguish the case at bar from all these cases. would become effective. The question presented was carefully considered in
the case of State vs. Shields, et al. (110 La., 547, 34 Sou., 673) (in which it was
absolutely necessary that it should be decided), and it was there held that in
In the case at bar the undertaking of the defendant was to sell to the plaintiff 600 piculs
receiving an order for a quantity of goods, of a kind and at a price agreed on,
of sugar of the first and second classes. Was this an agreement upon the "thing" which
to be supplied from a general stock, warehoused at another place, the agent
was the object of the contract within the meaning of article 1450, supra? Sugar is one of
receiving the order merely enters into an executory contract for the sale of
the staple commodities of this country. For the purpose of sale its bulk is weighed, the
the goods, which does not divest or transfer the title of any determinate
customary unit of weight being denominated a "picul." There was no delivery under the
object, and which becomes effective for that purpose only when specific
contract. Now, if called upon to designate the article sold, it is clear that the defendant
goods are thereafter appropriated to the contract; and, in the absence of a
could only say that it was "sugar." He could only use this generic name for the thing
more specific agreement on the subject, that such appropriated takes place
sold. There was no "appropriation" of any particular lot of sugar. Neither party could
only when the goods as ordered are delivered to the public carriers at the
point to any specific quantity of sugar and say: "This is the article which was the subject
place from which they are to be shipped, consigned to the person by whom
of our contract." How different is this from the contracts discussed in the cases referred
the order is given, at which time and place, therefore, the sale is perfected
to above! In the McCullough case, for instance, the tobacco factory which the parties
and the title passes.
dealt with was specifically pointed out and distinguished from all other tobacco
This case and State vs. Shields, referred to in the above quotation are amply illustrative interpretation or construction. Under the provisions of article 1255 of the Civil Code
of the position taken by the Louisiana court on the question before us. But we cannot contracting parties are free to execute the contracts that they may consider suitable,
refrain from referring to the case of Larue and Prevost vs. Rugely, Blair and Co. (10 La. provided they are not in contravention of law, morals, or public order. In our opinion
Ann., 242) which is summarized by the court itself in the Shields case as follows: there is nothing in the contract under consideration which is opposed to any of these
. . . It appears that the defendants had made a contract for the sale, by weight,
of a lot of cotton, had received $3,000 on account of the price, and had given For the foregoing reasons the judgment appealed from is modified by allowing the
an order for its delivery, which had been presented to the purchaser, and recovery of P1,200 under paragraph 4 of the contract. As thus modified, the judgment
recognized by the press in which the cotton was stored, but that the cotton appealed from is affirmed, without costs in this instance.
had been destroyed by fire before it was weighed. It was held that it was still
at the risk of the seller, and that the buyer was entitled to recover the $3,000 Arellano, C.J., Torres, Carson and Araullo, JJ., concur.
paid on account of the price. Johnson, J., dissents.

We conclude that the contract in the case at bar was merely an executory agreement; a
promise of sale and not a sale. At there was no perfected sale, it is clear that articles
1452, 1096, and 1182 are not applicable. The defendant having defaulted in his
engagement, the plaintiff is entitled to recover the P3,000 which it advanced to the
defendant, and this portion of the judgment appealed from must therefore be affirmed.

The plaintiff has appealed from the judgment of the trial court on the ground that it is
entitled to recover the additional sum of P1,200 under paragraph 4 of the contract. The
court below held that this paragraph was simply a limitation upon the amount of
damages which could be recovered and not liquidated damages as contemplated by the
law. "It also appears," said the lower court, "that in any event the defendant was
prevented from fulfilling the contract by the delivery of the sugar by condition over
which he had no control, but these conditions were not sufficient to absolve him from
the obligation of returning the money which he received."

The above quoted portion of the trial court's opinion appears to be based upon the
proposition that the sugar which was to be delivered by the defendant was that which
he expected to obtain from his own hacienda and, as the dry weather destroyed his
growing cane, he could not comply with his part of the contract. As we have indicated,
this view is erroneous, as, under the contract, the defendant was not limited to his
growth crop in order to make the delivery. He agreed to deliver the sugar and nothing is
said in the contract about where he was to get it.

We think is a clear case of liquidated damages. The contract plainly states that if the
defendant fails to deliver the 600 piculs of sugar within the time agreed on, the contract
will be rescinded and he will be obliged to return the P3,000 and pay the sum of P1,200
by way of indemnity for loss and damages. There cannot be the slightest doubt about
the meaning of this language or the intention of the parties. There is no room for either
Republic of the Philippines 1. To negotiate with the Municipal Government of Balanga so that
SUPREME COURT the above-mentioned lot shall be the site of the proposed Balanga
Manila Public Market;

THIRD DIVISION 2. To sell 1200 sq. m. for the sum of TWENTY- FOUR THOUSAND
PESOS (24,000.00) right at the Market Site;
G.R. No. 127520 February 9, 2007
3. And to perform all the legal phase incidental to this work.
vs. That for and in consideration of this undertaking, I bind myself to pay Atty. Angelino M.
COURT OF APPEALS and ANGELINO BANZON, Respondents. Banzon FIVE THOUSAND SQUARE METERS (5000) of the said lot, for which in no case I
shall not be responsible for payment of income taxes in relation hereto, this area
DECISION located also at market site.

CALLEJO, SR., J.: That I, Angelino M. Banzon, is willing to undertake the above-enumerated undertaking.

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in WITNESS our hands this 14 of July, 1968, in Balanga, Bataan.
CA-G.R. CV No. 41268 affirming with modification the Decision2 of the Regional Trial
Court (RTC) of Balanga, Bataan, Branch 1. (Signed) (Signed)
The Antecedents
Pursuant to the agreement, Atty. Banzon, on even date, sent a letter-proposal4 to the
Camacho was the owner of Lot 261, a 7.5-hectare parcel of land situated in Balanga, municipal council offering three sites for the proposed public market which included Lot
Bataan and covered by Transfer Certificate of Title No. T-10,185. 261. Still on the same date, Camacho executed a Special Power of Attorney5 giving Atty.
Banzon the authority to execute and sign for her behalf a Deed of Donation transferring
On July 14, 1968, Camacho and respondent Atty. Angelino Banzon entered into a a 17,000-sq-m portion of Lot 261 to the municipal government of Balanga, Bataan. The
contract for legal services denominated as a "Contract of Attorneys Fee."3 The Deed of Donation was executed, which was later accepted by the local government unit
agreement is worded as follows: in Municipal Resolution No. 127.6

KNOW ALL MEN BY THESE PRESENTS: Silvestre Tuazon had been an agricultural tenant in Lot 261 since World War II. On
August 22, 1968, Tuazon and Camacho entered into an "Agreement with Voluntary
That we, Aurora B. Camacho, widow, of legal age and resident of Balanga, Bataan, and Surrender"7 where Tuazon voluntarily surrendered his right as a tenant of the
landholding. Despite the agreement, however, Tuazon plowed a portion of the lot and
Angelino M. Banzon, have agreed on the following:
planted palay without Camachos consent. Since Tuazon refused to vacate the premises,
Camacho and the Municipality of Balanga, through then Acting Mayor Victor Y. Baluyot,
That I, Aurora B. Camacho is the registered owner of Lot No. 261 Balanga Cadastre, has filed a complaint8 for forcible entry on November 18, 1969 before the Municipal Trial
secured the legal services of Atty. Angelino M. Banzon to perform the following: Court (MTC) of Balanga, Bataan. The complaint was docketed as Civil Case No. 424. The
case was eventually decided in favor of the plaintiffs and Tuazon was ordered to vacate
the lot. On appeal to the RTC, trial de novo ensued, in view of the absence of the
transcript of stenographic notes of the proceedings before the MTC. The RTC issued a Annex "C"; EIGHT HUNDRED (800) square meters which the INTERVENOR
preliminary mandatory injunction ordering Tuazon to "discontinue entering the subject purchased from third parties;
premises until further orders of the court."9
3. On the Second Cause of Action, ordering the Plaintiff Aurora B. Camacho to
On September 1, 1973, the plaintiffs, through Atty. Banzon, and Tuazon entered into an pay the sum of P8,820.00, corresponding to the lease rental of (5880) square
"Agreement to Stay Court Order."10 Under the agreement, Tuazon was allowed to meters a month, counted from July, 1973, until the same is delivered to the
cultivate specific portions of the property as indicated in a sketch plan which the parties INTERVENOR;
prepared, and to use the markets water supply to irrigate his plants within the lot
subject to the markets preferential rights. The parties also contracted that "the 4. On the Third Cause of Action, ordering the Plaintiff Aurora B. Camacho to
agreement shall in no way affect the merits of Civil Case No. 3512 and CAR Case No. deliver (1000) square meters, as attorneys fee in handling seven (7) cases;
520-B73; and that no part shall be construed as impliedly creating new tenancy
5. Ordering the Plaintiff Aurora B. Camacho and Defendant Silvestre Tuazon to
pay jointly and severally, the sum of P5,000.00 for attorneys fee for legal
On December 6, 1973, Camacho filed a Manifestation11 in Civil Case No. 3512 declaring services to the INTERVENOR; cost and litigation expenses of P1,000. until the
that she had terminated the services of Atty. Banzon and had retained the services of case is terminated.
new counsel, Atty. Victor De La Serna.
6. To grant such relief, just and equitable in the premises.15
On December 17, 1973, Atty. Banzon filed a Complaint-in-Intervention12 in Civil Case No.
3512. He alleged that Camacho had engaged his services as counsel in CAR Case No. 59
Camacho opposed16 Atty. Banzons motion on the ground that the admission of the
B65 (where a favorable decision was rendered) and in Civil Case No. 3512. Under the
complaint-in-intervention would merely serve to delay the case. She also claimed that
Contract of Attorneys Fee which they had both signed, Camacho would compensate
his interest could be fully ventilated in a separate case for recovery of property or for
him with a 5,000-sq-m portion of Lot 261 in case he succeeds in negotiating with the
Municipality of Balanga in transferring the projected new public market which had been
set for construction at the Doa Francisca Subdivision, all legal requirements having
been approved by a municipal resolution, the Development Bank of the Philippines, and On April 5, 1974, the RTC granted17 the motion and subsequently admitted the
the National Urban Planning Commission. Atty. Banzon further claimed that as a complaint-in-intervention.
consequence of the seven cases filed by/against Camacho, she further bound herself
orally to give him a 1,000-sq-m portion of Lot 261 as attorneys fee. He had also On December 31, 1973, Atty. Banzon and Tuazon entered into the following amicable
acquired from Camacho by purchase an 80-sq-m portion of the subject lot as evidenced settlement:
by a Provisional Deed of Sale13 and from third parties an 800-sq-m portion. He further
declared that his requests for Camacho to deliver the portions of the subject lot 1. That for and in consideration of the sum of TWO THOUSAND PESOS
remained unheeded, and that of the seven cases14 he had handled for Camacho, four (P2,000.00), Philippine currency, which have been received from the
had been decided in her favor while three are pending. Atty. Banzon thus prayed for the INTERVENOR and acknowledged to have been received by the Defendant
following relief: Silvestre Tuazon, the latter hereby acknowledges, waives his defenses against
the claim of the INTERVENOR ANGELINO M. BANZON over a portion of Lot No.
1. Ordering the ejectment of Defendant Silvestre Tuazon, in so far as (6880) 261, portion of the lot in question, to the extent of SIX THOUSAND EIGHT
square meters is concerned, INTERVENORS claim over Lot 261; HUNDRED EIGHTY (6880) SQUARE METERS as claimed and contained in the
2. The First Cause of Action, ordering the Plaintiff Aurora B. Camacho to SETTLEMENT hereby surrenders the actual possession of the said portion,
deliver (5000) square meters as per Annex "A"; EIGHTY square meters as per subject to the approval of this Hon. Court, in favor of the INTERVENOR;
2. That the herein parties to this AMICABLE SETTLEMENT waive and renounce improvements outside the portion of the property which Camacho had agreed to
whatever rights or claims, including future claims that each may have against convey to him. Thus, the RTC rendered a partial decision26 approving the compromise
each other; agreement.

3. That the parties herein bind themselves to comply with the conditions of On September 12, 1978, Camacho filed a Motion to Dismiss27 the Complaint-in-
the foregoing settlement; Intervention filed by Atty. Banzon on the ground that the jurisdiction of the court to try
the case ceased to exist because the principal action had been terminated. The RTC
4. That the foregoing AMICABLE SETTLEMENT was realized and achieved denied the motion in its Order28 dated March 16, 1979. It held that Atty. Banzon had an
between the herein parties, thru the prior intercession of the Defendants interest over the subject property which he had to protect and that the compromise
counsel Atty. Narciso V. Cruz, Jr. agreement between Camacho and Tuazon did not include him. Moreover, the dismissal
of the intervention would not achieve its purpose of avoiding multiplicity of suits. The
propriety of the denial of Camachos motion to dismiss was finally settled by this Court
WHEREFORE, it is respectfully prayed that the foregoing AMICABLE SETTLEMENT be
in Camacho v. Court of Appeals29 where this Court affirmed the denial of the motion.
approved and made as the basis of this Hon. Courts decision between the herein
INTERVENOR and DEFENDANT Silvestre Tuazon.18
After trial on the merits, the RTC rendered a Decision30 on September 1, 1992 in favor of
Atty. Banzon. The fallo reads:
In Answer19 to the complaint-in-intervention, Camacho denied that she solicited the
services of Atty. Banzon to facilitate the transfer of the site of the proposed public
market; in fact, it was Atty. Banzon who approached and convinced her to donate a ACCORDINGLY, judgment is hereby rendered:
portion of the lot to the municipality of Balanga. He assured her that the municipality of
Balanga planned to relocate the public market and was scouting for a new location. He 1. Ordering plaintiff Aurora B. Camacho under the Contract of Attorneys Fees,
also told her that her lot appeared to be the most ideal location, and that he would take [to deliver] 5000 square meters of the subject landholding, Lot 261-B-1,
care of all the legal problems. covered by Transfer Certificate of Title No. T-76357, or any other derivative
sublots of the original Lot 261-B;
Camacho admitted, however, that she signed the Contract of Attorneys Fee but only
upon the request of Atty. Banzon. He told her that the document would be shown to the 2. Declaring the dismissal of said intervenor from the case at bar as
municipal councilors "for formalitys sake" to prove his authority to act for and in behalf unjustified;
of Camacho. It was never intended to bind her to pay attorneys fees.20 She further
denied that she agreed to give to Atty. Banzon 1,000 sq m for handling the seven cases; 3. Ordering said plaintiff to pay and deliver to said intervenor 1000 square
they never discussed attorneys fees. The cases stemmed from his assurance that he meters of the property in question, Lot 261-B-1 or any other derivative sublots
would take care of any legal problem resulting from the donation of her property. She of the original Lot 261-B in case of deficiency, for legal services rendered in
was not even a party in some of the cases cited by Atty. Banzon.21 Lastly, she denied seven (7) cases;
that he had made demands to deliver the mentioned portions of the property.22
4. Directing said plaintiff to deliver to said intervenor, under a Provisional
In his Reply,23 Atty. Banzon countered that the Balanga Municipal Council Resolution No. Deed of Sale, 80 square meters of the subject property, Lot 261-B-1 or any
128 transferring the market site to Camachos property was enacted precisely because other derivative sublots of the original Lot 261 in case of deficiency, after
of his letter-proposal24 to the municipal council. payment of the balance of the purchase price;

On August 14, 1977, Camacho and Tuazon entered into a Compromise Agreement,25 5. Ordering said plaintiff to execute the corresponding Deed of Sale in favor of
whereby Camacho agreed to transfer a 1,000-sq-m portion of Lot 261-B in favor of said intervenor for the aforesaid 80 square meters;
Tuazon; for his part, Tuazon moved to dismiss Civil Case No. 3805 and to remove all the
6. Condemning said plaintiff to pay moral damages to said intervenor in the OF BRANCH 90 OF THE REGIONAL TRIAL COURT OF QUEZON CITY WHEN THE
amount of 100,000.00; attorneys fees in the sum of 30,000.00; and the INSTANT DECISION WAS SIGNED ON SEPTEMBER 1, 1992.
costs of the suit.
According to the RTC, Camacho had indeed read the contract and freely affixed her OF CONTRACT EXH. "C" AND IN ORDERING PLAINTIFF TO DELIVER TO
signature thereon. Applying the provisions of Section 7 (now section 9), Rule 13032 of INTERVENOR 5,000 SQUARE METERS OF LOT 261-B-1, T.C.T. T-76357,
the Rules of Court, it concluded that the terms of the contract were embodied in the CONSIDERING THAT THIS LOT IS NOT SPECIFIED IN EXH. "C".
document itself. Moreover, Camacho did not bother to pay for all the other cases being
handled by Atty. Banzon because she knew that she had agreed already to pay III.
attorneys fees. The court likewise found that applying the provisions of Sections 2433
and 26,34 Rule 138 of the Rules of Court, the area of the lot agreed upon as attorneys
fees appears to be a reasonable compensation for his services. Since Atty. Banzon
handled other cases subsequent to the execution of the contract of attorneys fees, the
additional 1,000-sq-m lot which the parties had orally agreed upon is proper. The RTC
declared that Atty. Banzon was entitled to be compensated based on quantum meruit
since his dismissal from the present case was unjustified. It also held that Camacho was
obliged to execute the necessary public instrument covering the 80-sq-m portion of the IV.
lot which she had sold to Atty. Banzon. It went further and awarded moral damages to
Atty. Banzon on account of the mental anguish and besmirched reputation he had THE LOWER COURT ERRED IN AWARDING INTERVENOR 1,000 SQUARE

On October 8, 1992, Atty. Banzon filed a Motion for Execution Pending Appeal.35 V.
Camacho, on the other hand, filed a Notice of Appeal. Atty. Banzon filed a motion to
dismiss on the ground that since the case originated from the municipal court, it should THE LOWER COURT ERRED IN ORDERING PLAINTIFF TO EXECUTE A FINAL DEED
be assailed via petition for review. On November 20, 1992, the court issued an Order36 OF SALE FOR 80 SQUARE METERS OUT OF LOT 261-B-1, CONSIDERING THAT
denying the motion for execution pending appeal for failure to state good reasons LOT 261-B-1 IS NOT SPECIFIED IN THE PROVISIONAL DEED OF SALE.37
therefor. It likewise granted the notice of appeal on the ground that the complaint-in-
intervention originated from the RTC and not from the MTC; under the factual backdrop
of the case, ordinary appeal is proper. On October 29, 1996, the CA rendered a decision38 affirming with modification the RTC
ruling. The fallo reads:
On appeal to the CA, Camacho raised the following errors:
WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED with
modification requiring plaintiff Camacho to DELIVER 5,000 sq.m. and 1,000 sq. m. of Lot
I. 261-B-1 to Intervenor as his attorneys fee and 80 sq. m. also from Lot 261 subject to the
conditions embodied under no. 4 of the dispositive portion of the assailed decision all
THE LOWER COURT ERRED IN ALLOWING JUDGE ABRAHAM VERA TO SIGN THE within thirty (30) days from the finality of this decision.
The CA held that all the elements of a valid contract were present: Camacho (a dentistry 2. DID THE COURT OF APPEALS CORRECTLY APPLY THE PROVISION OF ART.
graduate and an experienced businesswoman conversant in English) cannot plead that 1246 OF THE CIVIL CODE TO THE INSTANT CASE IN RULING THAT CONTRACT
she did not understand the undertaking she had entered into; the object of the contract EXH. "C" IS VALID AS TO OBJECT?
is certain since the genus of the object was expressed although there was no
determination of the individual specie; and the cause of the obligation to negotiate WILL THE DECISION REQUIRING THE DELIVERY OF 5,000 SQUARE METERS OF
and offer a site where the public market will be constructed is not unlawful and LOT 261 BASED ON THE SAID ART. 1246, IN WHICH INTERVENOR CANNOT
cannot be considered as influence peddling. As to the alleged violation of the terms of DEMAND A THING OF SUPERIOR QUALITY AND NEITHER CAN PLAINTIFF
the special power of attorney, the court held that Camacho was estopped from claiming CAMACHO DELIVER A THING OF INFERIOR QUALITY, BE SUSCEPTIBLE OF
The CA likewise found the award of moral damages to be in order; that the discharge of
Atty. Banzon as counsel for Camacho was not justified and his discharge does not in any IF SO, WILL THAT NOT ALL THE MORE PROVE THAT TE OBJECT OF CONTRACT
way deprive him of his right to attorneys fees. Lastly, the CA held that the RTC erred in EXH. "C" IS INDETERMINATE PURSUANT [TO] ART. 1349 OF THE CIVIL CODE?
requiring Camacho to deliver Lot 261-B-1, since Atty. Banzon cannot demand a portion
of superior quality in the same way that appellant cannot transfer an inferior quality.
On December 3, 1996, the CA issued a Resolution40 instituting petitioner Aurora Fe WITHOUT FIRST REVEALING OR SETTING FORTH THE REAL NATURE OF THIS OR
Camacho as substitute for the deceased Aurora B. Camacho. THESE UNDERTAKINGS BASED ON THE ALLEGATIONS AND TESTIMONIES OF
Atty. Banzon filed a Motion for Partial Reconsideration of the CA Decision, as well as a CONTRACT EXH. "C" ARE LAWFUL.
Motion to Declare Decision Final insofar as Camacho was concerned. On the other hand,
Camacho moved to cancel the notice of lis pendens. In the meantime, petitioner had 4. WHETHER OR NOT THE COURT OF APPEALS COMMIT A GRAVE ABUSE OF
filed the petition before this Court. Thus, the CA no longer acted on the motions on the DISCRETION BY TREATING LIKE A MATTER OUT OF RECORD THE ALLEGED
ground that it had already lost jurisdiction over the case. 41 REASONS OF PLAINTIFF CAMACHO FOR DISMISSING INTERVENOR AS HER
In the present petition, petitioner raises the following issues: ON PAGES 42-60 OF HER APPELLANTS BRIEF, ANNEX "B," AND WHICH WERE
5. WHETHER OR NOT THE AWARD OF 1,000 SQ. M. OF LOT 261 ATTORNEYS The first element
Is shown by their signatures on the Contract

Petitioner argues that the findings of facts in the assailed decision are mere conclusions,
Consent is manifested by the meeting of the offer and the acceptance upon the thing
without citation of evidence to support them. She likewise avers that consent was not
and the cause which are to constitute the agreement.46 In this case, Camacho admitted
clearly proven; the conclusion of the CA was based on the presumption that the
the existence of the contract as well as the genuineness of her signature. However, she
document was read prior to being signed. Petitioner insists that there is no "object
claimed that she signed only upon the request of Atty. Banzon, who told her that the
certain" to speak of since the exact location of the subject property cannot be
document would only be shown to the municipal councilors ("for formalitys sake") to
determined; in short, the issue is not the quality of the property but its identity.
prove his authority in her behalf. It was never intended to bind her to pay him
Petitioner further asserts that the cause of the contract pirating of the municipalitys
attorneys fees;47 in short, petitioner insists that Camacho had not given her consent to
market project and ejecting the tenant to convert the property into a commercial
the contract.
establishment is illegal. She further insists that respondent failed to accomplish the
twin objective of ejecting Silvestre Tuazon and converting the remaining land into a
commercial area; thus, he is not entitled to the 5,000-sq-m lot. She further contends We, however, do not agree. The contract between Camacho and respondent is
that the CA erred in awarding moral damages because respondent did not ask for it in evidenced by a written document signed by both parties denominated as Contract of
his complaint-in-intervention. Lastly, she asserts that the CA erred in affirming the Attorneys Fee. It is an established rule that written evidence is so much more certain
award of the 1,000-sq-m lot pursuant to a verbal contract between Camacho and and accurate than that which rests in fleeting memory only; that it would be unsafe,
respondent, especially considering the prevailing jurisprudence against a lawyers when parties have expressed the terms of their contract in writing, to admit weaker
acquisition of a clients lot in litigation without the latters consent. evidence to control and vary the stronger, and to show that the parties intended a
different contract from that expressed in the writing signed by them.48 Moreover, the
moment a party affixes her signature thereon, he or she is bound by all the terms
In his Comment,43 respondent counters that the elements of a valid contract are
stipulated therein and is open to all the legal obligations that may arise from their
present: Camachos consent to the contract is evidenced by her signature which was in
fact admitted by the latter; that while it is true that the identity of the 5,000-sq-m
portion of Lot 261 has not been specified due to the absence of the necessary technical
descriptions, it is capable of being made determinate without the need of a new In the instant case, Camacho voluntarily signed the document evidencing the contract.
agreement between the parties; as to the validity of the cause of the contract, the Camachos claim that the document was intended only to show respondents authority
general principle of estoppel applies. to represent her with respect to the transaction is flimsy, since a special power of
attorney could just as easily have accomplished that purpose. In fact, Camacho did
execute a Special Power of Attorney50 after the Contract of Attorneys Fee was
The Ruling of the Court
executed, and if Camacho were to be believed, the Contract of Attorneys Fee should
have been immediately canceled thereafter since it was no longer needed. As correctly
Article 1305 of the New Civil Code defines a contract as a "meeting of minds between held by the CA, Camacho was an experienced businesswoman, a dentistry graduate and
two persons whereby one binds himself, with respect to the other, to give something or is conversant in the English language. We note that the words and phrases used in the
to render some service." Contracts shall be obligatory in whatever form they may have Contract of Attorneys Fee are very simple and clear; thus, she cannot plead that she did
been entered into, provided all the essential requisites for their validity are present. 44 not understand the undertaking she had entered into.51 Considering that her
undertaking was to part with a 5,000-sq-m portion of her property, she should have
In general, there are three (3) essential requisites for a valid contract: (1) consent of the been more vigilant in protecting her rights.
contracting parties; (2) an object certain which is the subject of the contract; and (3) the
cause of the obligation which is established.45
Even assuming that the contract did not reflect the true intention of the parties as to portion of Lot 261 to Atty. Banzon, the description of the property subject of the
their respective obligations, it is nevertheless binding. The existence of the written contract is sufficient to validate the same.
contract, coupled with Camachos admission that the signature appearing thereon was
hers, constitute ineluctable evidence of her consent to the agreement. It cannot be The Cause or Consideration of the contract is not illegal
overcome by mere denial and allegations that they did not intend to be bound thereby.
We also note that Camacho did not avail of the remedy of reformation of the
In general, the cause is the why of the contract or the essential reason which moves the
instrument in order to reflect what, according to her, was the true agreement.
contracting parties to enter into the contract.53 For the cause to be valid, it must be
lawful such that it is not contrary to law, morals, good customs, public order or public
Camachos consent to the contract was further manifested in the following events that policy.54 Petitioner insists that the cause of the subject contract is illegal. However,
transpired after the contract was executed: the execution of the agreement with under the terms of the contract, Atty. Banzon was obliged to negotiate with the
voluntary surrender signed by Tuazon; the execution of the Deed of Donation where municipal government of Balanga for the transfer of the proposed new public market to
Atty. Banzon was authorized to sign the same on behalf of Camacho; and the sale of Camachos property (Lot 261); to sell 1,200 square meters right at the market site; and
1200 sq. m. portion of the property right at the market site. In all these transactions, to take charge of the legal phases incidental to the transaction which include the
Atty. Banzon represented Camacho pursuant to the Contract of Attorneys Fee. ejectment of persons unlawfully occupying the property (whether through amicable
settlement or court action), and the execution of the Deed of Donation and other
The object of the contract is still certain despite the parties failure to indicate the papers necessary to consummate the transaction. There was thus nothing wrong with
specific portion of the property to be given as compensation for services the services which respondent undertook to perform under the contract. They are not
contrary to law, morals, good customs, public order or public policy.
Articles 1349 and 1460 of the Civil Code provide the guidelines in determining whether
or not the object of the contract is certain: Petitioner argues that the cause of the contract is the "pirating" of the municipalitys
market project and ejecting the tenant to convert the property into a commercial
Article 1349. The object of every contract must be determinate as to its kind. The fact establishment. This is premised on the fact that the construction of the new public
that the quantity is not determinate shall not be an obstacle to the existence of the market at Doa Francisca Subdivision had originally been approved by the municipal
contract, provided it is possible to determine the same, without the need of a new council of Balanga, the Development Bank of the Philippines, and the National Urban
contract between the parties. Planning Commission; and at the time the contract was executed, Tuazon occupied the
property. The records show, however, that the municipal council was scouting for a new
location because it had reservations regarding the site of the proposed project. And
while Lot 261 was considered to be the most ideal (because it stands on higher ground
and is not susceptible to flooding) it does not follow that respondent no longer
Article 1460. A thing is determinate when it is particularly designated and/or physically negotiated for and in Camachos behalf. There were other terms to be negotiated, such
segregated from all others of the same class. as the mode of transfer (whether sale or donation); the titling of the property in the
name of the municipality; the terms of payment, if any; and such other legalities
The requisite that a thing be determinate is satisfied if at the time the contract is necessary to consummate the transaction.
entered into, the thing is capable of being made determinate without the necessity of a
new or further agreement between the parties. It must be stressed that Camacho was not deprived of any property right. The portions
of her property which she parted with (the 17,000-sq-m portion donated to the
In this case, the object of the contract is the 5,000-sq-m portion of Lot 261, Balanga municipality; the 5,000-sq-m portion given to respondent as attorneys fees; and the
Cadastre. The failure of the parties to state its exact location in the contract is of no 1,200-sq-m portion which was sold) were either in exchange for services rendered or for
moment; this is a mere error occasioned by the parties failure to describe with monetary consideration. In fact, all these transactions resulted in the increase in the
particularity the subject property, which does not indicate the absence of the principal economic value of her remaining properties.
object as to render the contract void.52 Since Camacho bound herself to deliver a
Thus, the defense of the illegality of respondents undertaking is baseless. The municipal It must be understood that a retainer contract is the law that governs the relationship
council had the authority to choose the best site for its project. We also note that the between a client and a lawyer.62 Unless expressly stipulated, rendition of professional
market site was transferred with the active participation of Camacho, who agreed to services by a lawyer is for a fee or compensation and is not gratuitous.63 Whether the
donate the 17,000-sq-m portion of her property; the new public market was lawyers services were solicited or they were offered to the client for his assistance,
constructed and became operational; and the sale of the 1,200-sq-m lot was inasmuch as these services were accepted and made use of by the latter, we must
consummated when Camacho executed the deeds herself. Thus, petitioner cannot be consider that there was a tacit and mutual consent as to the rendition of the services,
allowed to evade the payment of Camachos liabilities under the contract with and thus gives rise to the obligation upon the person benefited by the services to make
respondent; a contrary conclusion would negate the rule of estoppel and unjust compensation therefor.64 Lawyers are thus as much entitled to judicial protection
enrichment. against injustice on the part of their clients as the clients are against abuses on the part
of the counsel. The duty of the court is not only to see that lawyers act in a proper and
As to the additional 1,000-sq-m-portion of Lot 261, however, we find and so hold that lawful manner, but also to see that lawyers are paid their just and lawful fees.65 If
respondent is not entitled thereto. lawyers are entitled to fees even if there is no written contract, with more reason that
they are entitled thereto if their relationship is governed by a written contract of
attorneys fee.
Indeed, it was sufficiently established that an attorney-client relationship existed
between Camacho and respondent and that the latter handled several other cases for
his client. The records show that the parties had agreed upon specific sums of money as In her fourth assigned error, petitioner claims that the CA failed to rule on the propriety
attorneys fees for the other cases: of the dismissal of respondent as Camachos counsel.

Civil Case No. C-1773 10,000.0055 We do not agree. We uphold the following pronouncement of the CA on the matter:

Civil Case No. 424 1,000.0056 In this case, the grounds relied upon by plaintiff Camacho as justifications for the
discharge of Intervenor are not sufficient to deprive the latter of his attorneys fees.
CAR Case No. 278-B70 2,000.0057
Intervenor may see the case in an angle different from that seen by plaintiff Camacho.
The procedures adopted by Intervenor may not be what plaintiff Camacho believes to
CAR Case No. 520-B73 P5,000.0058
be the best. But these do not in any way prove that Intervenor was working to the
prejudice of plaintiff Camacho.
Civil Case No. 3281 5,000.0059
Failure of plaintiff Camacho to prove that Intervenor intended to damage her, We
This clearly negates respondents claim of an additional 1,000-sq-m share as consider the charges of plaintiff Camacho as mere honest difference of opinions.
compensation for services rendered. Likewise, there being no evidence on respondents
right over the 800-sq-m allegedly purchased from third persons, he is likewise not
As to the charge that Intervenor failed to account the money he collected in behalf of
entitled to this portion of the property.
plaintiff Camacho, the same is not supported by any evidence. Suffice it to say that mere
allegations cannot prove a claim.66
On the other hand, Camacho admitted in her Answer60 to the Complaint-in-Intervention
that respondent had purchased from her an 80-sq-m portion of the property. Since she
The ruling of the CA on the award of moral damages is likewise in accordance with the
had merely executed a Provisional Deed of Sale,61 we agree with the RTC that
facts and established jurisprudence:
respondent has the right to require the execution of a public instrument evidencing the
The act of plaintiff Camacho is a clear case of breach of Worst,
when Intervenor demanded payment, plaintiff Camacho adopted all sorts of strategies
to delay payment. This case dragged on for twenty (20) years. And until this time,
plaintiff Camacho continues to unjustifiably refuse the payment of the attorneys fees
due to intervenor.

For these, one can readily imagine the worries and anxiety gone through by Intervenor.
Award of moral damages is but proper.

Moral damages may be granted if the party had proven that he suffered mental anguish,
serious anxiety and moral shock as a consequence of the act of the other party. Moral
damages can be awarded when a party acted in bad faith as in this case by Camacho.67

IN LIGHT OF ALL THE FOREGOING, the appealed decision is AFFIRMED with the
MODIFICATION that the award of a 1,000-square-meter portion of Lot 261 to
respondent Atty. Angelito Banzon as attorneys fees is DELETED.

Republic of the Philippines KNOW ALL MEN BY THESE PRESENTS:
Manila I, ANDRES F. SANTOS, of legal age, married to Aurora 0. Santos,
Filipino and resident cf San Dionisio, Paranaque, Rizal, Philippines,
FIRST DIVISION for and in consideration of the sum of TWO THOUSAND (P 2,000.00)
PESOS, Philippine Currency, the receipt whereof is hereby
G.R. No. L-46892 September 30, 1981 acknowledged, do hereby SELLS, CONVEYS, and TRANSFERS (sic)
unto Amparo del Rosario, of legal age, married to Fidel del Rosario
but with legal separation, Filipino and resident of San Dionisio,
HEIRS OF AMPARO DEL ROSARIO, plaintiffs-appellees,
Paranaque, Rizal, Philippines that certain 20,000 square meters to
be segregated from Lot 1 of plan Psu-206650 along the southeastern
portion of said lot, which property is more particularly described as

A parcel of land (Lot 1 as shown on plan Psu-

206650, situated in the Barrio of Sampaloc,
Municipality of Tanay, Province of Rizal.
GUERRERO, J.: Bounded on the SW., along lines 1-2-3, by Lot 80
of Tanay Public Land Subdivision, Pls-39; on the
The Court of Appeals, 1 in accordance with Section 31 of the Judiciary Act of 1948, as NW., along lines 3-4-5, by Lot 2; and along lines
amended, certified to Us the appeal docketed as CA-G.R. No. 56674-R entitled "Amparo 5-6-7-8-9-10-11, by Lot 6; on the NE., along lines
del Rosario, plaintiff-appellee, vs. Spouses Andres Santos and Aurora Santos, defendants- 11-12-13, by Lot 3: and along lines 13-1415, by
appellants," as only questions of law are involved. Lot 4, all of plan Psu-206650; and on the SE.,
along line 15-1, by Lot 5 of plan Psu- 206650 ... ;
On January 14, 1974, Amparo del Rosario filed a complaint against the spouses Andres containing an area of ONE HUNDRED EIGHTY
F. Santos and Aurora O. Santos, for specific performance and damages allegedly for ONE THOUSAND FOUR HUNDRED TWENTY
failure of the latter to execute the Deed of Confirmation of Sale of an undivided 20,000 (181,420) SQUARE METERS. All points referred
square meters of land, part of Lot 1, Psu-206650, located at Barrio Sampaloc, Tanay, to are indicated on the plan and are marked on
Rizal, in malicious breach of a Deed of Sale (Exhibit A or 1) dated September 28, 1964. the ground as follows: ...

Amparo del Rosario died on Sept. 21, 1980 so that she is now substituted by the heirs of which above-described property, I own one-half (1/2) interest
named in her will still undergoing probate proceedings. Andres F. Santos also died, on thereof being my attorney's fee, and the said 20,000 square meters
Sept. 5, 1980, and he is substituted by the following heirs: Jovita Santos Gonzales, will be transferred unto the VENDEE as soon as the title thereof has
Arnulfo O. Santos, Archimedes O. Santos, Germelina Santos Ravida, and Andres O. been released by the proper authority or authorities concerned:
Santos, Jr.
That the parties hereto hereby agree that the VENDOR shall execute
The Deed of Sale (Exh. A or 1) is herein reproduced below: a Deed of Confirmation of Deed of Sale in favor of the herein
VENDEE as soon as the title has been released and the subdivision
plan of said Lot 1 has been approved by the Land Registration
DEED OF SALE Commissioner.
IN WITNESS WHEREOF, I have hereunto set my hand this 28th day of (a) TCT 203580 30,205 sq. meters
September, 1964, in the City of Manila, Philippines.
(b) TCT 203581 19, 790 sq. meters
(c) TCT 167568 40,775 sq. meters
With My Marital Consent:
In a motion to dismiss, defendants pleaded, inter alia, the defenses of lack of jurisdiction
s/ Aurora O. Santos (Wife) t/ Aurora O. Santos (Wife) of the court a quo over the subject of the action and lack of cause of action allegedly
because there was no allegation as to the date of the approval of the subdivision plan,
SIGNED IN THE PRESENCE OF: s/ Felicitas C. Moro s/ Corona C. Venal no specific statement that the titles therein mentioned were curved out of Lot I and no
clear showing when the demands were made on the defendants. They likewise set up
the defense of prescription allegedly because the deed of sale was dated September 28,
1964 and supposedly ratified October 1, 1964 but the complaint was filed only on
January 14, 1974, a lapse of more than nine years when it should have been filed within
BEFORE ME, a Notary Public for and in Rizal, Philippines, personally five years from 1964 in accordance with Article 1149, New Civil Code.
appeared Andres F. Santos, with Res. Cert. No. 4500027 issued at
Paranaque, Rizal, on Jan. 9, 1964, B-0935184 issued at Paranaque,
Defendant also claimed that the demand set forth in the complaint has been waived,
Rizal on April 15, 1964, and Aurora 0. Santos, with Res. Cert. No. A-
abandoned or otherwise extinguished. It is alleged that the deed of sale was "only an
4500028 issued at Paranaque, Rizal, on Jan. 9, 1964, giving her
accommodation graciously extended, out of close friendship between the defendants
marital consent to this instrument, both of whom are known to me
and the plaintiff and her casual business partner in the buy and sell of real estate, one
and to me known to be the same persons who executed the
Erlinda Cortez;" 3 that in order to allay the fears of plaintiff over the non-collection of
foregoing instruments and they acknowledged to me that the same
the debt of Erlinda Cortez to plaintiff in various sums exceeding P 2,000.00, defendants,
is their free act and voluntary deed.
who were in turn indebted to Erlinda Cortez in the amount of P 2,000.00, voluntarily
offered to transfer to plaintiff their inexistent but expectant right over the lot in
IN WITNESS WHEREOF, I have hereunto signed this instrument and question, the same to be considered as part payment of Erlinda Cortez' indebtedness;
affixed my notarial seal this lst day of October, 1964, in Pasig, Rizal, that as Erlinda Cortez later on paid her creditor what was then due, the deed of sale had
Philippines. in effect been extinguished. Defendants thereby characterized the said deed of sale as a
mere tentative agreement which was never intended nor meant to be ratified by and
Doc. No. 1792; Page No. 85; Book No. 19; Series of 1964. acknowledged before a notary public. In fact, they claimed that they never appeared
before Notary Public Florencio Landrito.
Finally, defendants alleged that the claim on which the action or suit is founded is
NOTARY PUBLIC Until December 31, 1965 2 unenforceable under the statute of frauds and that the cause or object of the contract
did not exist at the time of the transaction.

Plaintiff claimed fulfillment of the conditions for the execution of the Deed of
Confirmation of Sale, namely: the release of the title of the lot and the approval of the After an opposition and a reply were filed by the respective parties, the Court a quo
subdivision plan of said lot by the Land Registration Commission. She even enumerated resolved to deny the motion to dismiss of defendants. Defendants filed their answer
the titles with their corresponding land areas derived by defendants from the aforesaid with counterclaim interposing more or less the same defenses but expounding on them
lot, to wit: further. In addition, they claimed that the titles allegedly derived by them from Lot 1 of
Annex A or I were cancelled and/or different from said Lot I and that the deed of sale
was simulated and fictitious, plaintiff having paid no amount to defendants; and that the Custodio would assign and deliver to Santos "one-half (1/2) share of
deed was entrusted to plaintiff's care and custody on the condition that the latter; (a) the whole property as appearing in the certificate of title so issued."
would secure the written consent of Erlinda Cortez to Annex A or I as part payment of Exh. B or 2).
what she owed to plaintiff; (b) would render to defendants true accounting of
collections made from Erlinda showing in particular the consideration of 2,000.00 of On March 22, 1964, Custodio's land was surveyed under plan Psu-
Annex A or I duly credited to Erlinda's account. 4 226650 (Exh. D or 4). It was divided into six (6) lots, one of which
was a road lot. The total area of the property as surveyed was
Plaintiff filed a reply and answer to counterclaim and thereafter a motion for summary 211,083 square meters. The respective areas of the lots were as
judgment and/or judgment on the pleadings on the ground that the defenses of follows:
defendants fail to tender an issue or the same do not present issues that are serious
enough to deserve a trial on the merits, 5 submitting on a later date the affidavit of
merits. Defendants filed their corresponding opposition to the motion for summary Lot 1 181,420 square
judgment and/or judgment on the pleadings. Not content with the pleadings already meters
submitted to the Court, plaintiff filed a reply while defendants filed a supplemental
opposition. Lot 2 7,238 square
With all these pleadings filed by the parties in support of their respective positions, the Lot 3 7,305 square
Court a quo still held in abeyance plaintiff's motion for summary judgment or judgment meters
on the pleadings pending the pre-trial of the case. At the pre-trial, defendants offered
by way of compromise to pay plaintiff the sum of P2,000.00, the consideration stated in Lot 4 5,655 square
the deed of sale. But the latter rejected the bid and insisted on the delivery of the land meters
to her. Thus, the pre-trial proceeded with the presentation by plaintiff of Exhibits A to Q
which defendants practically admitted, adopted as their own and marked as Exhibits 1 Lot 5 5,235 square
to 17. In addition, the latter offered Exhibit 18, which was their reply to plaintiff's letter meters
of demand dated December 21, 1973.
Road Lot 6 4,230 square
From the various pleadings filed in this case by plaintiff, together with the annexes and meters
affidavits as well as the exhibits offered in evidence at the pre-trial, the Court a quo
found the following facts as having been duly established since defendant failed to meet TOTAL 211,083 square
them with countervailing evidence: meters

In February, 1964, Teofilo Custodia owner of a parcel of xxx xxx xxx

unregistered land with an area of approximately 220,000 square
meters in Barrio Sampaloc, Tanay, Rizal, hired Attorney Andres F.
Santos "to cause the survey of the above-mentioned property, to file On December 27, 1965, a decree of registration No. N-108022 was
registration proceedings in court, to appear and represent him in all issued in Land Registration Case No. N-5023, of the Court of First
government office relative thereto, to advance all expenses for Instance of Rizal, LRC Record No. N-27513, in favor of Teofilo
surveys, taxes to the government, court fees, registration fees ... up Custodia married to Miguela Perrando resident of Tanay, Rizal. On
to the issuance of title in the name" of Custodia. They agreed that March 23, 1966, Original Certificate of Title No. 5134 (Exh. Q or 17)
after the registration of the title in Custodio's name, and "after was issued to Custodio for Lots 1, 2, 3, 4 and 5, Psu- 206650, with a
deducting all expenses from the total area of the property,"
total area of 206,853 square meters. The areas of the five (5) lots
Road Lot 6 5,303 square
were as follows:

Lot 1 181,420 square TOTAL 206,853 square

meters meters

Lot 2 7,238 square

On June 22, 1966, the consolidation-subdivision plan (LRC) Pcs-5273
(Exh. E or 5) was approved by the Land Registration Commission and
by the Court of First Instance of Rizal in an order dated July 2, 1966
Lot 3 7,305 square
(Entry No. 61037 T-167561, Exh. Q). Upon its registration, Custodio's
O.C.T. No. 5134 (Exh. Q) was cancelled and TCT Nos. 167561,
167562, 167563, 167564 (Exh. G), 167565 (Exh. H and 167566 were
Lot 4 5,655 square
issued for the six lots in the name of Custodio (Entry No. 61035, Exh.
Lot 5 5,235 square
meters On June 23, 1966, Custodio conveyed to Santos Lots 4 and 5, Pcs-
5273 with a total area of 90,775 square meters (Exh. B or 2)
described in Custodio's TCT No. 167564 (Exh. G or 7) and TCT No.
In April to May, 1966, a consolidation-subdivision survey (LRC) Pcs- 167565 (Exh. H or 8), plus a one-half interest in the Road Lot No. 6,
5273 (Exh. E or 5) was made on the above lots converting them into as payment of Santos' attorney's fees and advances for the
six (6) new lots as follows: registration of Custodio's land.

xxx xxx xxx Upon registration of the deed of conveyance on July 5, 1966,
Custodio's TCT Nos. 167564 and 167565 (Exhs. G and H) were
cancelled. TCT No. 167568 (Exh. I or 9) for Lot 4 and TCT No. 167585
Lot 1 20,000 square (Exh. J or 10) for Lot 5 were issued to Santos.

Lot 2 40,775 square On September 2, 1967, Santos' Lot 5, with an area of 50,000 square
meters meters was subdivided into two (2) lots, designated as Lots 5-A and
5-B in the plan Psd-78008 (Exh. F or 6), with the following areas:
Lot 3 50,000 square
Lot 5-A 30,205
Lot 4 40,775 square
Lot 5-B 19,795
Lot 5 50,000 square
TOTAL 50,000 90,775 sq.m.
plus one-half of the road lot, Lot 6, PCS-5273, with an area of 5,303
square meters, which is registered jointly in the name of Santos and
Upon registration of Psd-78008 on October 3, 1967, Santos' TCT No. Custodio (Exh. B & E) 6
167585 (Exh. J) was cancelled and TCT No. 203578 for Lot 5- A and
TCT No. 203579 for Lot 5-B were supposed to have been issued to The court a quo thereupon concluded that there are no serious factual issues involved
Santos (See Entry 6311 in Exh. J or 10). Actually, TCT No. 203580 was so the motion for summary judgment may be properly granted. Thereafter, it proceeded
issued for Lot 5-A (Exh. K or 1 1), and TCT No. 203581 for Lot 5-B to dispose of the legal issues raised by defendants and rendered judgment in favor of
(Exh. L or 12), both in the name of Andres F. Santos. plaintiff. The dispositive portion of the decision states as follows:

Out of Custodio's original Lot 1, Psu-206650, with an area of 181,420 WHEREFORE, defendants Andres F. Santos and Aurora Santos are
square meters, Santos was given a total of 90,775 square meters, ordered to execute and convey to plaintiff Amparo del Rosario,
registered in his name as of October 3, 1967 under three (3) titles, within ten (10) days from the finality of this decision, 20,000 square
namely: meters of land to be taken from the southeastern portion of either
Lot 4, Pcs-5273, which has an area of 40,775 square meters,
described in TCT No. 167568 (Exh. I or 9) of from their LOL 5-A. with
an area of 30,205 square meters, described in TCI No. 203; O (Exh. K
or 11). The expenses of segregating the 20,000 square meters
TCT No. 167585 portion shall be borne fqually by the parties. rhe expenses for the
for execution and registration of the sale shall be borne by the
defendants (Art. 1487, Civil Code). Since the defendants compelled
Lot 4 Pcs-5273 40,775 sq. m. the plaintiff to litigate and they failed to heed plainliff's just demand,
they are further ordered to pay the plaintiff the sum of P2,000.00 as
(Exh. J or 10) attorney's fees and the costs of this action.
TCT No. 203580

Lot 5-A Psd-78008 30,205 sq. m. Aggrieved by the aforesaid decision, the defendant's filed all appeal to the Court of
Appeals submitting for resolution seven assignments of errors, to wit:
(Exh. K or 11)
I. The lower court erred in depriving the appellants of their right to
TCT No. 203581 the procedural due process.

Lot 5-B Psd-78008 19,795 sq. m. II. The lower court erred in holding that the appellee's claim has not
been extinguished.
(Exh. L or 12)
III. The lower court erred in sustaining appellee's contention that
there are no other unwritten conditions between the appellants and
the appellee except those express in Exh. "1" or "A", and that Erlinda apparently, they appeared before Notary Public Florencio Landrito when, in fact, they
Cortez' conformity is not required to validate the appellants' claimed that they did not. In effect, there is an admission of the due execution and
obligation. genuineness of the document because by the admission of the due execution of a
document is meant that the party whose signature it bears admits that voluntarily he
IV. The lower court erred in holding that Exh. "l" or "A" is not signed it or that it was signed by another for him and with his authority; and the
infirmed and expressed the true intent of the parties. admission of the genuineness of the document is meant that the party whose signature
it bears admits that at the time it was signed it was in the words and figures exactly as
set out in the pleading of the party relying upon it; and that any formal requisites
V. The lower court erred in declaring that the appellants are co-
required by law, such as swearing and acknowledgment or revenue stamps which it
owners of the lone registered owner Teofilo Custodia.
requires, are waived by him. 9

VI. The lower court erred in ordering the appellants to execute and
As correctly pointed out by the court a quo, the alleged false notarization of the deed of
convey to the appellee 20,000 sq. m. of land to be taken from the
sale is of no consequence. For a sale of real property or of an interest therein to be
southeastern portion of either their lot 4, Pcs-5273, which has an
enforceable under the Statute of Frauds, it is enough that it be in writing. 10 It need not
area of 40,775 sq.m., described in T.C.T. No. 167568 (Exh. 9 or 1), or
be notarized. But the vendee may avail of the right under Article 1357 of the New Civil
from their lot No. 5-A, with an area of 30,205 sq.m. described in
Code to compel the vendor to observe the form required by law in order that the
T.C.T. No. 203580 (Exh. 11 or K), the expenses of segregation to be
instrument may be registered in the Registry of Deeds. 11 Hence, the due execution and
borne equally by the appellants and the appellee and the expenses
genuineness of the deed of sale are not really in issue in this case. Accordingly, assigned
of execution and registration to be borne by the appellants.
error I is without merit.

VII. Thelowercourterredinorderingtheappellantstopayto the

What appellants really intended to prove through the alleged false notarization of the
appellee the sum of P2,000. 00 as attorney's fee and costs. 8
deed of sale is the true import of the matter, which according to them, is a mere
tentative agreement with appellee. As such, it was not intended to be notarized and was
The first four revolve on the issue of the propriety of the rendition of summary merely entrusted to appellee's care and custody in order that: first, the latter may
judgment by the court a quo, which concededly is a question of law. The last three assail secure the approval of one Erlinda Cortez to their (appellants') offer to pay a debt owing
the summary judgment itself. Accordingly, the Court of Appeals, with whom the appeal to her in the amount of P2,000.00 to appellee instead of paying directly to her as she
was filed, certified the records of the case to this Court for final determination. was indebted to appellee in various amounts exceeding P2,000.00; and second once the
approval is secured, appellee would render an accounting of collections made from
For appellants herein, the rendition of summary judgment has deprived them of their Erlinda showing in particular the consideration of P2,000.00 of the deed of sale duly
right to procedural due process. They claim that a trial on the merits is indispensable in credited to Erlinda's account.
this case inasmuch as they have denied under oath all the material allegations in
appellee's complaint which is based on a written instrument entitled "Deed of Sale", According to appellants, they intended to prove at a full dress trial the material facts: (1)
thereby putting in issue the due execution of said deed. that the aforesaid conditions were not fulfilled; (2) that Erlinda Cortez paid her total
indebtedness to appellee in the amount of P14,160.00, the P2,000.00 intended to be
Appellants in their opposition to the motion for summary judgment and/or judgment on paid by appellant included; and (3) that said Erlinda decided to forego, renounce and
the pleadings, however, do not deny the genuineness of their signatures on the deed of refrain from collecting the P2,000.00 the appellants owed her as a countervance
sale. reciprocity of the countless favors she also owes them.

(Par. 3 of said Motion, p. 101, Record on Appeal). They do not contest the words and Being conditions which alter and vary the terms of the deed of sale, such conditions
figures in said deed except in the acknowledgment portion thereof where certain words cannot, however, be proved by parol evidence in view of the provision of Section 7, Rule
were allegedly cancelled and changed without their knowledge and consent and where, 130 of the Rules of Court which states as follows:
Sec. 7. Evidence of written agreements when the terms of an matter of the contract, of the relations of the parties to each other, and of the facts and
agreement have been reduced to writing, it is to be considered as circumstances surrounding them when they entered into the. contract may be received
containing all such terms, and, therefore, there can be, between the to enable the court to make a proper interpretation of the instrumental. 14 In the case
parties and their successors in interest, no evidence of the terms of at bar, the Deed of Sale (Exh. A or 1) is clear, without any ambiguity, mistake or
the agreement other than the contents of the writing, except in the imperfection, much less obscurity or doubt in the terms thereof. We, therefore, hold
following cases: and rule that assigned errors III and IV are untenable.

(a) Where a mistake or imperfection of the writing, or its failure to According to the court a quo, "(s)ince Santos, in his Opposition to the Motion for
express the true intent and agreement of the parties, or the validity Summary Judgment failed to meet the plaintiff's evidence with countervailing evidence,
of the agreement is put in issue by the pleadings; a circumstance indicating that there are no serious factual issues involved, the motion
for summary judgment may properly be granted." We affirm and sustain the action of
(b) When there is an intrinsic ambiguity in the writing. The term the trial court.
"agreement" includes wills."
Indeed, where a motion for summary judgment and/or judgment on the pleadings has
The parol evidence rule forbids any addition to or contradiction of the terms of a written been filed, as in this case, supporting and opposing affidavits shall be made on personal
instrument by testimony purporting to show that, at or before the signing of the knowledge, shall set forth such facts as may be admissible in evidence, and shall show
document, other or different terms were orally agreed upon by the parties. 12 affirmatively that the affiant is competent to testify as to the matters stated therein.
Sworn or certified copies of all papers or parts thereof referred to in the
affidavitshalibeattachedtheretoorservedtherewith. 15
While it is true, as appellants argue, that Article 1306 of the New Civil Code provides
that "the contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided that they are not contrary to law, Examining the pleadings, affidavits and exhibits in the records, We find that appellants
morals, good customs, public order, or public policy" and that consequently, appellants have not submitted any categorical proof that Erlinda Cortez had paid the P2,000.00 to
and appellee could freely enter into an agreement imposing as conditions thereof the appellee, hence, appellants failed to substantiate the claim that the cause of action of
following: that appellee secure the written conformity of Erlinda Cortez and that she appellee has been extinguished. And while it is true that appellants submitted a receipt
render an accounting of all collections from her, said conditions may not be proved as for P14,160.00 signed by appellee, appellants, however, have stated in their answer
they are not embodied in the deed of sale. with counterclaim that the P2,000.00 value of the property covered by the Deed of Sale,
instead of being credited to Erlinda Cortez, was conspicuously excluded from the
accounting or receipt signed by appellee totalling P14,160.00. The aforesaid receipt is
The only conditions imposed for the execution of the Deed of Confirmation of Sale by
no proof that Erlinda Cortez subsequently paid her P2,000.00 debt to appellee. As
appellants in favor of appellee are the release of the title and the approval of the
correctly observed by the court a quo, it is improbable that Cortez would still pay her
subdivision plan. Thus, appellants may not now introduce other conditions allegedly
debt to appellee since Santos had already paid it.
agreed upon by them because when they reduced their agreement to writing, it is
presumed that "they have made the writing the only repository and memorial of truth,
and whatever is not found in the writing must be understood to have been waived and Appellants' claim that their P2,000.00 debt to Erlinda Cortez had been waived or
abandoned." 13 abandoned is not also supported by any affidavit, document or writing submitted to the
court. As to their allegation that the appellee's claim is barred by prescription, the ruling
of the trial court that only seven years and six months of the ten-year prescription
Neither can appellants invoke any of the exceptions to the parol evidence rule, more
period provided under Arts. 1144 and 155 in cases of actions for specific performance of
particularly, the alleged failure of the writing to express the true intent and agreement
the written contract of sale had elapsed and that the action had not yet prescribed, is in
of the parties. Such an exception obtains where the written contract is so ambiguous or
accordance with law and, therefore, We affirm the same.
obscure in terms that the contractual intention of the parties cannot be understood
from a mere reading of the instrument. In such a case, extrinsic evidence of the subject
The action of the court a quo in rendering a summary judgment has been taken in We further reject the contention of the appellants that the lower court erred in ordering
faithful compliance and conformity with Rule 34, Section 3, Rules of Court, which the appellants to execute and convey to the appellee 20,000 sq.m. of land to be taken
provides that "the judgment sought shall be rendered forthwith if the pleadings, from the southeastern portion of either their Lot 4, Pcs-5273, which has an area of
depositions, and admissions on file together with the affidavits, show that, except as to 40,775 sq.m., described in T.C.T. No. 167568 (Exh. 9 or 1), or from their Lot No. 5-A, with
the amount of damages, there is no genuine issue as to any material fact and that the an area of 30,205 sq.m. described in T.C.T. No. 203580 (Exh. 11 or K), the expenses of
moving party is entitled to a judgment as a matter of law. " segregation to be borne equally by the appellants and the appellee and the expenses of
execution and registration to be borne by the appellants. Their argument that the
Resolving assignments of errors, V, VI, and VII which directly assail the summary southeastern portion of Lot 4 or Lot 5-A is no longer the southeastern portion of the
judgment, not the propriety of the rendition thereof which We have already resolved to bigger Lot 1, the latter portion belonging to the lone registered owner, Teofilo Custodia
be proper and correct, it is Our considered opinion that the judgment of the court a quo is not impressed with merit. The subdivision of Lot I between the appellants and Teofilo
is but a logical consequence of the failure of appellants to present any bona fide defense Custodio was made between themselves alone, without the intervention, knowledge
to appellee's claim. Said judgment is simply the application of the law to the undisputed and consent of the appellee, and therefore, not binding upon the latter. Appellants may
facts of the case, one of which is the finding of the court a quo, to which We agree, that not violate nor escape their obligation under the Deed of Sale they have agreed and
appellants are owners of one-half (1/2) interest of Lot I and, therefore, the fifth signed with the appellee b3 simply subdividing Lot 1, bisecting the same and segregating
assignment of error of appellants is without merit. portions to change their sides in relation to the original Lot 1.

By the terms of the Deed of Sale itself, which We find genuine and not infirmed, Finally, considering the trial court's finding that the appellants compelled the appellee
appellants declared themselves to be owners of one-half (1/2) interest thereof. But in to litigate and they failed to heed appellee's just demand, the order of the court
order to avoid appellee's claim, they now contend that Plan Psu-206650 where said Lot I awarding the sum of P2,000.00 as attorney's fees is just and lawful, and We affirm the
appears is in the exclusive name of Teofilo Custodio as the sole and exclusive owner same.
thereof and that the deed of assignment of one-half (1/2) interest thereof executed by
said Teofilo Custodio in their favor is strictly personal between them. Notwithstanding WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby
the lack of any title to the said lot by appellants at the time of the execution of the deed AFFIRMED in toto, with costs against the appellants.
of sale in favor of appellee, the said sale may be valid as there can be a sale of an
expected thing, in accordance with Art. 1461, New Civil Code, which states: SO ORDERED.

Art. 1461. Things having a potential existence may be the object of

the contract of sale.

The efficacy of the sale of a mere hope or expectancy is deemed

subject to the condition that the thing will come into existence.

The sale of a vain hope or expectancy is void.

In the case at bar, the expectant right came into existence or materialized for the
appellants actually derived titles from Lot I .
Republic of the Philippines surnamed Yturralde. In 1950, Margarita de los Reyes contracted a
SUPREME COURT second marriage with her brother-in-law and uncle of the
Manila petitioners herein, Damaso Yturralde .

EN BANC On May 30, 1952, Damaso Yturralde and Margarita de los Reyes
executed a deed of sale with right of repurchase in favor of the
respondent herein, Isabelo Rebollos, covering the above-mentioned
property in consideration of the sum of P1,715.00. The vendors a
retro failed to exercise the right to repurchase the property within
G.R. No. L-31586 February 28, 1972
the three-year period agreed upon, which expired on May 30, 1955.
In 1961, Margarita de los Reyes died.
and ROSALIA all surnamed YTURRALDE petitioners-appellants,
On May 3, 1965, the respondent, Isabelo Rebollos, filed a petition
for consolidation of ownership with the Court of First Instance of
Zamboanga del Sur, docketed as Civil Case No. 436 therein, naming
as Judge of the Court of First Instance of Zamboanga del Sur, and ISABELO REBOLLOS,
as respondents in the case the petitioners herein and Damaso
Yturralde (Annex A, Petition). Summons was then issued, and
received on June 17, 1965 by the respondent therein, Damaso,
Jose A. Ambrosia and Patrio C. Avedano for petitioners-appellants. Ernesto, Fortunata, Montano, Guadalupe, Luis and Rosalia, all
surnamed Yturralde (Annexes C and F, Petition). However, summons
Geronimo G. Pajarito for respondents-appellees. could not be served on three of the respondents therein, Josefina,
Zosima and Ramon Yturralde, as they were no longer residing at
their last known addresses (Annexes B, C and F, Petition). The Judge
then presiding the Court of First Instance of Zamboanga del Sur,
Hon. Dimalanes Buissan, in his order dated October 7, 1965,
MAKASIAR, J.:p directed that summons be served upon the said three respondents
therein (Annex C, Petition). The copies of the petition sent to said
Petitioners-appellants in this appeal by certiorari seek the reversal of the decision of the three respondents, but returned without service, were then
Court of Appeals dated December 24, 1969. delivered by Rebollos to the Clerk of Court of the Court of First
Instance of Zamboanga del Sur to complete the delivery thereof
The Court of Appeals narrated the facts thus: . under Section 6 of Rule 13, Rules of Court (Annex D, Petition).
Thereafter, on motion filed by Rebollos to declare the respondents
in the case in default (Annex E, Petition), the Court issued an order
It appears that the spouses Francisco Yturralde and Margarita de los
dated November 13, 1965, declaring all the respondents therein in
Reyes, owned a parcel of agricultural land located in Guilinan,
default, after which Rebollos presented his evidence (Annexes F and
Tungawan, Zamboanga del Sur, containing an area of 14.1079
G, Petition). On November 20, 1965, the Court rendered a decision
hectares, more or less, and registered in their names under Original
consolidating the ownership of the subject property in favor of
Certificate of Title No. 2356 of the Office of the Register of Deeds of
Rebollos, and ordering the Register of Deeds of Zamboanga del Sur
Zamboanga del Sur. Sometime in the year 1944, Francisco Yturralde
to cancel Original Certificate of Title No. 2356 covering said property
died intestate, survived by his wife, Margarita de los Reyes, and their
and, in lieu thereof, to issue a transfer certificate of title in the name
children who are the petitioners herein, Ernesto, Fortunata,
of Rebollos (Annex H, Petition).
Montano, Zosimo, Ramon, Guadalupe, Luis, Josefina and Rosalia, all
On June 3, 1966, Rebollos filed a motion to order the petitioner The case before us is one for prohibition. (Section 2 of Rule 65, Rules
Montano Yturralde herein to surrender and deliver to the Register of of Court). (Pp. 16-19, rec.).
Deeds the owner's duplicate of Original Certificate of Title No. 2356,
which motion was granted by the Court presided at the time by The Court of Appeals held that the action for prohibition before it seeking to restrain the
Judge Antonio Montilla (Annexes I and H, Petition). Due to the enforcement of the decision in Civil Case No. 436 and the implementing orders issued
failure of petitioner Montano Yturralde to comply with the order subsequent thereto by the respondent Judge of the Court of First Instance of
(Annex J) and on the motion filed by Rebollos, the Court, then Zamboanga del Sur, will not prosper; because prohibition is a preventive remedy to
presided by the respondent Judge ordered the arrest of said restrain the exercise of a power or the performance of an act and not a remedy against
Montano Yturralde, but the order of arrest was subsequently lifted acts already accomplished, which cannot be undone through a writ of prohibition, and
on motion filed by Montano Yturralde (Annexes K, L, M, N, O and P, in the instant case, the judgment of the lower trial court consolidates the ownership of
Petition). the entire property involved in Civil Case No. 436 in favor of respondent Isabelo
Rebollos, orders the cancellation of the original certificate of title covering the same,
On motion filed by Rebollos, dated January 6, 1969, the respondent and directs the issuance of a new certificate of title in the name of respondent Rebollos.
Judge ordered the execution of the judgment in Civil Case No. 436,
and on January 20, 1969, the corresponding writ of execution was By virtue of an absolute deed of sale executed on January 3, 1968 by respondent Isabelo
issued (Annexes Q, R and S, Petition). The petitioners herein then Rebollos, a new certificate of title was issued in the name of the vendee, Pilar M. Vda.
filed a motion for reconsideration of the order granting execution de Reyes (citing Annexes 4 and 5 of the Answer). The respondent Court of Appeals then
and for the quashing of the writ of execution, which was denied by concluded that "As the thing sought to be restrained had already been done, and since a
the respondent Judge in his order of March 21, 1969 (Annex T, U, V certificate of title is conclusive evidence of the ownership of the land referred to therein
and W, Petition). On petition filed by Rebollos, the respondent (Section 47, Act No. 496, as amended; Aldecoa & Co. vs. Warner, Barnes & Co., 30 Phil.
Judge, ordered the demolition of all buildings not belonging to said 153; Yumul vs. Rivera, et a1., 64 Phil. 13), and the same cannot be collaterally attacked,
Rebollos found on the premises in question (Annexes X and Y, but can only be challenged in a direct proceeding (Menderson vs. Garrido, 90 Phil. 624),
Petition).The petitioners then filed a motion for reconsideration of prohibition in this case is not the proper remedy." .
the order of demolition, which was denied by the respondent Judge,
who, however, on motion of said petitioners, directed the
Petitioners-appellants claim that the Court of Appeals erred (1) in sustaining the
respondent Sheriff to defer the implementation of the writ of
actuation of the trial court in allowing service of summons upon appellants Josefina,
execution and the order of demolition until after June 23, 1969
Zosima and Ramon Yturralde by registered mail pursuant to Section 6, Rule 13, of the
(Annexes Z and AA, Petition). Thereafter, the petitioners instituted
Rules of Court; (2) in sustaining the ruling of the trial court that it properly acquired
the present proceedings.
jurisdiction over the aforesaid three appellants by virtue of such mode of service of
summons; and (3) in not declaring as null and void the decision of the trial court along
The petition was given due course by this Court, and on June 19, with its implementing orders, at least insofar as the aforenamed three appellants are
1969, a writ of preliminary injunction was issued, restraining the concerned on the ground that they were not given their day in court.
respondents from enforcing the decision and the orders complained
of in Civil Case No. 436, until further orders. In his answer to the
The three assigned errors shall be discussed jointly.
petition filed by the respondent, Isabelo Rebollos, he averred that
on January 3, 1968, he sold the property in question to Pilar M. vda.
de Reyes under a deed of absolute sale and, accordingly, a Transfer I
Certificate of Title was issued in favor of said vendee covering the
subject property by the Register of Deeds (Answers and Annexes 4 The respondent Court of Appeals erred in holding that the petition for prohibition
and 5 thereto). before it will not prosper as the act sought to be prevented had already been
performed; because the order for the issuance of the writ of execution, the
corresponding writ of execution and the order for demolition respectively dated January consolidation shall be effected through an ordinary civil action, not by a mere motion,
6, 1969, January 20, 1969 and May 15, 1969 in Special Civil Case No. 436 were not and that the vendor a retro should be made a party defendant, who should be served
enforced by the respondent trial judge, who in his order dated May 26, 1969 directed with summons in accordance with Rule 14 of the Revised Rules of Court; and that the
the provincial sheriff to defer the implementation thereof (Annex "AA", p. 66, record of failure on the part of the court to cause the service of summons as prescribed in Rule
C.A. G.R. No. 43310; pp. 19-26, rec.). The petitioners herein reiterated that they are still 14, is sufficient cause for attacking the validity of the judgment and subsequent orders
in possession of the property in question, which possession was recognized and on jurisdictional grounds.2 The Court in said case stressed that the reason behind the
protected by the respondent Court of Appeals itself when it issued the writ of requirement of a judicial order for consolidation as directed by Article 1067 of the new
preliminary injunction dated June 19, 1969 against private respondent Isabelo Rebollos Civil Code is because "experience has demonstrated too often that many sales with right
pursuant to its resolution dated June 17, 1969 (pp. 67-74, rec. of C.A. G.R. No. 43310). of re-purchase have been devised to circumvent or ignore our usury laws and for this
reason, the law looks upon them with disfavor (Report of the Code Commission, pp. 63-
It should be noted that the petition for prohibition filed with the Court of Appeals 64). When, therefore, Article 1607 speaks of a judicial order after the vendor shall have
prayed for the issuance of the writ of preliminary injunction. been duly heard, it contemplates none other than a regular court proceeding under the
governing Rules of Court, wherein the parties are given full opportunity to lay bare
before the court the real covenant. Furthermore, the obvious intent of our Civil Code, in
enjoining herein respondents from enforcing the Decision dated
requiring a judicial confirmation of the consolidation in the vendee a retro of the
November 20, 1965, the orders dated January 15, 1969, March 21,
ownership over the property sold, is not only to have all doubts over the true nature of
1969, May 15, 1969 and May 26, 1969, Annexes "H", "R", "W", "Y",
the transaction speedily ascertained, and decided, but also to prevent the interposition
and "AA" hereof, and after due hearing ..., the preliminary writ of
of buyers in good faith while such determination is being made. Under the former
injunction be made permanent and so with the writ of prohibition.
method of consolidation by a mere extrajudicial affidavit of the buyer a retro, the latter
could easily cut off any claims of the seller by disposing of the property, after such
Petitioners also pray for such other and further reliefs to which they consolidation, to strangers in good faith and without notice. The chances of the seller a
may be entitled under the law. retro to recover his property would thus be nullified, even if the transaction were really
proved to be a mortgage and not a sale." 3
While it is true that the decision in Special Civil Case No. 436 was already rendered,
Original Certificate of Title No. 2356 was cancelled and a new transfer certificate of title The doctrine in the aforesaid case of Teodoro vs. Arcenas was reiterated by this
issued in the name of Pilar V. vda. de Reyes by virtue of the deed of absolute sale Supreme Tribunal through Mr. Justice Jose P. Bengzon in the case of Ongcoco, et al. vs.
executed on January 3, 1968 by private respondent Isabelo Rebollos in her favor; the Honorable Judge, et al. 4
writ of execution and the order of demolition, as heretofore stated, were never
enforced by reason of which herein petitioners remain and are still in possession of the
The jurisdiction over the persons of herein petitioners Josefina, Zosima and Ramon all
land. Moreover, the general prayer for such other reliefs as herein petitioners may be
surnamed Yturralde, was not properly acquired by the court because they were not
entitled to under the law, includes a prayer for the nullification of the decision of
properly served with summons in the manner directed by Rule 14 of the Revised Rules
November 20, 1965 as well as the questioned orders above-mentioned.
of Court. The said three petitioners cannot therefore be legally declared in default. Rule
13 of the Revised Rules of Court on service and filing of pleadings and other papers with
II the court, does not apply to service of summons. Rule 14 of the Revised Rules of Court
on service of summons, which should govern, provides that "upon the filing of the
Unlike the old Civil Code, Article 1607 of the new Civil Code of 1950 provides that complaint, the Clerk of Court shall forthwith issue the corresponding summons to the
consolidation of ownership in the vendee a retro of real property by virtue of the failure defendants" (Section 1, Rule 14), which summons shall be served by the sheriff or other
of the vendor a retro "to comply with the provisions of Article 1616 shall not be proper court officer or for special reason by any person specially authorized by the court
recorded in the Registry of Property without a judicial order, after the vendor has been issuing the summons by personally handing a copy of the same to the defendants
duly heard." In the case of Teodoro vs. Arcenas,1 this Court, through Mr. Justice Jose B. (Sections 5 & 7, Rule 14). If the residence of the defendant is unknown or cannot be
L. Reyes, ruled that under the aforesaid Article 1607 of the new Civil Code, such ascertained by diligent inquiry or if the defendant is residing abroad, service may be
made by publication in a newspaper of general circulation in accordance with Sections
16 & 17, Rule 14.5 The sheriff or private respondent Isabelo Rebollos himself should Consequently, the vendee a retro, Isabelo Rebollos, cannot legally petition for the
have made a diligent inquiry as to the whereabouts of the three petitioners consolidation of his ownership over the entire lot.
aforementioned. The trial court could have directed such an inquiry, which would have
disclosed that petitioners Josefina, Ramon and Zosima reside respectively at Sibugey in But in the petition he filed in Special Civil Case No. 436 on May 3, 1965 against herein
Zamboanga del Sur, Roxas Street in Basilan City, and Washington, D.C., U.S.A. There is nine petitioners as children and heirs of the deceased spouses Francisco Yturralde (who
no showing that such a diligent inquiry was made to justify a substituted service of died in 1944) and Margarita de los Reyes (who died in 1961), and Damaso Yturralde,
summons by publication. The return dated June 18, 1965, of the acting chief of police of stepfather of herein petitioners, Rebollos prayed for the consolidation of his ownership
Tungawan, Zamboanga del Sur, to the clerk of court and ex-officio provincial sheriff over the entire lot covered by O.C.T. No. 2356, and not merely over the interest
"that Josefina, Zosima and Ramon are no longer residing in this municipality" (Annex "B" conveyed to him by Margarita. As the petition of private respondent Rebollos sought to
to Petition of Court of Appeals, p. 20, rec. of C.A. G.R. No. 43310), does not suffice to divest all of them of their undivided interest in the entire agricultural land, which
indicate that a careful investigation of their whereabouts was made. And even if it did, undivided interest was never alienated by them to Rebollos, herein petitioners became
substituted service of summon by publication should have been required. Aside from indispensable parties. Rebollos himself acknowledged that they are indispensable
the fact that the said return of service is a nullity as it is not under oath, there is no parties, for he included them as party-defendants in his petition in order to acquire their
showing even that the acting chief of police was especially authorized by the court to undivided interest in the lot. While summons were served properly on all the other
serve the summons (Sections5 & 20, Rule 14, Revised Rules of Court.)6 defendants in said Civil Case No. 436, herein petitioners Josefina, Zosima and Ramon
were not so served. Because of such failure to comply with Rule 14 of the Revised Rules
To emphasize, Section 3 of Rule 14 of the Revised Rules of Court commands the service of Court on service of summons on indispensable parties, as heretofore stated, the
of summons together with a copy of the petition, on each of the defendants who must trialcourt did not validly acquire jurisdiction over the case; because no complete and
be specifically named in the summons, upon the filing of such petition, like the petition final determination of the action can be had without the aforesaid three petitioners
in Special Civil Case No. 436 filed by privaterespondent Isabelo Rebollos for Josefina, Zosima and Ramon.
consolidation of ownership over the lot coveredby Original Certificate of Title No. 2356
in the name of "Francisco Yturralde married to Margarita de los Reyes." . The petition for consolidation filed by herein private respondent Rebollos is similar in
effect to an action for partition by a co-owner, wherein each co-owner is an
III indispensable party; for without him no valid judgment for partition may be rendered. 8

The action for consolidation should be brought against all the indispensable parties, That the three children, herein petitioners Josefina, Zosima and Ramon, are essential
without whom no final determination can be had of the action; and such indispensable parties, without whom no valid judgment may be rendered, is further underscored by
parties who are joined as party defendants must be properly summoned pursuant to the fact that the agricultural land in question was owned by them in common and pro
Rule 14 of the Revised Rules of Court. If anyone of the party defendants, who are all indiviso with their mother and their brothers and sisters and was not then as now
indispensable parties is not properly summoned, the court acquires no jurisdiction over physically partitioned among them.
the entire case and its decision and orders therein are null and void. 7
For attempting to acquire the entire parcel by foisting upon the court the
The pacto de retro sale executed by Margarita de los Reyes "casada en segundas nuptias misrepresentation that the whole lot was sold to him, private respondent Isabelo
con Damaso Yturralde," expressly stipulates that she only sold all her rights, interests Rebollos must suffer the consequences of his deceit by the nullification of the entire
and participation in the lot covered by O.C.T. No. 2356 (Annex "I", p. 66, rec.). Margarita decision in his favor granting the consolidation of his title over the entire land in
therefore, could not, for she had no right to, sell the entire lot, which is registered under question. This Court condemns such deception.
O.C.T. No. 2356 "inthe name of Francisco Yturralde married to Margarita de los Reyes."
Said lot is acknowledge by herein petitioners as the conjugal property of Francisco and It should be noted that herein petitioners in 1967 also filed an action against only
Margarita (p. 2, rec. of C.A. G.R. No. 43310). What she validly disposed of under the Isabelo Rebollos for the recovery of ownership, annulment of judgment, redemption
aforesaid pacto de retro sale of 1952 was only her conjugal share in the lot plus her and damages in the Court of First Instance of Zamboanga del Sur docketed as Civil Case
successional right as heir in the conjugal share of her deceased husband Francisco.
No. 944 and entitled "Fortunata Yturralde, et al. vs. Rebollos" (pp. 76, 84-96, rec. of C.A. WHEREFORE, judgment is hereby rendered reversing the decision of respondent Court
G.R. No. 43310). of Appeals dated December 24, 1969, and setting aside as null and void .

In their complaint in said Civil Case No. 944 dated May 23, 1967 (pp. 117-124, rec. of (1) the decision of the respondent trial judge dated November 20, 1965; .
C.A. G.R. No. 43310), herein petitioners allege inter alia that the respondent trial court
(in Special Civil Case No. 436) had no jurisdiction over their share in the aforementioned (2) the order for the issuance of the writ of execution dated January 6, 1969; .
lot through a "summary proceedings without notice to them" (pp. 88-89, rec. of C.A.
G.R. No. 43310).
(3) the writ of execution dated January 20, 1969; and .

Herein petitioners should amend their complaint in Civil Case No. 944 so as toinclude
(4) the order of demolition dated May 15, 1969 in Special Civil Case No. 436; .
Pilar V. vda. de Reyes party defendant therein in order that they can obtain a full and
complete valid judgment in the same action; because the vendee is an indispensable
party. 9 without prejudice to the final outcome of Civil Case No. 944.

It is a curious fact that Rebollos filed his petition for consolidation of title only on May 3, With costs against private respondent Isabelo Rebollos.
1965, almost ten years after the redemption period expiredon May 30, 1955, and about
four years after the death in 1961 of the vendor a retro.

lt is equally interesting to note that after herein petitioners filed in 1967 an action
against Rebollos for the recovery of ownership, annulment of judgment, redemption
and damages, Rebollos sold on January 3, 1968 the land in question to Pilar V. vda. de
Reyes, with the deed of sale duly notarized by Atty. Geronimo G. Pajarito, counsel for
Rebollos in Special Civil Case No. 436 (pp. 16-17, 22-25, 31, 42, 44-47, 51, 56, 59, 61-62,
93, rec. of C.A. G.R. No. 43310).

But more intriguing is the fact that, after Rebollos sold on January 3, 1968 the land to
Pilar V. vda. de Reyes, Rebollos himself, not his vendee, filed:

(1) a motion dated January 6, 1969 for the issuance of a writ of

execution from the judgment in Special Civil Case No. 436, by reason
of which the corresponding writ of execution was issued on January
20, 1969; .

(2) an opposition to the motion of herein petitioners for the

reconsideration of the aforesaid order of January 20, 1969; and .

(3) a motion dated April 7, 1969 for execution and demolition of the
buildings of herein petitioners (pp, 61-62, rec. of CA-G.R. No. 43310).
Republic of the Philippines Constancio Sienes and Genoveva Silay is void, and the reconveyance prayed
SUPREME COURT for by them is denied; (2) that the sale made by Paulina and Cipriana Yaeso in
Manila favor of defendants Fidel Esparcia and Paulina Sienes involving the same lot is
also void, and they have no valid title thereto; and (3) that the reservable
EN BANC property in question is part of and must be reverted to the estate of Cipriana
Yaeso, the lone surviving relative and heir of Francisco Yaeso at the death of
Andrea Gutang as of December 13, 1951. No pronouncement as to the costs.
G.R. No. L-12957 March 24, 1961

From the above decision the Sienes spouse interposed the present appeal, their
CONSTANCIO SIENES, ET AL., plaintiffs-appellants,
principal contentions being, firstly, that the lower court erred in holding that Lot 3368 of
the Cadastral Survey of Ayuquitan was a reservable property; secondly, in annulling the
FIDEL ESPARCIA, ET AL., defendants-appellees.
sale of said lot executed by Andrea Gutang in their favor; and lastly, in holding that
Cipriana Yaeso, as reservee, was entitled to inherit said land.
Proceso R. Remollo for plaintiffs-appellants.
Leonardo D. Mancao for defendants-appellees.
There is no dispute as to the following facts:

Lot 3368 originally belonged to Saturnino Yaeso. With his first wife, Teresa Ruales, he
had four children named Agaton, Fernando, Paulina and Cipriana, while with his second
Appellants commenced this action below to secure judgment (1) declaring null and void wife, Andrea Gutang, he had an only son named Francisco. According to the cadastral
the sale executed by Paulina and Cipriana Yaeso in favor of appellees, the spouses Fidel records of Ayuquitan, the properties left by Saturnino upon his death the date of
Esparcia and Paulina Sienes; (2) ordering the Esparcia spouses to reconvey to appellants which does not clearly appear of record were left to his children as follows: Lot 3366
Lot 3368 of the Cadastral Survey of Ayuquitan (now Amlan), Oriental Negros; and (3) to Cipriana, Lot 3367 to Fernando, Lot 3375 to Agaton, Lot 3377 (southern portion) to
ordering all the appellees to pay, jointly and severally, to appellants the sum of P500.00 Paulina, and Lot 3368 (western portion) to Francisco. As a result of the cadastral
as damages, plus the costs of suit. In their answer appellees disclaimed any knowledge proceedings, Original Certificate of Title No. 10275 covering Lot 3368 was issued in the
or information regarding the sale allegedly made on April 20, 1951 by Andrea Gutang in name of Francisco. Because Francisco was a minor at the time, his mother administered
favor of appellants and alleged that, if such sale was made, the same was void on the the property for him, declared it in her name for taxation purposes (Exhs A & A-1), and
ground that Andrea Gutang had no right to dispose of the property subject matter paid the taxes due thereon (Exhs. B, C, C-1 & C-2). When Francisco died on May 29, 1932
thereof. They further alleged that said property had never been in possession of at the age of 20, single and without any descendant, his mother, as his sole heir,
appellants, the truth being that appellees, as owners, had been in continuous executed the public instrument Exhibit F entitled EXTRAJUDICIAL SETTLEMENT AND
possession thereof since the death of Francisco Yaeso. By way of affirmative defense SALE whereby, among other things, for and in consideration of the sum of P800.00 she
and counterclaim, they further alleged that on July 30, 1951, Paulina and Cipriana Yaeso, sold the property in question to appellants. When thereafter said vendees demanded
as the only surviving heirs of Francisco Yaeso, executed a public instrument of sale in from Paulina Yaeso and her husband Jose Esparcia, the surrender of Original Certificate
favor of the spouses Fidel Esparcia and Paulina Sienes, the said sale having been of Title No. 10275 which was in their possession the latter refused, thus giving rise
registered together with an affidavit of adjudication executed by Paulina and Cipriana to the filing of the corresponding motion in the cadastral record No. 507. The same,
on July 18, 1951, as sole surviving heirs of the aforesaid deceased; that since then the however, was denied (Exhs. 8 & 9).
Esparcias had been in possession of the property as owners.
Thereafter, or more specifically, on July 30, 1951, Cipriana and Paulina Yaeso, the
After trial upon the issues thus joined, the lower court rendered judgment as follows: surviving half-sisters of Francisco, and who as such had declared the property in their
name, on January 1, 1951 executed a deed of sale in favor of the spouses Fidel Esparcia
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered declaring (1) and Paulina Sienes (Exh. 2) who, in turn, declared it in their name for tax purposes and
that the sale of Lot No. 3368 made by Andrea Gutang to the plaintiff spouses
thereafter secured the issuance in their name of Transfer Certificate of Title No. T-2141 reserve, died. Thus the former became the absolute owner of the reservable property
(Exhs. 5 & 5-A). upon Andrea's death. While it may be true that the sale made by her and her sister prior
to this event, became effective because of the occurrence of the resolutory condition,
As held by the trial court, it is clear upon the facts already stated, that the land in we are not now in a position to reverse the appealed decision, in so far as it orders the
question was reservable property. Francisco Yaeso inherited it by operation of law from reversion of the property in question to the Estate of Cipriana Yaeso, because the
his father Saturnino, and upon Francisco's death, unmarried and without descendants, it vendees the Esparcia spouses did not appeal therefrom.
was inherited, in turn, by his mother, Andrea Gutang. The latter was, therefore, under
obligation to reserve it for the benefit of relatives within the third degree belonging to WHEREFORE, the appealed decision as above modified is affirmed, with costs, and
the line from which said property came, if any survived her. The record discloses in this without prejudice to whatever action in equity the Esparcia spouses may have against
connection that Andrea Gutang died on December 13, 1951, the lone reservee surviving the Estate of Cipriana Yaeso for the reconveyance of the property in question.
her being Cipriana Yaeso who died only on January 13, 1952 (Exh. 10).
Bengzon, Actg. C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera
In connection with reservable property, the weight of opinion is that the reserve creates and Paredes, JJ., concur.
two resolutory conditions, namely, (1) the death of the ascendant obliged to reserve
and (2) the survival, at the time of his death, of relatives within the third degree
belonging to the line from which the property came (6 Manresa 268-269; 6 Sanchez
Roman 1934). This Court has held in connection with this matter that the reservista has
the legal title and dominion to the reservable property but subject to a resolutory
condition; that he is like a life usufructuary of the reservable property; that he may
alienate the same but subject to reservation, said alienation transmitting only the
revocable and conditional ownership of the reservists, the rights acquired by the
transferee being revoked or resolved by the survival of reservatarios at the time of the
death of the reservista (Edroso vs. Sablan, 25 Phil. 295; Lunsod vs. Ortega, 46 Phil. 664;
Florentino vs. Florentino, 40 Phil. 480; and Director of Lands vs. Aguas, 65 Phil. 279).

The sale made by Andrea Gutang in favor of appellees was, therefore, subject to the
condition that the vendees would definitely acquire ownership, by virtue of the
alienation, only if the vendor died without being survived by any person entitled to the
reservable property. Inasmuch much as when Andrea Gutang died, Cipriana Yaeso was
still alive, the conclusion becomes inescapable that the previous sale made by the
former in favor of appellants became of no legal effect and the reservable property
subject matter thereof passed in exclusive ownership to Cipriana.

On the other hand, it is also clear that the sale executed by the sisters Paulina and
Cipriana Yaeso in favor of the spouses Fidel Esparcia and Paulina Sienes was subject to a
similar resolutory condition. The reserve instituted by law in favor of the heirs within the
third degree belonging to the line from which the reservable property came, constitutes
a real right which the reservee may alienate and dispose of, albeit conditionally, the
condition being that the alienation shall transfer ownership to the vendee only if and
when the reservee survives the person obliged to reserve. In the present case, Cipriana
Yaeso, one of the reservees, was still alive when Andrea Gutang, the person obliged to
Republic of the Philippines As culled from the decision of the trial court 1 the facts of the case are as follows:
Manila Petitioner Norma S. Tirado (hereafter Mrs. Tirado) acquired ownership of a parcel of
land under a Deed of Assignment executed by her father Jose Dimzon on October 12,
FIRST DIVISION 1967. The deed assigned 73,000 sq. m. of Dimzon's land consisting of 361,558 sq. m.,
(Plan of Lot B-2, Psd-4350, Exh. "C," Lilia Sevilla) (p. 163, Rollo).
G.R. No. 84201 August 3, 1990
Tirado subsequently sought the assistance of respondent Lilia Sevilla to have her land
NORMA S. TIRADO, petitioner, titled, including that of her father. Mrs. Sevilla agreed, provided Mrs. Tirado sold one
vs. hectare of land to her. A deed of sale was finalized on September 30,1974, under which
LILIA SEVILLA, THOMAS S. ONG, CELSO UY and COURTS OF APPEALS, respondents. Mrs. Sevilla would get 10,600 sq. m. (1 ha.) for a consideration of P500,000.00. Mrs.
Sevilla failed to pay the downpayment of P50,000.00 within the agreed one-week
Jose P. Villanueva for petitioner.

Keenly interested in having her land titled, Mrs. Tirado agreed to execute another deed
Advincula /Rigor Law Office for private respondents.
of sale whereby she would sell 15,000 sq. m. (or 1.5 has.) to Mrs. Sevilla who, in turn,
would deliver three (3) fishing boats worth P150,000.00 and advance initial expenses for
Alfonso B. Manayon for Ong and Uy. the titling of the land. The first deed of sale would be deemed cancelled. The second
document of sale was finalized on December 23, 1975.

Despite the lapse of several months, and repeated demands, Mrs. Sevilla failed to
MEDIALDEA, J.: institute any proceedings nor to advance any money for the titling of Mrs. Tirado's land.
Instead, without Mrs. Tirado's consent and knowledge, she filed a petition in her name
This petition seeks to review on certiorari the decision of the Court of Appeals, dated (Civil Case 1755, CFI, Br. XXXII Kalookan City) for the issuance of title over the entire area
March 1, 1988, which modified and/or amended the decision of the Regional Trial Court of Lot B-2, Psd-4350 (Dimzon's land) which includes Mrs. Tirado's 73,000 sq. m.
of Kalookan City by declaring private respondents Celso Uy and Thomas S. Ong
purchasers in good faith and for value of a parcel of land (contrary to the findings of the On December 23, 1976, TCT No. 4128 (covering both Mrs. Tirado and Dimson's lands, or
trial court) as follows: the entire Lot B-2 of Plan Psd 4350) was issued in Mrs. Sevilla's name. Later, Mrs. Sevilla
submitted a subdivision plan on the basis of which three (3) transfer certificates of title
WHEREFORE, IN VIEW OF THE ABOVE, the appealed decision is (TCT Nos. C-5374, C-5379 and C-5380) were issued in lieu of TCT-4128, likewise in the
hereby MODIFIED and TCT-12456 issued in the names of Thomas S. name of Mrs. Sevilla.
Ong and Celso Uy is hereby declared valid without prejudice on the
part of plaintiff-appellee to file a separate action for reimbursement On March 29, 1977, TCT No. C-5380 was cancelled and in its stead Transfer Certificate of
for the value of said property from appellant Lilia Sevilla. Title Nos. C-10298 and C-10299 were issued, again in Mrs. Sevilla's name.

Other than the modification above indicated, the rest of the decision On November 8, 1977, Mrs. Sevilla sold 4/5 portion of TCT No. C-10299 to Thomas Ong
appealed from dated April 25, 1984 is hereby AFFIRMED in toto. No and, on November 15, 1977, 1/5 portion thereof to Celso Uy (p. 77, Rollo). On February
pronouncement as to cost. 14, 1978, TCT No. C-12456 was issued to Ong and Uy, (co-respondents in this petition).

SO ORDERED. (p. 6, Rollo)

On the other hand, Mrs. Tirado who had verified the issuance of TCT No. 4128, filed on With regards (sic) to the cross-claim interposed against respondent
December 23, 1977, this case (CC No. 6667, RTC, Br. XXXIII, Kalookan City) for the Liha D. Sevilla and as aforestated, respondent Lilia D. Sevilla is
annulment of the judgment in Civil Case 1755 and the corresponding cancellation of TCT further ordered to pay respondents Thomas S. Ong and Celso Uy the
No. 4128. Respondent Sevilla was declared in default for failure to file her answer and following:
petitioner was allowed to present her evidence ex parte. Ong and Uy, who had been
impleaded on an amended complaint (filed on January 14, 1980) filed an answer with 1. The amount of the purchase price of the parcel of land purchased
counterclaim and crossclaim against Lilia Sevilla, on September 12, 1980. by respondents Thomas S. Ong and Celso Uy from respondent Lilia
D. Sevilla and which property is more particularly described in the
On February 20, 1984, Ong and Uy were likewise declared in default for failure of their herein cancelled TCT No. C-12456;
counsel, who had been given a special power of Attorney, to appear on their behalf at
the pre-trial. Petitioner was likewise allowed to present her evidence ex parte against 2. The amount of P10,000.00 for and as attorney's fees; and
Ong and Uy.
3. Costs of suit.
On April 25, 1984, the trial court rendered a decision, the dispositive portion of which
The counterclaim as interposed by respondents Thomas Ong and
Celso Uy are hereby DISMISSED for lack of basis to support the
WHEREFORE, judgment is rendered in favor of petitioner and against same.
respondent Lilia Sevilla, ordering the questioned decision partly
nullified and transfer certificate of title No. 4128 issued therefrom is
SO ORDERED. (pp. 55-56, RTC Decision, Rollo)
hereby amended to exclude the claim of herein petitioner to the
extent of 73,000 square meters. Necessarily, subsequent transfers, if
any, from the said title particularly Transfer of Certificate Nos. C- A motion for reconsideration filed by Ong and Uy was denied on October 23, 1984.
5380, C-10298, C-10299 and C-12456, involving the property
awarded to herein petitioner are declared null and void ab initio. As On appeal by Mrs. Sevilla, Ong and Uy, the Court of Appeals modified the decision by
to petitioner's prayer that the Register of Deeds for the City of declaring Ong and Uy purchasers in good faith and for value, in effect depriving Mrs.
Kalookan be directed to issue separate transfer certificate of title in Tirado of that portion of land to the extent covered by TCT No. 12456.
the name of herein petitioner for the area claimed by her totalling
seventy three thousand (73,000) square meters, this Court cannot Hence, this petition by Mrs. Tirado questioning the validity of TCT No. C-12456 issued in
rule on this prayer considering that the issuance of such title by the the names of Ong and Uy.
Register of Deeds shall be subject to the submission of a subdivision
plan duly approved by the Land Registration Commission. Further
respondent Lilia Sevilla is ordered to pay unto petitioner the We affirm the ruling of the Court of Appeals.
Mrs. Tirado anchors her argument on the lis pendens earlier inscribed in TCT Nos. 10298
1. The amount of P30,000.00 for moral damages and the further and 10299 on July 29, 1977. This was, however, done at the instance of the counsel of
sum of P20,000.00 as exemplary damages; Mrs. Tirado's mother, Mrs, Roqueta Rodriguez-Dimson who had earlier flied CC- 1836, in
the then CFI, Br. 120, Kalookan City (p. 97, Rollo) for the annulment likewise of TCT No.
4128 and all titles emanating therefrom. The case was however subsequently dismissed
2. The amount of P10,000.00 for and as attorney's fees; and on December 15, 1977 because Mrs. Dimson was not the real party-in-interest (p. 105,
Rollo). The order cancelling Mrs. Dimson's lis pendens was inscribed on February 7, 1978
3. The costs of suit. (p. 75, Rollo) or seven (7) days prior to the issuance of TCT No. 12456 on February 14,
1978 in Ong and Uy's name. Mrs. Tirado insists that since the lis pendens had been duly Ong then stepped into the shoes of Lilia Sevilla so that the latter (Uy
inscribed on TCT No. 5380 on July 29, 1977, and subsequently carried over to TCT Nos. and Ong) are to all intents and purposes purchasers in good faith
10298 and 10299, Ong and Uy had been duly forwarned about an infirmity in said title; and for value because their predecessor's title was held valid by the
hence, at the time they purchased subject property in November, 1977, they could not court in Civil Case No. 1836. (p. 72, Rollo, CA Resolution on Motion
be considered purchasers in good faith, and the subsequent issuance of TCT 12456 was for Reconsideration)
an error.
To require Ong and Uy to go beyond the lis pendens annotation or to look beyond TCT
The purpose of filing notice of lis pendens is to charge strangers with notice of the No. 10299 would be to impose an additional burden on Ong and Uy since the lis
particular litigation referred to in the notice; and if the notice is effective, a third person pendens annotation sufficiently served its purpose.
who acquires the property affected by the lis pendens takes same subject to the
eventuality of the litigation. But when the adverse right fails in such litigation, the lis Moreover, the lis pendens annotation, although considered a "general notice to all the
pendens loses its efficacy (Atkins Kroll & Co. vs. Domingo, 46 Phil. 362, 1924) cited in world, . . . it is not correct to speak of it as a part of the doctrine of notice, the purchaser
Noblejas and Noblejas, Registration of Land Titles and Deeds, Ann., 1986 Ed., p. 304) pendente lite is affected, not by notice, but because the law does not allow litigating
parties to give to others, pending the litigation, rights to the property in dispute so as to
Thus, the Court of Appeals correctly ruled: prejudice the opposite party. The doctrine rests upon public policy, not notice." (2
Bouvier, Law Dictionary and Concise Encyclopedia, p. 2032, SCRA Annotation on Civil
... at the time appellants Ong and Uy purchased the realty in Law, the Public Land Act and the Property Registration Decree, 1983 Ed., Central
question (TCT No. C-10299), they were well aware that it was Lawbook Publishing Co., Inc., pp. 118-119) (emphasis supplied).
involved in a litigation because of a notice of lis pendens filed by the
counsel of Roqueta Rodriguez on July 28, 1977. However, they (Ong It is now pointed out that Mrs. Tirado had likewise caused to be inscribed a lis pendens
and Uy) took a calculated risk and brought (sic) it just the same from on TCT No. 10298 which had remained titled in Sevilla's name. The parcel of land
Lilia Sevilla, hoping all the while mayhap, that a decision would be covered by said title however was never the subject of any deed of sale between her
rendered favorable to their predecessor-in-interest, Lilia Sevilla in and Ong and Uy. Moreover, such lis pendens was inscribed only on August 31, 1979, two
Civil Case No. C-1836. And true enough and as per their expectation, years after Ong and Uy had brought the land covered by TCT No. 10299 in 1977, and a
after said sale to appellants (Ong and Uy), said notice of lis pendens year after TCT No. 10299 was cancelled on February 14, 1978 to give way to TCT No.
was cancelled by virtue of the order of the Court of First Instance of 12456 in Ong and Uy's name.
Rizal, Caloocan, Branch XII on December 17, 1977, by virtue of a
favorable decision rendered in favor of said Lilia Sevilla. On February Petitioner again points out that she had likewise caused to be inscribed a lis pendens on
14, 1978, T.C.T. No. C-12456 was issued in the names of defendants- TCT No. 12456 (p. 8, Rollo). This move however is irrelevant since the inscription was
appellants Thomas S. Ong and Celso S. Uy (Exh. C. Uy-Ong; p. 177, made on April 22, 1980, or two years after TCT 12456 had long become indefeasible. We
Records). Said Torrens Title does not also show any notice (sic) lis quote from the CA decision:
pendens annotated therein, (pp. 39-40, Rollo, CA Decision)
In a host of cases, our Supreme Court has enunciated the well-
xxx xxx xxx settled rule that "The Certificate serves as evidence of an
indefeasible title to the property in favor of the person whose name
At bar, it is beyond question that at the beginning, Lilia Sevilla's title appears therein. After the expiration of the one year period from
to said property was contested by Roqueta Rodriguez, However, the issuance of the decree of registration upon which it is based, it
once the Court of First Instance of Caloocan, Branch XII rendered its becomes incontrovertible (Pamintuan vs. San Agustin, 43 Phil. 558;
decision in favor of said Lilia Sevilla, her title thereto became Reyes and Nadres vs. Borbon and Director of Lands, 50 Phil. 791;
judicially settled so that it ineluctably follows that the title awarded Manuel Syjuco et al. vs. Luis Francisco, 53 O.G. 2186, April 15, 1957;
to her is a legal title. It also logically follows that appellants Uy and
Brizuela, et al. vs. Ciriaco Vda. de Vargas, 53 O.G. 2822, May 15,
1987. (p. 41, Rollo)

Besides, Ong and Uy were impleaded by Mrs. Tirado on an amended complaint on

January 14, 1980, two years after the issuance of TCT 12456.

ACCORDINGLY, we AFFIRM the decision of the Court of Appeals. No Costs.


Narvasa (Chairman), Cruz, Gancayco and Grio-Aquino, JJ., concur.

III price spouses have always been in continued possession over the western half of the land up
to the present.
Republic of the Philippines
SUPREME COURT Not known to them, meanwhile, Maximo Mapalo, on March 15, 1938, registered the
Manila deed of sale in his favor and obtained in his name Transfer Certificate of Title No. 12829
over the entire land. Thirteen years later on October 20, 1951, he sold for P2,500.00 said
EN BANC entire land in favor of Evaristo, Petronila Pacifico and Miguel all surnamed Narciso. The
sale to the Narcisos was in turn registered on November 5, 1951 and Transfer Certificate
of Title No. 11350 was issued for the whole land in their names.
G.R. No. L-21489 and L-21628 May 19, 1966

The Narcisos took possession only of the eastern portion of the land in 1951, after the
MIGUEL MAPALO, ET AL., petitioners,
sale in their favor was made. On February 7, 1952 they filed suit in the Court of First
Instance of Pangasinan (Civil Case No. 1191) to be declared owners of the entire land,
MAXIMO MAPALO, ET AL., respondents.
for possession of its western portion; for damages; and for rentals. It was brought
against the Mapalo spouses as well as against Floro Guieb and Rosalia Mapalo Guieb
Pedro P. Tuason for petitioners. who had a house on the western part of the land with the consent of the spouses
Primicias and Del Castillo for respondents. Mapalo and Quiba.

BENGZON, J.P., J.: The Mapalo spouses filed their answer with a counterclaim on March 17, 1965, seeking
cancellation of the Transfer Certificate of Title of the Narcisos as to the western half of
The spouses Miguel Mapalo and Candida Quiba, simple illiterate farmers, were the land, on the grounds that their (Mapalo spouses) signatures to the deed of sale of
registered owners, with Torrens title certificate O.C.T. No. 46503, of a 1,635-square- 1936 was procured by fraud and that the Narcisos were buyers in bad faith. They asked
meter residential land in Manaoag, Pangasinan. Said spouses-owners, out of love and for reconveyance to them of the western portion of the land and issuance of a Transfer
affection for Maximo Mapalo a brother of Miguel who was about to get married Certificate of Title in their names as to said portion.
decided to donate the eastern half of the land to him. O.C.T. No. 46503 was delivered.
As a result, however, they were deceived into signing, on October 15, 1936, a deed of In addition, the Mapalo spouses filed on December 16, 1957 their own complaint in the
absolute sale over the entire land in his favor. Their signatures thereto were procured by Court of First Instance of Pangasinan (Civil Case No. U-133) against the aforestated
fraud, that is, they were made to believe by Maximo Mapalo and by the attorney who Narcisos and Maximo Mapalo. They asked that the deeds of sale of 1936 and of 1951
acted as notary public who "translated" the document, that the same was a deed of over the land in question be declared null and void as to the western half of said land.
donation in Maximo's favor covering one-half (the eastern half) of their land. Although
the document of sale stated a consideration of Five Hundred (P500.00) Pesos, the
Judge Amado Santiago of the Court of First Instance of Pangasinan located in the
aforesaid spouses did not receive anything of value for the land. The attorney's
municipality of Urdaneta tried the two cases jointly. Said court rendered judgment on
misbehaviour was the subject of an investigation but its result does not appear on
January 18, 1961, as follows:
record. However we took note of the fact that during the hearing of these cases said
notary public was present but did not take the witness stand to rebut the plaintiffs'
testimony supporting the allegation of fraud in the preparation of the document. WHEREFORE, judgment is hereby rendered as follows, to wit:

Following the execution of the afore-stated document, the spouses Miguel Mapalo and (a) dismissing the complaint in Civil Case No. 11991;
Candida Quiba immediately built a fence of permanent structure in the middle of their
land segregating the eastern portion from its western portion. Said fence still exists. The (b) declaring Exhibit A, plaintiffs in Case No. 11991 and Exhibit 1, defendants in
Case No. U-133 as a donation only over the eastern half portion of the above-
described land, and as null and void with respect to the western half portion And here appellants press the contention that the document dated October 15, 1936,
thereof; purporting to sell the entire land in favor of Maximo Mapalo, is void, not merely
voidable, as to the western portion of the land for being absolutely simulated or
(c) declaring as null and void and without legal force and effect Transfer fictitious.
Certificate of Title No. 12829 issued in favor of Maximo Mapalo as regards the
western half portion of the land covered therein; Starting with fundamentals, under the Civil Code, either the old or the new, for a
contract to exist at all, three essential requisites must concur: (1) consent, (2) object,
(d) declaring as null and void Transfer Certificate of Title No. 11350 in the and (3) cause or consideration.1 The Court of Appeals is right in that the element of
names of the Narcisos insofar as the western half portion of the land covered consent is present as to the deed of sale of October 15, 1936. For consent was
therein is concerned; admittedly given, albeit obtained by fraud. Accordingly, said consent, although
defective, did exist. In such case, the defect in the consent would provide a ground for
annulment of a voidable contract, not a reason for nullity ab initio.
(e) ordering the spouses Mapalo and Quiba and the Narcisos to have the
above-described land be subdivided by a competent land surveyor and that
the expenses incident thereto be borne out by said parties pro rata; The parties are agreed that the second element of object is likewise present in the deed
of October 15, 1936, namely, the parcel of land subject matter of the same.
(f) ordering the Register of Deeds of Pangasinan to issue in lieu of Transfer
Certificate of Title No. 11350 two new titles upon completion of the Not so, however, as to the third element of cause or consideration. And on this point
subdivision plan, one in favor of the spouses Miguel Mapalo and Candida the decision of the Court of Appeals is silent.
Quiba covering the western half portion and another for the Narcisos covering
the eastern half portion of the said land, upon payment of the legal fees; As regards the eastern portion of the land, the Mapalo spouses are not claiming the
meanwhile the right of the spouses Mapalo and Quiba is hereby ordered to be same, it being their stand that they have donated and freely given said half of their land
annotated on the back of Transfer Certificate of Title No. 11350; and to Maximo Mapalo. And since they did not appeal from the decision of the trial court
finding that there was a valid and effective donation of the eastern portion of their land
(g) sentencing Maximo Mapalo and the Narcisos to pay the costs. in favor of Maximo Mapalo, the same pronouncement has become final as to them,
rendering it no longer proper herein to examine the existence, validity efficacy of said
donation as to said eastern portion.1wph1.t

Now, as to the western portion, however, the fact not disputed herein is that no
The Narcisos appealed to the Court of Appeals. In its decision on May 28, 1963, the
donation by the Mapalo spouses obtained as to said portion. Accordingly, we start with
Court of Appeals reversed the judgment of the Court of First Instance, solely on the
the fact that liberality as a cause or consideration does not exist as regards the western
ground that the consent of the Mapalo spouses to the deed of sale of 1936 having been
portion of the land in relation to the deed of 1936; that there was no donation with
obtained by fraud, the same was voidable, not void ab initio, and, therefore, the action
respect to the same.
to annul the same, within four years from notice of the fraud, had long prescribed. It
reckoned said notice of the fraud from the date of registration of the sale on March 15,
1938. The Court of First Instance and the Court of Appeals are therefore unanimous that It is reduced, then, to the question whether there was an onerous conveyance of
the spouses Mapalo and Quiba were definitely the victims of fraud. It was only on ownership, that is, a sale, by virtue of said deed of October 15, 1936, with respect to
prescription that they lost in the Court of Appeals. said western portion. Specifically, was there a cause or consideration to support the
existence of a contrary of sale?
From said decision of the Court of Appeals, the Mapalo spouses appealed to this Court.
The rule under the Civil Code, again be it the old or the new, is that contracts without a
cause or consideration produce no effect whatsoever.2 Nonetheless, under the Old Civil
Code, the statement of a false consideration renders the contract voidable, unless it is el medio juridico adoptado y el fin practico perseguido, por utilizacion de una
proven that it is supported by another real and licit consideration.3 And it is further via oblicua o combinacion de formas juridicas entrelazadas que permita la
provided by the Old Civil Code that the action for annulment of a contract on the ground obtencion de un resultado no previsto en los cuadros de la ley negocios
of falsity of consideration shall last four years, the term to run from the date of the indirectos y negocios fiduciarlos, validos cuando no envuelven fraude de ley,
consummation of the contract.4 como en el caso de la verdadera disconformidad entre la apariencia del acto y
su real contenido, preparada deliberadamente por las partes negocio
Accordingly, since the deed of sale of 1936 is governed by the Old Civil Code, it should simulado , ya que, cuando esta divergencia implica no una ausencia total de
be asked whether its case is one wherein there is no consideration, or one with a voluntad y de acto real, sino mera ocultacion de un negocio verdadero bajo la
statement of a false consideration. If the former, it is void and inexistent; if the latter, falsa apariencia de un negocio fingido "sirulacion relativa", la ineficacia de la
only voidable, under the Old Civil Code. As observed earlier, the deed of sale of 1936 forma externa simulada, no es obstaculo para la posible validez del negocio
stated that it had for its consideration Five Hundred (P500.00) Pesos. In fact, however, disimulado que contiene, en tanto este ultimo sea licito y reuna no solo los
said consideration was totally absent. The problem, therefore, is whether a deed which requisitos generales, sino tambien los que corresponden a su naturaleza
states a consideration that in fact did not exist, is a contract without consideration, and especial, doctrina, en obligada aplicacion de los preceptos de nuestra Ley civil,
therefore void ab initio, or a contract with a false consideration, and therefore, at least especialmente en su art. 1.276, que, al establecer el principio de nulidad de
under the Old Civil Code, voidable. los contratos en los que se hace expresion de una causa falsa, deja a salvo el
caso de que esten fundados en otra verdadera y licita. (Manresa, Codigo Civil,
Tomo VIII, Vol. II pp. 357-358)
According to Manresa, what is meant by a contract that states a false consideration is
one that has in fact a real consideration but the same is not the one stated in the
document. Thus he says: Sanchez Roman says:

En primer lugar, nor interesa recordar la diferencia entre simulacion y el Ya hemos dicho que la intervencion de causa en los contratos es necesaria, y
contrato con proposito fraudulento. Este aunque ilicito es real; mas el primero que sin ellos son nulos; solo se concibe que un hombre perturbado en su
es falso en realidad, aunque se le presente como verdadero. (Manresa, Codigo razon pueda contratar sin causa. ...
Civil, Tomo VIII, Vol. II, p. 354.)
Por la misma razon de la necesidad de la intervencion de causa en el contrato,
And citing a decision of the Supreme Court of Spain on the matter, Manresa further es preciso que esta sea verdadera y no supuesta, aparente o figurada. Que la
clarifies the difference of false cause and no cause, thus: falsedad de la causa vicia el consentimiento y anula el contrato, es, no solo
doctrina indudable de Derecho Cientifico sino tambien de antiguo Derecho de
Castilla, que en multitud de leyes asi lo declararon. (Sanchez Roman, Derecho
Insiste en el distingo con mas detenida descripcion la sentencia de 25 de mayo
Civil, Tomo IV, p. 206.).
de 1944, en la que se argumenta:

In a clearer exposition of the above distinction, Castan states:

Si bien es elemento fundamental de todo negocio, la declaracion de voluntad
substracto de una voluntad efectiva, y la existencia de una causa que
leconfiera significado juridico sealando la finalidad que con este se persigue, 2.. La causa ha de ser verdadera. La causa falsa puede ser erronea o simulada.
no ha de deducirse de esta doctrina, fundamentalmente recogida en el Es erronea como dice Giorgi, la causa que tiene por base la credulidad en un
articulo 1.261 y concordantes del Codigo civil, que cualquier falta de hecho no existente; y simulada la que tiene lugar cuando se hace aparecer
adecuacion entre cualquier incongruencia entre la causa expresada y la artificiosamente una distinta de la verdadera. La erronea produce siempre la
verdadera, y, en general, entre la estructuracion y la finalidad economica; inexistencia del contrato; la simulada no siempre produce este efecto, porque
hayan de producir la ineficacia del negocio, pues por el contrario, puede este puede suceder que la causa oculta, pero verdadera, baste para sostener el
ser valido y producir sus efectos tanto en el caso de la mera disonancia entre contrato. De acuerdo con esta doctrina, dice el art. 1.276 de nuestro Codigo
que "la expresion de una causa falsa en los contratos dara lugar a la nulidad, si
no se probase que estaban fundados en otra verdadera y licita". (Castan Anent the matter of whether the Narcisos were purchasers in good faith, the trial court
Derecho Civil Espaol, Tomo II, pp. 618-619) in its decision resolved this issue, thus:

From the foregoing it can be seen that where, as in this case, there was in fact no With regard to the second issue, the Narcisos contend that they are the
consideration, the statement of one in the deed will not suffice to bring it under the rule owners of the above-described property by virtue of the deed of sale (Exh. B,
of Article 1276 of the Old Civil Code as stating a false consideration. Returning to plaintiffs in 11991 and Exh. 2, defendants in U-133) executed in their favor by
Manresa: Maximo Mapalo, and further claim that they are purchasers for value and in
good faith. This court, however, cannot also give weight and credit on this
Figurando en nuestro Derecho positivo la causa, como un elemento esential theory of the Narcisos on the following reasons: Firstly, it has been positively
del contrato, es consecuencia ineludible, se reputar simulada la entrega del shown by the undisputed testimony of Candida Quiba that Pacifico Narciso
precio en la compraventa de autos, el que haya que declararla nula por and Evaristo Narciso stayed for some days on the western side (the portion in
inexistente haciendose aplicacion indebida de art. 1.276 por el Tribunal question) of the above-described land until their house was removed in 1940
sentenciador al cohonestar la falta de precio admitiendo se pueda tratar de by the spouses Mapalo and Quiba; secondly, Pacifica Narciso admitted in his
una donacion, ya que la recta aplicacion del citado precepto exige que los testimony in chief that when they bought the property, Miguel Mapalo was
negocios simulados, o sea con causa falsa, se justifique la verdadera y licita en still in the premises in question (western part) which he is occupying and his
que se funda el acto que las partes han querido ocultar y el cumplimiento de house is still standing thereon; and thirdly, said Pacifico Narciso when
las formalidades impuestas por la Ley y, cual dice la sentencia de 3 de marzo presented as a rebuttal and sub-rebuttal witness categorically declared that
de 1932, esta rigurosa doctrina ha de ser especialmente impuesta en la before buying the land in question he went to the house of Miguel Mapalo
donaciones puras y simples; de los que deduce que la sentencia recurrida al and Candida Quiba and asked them if they will permit their elder brother
no decretar la nulidad instada por falta de causa, incide en la infraccion de los Maximo to sell the property.
articulos 1.261, 1.274, 1.275 y 1.276 del Codigo Civil. (Sentencia de 22 de
febrero de 1940). (Manresa, Codigo Civil, Tomo VIII, Vol. II, p. 356) Aside from the fact that all the parties in these cases are neighbors, except
Maximo Mapalo the foregoing facts are explicit enough and sufficiently reveal
In our view, therefore, the ruling of this Court in Ocejo, Perez & Co. vs. Flores, 40 Phil. that the Narcisos were aware of the nature and extent of the interest of
921, is squarely applicable herein. In that case we ruled that a contract of purchase and Maximo Mapalo their vendor, over the above-described land before and at
sale is null and void and produces no effect whatsoever where the same is without the time the deed of sale in their favor was executed.
cause or consideration in that the purchase price which appears thereon as paid has in
fact never been paid by the purchaser to the vendor. Upon the aforestated declaration of Pacifico Narciso the following question
arises: What was the necessity, purpose and reason of Pacifico Narciso in still
Needless to add, the inexistence of a contract is permanent and incurable and cannot be going to the spouses Mapalo and asked them to permit their brother Maximo
the subject of prescription. In the words of Castan: "La inexistencia es perpetua e to dispose of the above-described land? To this question it is safe to state that
insubsanable no pudiendo ser objecto de confirmacion ni prescripcion (Op. cit., p. 644.) this act of Pacifico Narciso is a conclusive manifestation that they (the
In Eugenio v. Perdido, 97 Phil. 41, 42-43, involving a sale dated 1932, this Court, Narcisos) did not only have prior knowledge of the ownership of said spouses
speaking through Justice Cesar Bengzon, now Chief Justice, stated: over the western half portion in question but that they also have recognized
said ownership. It also conclusively shows their prior knowledge of the want of
dominion on the part of their vendor Maximo Mapalo over the whole land and
Under the existing classification, such contract would be "inexisting" and "the
also of the flaw of his title thereto. Under this situation, the Narcisos may be
action or defense for declaration" of such inexistence "does not prescribe".
considered purchasers in value but certainly not as purchasers in good faith. ...
(Art. 1410, New Civil Code). While it is true that this is a new provision of the
(pp. 97-98, Record on Appeal.)
New Civil Code, it is nevertheless a principle recognized since Tipton vs.
Velasco, 6 Phil. 67 that "mere lapse of time cannot give efficacy to contracts
that are null and void".
And said finding which is one of fact is found by us not a bit disturbed by the Court
of Appeals. Said the Court of Appeals:

In view of the conclusion thus reached, it becomes unnecessary to pass on the

other errors assigned. Suffice it to say that, on the merits the appealed
decision could have been upheld under Article 1332 of the new Civil Code and
the following authorities: Ayola vs. Valderrama Lumber Manufacturers Co.,
Inc., 49 O.G. 980, 982; Trasporte vs. Beltran, 51 O.G. 1434, 1435; Cortez vs.
Cortez, CA-G.R. No. 18451-R, August 8, 1961; Castillo vs. Laberinto, CA-G.R.
No. 18118-R, December 20, 1961; and 13 C.J. 372-373, as well as the several
facts and circumstances appreciated by the trial court as supporting appellees'

thereby in effect sustaining barring only its ruling on prescription the judgment
and findings of the trial court, including that of bad faith on the part of the Narcisos in
purchasing the land in question. We therefore see no need to further remand this case
to the Court of Appeals for a ruling on this point, as appellees request in their brief in
the event we hold the contract of 1936 to be inexistent as regards the western portion
of the land.

In view of defendants' bad faith under the circumstances we deem it just and equitable
to award, in plaintiffs' favor, attorneys' fees on appeal, in the amount of P1,000.00 as
prayed for in the counterclaim.

Wherefore, the decision of the Court of Appeals is hereby reversed and set aside, and
another one is hereby rendered affirming in toto the judgment of the Court of First
Instance a quo, with attorney's fees on appeal in favor of appellants in the amount of
P1,000.00, plus the costs, both against the private appellees. So ordered.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala,
Makalintal, Zaldivar and Sanchez, JJ., concur.
Republic of the Philippines possession of the lands purportedly conveyed until his death, that he remained the
SUPREME COURT declared owner thereof and that the tax payments thereon continued to be paid in his
Manila name. 4 Whatever the truth, however, is not crucial. What is not disputed is that on the
strength of the deeds of sale, the respondents were able to secure title in their favor
FIRST DIVISION over three of the ten parcels of land conveyed thereby. 5

G.R. No. L-38498 August 10, 1989 On May 22,1964 the petitioners commenced suit against the respondents in the Court
of First Instance of Cavite, seeking annulment of the deeds of sale as fictitious,
fraudulent or falsified, or, alternatively, as donations void for want of acceptance
embodied in a public instrument. Claiming ownership pro indiviso of the lands subject of
the deeds by virtue of being intestate heirs of Hilario Mateum, the petitioners prayed
for recovery of ownership and possession of said lands, accounting of the fruits thereof
and damages. Although the complaint originally sought recovery of all the twenty-nine
NAMBAYAN respondents.
parcels of land left by Mateum, at the pre-trial the parties agreed that the controversy
be limited to the ten parcels subject of the questioned sales, and the Trial Court ordered
Beltran, Beltran & Beltran for petitioners. the exclusion of the nineteen other parcels from the action. 6 Of the ten parcels which
remained in litigation, nine were assessed for purposes of taxation at values aggregating
Jose M. Legaspi for private respondents. P10,500 00. The record does not disclose the assessed value of the tenth parcel, which
has an area of 1,443 square meters. 7

In answer to the complaint, the defendants (respondents here) denied the alleged
NARVASA, J.: fictitious or fraudulent character of the sales in their favor, asserting that said sales were
made for good and valuable consideration; that while "... they may have the effect of
donations, yet the formalities and solemnities of donation are not required for their
The facts underlying this appeal by certiorari are not in dispute. Hilario Mateum of validity and effectivity, ... that defendants were collateral relatives of Hilario Mateum
Kawit, Cavite, died on March 11, 1964, single, without ascendants or descendants, and and had done many good things for him, nursing him in his last illness, which services
survived only by collateral relatives, of whom petitioners herein, his first cousins, were constituted the bulk of the consideration of the sales; and (by way of affirmative
the nearest. Mateum left no will, no debts, and an estate consisting of twenty-nine defense) that the plaintiffs could not question or seek annulment of the sales because
parcels of land in Kawit and Imus, Cavite, ten of which are involved in this appeal. 1 they were mere collateral relatives of the deceased vendor and were not bound,
principally or subsidiarily, thereby. 8
On April 3, 1964, the private respondents, themselves collateral relatives of Mateum
though more remote in degree than the petitioners, 2 registered with the Registry of After the plaintiffs had presented their evidence, the defendants filed a motion for
Deeds for the Province of Cavite two deeds of sale purportedly executed by Mateum in dismissal in effect, a demurrer to the evidence reasserting the defense set up in their
their (respondents') favor covering ten parcels of land. Both deeds were in Tagalog, save answer that the plaintiffs, as mere collateral relatives of Hilario Mateum, had no light to
for the English descriptions of the lands conveyed under one of them; and each recited impugn the latter's disposition of his properties by means of the questioned
the reconsideration of the sale to be" ... halagang ISANG PISO (Pl.00), salaping Pilipino, conveyances and submitting, additionally, that no evidence of fraud maintaining said
at mga naipaglingkod, ipinaglilingkod sa aking kapakanan ..." ("the sum of ONE PESO transfers had been presented. 9
Pl.00), Philippine Currency, and services rendered, being rendered and to be rendered
for my benefit"). One deed was dated February 6,1963 and covered five parcels of land,
and the other was dated March 4, 1963, covering five other parcels, both, therefore, The Trial Court granted the motion to dismiss, holding (a) on the authority of Armentia
antedating Mateum's death by more than a year. 3 It is asserted by the petitioners, but vs. Patriarca, 10 that the plaintiffs, as mere collateral relatives, not forced heirs, of
denied by the respondents, that said sales notwithstanding, Mateum continued in the Hilario Mateum, could not legally question the disposition made by said deceased
during his lifetime, regardless of whether, as a matter of objective reality, said upholding the contract should prove that there is another true and
dispositions were valid or not; and (b) that the plaintiffs evidence of alleged fraud was lawful consideration therefor. (lbid., Art. 1353).
insufficient, the fact that the deeds of sale each stated a consideration of only Pl.00 not
being in itself evidence of fraud or simulation. 11 If therefore the contract has no causa or consideration, or the causa
is false and fictitious (and no true hidden causa is proved) the
On appeal by the plaintiffs to the Court of Appeals, that court affirmed, adverting with property allegedly conveyed never really leaves the patrimony of the
approval to the Trial Court's reliance on the Armentia ruling which, it would appear, transferor, and upon the latter's death without a testament, such
both courts saw as denying, without exception, to collaterals, of a decedent, not forced property would pass to the transferor's heirs intestate and be
heirs, the right to impugn the latter's dispositions inter vivos of his property. The recoverable by them or by the Administrator of the transferor's
Appellate Court also analyzed the testimony of the plaintiffs' witnesses, declared that it estate. In this particular regard, I think Concepcion vs. Sta. Ana, 87
failed to establish fraud of any kind or that Mateum had continued paying taxes on the Phil. 787 and Sobs vs. Chua Pua Hermanos, 50 Phil. 536, do not
lands in question even after executing the deeds conveying them to the defendants, and correctly state the present law, and must be clarified.
closed with the statement that "... since in duly notarized and registered deeds of sale
consideration is presumed, we do not and it necessary to rule on the alternative To be sure the quoted passage does not reject and is not to be construed as rejecting
allegations of the appellants that the said deed of sale were (sic) in reality donations. 12 the Concepcion and Solis rulings 13 as outrightly erroneous, far from it. On the contrary,
those rulings undoubtedly read and applied correctly the law extant in their time: Art.
One issue clearly predominates here. It is whether, in view of the fact that, for 1276 of the Civil Code of 1889 under which the statement of a false cause in a contract
properties assuredly worth in actual value many times over their total assessed rendered it voidable only, not void ab initio. In observing that they "... do not correctly
valuation of more than P10,000.00, the questioned deeds of sale each state a price of state the present law and must be clarified," Justice Reyes clearly had in mind the fact
only one peso (P1.00) plus unspecified past, present and future services to which no that the law as it is now (and already was in the time Armentia) no longer deems
value is assigned, said deeds were void or inexistent from the beginning ("nulo") or contracts with a false cause, or which are absolutely simulated or fictitious, merely
merely voidable, that is, valid until annulled. If they were only voidable, then it is a voidable, but declares them void, i.e., inexistent ("nulo") unless it is shown that they are
correct proposition that since the vendor Mateum had no forced heirs whose legitimes supported by another true and lawful cause or consideration. 14 A logical consequence
may have been impaired, and the petitioners, his collateral relatives, not being bound of that change is the juridical status of contracts without, or with a false, cause is that
either principally or subsidiarily to the terms of said deeds, the latter had and have no conveyances of property affected with such a vice cannot operate to divest and transfer
actionable right to question those transfers. ownership, even if unimpugned. If afterwards the transferor dies the property descends
to his heirs, and without regard to the manner in which they are called to the
On the other hand, if said deeds were void ab initio because to all intents and purposes succession, said heirs may bring an action to recover the property from the purported
without consideration, then a different legal situation arises, and quite another result transferee. As pointed out, such an action is not founded on fraud, but on the premise
obtains, as pointed out by the eminent civil law authority, Mr. Justice J.B.L. Reyes who, that the property never leaves the estate of the transferor and is transmitted upon his
in his concurring opinion in Armentia, said: death to heirs, who would labor under no incapacity to maintain the action from the
mere fact that they may be only collateral relatives and bound neither principally or
subsidiarily under the deed or contract of conveyance.
I ... cannot bring myself to agree to the proposition that the heirs
intestate would have no legal standing to contest the conveyance
made by the deceased if the same were made without any In Armentia the Court determined that the conveyance questioned was merely
consideration, or for a false and fictitious consideration. For under annullable not void ab initio, and that the plaintiff s action was based on fraud vitiating
the Civil Code of the Philippines, Art. 1409, par. 3, contracts with a said conveyance. The Court said:
cause that did not exist at the time of the transaction are inexistent
and void from the beginning. The same is true of contracts stating a Hypothetically admitting the truth of these allegations (of plaintiffs
false cause (consideration) unless the persons interested in complaint), the conclusion is irresistible that the sale is merely
voidable. Because Marta Armentia executed the document, and this
is not controverted by plaintiff. Besides, the fact that the vendees representative of money, e.g., a check or draft, again citing Manresa 16 to the effect
were minors, makes the contract, at worst, annullable by them, that services are not the equivalent of money insofar as said requirement is concerned
Then again, inadequacy of consideration does not imply total want and that a contract is not a true sale where the price consists of services or prestations;
of consideration. Without more, the parted acts of Marta Armentia
after the sale did not indicate that the said sale was void from the 4. once more citing Manresa 17 also point out that the "services" mentioned in the
being. questioned deeds of sale are not only vague and uncertain, but are unknown and not
susceptible of determination without the necessity of a new agreement between the
The sum total of all these is that, in essence, plaintiffs case is parties to said deeds.
bottomed on fraud, which renders the contract voidable.
Without necessarily according all these assertions its full concurrence, but upon the
It therefore seems clear that insofar as it may be considered as setting or reaffirming consideration alone that the apparent gross, not to say enormous, disproportion
precedent, Armentia only ruled that transfers made by a decedent in his lifetime, which between the stipulated price (in each deed) of P l.00 plus unspecified and unquantified
are voidable for having been fraudulently made or obtained, cannot be posthumously services and the undisputably valuable real estate allegedly sold worth at least
impugned by collateral relatives succeeding to his estate who are not principally or P10,500.00 going only by assessments for tax purposes which, it is well-known, are
subsidiarily bound by such transfers. For the reasons already stated, that ruling is not notoriously low indicators of actual value plainly and unquestionably demonstrates that
extendible to transfers which, though made under closely similar circumstances, are they state a false and fictitious consideration, and no other true and lawful cause having
void ab initio for lack or falsity of consideration. been shown, the Court finds both said deeds, insofar as they purport to be sales, not
merely voidable, but void ab initio.
The petitioners here argue on a broad front that the very recitals of the questioned
deeds of sale reveal such want or spuriousness of consideration and therefore the void Neither can the validity of said conveyances be defended on the theory that their true
character of said sales. They: causa is the liberality of the transferor and they may be considered in reality donations
18 because the law 19 also prescribes that donations of immovable property, to be
1. advert to a decision of the Court of Appeals in Montinola vs. Herbosa (59 O.G. No. 47, valid, must be made and accepted in a public instrument, and it is not denied by the
pp, 8101, 8118) holding that a price of P l.00 for the sale of things worth at least respondents that there has been no such acceptance which they claim is not required.
P20,000.00 is so insignificant as to amount to no price at all, and does not satisfy the law 20
which, while not requiring for the validity of a sale that the price be adequate,
prescribes that it must be real, not fictitious, stressing the obvious parallel between that The transfers in question being void, it follows as a necessary consequence and
case and the present one in stated price and actual value of the property sold; conformably to the concurring opinion in Armentia, with which the Court fully agrees,
that the properties purportedly conveyed remained part of the estate of Hilario
2. cite Manresa to the same effect: that true price, which is essential to the validity of a Mateum, said transfers notwithstanding, recoverable by his intestate heirs, the
sale, means existent, real and effective price, that which does not consist in an petitioners herein, whose status as such is not challenged.
insignificant amount as, say, P.20 for a house; that it is not the same as the concept of a
just price which entails weighing and measuring, for economic equivalence, the amount The private respondents have only themselves to blame for the lack of proof that might
of price against all the factors that determine the value of the thing sold; but that there have saved the questioned transfers from the taint of invalidity as being fictitious and
is no need of such a close examination when the immense disproportion between such without ilicit cause; proof, to be brief, of the character and value of the services, past,
economic values is patent a case of insignificant or ridiculous price, the unbelievable present, and future, constituting according to the very terms of said transfers the
amount of which at once points out its inexistence; 15 principal consideration therefor. The petitioners' complaint (par. 6) 21 averred that the
transfers were "... fraudulent, fictitious and/or falsified and (were) ... in reality donations
3. assert that Art. 1458 of the Civil Code, in prescribing that a sale be for a ... price of immovables ...," an averment that the private respondents not only specifically
certain in money or its equivalent ... requires that "equivalent" be something denied, alleging that the transfers had been made "... for good and valuable
consideration ...," but to which they also interposed the affirmative defenses that said
transfers were "... valid, binding and effective ...," and, in an obvious reference to the
services mentioned in the deeds, that they "... had done many good things to (the
transferor) during his lifetime, nursed him during his ripe years and took care of him
during his previous and last illness ...," (pars. 4, 6, 16 and 17, their answer).lwph1.t
22 The onus, therefore, of showing the existence of valid and illicit consideration for the
questioned conveyances rested on the private respondents. But even on a contrary
assumption, and positing that the petitioners initially had the burden of showing that
the transfers lacked such consideration as they alleged in their complaint, that burden
was shifted to the private respondents when the petitioners presented the deeds which
they claimed showed that defect on their face and it became the duty of said
respondents to offer evidence of existent lawful consideration.

As the record clearly demonstrates, the respondents not only failed to offer any proof
whatsoever, opting to rely on a demurrer to the petitioner's evidence and upon the
thesis, which they have maintained all the way to this Court, that petitioners, being
mere collateral relatives of the deceased transferor, were without right to the
conveyances in question. In effect, they gambled their right to adduce evidence on a
dismissal in the Trial Court and lost, it being the rule that when a dismissal thus obtained
is reversed on appeal, the movant loses the right to present evidence in his behalf. 23

WHEREFORE, the appealed Decision of the Court of Appeals is reversed. The questioned
transfers are declared void and of no force or effect. Such certificates of title as the
private respondents may have obtained over the properties subject of said transfers are
hereby annulled, and said respondents are ordered to return to the petitioners
possession of an the properties involved in tills action, to account to the petitioners for
the fruits thereof during the period of their possession, and to pay the costs. No
damages, attorney's fees or litigation expenses are awarded, there being no evidence
thereof before the Court.

Republic of the Philippines c) A two-storey commercial building, the first floor rented to different persons
SUPREME COURT and the second floor, Bonanza Hotel, operated by the defendant also located
Manila on the above described lot; and

FIRST DIVISION d) A sari-sari store (formerly a bakery) also located on the above described
G.R. No. 130115 July 16, 2008
According to petitioners, the said lot and properties were titled and tax declared under
FELIX TING HO, JR., MERLA TING HO BRADEN, JUANA TING HO & LYDIA TING HO trust in the name of respondent Vicente Teng Gui for the benefit of the deceased Felix
BELENZO, Petitioners, Ting Ho who, being a Chinese citizen, was then disqualified to own public lands in the
vs. Philippines; and that upon the death of Felix Ting Ho, the respondent took possession of
VICENTE TENG GUI, Respondent. the same for his own exclusive use and benefit to their exclusion and prejudice.4

DECISION In his answer, the respondent countered that on October 11, 1958, Felix Ting Ho sold
the commercial and residential buildings to his sister-in-law, Victoria Cabasal, and the
bakery to his brother-in-law, Gregorio Fontela.5 He alleged that he acquired said
properties from the respective buyers on October 28, 1961 and has since then been in
possession of subject properties in the concept of an owner; and that on January 24,
This is a Petition for Review on Certiorari1 assailing the Decision2 of the Court of Appeals 1978, Original Certificate of Title No. P-1064 covering the subject lot was issued to him
(CA) in CA-G.R. CV No. 42993 which reversed and set aside the Decision of the Regional pursuant to a miscellaneous sales patent granted to him on January 3, 1978.6
Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 558-0-88.
The undisputed facts as found by the trial court (RTC), and affirmed by the appellate
The instant case traces its origin to an action for partition filed by petitioners Felix Ting court (CA), are as follows:
Ho, Jr., Merla Ting Ho Braden, Juana Ting Ho and Lydia Ting Ho Belenzo against their
brother, respondent Vicente Teng Gui, before the RTC, Branch 74 of Olongapo City. The
[T]he plaintiffs and the defendant are all brothers and sisters, the defendant being the
controversy revolves around a parcel of land, and the improvements established
oldest.lavvphi1 They are the only legitimate children of the deceased Spouses Felix Ting
thereon, which, according to petitioners, should form part of the estate of their
Ho and Leonila Cabasal. Felix Ting Ho died on June 26, 1970 while the wife Leonila
deceased father, Felix Ting Ho, and should be partitioned equally among each of the
Cabasal died on December 7, 1978. The defendant Vicente Teng Gui is the oldest among
the children as he was born on April 5, 1943. The father of the plaintiffs and the
defendant was a Chinese citizen although their mother was Filipino. That sometime in
In their complaint before the RTC, petitioners alleged that their father Felix Ting Ho died 1947, the father of the plaintiffs and defendant, Felix Ting Ho, who was already then
intestate on June 26, 1970, and left upon his death an estate consisting of the following: married to their mother Leonila Cabasal, occupied a parcel of land identified to (sic) as
Lot No. 18 Brill which was thereafter identified as Lot No. 16 situated at Afable Street,
a) A commercial land consisting of 774 square meters, more or less, located at East Bajac-Bajac, Olongapo City, by virtue of the permission granted him by the then
Nos. 16 and 18 Afable St., East Bajac-Bajac, Olongapo City, covered by Original U.S. Naval Reservation Office, Olongapo, Zambales. The couple thereafter introduced
Certificate of Title No. P-1064 and Tax Declaration No. 002-2451; improvements on the land. They built a house of strong material at 16 Afable Street
which is a commercial and residential house and another building of strong material at
b) A two-storey residential house on the aforesaid lot; 18 Afable Street which was a residential house and a bakery. The couple, as well as their
children, lived and resided in the said properties until their death. The father, Felix Ting
Ho had managed the bakery while the mother managed the sari-sari store. Long before
the death of Felix Ting Ho, who died on June 26, 1970, he executed on October 11, 1958
a Deed of Absolute Sale of a house of strong material located at 16 Afable Street, transferring the said properties to his eldest son as he thought that he cannot acquire
Olongapo, Zambales, specifically described in Tax Dec. No. 5432, in favor of Victoria the properties as he was a Chinese citizen. To transfer the improvements on the land to
Cabasal his sister-in-law (Exh. C). This Deed of Sale cancelled the Tax Dec. of Felix Ting his eldest son the defendant Vicente Teng Gui, he first executed simulated Deeds of
Ho over the said building (Exh. C-1) and the building was registered in the name of the Sales in favor of the sister and brother-in-law of his wife in 1958 and after three (3)
buyer Victoria Cabasal, as per Tax Dec. No. 7579 (Exh. C-2). On the same date, October years it was made to appear that these vendees had sold the improvements to the
11, 1958 the said Felix Ting Ho also sold a building of strong material located at 18 defendant Vicente Teng Gui who was then 18 years old. The Court finds that these
Afable Street, described in Tax Dec. No. 5982, in favor of Gregorio Fontela, of legal age, transaction (sic) were simulated and that no consideration was ever paid by the
an American citizen, married (Exh. D). This Deed of Sale, in effect, cancelled Tax Dec. No. vendees.
5982 and the same was registered in the name of the buyer Gregorio Fontela, as per Tax
Dec. No. 7580 (Exh. D-2). In turn Victoria Cabasal and her husband Gregorio Fontela sold xxx xxx xxx
to Vicente Teng Gui on October 28, 1961 the buildings which were bought by them from
Felix Ting Ho and their tax declarations for the building they bought (Exhs. C-2 and D-2)
With regards (sic) to the transfer and relinquishment of Felix Ting Hos right to the land
were accordingly cancelled and the said buildings were registered in the name of the
in question in favor of the defendant, the Court believes, that although from the face of
defendant Vicente Teng Gui (Exhs. C-3 and D-3). On October 25, 1966 the father of the
the document it is stated in absolute terms that without any consideration Felix Ting Ho
parties Felix Ting Ho executed an Affidavit of Transfer, Relinquishment and
was transferring and renouncing his right in favor of his son, the defendant Vicente Teng
Renouncement of Rights and Interest including Improvements on Land in favor of his
Gui, still the Court believes that the transaction was one of implied trust executed by
eldest son the defendant Vicente Teng Gui. On the basis of the said document the
Felix Ting Ho for the benefit of his family8
defendant who then chose Filipino citizenship filed a miscellaneous sales application
with the Bureau of Lands. Miscellaneous Sales Patent No. 7457 of the land which was
then identified to be Lot No. 418, Ts-308 consisting of 774 square meters was issued to Notwithstanding such findings, the RTC considered the Affidavit of Transfer,
the applicant Vicente Teng Gui and accordingly on the 24th of January, 1978 Original Relinquishment and Renouncement of Rights and Interests over the land as a donation
Certificate of Title No. P-1064 covering the lot in question was issued to the defendant which was accepted by the donee, the herein respondent. With respect to the
Vicente Teng Gui. Although the buildings and improvements on the land in question properties in the lot, the trial court held that although the sales were simulated,
were sold by Felix Ting Ho to Victoria Cabasal and Gregorio Fontela in 1958 and who in pursuant to Article 1471 of the New Civil Code9 it can be assumed that the intention of
turn sold the buildings to the defendant in 1961 the said Felix Ting Ho and his wife Felix Ting Ho in such transaction was to give and donate such properties to the
remained in possession of the properties as Felix Ting Ho continued to manage the respondent. As a result, it awarded the entire conjugal share of Felix Ting Ho in the
bakery while the wife Leonila Cabasal continued to manage the sari-sari store. During all subject lot and properties to the respondent and divided only the conjugal share of his
the time that the alleged buildings were sold to the spouses Victoria Cabasal and wife among the siblings. The dispositive portion of the RTC decision decreed:
Gregorio Fontela in 1958 and the subsequent sale of the same to the defendant Vicente
Teng Gui in October of 1961 the plaintiffs and the defendant continued to live and were WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
under the custody of their parents until their father Felix Ting Ho died in 1970 and their defendant as the Court orders the partition and the adjudication of the subject
mother Leonila Cabasal died in 1978.7 (Emphasis supplied) properties, Lot 418, Ts-308, specifically described in original Certificate of Title No. P-
1064 and the residential and commercial houses standing on the lot specifically
In light of these factual findings, the RTC found that Felix Ting Ho, being a Chinese described in Tax Decs. Nos. 9179 and 9180 in the name of Vicente Teng Gui in the
citizen and the father of the petitioners and respondent, resorted to a series of following manner, to wit: To the defendant Vicente Teng Gui is adjudicated an
simulated transactions in order to preserve the right to the lot and the properties undivided six-tenth (6/10) of the aforementioned properties and to each of the plaintiffs
thereon in the hands of the family. As stated by the trial court: Felix Ting Ho, Jr., Merla Ting-Ho Braden, Juana Ting and Lydia Ting Ho-Belenzo each an
undivided one-tenth (1/10) of the properties10
After a serious consideration of the testimonies given by both one of the plaintiffs and
the defendant as well as the documentary exhibits presented in the case, the Court is From this decision, both parties interposed their respective appeals. The petitioners
inclined to believe that Felix Ting Ho, the father of the plaintiffs and the defendant, and claimed that the RTC erred in awarding respondent the entire conjugal share of their
the husband of Leonila Cabasal thought of preserving the properties in question by deceased father in the lot and properties in question contrary to its own finding that an
implied trust existed between the parties. The respondent, on the other hand, asserted these properties should form part of the estate of the late spouses Felix Ting Ho and
that the RTC erred in not ruling that the lot and properties do not form part of the Leonila Cabasal.
estate of Felix Ting Ho and are owned entirely by him.
Thus, while the appellate court dismissed the complaint for partition with respect to the
On appeal, the CA reversed and set aside the decision of the RTC. The appellate court lot in question, it awarded the petitioners a four-fifths (4/5) share of the subject
held that the deceased Felix Ting Ho was never the owner and never claimed ownership properties erected on the said lot. The dispositive portion of the CA ruling reads as
of the subject lot since he is disqualified under Philippine laws from owning public lands, follows:
and that respondent Vicente Teng Gui was the rightful owner over said lot by virtue of
Miscellaneous Sales Patent No. 7457 issued in his favor, viz: WHEREFORE, premises considered, the decision appealed from is REVERSED and SET
ASIDE and NEW JUDGMENT rendered:
The deceased Felix Ting Ho, plaintiffs and defendants late father, was never the owner
of the subject lot, now identified as Lot No. 418, Ts-308 covered by OCT No. P-1064 1. DISMISSING plaintiff-appellants complaint with respect to the subject
(Exh. A; Record, p. 104). As stated by Felix Ting Ho no less in the "Affidavit of Transfer, parcel of land, identified as Lot No. 418, Ts-308, covered by OCT No. P-1064, in
Relinquishment and Renouncement of Rights and Interest" etc. (Exh. B: Record, p. 107), the name of plaintiff-appellants [should be defendant-appellant];
executed on October 25, 1966 he, the late Felix Ting Ho, was merely a possessor or
occupant of the subject lot "by virtue of a permission granted by the then U.S. Naval
2. DECLARING that the two-storey commercial building, the two-storey
Reservation Office, Olongapo, Zambales". The late Felix Ting Ho was never the owner
residential building and sari-sari store (formerly a bakery), all erected on the
and never claimed ownership of the land. (Emphasis supplied)1avvphi1
subject lot No. 418, Ts-308, form part of the estate of the deceased spouses
Felix Ting Ho and Leonila Cabasal, and that plaintiff-appellants are entitled to
The affidavit, Exhibit B, was subscribed and sworn to before a Land Investigator of the four-fifths (4/5) thereof, the remaining one-fifth (1/5) being the share of the
Bureau of Lands and in the said affidavit, the late Felix Ting Ho expressly acknowledged defendant-appellant;
that because he is a Chinese citizen he is not qualified to purchase public lands under
Philippine laws for which reason he thereby transfers, relinquishes and renounces all his
3. DIRECTING the court a quo to partition the said two-storey commercial
rights and interests in the subject land, including all the improvements thereon to his
building, two-storey residential building and sari-sari store (formerly a bakery)
son, the defendant Vicente Teng Gui, who is of legal age, single, Filipino citizen and
in accordance with Rule 69 of the Revised Rules of Court and pertinent
qualified under the public land law to acquire lands.
provisions of the Civil Code;

xxx xxx xxx

4. Let the records of this case be remanded to the court of origin for further
Defendant Vicente Teng Gui acquired the subject land by sales patent or purchase from
the government and not from his father, the late Felix Ting Ho. It cannot be said that he
5. Let a copy of this decision be furnished the Office of the Solicitor General;
acquired or bought the land in trust for his father because on December 5, 1977 when
the subject land was sold to him by the government and on January 3, 1978 when
Miscellaneous Sales Patent No. 7457 was issued, the late Felix Ting Ho was already
dead, having died on June 6, 1970 (TSN, January 10, 1990, p. 4).11 6. There is no pronouncement as to costs.

Regarding the properties erected over the said lot, the CA held that the finding that the SO ORDERED.12
sales of the two-storey commercial and residential buildings and sari-sari store to
Victoria Cabasal and Gregorio Fontela and subsequently to respondent were without
consideration and simulated is supported by evidence, which clearly establishes that
Both petitioners and respondent filed their respective motions for reconsideration from remain here forever and share our fortunes and misfortunes, Filipino citizenship is not
this ruling, which were summarily denied by the CA in its Resolution13 dated August 5, impossible to acquire.15
1997. Hence, this petition.
In the present case, the father of petitioners and respondent was a Chinese citizen;
According to the petitioners, the CA erred in declaring that Lot No. 418, Ts-308 does not therefore, he was disqualified from acquiring and owning real property in the
form part of the estate of the deceased Felix Ting Ho and is owned alone by respondent. Philippines. In fact, he was only occupying the subject lot by virtue of the permission
Respondent, on the other hand, contends that he should be declared the sole owner not granted him by the then U.S. Naval Reservation Office of Olongapo, Zambales. As
only of Lot No. 418, Ts-308 but also of the properties erected thereon and that the CA correctly found by the CA, the deceased Felix Ting Ho was never the owner of the
erred in not dismissing the complaint for partition with respect to the said properties. subject lot in light of the constitutional proscription and the respondent did not at any
instance act as the dummy of his father.
The primary issue for consideration is whether both Lot No. 418, Ts-308 and the
properties erected thereon should be included in the estate of the deceased Felix Ting On the other hand, the respondent became the owner of Lot No. 418, Ts-308 when he
Ho. was granted Miscellaneous Sales Patent No. 7457 on January 3, 1978, by the Secretary
of Natural Resources "By Authority of the President of the Philippines," and when
We affirm the CA ruling. Original Certificate of Title No. P-1064 was correspondingly issued in his name. The
grant of the miscellaneous sales patent by the Secretary of Natural Resources, and the
corresponding issuance of the original certificate of title in his name, show that the
With regard to Lot No. 418, Ts-308, Article XIII, Section 1 of the 1935 Constitution states:
respondent possesses all the qualifications and none of the disqualifications to acquire
alienable and disposable lands of the public domain. These issuances bear the
Section 1. All agricultural timber, and mineral lands of the public domain, waters, presumption of regularity in their performance in the absence of evidence to the
minerals, coal, petroleum, and other mineral oils, all forces of potential energy and contrary.
other natural resources of the Philippines belong to the State, and their disposition,
exploitation, development, or utilization shall be limited to citizens of the Philippines or
Registration of grants and patents involving public lands is governed by Section 122 of
to corporations or associations at least sixty per centum of the capital of which is owned
Act No. 496, which was subsequently amended by Section 103 of Presidential Decree
by such citizens, subject to any existing right, grant, lease, or concession at the time of
No. 1529, viz:
the inauguration of the Government established under this Constitution (Emphasis
Sec. 103. Certificate of title pursuant to patents.Whenever public land is by the
Government alienated, granted or conveyed to any person, the same shall be brought
Our fundamental law cannot be any clearer. The right to acquire lands of the public
forthwith under the operation of this Decree. It shall be the duty of the official issuing
domain is reserved for Filipino citizens or corporations at least sixty percent of the
the instrument of alienation, grant, patent or conveyance in behalf of the Government
capital of which is owned by Filipinos. Thus, in Krivenko v. Register of Deeds,14 the Court
to cause such instrument to be filed with the Register of Deeds of the province or city
enunciated that:
where the land lies, and to be there registered like other deeds and conveyance,
whereupon a certificate of title shall be entered as in other cases of registered land, and
Perhaps the effect of our construction is to preclude aliens, admitted freely into the an owners duplicate issued to the grantee. The deeds, grant, patent or instrument of
Philippines from owning sites where they may build their homes. But if this is the conveyance from the Government to the grantee shall not take effect as a conveyance
solemn mandate of the Constitution, we will not attempt to compromise it even in the or bind the land, but shall operate only as a contract between the Government and the
name of amity or equity. We are satisfied, however, that aliens are not completely grantee and as evidence of authority to the Register of Deeds to make registration. It is
excluded by the Constitution from the use of lands for residential purposes. Since their the act of registration that shall be the operative act to affect and convey the land, and
residence in the Philippines is temporary, they may be granted temporary rights such as in all cases under this Decree registration shall be made in the office of the Register of
a lease contract which is not forbidden by the Constitution. Should they desire to Deeds of the province or city where the land lies. The fees for registration shall be paid
by the grantee. After due registration and issuance of the certificate of title, such land
shall be deemed to be registered land to all intents and purposes under this Decree.16 permit that to be done indirectly which, because of public policy, cannot be done
(Emphasis supplied) directly...19

Under the law, a certificate of title issued pursuant to any grant or patent involving Coming now to the issue of ownership of the properties erected on the subject lot, the
public land is as conclusive and indefeasible as any other certificate of title issued to Court agrees with the finding of the trial court, as affirmed by the appellate court, that
private lands in the ordinary or cadastral registration proceeding. The effect of the the series of transactions resorted to by the deceased were simulated in order to
registration of a patent and the issuance of a certificate of title to the patentee is to vest preserve the properties in the hands of the family. The records show that during all the
in him an incontestable title to the land, in the same manner as if ownership had been time that the properties were allegedly sold to the spouses Victoria Cabasal and
determined by final decree of the court, and the title so issued is absolutely conclusive Gregorio Fontela in 1958 and the subsequent sale of the same to respondent in 1961,
and indisputable, and is not subject to collateral attack.17 the petitioners and respondent, along with their parents, remained in possession and
continued to live in said properties.
Nonetheless, petitioners invoke equity considerations and claim that the ruling of the
RTC that an implied trust was created between respondent and their father with respect However, the trial court concluded that:
to the subject lot should be upheld.
In fairness to the defendant, although the Deeds of Sale executed by Felix Ting Ho
This contention must fail because the prohibition against an alien from owning lands of regarding the improvements in favor of Victoria Cabasal and Gregorio Fontela and the
the public domain is absolute and not even an implied trust can be permitted to arise on subsequent transfer of the same by Gregorio Fontela and Victoria Cabasal to the
equity considerations. defendant are all simulated, yet, pursuant to Article 1471 of the New Civil Code it can be
assumed that the intention of Felix Ting Ho in such transaction was to give and donate
In the case of Muller v. Muller,18 wherein the respondent, a German national, was the improvements to his eldest son the defendant Vicente Teng Gui 20
seeking reimbursement of funds claimed by him to be given in trust to his petitioner
wife, a Philippine citizen, for the purchase of a property in Antipolo, the Court, in Its finding was based on Article 1471 of the Civil Code, which provides that:
rejecting the claim, ruled that:
Art. 1471. If the price is simulated, the sale is void, but the act may be shown to have
Respondent was aware of the constitutional prohibition and expressly admitted his been in reality a donation, or some other act or contract.211avvph!1
knowledge thereof to this Court. He declared that he had the Antipolo property titled in
the name of the petitioner because of the said prohibition. His attempt at subsequently The Court holds that the reliance of the trial court on the provisions of Article 1471 of
asserting or claiming a right on the said property cannot be sustained. the Civil Code to conclude that the simulated sales were a valid donation to the
respondent is misplaced because its finding was based on a mere assumption when the
The Court of Appeals erred in holding that an implied trust was created and resulted by law requires positive proof.
operation of law in view of petitioner's marriage to respondent. Save for the exception
provided in cases of hereditary succession, respondent's disqualification from owning The respondent was unable to show, and the records are bereft of any evidence, that
lands in the Philippines is absolute. Not even an ownership in trust is allowed. Besides, the simulated sales of the properties were intended by the deceased to be a donation to
where the purchase is made in violation of an existing statute and in evasion of its him. Thus, the Court holds that the two-storey residential house, two-storey residential
express provision, no trust can result in favor of the party who is guilty of the fraud. To building and sari-sari store form part of the estate of the late spouses Felix Ting Ho and
hold otherwise would allow circumvention of the constitutional prohibition. Leonila Cabasal, entitling the petitioners to a four-fifths (4/5) share thereof.

Invoking the principle that a court is not only a court of law but also a court of equity, is IN VIEW WHEREOF, the petition is DENIED. The assailed Decision dated December 27,
likewise misplaced. It has been held that equity as a rule will follow the law and will not 1996 of the Court of Appeals in CA-G.R. CV No. 42993 is hereby AFFIRMED.
Republic of the Philippines During the 1965 presidential elections, [petitioner] supported the late President
SUPREME COURT Diosdado Macapagal against then Senate President Ferdinand Marcos. Upon the
election of the late President Ferdinand Marcos in 1965 and prior to the imposition of
THIRD DIVISION Martial law on September 21, 1972, [petitioner] printed numerous articles highly critical
of the Marcos administration, exposing the corruption and abuses of the regime. The
[petitioner] likewise ran a series of articles exposing the plan of the Marcoses to impose
G.R. No. 132864 October 24, 2005
a dictatorship in the guise of Martial Law . . . .


In the evening of September 20, 1972, soldiers surrounded the Free Press Building,
forced out its employees at gunpoint and padlocked the said establishment. The soldier
COURT OF APPEALS (12th Division) and LIWAYWAY PUBLISHING, INC., Respondents.
in charge of the military contingent then informed Teodoro Locsin, Jr., the son of
Teodoro Locsin, Sr., the President of [petitioner], that Martial Law had been declared
DECISION and that they were instructed by the late President Marcos to take over the building and
to close the printing press. xxx.
On September 21, 1972 . . ., Teodoro Locsin, Sr. was arrested [and] . . . . was brought to
In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Camp Crame and was subsequently transferred to the maximum security bloc at Fort
Philippine Free Press, Inc. seeks the reversal of the Decision1 dated February 25, 1998 of Bonifacio.
the Court of Appeals (CA) in CA-GR CV No. 52660, affirming, with modification, an earlier
decision of the Regional Trial Court at Makati, Branch 146, in an action for annulment of Sometime in December, 1972, Locsin, Sr. was informed . . . that no charges were to be
deeds of sale thereat instituted by petitioner against the Presidential Commission for filed against him and that he was to be provisionally released subject to the following
Good conditions, to wit: (1) he remained (sic) under city arrest; xxx (5) he was not to publish
the Philippine Free Press nor was he to do, say or write anything critical of the Marcos
Government (PCGG) and the herein private respondent, Liwayway Publishing, Inc. administration . . . .

As found by the appellate court in the decision under review, the facts are: Consequently, the publication of the Philippine Free Press ceased. The subject building
remained padlocked and under heavy military guard (TSB, 27 May 1993, pp. 51-52;
xxx [Petitioner] . . . is a domestic corporation engaged in the publication of Philippine stipulated). The cessation of the publication of the ... magazine led to the financial ruin
Free Press Magazine, one of the . . . widely circulated political magazines in the of [petitioner] . . . . [Petitioners] situation was further aggravated when its employees
Philippines. Due to its wide circulation, the publication of the Free Press magazine demanded the payment of separation pay as a result of the cessation of its operations.
enabled [petitioner] to attain considerable prestige prior to the declaration of Martial [Petitioners] minority stockholders, furthermore, made demands that Locsin, Sr. buy
Law as well as to achieve a high profit margin. . . . out their shares. xxx.

Sometime in . . . 1963, [petitioner] purchased a parcel of land situated at No. 2249, On separate occasions in 1973, Locsin, Sr. was approached by the late Atty. Crispin
Pasong Tamo Street, Makati which had an area of 5,000 square meters as evidenced by . Baizas with offers from then President Marcos for the acquisition of the [petitioner].
. . (TCT) No. 109767 issued by the Register of Deeds of Makati (Exh. Z). Upon taking However, Locsin, Sr. refused the offer stating that [petitioner] was not for sale (TSN, 2
possession of the subject land, [petitioner] constructed an office building thereon to May 1988, pp. 8-9, 40; 27 May 1993, pp. 66-67).
house its various machineries, equipment, office furniture and fixture. [Petitioner]
thereafter made the subject building its main office . . . . A few months later, the late Secretary Guillermo De Vega approached Locsin, Sr.
reiterating Marcoss offer to purchase the name and the assets of the [petitioner].xxx
Sometime during the middle of 1973, Locsin, Sr. was contacted by Brig. Gen. Hans In a decision dated October 31, 1995,2 the trial court dismissed petitioners complaint
Menzi, the former aide-de-camp of then President Marcos concerning the sale of the and granted private respondents counterclaim, to wit:
[petitioner]. Locsin, Sr. requested that the meeting be held inside the [petitioner]
Building and this was arranged by Menzi (TSN, 27 May 1993, pp. 69-70). During the said WHEREFORE, in view of all the foregoing premises, the herein complaint for annulment
meeting, Menzi once more reiterated Marcoss offer to purchase both the name and the of sales is hereby dismissed for lack of merit.
assets of [petitioner] adding that "Marcos cannot be denied" (TSN, 27 May 1993, p. 71).
Locsin, Sr. refused but Menzi insisted that he had no choice but to sell. Locsin, Sr. then
On [respondent] counterclaim, the court finds for [respondent] and against [petitioner]
made a counteroffer that he will sell the land, the building and all the machineries and
for the recovery of attorneys fees already paid for at P1,945,395.98, plus a further
equipment therein but he will be allowed to keep the name of the [petitioner]. Menzi
P316,405.00 remaining due and payable.
promised to clear the matter with then President Marcos (TSN, 27 May 1993, p. 72).
Menzi thereafter contacted Locsin, Sr. and informed him that President Marcos was
amenable to his counteroffer and is offering the purchase price of Five Million Seven SO ORDERED. (Words in bracket added)
Hundred Fifty Thousand (P5, 750,000.00) Pesos for the land, the building, the
machineries, the office furnishing and the fixtures of the [petitioner] on a "take-it-or- In time, petitioner appealed to the Court of Appeals (CA) whereat its appellate recourse
leave-it" basis (TSN, 2 May 1988, pp.42-43; 27 May 1993, p. 88). was docketed as CA-G.R. C.V. No. 52660.

On August 22, 1973, Menzi tendered to Locsin, Sr. a check for One Million (P1, As stated at the outset hereof, the appellate court, in a decision dated February 25,
000,000.00) Pesos downpayment for the sale, . . . Locsin, Sr. accepted the check, subject 1998, affirmed with modification the appealed decision of the trial court, the
to the condition that he will refund the same in case the sale will not push through. modification consisting of the deletion of the award of attorneys fees to private
(Exh. 7). respondent, thus:

On August 23, 1973, the Board of Directors of [petitioner] held a meeting and WHEREFORE, with the sole modification that the award of attorneys fees in favor of
reluctantly passed a resolution authorizing Locsin, Sr. to sell the assets of the [respondent] be deleted, the Decision appealed from is hereby AFFIRMED in all
[petitioner] to Menzi minus the name "Philippine Free Press (Exhs. A-1 and 1; TSN, 27 respects.
May 1993, pp. 73-76).
On October 23, 1973, the parties [petitioner, as vendor and private respondent,
represented by B/Gen. Menzi, as vendee] met . . . and executed two (2) notarized Deeds Hence, petitioners present recourse, urging the setting aside of the decision under
of Sale covering the land, building and the machineries of the [petitioner]. Menzi paid review which, to petitioner, decided questions of substance in a way not in accord with
the balance of the purchase price in the amount of . . . (P4,750,000.00) Pesos (Exhs. A law and applicable jurisprudence considering that the appellate court gravely erred:
and (; B and 10;TSN, 27 May 1993, pp. 81-82; 3 June 1993, p. 89).

Locsin, Sr. thereafter used the proceeds of the sale to pay the separation pay of
[petitioners] employees, buy out the shares of the minority stockholders as well as to
On February 26, 1987, [petitioner] filed a complaint for Annulment of Sale against
[respondent] Liwayway and the PCGG before the Regional Trail Court of Makati, Branch
146 on the grounds of vitiated consent and gross inadequacy of purchase price. On II
motion of defendant PCGG, the complaint against it was dismissed on October 22, 1987.
(Words in bracket and underscoring added)
xxx IN CONCLUDING THAT THE UNDISPUTED FACTS AND CIRCUMSTANCES PRECEDING Petitioner starts off with its quest for the allowance of the instant recourse on the
THE EXECUTION OF THE CONTRACTS OF SALE FOR THE PETITIONER'S PROPERTIES DID submission that the martial law regime tolled the prescriptive period under Article 1391
Article 391. The action for annulment shall be brought within four years.
In cases of intimidation, violence or undue influence, from the time the defect of the
consent ceases.
xxx xxx xxx

It may be recalled that the separate deeds of sale3 sought to be annulled under
petitioners basic complaint were both executed on October 23, 1973. Per the appellate
court, citing Development Bank of the Philippines [DBP] vs. Pundogar4, the 4-year
prescriptive period for the annulment of the aforesaid deeds ended "in late 1977",
III doubtless suggesting that petitioners right to seek such annulment accrued four (4)
years earlier, a starting time-point corresponding, more or less, to the date of the
xxx IN CONCLUDING THAT THE GROSSLY INADEQUATE PURCHASE PRICE FOR conveying deed, i.e., October 23, 1973. Petitioner contends, however, that the 4-year
PETITIONER'S PROPERTIES DOES NOT INDICATE THE VITIATION OF PETITIONER'S prescriptive period could not have commenced to run on October 23, 1973, martial law
CONSENT TO THE CONTRACTS OF SALE. being then in full swing. Plodding on, petitioner avers that the continuing threats on the
life of Mr. Teodoro Locsin, Sr. and his family and other menacing effects of martial law
IV which should be considered as force majeure - ceased only after the February 25, 1986
People Power uprising.
SURVIVAL CONSTITUTE AN IMPLIED RATIFICATION [OF] THE CONTRACTS OF SALE. Petitioner instituted its complaint for annulment of contracts on February 26, 1987. The
question that now comes to the fore is: Did the 4-year prescriptive period start to run in
late October 1973, as postulated in the decision subject of review, or on February 25,
1986, as petitioner argues, on the theory that martial law has the effects of a force
majeure5, which, in turn, works to suspend the running of the prescriptive period for the
xxx IN EXCLUDING PETITIONER'S EXHIBITS "X-6" TO "X-7" AND "Y-3" (PROFFER) WHICH main case filed with the trial court.
Petitioner presently faults the Court of Appeals for its misapplication of the doctrinal
rule laid down in DBP vs. Pundogar6 where this Court, citing and quoting excerpts from
the ruling in Tan vs. Court of Appeals 7, as reiterated in National Development Company
The petition lacks merit. vs. Court of Appeals, 8 wrote

We can not accept the petitioners contention that the period during which
authoritarian rule was in force had interrupted prescription and that the same began to
run only on February 25, 1986, when the Aquino government took power. It is true that consolidation with eight (8) other petitions against the martial law regime, is now
under Article 1154 [of the Civil Code] xxx fortuitous events have the effect of tolling the memorialized in books of jurisprudence and cited in legal publications and case studies
period of prescription. However, we can not say, as a universal rule, that the period from as Aquino vs. Enrile.11
September 21, 1972 through February 25, 1986 involves a force majeure. Plainly, we can
not box in the "dictatorial" period within the term without distinction, and without, by Incidentally, Mr. Locsin Sr., as gathered from the ponencia of then Chief Justice Querube
necessity, suspending all liabilities, however demandable, incurred during that period, Makalintal in Aquino, was released from detention notwithstanding his refusal to
including perhaps those ordered by this Court to be paid. While this Court is cognizant of withdraw from his petition in said case. Judging from the actuations of Mr. Locsin, Sr.
acts of the last regime, especially political acts, that might have indeed precluded the during the onset of martial law regime and immediately thereafter, any suggestion that
enforcement of liability against that regime and/or its minions, the Court is not inclined intimidation or duress forcibly stayed his hands during the dark days of martial law to
to make quite a sweeping pronouncement, . . . . It is our opinion that claims should be seek judicial assistance must be rejected.12
taken on a case-to-case basis. This selective rule is compelled, among others, by the fact
that not all those imprisoned or detained by the past dictatorship were true political
Given the foregoing perspective, the Court is not prepared to disturb the ensuing ruling
oppositionists, or, for that matter, innocent of any crime or wrongdoing. Indeed, not a
of the appellate court on the effects of martial law on petitioners right of action:
few of them were manipulators and scoundrels. [Italization in the original; Underscoring
and words in bracket added]
In their testimonies before the trial court, both Locsin, Sr. and Locsin, Jr. claimed that
they had not filed suit to recover the properties until 1987 as they could not expect
According to petitioner, the appellate court misappreciated and thus misapplied the
justice to be done because according to them, Marcos controlled every part of the
correct thrust of the Tan case, as reiterated in DBP which, per petitioners own
government, including the courts, (TSN, 2 May 1988, pp. 23-24; 27 May 1993, p. 121).
formulation, is the following:9
While that situation may have obtained during the early years of the martial law
administration, We could not agree with the proposition that it remained consistently
The prevailing rule, therefore, is that on a case-to-case basis, the Martial Law regime unchanged until 1986, a span of fourteen (14) years. The unfolding of subsequent
may be treated as force majeure that suspends the running of the applicable events would show that while dissent was momentarily stifled, it was not totally
prescriptive period provided that it is established that the party invoking the imposition silenced. On the contrary, it steadily simmered and smoldered beneath the political
of Martial Law as a force majeure are true oppositionists during the Martial Law regime surface and culminated in that groundswell of popular protest which swept the
and that said party was so circumstanced that is was impossible for said party to dictatorship from power.13
commence, continue or to even resist an action during the dictatorial regime.
(Emphasis and underscoring in the original)
The judiciary too, as an institution, was no ivory tower so detached from the ever
changing political climate. While it was not totally impervious to the influence of the
We are not persuaded. dictatorships political power, it was not hamstrung as to render it inutile to perform its
functions normally. To say that the Judiciary was not able to render justice to the
It strains credulity to believe that petitioner found it impossible to commence and persons who sought redress before it . . . during the Martial Law years is a sweeping and
succeed in an annulment suit during the entire stretch of the dictatorial regime. The unwarranted generalization as well as an unfounded indictment. The Judiciary, . . . did
Court can grant that Mr. Locsin, Sr. and petitioner were, in the context of DBP and Tan, not lack in gallant jurists and magistrates who refused to be cowed into silence by the
"true oppositionists" during the period of material law. Petitioner, however, has failed to Marcos administration. Be that as it may, the Locsins mistrust of the courts and of
convincingly prove that Mr. Locsin, Sr., as its then President, and/or its governing board, judicial processes is no excuse for their non-observance of the prescriptive period set
were so circumstanced that it was well-nigh impossible for him/them to successfully down by law.
institute an action during the martial law years. Petitioner cannot plausibly feign
ignorance of the fact that shortly after his arrest in the evening of September 20, 1972, Corollary to the presented issue of prescription of action for annulment of contract
Mr. Locsin, Sr., together with several other journalists10, dared to file suits against voidable on account of defect of consent14 is the question of whether or not duress,
powerful figures of the dictatorial regime and veritably challenged the legality of the intimidation or undue influence vitiated the petitioners consent to the subject contracts
declaration of martial law. Docketed in this Court as GR No. L-35538, the case, after its of sale. Petitioner delves at length on the vitiation issue and, relative thereto, ascribes
the following errors to the appellate court: first, in considering as hearsay the show that the evidence falls within the exceptions to the hearsay evidence rule
testimonial evidence that may prove the element of "threat" against petitioner or Mr. (Citations omitted)
Locsin, Sr., and the dictatorial regime's use of private respondent as a corporate vehicle
for forcibly acquiring petitioners properties; second, in concluding that the acts of then The appellate courts disposition on the vitiation-of-consent angle and the ratio therefor
President Marcos during the martial law years did not have a consent-vitiating effect on commends itself for concurrence.
petitioner; and third, in resolving the case on the basis of mere surmises and
Jurisprudence instructs that evidence of statement made or a testimony is hearsay if
offered against a party who has no opportunity to cross-examine the witness. Hearsay
The evidence referred to as hearsay pertains mainly to the testimonies of Messrs. evidence is excluded precisely because the party against whom it is presented is
Locsin, Sr. and Teodoro Locsin, Jr. (the Locsins, collectively), which, in gist, established deprived of or is bereft of opportunity to cross-examine the persons to whom the
the following facts: 1) the widely circulated Free Press magazine, which, prior to the statements or writings are attributed.15 And there can be no quibbling that because
declaration of Martial Law, took the strongest critical stand against the Marcos death has supervened, the late Gen Menzi, like the other purported Marcos subalterns,
administration, was closed down on the eve of such declaration, which closure Messrs. Baizas and De Vega, cannot cross-examine the Locsins for the threatening
eventually drove petitioner to financial ruin; 2) upon Marcos orders, Mr. Locsin, Sr. was statements allegedly made by them for the late President.
arrested and detained for over 2 months without charges and, together with his family,
was threatened with execution; 3) Mr. Locsin, Sr. was provisionally released on the
Like the Court of Appeals, we are not unmindful of the exception to the hearsay rule
condition that he refrains from reopening Free Press and writing anything critical of the
provided in Section 38, Rule 130 of the Rules of Court, which reads:
Marcos administration; and 4) Mr. Locsin, Sr. and his family remained fearful of reprisals
from Marcos until the 1986 EDSA Revolution.
SEC. 38. Declaration against interest. The declaration made by a person deceased or
unable to testify, against the interest of the declarant, if the fact asserted in the
Per the Locsins, it was amidst the foregoing circumstances that petitioners property in
declaration was at the time it was made so far contrary to the declarant's own interest,
question was sold to private respondent, represented by Gen. Menzi, who, before the
that a reasonable man in his position would not have made the declaration unless he
sale, allegedly applied the squeeze on Mr. Locsin, Sr. thru the medium of the "Marcos
believed it to be true, may be received in evidence against himself or his successors-in-
cannot be denied" and "[you] have no choice but to sell" line.
interest and against third persons.

The appellate court, in rejecting petitioners above posture of vitiation of consent,

However, in assessing the probative value of Gen. Menzis supposed declaration against
interest, i.e., that he was acting for the late President Marcos when he purportedly
coerced Mr. Locsin, Sr. to sell the Free Press property, we are loathed to give it the
It was under the above-enumerated circumstances that the late Hans Menzi, allegedly evidentiary weight petitioner endeavors to impress upon us. For, the Locsins can hardly
acting on behalf of the late President Marcos, made his offer to purchase the Free Press. be considered as disinterested witnesses. They are likely to gain the most from the
It must be noted, however, that the testimonies of Locsin, Sr. and Locsin, Jr. regarding annulment of the subject contracts. Moreover, allegations of duress or coercion should,
Menzis alleged implied threat that "Marcos cannot be denied" and that [respondent] like fraud, be viewed with utmost caution. They should not be laid lightly at the door of
was to be the corporate vehicle for Marcoss takeover of the Free Press is hearsay as men whose lips had been sealed by death.16 Francisco explains why:
Menzi already passed away and is no longer in a position to defend himself; the same
can be said of the offers to purchase made by Atty. Crispin Baizas and Secretary
[I]t has been said that "of all evidence, the narration of a witness of his conversation
Guillermo de Vega who are also both dead. It is clear from the provisions of Section 36,
with a dead person is esteemed in justice the weakest." One reason for its unreliability
Rule 130 of the 1989 Revised Rules on Evidence that any evidence, . . . is hearsay if its
is that the alleged declarant can not recall to the witness the circumstances under which
probative value is not based on the personal knowledge of the witness but on the
his statement were made. The temptation and opportunity for fraud in such cases also
knowledge of some other person not on the witness stand. Consequently, hearsay
operate against the testimony. Testimony to statements of a deceased person, at least
evidence, whether objected to or not, has no probative value unless the proponent can
where proof of them will prejudice his estate, is regarded as an unsafe foundation for
judicial action except in so far as such evidence is borne out by what is natural and Neither may petitioner circumvent the hearsay rule by invoking the exception under the
probable under the circumstances taken in connection with actual known facts. And a declaration-against-interest rule. In context, the only declaration supposedly made by
court should be very slow to act upon the statement of one of the parties to a supposed Gen. Menzi which can conceivably be labeled as adverse to his interest could be that he
agreement after the death of the other party; such corroborative evidence should be was acting in behalf of Marcos in offering to acquire the physical assets of petitioner. Far
adduced as to satisfy the court of the truth of the story which is to benefit materially the from making a statement contrary to his own interest, a declaration conveying the
person telling it. 17 notion that the declarant possessed the authority to speak and to act for the President
of the Republic can hardly be considered as a declaration against interest.
Excepting, petitioner insists that the testimonies of its witnesses the Locsins - are not
hearsay because: Petitioner next assails the Court of Appeals on its conclusion that Martial Law is not per
se a consent-vitiating phenomenon. Wrote the appellate court: 21
In this regard, hearsay evidence has been defined as "the evidence not of what the
witness knows himself but of what he has heard from others." xxx Thus, the mere fact In other words, the act of the ruling power, in this case the martial law administration,
that the other parties to the conversations testified to by the witness are already was not an act of mere trespass but a trespass in law - not a perturbacion de mero hecho
deceased does [not] render such testimony inadmissible for being hearsay. 18 but a pertubacion de derecho - justified as it is by an act of government in legitimate
self-defense (IFC Leasing & Acceptance Corporation v. Sarmiento Distributors
xxx xxx xxx Corporation, , citing Caltex (Phils.) v. Reyes, 84 Phil. 654 [1949]. Consequently, the act
of the Philippine Government in declaring martial law can not be considered as an act of
intimidation of a third person who did not take part in the contract (Article 1336, Civil
The testimonies of Teodoro Locsin, Sr. and Teodoro Locsin, Jr. that the late Atty. Baizas,
Code). It is, therefore, incumbent on [petitioner] to present clear and convincing
Gen. Menzi and Secretary de Vega stated that they were representing Marcos, that
evidence showing that the late President Marcos, acting through the late Hans Menzi,
"Marcos cannot be denied", and the fact that Gen. Menzi stated that private respondent
abused his martial law powers by forcing plaintiff-appellant to sell its assets. In view of
Liwayway was to be the corporate vehicle for the then President Marcos' take-over of
the largely hearsay nature of appellants evidence on this point, appellants cause must
petitioner Free Press are not hearsay. Teodoro Locsin, Sr. and Teodoro Locsin, Jr. were
in fact testifying to matters of their own personal knowledge because they were either
parties to the said conversation or were present at the time the said statements were
made. 19 According to petitioner, the reasoning of the appellate court is "flawed" because:22

Again, we disagree. It is implicit from the foregoing reasoning of the Court of Appeals that it treated the
forced closure of the petitioner's printing press, the arrest and incarceration without
charges of Teodoro Locsin, Sr., the threats that he will be shot and the threats that other
Even if petitioner succeeds in halving its testimonial evidence, one-half purporting to
members of his family will be arrested as legal acts done by a dictator under the Martial
quote the words of a live witness and the other half purporting to quote what the live
Law regime. The same flawed reasoning led the Court of Appeals to the erroneous
witness heard from one already dead, the other pertaining to the dead shall
conclusion that such acts do not constitute force, intimidation, duress and undue
nevertheless remain hearsay in character.
influence that vitiated petitioner's consent to the Contracts of Sale.

The all too familiar rule is that "a witness can testify only to those facts which he knows
The contention is a rehash of petitioners bid to impute on private respondent acts of
of his own knowledge". 20 There can be no quibbling that petitioners witnesses cannot
force and intimidation that were made to bear on petitioner or Mr. Locsin, Sr. during the
testify respecting what President Marcos said to Gen. Menzi about the acquisition of
early years of martial law. It failed to take stock of a very plausible situation depicted in
petitioners newspaper, if any there be, precisely because none of said witnesses ever
the appellate courts decision which supports its case disposition on the issue respecting
had an opportunity to hear what the two talked about.
vitiation. Wrote that court:
Even assuming that the late president Marcos is indeed the owner of [respondent], it Petitioners third assigned error centers on the gross inadequacy of the purchase price,
does not necessarily follow that he, acting through the late Hans Menzi, abused his referring to the amount of P5,775,000.00 private respondent paid for the property in
power by resorting to intimidation and undue influence to coerce the Locsins into selling question. To petitioner, the amount thus paid does not even approximate the actual
the assets of Free Press to them (sic). market value of the assets and properties,27 and is very much less than the P18 Million
offered by Eugenio Lopez.28 Accordingly, petitioner urges the striking down, as
It is an equally plausible scenario that Menzi convinced the Locsins to sell the assets of erroneous, the ruling of the Court of Appeals on purchase price inadequacy, stating in
the Free Press without resorting to threats or moral coercion by simply pointing out to this regard as follows: 29
them the hard fact that the Free Press was in dire financial straits after the declaration
of Martial Law and was being sued by its former employees, minority stockholders and Furthermore, the Court of Appeals in determining the adequacy of the price for the
creditors. Given such a state of affairs, the Locsins had no choice but to sell their properties and assets of petitioner Free Press relied heavily on the claim that the
assets.23 audited financial statements for the years 1971 and 1972 stated that the book value of
the land is set at Two Hundred Thirty-Seven Thousand Five Hundred Pesos
Petitioner laments that the scenario depicted in the immediately preceding quotation as (P237,500.00). However, the Court of Appeals' reliance on the book value of said assets
a case of a court resorting to "mere surmises and speculations", 24 oblivious that is clearly misplaced. It should be noted that the book value of fixed assets bears very
petitioner itself can only offer, as counterpoint, also mere surmises and speculations, little correlation with the actual market value of an asset. (Emphasis and underscoring
such as its claim about Eugenio Lopez Sr. and Imelda R. Marcos offering "enticing in the original).
amounts" to buy Free Press.25
With the view we take of the matter, the book or actual market value of the property at
It bears stressing at this point that even after the imposition of martial law, petitioner, the time of sale is presently of little moment. For, petitioner is effectively precluded, by
represented by Mr. Locsin, Sr., appeared to have dared the ire of the powers-that-be. force of the principle of estoppel ,30 from cavalierly disregarding with impunity its own
He did not succumb to, but in fact spurned offers to buy, lock-stock-and-barrel, the Free books of account in which the property in question is assigned a value less than what
Press magazine, dispatching Marcos emissaries with what amounts to a curt "Free Press was paid therefor. And, in line with the rule on the quantum of evidence required in civil
is not for sale". This reality argues against petitioners thesis about vitiation of its cases, neither can we cavalierly brush aside private respondents evidence, cited with
contracting mind, and, to be sure, belying the notion that Martial Law worked as a approval by the appellate court, that tends to prove that-31
Sword of Damocles that reduced petitioner or Mr. Locsin, Sr. into being a mere
automaton. The following excerpt from the Court of Appeals decision is self- xxx the net book value of the Properties was actually only 994,723.66 as appearing in
explanatory: 26 Free Press's Balance Sheet as of November 30, 1972 (marked as Exh. 13 and Exh. V),
which was duly audited by SyCip, Gorres, and Velayo, thus clearly showing that Free
Noteworthy is the fact that although the threat of arrest hung over his head like the Press actually realized a hefty profit of 4,755,276.34 from the sale to Liwayway.
Sword of Damocles, Locsin Sr. was still able to reject the offers of Atty. Baizas and
Secretary De Vega, both of whom were supposedly acting on behalf of the late Lest it be overlooked, gross inadequacy of the purchase price does not, as a matter of
President Marcos, without being subjected to reprisals. In fact, the Locsins testified that civil law, per se affect a contract of sale. Article 1470 of the Civil Code says so. It reads:
the initial offer of Menzi was rejected even though it was supposedly accompanied by
the threat that "Marcos cannot be denied". Locsin, Sr. was, moreover, even able to Article 1470. Gross inadequacy of price does not affect a contract of sale, except as it
secure a compromise that only the assets of the Free Press will be sold. It is, therefore, may indicate a defect in the consent, or that the parties really intended a donation or
quite possible that plaintiff-appellants financial condition, albeit caused by the some other act or contract.
declaration of Martial Law, was a major factor in influencing Locsin, Sr. to accept
Menzis offer. It is not farfetched to consider that Locsin, Sr. would have eventually
Following the aforequoted codal provision, it behooves petitioner to first prove "a
proceeded with the sale even in the absence of the alleged intimidation and undue
defect in the consent", failing which its case for annulment contract of sale on ground
influence because of the absence of other buyers.
gross inadequacy of price must fall. The categorical conclusion of the Court of Appeals,
confirmatory of that of the trial court, is that the price paid for the Free Press office Costs against petitioner.
building, and other physical assets is not unreasonable to justify the nullification of the
sale. This factual determination, predicated as it were on offered evidence, notably SO ORDERED.
petitioners Balance Sheet as of November 30, 1972 (Exh. 13), must be accorded great
weight if not finality.32

In the light of the foregoing disquisition, the question of whether or not petitioners
undisputed utilization of the proceeds of the sale constitutes, within the purview of
Article 1393 of the Civil Code,33 implied ratification of the contracts of sale need not
detain us long. Suffice it to state in this regard that the ruling of the Court of Appeals on
the matter is well-taken. Wrote the appellate court: 34

In the case at bench, Free Presss own witnesses admitted that the proceeds of the 1973
sale were used to settle the claims of its employees, redeem the shares of its
stockholders and finance the companys entry into money-market shareholdings and
fishpond business activities (TSN, 2 May 1988, pp. 16, 42-45). It need not be
overemphasized that by using the proceeds in this manner, Free Press only too clearly
confirmed the voluntaries of its consent and ratified the sale. Needless to state, such
ratification cleanses the assailed contract from any alleged defects from the moment it
was constituted (Art. 1396, Civil Code).

Petitioners posture that its use of the proceeds of the sale does not translate to tacit
ratification of what it viewed as voidable contracts of sale, such use being a "matter of
[its financial] survival",35 is untenable. As couched, Article 1393 of the Civil Code is
concerned only with the act which passes for ratification of contract, not the reason
which actuated the ratifying person to act the way he did. "Ubi lex non distinguit nec nos
distinguere debemus. When the law does not distinguish, neither should we". 36

Finally, petitioner would fault the Court of Appeals for excluding Exhibits "X-6" to "X-7"
and "Y-3" (proffer). These excluded documents which were apparently found in the
presidential palace or turned over by the US Government to the PCGG, consist of,
among others, what appears to be private respondents Certificate of Stock for 24,502
shares in the name of Gen. Menzi, but endorsed in blank. The proffer was evidently
intended to show that then President Marcos owned private respondent, Liwayway
Publishing Inc. Said exhibits are of little relevance to the resolution of the main issue
tendered in this case. Whether or not the contracts of sale in question are voidable is
the issue, not the ownership of Liwayway Publishing, Inc.

WHEREFORE, the petition is DENIED, and the challenged decision of the Court of
Republic of the Philippines 4. Lastly, the Court of Appeals erred in holding that the herein petitioner has
SUPREME COURT no cause of action against defendant-respondent.
5. On May 14, 1923 petitioner and respondent entered into a contract of lease
EN BANC in the fifth clause of which, pertinent to the question at issue, provides:

G.R. No. L-45969 May 4, 1939 5th. That upon termination of the period of this contract, namely, ten years, the lessor
shall have the option to buy the building or improvement which the lessee may have
TAN TIAH (alias T. SUYA), petitioner, built upon the lots, reimbursing the latter ninety per cent (90%) of the original net cost
vs. of the construction; but should the lessor be unable or unwilling to buy said building or
YU JOSE (alias JOSE Y. NAVARRO), respondent. improvement, the income or rent derived therefrom shall be equally divided between
said lessor and lessee, and the latter shall no longer have the obligation to pay the rent
agreed upon for the lots in the second paragraph of this contract; provided, however,
Pastor Salazar and Vamenta and Vamenta for petitioner.
that the present contract, with the modification just mentioned, with respect to the
Norberto Romualdez for respondent.
income from the building and the rent from the lot, shall continue in force until the
lessor buys the building or improvement or the lessee buys the land.
The judgment rendered by the Court of First Instance of Leyte and reversed by the Court
This is an appeal by way of certiorari taken by Tan Tiah (alias T. Suya), wherein he prays, of Appeals, which absolved the defendant is as follows:
on the grounds alleged therein, for the review of the decision rendered in the case by
the Court of Appeals reversing that of the Court of First Instance of Leyte, for the
Wherefore, judgment is rendered sentencing defendant to buy the house of
reversal thereof, and for the affirmance of the decision of said Court of First Instance.
plaintiff or to sell to plaintiff the land on which the latter's house is built. Each
of the parties must submit the name of a person to be appointed
As grounds for the allowance of the appeal, petitioner assigns the following alleged commissioner for the assessment and appraisal of the land on which plaintiff's
errors of law committed by said Court of Appeals in its decision, to wit: house is built.

1. The Court of Appeals erred in finding in its decision, subject of the present Defendant is sentenced to pay the costs of the suit.
petition for certiorari, that the 5th paragraph of the contract of lease Exhibit A
establishes rights for the petitioner and for the respondent, which are
The main question to be decided in this appeal is whether plaintiff, as lessee, has a right,
antagonistic and, therefore, unenforceable by action.
by virtue of the aforecited fifth clause of the contract of lease, to compel defendant as
lessor, to sell to him the land on which he built his house in accordance with said
2. The Court of Appeals likewise erred in finding in its decision that the contract.
promise, if any, made by respondent to sell to petitioner the land in question
is not enforceable by action for lack of a price.
It will be seen that the lessor is given the preference of buying the building erected on
the leased land at a price equivalent to 90 per cent of the original net cost of the
3. The Court of Appeals also erred in finding in its decision that the 5th construction upon the termination of the ten years fixed in the contract as the duration
paragraph of the contract of lease entered into by petitioner and respondent of the lease. As ten years have elapsed and the lessor has not exercised his right to buy
does not state two promises to buy and to sell which are mutually the building, and has no intention to do so, may the lessee compel the lessor to sell to
demandable. him the leased land? The lessee is not given the option to buy the land. The grant of said
right may not be inferred from the conditional clause of paragraph 5 and from
paragraph 4 of the contract since neither in the conditional clause aforecited nor in the
fourth paragraph of the contract is the lessor bound to sell the questioned land to the
lessee. Furthermore, in the said conditional clause the price which the lessee would
have to pay should he decide to buy the land is not fixed. Article 1445 of the Civil Code
provides that "By the contract of purchase and sale one of the contracting parties binds
himself to deliver a determinate thing and the other to pay a certain price therefor in
money or in something representing the same." According to article 1451, "a promise to
sell or buy, when there is an agreement as to the thing and the price, entitles the
contracting parties reciprocally to demand the fulfillment of the contract." And article
1447 of the same Code provides that in order that the price may be considered certain,
it shall be sufficient that it be so in relation to some certain thing, or that its
determination be left to the judgment of some particular person, and should the latter
be unable or unwilling to fix the price, the contract shall be inoperative. And according
to article 1449 of the same Code, the designation of the price can never be left to the
determination of one of the contracting parties.

As we have said, a price certain which the lessee should pay the lessor for the land in
case he should desire to buy it has not been fixed; neither has anything which may have
definite value or which may serve as a basis for the fixing of the price been designated.
Also, no determinate person has been named to fix the price.

The price of the leased land not having been fixed and the lessor not having bound
himself to sell it, the essential elements which give life to the contract are lacking. It
follows that the lessee cannot compel the lessor to sell the leased land to him.

Having arrived at this conclusion, we do not find sufficient grounds for reversing the
decision appealed from, which is hereby affirmed, with costs against the appellant.

Imperial, Diaz, Laurel, and Concepcion, JJ., concur.

Republic of the Philippines record on appeal within sixty (60) days from receipt of said notice. This 60-day term was
SUPREME COURT to expire on January 17, 1969.
Allegedly under date of January 15, 1969, the petitioners allegedly sent to the Court of
EN BANC Appeals and to counsel for the respondent, by registered mail allegedly deposited
personally by its mailing clerk, one Juanito D. Quiachon, at the Makati Post Office, a
"Motion For Extension of Time To File Printed Record on Appeal." The extension of time
was sought on the ground "of mechanical failures of the printing machines, and the
voluminous printing jobs now pending with the Vera Printing Press. ..."
G.R. No. L-31018 June 29, 1973

On February 10, 1969, the petitioners filed their printed record on appeal in the Court of
Appeals. Thereafter, the petitioners received from the respondent a motion filed on
February 8, 1969 praying for the dismissal of the appeal on the ground that the
petitioners had failed to file their printed record on appeal on time. Acting on the said
motion to dismiss the appeal, the Court of Appeals, on February 25, 1969, issued the
Napoleon G. Rama for petitioners. following resolution:

Dominador L. Reyes for private respondent. Upon consideration of the motion of counsel for defendant-appellee
praying on the grounds therein stated that the appeal be dismissed
in accordance with Rules of Court, and of the opposition thereto
filed by counsel for plaintiff-appellants, the Court RESOLVED to
CASTRO, J.: DENY the said motion to dismiss.

This is a petition for certiorari and mandamus filed by Lorenzo Velasco and Socorro J. Upon consideration of the registry-mailed motion of counsel for
Velasco (hereinafter referred to as the petitioners) against the resolution of the Court of plaintiffs appellants praying on the grounds therein stated for an
Appeals dated June 28, 1969 in CA-G.R. 42376, which ordered the dismissal of the extension of 30 days from January 15, 1969 within which to file the
appeal interposed by the petitioners from a decision of the Court of First Instance of printed record on appeal, the Court RESOLVED to GRANT the said
Quezon City on the ground that they had failed seasonably to file their printed record on motion and the printed record on appeal which has already been
appeal. filed is ADMITTED.

Under date of November 3, 1968, the Court of First Instance of Quezon City, after On March 11, 1969, the respondent prayed for a reconsideration of the above-
hearing on the merits, rendered a decision in civil case 7761, dismissing the complaint mentioned resolution, averring that the Court of Appeals had been misled bythe
filed by the petitioners against the Magdalena Estate, Inc. (hereinafter referred to as the petitioners' "deceitful allegation that they filed the printed record on appeal within the
respondent) for the purpose of compelling specific performance by the respondent of reglementary period," because according to a certification issued by the postmaster of
an alleged deed of sale of a parcel of residential land in favor of the petitioners. The Makati, Rizal, the records of the said post office failed to reveal that on January 15, 1969
basis for the dismissal of the complaint was that the alleged purchase and sale the date when their motion for extension of time to file the printed record on appeal
agreement "was not perfected". was supposedly mailed by the petitioners there was any letter deposited there by the
petitioners' counsel. The petitioners opposed the motion for reconsideration. They
submitted to the appellate court the registry receipts (numbered 0215 and 0216), both
On November 18, 1968, after the perfection of their appeal to the Court of Appeals, the stampled January 15, 1969, which were issued by the receiving clerk of the registry
petitioners received a notice from the said court requiring them to file their printed section of the Makati Post Office covering the mails for the disputed motion for
extension of time to file their printed record on appeal and the affidavit of its mailing 1969 with E.B.A. Construction of 1049 Belbar Building, Metropolitan,
clerk Juanito D. Quiachon, to prove that their motion for extension was timely filed and Pasong Tamo, Makati, as sender, and Pres. R. Nakaya of the United
served on the Court of Appeals and the respondent, respectively. After several other Pacific Trading Co., Ltd., 79, 6 Chamo, Nakatu, Yokohari, Japan, as
pleadings and manifestations were filed by the parties relative to the issue raised by the addressee; (c) that on January 15, 1969, the registered letters
respondent's above-mentioned motion for reconsideration, the Court of Appeals posted at the Makati Post Office were numbered consecutively from
promulgated on June 28, 1969, its questioned resolution, the dispositive portion of 1001-2225, inclusive, and none of these letters was addressed to
which reads as follows: Atty. Abraham F. Sarmiento of to the Court of Appeals; (d) that in
Registry Bill Book No. 30 for Quezon City as well as that Manila,
WHEREFORE, the motion for reconsideration filed on March 11, corresponding to February 7, 1969, there are entries covering
1969 is granted and appeal interposed by plaintiff-appellants from registered letters Nos. 0215 and 0216 for dispatch to Quezon City
the judgment of the court below is hereby dismissed for their failure and Manila, respectively; however, such registry book for February
to file their printed Record on Appeal within the period authorized 7, 1969 shows no letters with such numbers posted on the said date.
by this Court. Atty. Patrocino R. Corpuz [counsel of the petitioner] is
required to show cause within ten (10) days from notice why he The Acting Postmaster of the Commercial Center Post Office of
should not be suspended from the practice of his necessary Makati, Rizal, further certifies that "Registry Receipts Nos. 0215 and
investigation against Juanito D. Quiachon of the Salonga, Ordoez, 0216 addressed to Atty. Abraham F. Sarmiento of the Magdalena
Yap, Sicat & Associates Law Office, Suite 319 337 Rufino Building, Estate, Quezon City and the Honorable Court of Appeals,
Ayala Avenue, Makati Post Office, to file the appropriate criminal respectively, does not appear in our Registry Record Book which was
action against them as may be warranted in the premises, and to allegedly posted at this office on January 15, 1969."
report to this Court within thirty (30) days the action he has taken
thereon. From the foregoing, it is immediately apparent that the motion for
extension of time to file their Record on Appeal supposedly mailed
The foregoing desposition was based on the following findings of the Court of Appeals: by the plaintiffs on January 15, 1969 was not really mailed on that
date but evidently on a date much later than January 15, 1969. This
An examination of the Rollo of this case, particularly the letter is further confirmed by the affidavit of Flaviano Malindog, a letter
envelope on page 26 thereof, reveals that on January 15, 1969, carrier of the Makati Post Office, which defendant attached as
plaintiffs supposedly mailed via registered mail from the Post Office Annex 1 to its supplemental reply to plaintiffs' opposition to the
of Makati, Rizal their motion for extension of 30 days from that date motion for reconsideration. In his said affidavit, Malindog swore
to file their printed Record on Appeal, under registered letter No. among others:
0216. However, in an official certification, the Postmaster of Makati
states that the records of his office disclose: (a) that there were no 'That on February 7, 1969, between 12:00
registered letters Nos. 0215 and 0216 from the Salonga, Ordoez, o'clock noon and 1:00 o'clock in the afternoon,
Yap, Sicat & Associates addressed to Atty. Abraham F. Sarmiento, JUANITO D. QUIACHON approached me at the
202 Magdalena Building, Espaa Ext., Quezon City, and to the Court Makati Post Office and talked to me about
of Appeals, Manila, respectively, that were posted in the Post Office certain letters which his employer had asked him
of Makati, Rizal, on January 15, 1969; (b) that there is a registered to mail and that I should help him do something
letter numbered 215 but that the same was posted on January 3, about the matter; but I asked him what they
1969 by Enriqueta Amada of 7 Angel, Pasillo F-2, Cartimar, Pasay were all about, and he told me that they were
City, as sender, and Giral Amasan of Barrio Cabuniga-an, Sto. Nio, letters for the Court of Appeals and for Atty.
Samar, as addressee; and that there is also a registered letter Abraham Sarmiento and that his purpose was to
numbered 216; but that the same was likewise posted on January 3, show that they were posted on January 15,
1969; that I inquired further, and he said that On September 5, 1969, after the rendition of the foregoing resolution, the Court of
the letters were not so important and that his Appeals promulgated another, denying the motion for reconsideration of the petitioner,
only concern was to have them post maker but, at the same time, accepting as satisfactory the explanation of Atty. Patrocino R.
January 15, 1969; Corpuz why he should not be suspended from the practice of the legal profession.

'That believing the word of JUANITO D. On September 20, 1969, the First Assistant Fiscal of Rizal notified the Court of Appeals
QUIACHON that the letters were not really that he had found a prima facie case against Flaviano C. Malindog and would file the
important I agreed to his request; whereupon, I corresponding information for falsification of public documents against him. The said
got two (2) registry receipts from an old registry fiscal, however, dismissed the complaint against Quiachon for lack of sufficient
receipt booklet which is no longer being used evidence. The information subsequently filed against Malindog by the first Assistance
and I numbered them 0215 for the letter Fiscal of Rizal reads as follow:
addressed to Atty. Abraham Sarmiento in
Quezon City and 0216 for the letter addressed to That on or about the 7th day of February 1969, in the municipality of
the Court of Appeals, Manila; that I placed the Makati, province of Rizal, and a place within the jurisdiction of this
same numbering on the respective envelopes Honorable Court, the above-named accused, conspiring and
containing the letters; and that I also post maker confederating together and mutually helping and aiding with John
them January 15, 1969; Doe, whose true identity and present whereabout is still unknown,
did then and there willfully, unlawfully and feloniously falsify two
'That to the best of my recollection I wrote the registry receipts which are public documents by reason of the fact
correct date of posting, February 7, 1969, on the that said registry receipts are printed in accordance with the
back of one or both of the registry receipts standard forms prescribed by the Bureau of Posts, committed as
above mentioned; follows: the above-named accused John Doe, on the date above-
mentioned approached and induced the accused Malindog, a letter-
'That the correct date of posting, February 7, carrier at the Makati Post Office, to postmark on Abraham
1969 also appears in the Registry Bill Books for Sarmiento in Quezon City, and the other to the Court of Appeals,
Quezon City and Manila where I entered the Manila, and the accused Malindog, acceding to the inducement of,
subject registered letters; and in conspiracy with, his co-accused John Doe, did then and there
willfully and feloniously falsify said registry receipts of the Makati
Post Office on January 15, 1969, thereby making it appear that the
Of course, plaintiff's counsel denies the sworn statement of
said sealed envelopes addressed to Atty. Sarmiento and the Court of
Malindog and even presented the counter-affidavit of one of his
Appeals were actually posted, and causing it to appear that the
clerk by the name of Juanito D. Quiachon. But between Malindog,
Postmaster of Makati participated therein by posting said mail
whose sworn statement is manifestly a declaration against interest
matters on January 15, 1969, when in truth and in fact he did not so
since he can be criminally prosecuted for falsification on the basis
thereof, and that of Quiachon, whose statement is self-serving, we
are very much inclined to give greater weight and credit to the
former. Besides, plaintiffs have not refuted the facts disclosed in the The petitioner contend that in promulgating its questioned resolution, the Court of
two (2) official certifications above mentioned by the Postmakers of Appeals acted without or in excess of jurisdiction, or with such whimsical and grave
Makati, Rizal. These two (2) certifications alone, even without to abuse of discretion as to amount to lack of jurisdiction, because (a) it declared that the
move this Court to reconsider its resolution of February 25, 1969 motion for extension of time to file the printed record on appeal was not mailed on
and order the dismissal of this appeal. January 15, 1969, when, in fact, it was mailed on the record on appeal was filed only on
February 10, 1969, beyond the time authorized by the appellate court, when the truth is
that the said date of filing was within the 30-day extension granted by it; (c) the adverse In resolving this issue in favor of the respondent, this Court finds, after a careful study
conclusion of the appellate court are not supported by the records of the case, because and appraisal of the pleadings, admissions and denials respectively adduced and made
the said court ignored the affidavit of the mailing clerk of the petitioners' counsel, the by the parties, that the Court of Appeals did not gravely abuse its discretion and did not
registry receipts and postmarked envelopes (citing Henning v. Western Equipment, 62 act without or in excess of its jurisdiction. We share the view of the appellate court that
Phil. 579, and Caltex Phil., Inc. v. Katipunan Labor Union, 52 O.G. 6209), and, instead, the certifications issued by the two postmasters of Makati, Rizal and the sworn
chose to rely upon the affidavit of the mail carrier Malindog, which affidavit was declaration of the mail carrier Malindog describing how the said registry receipts came
prepared by counsel for the respondent at the affiant himself so declared at the to be issued, are worthy of belief. It will be observed that the said certifications explain
preliminary investigation at the Fiscal's office which absolved the petitioners' counsel clearly and in detail how it was improbable that the petitioners' counsel in the ordinary
mailing clerk Quiachon from any criminal liability; (d) section 1, Rule 50 of the Rules of course of official business, while Malindog's sworn statement, which constitutes a very
Court, which enumerates the grounds upon which the Court of Appeals may dismiss an grave admission against his own interest, provides ample basis for a finding that where
appeal, does not include as a ground the failure to file a printed record on appeal; (e) official duty was not performed it was at the behest of a person interested in the
the said section does not state either that the mismailing of a motion to extend the time petitioners' side of the action below. That at the preliminary investigation at the Fiscal's
to file the printed record on appeal, assuming this to be the case, may be a basis for the office, Malindog failed to identify Quiachon as the person who induced him to issue
dismissal of the appeal; (f) the Court of Appeals has no jurisdiction to revoke the falsified receipts, contrary to what he declared in his affidavit, is of no moment since the
extention of time to file the printed record on appeal it had granted to the petitioners findings of the inquest fiscal as reflected in the information for falsification filed against
based on a ground not specified in section 1, Rule 50 of the Rules of Court; and (g) the Malindog indicate that someone did induce Malindog to make and issue false registry
objection to an appeal may be waived as when the appellee has allowed the record on receipts to the counsel for the petitioners.
appeal to be printed and approved (citing Moran, Vol. II, p. 519).
This Court held in Bello vs. Fernando1 that the right to appeal is nota natural right nor a
Some of the objections raised by the petitioners to the questioned resolution of the part of due process; it is merely a statutory privilege, and may be exercised only in the
Court of Appeals are obviously matters involving the correct construction of our rules of manner provided by law. In this connection, the Rule of Court expressly makes it the
procedure and, consequently, are proper subjects of an appeal by way of certiorari duty of an appellant to file a printed record on appeal with the Court of Appeals within
under Rule 45 of the Rules of Court, rather than a special civil action for certiorari under sixty (60) record on appeal approved by the trial court has already been received by the
Rule 65. The petitioners, however, have correctly appreciated the nature of its said court. Thus, section 5 of Rule 46 states:
objections and have asked this Court to treat the instant petition as an appeal by way of
certiorari under Rule 45 "in the event ... that this Honorable Supreme Court should Sec. 5. Duty of appellant upon receipt of notice. It shall be the
deem that an appeal is an adequate remedy ..." The nature of the case at bar permits, in duty of the appellant within fifteen (15) days from the date of the
our view, a disquisition of both types of assignments. notice referred to in the preceding section, to pay the clerk of the
Court of Appeals the fee for the docketing of the appeal, and within
We do not share the view of the petitioners that the Court of Appeals acted without or sixty (60) days from such notice to submit to the court forty (40)
in excess of jurisdiction or gravely abused its discretion in promulgating the questioned printed copies of the record on appeal, together with proof of
resolution. service of fifteen (15) printed copies thereof upon the appelee.

While it is true that stamped on the registry receipts 0215 and 0215 as well as on the As the petitioners failed to comply with the above-mentioned duty which the Rules of
envelopes covering the mails in question is the date "January 15, 1969," this, by itself, Court enjoins, and considering that, as found by the Court of Appeals, there was a
does not establish an unrebuttable presumption of the fact of date of mailing. Henning deliberate effort on their part to mislead the said Court in grating them an extension of
and Caltex, cited by the petitioners, are not in point because the specific adjective issue time within which to file their printed record on appeal, it stands to reason that the
resolved in those cases was whether or not the date of mailing a pleading is to be appellate court cannot be said to have abused its discretion or to have acted without or
considered as the date of its filing. The issue in the case at bar is whether or not the in excess of its jurisdiction in ordering the dismissal of their appeal.
motion of the petitioners for extension of time to file the printed record on appeal was,
in point of fact, mailed (and, therefore, filed) on January 15, 1969.
Our jurisprudence is replete with cases in which this Court dismissed an appeal on It is alleged by the plaintiff that the agreement was that the plaintiff
grounds not mentioned specifically in Section 1, Rule 50 of the Rules of Court. (See, for was to give a down payment of P10,000.00 to be followed by
example, De la Cruz vs. Blanco, 73 Phil. 596 (1942); Government of the Philippines vs. P20,000.00 and the balance of P70,000.00 would be paid in
Court of Appeals, 108 Phil. 86 (1960); Ferinion vs. Sta. Romana, L-25521, February 28, installments, the equal monthly amortization of which was to be
1966, 16 SCRA 370, 375). determined as soon as the P30,000.00 down payment had been
completed. It is further alleged that the plaintiff paid down payment
It will likewise be noted that inasmuch as the petitioners' motion for extension of the of P10,000.00 on November 29, 1962 as per receipt No. 207848
period to file the printed record on appeal was belated filed, then, it is as though the (Exh. "A")and that when on January 8, 1964 he tendered to the
same were non-existent, since as this Court has already stated in Baquiran vs. Court of defendant the payment of the additional P20,000.00 to complete
Appeals,2 "The motion for extension of the period for filing pleadings and papers in the P30,000.00 the defendant refused to accept and that eventually
court must be made before the expiration of the period to be extended." The soundness it likewise refused to execute a formal deed of sale obviously agreed
of this dictum in matters of procedure is self-evident. For, were the doctrine otherwise, upon. The plaintiff demands P25,000.00 exemplary damages,
the uncertainties that would follow when litigants are left to determine and P2,000.00 actual damages and P7,000.00 attorney's fees.
redetermine for themselves whether to seek further redress in court forthwith or take
their own sweet time will result in litigations becoming more unreable than the very The defendant, in its Answer, denies that it has had any direct
grievances they are intended to redness. dealings, much less, contractual relations with the plaintiff regarding
the property in question, and contends that the alleged contract
The argument raised by the petitioner that the objection to an appeal maybe waived, described in the document attached to the complaint as Annex A is
as when the appellee allows the record on appeal to be printed and approved is entirely unenforceable under the Statute of Frauds; that the truth of
likewise not meritorious considering that the respondent did file a motion in the Court the matter is that a portion of the property in question was being
of Appeals on February 8, 1969 praying for the dismissal of the below of the petitioners leased by a certain Socorro Velasco who, on November 29, 1962,
had not yet filed their record on appeal and, therefore, must be considered to have went to the office of the defendant indicated her desire to purchase
abandoned their appeal. the lot; that the defendant indicated its willingness to sell the
property to her at the price of P100,000.00 under the condition that
a down payment of P30,000.00 be made, P20,000.00 of which was
In further assailing the questioned resolution of the Court of Appeals, the petitioners
to be paid on November 31, 1962, and that the balance of
also point out that on the merits the equities of the instant case are in their favor. A
P70,000.00 including interest a 9% per annum was to be paid on
reading of the record, however, persuades us that the judgment a quo is substantially
installments for a period of ten years at the rate of P5,381.32 on
correct and morally just.
June 30 and December of every year until the same shall have been
fully paid; that on November 29, 1962 Socorro Velasco offered to
The appealed decision of the court a quo narrates both the alleged and proven facts of pay P10,000.00 as initial payment instead of the agreed P20,000.00
the dispute between the petitioners and the respondent, as follows: but because the amount was short of the alleged P20,000.00 the
same was accepted merely as deposited and upon request of
This is a suit for specific performance filed by Lorenzo Velasco Socorro Velasco the receipt was made in the name of her brother-in-
against the Magdalena Estate, Inc. on the allegation that on law the plaintiff herein; that Socorro Velasco failed to complete the
November 29, 1962 the plaintiff and the defendant had entered into down payment of P30,000.00 and neither has she paid any
a contract of sale (Annex A of the complaint) by virtue of which the installments on the balance of P70,000.00 up to the present time;
defendant offered to sell the plaintiff and the plaintiff in turn agreed that it was only on January 8, 1964 that Socorro Velasco tendered
to buy a parcel of land with an area of 2,059 square meters more payment of P20,000.00, which offer the defendant refused to accept
particularly described as Lot 15, Block 7, Psd-6129, located at No. 39 because it had considered the offer to sell rescinded on account of
corner 6th Street and Pacific Avenue, New Manila, this City, for the her failure to complete the down payment on or before December
total purchase price of P100,000.00. 31, 1962.
The lone witness for the plaintiff is Lorenzo Velasco, who exhibits is correct. The material averments contained in the petitioners' complaint themselves
the receipt, Exhibits A, issued in his favor by the Magdalena Estate, disclose a lack of complete "agreement in regard to the manner of payment" of the lot
Inc., in the sum of P10,000.00 dated November 29, 1962. He also in question. The complaint states pertinently:
identifies a letter (Exh. B)of the Magdalena Estate, Inc. addressed to
him and his reply thereto. He testifies that Socorro Velasco is his 4. That plaintiff and defendant further agreed that the total down
sister-in-law and that he had requested her to make the necessary payment shall by P30,000.00, including the P10,000.00 partial
contacts with defendant referring to the purchase of the property in payment mentioned in paragraph 3 hereof, and that upon
question. Because he does not understand English well, he had completion of the said down payment of P30,000.00, the balance of
authorized her to negotiate with the defendant in her whenever she P70,000.00 shall be said by the plaintiff to the defendant in 10 years
went to the office of the defendant, and as a matter of fact, the from November 29, 1962;
receipt for the P10,000.00 down payment was issued in his favor.
The plaintiff also depends on Exhibit A to prove that there was a
5. That the time within the full down payment of the P30,000.00 was
perfected follows: "Earnest money for the purchase of Lot 15, Block
to be completed was not specified by the parties but the defendant
7, Psd-6129, Area 2,059 square meters including improvements
was duly compensated during the said time prior to completion of
thereon P10,000.00." At the bottom of Exhibit A the following
the down payment of P30,000.00 by way of lease rentals on the
appears: "Agreed price: P100,000.00, P30,000.00 down payment,
house existing thereon which was earlier leased by defendant to the
bal. in 10 years."
plaintiff's sister-in-law, Socorro J. Velasco, and which were duly paid
to the defendant by checks drawn by plaintiff.
To prove that the Magdalena Estate, Inc. had been dealing all along
with him and not with his sister-in-law and that the Magdalena
It is not difficult to glean from the aforequoted averments that the petitioners
Estate, Inc. knew very well that he was the person interested in the
themselves admit that they and the respondent still had to meet and agree on how and
lot in question and not his sister-in-law, the plaintiff offers in
when the down-payment and the installment payments were to be paid. Such being the
evidence five checks all drawn by him in favor of Magdalena Estate,
situation, it cannot, therefore, be said that a definite and firm sales agreement between
Inc. for payment of the lease of the property. ....
the parties had been perfected over the lot in question. Indeed, this Court has already
ruled before that a definite agreement on the manner of payment of the purchase price
There does not seem to be any dispute regarding the fact that the is an essential element in the formation of a binding and unforceable contract of sale.3
Velasco family was leasing this property from the Magdalena Estate, The fact, therefore, that the petitioners delivered to the respondent the sum of P10,000
Inc. since December 29, 1961; that the Velasco family sometime in as part of the down-payment that they had to pay cannot be considered as sufficient
1962 offered to purchase the lot as a result of which Lorenzo proof of the perfection of any purchase and sale agreement between the parties herein
Velasco thru Socorro Velasco made the P10,000.00 deposit or, in the under article 1482 of the new Civil Code, as the petitioners themselves admit that some
language of the defendant 'earnest money or down payment' as essential matter the terms of payment still had to be mutually covenanted.
evidenced by Exhibit A. The only matter that remains to be decided
is whether the talks between the Magdalena Estate, Inc. and
ACCORDINGLY, the instant petitioner is hereby denied. No pronouncement as to costs.
Lorenzo Velasco either directly or thru his sister-in-law Socorro
Velasco ever ripened into a consummated sale. It is the position of
the defendant (1) that the sale was never consummated and (2) that
the contract is unenforceable under the Statute of Frauds.

The court a quo agreed with the respondent's (defendant therein) contention that no
contract of sale was perfected because the minds of the parties did not meet "in regard
to the manner of payment." The court a quo appraisal of this aspect of the action below
Republic of the Philippines the Province (Marinduque) where the unit will be used on the 19th
2. the downpayment of P100,000.00 will be paid by Mr. Sosa on
FIRST DIVISION June 15, 1989.

3. the TOYOTA SHAW, INC. LITE ACE yellow, will be pick-up [sic] and
released by TOYOTA SHAW, INC. on the 17th of June at 10 a.m.
G.R. No. L-116650 May 23, 1995

TOYOTA SHAW, INC., petitioner,

COURT OF APPEALS and LUNA L. SOSA, respondents.


At the heart of the present controversy is the document marked Exhibit "A" 1 for the
private respondent, which was signed by a sales representative of Toyota Shaw, Inc.
named Popong Bernardo. The document reads as follows:




1. all necessary documents will be submitted to TOYOTA SHAW, INC.

(POPONG BERNARDO) a week after, upon arrival of Mr. Sosa from
a) A
downpayment P 53,148.00
b) insurance P 13,970.00
c) BLTOregistration fee P 1,067.00
. fee
CHMO P 2,715.00
service fee P 500.00
Was this document, executed and signed by the petitioner's sales representative, a
perfected contract of sale, binding upon the petitioner, breach of which would entitle accessories P 29,000.00
the private respondent to damages and attorney's fees? The trial court and the Court of
Appeals took the affirmative view. The petitioner disagrees. Hence, this petition for
review on certiorari.
and that the "BALANCE TO BE FINANCED" is "P274,137.00." The spaces provided for
The antecedents as disclosed in the decisions of both the trial court and the Court of "Delivery Terms" were not filled-up. It also contains the following pertinent provisions:
Appeals, as well as in the pleadings of petitioner Toyota Shaw, Inc. (hereinafter Toyota)
and respondent Luna L. Sosa (hereinafter Sosa) are as follows. Sometime in June of
1989, Luna L. Sosa wanted to purchase a Toyota Lite Ace. It was then a seller's market
and Sosa had difficulty finding a dealer with an available unit for sale. But upon
contacting Toyota Shaw, Inc., he was told that there was an available unit. So on 14 June 1. This sale is subject to availability of unit.
1989, Sosa and his son, Gilbert, went to the Toyota office at Shaw Boulevard, Pasig,
Metro Manila. There they met Popong Bernardo, a sales representative of Toyota. 2. Stated Price is subject to change without prior notice, Price
prevailing and in effect at time of selling will apply. . . .
Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989
because he, his family, and a balikbayan guest would use it on 18 June 1989 to go to Rodrigo Quirante, the Sales Supervisor of Bernardo, checked and approved the VSP.
Marinduque, his home province, where he would celebrate his birthday on the 19th of
June. He added that if he does not arrive in his hometown with the new car, he would On 17 June 1989, at around 9:30 a.m., Bernardo called Gilbert to inform him that the
become a "laughing stock." Bernardo assured Sosa that a unit would be ready for pick vehicle would not be ready for pick up at 10:00 a.m. as previously agreed upon but at
up at 10:00 a.m. on 17 June 1989. Bernardo then signed the aforequoted "Agreements 2:00 p.m. that same day. At 2:00 p.m., Sosa and Gilbert met Bernardo at the latter's
Between Mr. Sosa & Popong Bernardo of Toyota Shaw, Inc." It was also agreed upon by office. According to Sosa, Bernardo informed them that the Lite Ace was being readied
the parties that the balance of the purchase price would be paid by credit financing for delivery. After waiting for about an hour, Bernardo told them that the car could not
through B.A. Finance, and for this Gilbert, on behalf of his father, signed the documents be delivered because "nasulot ang unit ng ibang malakas."
of Toyota and B.A. Finance pertaining to the application for financing.
Toyota contends, however, that the Lite Ace was not delivered to Sosa because of the
The next day, 15 June 1989, Sosa and Gilbert went to Toyota to deliver the disapproval by B.A. Finance of the credit financing application of Sosa. It further alleged
downpayment of P100,000.00. They met Bernardo who then accomplished a printed that a particular unit had already been reserved and earmarked for Sosa but could not
Vehicle Sales Proposal (VSP) No. 928,2 on which Gilbert signed under the subheading be released due to the uncertainty of payment of the balance of the purchase price.
CONFORME. This document shows that the customer's name is "MR. LUNA SOSA" with Toyota then gave Sosa the option to purchase the unit by paying the full purchase price
home address at No. 2316 Guijo Street, United Paraaque II; that the model series of in cash but Sosa refused.
the vehicle is a "Lite Ace 1500" described as "4 Dr minibus"; that payment is by
"installment," to be financed by "B.A.," 3 with the initial cash outlay of P100,000.00
After it became clear that the Lite Ace would not be delivered to him, Sosa asked that
broken down as follows:
his downpayment be refunded. Toyota did so on the very same day by issuing a Far East
Bank check for the full amount of P100,000.00, 4 the receipt of which was shown by a After trial on the issues agreed upon during the pre-trial session, 11 the trial court
check voucher of Toyota,5 which Sosa signed with the reservation, "without prejudice to rendered on 18 February 1992 a decision in favor of Sosa. 12 It ruled that Exhibit "A,"
our future claims for damages." the "AGREEMENTS BETWEEN MR. SOSA AND POPONG BERNARDO," was a valid
perfected contract of sale between Sosa and Toyota which bound Toyota to deliver the
Thereafter, Sosa sent two letters to Toyota. In the first letter, dated 27 June 1989 and vehicle to Sosa, and further agreed with Sosa that Toyota acted in bad faith in selling to
signed by him, he demanded the refund, within five days from receipt, of the another the unit already reserved for him.
downpayment of P100,000.00 plus interest from the time he paid it and the payment of
damages with a warning that in case of Toyota's failure to do so he would be As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A,"
constrained to take legal action. 6 The second, dated 4 November 1989 and signed by the trial court held that the extent of Bernardo's authority "was not made known to
M. O. Caballes, Sosa's counsel, demanded one million pesos representing interest and plaintiff," for as testified to by Quirante, "they do not volunteer any information as to
damages, again, with a warning that legal action would be taken if payment was not the company's sales policy and guidelines because they are internal matters." 13
made within three days.7 Toyota's counsel answered through a letter dated 27 Moreover, "[f]rom the beginning of the transaction up to its consummation when the
November 1989 8 refusing to accede to the demands of Sosa. But even before this downpayment was made by the plaintiff, the defendants had made known to the
answer was made and received by Sosa, the latter filed on 20 November 1989 with plaintiff the impression that Popong Bernardo is an authorized sales executive as it
Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota permitted the latter to do acts within the scope of an apparent authority holding him
for damages under Articles 19 and 21 of the Civil Code in the total amount of out to the public as possessing power to do these acts." 14 Bernardo then "was an agent
P1,230,000.00.9 He alleges, inter alia, that: of the defendant Toyota Shaw, Inc. and hence bound the defendants." 15

9. As a result of defendant's failure and/or refusal to deliver the The court further declared that "Luna Sosa proved his social standing in the community
vehicle to plaintiff, plaintiff suffered embarrassment, humiliation, and suffered besmirched reputation, wounded feelings and sleepless nights for which
ridicule, mental anguish and sleepless nights because: (i) he and his he ought to be compensated." 16 Accordingly, it disposed as follows:
family were constrained to take the public transportation from
Manila to Lucena City on their way to Marinduque; (ii) his WHEREFORE, viewed from the above findings, judgment is hereby
balikbayan-guest canceled his scheduled first visit to Marinduque in rendered in favor of the plaintiff and against the defendant:
order to avoid the inconvenience of taking public transportation;
and (iii) his relatives, friends, neighbors and other provincemates,
1. ordering the defendant to pay to the plaintiff
continuously irked him about "his Brand-New Toyota Lite Ace that
the sum of P75,000.00 for moral damages;
never was." Under the circumstances, defendant should be made
liable to the plaintiff for moral damages in the amount of One
Million Pesos (P1,000,000.00). 10 2. ordering the defendant to pay the plaintiff the
sum of P10,000.00 for exemplary damages;
In its answer to the complaint, Toyota alleged that no sale was entered into between it
and Sosa, that Bernardo had no authority to sign Exhibit "A" for and in its behalf, and 3. ordering the defendant to pay the sum of
that Bernardo signed Exhibit "A" in his personal capacity. As special and affirmative P30,000.00 attorney's fees plus P2,000.00
defenses, it alleged that: the VSP did not state date of delivery; Sosa had not completed lawyer's transportation fare per trip in attending
the documents required by the financing company, and as a matter of policy, the vehicle to the hearing of this case;
could not and would not be released prior to full compliance with financing
requirements, submission of all documents, and execution of the sales 4. ordering the defendant to pay the plaintiff the
agreement/invoice; the P100,000.00 was returned to and received by Sosa; the venue sum of P2,000.00 transportation fare per trip of
was improperly laid; and Sosa did not have a sufficient cause of action against it. It also the plaintiff in attending the hearing of this case;
interposed compulsory counterclaims. and
5. ordering the defendant to pay the cost of suit. From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing the
SO ORDERED. form of contracts.

Dissatisfied with the trial court's judgment, Toyota appealed to the Court of Appeals. What is clear from Exhibit "A" is not what the trial court and the Court of Appeals
The case was docketed as CA-G.R. CV No. 40043. In its decision promulgated on 29 July appear to see. It is not a contract of sale. No obligation on the part of Toyota to transfer
1994,17 the Court of Appeals affirmed in toto the appealed decision. ownership of a determinate thing to Sosa and no correlative obligation on the part of
the latter to pay therefor a price certain appears therein. The provision on the
downpayment of P100,000.00 made no specific reference to a sale of a vehicle. If it was
Toyota now comes before this Court via this petition and raises the core issue stated at
intended for a contract of sale, it could only refer to a sale on installment basis, as the
the beginning of the ponencia and also the following related issues: (a) whether or not
VSP executed the following day confirmed. But nothing was mentioned about the full
the standard VSP was the true and documented understanding of the parties which
purchase price and the manner the installments were to be paid.
would have led to the ultimate contract of sale, (b) whether or not Sosa has any legal
and demandable right to the delivery of the vehicle despite the non-payment of the
consideration and the non-approval of his credit application by B.A. Finance, (c) whether This Court had already ruled that a definite agreement on the manner of payment of the
or not Toyota acted in good faith when it did not release the vehicle to Sosa, and (d) price is an essential element in the formation of a binding and enforceable contract of
whether or not Toyota may be held liable for damages. sale. 18 This is so because the agreement as to the manner of payment goes into the
price such that a disagreement on the manner of payment is tantamount to a failure to
agree on the price. Definiteness as to the price is an essential element of a binding
We find merit in the petition.
agreement to sell personal property. 19

Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit
Moreover, Exhibit "A" shows the absence of a meeting of minds between Toyota and
"A" is a perfected contract of sale.
Sosa. For one thing, Sosa did not even sign it. For another, Sosa was well aware from its
title, written in bold letters, viz.,
Article 1458 of the Civil Code defines a contract of sale as follows:
Art. 1458. By the contract of sale one of the contracting parties BERNARDO OF TOYOTA SHAW, INC.
obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefor a price certain in
that he was not dealing with Toyota but with Popong Bernardo and that the latter did
money or its equivalent.
not misrepresent that he had the authority to sell any Toyota vehicle. He knew that
Bernardo was only a sales representative of Toyota and hence a mere agent of the
A contract of sale may be absolute or conditional. latter. It was incumbent upon Sosa to act with ordinary prudence and reasonable
diligence to know the extent of Bernardo's authority as an
and Article 1475 specifically provides when it is deemed perfected: agent20 in respect of contracts to sell Toyota's vehicles. A person dealing with an agent
is put upon inquiry and must discover upon his peril the authority of the agent.21
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 At the most, Exhibit "A" may be considered as part of the initial phase of the generation
and upon the price. or negotiation stage of a contract of sale. There are three stages in the contract of sale,
(a) preparation, conception, or generation, which is the period of nasulot ang unit ng ibang malakas," while the Sosas had already been waiting for an
negotiation and bargaining, ending at the moment of agreement of hour for the delivery of the vehicle in the afternoon of 17 June 1989. However, in
the parties; paragraph 7 of his complaint, Sosa solemnly states:

(b) perfection or birth of the contract, which is the moment when On June 17, 1989 at around 9:30 o'clock in the morning, defendant's
the parties come to agree on the terms of the contract; and sales representative, Mr. Popong Bernardo, called plaintiff's house
and informed the plaintiff's son that the vehicle will not be ready for
(c) consummation or death, which is the fulfillment or performance pick-up at 10:00 a.m. of June 17, 1989 but at 2:00 p.m. of that day
of the terms agreed upon in the contract.22 instead. Plaintiff and his son went to defendant's office on June 17
1989 at 2:00 p.m. in order to pick-up the vehicle but the defendant
for reasons known only to its representatives, refused and/or failed
The second phase of the generation or negotiation stage in this case was the execution
to release the vehicle to the plaintiff. Plaintiff demanded for an
of the VSP. It must be emphasized that thereunder, the downpayment of the purchase
explanation, but nothing was given; . . . (Emphasis supplied). 25
price was P53,148.00 while the balance to be paid on installment should be financed by
B.A. Finance Corporation. It is, of course, to be assumed that B.A. Finance Corp. was
acceptable to Toyota, otherwise it should not have mentioned B.A. Finance in the VSP. The VSP was a mere proposal which was aborted in lieu of subsequent events. It follows
that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle
to him, and its non-delivery did not cause any legally indemnifiable injury.
Financing companies are defined in Section 3(a) of R.A. No. 5980, as amended by P.D.
No. 1454 and P.D. No. 1793, as "corporations or partnerships, except those regulated by
the Central Bank of the Philippines, the Insurance Commission and the Cooperatives The award then of moral and exemplary damages and attorney's fees and costs of suit is
Administration Office, which are primarily organized for the purpose of extending credit without legal basis. Besides, the only ground upon which Sosa claimed moral damages is
facilities to consumers and to industrial, commercial, or agricultural enterprises, either that since it was known to his friends, townmates, and relatives that he was buying a
by discounting or factoring commercial papers or accounts receivables, or by buying and Toyota Lite Ace which they expected to see on his birthday, he suffered humiliation,
selling contracts, leases, chattel mortgages, or other evidence of indebtedness, or by shame, and sleepless nights when the van was not delivered. The van became the
leasing of motor vehicles, heavy equipment and industrial machinery, business and subject matter of talks during his celebration that he may not have paid for it, and this
office machines and equipment, appliances and other movable property." 23 created an impression against his business standing and reputation. At the bottom of
this claim is nothing but misplaced pride and ego. He should not have announced his
plan to buy a Toyota Lite Ace knowing that he might not be able to pay the full purchase
Accordingly, in a sale on installment basis which is financed by a financing company,
price. It was he who brought embarrassment upon himself by bragging about a thing
three parties are thus involved: the buyer who executes a note or notes for the unpaid
which he did not own yet.
balance of the price of the thing purchased on installment, the seller who assigns the
notes or discounts them with a financing company, and the financing company which is
subrogated in the place of the seller, as the creditor of the installment buyer. 24 Since Since Sosa is not entitled to moral damages and there being no award for temperate,
B.A. Finance did not approve Sosa's application, there was then no meeting of minds on liquidated, or compensatory damages, he is likewise not entitled to exemplary damages.
the sale on installment basis. Under Article 2229 of the Civil Code, exemplary or corrective damages are imposed by
way of example or correction for the public good, in addition to moral, temperate,
liquidated, or compensatory damages.
We are inclined to believe Toyota's version that B.A. Finance disapproved Sosa's
application for which reason it suggested to Sosa that he pay the full purchase price.
When the latter refused, Toyota cancelled the VSP and returned to him his P100,000.00. Also, it is settled that for attorney's fees to be granted, the court must explicitly state in
Sosa's version that the VSP was cancelled because, according to Bernardo, the vehicle the body of the decision, and not only in the dispositive portion thereof, the legal
was delivered to another who was "mas malakas" does not inspire belief and was reason for the award of attorney's fees. 26 No such explicit determination thereon was
obviously a delayed afterthought. It is claimed that Bernardo said, "Pasensiya kayo, made in the body of the decision of the trial court. No reason thus exists for such an
WHEREFORE, the instant petition is GRANTED. The challenged decision of the Court of
Appeals in CA-G.R. CV NO. 40043 as well as that of Branch 38 of the Regional Trial Court
of Marinduque in Civil Case No. 89-14 are REVERSED and SET ASIDE and the complaint in
Civil Case No. 89-14 is DISMISSED. The counterclaim therein is likewise DISMISSED.

No pronouncement as to costs.

Republic of the Philippines demand set forth in complaint against Apostol is for P34,015.06 with legal
SUPREME COURT interests thereon from January 8, 1952. The Empire lnsurance Company was
Manila included in the complaint having executed a performance bond of P10,000.00
in favor of Apostol.
In his answer, Apostol interposed payment as a defense and sought the
G.R. No. L-10141 January 31, 1958 dismissal of the complaint.

REPUBLIC OF THE PHILIPPINES, petitioner, On July 19, 1955, the Philippine Resources Development Corporation moved
vs. to intervene, appending to its motion, the complaint in the intervention of
PHILIPPINE RESOURCES DEVELOPMENT CORPORATION and the COURT OF APPEALS, even date. The complaint recites that for sometime prior to Apostol's
respondents. transactions the corporate had some goods deposited in a warehouse at 1201
Herran, Manila; that Apostol, then the president of the corporation but
without the knowledge or consent of the stockholders thereof, disposed of
Office of the Solicitor General Ambrosio Padilla, and Solicitor Frine C. Zaballero for
said goods by delivering the same to the Bureau of Prisons of in an attempt to
settle his personal debts with the latter entity; that upon discovery of Apodol's
Vicente L. Santiago for respondent Corporation.
act, the corporation took steps to recover said goods by demanding from the
Bureau of Prisons the return thereof; and that upon the refusal of the Bureau
PADILLA, J.: to return said goods, the corporation sought leave to intervene in Civil Case
No. 26166.
This is a petition under Rule 46 to review a judgment rendered by the Court of
Appeals,in CA-GR No. 15767-R, Philippine Resources Development Corporation vs. The As aforestated, His Honor denied the motion for intervention and thereby
Hon. Judge Magno Gatmaitan et al. issued an order to this effect on July 23, 1955. A motion for the
reconsideration of said order was filed by the movant corporation and the
The findings of the Court of Appeals are, as follows. same was likewise denied by His Honor on August 18, 1955 . . . (Annex L.).

It appears that on May 6, 1955, the Republic of the Philippines in On 3 September 1955, in a petition for a writ of certiorari filed in the Court of Appeals,
representation of the Bureau of Prisons instituted against Macario Apostol the herein respondent corporation prayed for the setting aside of the order of the Court
and the Empire Insurance Co. a complaint docketed as Civil Case No. 26166 of of First Instance that had denied the admission of its complaint-in-intervention and for
the Court of First instance of Manila. The complaint alleges as the first cause an order directing the latter Court to allow the herein respondent corporation to
of action, that defendant Apostol submitted the highest bid the amount intervene in the action (Annex G). On 12 December 1955 the Court of Appeals set aside
P450.00 per ton for the purchase of 100 tons of Palawan Almaciga from the the order denying the motion to intervene and ordered the respondent court to admit
Bureau of Prisons; that a contract therefor was drawn and by virtue of which, the herein respondent corporation's complaint-in-intervention with costs against
Apostol obtained goods from the Bureau of Prisons valued P15,878.59; that of Macario Apostol.
said account, Apostol paid only P691.10 leaving a balane obligation of
P15,187.49. The complaint further averes, as second cause of action, that On 9 January 1956 the Republic of the Philippines filed this petition in this Court for the
Apostol submitted the best bid with the Bureau of Prisons for the purchase of purpose stated at the beginning of this opinion.
three million board feet of logs at P88.00 per 1,000 board feet; that a contract
was executed between the Director of Prisons and Apostol pursuant to which
The Goverment contends that the intervenor has no legal interest in the matter in
contract Apostol obtained deliveries of logs valued at P65.830.00, and that
litigation, because the action brought in the Court of First Instance of Manila against
Apostol failed to pay a balance account Of P18,827.57. All told, for the total
Macario Apostol and the Empire Insurance Company (Civil Case No. 26166, Annex A) is We find no merit in respondents' contention. It is true that the very subject
just for the collection from the defendant Apostol of a sum of money, the unpaid matter of the original case is a sum of money. But it is likewise true as borne
balance of the purchase price of logs and almaciga bought by him from the Bureau of out by the records, that the materials purportedly belonging to the petitioner
Prisons, whereas the intervenor seeks to recover ownership and possession of G. I. corporation have been assessed and evaluated and their price equivalent in
sheets, black sheets, M. S. plates, round bars and G. I. pipes that it claims its owns-an terms of money have been determined; and that said materials for whatever
intervention which would change a personal action into one ad rem and would unduly price they have been assigned by defendant now respondent Apostol as
delay the disposition of the case. tokens of payment of his private debts with the Bureau of Prisons. In view of
these considerations, it becomes enormously plain in the event the
The Court of Appeals held that: respondent judge decides to credit Macario Apostol with the value of the
goods delivered by the latter to the Bureau of Prisons, the petitioner
corporation stands to be adversely affected by such judgment. The conclusion,
Petitioner ardently claims that the reason behind its motion to intervene is the
therefore, is inescapable that the petitioner possesses a legal interest in the
desire to protect its rights and interests over some materials purportedly
matter in litigation and that such interest is of an actual, material, direct and
belonging to it; that said material were unauthorizedly and illegally assigned
immediate nature as to entitle petitioner to intervene.
and delivered to the Bureau of Prisons by petitioning corporation's president
Macario Apostol in payment of the latter's personal accounts with the said
entity; and that the Bureau of Prisons refused to return said materials despite xxx xxx xxx
petitioner's demands to do so.
Section 3 of Rule 13 of the Rules of Court endows the lower Court with
Petitioner refers to the particulars recited in Apostol's answer dated July 12, discretion to allow or disapprove the motion for intrvention (Santarromana et
1955 to the effect that Apostol had paid unto the Bureau of Prisons his al. vs. Barrios, 63 Phil. 456); and that in the exercise of such discretion, the
accounts covered, among others, by BPPO 1077 for the sum of P4,638.40 and court shall consider whether or not the intervention will unduly delay or
BPPO 1549 for the amount of P4,398.54. Petitioner moreover, points to the prejudice the adjudicatio of the rights of the original parties and whether or
State of Paid and Unpaid accounts of Apostol dated January 16, 1954 prepared not the intervenors the rights may be fully protected in a separate proceeding.
by the accounting of officer of the Bureau of Prisons (Annex B. Complaint in The petitioner in the instant case positively authorized to a separate action
Intervention), wherein it appears that the aforementioned accounts covered against any of all the respondents. But considering that the resolution of the
respectively by BPPO Nos. 1077 for 892 pieces of GI sheets and 1549 for 399 issues raised in and enjoined by the pleadings in the main case, would virtally
pieces of GI pipes in the total sum of P9,036.94 have not been credited to affect the rights not only the original parties but also of the berein petitioner:
Apostol's account in view of lack of supporting papers; and that according to that far from unduly delaying or prejudicing the adjudication of the rights of
the reply letter of the Undersecretary of Justice, said GI sheets and pipes were the original parties or bringing about confusion in the original case, the
delivered by Macario Apostol to the Bureau of Prisons allegedly in Apostol's adnission of the complaint in intervention would help clarify the vital issue of
capacity as owner and that the black iron sheets were delivered by Apostol as the true and real ownership of the materials involved, besides preventing an
President of the petitioner corporation. abhorrent munltiplicity of suit, we believe that the motion to intervene should
be given due to cause.
Respondents, on the other hand, assert that the subject matter of the original
litigation is a sum of money allegedly due to the Bureau of Prisons from We find no reason for disturbing the foregoing pronouncements. The Government
Macario Apostol and not the goods or the materials reportedly turned over by argues that "Price . . . is always paid in terms of money and the supposed payment
Apostol as payment of his private debts to the Bureau of Prisons and the beeing in kind, it is no payment at all, "citing Article 1458 of the new Civil Code.
recovery of which is sought by the petitioner; and that for this reason, However, the same Article provides that the purschaser may pay "a price certain in
petitioner has no legal interest in the very subject matter in litigation as to money or its equivalent," which means that they meant of the price need not be in
entitle it to intervene. money. Whether the G.I. sheets, black sheets, M. S. Plates, round bars and G. I. pipes
claimed by the respondent corporation to belong to it and delivered to the Bureau of
Prison by Macario Apostol in payment of his account is sufficient payment therefore, is in its behalf, hte resolution of the Court of Appeals on this point should not be
for the court to pass upon and decide after hearing all the parties in the case. Should the disturbed.
trial court hold that it is as to credit Apostol with the value or price of the materials
delivered by him, certainly the herein respondent corporation would be affected Granting that counsel has not been actually authorized by the board of directors to
adversely if its claim of ownership of such sheets, plates, bars and pipes is true. appear for and in behalf of the respondent corporation, the fact that counsel is the
secretary treasurer of the respondent corporation and member of the board of
The Government reiterates in its original stand that counsel appearing for the directors; and that the other members of the board, namely, Macario Apostol, the
respondent corporation has no authority to represent it or/and sue in its behalf, the president, and his wife Pacita R. Apostol, who shuold normally initiate the action to
Court of Appeals held that: protect the corporate properties and in interest are the ones to be adversely affected
thereby, a single stockholder under such circumstances may sue in behalf of the
Respondents aver also that petitioner lacks legal capacity to sue and that its corporation.2 Counsel as a stockholder and director of the respondent corporation may
counsel is acting merely in an individual capacity without the benefit of the sue in its behalf and file the complaint in intervention in the proper court.
corporate act authorizing him to bring sue. In this connection, respondents
invoked among others section 20 of Rule 127 which provision, in our opinion, The judgment under review is affirmed, without pronouncements as to costs.
squarely disproves their claim as by virtue thereof, the authority of
petitioner's counsel is pressumed. Withal, the claim of the counsel for the
petitioner that a resolution to proceed against Apostol, had been
unanonimously adopted by the stockholders of the corporation, has not been

Evidently, petitioner is a duly organized corporation with offices at the

Samanillo Building and that as such, it is endowed with a personality distinct
and separate from that of its president or stockholders. It has the right to
bring suit to safeguard its interests and ordinarily, such right is exercised at the
instance of the president. However, under the circumstance now obtaining,
such right properly devolves upon the other officers of the corporations as
said right is sought to be exercised against the president himself who is the
very object of the intended suit.

The power of a corporation to sue and be sued in any court1 is lodged in the board of
directors which exercises it corporater powers,2 and not in the president, as contended
by the Government. The "motion for admission of complaint in intervention" (Annex C)
and the "complaint in intervention" attached thereto, signed by counsel and filed in the
Court of First Instance begin with the following statement: "COMES NOW the above-
name Intervenor, by its undersigned counsel, . . . , "and underneath his typewritten
name is affixed the description" Counsel for the Intervenor." As counsels authority to
appeal for the respondent corporation was newer questioned in the Court of First
Instance, it is to be pressumed that he was properly authorized to file the complaint in
intervention and appeal for his client.1 It was only in the Court of Appeals where his
authority to appear was questioned. As the Court of Appeals was satisfied that counsel
was duly authorized by his client to file the complaint does in intervention and to appear
Republic of the Philippines PIAS, M.M. COVERED BY TCT NO. T-9905 AND WITH AN AREA OF 439 SQUARE
G.R. No. 139173 February 28, 2007
On March 28, 1990, respondent, through his counsel Atty. Ponciano Espiritu, wrote
DECISION 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
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil stating that petitioner Amparo Herrera is leaving for abroad on or before April 15, 1990
Procedure, as amended, assailing the Decision1 of the Court of Appeals dated January and that they are canceling the transaction. Petitioners also informed respondent that
29, 1999 and its Resolution dated July 14, 1999 in CA-G.R. CV No. 48824. he can recover the earnest money of 100,000.00 anytime.

Spouses Onnie and Amparo Herrera, petitioners, are the registered owners of a lot Again, on April 6, 1990,5 petitioners wrote respondent stating that they delivered to his
located in Las Pias, Metro Manila covered by Transfer Certificate of Title No. T-9905. counsel Philippine National Bank Managers Check No. 790537 dated April 6, 1990 in the
amount of 100,000.00 payable to him.
Sometime in March 1990, Godofredo Caguiat, respondent, offered to buy the lot.
Petitioners agreed to sell it at 1,500.00 per square meter. Respondent then gave In view of the cancellation of the contract by petitioners, respondent filed with the
petitioners 100,000.00 as partial payment. In turn, petitioners gave respondent the Regional Trial Court, Branch 63, Makati City a complaint against them for specific
corresponding receipt stating that respondent promised to pay the balance of the performance and damages, docketed as Civil Case No. 90-1067.6
purchase price on or before March 23, 1990, thus:
On June 27, 1994, after hearing, the trial court rendered its Decision7 finding there was a
Las Pias, Metro Manila 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:
March 19, 1990
PIAS, METRO MANILA 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
100,000.00 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 In holding that there is a perfected contract of sale, both courts mainly relied on the
Philippines, reads as follows, to wit: 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
Art. 1482. Whenever earnest money is given in a contract of sale, it shall be considered shall be considered as part of the price and as proof of the perfection of the contract."
as part of the price and as proof of the perfection of the contract.
We are not convinced.
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 In San Miguel Properties Philippines, Inc. v. Spouses Huang,13 we held that the stages of
the same intent to pursue the sale in a letter dated April 6, 1990. Third, plaintiff had the a contract of sale are: (1) negotiation, covering the period from the time the prospective
balance of the purchase price ready for payment (Exh. C). Defendants mere allegation contracting parties indicate interest in the contract to the time the contract is perfected;
that it was plaintiff who did not appear on March 23, 1990 is unavailing. Defendants (2) perfection, which takes place upon the concurrence of the essential elements of the
letters (Exhs. 2 and 5) appear to be mere afterthought. 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
On appeal, the Court of Appeals, in its assailed Decision of January 29, 1999, affirmed respective undertakings under the contract of sale, culminating in the extinguishment
the trial courts judgment. thereof.

Forthwith, petitioners filed their motion for reconsideration but it was denied by the With the above postulates as guidelines, we now proceed to determine the real nature
appellate court in its Resolution8 dated July 14, 1999. of the contract entered into by the parties.

Hence, the present recourse. 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
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
Petitioners contend that the Receipt is not a perfected contract of sale as provided for in
Article 14589 in relation to Article 147510 of the Civil Code. The delivery to them of
100,000.00 as down payment cannot be considered as proof of the perfection of a
contract of sale under Article 148211 of the same Code since there was no clear MR. CAGUIAT PROMISED TO PAY THE BALANCE OF THE PURCHASE PRICE ON OR BEFORE
agreement between the parties as to the amount of consideration. MARCH 23, 1990, AND THAT WE WILL EXECUTE AND SIGN THE FINAL DEED OF SALE ON
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 there can be no other interpretation than that they agreed to a conditional contract of
changed on appeal in the absence of a clear showing that the trial court overlooked, sale, consummation of which is subject only to the full payment of the purchase price.
disregarded, or misinterpreted some facts of weight and significance, which if
considered would have altered the result of the case.1awphi1.net12 In the present A contract to sell is akin to a conditional sale where the efficacy or obligatory force of
case, we find that both the trial court and the Court of Appeals interpreted some the vendor's obligation to transfer title is subordinated to the happening of a future and
significant facts resulting in an erroneous resolution of the issue involved. 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 earnest money forms part of the consideration only if the sale is consummated upon full
jurisprudence. As early as 1951, in Sing Yee v. Santos,16 we held that: 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.
x x x [a] distinction must be made between a contract of sale in which title passes to the
buyer upon delivery of the thing sold and a contract to sell x x x where by agreement the As previously discussed, the suspensive condition (payment of the balance by
ownership is reserved in the seller and is not to pass until the full payment, of the respondent) did not take place. Clearly, respondent cannot compel petitioners to
purchase price is made. In the first case, non-payment of the price is a negative transfer ownership of the property to him.
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 WHEREFORE, we GRANT the instant Petition for Review. The challenged Decision of the
lost and cannot recover the ownership of the land sold until and unless the contract of Court of Appeals is REVERSED and respondents complaint is DISMISSED.
sale is itself resolved and set aside. In the second case, however, the title remains in the
vendor if the vendee does not comply with the condition precedent of making payment
at the time specified in the contract.

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

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

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

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

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

It is true that Article 1482 of the Civil Code provides that "Whenever earnest money is
given in a contract of sale, it shall be considered as part of the price and proof of the
perfection of the contract." However, this article speaks of earnest money given in a
contract of sale. In this case, the earnest money was given in a contract to sell. The
G.R. No. 137290 July 31, 2000 1. We will be given the exclusive option to purchase the property within the
30 days from date of your acceptance of this offer.
vs. 2. During said period, we will negotiate on the terms and conditions of the
SPOUSES ALFREDO HUANG and GRACE HUANG, respondents. purchase; SMPPI will secure the necessary Management and Board approvals;
and we initiate the documentation if there is mutual agreement between us.
3. In the event that we do not come to an agreement on this transaction, the
MENDOZA, J.: said amount of 1,000,000.00 shall be refundable to us in full upon demand. .
This is a petition for review of the decision,1 dated April 8, 1997, of the Court of Appeals
which reversed the decision of the Regional Trial Court, Branch 153, Pasig City Isidro A. Sobrecarey, petitioners vice-president and operations manager for corporate
dismissing the complaint brought by respondents against petitioner for enforcement of real estate, indicated his conformity to the offer by affixing his signature to the letter
a contract of sale. and accepted the "earnest-deposit" of 1 million. Upon request of respondent spouses,
Sobrecarey ordered the removal of the "FOR SALE" sign from the properties.
The facts are not in dispute.
Atty. Dauz and Sobrecarey then commenced negotiations. During their meeting on April
8, 1994, Sobrecarey informed Atty. Dauz that petitioner was willing to sell the subject
Petitioner San Miguel Properties Philippines, Inc. is a domestic corporation engaged in
properties on a 90-day term. Atty. Dauz countered with an offer of six months within
the purchase and sale of real properties. Part of its inventory are two parcels of land
which to pay.
totalling 1, 738 square meters at the corner of Meralco Avenue and General Capinpin
Street, Barrio Oranbo, Pasig City, which are covered by TCT Nos. PT-82395 and PT-82396
of the Register of Deeds of Pasig City. On April 14, 1994, the parties again met during which Sobrecarey informed Atty. Dauz
that petitioner had not yet acted on her counter-offer. This prompted Atty. Dauz to
propose a four-month period of amortization.
On February 21, 1994, the properties were offered for sale for 52,140,000.00 in cash.
The offer was made to Atty. Helena M. Dauz who was acting for respondent spouses as
undisclosed principals. In a letter2 dated March 24, 1994, Atty. Dauz signified her On April 25, 1994, Atty. Dauz asked for an extension of 45 days from April 29, 1994 to
clients interest in purchasing the properties for the amount for which they were offered June 13, 1994 within which to exercise her option to purchase the property, adding that
by petitioner, under the following terms: the sum of 500,000.00 would be given as within that period, "[we] hope to finalize [our] agreement on the matter."4 Her request
earnest money and the balance would be paid in eight equal monthly installments from was granted.
May to December, 1994. However, petitioner refused the counter-offer.
On July 7, 1994, petitioner, through its president and chief executive officer, Federico
On March 29, 1994, Atty. Dauz wrote another letter3 proposing the following terms for Gonzales, wrote Atty. Dauz informing her that because the parties failed to agree on the
the purchase of the properties, viz: terms and conditions of the sale despite the extension granted by petitioner, the latter
was returning the amount of 1 million given as "earnest-deposit."5
This is to express our interest to buy your-above-mentioned property with an area of 1,
738 sq. meters. For this purpose, we are enclosing herewith the sum of 1,000,000.00 On July 20, 1994, respondent spouses, through counsel, wrote petitioner demanding the
representing earnest-deposit money, subject to the following conditions. execution within five days of a deed of sale covering the properties. Respondents
attempted to return the "earnest-deposit" but petitioner refused on the ground that
respondents option to purchase had already expired.
On August 16, 1994, respondent spouses filed a complaint for specific performance The petition is meritorious.
against petitioner before the Regional Trial Court, Branch 133, Pasig City where it was
docketed as Civil Case No. 64660. In holding that there is a perfected contract of sale, the Court of Appeals relied on the
following findings: (1) earnest money was allegedly given by respondents and accepted
Within the period for filing a responsive pleading, petitioner filed a motion to dismiss by petitioner through its vice-president and operations manager, Isidro A. Sobrecarey;
the complaint alleging that (1) the alleged "exclusive option" of respondent spouses and (2) the documentary evidence in the records show that there was a perfected
lacked a consideration separate and distinct from the purchase price and was thus contract of sale.
unenforceable and (2) the complaint did not allege a cause of action because there was
no "meeting of the minds" between the parties and, therefore, no perfected contract of With regard to the alleged payment and acceptance of earnest money, the Court holds
sale. The motion was opposed by respondents. that respondents did not give the 1 million as "earnest money" as provided by Art.
1482 of the Civil Code. They presented the amount merely as a deposit of what would
On December 12, 1994, the trial court granted petitioners motion and dismissed the eventually become the earnest money or downpayment should a contract of sale be
action. Respondents filed a motion for reconsideration, but it was denied by the trial made by them. The amount was thus given not as a part of the purchase price and as
court. They then appealed to the Court of Appeals which, on April 8, 1997, rendered a proof of the perfection of the contract of sale but only as a guarantee that respondents
decision6 reversing the judgment of the trial court. The appellate court held that all the would not back out of the sale. Respondents in fact described the amount as an
requisites of a perfected contract of sale had been complied with as the offer made on "earnest-deposit." In Spouses Doromal, Sr. v. Court of Appeals,9 it was held:
March 29, 1994, in connection with which the earnest money in the amount of 1
million was tendered by respondents, had already been accepted by petitioner. The . . . While the 5,000 might have indeed been paid to Carlos in October, 1967, there is
court cited Art. 1482 of the Civil Code which provides that "[w]henever earnest money is nothing to show that the same was in the concept of the earnest money contemplated
given in a contract of sale, it shall be considered as part of the price and as proof of the in Art. 1482 of the Civil Code, invoked by petitioner, as signifying perfection of the sale.
perfection of the contract." The fact the parties had not agreed on the mode of Viewed in the backdrop of the factual milieu thereof extant in the record, We are more
payment did not affect the contract as such is not an essential element for its validity. In inclined to believe that the said 5,000.00 were paid in the concept of earnest money as
addition, the court found that Sobrecarey had authority to act in behalf of petitioner for the term was understood under the Old Civil Code, that is, as a guarantee that the buyer
the sale of the properties.7 would not back out, considering that it is not clear that there was already a definite
agreement as to the price then and that petitioners were decided to buy 6/7 only of the
Petitioner moved for reconsideration of the trial courts decision, but its motion was property should respondent Javellana refuse to agree to part with her 1/7 share.10
denied. Hence, this petition.
In the present case, the 1 million "earnest-deposit" could not have been given as
Petitioner contends that the Court of Appeals erred in finding that there was a perfected earnest money as contemplated in Art. 1482 because, at the time when petitioner
contract of sale between the parties because the March 29, 1994 letter of respondents, accepted the terms of respondents offer of March 29, 1994, their contract had not yet
which petitioner accepted, merely resulted in an option contract, albeit it was been perfected. This is evident from the following conditions attached by respondents
unenforceable for lack of a distinct consideration. Petitioner argues that the absence of to their letter, to wit: (1) that they be given the exclusive option to purchase the
agreement as to the mode of payment was fatal to the perfection of the contract of property within 30 days from acceptance of the offer; (2) that during the option period,
sale. Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had the parties would negotiate the terms and conditions of the purchase; and (3) petitioner
authority to sell the subject real properties.8 would secure the necessary approvals while respondents would handle the
Respondents were required to comment within ten (10) days from notice. However,
despite 13 extensions totalling 142 days which the Court had given to them, The first condition for an option period of 30 days sufficiently shows that a sale was
respondents failed to file their comment. They were thus considered to have waived the never perfected.1wphi1 As petitioner correctly points out, acceptance of this condition
filing of a comment. did not give rise to a perfected sale but merely to an option or an accepted unilateral
promise on the part of respondents to buy the subject properties within 30 days from
the date of acceptance of the offer. Such option giving respondents the exclusive right the manner of payment is tantamount to a failure to agree on the price.16 In Velasco v.
to buy the properties within the period agreed upon is separate and distinct from the Court of Appeals,17 the parties to a proposed sale had already agreed on the object of
contract of sale which the parties may enter.11 All that respondents had was just the sale and on the purchase price. By the buyers own admission, however, the parties still
option to buy the properties which privilege was not, however, exercised by them had to agree on how and when the downpayment and the installments were to be paid.
because there was a failure to agree on the terms of payment. No contract of sale may It was held:
thus be enforced by respondents.
. . . Such being the situation, it can not, therefore, be said that a definite and firm sales
Furthermore, even the option secured by respondents from petitioner was fatally agreement between the parties had been perfected over the lot in question. Indeed,
defective. Under the second paragraph of Art. 1479, an accepted unilateral promise to this Court has already ruled before that a definite agreement on the manner of payment
buy or sell a determinate thing for a price certain is binding upon the promisor only if of the purchase price is an essential element in the formation of a binding and
the promise is supported by a distinct consideration. Consideration in an option contract enforceable contract of sale. The fact, therefore, that the petitioners delivered to the
may be anything of value, unlike in sale where it must be the price certain in money or respondent the sum of P10,000 as part of the down-payment that they had to pay
its equivalent. There is no showing here of any consideration for the option. Lacking any cannot be considered as sufficient proof of the perfection of any purchase and sale
proof of such consideration, the option is unenforceable. agreement between the parties herein under Art. 1482 of the new Civil Code, as the
petitioners themselves admit that some essential matter - the terms of the payment -
Equally compelling as proof of the absence of a perfected sale is the second condition still had to be mutually covenanted.18
that, during the option period, the parties would negotiate the terms and conditions of
the purchase. The stages of a contract of sale are as follows: (1) negotiation, covering Thus, it is not the giving of earnest money, but the proof of the concurrence of all the
the period from the time the prospective contracting parties indicate interest in the essential elements of the contract of sale which establishes the existence of a perfected
contract to the time the contract is perfected; (2) perfection, which takes place upon the sale.
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, In the absence of a perfected contract of sale, it is immaterial whether Isidro A.
which begins when the parties perform their respective undertakings under the contract Sobrecarey had the authority to enter into a contract of sale in behalf of petitioner. This
of sale, culminating in the extinguishment thereof.12 In the present case, the parties issue, therefore, needs no further discussion.
never got past the negotiation stage. The alleged "indubitable evidence"13 of a
perfected sale cited by the appellate court was nothing more than offers and counter-
WHEREFORE, the decision of the Court of Appeals is REVERSED and respondents
offers which did not amount to any final arrangement containing the essential elements
complaint is DISMISSED.
of a contract of sale. While the parties already agreed on the real properties which were
the objects of the sale and on the purchase price, the fact remains that they failed to
arrive at mutually acceptable terms of payment, despite the 45-day extension given by SO ORDERED.

The appellate court opined that the failure to agree on the terms of payment was no bar
to the perfection of the sale because Art. 1475 only requires agreement by the parties
as to the price of the object. This is error. In Navarro v. Sugar Producers Cooperative
Marketing Association, Inc.,14 we laid down the rule that the manner of payment of the
purchase price is an essential element before a valid and binding contract of sale can
exist. Although the Civil Code does not expressly state that the minds of the parties
must also meet on the terms or manner of payment of the price, the same is needed,
otherwise there is no sale. As held in Toyota Shaw, Inc. v. Court of Appeals,15
agreement on the manner of payment goes into the price such that a disagreement on